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BUFFALO COAL CORPORATION - Interim management's discussion and analysis for the three and six months ended 30 June 2019

Release Date: 29/08/2019 15:06
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Interim management's discussion and analysis for the three and six months ended 30 June 2019

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


INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS –QUARTERLY HIGHLIGHTS

For the three and six months ended June 30, 2019
(Presented in South African Rands)

BASIS OF PREPARATION

The following Management’s Discussion and Analysis (“MD&A”) relates to the financial condition and results of
operations of Buffalo Coal Corp. and its subsidiaries (“we”, “our”, “us”, “BC Corp”, the “Company” or the “Group”) for
the three and six months ended June 30, 2019 and should be read in conjunction with the audited annual consolidated
financial statements for the years ended December 31, 2018 and December 31, 2017, the Management’s Discussion
and Analysis for the year ended December 31, 2018 and the unaudited condensed interim consolidated financial
statements for the three and six months ended June 30, 2019. 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 August 29, 2019 unless otherwise indicated. References to Q2 2019
mean the three months ended June 30, 2019, Q1 2019 mean the three months ended March 31, 2019 and Q4 2018,
Q3 2018, Q2 2018 and Q1 2018 refer to the three months ended December 31, 2018, September 30, 2018, June 30,
2018 and March 31, 2018, respectively. References to 2019 YTD mean the six months ended June 30, 2019 and 2018
YTD mean the six months ended June 30, 2018.

Unless otherwise noted all amounts are recorded in South African Rands (“R” or “Rands” or “ZAR”). 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:R10.7586 and amounts in US Dollars were translated at US$1:R14.0840.

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,
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.


                                                           1
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

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 primarily listed on the TSX
Venture Exchange (“TSXV”) and has a secondary listing on the Alternative Exchange (“AltX”) operated by the JSE. BC
Corp trades under the symbol “BUF” on the TSXV and “BUC” on the AltX. As at June 30, 2019, BC Corp had 421 352 596
common shares outstanding, of which 347 945 097 common shares (82.6%) were held by Resource Capital Fund V LP.
(“RCF”) and 41 713 907 common shares (9.9%) were held by STA Coal Mining Company (Pty) Ltd (“STA”).

The Company owns 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”). 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.

The BC Dundee Properties comprise Aviemore anthracite mine ("Aviemore") and Magdalena bituminous mine
("Magdalena"). The Group is currently only engaged in underground coal mining at Aviemore, having suspended its
underground mining operations at Magdalena in the last quarter of 2018.

The Magdalena underground mining activities ceased at the end of October 2018 and an initial 125 employees were
retrenched on November 1, 2018. BC Dundee retained 27 of the employees for a further four months to assist in
stripping out all equipment and infrastructure from underground that the mine can use elsewhere or dispose of before
they were also retrenched at the end of February 2019. Following this action, the mine was placed on care and
maintenance. STA removed their equipment from underground over a period of 3-4 months after their contract was
terminated.

The Company has two processing plants of which one is located on the Magdalena property and has been placed on
care and maintenance following the closure of the Magdalena underground mining activities. BC Dundee’s head office
is located in the town of Dundee and is known as the Coalfields site. The second processing plant is located at Coalfields,
as is the Company’s rail siding.



                                                               2
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

On February 11, 2019, the chief executive officer (“CEO”) at the time had resigned from the Company. As an interim
measure, the Board appointed Emma Oosthuizen, the Company’s chief financial officer (“CFO”) at the time, to the dual
role of CFO and interim CEO. The board of directors of Buffalo Coal is continuing the process of identifying and
appointing a successor to fill the CEO role. Following the approval of the Interim Results and discussion with the TSX
Venture Exchange, the Board appointed Graham du Preez as interim CFO, with Ms. Oosthuizen continuing in the role
of interim CEO. Mr. Du Preez previously assumed the role of Interim CFO on October 17, 2016 until the appointment
of Ms. Oosthuizen as CFO on October 15, 2018, following which Mr. Du Preez’s role changed to Strategic Corporate
Executive in addition to his role as Corporate Secretary.

BUSINESS OVERVIEW

Summary of quarterly results

The table below sets out selected financial data for the periods indicated as derived from BC Corp’s interim results
and annual consolidated financial statements which was prepared in accordance with IFRS:

                                                  Basic &
                                                  diluted                                            (A)
                                      Profit    earnings                              Total        Asset       (B)          (C)
                                  (loss) for   (loss) per   Adjusted     Total   liabilities retirement Borrowings   RCF loan
                        Revenue the period          share    EBITDA*    assets (excl A,B,C) obligations (Investec)   facilities

Fiscal quarters ended     R'000        R'000    R/share        R'000     R'000      R'000       R'000       R'000      R'000
June 30, 2019           102 592       24 445       0.06       19 979   233 327     82 957      51 802     105 276    370 491
March 31, 2019           96 188          832        0.00      17 842   218 852     82 726      48 362     102 347    387 060
December 31, 2018       157 367       26 541        0.06      39 923   228 808     99 321      49 891     100 983    381 087
September 30, 2018      206 404     (70 474)      (0.18)      18 300   277 214    162 100      50 274     123 170    370 687
June 30, 2018           204 321       10 399        0.03      41 600   334 176    156 342      35 653     145 639    356 163
March 31, 2018          190 425     (34 482)      (0.08)      31 420   330 132    198 317      40 432     158 914    303 859
December 31, 2017       228 762     (90 800)      (0.22)      65 800   360 308    159 457      35 898     187 956    314 763
September 30, 2017      183 494     (30 200)      (0.08)      24 900   539 604    224 889      34 247     187 270    341 734
June 30, 2017           154 442      (6 900)      (0.02)     (6 100)   504 037    179 835      33 486     185 070    325 707
March 31, 2017          171 424        4 200        0.01      13 700   519 244    206 910      33 944     162 177    331 437
December 31, 2016       183 887     (19 395)      (0.05)       (576)   504 248    199 289      29 358     161 016    336 288
September 30, 2016      178 148     (25 536)      (0.07)      13 530   523 727    195 982      22 666     182 988    336 035
June 30, 2016           156 059       11 481        0.03     (6 090)   514 994    223 796      22 166     166 363    293 619

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

Summary results for Q2 2019 and 2019 YTD

The Group recorded R102.6 million in revenue for Q2 2019 (Q2 2018: R204.3 million), R96.2 million for Q1 2019 and
R198.8 million for 2019 YTD (2018 YTD: R394.7 million).

The lower revenue compared to Q2 2018 and 2018 YTD was mainly driven by the closure of the Magdalena
underground mine during Q4 2018 which resulted in an overall decrease in tonnes sold of 52% and 55% compared to
Q2 2018 and 2018 YTD. The increase in revenue for Q2 2019 compared to Q1 2019 was driven mainly by an
improvement in average selling prices quarter over quarter.


                                                                3
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

The Group reported a consolidated profit of R24.4 million in Q2 2019 (Q2 2018: R10.4 million), R25.3 million for 2019
YTD (consolidated loss 2018 YTD: R24.4 million) and R0.8 million in Q1 2019. The improvement in profits during Q2
2019 and 2019 YTD compared to Q2 2018 and 2018 YTD can be largely attributable to foreign exchange gains of R9.1
million and R7.5 million in the respective periods (Q2 2018 and 2018 YTD: foreign exchange loss: R54.3 million and
R38.8 million).

The Group generated R2.6 million cash from its operations in Q2 2019 (Q2 2018: R30.0 million), R5.2 million for 2019
YTD (2018 YTD: R59.0 million) and R2.6 million in Q1 2019. The Group spent R2.7 million in Q2 2019 (Q2 2018: R11.0
million), R4.4 million for 2019 YTD (2018 YTD: R17.7 million) and R1.7 million in Q1 2019 on capital expenditures at its
operations. Low sales volumes in Q2 2019 resulted in limited cash being generated by operations and as a result no
payment could be made to Investec Bank Limited (“Investec”) to decrease the outstanding Investec debt. BC Dundee
settled R15.0 million and R45.0 million, respectively, of the outstanding Investec debt in Q2 2018 and 2018 YTD.

Total assets amounted to R233.3 million as at June 30, 2019 (December 31, 2018: R228.8 million) and mainly included
property, plant and equipment of R55.8 million (December 31, 2018: R58.5 million), investment funds supporting the
asset retirement obligations of R56.9 million (December 31, 2018: R54.9 million) and current assets of R97.6 million
(December 31, 2018: R96.2 million).

As at June 30, 2019, the Group’s current assets mainly comprised trade and other receivables of R39.5 million
(December 31, 2018: R48.3 million), inventories of R52.1 million (December 31, 2018: R41.8 million) and cash and cash
equivalents of R6.1 million (December 31, 2018: R5.2 million).

As at June 30, 2019, the Group’s total liabilities (excluding A, B, C) amounted to R83.0 million (December 31, 2018:
R99.3 million) and consisted primarily of R75.4 million in trade and other payables (December 31, 2018: R95.4 million).
Trade and other payables included R20.6 million owing to STA as at June 30, 2019 (December 31, 2018: R22.1 million).

The Group’s asset retirement obligation (current and long-term) amounted to R51.8 million as at June 30, 2019
(December 31, 2018: R49.9 million) (Refer to Note 8 of the Interim Results).

BC Corp owed R105.3 million in borrowings to Investec on June 30, 2019 (December 31, 2018 balance of R101.0 million)
(Refer to the Note 7 of the Interim Results).

BC Corp also had a convertible loan to RCF of US$27 million (“RCF loan”) which according to the original loan agreement
matured as at June 30, 2019 (December 31, 2018: US$27 million). The decrease in the ZAR value of the RCF loan balance
was due to the extension of the maturity date of the loan from June 30, 2019 to December 31, 2019, which resulted in
a lower closing balance on conversion at the end of Q2 2019, partially offset by weakening of the ZAR against the US$
(Refer to the Note 6 of the Interim Results).

OVERVIEW OF THE PERIOD AND OUTLOOK FOR THE GROUP

Production and sales

During Q2 2019 the Company continued mining out the current Aviemore reserves, by incorporating pillar extraction
(L-ing). Production for Q2 2019 were 22% lower than planned, with year-to-date production 9% lower than planned as
a result of mining being restricted due to dykes encountered in both mining sections along with poor roof conditions
in one of the two mining sections which resulted in less run of mine (“ROM”) tonnes for the quarter. Production should
improve in the third quarter as both mining sections move into new mining areas with less geological restrictions
anticipated.

                                                           4
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Q2 2019 sales continued to be lower than planned, however sales did reflect an overall 15% improvement from Q1
2019 mainly as a result of an increase in calcine and high-ash sales during Q2 2019. The higher sales during the quarter
resulted in a slight (6%) decrease in saleable inventory levels at the end of June 2019.

Cash flow and funding

The slow start-up of sales at the beginning of Q1 2019 lowered the projection of the cash flow to be generated from
operations for Q1 2019. Consequently, management approached Investec at the end of January 2019 with the request
for a deferral of its agreed March loan instalment as well as proposed revisions to its quarterly instalment profile to
settle the outstanding loan facilities.

On March 5, 2019, the Company accepted and agreed to Investec’s amendment to the Term Loan and Revolving Credit
Facility Agreement. Pursuant to the amended agreement, the final maturity date has been extended from December
31, 2019 to September 30, 2020. Quarterly repayment instalments were set at R25.5 million due on June 30, 2019, R20
million on September 30, 2019 and December 31, 2019, R10 million on March 31, 2020, and R15 million on June 30,
2020 and September 30, 2020. The Corporation is obliged to pay any accrued royalties payable to Investec at the end
of September 2020 (R5.8 million as at June 30, 2019, December 31, 2018: R5.6 million). In addition, Investec agreed
not to exercise its acceleration rights with respect to any existing events of default under the Investec Facility until June
30, 2019.

Due to the Company’s continued cashflow constraints during the first half of calendar 2019, the Company was not able
to settle the R25.5 million instalment due on June 30, 2019 and, through discussions with Investec, renegotiated the
terms of repayment thereof. On July 1, 2019, the Company accepted and agreed to Investec’s amendment to the Term
Loan and Revolving Credit Facility Agreement. Pursuant to the amended agreement, the R25.5 million will be paid in
three monthly instalments, being R7 million payable on July 31, 2019, R7 million payable on August 31, 2019 and R11.5
million payable on September 30, 2019. The first instalment of R7 million was paid to Investec on July 31, 2019.

The RCF loan of US$27 million was due and payable on June 30, 2019 (Refer to the Note 6 of the Interim Results). As at
April 15, 2019, RCF agreed to extend the maturity date until December 31, 2019 to allow the Company to obtain
financing in order to settle this amount as it currently does not have the means to repay this amount in full.

Going concern

The Group’s ability to continue as a going concern and ultimately continue long term operations, is dependent on its
ability to realize on the identified short-term opportunities and to secure the funding required for its identified medium
to longer term projects.

In October 2018, the Board formed a Special Committee to monitor developments. The Special Committee has
undertaken a strategic review of the Company and its capital structure and is in the process of reviewing other strategic
alternatives that may be in the interests of Buffalo Coal and its stakeholders.

It is uncertain what the outcome of the above-mentioned strategic review process will be and if the Company will be
able to obtain financing to settle its debt obligations.



                                                             5
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Although the Group has, over time, 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
production and sales forecasts, it should be able to generate positive cash flows in the foreseeable future.

There is no assurance that the Company will be able to meet its covenants in the future, or that Investec will provide
future waivers or that RCF will provide further extensions, if required. These matters constitute material uncertainties
which cast significant doubt as to whether the Group can continue as a going concern.

Should the going concern assumption not be appropriate for the preparation of these Interim Results 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.

Markets

The Group focussed on mining and selling anthracite coal during Q2 2019, with very minor bituminous sales from the
minimal remaining stock. Sales for the quarter were to both the export and domestic markets. Sales of “high-ash”
product ceased during the quarter on completion of the tonnage which had been contracted. A general market
recovery in the thermal sector will be necessary before demand for the Company’s high-ash will be possible again.

For Q2 2019, the Group continued to utilize an export allocation of 51,125 tonnes per quarter through the Quattro
scheme at RBCT. During July, however, the expected (and previously reported) notice was received from the
Department of Mineral Resources (“DMR”) cancelling Zinoju Coal’s participation in the Quattro scheme, with effect
from 1st August 2019. It still remains the case that no overall impact is anticipated on export sales.

API4 Index:

The bituminous export coal price for Richards Bay was lower in Q2 2019 compared to Q1 2019, with average prices
having decreased to almost $63 in June 19, with some prices having been recorded at under $60.

The reduction in Brazilian steel markets this year as a result of Vale’s ongoing difficulties from tailings dam disasters
has meant a reduced offtake of duff, and as a result thermal markets may have to come into play for this product during
the second half of the 2019 year.

US$/ZAR Exchange Rate:

The ZAR exchange rate to the US$ was weaker in Q2 2019 compared to Q1 2019, having ranged from a monthly average
of R14.15 in April 2019 to a low of R14.58 in June 2019. The Company’s ZAR receipts are minimally exposed to these
fluctuations as most of the export tonnage is priced in ZAR.

Anthracite

Demand for anthracite products from the domestic consumers is slightly weaker in Q2 2019, with more competition
from other anthracite producers whose markets have been affected by shutdowns in the chrome smelting sector.
Increasing the domestic off-take of peas has therefore not been possible.

Calcined anthracite markets did recover however, and sales in Q2 2019 recovered significantly from the Q1 2019 levels,
meaning that the peas stock (the feedstock for the calcining process) did not continue to grow significantly.


                                                           6
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Export movements for duff have been sporadic due to a significant drop in Brazilian shipments, meaning that stock
levels have also been highly variable.

Overall demand and pricing for nut sized products remains strong, and the company cannot meet the level of orders
that customers wish to place.

Overall therefore, markets are under some pressure currently, but forward demand forecasts remain positive, as
confirmed by Afriforesight publications showing a positive outlook for South African anthracite, both in demand and
pricing terms.

OPERATIONAL REVIEW

Consolidated operational results for 2019 YTD, 2018 YTD, Q2 2019, Q2 2018 and Q1 2019

                                                                          %                                %                    %
Operational results                           2019 YTD   2018 YTD VARIATION     Q2 2019   Q2 2018 VARIATION    Q1 2019 VARIATION
ROM (t)                                        229 907    554 853      (59%)     99 667   288 055      (65%)   130 240      (23%)
- Aviemore (t)                                 211 873    243 973      (13%)     93 445   119 721      (22%)   118 428      (21%)
- Aviemore (t) (bought-in)                      18 034     32 734      (45%)      6 222    23 427      (73%)    11 812      (47%)
- Magdalena (t)                                    -      277 091     (100%)        -     144 907     (100%)       -          N/A
- Bituminous (t) (bought-in)                       -        1 055     (100%)        -         -          N/A       -          N/A
Saleable production (excluding calcine) (t)    158 646   369 750        (57%)    67 042   189 175      (65%)   91 604       (27%)
- Anthracite (t)                               145 294   169 067        (14%)    63 017    85 015      (26%)   82 277       (23%)
- Anthracite (t) (bought-in)                    12 017    21 507        (44%)     4 025    16 329      (75%)    7 992       (50%)
- Bituminous (t)                                 1 335   178 541        (99%)       -      87 831     (100%)    1 335      (100%)
- Bituminous (t) (bought-in)                       -         635       (100%)       -         -          N/A      -           N/A
Yield on plant feed (excluding calcine) (%)     67.0%      66.6%           1%    64.3%     65.6%        (2%)    69.1%        (7%)
- Anthracite (%)                                66.8%      69.5%         (4%)    64.3%     70.4%        (9%)    68.8%        (7%)
- Anthracite (%) (bought-in)                    66.6%      65.7%           1%    64.7%     69.7%        (7%)    67.7%        (4%)
- Bituminous (%)                                 0.0%      64.3%          N/A      N/A     60.9%         N/A      N/A         N/A
- Bituminous (%) (bought-in)                      N/A      60.2%          N/A      N/A       N/A         N/A      N/A         N/A
Sales (t)                                      188 449   418 168        (55%)   100 767   210 821      (52%)   87 744         15%
- Anthracite (t)                               118 254   155 042        (24%)    56 970    84 180      (32%)   61 346        (7%)
- Bituminous (t)                                 3 572   185 512        (98%)       234    91 198     (100%)    3 338       (93%)
- Calcine (t)                                   18 606    29 756        (37%)    12 207    12 493       (2%)    6 399         91%
- Anthracite high-ash sales (t)                 48 017    47 858           0%    31 356    22 950        37%   16 661         88%
Sales (t) (excluding high-ash sales)          140 432    370 310        (62%)   69 411    187 871      (63%)   71 083        (2%)
Saleable inventory tonnes                       59 844    46 428          29%    59 844    46 428        29%   63 882        (6%)
- Anthracite (t)                                50 770    31 580          61%    50 770    31 580        61%   50 085          1%
- Bituminous (t)                                 1 522    13 195        (88%)     1 522    13 195      (88%)    4 737       (68%)
- Calcine (t)                                    7 552     1 653         357%     7 552     1 653       357%    9 060       (17%)

An analysis of the operational results for Q2 2019 and 2019 YTD compared to Q2 2018 and 2018 YTD, respectively, as
well as Q2 2019 compared to Q1 2019 are discussed below:




                                                                   7
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

ROM Production

Total ROM tonnes for Q2 2019 and 2019 YTD decreased with 65% and 59%, respectively, compared to Q2 2018 and
2018 YTD. The overall decreases over comparative periods were primarily due to the closure of the Magdalena
operations during Q4 2018. Total ROM tonnes for Q2 2019 decreased with 23% compared to Q1 2019.

Aviemore’s ROM tonnes for Q2 2019 and 2019 YTD decreased with 22% and 13% compared to Q2 2018 and 2018 YTD,
respectively, and decreased with 21% in Q2 2019 compared to Q1 2019.

Aviemore’s current reserves are now being mined out and as a result there has been a decrease in its monthly ROM
production. The mine’s Q2 2019 production were 22% lower than planned, with year-to-date production 9% lower than
planned, as a result of mining being restricted due to dykes encountered in both mining sections along with poor roof
conditions in one of the two mining sections which resulted in less ROM tonnes for the quarter. Production should
improve in the third quarter as both mining sections move into new mining areas with less geological restrictions
anticipated.

Anthracite bought-in tonnes for Q2 2019 and 2019 YTD decreased with 73% and 45% compared to Q2 2018 and 2018
YTD, respectively, and decreased with 47% in Q2 2019 compared to Q1 2019.

The Company has an arrangement with a neighbouring coal miner to buy-in their anthracite coal. The neighbouring
coal company changed over to a new mining contractor towards the end of Q1 2019. This change-over along with
weather constraints limited their production during Q1 2019 and Q2 2019, with production anticipated to ramp-up
during the third quarter of 2019.

Saleable Production

The total overall saleable coal production for Q2 2019 and 2019 YTD was 65% and 57% lower compared to Q2 2018
and 2018 YTD and 27% lower compared to Q1 2019 mainly due to a combination of lower ROM production primarily
as a result of the Magdalena underground mine closure, but also due to lower ROM production at Aviemore during Q2
2019 and less bought-in tonnes compared to comparative periods.

Overall yield achieved for Q2 2019 and 2019 YTD was in line compared to Q2 2018 and 2018 YTD, respectively, and
decreased with 7% compared to Q1 2019.

Saleable anthracite decreased with 26% and 14% compared to Q2 2018 and 2018 YTD, respectively, primarily as a result
of Aviemore’s current reserves that are now being mined out which has and will going forward result in a decrease in
monthly ROM production and accordingly, saleable tonnes. The 23% decrease compared to Q1 2019 was primarily
driven by the lower ROM tonnes produced and lower bought-in-tonnes during Q2 2019.

Sales

Overall sales (excluding high-ash sales) for Q2 2019 and 2019 YTD were 63% and 62% lower compared with Q2 2018
and 2018 YTD, respectively, and 2% lower compared to Q1 2019.

Anthracite sales for Q2 2019 and 2019 YTD were 32% and 24% lower compared to Q2 2018 and 2018 YTD, respectively,
and 7% lower compared to Q1 2019. The lower sales in Q2 2019 and 2019 YTD were due mainly to a slow start-up of
orders from customers along with train delays due to bad weather in Q1 2019 along with limited export demand during
Q2 2019.
                                                         8
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Bituminous sales for Q2 2019 and 2019 YTD were from stock created from the close out activities at the Magdalena
underground mine.

Calcine sales and anthracite high-ash sales fluctuate from quarter to quarter, based on demand for these products.
Calcine sales for Q2 2019 and 2019 YTD were 2% and 37% lower compared to Q2 2018 and 2018 YTD, respectively, due
to lower calcine demand in the market which improved with 91% compared to Q1 2019 as the demand grew for the
product during Q2 2019.

Health and Safety

The Company’s operations maintain an integrated Health, Safety and Environment (“HSE”) management system,
established using the OHSAS18001 and ISO14001 frameworks as well as minimum standards, and fully supports the co-
existence of occupational health, safety and the environment within which the Company operates, in order to ensure
compliance and achieve zero harm. Operating safely and responsibility is an integral part of our business strategy. We
strive to obtain an injury free workplace and to create a company culture that protects employees and visitors from
harm. The Company undertakes training and development initiatives and related ventures on a regular basis in order
to improve individual outlook on health, safety and the environment.

As at June 30, 2019, the Group had achieved more than 7,472 fatality free production shifts at Coalfields. Aviemore
Colliery achieved 2,515 and Magdalena Colliery 714 fatality free production shifts. The Company achieved a Lost time
injury free rate of 0.263 (per 200,000 hours) for the year to date against the target rate of 0.3.

FINANCIAL REVIEW

Consolidated financial results for 2019 YTD, 2018 YTD, Q2 2019, Q2 2018 and Q1 2019

                                                                                 %                               %                    %
Financial results                                  2019 YTD    2018 YTD VARIATION     Q2 2019   Q2 2018 VARIATION    Q1 2019 VARIATION
Revenue (R'millions)                                  198.8        394.7     (50%)     102.6       204.3     (50%)      96.2         7%
Cost of sales (R'millions)                           (136.4)     (296.2)     (54%)     (65.5)    (150.9)     (57%)    (70.9)       (8%)
Other income/(expenses) - net (R'millions)             21.2       (53.3)      140%      18.8        (9.6)     296%       2.4      676%
General and administration expenses (R'millions)      (38.4)      (40.7)       (6%)    (21.2)     (18.9)       12%    (17.2)        23%
Operating profit/(loss) (R'millions)                   45.2          4.6    (883%)      34.8       24.9        40%     10.5       232%
Finance (costs)/income - net (R'millions)             (20.0)      (28.1)     (28%)     (10.3)     (14.5)     (28%)      (9.6)        7%
Income tax (R'millions)                                 -           (1.0)   (100%)        -          -         N/A       -          N/A
Profit/(loss) for the period (R'millions)              25.3       (24.4)      204%      24.4       10.4       135%       0.8     2956%
Adjusted EBITDA (R'millions) (*)                        37.8       73.0      (48%)       20.0      41.6      (52%)       17.8       12%
Average selling price per ton sold (R)
(excluding high-ash sales)                            1 295        1020        27%      1 345     1042        29%      1 244        8%
Cash cost of sales per ton sold (R)
(excluding high-ash export costs)                       852         737        16%       801       738         9%       900      (11%)
CAD:ZAR (average)                                     10.64        9.62        11%      10.75      9.78       10%      10.54        2%
USD:ZAR (average)                                     14.19       12.30        15%      14.37     12.64       14%      14.01        3%

An analysis of the financial results for Q2 2019 and 2019 YTD compared to Q2 2018 and 2018 YTD, respectively, as well
as Q2 2019 compared to Q1 2019 are discussed below:

                                                                    9
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Revenue

                                                                            %                                %                      %
R'000                                        2019 YTD   2018 YTD   VARIATION    Q2 2019   Q2 2018   VARIATION    Q1 2019   VARIATION
Anthracite                                    145 142    163 882        (11%)    71 094    88 698        (20%)    74 048         (4%)
-Domestic                                      65 946     47 086          40%    34 288   24 005           43%    31 657           8%
-Export                                        79 196    116 796        (32%)    36 806   64 693         (43%)    42 391        (13%)
Bituminous                                      3 311    164 604       (98%)       326    86 266        (100%)     2 985        (89%)
-Domestic                                       3 311     96 532       (97%)       326    48 582         (99%)     2 985        (89%)
-Export                                           -       68 072      (100%)       -      37 684        (100%)      -             N/A

Calcine                                        33 340     49 374        (32%)    21 946    20 737           6%    11 393          93%
Revenue (excluding high-ash sales)            181 793    377 860        (52%)    93 366   195 701        (52%)    88 426           6%
Export (high-ash)                              16 580     16 616         (0%)     9 102     8 465           8%     7 478          22%
Sundry sales (slurry/discard)                     406        270          50%       124       155        (20%)       284        (56%)
Total Revenue                                 198 779    394 746        (50%)   102 592   204 321        (50%)    96 188           7%

Revenue (excluding high-ash sales) for Q2 2019 and 2019 YTD was 52% lower, respectively, compared to Q2 2018 and
2018 YTD, due to a 63% and 62% decrease in sales volumes, partially offset by a 29% and 27% improvement in average
selling prices over comparative periods. Revenue (excluding high-ash sales) for Q2 2019 increased with 6% compared
to Q1 2019 as a result of an 8% improvement in average selling prices.

Anthracite revenue for Q2 2019 and 2019 YTD was 20% and 11% lower, respectively, compared to Q2 2018 and 2018
YTD, mainly due to lower anthracite sales volumes, partially offset by higher average selling prices. Anthracite revenue
for Q2 2019 was 4% lower compared to Q1 2019 as a result of 7% lower anthracite sales volumes, partially offset by
higher average selling prices.

Bituminous revenue for Q2 2019 and 2019 YTD related to sales out of remaining bituminous inventory. The major
decreases compared to 2018, were as a result of the closure of the Magdalena underground mine.

During Q2 2019 and 2019 YTD the average selling price per ton was higher compared to Q2 2018, 2018 YTD and Q1
2019 as a result of an increase in overall market prices that resulted in the negotiation of better selling prices in new
sales contracts entered into with the Group’s significant customers.

Calcine revenue for Q2 2019 improved with 6% to Q2 2018 mainly as a result of better sales prices. Calcine revenue for
2019 YTD was 32% lower compared to 2018 YTD, mainly due to the 37% lower sales volumes achieved, partially offset
by better selling prices. Calcine revenue for Q2 2019 improved 93% compared to Q1 2019 as a result of higher calcine
volumes at better sales prices.

Cost of Sales

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

Cost of sales for Q2 2019 and 2019 YTD was 57% and 54% lower compared to Q2 2018 and 2018 YTD, respectively. The
main driver for the decreased costs were the closure of the Magdalena underground mine at the end of October 2018
which resulted in a reduction in costs. Cost of sales for Q2 2019 was 8% lower compared to Q1 2019, mainly due to
limiting of expenditures.

                                                            10
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Cash cost per sales ton increased by 9% and 16% compared to Q2 2018 and 2018 YTD, respectively. Although cost of
sales in ZAR terms decreased over the comparative periods, the cash cost per sales ton increased due to the lower sales
tonnes over the comparative periods which resulted in higher unit costs. Cash cost per sales ton for Q2 2019 decreased
by 11% compared to Q1 2019, due to the increase in sales tonnes during Q2 2019.

The Group continues to be cost conscious, limiting expenditures in order to ensure the sustainability of the Group.

Other Income (Expense) – net

Other income and expenses comprise profit/loss on sale of assets, foreign exchange gains/losses, fair value adjustments
on financial assets and conversion option liabilities and gains/losses on extension of the maturity date of the RCF
Convertible Loan.

The R18.8 million net income for Q2 2019 (Q2 2018: net expense of R9.6 million) was mainly attributable to a foreign
exchange gain of R9.1 million (Q2 2018: foreign exchange loss of R54 million), a positive fair value adjustment on the
financial assets of R1.1 million (Q2 2018: R0.9 million) and a positive fair value adjustment on the conversion option
liability (RCF convertible loan) and the warrant liability (Investec warrants) of R8.7 million (Q2 2018: R43.2 million) along
with a gain on extension of the maturity date of the RCF Convertible loan of R10.5 million offset by a corresponding
loss on extension of the RCF conversion option of R11.1 million (2018: RNil).

The R21.2 million net income for 2019 YTD (2018 YTD: net expense of R53.3 million) was mainly attributable to a foreign
exchange gain of R7.5 million (2018 YTD: foreign exchange loss of R38.8 million), a positive fair value adjustment on
the financial assets of R2.0 million (2018 YTD: R1.5 million) and a positive fair value adjustment on the conversion
option liability (RCF convertible loan) and the warrant liability (Investec warrants) of R11.7 million (2018 YTD 2018:
negative fair value adjustment of R17.4 million) along with a gain on extension of the maturity date of the RCF
Convertible loan of R10.5 million offset by a corresponding loss on extension of the RCF conversion option of R11.1
million (2018: RNil).

The net income of R2.4 million for Q1 2019 was mainly attributable to a fair value adjustment gain on the conversion
option liability (RCF convertible loan) and the warrant liability (Investec warrants) of R3.0 million along with a positive
fair value adjustment on the financial assets of R0.8 million partially offset a foreign exchange loss of R1.8 million.

General and administration expenses

These expenses include the general and administration expenses relating to BC Dundee’s head office at Coalfields, the
Company’s corporate office in Centurion and the Canadian head office.

The 12% higher general and administration expenses for Q2 2019 compared to Q2 2018 were mainly due to R1.3 million
lower consulting fees, R2.1 million lower salaries and wages and R1.8 million other expenses largely offset by R1.1
million higher audit fees and a R5.1 million higher expense adjustment in the rehabilitation provision.

The 6% lower general and administration expenses 2019 YTD compared to 2018 YTD, were mainly as a result of R1.4
million lower consulting fees, a R3.1 million positive adjustment of the Section 24G penalty provision and R3.6 million
lower salaries and wages, partially offset by a R4 million increase in bad debts provision.




                                                             11
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

The 23% higher general and administration expenses for Q2 2019 compared to Q1 2019 were due mainly to a R5.6
million higher expense adjustment in the rehabilitation provision along with only R0.3 million bad debts provided for
(Q1 2019: R5.4 million) and no reversal of penalties (Q1 2019: R1.1 million).

In Q1 2019, the Company recorded a R1.1 million reversal of the section 24G penalty provision related to the calcine
plant for which an initial R2 million provision was made in Q1 2018. Also, in Q1 2019, the Company provided for R5.7
million in bad debts following two customers that went into business rescue during Q1 2019. Salaries and wages
reduced as a result of the section 189 process following the closure of Magdalena underground mine.

Finance Costs/Income-net

Finance costs for Q2 2019 and 2019 YTD were 30% lower compared to Q2 2018 and 2018 YTD primarily due to the
overall lower outstanding Investec facilities and STA accounts payable balance over comparative periods that resulted
in lower interest charges. In addition, no more royalties payable to Investec had to be provided for following the closure
of the Magdalena underground mine. Finance costs for Q2 2019 were in line compared to Q1 2019.

The group recorded a net accretion expense of R4.7 million for Q2 2019 (Q2 2018: R3.2million; Q1 2019: R3.6 million)
and R8.3 million for 2019 YTD (2018 YTD: R6.2 million) in relation to the RCF Loan.

The group recorded a net accretion expense of R2.3 million for Q2 2019 (Q2 2018: R1.6 million; Q1 2019: R2.1 million)
and R4.3 million for 2019 YTD (2018 YTD: 3.1 million) in relation to the Investec warrant asset.

Income tax

No income tax was recognized during Q2 2019, 2019 YTD, Q2 2018 or Q1 2019. An additional provision of R1 million
was made during Q1 2018 with regards to potential taxes payable.

CONSOLIDATED FINANCIAL POSITION

Balance sheet review

Assets

Right of use assets relating to lease agreements were recorded as of Q1 2019 after implementing the now effective
IFRS 16 - Leases standard (Refer to Note 4 in the Interim Results).

The 18% decrease in trade and other receivables resulted mainly from low sales volumes during 2019 YTD along with
the R5.3 million provision for bad debts at the end of Q1 2019 as a result of two customers that went into business
rescue, the ultimate outcome of which is not yet known.

Although overall saleable inventory levels have reduced since the end of Q1 2019 (6%), the value of inventory at the
end of June 2019 remains higher (15%) compared to end of March 2019 as a result of the lower sales volumes (excluding
high-ash) for Q2 2019 compared to Q1 2019, which resulted in higher unit costs over the comparative periods that
culminated into higher inventory values.




                                                           12
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Summary balance sheet information

                                                        June 30,     December 31,           %     March 31,            %
R'000                                                      2019             2018        VARIANCE      2019         VARIANCE

Property, plant and equipment                             55 802          58 484         (5%)        56 737          (2%)
Right of use assets                                        3 895             -          100%          4 282          (9%)
Investments & long-term receivables                        7 906           8 017         (1%)         8 023          (1%)
Trade and other receivables                               39 515          48 284       (18%)         31 351           26%
Inventories                                               52 060          41 824          24%        45 335           15%
Cash and cash equivalents                                  6 071           5 232          16%         6 187          (2%)
Restricted cash                                           11 200          11 200         (0%)        11 200          (0%)
Other receivables - restricted                            56 878          54 902           4%        55 738            2%
Current tax assets                                           -               865      (100%)            -             N/A
Total assets                                             233 327         228 808           2%       218 852            7%

RCF loan facilities (loan and conversion option)         373 309         384 220          (3%)      387 208          (4%)
Other borrowings                                         105 276         100 991            4%      102 347            3%
Trade and other payables                                  75 400          95 352        (21%)        77 444          (3%)
Asset retirement obligation                               51 802          49 891            4%       48 362            7%
Lease liabilities                                          3 895             -           100%         4 282          (9%)
Current tax liabilities                                      844             829            2%          851          (1%)
Total liabilities                                        610 526         631 283          (3%)      620 495          (2%)

Total equity                                            (377 198)       (402 475)        (6%)      (401 643)         (6%)


Liabilities

The 21% decrease in trade and other payables was mainly attributable to a R13.4 million reduction in trade creditors,
a R1.6 million reduction in VAT payable to the Receiver of Revenue, a R1.1 million reversal in the 24G penalty provisions
related to the calcine plant and R3.0 million reduction in provisions related to section 189 retrenchments paid out in
Q1 2019.

The 4% increase in asset retirement obligation mainly relates to changes in the discount and inflation rates used to
calculate the fair value of both the rehabilitation obligation at the end of each reporting period.

Lease liabilities relating to lease agreements were recorded as of Q1 2019 after implementing the now effective IFRS
16 - Leases standard (Refer to Note 4 in the Interim Results).




                                                           13
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

CASH FLOW REVIEW

The condensed consolidated statements of cash flows are summarized below:

                                                                               %                                  %                     %
R'000                                          2019 YTD    2018 YTD    VARIATION    Q2 2019       Q2 2018 VARIATION    Q1 2019 VARIATION
Net cash generated from operating activities      5 249      58 516         (91%)     2 605        29 517      (91%)     2 645       (2%)
Net cash (utilized in) investing activities      (4 411)    (17 665)        (75%)    (2 721)      (11 045)     (75%)    (1 690)       61%
Net cash (utilized in) financing activities         -       (45 000)       (100%)       -         (15 000)    (100%)       -          N/A
Change in cash and cash equivalents                 838      (4 149)       (120%)      (116)        3 472     (103%)       955     (112%)

Operating activities

As discussed under the ‘Overview of the period and outlook for the group’ section earlier in this MD&A, cash flow was
limited during the year to date as a result of lower than planned sales volumes which resulted in limited cash flow
generated from the operations compared to its comparative prior year periods.

Investing activities

Cash on investing activities related to capital spent on property, plant and equipment. Due to the Company’s cash flow
constraints, cash on property, plant and equipment was limited as far as possible.

Financing activities

At the end of Q1 2018 and Q4 2018, the Company made installments of R30 million and R25 million, respectively, to
reduce the Company’s outstanding Investec loan facility. Due to limited cash generated during 2019 YTD, the Company
did not make any settlement payments towards the outstanding Investec during 2019 YTD (Refer to Note 1 – Going
concern of the Interim Results).

RELATED PARTY TRANSACTIONS

During 2019 YTD and 2018 YTD, the Company did not enter into any transactions with related parties in the ordinary
course of business.

The following balances were outstanding as at June 30, 2019 and December 31, 2018:

R'000                                                                                          June 30, 2019      December 31, 2018
Related party payables
RCF ¹                                                                                                  7 026                  4 846

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. 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, included in payables are accrued
interest payable to RCF of R3.5 million (December 31, 2018: R3.1 million) on the RCF Convertible loan as well as costs
invoiced by RCF to the Company in previous years that have not been settled.
                                                                       14
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

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 Q2 2019, Q2 2018
2019 YTD and 2018 YTD were as follows:

R'000                                                                  2019 YTD      2018 YTD        Q2 2019       Q2 2018
Short-term benefits                                                       4 598         5 332         2 188          2 488
Share-based payments                                                         -              2            -               1
Total                                                                     4 598         5 334          2 188         2 489

Amounts owing to directors and other members of key management personnel were R0.5 million as of June 30, 2019
(December 31, 2018: R0.4 million). These amounts are to be settled in the normal course of business.

Management Agreements

Certain management contracts require that payments of approximately R3.9 million be made upon the occurrence of
a change of control, other than a change of control attributable to RCF and/or Investec. As no triggering event has taken
place, no provision has been recognised as of June 30, 2019.

SUBSEQUENT EVENTS

Other Matters

Except for the matters discussed below or disclosed in the foregoing, 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,
including those discussed below, that could have a material adverse effect on, among other things, the operating
results, earnings, properties, business and condition (financial or otherwise) of the Company.

Section 24G applications

The previously operational adit at Magdalena does not have an amended Environmental Management Program
(“EMP”) or an amended Integrated Water Use License Application (“IWULA”). As a result, the mine had to apply for a
Section 24G retrospective Environmental Impact Analysis (“EIA”). On July 24, 2019, the DMR did a site inspection at
Magdalena.




                                                           15
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

DMR has to provide a report on their visit to the penalty committee by the end of August following which a final decision
will be made on the penalty to be issued. R2.45 million had been provided for during December 2017 to settle potential
penalties for the non-compliance. The mine has not yet been issued with any penalties in this regard. Accordingly, the
full amount has been included in Provisions (Trade and other payables) as at June 30, 2019.

The Company’s Calcine plant has been operating without an Air Emissions License (“AEL”), and this has necessitated
that a Section 24G application be submitted to the Economic Development, Tourism and Environmental Affairs
(“EDTEA”). The Section 24G application relates to the commencement of certain listed activities which have
commenced at the Calcine plant at Coalfields, prior to obtaining Environmental Authorization (“EA”). An additional R2.0
million had been provided for in Q1 2018 to settle estimated fines for non-compliance. On April 24, 2019, the Company
received a fine letter from the EDTEA which imposed a fine of R925,000 for non-compliance. Accordingly, the provision
included in Trade and other payables was reduced to R0.9 million as at June 30, 2019.

The Company has made, and expects to make in the future, expenditures to comply with environmental laws and
regulations.

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:

Adjusted EBITDA

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 to adjusted EBITDA is as follows:

R'000                                                        2019 YTD       2018 YTD    Q2 2019      Q2 2018      Q1 2019
Operating profit for the period                                45 227          4 639    34 758       24 873        10 469
Depreciation and amortization                                   8 137         12 030      4 058       6 482         4 078
Impairment of receivables                                       5 667          1 668        320          -          5 347
Fair value adjustments of financial assets and conversion
option liability                                                 (13 699)    15 856      (9 873)     (44 113)      (3 826)
Stock-based compensation                                              -           2          -             1           -
Foreign exchange (gains)/losses                                   (7 509)    38 807      (9 284)      54 338        1 774
Adjusted EBITDA                                                   37 822     73 001      19 979       41 581       17 842




                                                            16
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

Working Capital

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

                                                                    June 30,        December 31,              %      March 31,              %
R'000                                                       Notes     2019              2018          VARIATION        2019         VARIATION
Current assets
Cash and cash equivalents                                                   6 071          5 232            16%            6 187          (2%)
Trade and other receivables                                                39 515         48 284          (18%)           31 351           26%
Inventories                                                                52 060         41 824            24%           45 335           15%
Taxation receivable                                                           -              865         (100%)              -             N/A
                                                                           97 646         96 206             1%           82 873           18%
Current liabilities
Trade and other payables                                                 75 400           95 352          (21%)           77 444          (3%)
Current lease liabilities                                                 1 597               -            100%            1 641          (3%)
Current portion of borrowings                                 1         105 276          100 983              4%         102 347            3%
RCF Loan Facility                                             2         373 309          381 087            (2%)         387 208          (4%)
Current tax liability                                                       844              829              2%             851          (1%)
                                                                        556 426          578 251            (4%)         569 491          (2%)
Net working capital                                                    (458 780)        (482 046)           (5%)        (486 618)         (6%)

Notes:
1) Current portion of borrowings comprised of the outstanding loan balance payable to Investec at the end of the respective period. (See Note
   7 to the Interim Results)
2) RCF loan facility comprised US$27 million outstanding and payable as at June 30, 2019 converted to ZAR at the end of the respective periods.
   (See Note 6 to the Interim Results)

Headline profit & (loss) per share

Headline profit & (loss) is a profit measure required for JSE-listed companies as defined by the South African Institute
of Chartered Accountants. Headline loss per share is a basis for measuring earnings per share which accounts for all
the profits and losses from operational, trading, and interest activities, that have been discontinued or acquired at any
point during the year.

Excluded from this figure are profits or losses associated with the sale or termination of discontinued operations, fixed
assets or related businesses, or from any permanent devaluation or write-off of their values.

Reconciliation of profit/(loss) for the periods to headline profit/(loss) is disclosed below:

R'000                                                                      2019 YTD       2018 YTD        Q2 2019         Q2 2018       Q1 2019
Profit/(loss) for the period                                                 25 277        (24 442)       24 445          10 399           832
Net (profit) on disposal of property, plant and equipment                       (48)           -              (48)            -           (182)
Headline profit/(loss) for the period                                        25 229        (24 442)       24 397          10 399           650
Headline profit/(loss) per share - basic and diluted                           0.06          (0.06)         0.06            0.03          0.00




                                                                      17
BUFFALO COAL CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2019

SUMMARY OF SECURITIES AS AT AUGUST 29, 2019

As at August 29, 2019 the following Common Shares and Common Share purchase options were issued and
outstanding:

•     421 352 596 Common Shares;
•     2 258 954 Common Share purchase options with exercise prices ranging from C$0.0387-C$0.29 with a weighted
      average remaining contractual life of 2.31 years;

LIST OF DIRECTORS AND OFFICERS

Craig Wiggill                  Director, Chairman of the Board of Directors
Robert Francis                 Director
Edward Scholtz                 Director
Emma Oosthuizen                Interim Chief Executive Officer
Graham du Preez                Interim Chief Financial Officer and Corporate Secretary

August 29, 2019

Designated Adviser: Questco Corporate Advisory Proprietary Limited




                                                        18

Date: 29/08/2019 03:06:00
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