CONTINENTAL COAL LTD - Operations Report for the Dec 2013 Quarter

31 January 2014

REPORT FOR THE QUARTER ENDED 31 DECEMBER 2013

Continental Coal Limited ("Continental" or "the Company") is pleased to provide
its operations report for the quarter ended 31 December 2013.

COMPANY HIGHLIGHTS

Operations

  * ROM thermal coal production for the quarter of 573,253, a 22% increase on
    2012. Year to date ROM production of 1,199,439, an increase of 20% on 2012

  * Sales for the quarter of 461,918t, a 3% increase on 2012 with year to date
    sales 21% higher than 2012

  * 61% increase in export sales for the quarter on 2012 with year to date
    export sales 53% higher than 2012

  * Penumbra production expected to achieve design capacity in April 2014

  * Vlakvarkfontein on track to meet production and cost guidance

Corporate

  * Execution of binding term sheet for $5 million bridge finance to provide
    near term working capital to allow for a broader recapitalization and
    restructure of the Company's financial arrangement's to be pursued

  * Board and management changes to be implemented subject to closing of the
    bridge funding arrangements


 1.  OPERATIONS

 1.1 Health and Safety

During the Quarter, four Dressing Station Case ("DSC") accidents were reported
at the Company's mining and processing operations - all four DSC accidents were
relatively minor incidents reported at the Penumbra Underground Mine with none
reported at the Vlakvarkfontein Mine and Delta processing facility.  Two
reportable dam overflowing related incidents have also occurred at the Penumbra
Underground Mine and processing facility during the quarter under review due to
excessive rain. The incidents had no material impacts and their causes are
being addressed.

 1.2 Operational performance



                       Operational performance (tonnes)

                    Quarter ended Quarter ended 6 months ended   6 months
                                                                   ended
                     31 December   31 December   31 December
                        2013          2012           2013       31 December
                                                                   2012

Run of Mine (ROM)
production

Vlakvarkfontein        333,775       313,495       728,983        735,748

Ferreira               110,707       152,280       247,129        258,037

Penumbra               128,771        2,694        223,327         2,694

Total ROM              573,253       468,469      1,199,439       996,479
production

Feed to plant

Ferreira               116,436       161,605       269,670        323,253

Penumbra               120,872        2,694        216,401         2,694

Total feed to plant    237,308       164,299       486,071        325,947

Export yields

Ferreira                66.9%         66.2%         72.0%          68.0%

Penumbra                58.2%         26.2%         55.4%          26.2%

Export coal buy-in     19,024           -           20,953           -

Domestic sales         304,676       351,264       712,624        647,659

Export sales           157,242       97,939        320,696        209,750

Total sales            461,918       449,203      1,033,320       857,409

Total ROM coal production for the Quarter of 573,253t was achieved from the
Vlakvarkfontein, Ferreira and Penumbra Coal Mines. Total ROM production
increased by 22% from the comparable quarter in 2012 and increased by 20% for
the 6 months ended 31 December 2012.

Feed to the Delta Processing Operations for the Quarter of 237,308t represented
a 44% increase to the comparable quarter in 2012 and also a 49% increase for
the 6 months ended 31 December 2013.

Ferreira achieved a 66.9% export yield for the quarter which was in line with
the comparative quarter in 2012.

Export yields at Penumbra have shown a steady increase during the past 6 months
with the average yield of 58.2% recorded for the quarter. Contamination from
sand stone rolls encountered at Penumbra had a negative impact on the
production and export yield.

 1.3 Vlakvarkfontein Coal Mine

Vlakvarkfontein Coal Mine produced 333,775t ROM for the Quarter, which was 6%
higher than the comparable quarter in 2012 and on a year-to-date basis very
similar to the production achieved for the 6 months ended 31 December 2012. ROM
production for the 6 months ended 31 December 2013 however exceeded the budget
of 692,250t by 5%. An average strip ratio of 2.13:1 was achieved for the
Quarter (2.1:1 YTD).

Total thermal coal sales during the Quarter from the Vlakvarkfontein Coal Mine
were 304,676t and comprised 266,051t to Eskom and 38,625t of non-select coal.
Sales for the 6 months ended 31 December 2013 of 579,432t to Eskom were 11%
above budget with non-select coal sales of 133,192t being 52% below budget.

Free-on-Truck (FOT) costs for the quarter were ZAR154/t (US$14.00) which was 7%
lower than the budgeted cost of ZAR166/t (US$15.10) for the quarter.
Free-on-Truck (FOT) costs for the 6 months ended 31 December 2013 were ZAR151/t
(US$13.73) which was 2% lower than the budgeted cost of ZAR153/t (US$13.91) for
the period.

Vlakvarkfontein remains on target to achieve its planned production of 1.3 Mt
ROM at a cost of ZAR152/t (US$13.82) for FY2014.

 1.4 Ferreira Coal Mine

ROM coal production at the Ferreira Coal Mine for the Quarter, which was its
last producing quarter, totaled 110,707t which was 76% above the budgeted ROM
tonnes for the quarter. Ferreira produced a total of 247,129 ROM tonnes for the
6 months ended 31 December 2013 exceeding the planned ROM tonnes for the period
with 49,126t. An average strip ratio of 2.5:1 was achieved for the Quarter
(3.1:1 YTD).

Export yields for Ferreira averaged 66.9% during the quarter and 72.0% for the
6 months ended 31 December 2013.

Mining costs of ZAR147/t (US$13.36) ROM with Free-on-Board (FOB) costs of
ZAR623/t (US$56.64) were recorded for the quarter. Mining cost for the 6 months
ended 31 December 2013 were ZAR190/t (US$17.27) with FOB costs of ZAR641/t
(US$58.27) which were a 3% improvement on the ZAR662/t (US$60.18) average FOB
recorded for the 2013 financial year.

Mining at Ferreira has now been terminated with only inventory clean-up to be
completed. The Company is finalising the closure plan with all stakeholders and
will commence the final rehabilitation of the mine site on approval of the
closure plan by all stakeholders.

 1.5 Penumbra Coal Mine

The commissioning of the permanent ventilation shaft in August 2013 was the
last remaining infrastructure item required to reach the design capacity of
63,000 tonnes per month. With adequate ventilation in place since early
September 2013, both continuous miner sections were fully operational and able
to be deployed in the planned mining outlay of 9 road production sections.
Production rates increased to an average of 31,518t ROM per month during the
quarter ended 30 September 2013 with 51,000t ROM produced in October 2013. The
availability of the continuous miners during November 2013 had a negative
impact on the production build-up towards steady state production of 63,000t
ROM per month. The down-time of the continuous miners was caused by the
malfunction of the control valve circuit which resulted in water contaminating
the hydraulic oil. Operational management, together with the original equipment
manufacturer (OEM) managed to resolve this during late November 2013. Stone
rolls that are displacing the coal seam in the current mining area are also
impacting on the production rate and the delivered yield due to added
contamination. Management is currently reviewing the planned production lay-out
and evaluating opportunities to amend the lay-out to mitigate the impact of the
stone rolls on the production rate of the continuous miners.

A drill-and-blast section was added to the two continuous miner sections during
the quarter which will add additional flexibility to achieve and maintain the
planned production rate. Each continuous miner section currently has two
shuttle cars each with the third shuttle cars expected in February 2013,
creating further flexibility for steady state production.

ROM coal production at the Penumbra Coal Mine for the Quarter totaled 128,771t,
a 36% increase on the previous quarter's ROM production of 94,556t. Production
build-up at Penumbra is now forecast to achieve its design capacity of 63,000t
ROM per month by April 2014.

Export yields at Penumbra have shown a steady increase during the quarter with
the average yield of 58.2% recorded, a 13% improvement on the previous
quarter's yield of 51.5%. The yield is expected to improve to the planned 62%
with the increase in production and the mitigation of the additional
contamination caused by the stone rolls.

Mining costs of ZAR158/t (US$14.36) ROM were similar to the costs achieved in
the prior quarter with the FOB costs of ZAR676/t (US$61.45) recorded for the
quarter, a 5% increase on the FOB costs of the previous quarter.

Penumbra is forecasting the delivery of 570,000t ROM during the 2014 financial
year at a FOB cost of R580 (US$53) per sales tonne.

 2. DEVELOPMENT PROJECT


 2.1 De Wittekrans Coal Project

The Mining Right for De Wittekrans was granted in September 2013 and the
Company expects the Integrated Water Use License (IWUL) to be granted in Q2
2014. The South African Department of Mineral Resources (DMR) has informed the
Company that they received an appeal in terms of Section 96 of the Mineral and
Petroleum Resource Development Act (MPRDA) to the Mining Right that has been
awarded for De Wittekrans. Section 96 of the MPRDA allows interested and
affected parties to appeal against an approved mining right on various grounds
and also sets out the appeal process. The appeal was lodged by the Federation
for a Sustainable Environment on behalf of surface right owners over which area
the mining right was granted. They are appealing the process followed in
application and awarding of the mining right as well as the ability of the
proposed mining activity to comply with certain environmental and
socio-economic requirements within the MPRDA and approved Environmental
Management Program (EMPR). The Company, through its legal counsel, is
responding to the appeal in terms of the process set out in Section 96 of the
MPRDA. The IWUL application will continue while this appeal is being opposed.

 3. EXPLORATION PROJECTS

 3.1 Botswana Coal Projects

Negotiations on the previously announced earn-in agreement on Prospecting
licences 339/2008 and 341/2008 were terminated during the quarter. The Company
is in early stage discussions with 2 unrelated parties to reach a commercial
agreement on 2 of the Prospecting licences that have been awarded to the
Company. The third license is in the process to be relinquished back. Further
detail will be made available as progress is made in the negotiations.

 4. CORPORATE

 4.1 Bridge finance

The Company has executed a binding term sheet with UK corporate advisory firm,
Empire Equity Limited ("Empire Equity"), to provide $5 million ("Investment
Amount") of limited recourse bridge funding. The funds raised will be applied
towards general operating expenses and payments to creditors of the Company
that do not otherwise agree to standstill agreements, allowing the Company to
continue trading as a going concern while it continues to seek to undertake a
broader recapitalisation and restructure of the Company and its financial
arrangements.

Subject to finalising definitive documentation, Empire Equity and/or its
nominees (the "Investors") will invest in 7.5 million unsecured convertible
promissory notes ("Notes") with a face value of A$1.00 at a discounted issue
price of A$0.6667 per Note and with a maturity date of 4 months post closing.
The Investors have also undertaken to assist the Company in undertaking a
rights issue currently proposed to raise up to A$28 million at an offering
price of A$0.01 per share (terms to be finally determined by the Company and
the underwriter engaged), including procuring underwriting of the rights issue,
with proceeds to be used to settle amounts owed by the Company to various
existing convertible note holders and other major creditors. The Notes are only
redeemable upon successful completion of the rights offer, being full
subscription including underwriter subscriptions, upon which the Investors will
have the option to redeem the Notes by either conversion into shares in the
Company (subject to obtaining necessary shareholder approvals) at a conversion
price equal to the rights offering price or request payment of the A$7.5
million face value in cash. The Investors are also required to procure
standstill agreements for 90 days from convertible note holders and other major
creditors of the Company to allow for the completion of the rights offering or
other recapitalization.

The Investors will receive a 6% fee on the Investment Amount as well as 70
million options, subject to shareholder approval, for providing the $5 million.
Each option will be exercisable at the rights offering price with 3 years to
expiry. In the event that shareholder approval is not obtained to deliver the
options, $500,000 in cash will become payable to the Investors in lieu of the
options. 100 million shares will also be issued to a settlement agent and held
in escrow as collateral, either to be sold in the event of default with
proceeds to be paid to the Investors, or if no default occurs, transferred to
applicants under the rights issue.

The Company is still seeking to finalise closing of the $5 million of bridge
funding from Empire Equity. The Investors have advised that fund transfers have
been initiated and the Company is awaiting confirmation from its escrow agent
of the receipt of funds. The Company will further update the market as
developments occur

 4.2 Secured debt

The prepayment by EDF Trading of a Coal supply Agreement in 2011 has been
restructured into a financial loan repayable through 24 monthly instalments
commencing in July 2014. The loan bears interest at 10% per annum and interest
will be capitalized until June 2014. Executing binding legal agreements for
this restructure is dependent on the recapitalisation of the Company and EDF
being provided a second ranking security over the Penumbra underground coal
mine and its assets.

The ABSA Project Finance facility secured over Penumbra Coal Mine is currently
in default due to the shares of the Company being suspended on the ASX and AIM.
ABSA is working with the Company during this recapitalisation process but has
reserved all of their rights while the recapitalisation in under way.

 4.3 Proposed listing on the Johannesburg Stock Exchange

The proposed listing has been postponed until such time as the recapitalisation
of the Company has been completed.

 4.4 Changes to the Board and Executive management

A condition to providing the funding is the resignation or termination of the
CEO, CFO and Non-Executive directors Mike Kilbride and Johan Bloemsma on
closing. To join the Board on closing of the transaction and subject to any
required regulatory approvals are:

  * Peter Landau, who is a former executive director of the Company, having
    resigned in May 2013. It is also noted that companies of which Mr Landau is
    a director or major shareholder are significant trade creditors or the
    Company, being owed approximately $2.8 million;

  * Paul D'Sylva, who is the Venture Partner of Empire Equity;

  * Mike Gibson, who is currently the CEO of Genet South Africa, a mineral
    resources and mining service company; and

  * a nominee from the creditors group.

Further details on the proposed new directors, including information required
under the AIM rules for companies, will be provided on or prior to their
appointment.

The management structure of the Company will be finalized after closing of the
funding and further consideration by the new board.

 4.5 ASX and Aim share trading suspension

The shares of the Company will remain suspended from trading on both the ASX
and AIM markets. The reconstituted Board of Directors will consider a decision
on seeking to lift the suspension of the shares following the closing of the
transaction and pending the provision of further clarification of its financial
position to the market.

Yours faithfully

Don Turvey
Chief Executive Officer

For further information please contact:

Media (Australia)
David Tasker
Professional Public Relations
T: [phone]

Nominated Advisor                         Joint Brokers
Stuart Laing                              Jeremy Wrathall / Chris Sim
RFC Corporate Finance                     Investec Bank plc
T: [phone]                        T: [phone]

                                          Jonathan Williams
                                          RFC Ambrian Ltd
                                          T : [phone]

About Continental Coal Limited

Continental Coal Limited (ASX:CCC/AIM: COOL) is a South African thermal coal
producer with a portfolio of projects located in South Africa's major coal
fields including three operating mines, the Vlakvarkfontein, Ferreira and
Penumbra Coal Mines, producing approx. 2.8Mtpa of thermal coal for the export
and domestic markets. A Feasibility Study was also completed on a proposed
fourth mine, the De Wittekrans Coal Project. The Company has concluded
strategic off-take and funding agreements with EDF Trading for its export
thermal coal production and secured debt funding from ABSA Capital to fund its
growth.

Competent Persons Statement

The information in this release that relates to Coal Resources on
Vlakvarkfontein, Vlakplaats and Wolvenfontein is based on resource estimates
completed by Dr. Philip John Hancox. Dr. Hancox is a member in good standing of
the South African Council for Natural Scientific Professions (SACNASP No.
400224/04) as well as a Member and Fellow of the Geological Society of South
Africa. He is also a member of the Fossil Fuel Foundation, the Geostatistical
Association of South Africa, the Society of Economic Geologists, and a Core
Member of the Prospectors and Developer Association of Canada. Dr. Hancox has
more than 12 years' experience in the South African Coal and Minerals
industries and holds a Ph.D from the University of the Witwatersrand (South
Africa).

The information in this release that relates to Coal Resources on Penumbra, De
Wittekrans, Knapdaar, Leiden and Wesselton II is based on coal resource
estimates completed by Mr. Nico Denner, a full time employee of Gemecs (Pty)
Ltd. Mr. Denner is a member in good standing of the South African Council for
Natural Scientific Professions (SACNASP No. 400060/98) as well as a Member and
Fellow of the Geological Society of South Africa. He has more than 15 years'
experience in the South African Coal and Minerals industries.

The information in this release that relates to Coal Resources on Project X and
Vaalbank is based on coal resource estimates completed by Mr. Coenraad van
Niekerk, a full time employee of Gemecs (Pty) Ltd. Mr. van Niekerk is a member
in good standing of the South African Council for Natural Scientific
Professions (SACNASP No. 400066/98) as well as a Member and Fellow of the
Geological Society of South Africa. He has more than 38 years' experience in
the South African Coal and Minerals industries.

The information in this release that relates to Coal Resources on Mooifontein
is based on coal resource estimates completed by Mr. Dawie van Wyk, a full time
employee of Geocoal services (Pty) Ltd. Mr. van Wyk is a member in good
standing of the South African Council for Natural Scientific Professions
(SACNASP No. 401964/83) as well as a Member and Fellow of the Geological
Society of South Africa. He has more than 30 years' experience in the South
African Coal and Minerals industries.

The Coal Reserves on Vlakvarkfontein, De Wittekrans and Penumbra is based on
reserve estimates completed by Eugène de Villiers. Mr. de Villiers is a
graduated mining engineer (B.Eng) Mining from the University of Pretoria and is
professionally registered with the Engineering Council of South Africa (Pr.eng
no - 20080066). He is also a member of the South African Institute of Mining
and Metallurgy (SAIMM Membership no. 700348) and the South African Coal
Managers Association (SACMA Membership no. 1742). Mr. de Villiers has been
working in the coal industry since 1993 and has a vast amount of production and
mine management as well as project related experience.

Forward Looking Statement

This document includes certain statements that may be deemed "forward-looking
statements" and information. All statements in this document, other than
statements of historical facts, that address future production, reserve
potential, exploration drilling, exploitation activities and events or
developments that the Company expects to take place in the future are
forward-looking statements and information. Although the Company believes the
expectations expressed in such forward-looking statements and information are
based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in the forward-looking statements and information. Factors that could cause
actual results to differ materially from those in forward-looking statements
include market prices, exploitation and exploration successes, drilling and
development results, production rates and operating costs, continued
availability of capital and financing and general economic, market or business
conditions. Investors are cautioned that any such statements are not guarantees
of future performance and actual results or developments may differ materially
from those stated.

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