PRAIRIE LITHIUM LIMITED — Capital/Financing Update 2012

Nov 29, 2012

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ASX RELEASE 30[th] November 2012

KANGWANE CENTRAL BANKABLE FEASIBILITY STUDY DELIVERS A ROBUST LONG-LIFE ANTHRACITE PROJECT

________________

ZYL Limited (“ZYL” or the “Company”) (ASX:ZYL), the Perth-based emerging anthracite producer is pleased to announce the results of the Bankable Feasibility Study (“BFS”) on the Kangwane Central Project (the “Project”) located in South Africa’s Mpumalanga Province.

HIGHLIGHTS:

• Project NPV of US$148m at a discount rate of 8%, based on 100% equity (after tax)

• Nominal IRR of 41.0% (27.2% real)

• Robust economics on an initial Project life of 20 years

• Phased development optimised to produce circa 1.2 Mtpa ROM (≈700 ktpa saleable) for the first eleven years, thereafter circa 900 ktpa ROM (≈400 ktpa saleable) from a combination of opencast and underground operations

• The on-mine ROM total operating cash costs will average US$42.39 per tonne for the opencast and US$30.24 per tonne for underground

• Start-up capex of US$67.6m for the opencast with additional capex required in years 6-7 and 12 of US$70.8m to establish the underground mines

• JORC-compliant Reserves of 19.3 Mt, including Proven Reserves of 17.4 Mt

• The Project will produce a very low sulphur, 16-17% ash product

• Gross Project revenue of US$1.475 billion (pre-tax)

• Net operating cash flow of $754 million

• Average selling price of US$136/tonne FOB, excluding a low sulphur premium

• Operating cash flow margin 31.5%

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Corporate Office: Level 8, 225 St Georges Terrace, Perth 6000,Western Australia Tel: +61 8 9486 4036 Email: info@zyllimited.com.au PO Box 7653, Cloisters Square, Perth 6850, Western Australia Fax: +61 8 9486 4799 Web: www.zyllimited.com.au

Details of the Bankable Feasibility Study

The Kangwane Central Project Bankable Feasibility Study has been completed by RSV Enco Consulting (Pty) Ltd ( “RSV Enco” ), as the lead consultant, for Main Street 800 (Pty) Ltd ( “Main Street” ), the vehicle in which ZYL holds its shareholding in the Project. The results from the BFS demonstrate a long life anthracite project with robust economics and inherent flexibility by virtue of having multiple opencast pits in combination with underground sections.

The Project will be developed in a phased manner commencing as an opencast mine and over time will transform into an underground operation. The majority of the production in the first 10 years of mining will be extracted by opencast mining. The preferred development strategy is based on the use of a contractor for opencast mining and an owner-operated model for underground mining. Throughout both the open pit and underground operations the processing plant will be an owneroperator based facility.

The Project is projected to deliver a strong cash flow and returns to shareholders, and transform ZYL into a producer of high grade anthracite. This is in line with ZYL’s strategic plan of taking advantage of the predicted significant global shortfall in the availability of seaborne anthracite in the next few years.

With the BFS now complete the Company will turn its focus to the permitting and licencing processes to ensure that steady progress is maintained in securing all of the necessary approvals to commence mining as soon as possible. Furthermore, the Company is now in a stronger position to continue with its financing strategies, and to progress discussions with offtakers, strategic partners and logistics service providers.

Project Overview

The Kangwane Central Project is located in an area that is well serviced with key infrastructure and is approximately 100km in a straight line from the port of Maputo which will be used to export Kangwane Central Project’s product for the global steel and associated industries.

Figure 1: Location of the Kangwane Central Project

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The Kangwane Central Project covers a Prospecting Right Area (“ PR Area” ) of 7204 hectares with the anthracite field running centrally through the area in a north-south orientation. The PR Area has been divided into two distinct areas, the Mining Right Area (“ MR Area” ) in the southern block, and the Life of Mine Area ( “LOM Area” ) in the northern block.

The MR Area in the south has been the focus of the BFS and where the opencast and underground mines have been scheduled for the initial 20 years of mining as shown in Figure 2 . The LOM Area in the north represents the future potential for the project where resources may be exploitable as an underground operation, and can be considered either for an expansion or extending the life of the Project.

Figure 2: The Kangwane Central Project Area

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Resource and Reserve Statement – November 2012

The Kangwane Central Project has JORC-compliant resources of 200 Mt, all in the Measured Category of which less than half will be exploited during the initial 20 years of mining. The total resources of the Kangwane Central Project are split roughly equally across the MR Area and the LOM Area ( Table 1 ).

Table 1: JORC-Compliant Resource Statement – Kangwane Central Project

			MR Area			LOM Area
SEAM	GTIS	TTIS	Classification	GTIS	TTIS	Classification
S7	221,482	166,112	Measured	540,898	405,674	Measured
S6	2,461,505	1,846,129	Measured	2,709,735	2,032,301	Measured
S5	6,702,350	5,026,763	Measured	5,512,750	4,134,563	Measured
S4U	7,559,860	5,669,895	Measured	6,143,880	4,607,910	Measured
S4L	13,738,900	10,304,175	Measured	21,290,700	15,968,025	Measured
S3	5,292,310	3,969,233	Measured	8,186,190	6,139,643	Measured
S2	56,825,740	42,619,305	Measured	56,290,240	42,217,680	Measured
S1	1,486,490	1,114,868	Measured	5,084,200	3,813,150	Measured
TOTAL	94,288,637	70,716,478		105,758,593	79,318,945

Note: The Measured Resources are inclusive of those resources modified to produce the Ore Reserves

The Number 2 seam contains the majority of the mineable reserves and is the most consistent formation across the entire area. Raw coal qualities for the MR Area are shown in Table A in the Annexure.

The Resource to Reserve conversion has been completed through the detailed mine planning and scheduling over the MR Area. The reserves are JORC-compliant and 90% are in the Proven Reserve category ( Table 2 ).

A recommendation has been made to undertake a limited number of additional exploration holes in the area between the opencast pits to further increase confidence and upgrade all reserves to the Proven Category. The product qualities for the reserves are detailed in Table B in the Annexure.

Further, the LOM Area will allow for potential reserve and production increases in the future.

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Table 2: JORC-Compliant Reserve Statement – Mining Rights Area Only

			ROM Tonnes	Proven Reserves	Probable Reserves
Block Name	Seam Name	GTIS
Opencast South	S4U	944,928	735,067	735,067	-
Opencast South	S3	677,769	281,876	281,876	-
Opencast South	S2	5,716,248	4,017,834	4,017,834	-
Total Opencast South
			5,034,776	5,034,776	-
Opencast North	S4U	137,989	107,343	55,640	51,702
Opencast North	S3	151,744	94,484	44,596	49,888
Opencast North	S2	5,372,505	3,842,807	2,553,695	1,289,112
Total Opencast North
			4,044,634	2,653,932	1,390,702
Total Opencast		-	9,079,410	7,688,708	1,390,702
Underground South		16,465,315	3,534,566	3,534,566	-
Underground North	S2	29,271,672	6,720,825	6,137,523	583,302
Total Underground			10,255,391	9,672,089	583,302
Total Mining Rights Area
			19,334,801	17,360,797	1,974,004

Mine Design

The mine has been designed to maximise extraction of the Number 2 seam which yields the highest volume of saleable anthracite. Various mine sequencing scenarios, utilising the XPAC mine scheduling software, were considered to ensure the most optimal sizing and depletion model for the reserves in the MR Area. The optimal configuration of the mining layout brought about a combined opencast and underground layout (see Figure A in the Annexure). This established that a 1.2 Mtpa Run of Mine ( “ROM” ) operation, commencing in the opencast areas, and then proceeding underground, was the most sustainable production level.

The reserve depletion model has targeted the high quality-high yield area in the south portion of the MR Area with the mining sequence gradually moving in a northerly direction. Opencast mining will be a standard truck and shovel operation whilst the underground operations will be bord and pillar mining using continuous miners and matched shuttle cars.

A number of mine models were investigated in detail, namely:

• Owner-operated opencast and underground mines

• Owner-operated opencast and contractor-operated underground mines

• Contractor-operated opencast and owner-operated underground mines

• Contractor-operated opencast and underground mines

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The contractor-operated opencast mine model, in which all capital equipment and staff are supplied by the contractor, with an owner-operated underground mine, returned the highest financial return for the project and this option has been selected as the preferred operating model. The coal processing plant will be an owner operated plant.

The production profile for the initial 20 year life of the mine is shown in Figure 3 . Additional schematic diagrams of the mine layouts are shown in Figures A, B, C and D in the Annexure.

Figure 3 : Kangwane Central Project ROM Production Profile

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1400000
1200000
1000000
800000
600000
400000
200000
0
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Y19 Y20
South Pit Tonnes North Pit Tonnes South Underground Tonnes North Underground Tonnes
ROM Tonnes
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Coal Processing Plant

The 200 tonnes per hour coal handling and preparation plant ( “CHPP” ) was designed by Taggart JHDA Engineering (Pty) Ltd, the South African operation of Taggart Global, a world leader in materials handling and coal preparation. The single stage washing plant is designed to operate on a 24 hour a day, 7 days a week basis utilising industry-standard dense medium cyclones and spirals, with provision for adequate maintenance time built into the operating programme.

The CHPP has been designed to handle raw coal, coal washing, and product and discard materials over the life of the project from multiple coal seams, taking into consideration both opencast and underground ROM feed up to 1.2 Mtpa. The plant design was developed to minimise the amount of mechanical equipment required, without compromising the efficiency of the process. Process flow sheet software (LIMN) has been used to run simulations to determine plant efficiencies and predict plant yields targeting an unsized 16% ash product.

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The mine plans have been optimised by exploiting the southern portions of the reserves in the early years of the Project where the yields are the highest, averaging 64.6%. During the 20 year life of the Project a total of 19.3 Mt ROM feed will be processed by the plant producing 10.9 Mt of saleable product giving an overall average practical yield of 56.4%.

All processing support infrastructure has been provided for including a quality control laboratory, central plant control room and mine workshop and change house facilities.

The key plant operating parameters are shown in Table 3 .

Table 3: Plant Design Parameters

Design Parameter	Value
Raw coal feed rate	1 200 000 tpa
Plant design feed rate	200 tph
Plant availability	92%
Number of modules	1
Planned maintenance	400 hourspa
Product size	Maximum 50mm
Targetproductquality	16% ash

A schematic process flow sheet of the CHPP is shown in the Annexure ( Figure E ).

Infrastructure

The Kangwane Central Project has the advantage of being located in an area of South Africa which has good regional infrastructure and is generally well developed economically. The project infrastructure ( Figure 4) has been designed to service the requirements of the opencast and mining operations for the 20 year life of the project. Furthermore, all infrastructure has been designed in such a manner as to ensure that it is in full compliance with existing environmental legislation and in accordance with national regulations.

On mine infrastructure has been strategically laid out to enhance efficiencies for creating effective production output. Inherent flexibility in the design will allow for future variations in the mine plans as well as production expansions, should market conditions warrant it.

An application for power supply to the state energy provider Eskom to provide an initial permanent power connection of 5MVA by September 2014 has been confirmed. This will be followed by another application for a further supply of an additional 3MVA in time to satisfy future underground mining requirements.

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Figure 4: Infrastructure Layout for the Kangwane Central Project

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Environmental and Permitting

Environmental consultants Prime Resources (Pty) Ltd were appointed to assist with the environmental and permitting processes on the project. The Department of Mineral Resources ( “DMR” ), the competent authority dealing with all mining related matters, accepted an application for a Mining Right covering the MR Area in August 2010.

Good progress on work in terms of a scoping study to support the application has been ongoing and the final Environmental Impact Assessment and Environmental Management Plan ( “EIA/EMP” ) was submitted to the DMR at the end of November 2012. Further applications in terms of water use and waste management are being prepared and will be submitted as soon as possible.

A Social and Labour Plan ( “SLP” ) was submitted to the DMR in September 2010, and although no revisions have been requested, a revised SLP will be submitted reflecting the current mining plans and any shortfalls identified during the feasibility study.

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Main Street continues to progress well with all aspects of the environmental and permitting processes and remains on track to secure approvals to commence production in 2014.

Logistics

Various road and rail transport options for the export of finished product were considered by the project’s logistical consultants, Letsema Consulting and Advisory (Pty) Ltd. A detailed analysis of all road and rail options and the various port capacities was conducted, as well as the potential operational complexities attached to each one.

Initially road hauling of product to the port of Maputo in Mozambique was considered the most practical solution. The key advantages are the proximity to Maputo by road (approximately 140km – see Figure 1 ), available capacity at the Maputo Main Port ( “MMP” ) and the ability to handle both sized and unsized products.

The Company, on behalf of Main Street, has been engaging with a port operator during 2012 to secure throughput capacity for the Kangwane Central Project, and has received a detailed proposal to provide capacity for the majority of the initial export volumes. The proposal includes a provision for an increase in capacity to cater for any expansion to the project output, as well as the delivery of product to the port by rail.

Rail options for the transport of product were also considered in the study but due to the difficulty in securing committed rail capacity and rolling stock prior to the commencement of production, this option was precluded in the short term.

Marketing and Sales

Global demand for metallurgical coals is driven to a large degree by the demand in steel production ( Figure 5 ) and its related ferroalloy products. In the various processes it plays a vital role both as a fuel, for pulverised coal injection ( “PCI” ) applications, for example, and also as a source of carbon in the chemistry of many smelting processes where it is used as a reducing agent.

Coking grade metallurgical coal is high quality coal that is transformed into metallurgical coke ( “met coke” ) through an energy intensive heating process before it can be used in applications that cannot tolerate some of its characteristics pre-coking. Met coke therefore carries the associated punitive costs that make other unprocessed reductants a very cost-attractive substitute, in whole or part, in many smelting operations.

Anthracite falls into the category of the highest form of unprocessed reductants and therefore is finding an increasingly beneficial application in a wide range of previously met coke dominated processes. The abundance of coking grade coal is also in decline which further adds to the future importance of anthracite as a carbon substitute, especially since anthracite is used in its raw state and the cost benefits become an ever more key principal advantage to the end users.

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Figure 5: Forecast Global Steel Production

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2000
1800
1600
1400 908
869
827
787
1200 683 726
1000
800
600
400 836 839 867 899 929 955
200
0
2011 2012E 2013E 2014E 2015E 2016E
Source: Wood Mackenzie Rest of World China
Million Tonnes
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Global seaborne anthracite volumes are small in comparison to metallurgical and thermal coal figures, and of the current levels of 40—45 Mtpa almost half is exported from Vietnam. However, due to the rapid increase in domestic consumption Vietnam is expected to become a net importer of anthracite by 2016, and in combination with the increasing demand for high grade anthracite, a global shortfall of 60 Mtpa is forecast by 2016 as shown in Figure 6 .

Figure 6: Supply/Demand Gap for High Grade/Ultra High Grade Anthracite

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100
90
80 88.7
70
72.6
60
50
40
30
20 28.4
19.5
10
0
2011 2016
Source: Wood Mackenzie HG & UHG Supply Potential Demand
Million Tonnes
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ZYL has undertaken extensive analysis of the current and future anthracite price regimes in the international and domestic market utilising information from amongst others Resource Net, a leading international market authority.

The Kangwane Central Project Anthracite price forecast is based on the Resource Net price forecast for a 10% ash product adjusted for the relative quality of product (higher ash, lower fixed carbon), transport costs and “out of spec” product.

This pricing methodology forecasts a price of US$136 in 2014, which has accordingly been set as the base price in the Kangwane Central Project financial evaluation. Subsequent to 2015, prices have been escalated at the current annual US rate of inflation of 3% per annum ( Figure 7 ). Using this methodology, the pricing for Kangwane Central Project anthracite is anticipated to be closely linked to that of a similar South African product reporting prices for similar 16-17% ash anthracite in the export market.

Figure 7: Kangwane Central Project Anthracite Price Forecast

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Market indications are that the sulphur content of anthracite has a significant influence on the price attained and it is expected that a reduction in sulphur from the typical 0.8-0.9% to Kangwane Central Project’s 0.4% will attract a further premium to the product pricing. Whilst sulphur content has not been factored into the pricing forecast, Main Street are of the opinion that there is significant upside potential to be found in the very low sulphur content of Kangwane Central Project’s anthracite.

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This pricing model does not take into account the impact of the anticipated future shortfall in the supply of high grade anthracite, and ZYL believes that this may cause a stepped change in the global anthracite export pricing model, which will directly benefit the Company.

Economic Evaluation

Capital Expenditure

The Kangwane Central Project start-up capital is US$67.6 million ( “Initial Capital” ) to commence production, with further capital of US$70.8 million ( “Underground Capital” ) required for underground operation start-ups in years 5, 6 and 11. The capital costs for Engineering, Procurement, and Construction Management ( “EPCM” ) have been estimated at US$12.5 million whilst the contingencies amount to US$13.7 million. A more detailed breakdown per area is set out in Table 4.

The level of accuracy of the capital estimates is plus 10% and minus 15%. A detailed contingency assessment was conducted by area and by discipline for the whole project scope, with each being assessed critically to determine appropriate specific contingencies. The resultant contingency allowance is calculated at 9.92% of the total capital cost.

Table 4: Capital Expenditure Estimates (US$)

Area	Initial Capital	Underground Capital	Total Project Capital
Off mine Infrastructure	352 518	-	352 518
On Mine Infrastructure	29 153 722	3 887 060	33 040 782
Bulk Services	172 280	-	172 280
Process Plant	8 850 892	-	8 850 892
Mining - Surface	12 453 136	-	-
Mining - Underground	-	54 433 210	66 886 345
Project In directs	2 849 640	-	2 849 640
Sub-total	53 832 188	58 320 269	112 152 458
EPCM Costs	7 277 032	5 220 809	12 497 841
Contingency	6 455 050	7 270 216	13 725 265
Total	67 564 270	70 811 294	138 375 564

Sustainable capital expenditure to be spent over the life of mine is US$93.9 million and includes underground mining equipment extensions, refurbishments and rebuilds. The capital will enable production from the mine to be maintained at the designated production levels from the opencast and underground operations for the 20 year life of the operation.

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Operating cost

The on-mine ROM cash operating costs for opencast production will average $42.39 per tonne and underground production will average $30.24 per tonne as set out in Table 5 .

The operating costs on a Free-on-Mine ( “FOM” ) basis for the life of mine average US$71.12 per opencast sales tonne and US$56.52 per underground sales tonne. After including transport and loading costs of US$15.00 per sales tonne and all inclusive port costs of $12.50 per sales tonne, this equates to an average Free-on-Board ( “FOB” ) cost of US$98.61 per opencast sales tonne and US$84.01 per underground sales tonne over the life of mine.

Table 5: Operating Costs Estimates

		Underground operating cost -$/tonne
	Opencast operating cost -$/tonne
Description
Opencast Mining	33.25	0.00
Underground Mining	0.00	20.46
Process Plant, Stockpile and Discard Handling	3.80	3.80
Electricity	0.84	1.47
On Mine Services	4.51	4.51
Total FOM Costper ROM Tonne	42.39	30.24
Average LOM Yield	0.60	0.54
Total FOM Costper Sales Tonne	71.12	56.52
Transport Costs	14.99	14.99
Port Costs	12.50	12.50
Total FOB Costper Sales Tonne	98.61	84.01

Project Financial Evaluation

Project economics were evaluated using a discounted cash flow analysis, with production estimates, capital costs, future revenues and operating costs projected into the future to yield annual net cash flows and ultimately a Net Present Value ( Table 6 ). The cash flows calculated are after tax and were discounted at 8% to reflect the time value of money and risk factors. An Internal Rate of Return ( “IRR” ) and payback period for the project were also calculated.

Macro-economic assumptions including inflation, exchange rate and specific cost inflation rate are based on the forecasts and views of derived by way of consensus from a number of leading South African Banks. The financial evaluation of the project has utilised a long term exchange rate of R8.34 to the US$ which is significantly lower than the spot price of R8.88 on 27 November 2012, which would have an immediate enhancement to the IRR and NPV value of the project.

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Table 6 : Kangwane Central Project Financial Highlights

	October 2012 Money Terms (Real) $'000
Parameter
Gross Project Revenue	1 475 273
Net Operating Cash Flow	754 079
Initial Capital(Years 1 & 2 including contingencies & EPCM)	67 564
Underground Capital(Years 6,7 & 12, including contingencies and EPCM)	70 811
Average ROM Production*	1.022 mtpa
Plant throughput capacity	200 tonnesper hour
Average Saleable Product Volume*	574 ktpa
Paybackperiod(Initial capital, Years)	2.90

* Ramp-up and ramp-down period excluded

Financial Evaluation Results	$'000
Project NPV(8% nominal discount rate, 100% equity, after tax)	147 823
Nominal Project IRR(100% equity, after tax)	41.0%

A sensitivity analysis on the four key parameters – capital expenditure, operating costs, yield and the sales price – was undertaken in terms of the IRR of the project. The results are shown in Table 7 .

Table 7: Financial Indicators – Sensitivity Analysis

	Nominal Internal Rate of Return	Nominal Internal Rate of Return	Nominal Internal Rate of Return	Nominal Internal Rate of Return	Nominal Internal Rate of Return	Nominal Internal Rate of Return	Nominal Internal Rate of Return
**Percentage Change **	15%	10%	5%	0%	-5%	-10%	-15%
Capital Expenditure	34.4%	36.4%	38.6%	41.0%	43.5%	46.4%	49.4%
Operating Costs	24.0%	29.7%	35.4%	41.0%	46.7%	52.5%	58.4%
Product Yield	57.5%	52.6%	46.8%	41.0%	35.2%	29.1%	22.8%
Selling Price	65.8%	57.4%	49.1%	41.0%	32.8%	24.1%	14.7%

As can be seen the project returns are most sensitive to selling price and least sensitive to capital expenditure.

The summary of the magnitude and timing of cash flows modelled for Kangwane Central Project is depicted in Figure 8 (South African Rand). The robust results from the BFS represent an excellent outcome and confirm the long-term, high-value potential of the Kangwane Central Project.

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Figure 8: Kangwane Central Project – Net Cash Flow Forecast – After Tax (SA Rand)

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3,500
3,000
2,500
2,000
1,500
1,000
500
0
(500)
(1,000)
Y-1 Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10Y11Y12Y13Y14Y15Y16Y17Y18Y19Y20Y21
Cumulative Net Cash Flow Annual Net Cash Flow
R millions
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Conclusion

CEO Ian Benning commented “The team is extremely pleased with the results of the BFS, which demonstrates the robust technical and financial viability of the Kangwane Central Project and a clear path to the development of the Kangwane Central Project. This will transform ZYL into a producer of high grade anthracite in the short term and provide the platform for significantly increasing the scale of operations through the potential extension in the LOM, an expansion of the Project, and advancement of the Kangwane South and North Projects in the coming years.

With the Kangwane Central Project’s proximity to the port and its geographical location relative to other producers, it will allow ZYL to take advantage of the predicted significant global shortfall in the availability and supply of seaborne anthracite to India, Brazil and Europe in the next few years.

Furthermore, the Company is now in a stronger position to continue with its financing strategies, and to progress discussions with offtakers, strategic partners and logistics service providers.”

ENDS

Contact: Ian Benning, CEO, ZYL LIMITED

T: +27 (0) 87 350 2751 M: +27 (0) 10 591 0634 E: ian.benning@zyllimited.co.za

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Head Office - Perth Australia

T: +61 (0) 8 9486 4036 E: info@zyllimited.com.au

Media - Australia

Annette Ellis, Purple Communications

M: +61 (0) 458 200 039

E: aellis@purplecom.com.au

About ZYL Limited

ZYL Limited is listed on the Australian Securities Exchange (ASX) and aims to become one of the world’s leading anthracite coal producers. The mission of ZYL is to develop high-margin metallurgical coal deposits for domestic and export markets. The Kangwane Central Project is located close to rail, port, power and water infrastructure.

Important information

The information in this announcement is an overview and does not contain all information necessary to make an investment decision. To the extent permitted by law, no representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this announcement, any of which may change without notice. This document is not a prospectus, disclosure document or offering document under Australian law or under any other law. It does not constitute an offer or invitation to apply for securities. It is for information purposes only. This announcement is not an offer of securities for subscription or sale in the United States or any other jurisdiction in which such an offer or solicitation is not authorised or to any other person to whom it is unlawful to make such an offer or solicitation. Some of the information contained in this announcement constitutes forward-looking statements that are subject to various risks and uncertainties, not all of which may be disclosed. These statements discuss future objectives or expectations concerning results of operations or financial condition or provide other forward-looking information.

Prospective investors should make their own independent evaluation of an investment in the securities. The material contained in this document does not take into account the investment objectives, financial situation or particular needs of any particular investor. No recommendation to investors regarding the suitability of the securities has been made and the recipient must make its own assessment and/or seek independent advice on financial, legal, tax and other matters, including the merits and risk involved. This announcement and its contents have been distributed to you, in confidence, solely for your information and may not be retransmitted or otherwise reproduced or disclosed to third parties or made public in any way, in whole or in part, for any purpose without written permission.

Competent Person Statement

Information in this report that relates to exploration results and minerals resources is based on information compiled by Mr Peet Meyer and Mr Ian MacFarlane, who are consultants to the company. Mr Meyer is a member of the Geological Society of South Africa, a Recognised Overseas Professional Organisation. Mr MacFarlane is a Fellow of South African Institute of Mining and Metallurgy, a Recognised Overseas Professional Organisation. Messrs Meyer and MacFarlane have sufficient experience which is relevant to the styles of mineralisation and types of deposits under consideration and to the activities they are undertaking to qualify as a Competent Persons as defined in the 2004 Edition of the ‘Australian Code of Reporting of Exploration, Mineral Resources and Ore Reserves’. Messrs Meyer and MacFarlane consent to the inclusion in this report of the matters based on his information in the form and context in which it appears.

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ANNEXURE

Table A: Raw Coal Qualities – Mining Right Area

		Resource	- Mining Right Area(Air Dry Basis)	- Mining Right Area(Air Dry Basis)	- Mining Right Area(Air Dry Basis)	- Mining Right Area(Air Dry Basis)
SEAM	GTIS	TTIS	RD	RCV	RIM	RA	RV	RFC	RTS
	(t)	(t)	(g/cm3)	(MJ/kg)	(%)	(%)	(%)	(%)	(%)
S7	221,482	166,112	1.45	30.30	0.97	13.14	6.57	79.31	0.74
S6	2,461,505	1,846,129	1.64	22.89	1.28	30.58	5.44	62.70	0.75
S5	6,702,350	5,026,763	1.70	21.84	1.35	35.62	6.74	56.29	0.37
S4U	7,559,860	5,669,895	1.56	25.17	1.29	23.77	6.92	68.03	0.44
S4L	13,738,900	10,304,175	1.73	19.71	1.92	36.42	6.80	55.10	0.22
S3	5,292,310	3,969,233	1.66	22.19	1.75	30.37	5.91	61.97	0.28
S2	56,825,740	42,619,305	1.63	24.14	1.97	24.92	7.11	66.00	0.24
S1	1,486,490	1,114,868	1.76	20.50	2.02	36.27	5.59	56.12	0.59
TOTAL	94,288,637	70,716,478

Abbreviations:

GTIS - Gross Tonnes In Situ

• TTIS - Total Tonnes In Situ

• RD - Relative Density

RCV - Raw Calorific Value RIM - Raw Inherent Moisture RA - Raw Ash Content RV - Raw Volatile Content RFC - Raw Fixed Carbon Content RTS - Raw Total Sulphur Content

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Table B: Product Qualities – Mining Rights Area

			Reserve - ProductQualities	Reserve - ProductQualities	Reserve - ProductQualities	Reserve - ProductQualities
SEAM	ROM Tonnes	*PY	PCV	PIM	PA	PV	PFC	PTS	PP
S4U	842,409	70.72	28.78	1.19	15.99	6.90	75.92	0.49	-
S3	376,359	52.58	24.05	1.82	18.29	6.07	73.91	0.37	0.009
S2 – OC	7,860,641	63.33	27.61	1.97	16.97	7.06	74.05	0.32	0.039
S2 – UG	10,255,391	60.85	27.46	1.86	16.78	6.36	75.14	0.25	0.050
TOTAL	19,334,801	62.17	27.52	1.88	16.75	6.58	74.91	0.28	0.047

• theoretical borehole yields

Abbreviations:

GTIS - Gross Tonnes In Situ

• TTIS - Total Tonnes In Situ

PY - Product Yield

PCV - Product Calorific Value

PIM - Product Inherent Moisture

• PA - Product Ash Content

PV - Product Volatile Content

PFC - Product Fixed Carbon

PTS - Product Total Sulphur Content

• PP - Product Phosphorus Content

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Figure A: LOM Production Scheduling – Kangwane Central Project

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Figure B1: Schematic of the Kangwane Central South Pit Shell

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Figure B2: Schematic Section through the Kangwane Central South Pit Shell (west to east)

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Figure B3: Schematic Section through the Kangwane Central South Pit Shell (north to south)

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Figure C: Schematic of the Kangwane Central North Pit Shell

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Figure D: Typical schematic of a Kangwane Central Project Underground production section

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Figure E: Coal Handling & Processing Plant – Schematic Flow Sheet

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