PRAIRIE LITHIUM LIMITED — Capital/Financing Update 2012

Sep 9, 2012

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ASX RELEASE 10 September 2012

ZYL ARRANGES $18 MILLION FINANCING

ADVANCES PROJECT DEVELOPMENT STRATEGY

• $18 million funding arranged via Convertible Note Term Sheet arranged by a sophisticated investor with approved funding from a Chinese Bank

• Funds will be used to;

• increase ZYL’s ownership of the Mbila project to 51% (post York acquisition)

• finalise the Bankable Feasibility Studies (BFS) at the Mbila and Kangwane Central projects, and

• supplement general working capital

• Mbila acquisition payments in respect of securing 51% ownership deferred until December 31, 2012

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ZYL Limited (“ZYL” or the “Company”) (ASX: ZYL), the Perth-based emerging anthracite producer with key projects in development in South Africa, has entered into a term sheet for an $18 million, 35 month term, Convertible Note with a sophisticated investor (“Investor”) via a special purpose entity

A term Sheet has been executed by ZYL and the Investor in conjunction with an Approval Letter for a Term Bilateral Loan for $18 million from a Chinese Bank based in Australia and formal agreements are expected to be executed shortly. The issue of the Convertible Note is conditional upon execution of final documentation by the parties and the usual regulatory approvals, amongst other things; shareholder approval to allow conversion of the Convertible Notes into ordinary ZYL shares and Foreign Investment Review Board (FIRB) approval. It is anticipated that these approvals will be obtained in early November 2012 with drawdown shortly thereafter. In the interim, the Investor has agreed to provide a bridging facility of $2 million, subject to FIRB approval, within approximately one month. This bridging facility is part of and not in addition to the $18 million facility.

CEO Ian Benning commented, “We are delighted with the financing and the support provided through this financing. We see this as a major milestone in the advancement of our two principal assets going forward, the Mbila and Kangwane Central projects. Having both Bankable Feasibility Studies complete

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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

and a majority interest in our key projects will elevate ZYL to the next level in its project development pathway.”

The key terms of the Convertible Note and information required by ASX Listing Rule 3.10.3 are summarised in Appendix 1.

Mbila Project Ownership

ZYL has successfully renegotiated the payment terms of the Mbila acquisition with the Mbila vendors so that the two payments that secure 51% ownership for ZYL totalling $13.6 million (principle payments excluding interest) are now due no later than December 31, 2012. Part of the proceeds from the Convertible Note will be used to meet this obligation. The particulars of the revised terms and final payment terms to secure the residual 23% to bring its interest to 74% are detailed in Appendix 2. Further details relating to the mechanics behind the ZYL Mbila project interest and the financial ownership commitments are provided in the quarterly report released to the market on 1 August 2012.

ZYL has a call option for a two years from the signature date (15 September 2011 until 15 September 2013), subject to payment of the amounts referred to above, to require the sellers to sell a further 23% of Mbila for US$14 million (plus 1% interest for each month that settlement does not occur following the 18 May 2012.

The sellers will have a put option for the final six months of the two year period to require ZYL to purchase a further 23% for US$14 million.

Kangwane Central Ownership

The completion of the Kangwane Central BFS in addition to the subscription of a the A Preference share to the value of A$7 million[1] , and the subscription or ordinary shares to the value of A$3.5million[1] are conditions precedent to ZYL’s ownership in the project increasing to 50.12% from 42.86%.

Strategy to Fund the Project

ZYL has been identifying and seeking strategic partners or off-takers to participate in the development of each of its assets.

Since the beginning of the year the company has received multiple expressions of interest from third parties who have indicated a desire to secure off-take, provide debt finance and/or project funding, and to partner with ZYL.

These discussions have been positive with their progression and subsequent outcome now dependent on the completion of the BFS’s.

1 Calculated at an exchange rate of R8,5 to the Australian Dollar

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The Company’s focus remains on developing and advancing its projects to production with its respective existing BEE partners. ZYL will consider and evaluate all available options that will lead to achieving this outcome.

In addition to lowering ZYL’s share of the capital development expenditure to develop Mbila and Kangwane Central, partnering or off-take agreements with a larger group will enable ZYL to look at increased production rates and enhanced infrastructure solutions.

In this regard, ZYL proposes to enter into a Product Services Agreement (Appendix 3) with the Investor. The Investor will provide advice in relation to the marketing and sales of the product and assist in the rail, road and other logistical issues as appropriate. This agreement does not restrict ZYL from working and negotiating with off-take partners or new project investors, but provides a further avenue to project financing.

It is expected that the Product Services Agreement will require ZYL to pay a service fee of 1.5% of attributable mine gates sales (exclusive of deliver/logistics costs) for the first 3 years of production only. For clarity, only one fee will be payable.

Alternatively, should the Investor arrange or provide financing for one or both mines, then the Investor will be entitled to a fee of 3% of attributable mine gate sales proceeds (exclusive of delivery/logistics costs) payable in respect of life-of-mine production in respect of the mine(s) financed, with such production determined using the BFS. For the avoidance of doubt only one fee is payable.

A buy out option is provided for under both scenarios and is detailed in Appendix 3.

CEO Ian Benning commented “We are very pleased with this agreement as it provides us with flexibility to work with off-take partners and project investors while at the same time allows for the Investor to work together with the Company and the Bank to provide ZYL with another option for project financing for the development of the projects.”

York Acquisition Update

During the second quarter of 2012, ZYL executed a binding heads of agreement to acquire 100% of York Energy N.L. (“York”) for $12 million in ZYL shares to be issued at approximately $0.18 (less outstanding liabilities). York owns 7% of Mbila (5% is held in escrow) and can earn up to an additional 23% in the Mbila project via a ‘put and call’ option for $14 million. In addition to the Mbila project, York has interests and rights in the Marble and Kangwane North projects of 60% & 70% respectively.

In the update to shareholders dated July 18, 2012 on the York acquisition process it was anticipated that the notice of meeting (“NOM”) and independent experts report (“IER”) would be supplied to shareholders by the end of August.

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We are pleased to advise that the Share Purchase Agreement between ZYL and York shareholders has been executed and that the NOM & IER are finalised subject to regulatory review. The documents will be supplied to shareholders in advance of a shareholders meeting anticipated to be held in November.

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Diagram 1: The location of the ZYL projects should the York acquisition be approved by shareholders

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

Head Office - Perth Australia T: +61 (0) 8 9486 4036

• E: info@zyllimited.com.au

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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. Flagship projects are the Mbila and Kangwane projects in South Africa, 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.

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Appendix 1

The key terms of the Convertible Note and information required by ASX Listing Rule 3.10.3 are set out below:

• Amount:

AUD $18 million

• Investor: A special purpose company, Prestige Glory Limited, financed by a Chinese Bank based in Australia.

 Coupon: 12% per annum payable quarterly in arrears. A minimum of 50% of the coupon is payable in cash, with the balance either cash or shares at the election of the Company.

 Term: Unless previously redeemed, converted, purchased or cancelled, the Notes will be redeemed 2 years 11 months from their issue date.

• Face Value: AUD $100,000 per Note

• Conversion Terms: Subject to the Company receiving the necessary

shareholder approval, the Notes can only be converted into ordinary shares from the first anniversary of the issue date, and at any time during the 30 day period after the company release a quarterly, half yearly and yearly report.

The Company may from the first anniversary of the issue date of the Notes give notice to the Note-holders advising that it wishes to repay the all of the Notes on issue. During the period of 30 days from the date of the Notice, a Note-holder may elect to convert all or some of the Notes held by it into Shares at the Conversion Price. At the end of the 30 day period, the Company will repay any Notes that the Note-holders have not elected to be converted

The Notes will be converted into equity at a 15% discount to the 20 day volume weighed average price of the Shares prior to the date of the conversion notice.

• Minimum Conversion Amount:

$5 million.

• Security:

The Notes will be secured by a first ranking general

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security deed under which ZYL grants to or on behalf of the Note holders a security interest (as defined in the PPSA) over all PPS property (as defined in the PPSA) and a fixed charge over all non PPS property. Other than as required for project financing in respect of either the Mbila or Kangwane Projects, during the Term, the Company will not, without the Note-holders written consent, which shall not be unreasonable withheld, borrow any amount from any other party. As part of the security arrangements, the Chinese Bank will have the benefit of the security arrangements.

Upon the provision of any senior secured loans that provide financing in respect of the Mbila or Kangwane Project, the Note holder will subordinate its security in relation to the assets and entities over which the senior lender is taking security to a second ranking security to a senior lender.

• Options:

• Conversion Restriction:

• Approvals and Listing:

18 million options will be issued to the Investor. The options will have a 25 cent exercise price and a term of three years. The options will be unlisted.

In the event the Conversion Price falls below 5 cents per share and the Note holder gives written notice of its intention to convert some or all of its Notes into shares, the Company may elect to repay the Note within 21 days of receiving the notice.

The issue of Shares on conversion of the Notes or ZYL Options or in payment of interest is subject to the approval of the Company’s shareholders at a general meeting prior to the issue of the Notes and the ZYL Options.

Any shares issued under the Convertible Note Raising will be fully paid ordinary shares in the capital of the Company and aapplication will be made for listing of the Shares issued on conversion of the Notes or ZYL Options or in payment of interest on the Notes.

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The issue of the Notes will be subject to customary conditions precedent.

• Termination:

The Notes will contain standard termination events for a convertible note of this nature and will include (without limitation) termination events relating to it and its subsidiaries.

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Appendix 2

Mbila acquisition terms post renegotiation and payment for residual 23%

• The date for payment of Second Tranche Payment 2 and 3 has been extended to 31 December 2012 (previously 1 September and 1 November 2012 respectively)

• From 1 September 2012 the amount of the Second Tranche Payment 2 is to be escalated at a rate of 2% per month and the amount of Second Tranche Payment 3 is to be escalated at a rate of 2% per month from 1 November 2012, in both cases up to and including the date of the payment thereof.

• The remedy period for default in respect of the Second Tranche Payment 2 and 3 is 5 business days following the issue of a default notice, however no earlier than December 31 2012.

• In the event of a default in respect of the Second Tranche Payment 2 and 3 and following expiry of the 5 business days remedy period, ZYL’s subsidiary will be obliged to sell the First and Second Tranche Subscription Shares to the vendors of Mbila for ZAR100; and the vendors of Mbila shall be entitled to exercise the Third Tranche Put Option immediately (refer to ZYL’s quarterly released on 1 August 2012 for further background information on the ‘put and call’’ option).

• ZYL has a call option for a two years from the signature date (15 September 2011 until 15 September 2013), subject to payment of the amounts referred to above, to require the sellers to sell a further 23% of Mbila for US$14,000,000 (plus 1% interest for each month that settlement does not occur following the 18 May 2012.

• The sellers will have a put option for the final six months of the two year period to require ZYL to purchase a further 23% for US$14,000,000

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Appendix 3

Product Service Agreement

The Investor and the Company will enter into a Product Services Agreement (“PSA”) for the Investor to provide sales and sales related services to the Company, which will include but not be limited to assistance in the negotiation of off-take for attributable saleable tons of ore in the relevant project/s (Product) and to advise and assist rail, road and logistics requirements to deliver the product to customers (to the extent that these are required by the shipping terms of the Product).

The PSA will be concluded on the following terms:

• Option 1, if the Investor arranges or provides Financing for one or both of the Mbila and Kangwane Projects, then in respect of the project/s that Prestige Glory Ltd arranges Financing for, the Investor will have the right to receive under the PSA a fee of 3% of the mine gate sale price of ZYL’s attributable tons, of the Product (i.e. exclusive of any other costs payable to deliver the Product including logistical costs), payable in respect of the Product sold for the life of mine of the project/s (with such life of mine and production being determined using the bankable feasibility study) in which such Finance is arranged or provided by the Investor.

• If the Investor arranges for or provides Financing for one or both of the Mbila and Kangwane Projects, the Company may terminate the PSA in respect of one or both of the project/s to which finance has been arranged or provided by The Investor by paying the Investor $1.50 per Metric Ton of forecast attributable Product for the balance of the life of mine of the project/s (with such life of mine and production being determined using the bankable feasibility study) which finance is arranged or provided by the Investor in respect of which the PSA is being terminated.

• Option 2, if the Investor does not arrange or provide for Financing for either or both of the Mbila and Kangwane Projects and such Financing is arranged by third parties, then the Investor will receive under the PSA a fee of 1.5% of the mine gate sale price of the attributable Product (i.e. exclusive of any other costs payable to deliver the Product including logistical costs) payable in respect of Product sold in the first 3 years (three years) of production.

At any time following the issue of the Notes unless the Investor arranges for or provides Financing for one or both of the Mbila and Kangwane Projects, the Company may terminate the PSA in respect of one or both of the projects by paying the Investor $1.50 per Metric Ton of forecast attributable Product to be produced for the balance of the first 3 years (three years) of production from the projects in respect of which the PSA is being terminated.

For the sake of clarity “Financing” being defined as the necessary funding to fully commission the development of the mine as defined in the bankable feasibility study, as recommended by the independent consultants RSV ENCO, and approved by the Board of ZYL.

The Investor and the Company acknowledge that the Chinese Bank will be taking security over all present and future acquired property of Investor and the Company consents to the benefit of the PSA being assigned by way of security to the Chinese Bank and acknowledges and agrees that no variation, amendment or other dealing with the PSA will be permitted without the prior written consent of the Chinese Bank being obtained.

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