PRAIRIE LITHIUM LIMITED — Capital/Financing Update 2012

May 24, 2012

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ASX RELEASE 25 May 2012

ZYL TO INCREASE OWNERSHIP IN MBILA PROJECT AND ACQUIRE TWO ADDITIONAL ANTHRACITE PROJECTS

• Binding Heads of Agreement to acquire 100% of York Energy N.L. (“York”) and its rights and interests in three South African-based anthracite projects:

• 30% of Mbila Project, increasing ZYL’s rights and interest in Mbila to 74%

• Rights to earn a 60% interest in Marble Project (located 30 km west of Mbila project)

• Rights to earn a 70% interest in Kangwane North Project (located 30km north of ZYL’s Kangwane Central)

• The York acquisition

• increases ZYL’s strategic anthracite holdings in South Africa

• allows ZYL to target both the domestic and export anthracite markets via multiple port and transport alternatives

• provides ZYL with a more diverse range of products to meet broad purchaser requirements

ZYL Limited (“ ZYL ” or the “ Company ”) ( ASX: ZYL ), the Perth-based emerging anthracite producer with key projects in development in South Africa, is pleased to announce it has executed a binding Heads of Agreement ( HoA ) for the acquisition of 100% of York Energy NL ( York ) for a total consideration of A$12 million of ZYL shares, less outstanding liabilities, the shares will be issued at approximately A$0.18 per share ( the T ransaction ).

Once completed, the acquisition will increase ZYL’s economic interest both in the Mbila Project and in the Kangwane Project area allowing for improved flexibility through greater economies of scale. In addition, the transaction will allow ZYL the opportunity to target both the domestic and export anthracite markets via multiple port and transport alternatives.

Commenting on the HoA, CEO Ian Benning said: “The agreement with York is very exciting for the Company as the York projects are well understood by ZYL and provide significant strategic synergies with our existing operations. The Transaction consolidates ZYL’s position within both the South African and international anthracite markets. ZYL will have a well-balanced pool of assets at various stages along the exploration and development value curve, allowing for the scheduling of development based on market demands.”

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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

“This places ZYL in a position to produce a diverse range of coal products, catering for a greater number of consumers and increasing flexibility in terms of both mine gate sales and export options.”

“The high level of interest received for the company’s product from both the Mbila and Kangwane projects warranted pursuing increased anthracite holdings within South Africa and the acquisition of York provides that opportunity.”

ZYL has received non-binding Expressions of Interest (EOIs) from customers for over 4.0Mtpa, which exceeds the forecast full saleable production from both its Mbila and Kangwane projects.

“The Transaction will provide a solid combination of both greenfields and brownfields assets with significant upside potential,” Mr Benning said.

Formal documentation is expected to be completed shortly. The Transaction is subject to the usual regulatory and shareholder approvals.

ZYL Production Strategy

The proposed York acquisition and the increased scale of resource and operations add momentum to the ZYL production strategy as the Company progresses down the development pathway. The strong interest in the Company and demand for its products has created the need to review multiple proposals (off-take, debt finance, project funding, infrastructure) in short order and ZYL is mindful of undertaking appropriate due diligence on all options available to it.

The Company is currently undertaking extensive discussions with third parties regarding transactions that would secure the ability for ZYL to fully finance the development of its anthracite projects. These discussions are separate from the debt funding proposals previously announced.

The Company will keep the market fully informed as these discussions progress.

Declaration of Previous Interest

ZYL directors Mr Bevan Tarratt and Dr Eric Lilford were previously shareholders of York and Mr Phillipe Lalieu previously had a potential indirect beneficial interest in York. Upon entering discussions with ZYL, these directors made arrangements to sell their York shareholdings, at cost, to unrelated third parties via a bookbuild process. Their divestment in York was concluded in April. Mr Tarratt, Dr Lilford and Mr Lalieu were not involved in the negotiations between ZYL and York and they will not receive any financial benefit from the Transaction.

In the interests of good corporate governance ZYL will obtain an independent expert’s report and seek shareholder approval in accordance with the ASX Listing Rules (both of which will form preconditions to the Transaction).

Complementary Asset Portfolio

With rights and interests in the Mbila Project, the Kangwane North Project and the Marble Project, detailed below, the York asset portfolio is highly complementary to ZYL’s existing anthracite interests in South Africa:

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Mbila Project

With the acquisition of York, ZYL will have the rights to a 74% interest in the Mbila project, comprising 44% ZYL and 30% York.

The Mbila Project is located approximately 150km north-west of the Richards Bay Coal Terminal, in South Africa’s KwaZulu-Natal province. Key infrastructure required for the development of an anthracite mine such as electricity, roads and railway sidings and lines are located in close proximity.

The project consists of a Mining Right covering 19 120ha (Mining Right Area) and a Prospecting Right covering 53 000ha (Msebe Prospecting Right). The two areas share a common boundary and are located within the Nongoma coal field.

Kangwane North Project

York has the right to earn up to 70% of the Kangwane North Project. The Kangwane North Project contains an exploration target of 50 – 70 Mt[1] . The project is approximately 30km north of ZYL’s Kangwane Central area and is within the same Nkomati coal field.

The New Order Prospecting Right over the Kangwane North Project consists of three properties covering 17 913ha in the Mpumalanga province of South Africa. Well-developed road and rail infrastructure, including a rail siding, exist adjacent to and on the properties, and link the project to the Port of Maputo located 100 km to the south-east.

1 The potential quantity and grade is conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

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Due to its similar characteristics and location, the Kangwane North Project will form part of the Kangwane suite; consisting of Kangwane North, Central and South areas which cover 43 000ha. The map above shows the location of the Kangwane Project in relation to port, rail and road infrastructure.

Marble Project

York has the right to earn up to 60% of the Marble Project, which is located 30 km to the east of the Mbila Project. It is situated within the Vryheid coal field, approximately 70km by road east of the town of Vryheid. A New Order Prospecting Right is held over the project, which covers 7 787ha.

KwaZulu-Natal hosts numerous anthracite collieries, including Rio Tinto’s Zululand Anthracite Colliery (ZAC), Petmin’s Somkhele Colliery and Aviemore’s Anthracite Colliery. Marble is in close proximity to existing processing plants, port, rail and other logistical infrastructure. The map below depicts the location of the Marble Project in relation to ZYL’s Mbila Project, surrounding infrastructure and existing anthracite mines.

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The project has an exploration target of 15-21Mt[2] , with the product expected to be low-ash, lowsulphur with a high calorific value. A geological database, including adit sampling and 36 drill holes totalling 11 830m, was completed by Anglo American and Rand London in the 1980s. The seams present at the Marble Project are the Alfred and Gus seams of the Vryheid formation.

York appointed The Mineral Corporation to complete an exploratory drilling programme, which began in March 2012 and is expected to be completed in May 2012. Vryheid Laboratories will complete a full wash analysis of the coal samples with the results due Q3 2012. Previous testing has found the anthracite at the Marble Project to have low sulphur, low ash and high calorific value characteristics.

The BEE partner for the Marble Project is Mr Fana Ephraim, who is a member of the Chamber of Mines and has held numerous positions within the South African mining industry.

2 The potential quantity and grade is conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

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Transaction terms/ acquisition agreement

ZYL has entered into a binding HoA for the acquisition of 100% of York, and will issue AU$12 million worth of shares in ZYL Limited, less outstanding liabilities, to the shareholders of York at a deemed issue price of approximately AU $0.18 per share (being the 30 day volume weighted average price of ZYL shares up to and including 30 April 2012).

At completion, the amount of consideration to be issued will be reduced by the amount of outgoings due and payable by York in respect of the JV Interests at the date of the binding Head of Agreement; and $1,175,000 worth of convertible notes to be repaid at settlement unless the notes were converted into York shares prior to settlement of transaction.

Assuming the notes are converted into York shares, the maximum number of new ZYL shares to be issued under the transaction is 62,368,743. The ZYL shares to be issued as consideration to each Vendor (Consideration Shares) will be subject to voluntary escrow as follows:

• (i) 33.33% of the Consideration Shares to be escrowed for 3 months from date of issue;

• (ii) 33.33% of the Consideration Shares to be escrowed for 6 months from date of issue; and

• (iii) 33.34% of the Consideration Shares to be escrowed for 9 months from date of issue.

The sale and purchase of York shares is subject to and conditional on:

• (i) completion of legal, technical and financial due diligence by ZYL on prospecting rights, JV interests, JV companies, subsidiaries and York;

• (ii) ZYL engaging and receiving an independent experts report confirming the transaction is fair and reasonable to the shareholders of ZYL; and

• (iii) ZYL obtaining shareholder and regulatory approval.

The above conditions (Conditions) are to be satisfied or waived by 31 October 2012. If any of the conditions above are not satisfied by this date then the Heads of Agreement will automatically terminate.

During the period from execution of the Heads of Agreement until completion ZYL will be responsible for all outgoings in respect to York’s JV Interests. A loan agreement with commercial terms will be negotiated between ZYL and York prior to advancement of payments. If completion does not occur for any reason, York will refund any amounts paid by ZYL during the period from execution of the Heads of Agreement until completion within 120 days of termination of the Heads of Agreement or the Formal Agreement (defined below), as applicable.

Both parties agree to negotiate in good faith a formal agreement (Formal Agreement) to replace the Heads of Agreement on terms and conditions which are consistent with the Heads of Agreement by 11 June 2012. The Heads of Agreement remains binding on both parties until a formal agreement is executed.

ZYL will seek shareholders’ approval for the transaction pursuant to listing rule 10.1 and Chapter 2E of the Corporations Act. As such the full project details and commercial terms with an independent expert’s report will form part of the notice of meeting to shareholders.

ENDS

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Contact:

Ian Benning, CEO, ZYL LIMITED

T: +27 (0) 87 350 2751 M: +27 (0) 83 702 8221

E: ian.benning@zyllimited.co.zau

Phillipe Lalieu, Commercial Director, ZYL Limited

T: +27 (0) 11 245 9800 M: +61 (0) 83 455 6867 E: phillipe.lalieu@zyllimited.com.au

Media - South Africa

James Duncan, Russell and Associates

T: +27 (0) 11 880 3924 M: +28 (0) 82 892 8052 E: james@rair.co.za

Media - Australia

Annette Ellis, Purple Communications

T: +61 (0) 8 6314 6300 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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Competent Persons Report

“Information in this presentation that relates to exploration results, minerals resources or ore reserves is based on information compiled by: Mr Dawie van Wyk in respect of Kangwane Central, Kangwane South and Mbila Mr Bob Hatherly of Kangwane North; Mr Petrus Meyer in respect of Kangwane Central; and Mrs Liz de Klerk in respect of Mbila. Mr Hatherly is an Associate of the MSA Group. Messrs van Wyk and Meyer and Mrs de Klerk are consultants to the Company. Mr van Wyk is a member and fellow of the Geological Society of South Africa and South African Council for Natural Scientific Professions, a Recognised Overseas Professional Organisation. Mr Meyer is a member of the Geological Society of South Africa. Mrs de Klerk is a member and on the council of the Geological Society of South Africa. Messrs van Wyk, Hatherly and Meyer and Mrs de Klerk 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 Competent Persons as defined in the 2004 Edition of the ‘Australian Code of Reporting of Exploration, Mineral Resources and Ore Reserves’. Messrs van Wyk, Hatherly and Meyer and Mrs de Klerk consent to the inclusion in this presentation of the matters based on their information in the form and context in which it appears.”

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