PRAIRIE LITHIUM LIMITED — Capital/Financing Update 2012

Mar 6, 2012

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ASX RELEASE 7 March 2012

MBILA PROJECT INTERIM FEASIBILITY STUDY RESULTS

Highlights:

• Mbila Interim Feasibility Study confirms project’s attractive, competitive economics on owneroperated basis

• Operational expenditure: AU $52 per saleable tonne

• Indicative sales prices: AU $112 to AU $135 at mine gate, based on Jan 2012 prices

• Phase 1 production rate: 580 000 saleable tonnes pa; Expressions of Interest in excess of 600 000tpa for Mbila product already received (refer to announcement dated 3 February 2012)

• Capital expenditure: AU $85m

• Internal rate of return (IRR): 41%

• Final Definitive Feasibility Study due end Q2 2012

ZYL Limited (“ ZYL ” or the “ Company ”) ( ASX: ZYL ), the Perth-based emerging anthracite producer, is pleased to announce the Interim Feasibility Study (IFS) results for its Mbila project, located in South Africa’s KwaZulu Natal province. The study, undertaken by RSV Enco, highlights the low cost and high margin properties of the Mbila Mining Right Area within the Mbila Project.

The IFS updated the Bankable Feasibility Study completed by Badger Mining in 2008 to include identified additional infrastructure requirements, drilling information, updated coal resources and reviews of historical data.

Project overview

The Mbila Project is located approximately 150km north west of the Richards Bay Coal Terminal. 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 (Prospecting Right Area). The two areas share a common boundary and are located approximately 15km to the east of the town of Nongoma. The IFS covers the Mining Right Area which represents less than one third of the greater Mbila project area. The diagram below shows the Mining Right Area in relation to the Prospecting Right Area.

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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

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The basis for the IFS is development of an owner-operated mine to produce 840 000 tonnes per annum (tpa) Run of Mine (ROM) over a mine life of 12 years. The decision to produce on a contractoror owner-operated basis will be based on the availability of key equipment and the allocation of capital to the project.

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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Capital expenditure

The report indicates initial capital expenditure (capex) to production for the Mbila project of AU $85m for an owner-operated mine, including a contingency of AU $10.8m (13% of capex).

Capex for the Mbila project Mining Right Area – owner-operated	Capex for the Mbila project Mining Right Area – owner-operated	(AU $)
Operating area description	Initial capex to production	Life of mine capital
Off-mine infrastructure	2 884 207	6 121 052
On-mine infrastructure	19 495 136	26 651 918
Processing	9 600 427	9 600 427
Underground capital	35 589 885	43 220 139
TOTAL CAPITAL	67 569 656	85 593 536
EPCM* costs/ preliminaries and generals	5 067 724	6 419 515
Owners costs	1 031 545	1 283 903
Contingency	10 837 133	13 727 886
TOTAL OTHER COSTS	16 918 402	21 431 304
TOTAL CAPITAL	84 488 058	107 024 840

*Engineering, procurement and construction management

Operational expenditure

The operational expenditure (opex) is based on a production rate of 840 000tpa ROM and 580 000tpa saleable product, sourced from both the Ecca and Beaufort seams as per the table below.

ROM production and saleable (tonnes) for the Mbila Project Mining Right Area	ROM production and saleable (tonnes) for the Mbila Project Mining Right Area	ROM production and saleable (tonnes) for the Mbila Project Mining Right Area
	ROM production rate	Saleable product
Ecca Seam	420 000	270 000
Beaufort Seam	420 000	310 000
TOTAL	840 000	580 000

Based on the above ROM production rates, the mining cost for the narrow Ecca Seam, with three drill and blast sections, is estimated at AU $32 and the wider Beaufort Seam, with a single drill and blast section, is estimated at AU $16.

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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**Opex per ROM and produced tonne for the Mbila Project Mining Right Area (AU $)1 **	**Opex per ROM and produced tonne for the Mbila Project Mining Right Area (AU $)1 **
Mining	24.14
Transport and loading cost to plant	1.89
Process plant	4.46
Electricity	0.81
On-mine services	3.77
Rehabilitation	0.62
TOTAL ROM COSTS	36.69
Average yield	67.6%
TOTAL PRODUCED COST	52.80

1. Opex excludes royalties and Social and Labour Plan costs

AU $52 per saleable tonne represents an average yield of 67.6% and a mine life of 12 years, based on proven and probable reserves.

The potential to increase the output from the Mbila Project as a Phase 2 expansion will be investigated in due course. Although conceptual in nature at this stage, the resource base can support an increased mine output, and there is considerable potential for increasing the resources further. To this end, an infill drilling programme has begun as indicated in the recent drill programme announcement.

Indicative product pricing

The IFS indicates mine gate pricing at Mbila for the Ecca and Beaufort primary product of, on average, AU $135 and AU $112 per tonne respectively at current exchange rates. Due to significant local demand, the product at Mbila will be sold at mine gate with customers managing the necessary logistical requirements in terms of trucking and railing the product from the mine. ZYL is currently targeting the domestic market; however, opportunities to achieve a higher sale price may exist through targeting a speciality export market.

Indicative product pricing at mine gate*	Indicative product pricing at mine gate*
Product	Ecca seam	Beaufort primary product	Beaufort secondary product
Ash content (%)	10	15	22
Product Size
Duff (0 * 10 mm)	130.43	108.70	76.40
Peas (10 * 20mm)	136.65	111.80	76.40
Small nuts (20 * 45mm)	142.86	118.01	86.96

*Based on anthracite prices as at January 2012

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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Geology and resources

The anthracite deposits at Mbila are hosted by the Ecca and Beaufort Group sediments with numerous discrete resource blocks on the property as a result of the topography of the regional terrain.

Mbila project – resource estimate statement (JORC- and SAMREC-compliant)	Mbila project – resource estimate statement (JORC- and SAMREC-compliant)	Mbila project – resource estimate statement (JORC- and SAMREC-compliant)
	Gross in situ tonnes (GIST)	Mineable in situ tonnes (MIST)
Total measured coal resource	24.8Mt	4.7Mt
Total indicated coal resource	67.1Mt	47.1Mt
Total inferred coal resource	32.8Mt	20.6Mt
Total JORC-compliant coal resource	124.7Mt	72.4Mt

Economic horizons are found within the M Seam of the Ecca Group and the B Seam of the Beaufort Group, which is split into the B3, B2 and B1 sub-seams.

Ecca : The M seam has an average mineable thickness of 1.1m and occurs from outcrop with an average depth from surface of 36m. The coal has an interbedded sandstone-siltstone roof and floor which dips at 2º to the east.

Beaufort : The B3-B1 coal package is, on average, 12m thick and the 2.8-3.5m sub-seams are separated by 0.5-2m carbonaceous mudstone partings. The table below highlights the reserves associated with the Ecca and Beaufort seams.

Mbila Project – reserve estimate statement (JORC- and SAMREC-compliant)	Mbila Project – reserve estimate statement (JORC- and SAMREC-compliant)	Mbila Project – reserve estimate statement (JORC- and SAMREC-compliant)
Seam	Mineable in situ tonnes(MIST)
		Category
Ecca	6 388 200	Proven
Beaufort	3 638 000	Proven
Beaufort	23 370 810	Probable
Total Mbila reserve	33 397 010	Proven & probable

The reserves in the table above form part of the JORC-compliant resource stated in the first table on page 5.

Coal quality

Mbila anthracite is high-quality with low-phosphorus, low ash and high fixed carbon characteristics; the product is in strong demand amongst South African producers of mineral sands, ferrochrome, ferromanganese and silicon carbide. To date, ZYL has received Expressions of Interest in excess of 600 000 tpa from local consumers and trading houses. The table below lists the Mbila product characteristics.

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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Mbila product coal specifications – air dry basis
		Beaufort primary product	Beaufort secondary product
	Ecca Seam
Coal classification	High Rank B Anthracite	High Rank C Anthracite	Mid Rank Anthracite
Yield %	64.3	51.2	17.3
Phosphorus %	0.008	0.012	-
Ash content %	9.7	14.9	22.0
Inherent moisture %	2.1	1.1	1.0
Volatile matter %	5.1	5.8	5.5
Fixed carbon %	83.1	78.2	71.4
Gross calorific value MJ/kg
	31.58	29.45	25.38
Total sulphur %	1.04	0.65	0.84

Mine access, design and mining methods

Access to the coal seams is planned via box-cuts into the side of the hills from which portals will be driven, either via horizontal or inclined roadways. Entries will generally be limited to two or three portals, allowing for conveying and travelling, as well as return airways and escape routes. The conveyor and travelling roads will be used as the intake air roadways.

The mine layout is designed to optimise the recovery of coal is based on the bord and pillar design with maximum extraction on the advance and no plans for secondary mining of pillars. The project contemplates two initial underground mines, one on the Ecca Seam and one on the Beaufort Seam that will be operated on a conventional bord and pillar, drill and blast mining method. This is based on three entries allowing for a conveyor/travelling road which, where possible and depending on the seam height, will also serve as the intake airway.

Open pit operations will be introduced later in the mine schedule.

Coal processing

The proposed coal washing and screening facility will be erected approximately 18km east of Nongoma at the spatial centre of the project area. The anthracite products to be produced from the Mbila Mining Right Area are of differing ash contents; as such, the washing plant at the mine has been designed to incorporate the variations in wash yields encountered throughout the life of the mine, allowing ZYL the flexibility to cater to the differing needs of end-users.

The coal plant design incorporates a two-module dense medium cyclone washing circuit followed by product screening of the coarser fractions and will be capable of batch-treating 70 000 tonnes per month of feed coal when operating on a three-shift basis. Ecca and Beaufort series coals will be batch-washed and the Beaufort Series discard will be re-washed and sold as a high-ash middlings product.

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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Saleable products will include small nuts, peas and duff coal with varying ash contents to suit the market’s demand.

Definitive Feasibility Study

The Definitive Feasibility Study (DFS) is on track and due to be completed at the end of Q2 2012, with scope for optimisation as the level of accuracy inherent in the DFS is improved. The results of the DFS will be released to the market once received.

Upside potential

• There is scope for the capex to be reduced as the greater level of accuracy inherent in the final DFS will be interrogated.

• Capex may also be reduced through the introduction of third-party contractors.

• The company is currently targeting the domestic market; however, opportunities to target a higher sale price may exist through a speciality export market.

• The in-fill drilling programme between S Block and Msebe Block is anticipated to define additional minable resource potential which will be incorporate into the future mining plan.

• The possibility of accessing the B3 and B1 sub-seams from a single box-cut and the extension of the box-cut from B3 seam to the B1 seam will be investigated during the next phase of the feasibility study.

• The wash plant capacity can be increased from 70 000 tonnes per month to 85 000 tonnes per month if operated on a four-shift cycle.

ZYL CEO Ian Benning stated: “The findings of the IFS confirm the economic viability of the Mbila project and support the ZYL Board’s decision to fast-track Mbila in order to deliver the best returns for shareholders. The IFS indicates Mbila will be a low-cost and high-margin metallurgical coal mine with a healthy IRR of 41%, for Phase 1 only, at current exchange rates”.

Contact: Ian Benning, CEO, ZYL LIMITED

T: +27 (0) 87 350 2751 M: +27 (0) 83 702 8221 E: ian.benning@zyllimited.co.za

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

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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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.

Competent person’s statement

Information in this announcement that relates to exploration results, minerals resources or ore reserves is based on information compiled by Mrs Liz de Klerk. Mrs de Klerk is consultant to the Company. Mrs de Klerk is on the council of the Geological Society of South Africa and is a member of the British Geological Society. Mrs de Klerk has sufficient experience, which is relevant to the styles of mineralisation and types of deposits under consideration and to the activities which she is 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’. Mrs de Klerk consents to the inclusion in this announcement of the matters based on her information in the form and context in which it appears.

Exchange rate of 1AUD: 8.05ZAR applied to all figures

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