31 January 2014REPORT FOR THE QUARTER ENDED 31 DECEMBER 2013Continental Coal Limited ("Continental" or "the Company") is pleased to provideits operations report for the quarter ended 31 December 2013.COMPANY HIGHLIGHTSOperations * 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 guidanceCorporate * 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 SafetyDuring the Quarter, four Dressing Station Case ("DSC") accidents were reportedat the Company's mining and processing operations - all four DSC accidents wererelatively minor incidents reported at the Penumbra Underground Mine with nonereported at the Vlakvarkfontein Mine and Delta processing facility. Tworeportable dam overflowing related incidents have also occurred at the PenumbraUnderground Mine and processing facility during the quarter under review due toexcessive rain. The incidents had no material impacts and their causes arebeing 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 2012Run of Mine (ROM)productionVlakvarkfontein 333,775 313,495 728,983 735,748Ferreira 110,707 152,280 247,129 258,037Penumbra 128,771 2,694 223,327 2,694Total ROM 573,253 468,469 1,199,439 996,479productionFeed to plantFerreira 116,436 161,605 269,670 323,253Penumbra 120,872 2,694 216,401 2,694Total feed to plant 237,308 164,299 486,071 325,947Export yieldsFerreira 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 304,676 351,264 712,624 647,659Export sales 157,242 97,939 320,696 209,750Total sales 461,918 449,203 1,033,320 857,409Total ROM coal production for the Quarter of 573,253t was achieved from theVlakvarkfontein, Ferreira and Penumbra Coal Mines. Total ROM productionincreased by 22% from the comparable quarter in 2012 and increased by 20% forthe 6 months ended 31 December 2012.Feed to the Delta Processing Operations for the Quarter of 237,308t representeda 44% increase to the comparable quarter in 2012 and also a 49% increase forthe 6 months ended 31 December 2013.Ferreira achieved a 66.9% export yield for the quarter which was in line withthe comparative quarter in 2012.Export yields at Penumbra have shown a steady increase during the past 6 monthswith the average yield of 58.2% recorded for the quarter. Contamination fromsand stone rolls encountered at Penumbra had a negative impact on theproduction and export yield. 1.3 Vlakvarkfontein Coal MineVlakvarkfontein 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 verysimilar to the production achieved for the 6 months ended 31 December 2012. ROMproduction for the 6 months ended 31 December 2013 however exceeded the budgetof 692,250t by 5%. An average strip ratio of 2.13:1 was achieved for theQuarter (2.1:1 YTD).Total thermal coal sales during the Quarter from the Vlakvarkfontein Coal Minewere 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) forthe period.Vlakvarkfontein remains on target to achieve its planned production of 1.3 MtROM at a cost of ZAR152/t (US$13.82) for FY2014. 1.4 Ferreira Coal MineROM coal production at the Ferreira Coal Mine for the Quarter, which was itslast producing quarter, totaled 110,707t which was 76% above the budgeted ROMtonnes for the quarter. Ferreira produced a total of 247,129 ROM tonnes for the6 months ended 31 December 2013 exceeding the planned ROM tonnes for the periodwith 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 the6 months ended 31 December 2013.Mining costs of ZAR147/t (US$13.36) ROM with Free-on-Board (FOB) costs ofZAR623/t (US$56.64) were recorded for the quarter. Mining cost for the 6 monthsended 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 FOBrecorded for the 2013 financial year.Mining at Ferreira has now been terminated with only inventory clean-up to becompleted. The Company is finalising the closure plan with all stakeholders andwill commence the final rehabilitation of the mine site on approval of theclosure plan by all stakeholders. 1.5 Penumbra Coal MineThe commissioning of the permanent ventilation shaft in August 2013 was thelast remaining infrastructure item required to reach the design capacity of63,000 tonnes per month. With adequate ventilation in place since earlySeptember 2013, both continuous miner sections were fully operational and ableto 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 thequarter ended 30 September 2013 with 51,000t ROM produced in October 2013. Theavailability of the continuous miners during November 2013 had a negativeimpact on the production build-up towards steady state production of 63,000tROM per month. The down-time of the continuous miners was caused by themalfunction of the control valve circuit which resulted in water contaminatingthe hydraulic oil. Operational management, together with the original equipmentmanufacturer (OEM) managed to resolve this during late November 2013. Stonerolls that are displacing the coal seam in the current mining area are alsoimpacting on the production rate and the delivered yield due to addedcontamination. Management is currently reviewing the planned production lay-outand evaluating opportunities to amend the lay-out to mitigate the impact of thestone rolls on the production rate of the continuous miners.A drill-and-blast section was added to the two continuous miner sections duringthe quarter which will add additional flexibility to achieve and maintain theplanned production rate. Each continuous miner section currently has twoshuttle 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. Productionbuild-up at Penumbra is now forecast to achieve its design capacity of 63,000tROM per month by April 2014.Export yields at Penumbra have shown a steady increase during the quarter withthe average yield of 58.2% recorded, a 13% improvement on the previousquarter'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 additionalcontamination caused by the stone rolls.Mining costs of ZAR158/t (US$14.36) ROM were similar to the costs achieved inthe prior quarter with the FOB costs of ZAR676/t (US$61.45) recorded for thequarter, a 5% increase on the FOB costs of the previous quarter.Penumbra is forecasting the delivery of 570,000t ROM during the 2014 financialyear at a FOB cost of R580 (US$53) per sales tonne. 2. DEVELOPMENT PROJECT 2.1 De Wittekrans Coal ProjectThe Mining Right for De Wittekrans was granted in September 2013 and theCompany expects the Integrated Water Use License (IWUL) to be granted in Q22014. The South African Department of Mineral Resources (DMR) has informed theCompany that they received an appeal in terms of Section 96 of the Mineral andPetroleum Resource Development Act (MPRDA) to the Mining Right that has beenawarded for De Wittekrans. Section 96 of the MPRDA allows interested andaffected parties to appeal against an approved mining right on various groundsand also sets out the appeal process. The appeal was lodged by the Federationfor a Sustainable Environment on behalf of surface right owners over which areathe mining right was granted. They are appealing the process followed inapplication and awarding of the mining right as well as the ability of theproposed mining activity to comply with certain environmental andsocio-economic requirements within the MPRDA and approved EnvironmentalManagement Program (EMPR). The Company, through its legal counsel, isresponding to the appeal in terms of the process set out in Section 96 of theMPRDA. The IWUL application will continue while this appeal is being opposed. 3. EXPLORATION PROJECTS 3.1 Botswana Coal ProjectsNegotiations on the previously announced earn-in agreement on Prospectinglicences 339/2008 and 341/2008 were terminated during the quarter. The Companyis in early stage discussions with 2 unrelated parties to reach a commercialagreement on 2 of the Prospecting licences that have been awarded to theCompany. The third license is in the process to be relinquished back. Furtherdetail will be made available as progress is made in the negotiations. 4. CORPORATE 4.1 Bridge financeThe Company has executed a binding term sheet with UK corporate advisory firm,Empire Equity Limited ("Empire Equity"), to provide $5 million ("InvestmentAmount") of limited recourse bridge funding. The funds raised will be appliedtowards general operating expenses and payments to creditors of the Companythat do not otherwise agree to standstill agreements, allowing the Company tocontinue trading as a going concern while it continues to seek to undertake abroader recapitalisation and restructure of the Company and its financialarrangements.Subject to finalising definitive documentation, Empire Equity and/or itsnominees (the "Investors") will invest in 7.5 million unsecured convertiblepromissory notes ("Notes") with a face value of A$1.00 at a discounted issueprice 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 arights issue currently proposed to raise up to A$28 million at an offeringprice of A$0.01 per share (terms to be finally determined by the Company andthe underwriter engaged), including procuring underwriting of the rights issue,with proceeds to be used to settle amounts owed by the Company to variousexisting convertible note holders and other major creditors. The Notes are onlyredeemable upon successful completion of the rights offer, being fullsubscription including underwriter subscriptions, upon which the Investors willhave the option to redeem the Notes by either conversion into shares in theCompany (subject to obtaining necessary shareholder approvals) at a conversionprice equal to the rights offering price or request payment of the A$7.5million face value in cash. The Investors are also required to procurestandstill agreements for 90 days from convertible note holders and other majorcreditors of the Company to allow for the completion of the rights offering orother recapitalization.The Investors will receive a 6% fee on the Investment Amount as well as 70million options, subject to shareholder approval, for providing the $5 million.Each option will be exercisable at the rights offering price with 3 years toexpiry. In the event that shareholder approval is not obtained to deliver theoptions, $500,000 in cash will become payable to the Investors in lieu of theoptions. 100 million shares will also be issued to a settlement agent and heldin escrow as collateral, either to be sold in the event of default withproceeds to be paid to the Investors, or if no default occurs, transferred toapplicants under the rights issue.The Company is still seeking to finalise closing of the $5 million of bridgefunding from Empire Equity. The Investors have advised that fund transfers havebeen initiated and the Company is awaiting confirmation from its escrow agentof the receipt of funds. The Company will further update the market asdevelopments occur 4.2 Secured debtThe prepayment by EDF Trading of a Coal supply Agreement in 2011 has beenrestructured into a financial loan repayable through 24 monthly instalmentscommencing in July 2014. The loan bears interest at 10% per annum and interestwill be capitalized until June 2014. Executing binding legal agreements forthis restructure is dependent on the recapitalisation of the Company and EDFbeing provided a second ranking security over the Penumbra underground coalmine and its assets.The ABSA Project Finance facility secured over Penumbra Coal Mine is currentlyin 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 hasreserved all of their rights while the recapitalisation in under way. 4.3 Proposed listing on the Johannesburg Stock ExchangeThe proposed listing has been postponed until such time as the recapitalisationof the Company has been completed. 4.4 Changes to the Board and Executive managementA condition to providing the funding is the resignation or termination of theCEO, CFO and Non-Executive directors Mike Kilbride and Johan Bloemsma onclosing. To join the Board on closing of the transaction and subject to anyrequired 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 requiredunder the AIM rules for companies, will be provided on or prior to theirappointment.The management structure of the Company will be finalized after closing of thefunding and further consideration by the new board. 4.5 ASX and Aim share trading suspensionThe shares of the Company will remain suspended from trading on both the ASXand AIM markets. The reconstituted Board of Directors will consider a decisionon seeking to lift the suspension of the shares following the closing of thetransaction and pending the provision of further clarification of its financialposition to the market.Yours faithfullyDon TurveyChief Executive OfficerFor further information please contact:Media (Australia)David TaskerProfessional Public RelationsT: +61 8 9388 0944Nominated Advisor Joint BrokersStuart Laing Jeremy Wrathall / Chris SimRFC Corporate Finance Investec Bank plcT: +61 8 9480 2500 T: +44 20 7597 4000 Jonathan Williams RFC Ambrian Ltd T : +44 203 440 6817About Continental Coal LimitedContinental Coal Limited (ASX:CCC/AIM: COOL) is a South African thermal coalproducer with a portfolio of projects located in South Africa's major coalfields including three operating mines, the Vlakvarkfontein, Ferreira andPenumbra Coal Mines, producing approx. 2.8Mtpa of thermal coal for the exportand domestic markets. A Feasibility Study was also completed on a proposedfourth mine, the De Wittekrans Coal Project. The Company has concludedstrategic off-take and funding agreements with EDF Trading for its exportthermal coal production and secured debt funding from ABSA Capital to fund itsgrowth.Competent Persons StatementThe information in this release that relates to Coal Resources onVlakvarkfontein, Vlakplaats and Wolvenfontein is based on resource estimatescompleted by Dr. Philip John Hancox. Dr. Hancox is a member in good standing ofthe South African Council for Natural Scientific Professions (SACNASP No.400224/04) as well as a Member and Fellow of the Geological Society of SouthAfrica. He is also a member of the Fossil Fuel Foundation, the GeostatisticalAssociation of South Africa, the Society of Economic Geologists, and a CoreMember of the Prospectors and Developer Association of Canada. Dr. Hancox hasmore than 12 years' experience in the South African Coal and Mineralsindustries and holds a Ph.D from the University of the Witwatersrand (SouthAfrica).The information in this release that relates to Coal Resources on Penumbra, DeWittekrans, Knapdaar, Leiden and Wesselton II is based on coal resourceestimates 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 forNatural Scientific Professions (SACNASP No. 400060/98) as well as a Member andFellow 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 andVaalbank is based on coal resource estimates completed by Mr. Coenraad vanNiekerk, a full time employee of Gemecs (Pty) Ltd. Mr. van Niekerk is a memberin good standing of the South African Council for Natural ScientificProfessions (SACNASP No. 400066/98) as well as a Member and Fellow of theGeological Society of South Africa. He has more than 38 years' experience inthe South African Coal and Minerals industries.The information in this release that relates to Coal Resources on Mooifonteinis based on coal resource estimates completed by Mr. Dawie van Wyk, a full timeemployee of Geocoal services (Pty) Ltd. Mr. van Wyk is a member in goodstanding of the South African Council for Natural Scientific Professions(SACNASP No. 401964/83) as well as a Member and Fellow of the GeologicalSociety of South Africa. He has more than 30 years' experience in the SouthAfrican Coal and Minerals industries.The Coal Reserves on Vlakvarkfontein, De Wittekrans and Penumbra is based onreserve estimates completed by Eugène de Villiers. Mr. de Villiers is agraduated mining engineer (B.Eng) Mining from the University of Pretoria and isprofessionally registered with the Engineering Council of South Africa (Pr.engno - 20080066). He is also a member of the South African Institute of Miningand Metallurgy (SAIMM Membership no. 700348) and the South African CoalManagers Association (SACMA Membership no. 1742). Mr. de Villiers has beenworking in the coal industry since 1993 and has a vast amount of production andmine management as well as project related experience.Forward Looking StatementThis document includes certain statements that may be deemed "forward-lookingstatements" and information. All statements in this document, other thanstatements of historical facts, that address future production, reservepotential, exploration drilling, exploitation activities and events ordevelopments that the Company expects to take place in the future areforward-looking statements and information. Although the Company believes theexpectations expressed in such forward-looking statements and information arebased on reasonable assumptions, such statements are not guarantees of futureperformance and actual results or developments may differ materially from thosein the forward-looking statements and information. Factors that could causeactual results to differ materially from those in forward-looking statementsinclude market prices, exploitation and exploration successes, drilling anddevelopment results, production rates and operating costs, continuedavailability of capital and financing and general economic, market or businessconditions. Investors are cautioned that any such statements are not guaranteesof future performance and actual results or developments may differ materiallyfrom those stated.