Continental signs coal off‐take and finance agreement with EDF Trading

Emerging South African focused coal company Continental Coal Limited has signed an off‐take and funding agreement with EDF Trading.

EDF Trading is a leader in the international wholesale energy markets and a wholly‐owned subsidiary of EDF S.A., a leading player in the energy industry.coal production process

Continental Coal Chief Executive Officer, Mr Don Turvey, believes the signing of these landmark agreements with EDF Trading, a leading player in the global coal industry, will prove to be a key milestone in the development of its South African coal assets.

“Execution of this landmark agreement between Continental Coal and EDF Trading marks another key milestone for the Company, following the commencement of coal production at our Vlakvarkfontein coal mine in May 2010, a milestone we believe will be key to advancing our aggressive growth and development plans,” Mr Turvey said.

Under the terms of the binding agreement, EDF Trading has secured all export quality thermal coal produced from the Project X, Vaalbank and Vlakvarkfontein mines for a period of 20 years, at the internationally‐recognised benchmark price for coal exported out of South Africa’s Richards Bay Coal Terminal – API4.

In addition EDF Trading has agreed to provide Continental with US$20 Million, through an advance purchase of export coal from the Vaalbank, Project X and Vlakvarkfontein coal mines (refer ASX announcement dated 30 March 2010). The first drawing of the “coal loan,” (US$7m) expected later this month, will be used by the Company to fund outstanding and deferred acquisition costs for the Vaalbank and Project X projects. Subsequent drawings of the “coal loan” will be used by the Company to fund mine optimisation studies, pre development costs and site establishment and capital construction costs.

“The signing of the agreement in our view is a reflection of the commitment to Continental from EDF Trading, together with the fundamental quality and strength of our team and projects,” Mr Turvey said.

The forecast combined initial production rates of export quality coal from the Vaalbank and Project X mines, attributable to Continental and subject to the off‐take agreement with EDF Trading, is expected to be at an initial rate of approx 145,000 per month (note this does not include the Company’s attributable production of domestic quality coal which will be in addition to this).

First coal production under the off‐take agreement is expected to occur in the first half of 2011 from the Vaalbank resource, with production from Project X expected to occur some six to nine months later.

“We now not only have a significant portfolio of advanced coal assets, a highly experienced management team and EDF Trading as our international off‐take partner, we also now have a significant funding platform to enable us to aggressively develop these projects, fund suitable acquisition opportunities and achieve our ambitions of becoming a significant mid tier coal mining company,” Mr Turvey said.

The Company’s first coal mining operation, Vlarkvarkfontein, commenced first coal sales in May 2010, less than 12 months after the Company secured an option to acquire it, with the first commercial sales contracts for this project signed in June 2010.

“Our path to production has taken less than 18 months of hard work – exploration, feasibility studies, approvals and financing. That is an enormous risk that has been borne by our shareholders. With coal production having commenced at Vlakvarkfontein in May and development of Vaalbank and Project X next year, shareholders will start to be rewarded for their support,” Mr Turvey concluded.