Mr. Malcolm Campbell reports

BUFFALO COAL CLOSES AN ADDITIONAL US$4 MILLION LOAN FACILITY

Buffalo Coal Corp. has closed the $4.0-million (U.S.) loan facility from Resource Capital Fund V LP (RCF) as announced on Feb. 2, 2015.

As previously announced, despite the restructuring initiatives which have been implemented throughout the group during 2013, 2014 and 2015 to date, the current market conditions and operational performance have necessitated further restructuring, and the requirement for additional capital over and above the funds already received from RCF. The additional funds will be used to improve operating efficiencies and support the group's working capital requirements during the restructuring period in the company's return to profitability, thereby ensuring that Buffalo remains sustainable into the future.

The $4.0-million (U.S.) will be advanced as a bridge loan and, subject to receiving disinterested shareholder approval, will roll over into Buffalo's existing $25.0-million (U.S.) convertible loan with RCF, under the same terms and conditions except for the proposed amendments to the interest rate and conversion price as set out below, and the increased amount available under the loan.

Bridge loan

The bridge loan proceeds will be used for general working capital and to implement the restructuring process at Buffalo's operations in Dundee, South Africa, as announced on March 11, 2015. Funds from the bridge loan will be available upon satisfaction of the conditions precedent, set out in the bridge loan documents, and will be drawn on an as-needed basis.

The bridge loan bears interest at a rate of 15 per cent per annum, payable on the maturity date, which is the earlier of the date on which the approval is received or June 30, 2015. Subject to receipt of the approval, interest will be payable in common shares of Buffalo at a price per share equal to the 20-day volume-weighted average price (VWAP) as at the date the payment is due.

No establishment fees were incurred on the bridge loan.

Upon receipt of the approval, the bridge loan will roll into the existing convertible loan (as discussed below). If the approval is not received by June 30, 2015, the bridge loan, and all accrued but unpaid interest due to RCF will be immediately due and payable in cash.

Convertible loan

Subject to receipt of the approval, the bridge loan will roll over into the existing convertible loan, resulting in an aggregate $29.0-million (U.S.) convertible loan facility with RCF. The convertible loan has the same terms and conditions as the existing convertible loan, except for the following changes to the interest rate, conversion price and the increased amount available under the loan. The existing convertible loan bears interest at a rate of 12 per cent per annum and is convertible into common shares at a price of 14.46 cents. Subject to receipt of the approval, the interest rate on the convertible loan will be increased to 15 per cent per annum, and the conversion price will be decreased to 4.69 cents, a 25-per-cent discount to the five-day VWAP as at Jan. 30, 2015.

The approvals

The issuance of common shares to RCF in satisfaction of interest obligations under the bridge loan, the conversion of the bridge loan, and the adjustment of the interest rate and conversion price on the existing convertible facility are subject to disinterested shareholder approval. Buffalo intends to seek approval of its shareholders for these matters at the annual general meeting to be held no later than June 30, 2015. As these transactions are related-party transactions under Multilateral Instrument 61-101, RCF and its affiliates holding common shares will not vote on these matters at this meeting.

Effect of the bridge loan and the proposed amendments

RCF currently owns 40,475,907 common shares, representing approximately 60.73 per cent of the currently issued and outstanding common shares (on a non-diluted basis).

Based on the Oanda midpoint exchange rate on March 27, 2015, of $1.00 (U.S.) equals $1.2476, and assuming that (a) the entire principal amount of the existing convertible loan remains outstanding at maturity, (b) the entire principal amount of the existing convertible loan is converted into common shares, (c) all accrued interest is converted into common shares at a price equal to the 20-day VWAP as at March 27, 2015, and (d) no other changes to the issued and outstanding capital of the company occur, RCF would own approximately 89 per cent of the then issued and outstanding common shares (on a fully diluted basis). Under the same assumptions, the full conversion of the principal amount of the convertible loan (including any interest accrued thereon) would result in RCF owning approximately 95 per cent of the then issued and outstanding common shares (on a fully diluted basis).

We seek Safe Harbor.