Again, refer to Slimey's reply. Fats does NOT convert to Muscles.

Exercising helps to burn calories but any form of workout of exercise is pointless if you consume more calories than you burn. As a result, you will be gaining weight instead of losing.

The most effective way of burning fat is through your eating habits (caloric deficit) and working out helps quite a bit too.

I suggest you read the previous replies here carefully

Did you even eat enough protein in the first place???

1g per pound of lean body mass (lbs)

How much protein in grams do you eat daily?

Do you even know that not enough protein can result in muscle loss in a Caloric deficit diet?? Especially a diet with extremely low Caloric intake, muscle loss would be a lot if there's little protein intake..

I noticed it's possible for me to only consume 240 calories for lunch; Small pack of honey roasted almonds (20g fat, 4g sugar, 7g fibre, 7g protein).

Coupled with a 800-1200 calories dinner consisting of only meat/fats and veg + supper, I hope this is sutainable and would greatly reduce my daily caloric intake.