Arnot coal mine

Supplementary descriptions are provided for projects and operations directly under Exxaro’s management control. For projects and operations included in the Exxaro mineral resource and ore reserve statement but in which Exxaro does not have management control, the reader is referred to that company’s website for supplementary information (refer to foreword).

Overview

Arnot mine is 43km east of Middelburg in Mpumalanga, South Africa, and was contracted to supply coal to the nearby Eskom Arnot power station until 31 December 2015. This was achieved by extracting no 2 seam lower (S2L) from two underground shafts, 8 and 10 shafts, using mechanised mining equipment (bord-and-pillar extraction) while Mooifontein open-cast used conventional truck-and-shovel, roll-over mining method to extract S2L and no 1 seam (S1). The operation is in closure.

History

Arnot mine produced thermal coal for over 40 years, using various mining methods, predominantly bord-and-pillar (currently mechanical), open-casting and short-walling between 1995 and 2005.

Arnot had a 40-year coal-supply agreement (CSA) with Eskom, supplying the adjacent Arnot power station, which ended on 31 December 2015.

A pre-feasibility study on the commercial viability of Arnot in 2016 found that there are several areas that can be profitably mined for the thermal coal market. However, due to the absence of a confirmed CSA, no reserves have been declared.

Geology

S1 and S2L are the only coal seams of economic interest in the Arnot mining right area, and these correlate with the typical Witbank coalfield seams. The no 1 seam is well developed across the entire underground and open-cast resource areas. It is intersected at an average depth of over 50m in the underground areas, rendering it unfeasible for exploitation. It does, however, occur at shallower depths of at least 23m in open-cast areas and remains a good prospect in these resource areas.

The depth to the top of no 2 seam depends largely on local surface topography and reaches a maximum depth of 80m along the eastern boundary of the mine lease area, and pinches and thins out in the eastern parts of the mining section due to local, pre-Karoo basement palaeo-highs. This seam is generally intersected at an average depth of 44m in underground resource areas; and at average depths of 20m in open-cast resource areas.

The presence of dolerite dykes and sills has a devolatising effect on the S2L coal seam. The intersected dykes are generally thin (0,3 to 1,5m), discontinuous and sub-parallel to a sill in an east-west direction. This sill is well-developed (about 5 to 40m thick) and overlies the S2L coal seam along the south-eastern resource boundary. The pre-Karoo basement topography consists of both felsites and diabase intrusives associated with the Transvaal supergroup and Bushveld igneous complex respectively.

Resource evaluation

The current geological model is the 2015 long-term geological model. Some 2 458 boreholes were used for resource estimation, using the Minex growth algorithm. Coal-quality compositing was conducted in Minex on a weighted average basis and signed-off substitute values were used for unsampled in-seam material. The 2015 updated resource classification was based on SANS 10320:2004 guidelines together with consideration of the mine’s risk and opportunity domain analysis (RODA) model. Criteria for estimating mineable tonnes in-situ (MTIS) include visually determined coal thickness and quality continuity; a 1,8m thickness cutoff for underground resources; a 1,0m thickness cut-off for open-castable resources and a maximum ash content of 35% across the resource. A 10% geological loss was applied.

Risk

A dispute emanating from the Exxaro/Eskom CSA is the discussion on the shortfall in the rehabilitation financial provision. This dispute will go into arbitration in the first half of 2018. Approval of the consolidated environmental management plan (EMP) is pending due to the outstanding conclusion of the dispute.

Reasonable prospects for eventual economic extraction

All aspects of table 24 have been considered. The operation, an Eskom tied mine, is in closure after termination of the CSA with Eskom. Except for uncertainty on the CSA, all aspects of reasonable prospects for eventual economic extraction are favourable. We believe a reasonable understanding between a mining operator and Eskom will address all potential conditions (e.g. land acquisition and outstanding environmental approvals) and will lead to coal extraction.

Figure 11: Typical north-south (A-A') section through Arnot geological model