Forzando

Overview

The Forzando complex, illustrated below, is in Mpumalanga province, 10km north of Bethal, 55km south-east of Witbank and 140km east of Johannesburg. The complex comprises two underground mines, Forzando North (FZON) and Forzando South (FZOS). Forzando complex covers 12 113ha over the farms Weltevreden 193IS, Koppie 228IS, Bankpan 225IS, Geluk 226IS, Halfgewonnen 190IS, Uitgedacht 229IS, Kalabasfontein 232IS, Schurvekop 227IS, Legdaar 78IS, Rensburgshoop 74IS and Kafferstad 79IS. Currently, only FZOS is in operation with FZON under care and maintenance.

Production at FZO Complex, specifically from FZON, started in 1995 with the exploitation of S4L by Anglovaal Minerals. Total Exploration South Africa (TESA) took over the operation from 1999 to 2004 when the colliery recorded its highest production of 2,3Mt ROM per annum. FZON was placed under care and maintenance in February 2014. FZOS extracts S4L using mechanised bord-and-pillar mining methods. The operation comprises five underground production sections with average ROM output of 2.4Mt per annum. ROM coal from underground is conveyed from FZOS to the coal-processing and beneficiation plant at FZON to produce an export product of 5 800kcal/kg. The final product is loaded at FZOS via existing rail-loading facilities, and sold free-on-board at Richards Bay Coal Terminal to existing markets in India.

History

The Forzando complex has been prospected by several mining groups in the past. Anglo American Corporation was the first to conduct exploration programmes between 1966 and 1969. Other companies that explored the complex include General Mining, Gold Fields and Anglovaal. Further exploration work was undertaken by TCSA from 2000 to 2015. Exxaro Coal Central took over and accounted for 24 and 35 boreholes in 2016 and 2017 respectively. A total of 2 539 boreholes have been drilled to date with the aim of:

  • Increasing the confidence level of the resource/reserve in terms of both structures and washability data
  • Investigating possible extension to the resource/reserve
  • Obtaining more information on dolerite activities
  • Delineating shaft positioning.

This borehole number translates to a density of over 15 boreholes per 100ha.

Several geophysical surveys were undertaken from 1992 to 2002, including a high-resolution total field and vertical gradient airborne magnetic survey (1992), an aerial survey to acquire data to construct a digital terrain model (2009) and a Dighem electromagnetic and magnetic airborne geophysical survey over the Schurvekop property (2012). An aerial survey for acquiring digital terrain model (DTM) data was flown over FZON and FZOS in 2013.

Mineral rights were first acquired in the 1980s by Anglovaal Minerals, which produced first coal at FZON in 1995. FZON exploited mainly S4L and a small amount of S2L. The mine was a flagship operation for TCSA until 2004, producing roughly 2 300kt ROM per annum at its peak between 2002 and 2004. FZON produced a 5 800kcal/kg export product with mining operations outsourced to G&B Contractors. The mine operated with three production CM sections. Surface infrastructure includes a coal-washing plant linked to the main Richards Bay Coal Terminal (RBCT) via a privately-owned railway loop and rapid coal-loading facility.

FZOS mine has been operating since 2006, exploiting S4L. After FZON was placed under care and maintenance, FZOS became the flagship ECC underground mine, operating four production CM sections, achieving around 170kt of ROM per month. FZOS used to produce a 5 800kcal/kg export product. This was changed to 5 300kcal/kg at the beginning of 2016 to take advantage of the significant yield differential of around 10 percentage points between the two products. The mine uses the coal-washing plant and rapid coal-loading facilities at FZON. In 2016, FZOS recorded its highest annual production (2 344kt) in its 11 years. This performance has just been repeated in 2017 as the colliery recorded 2 382Kt ROM. In terms of the validity and currency of the mining right (legal), both FZOS and FZON mining rights are in good standing as they expire in 2029. Exxaro has a reasonable expectation that renewal of the mining right will be approved.

Geology

The Forzando complex – comprising Forzando North and Forzando South mines and contiguous prospecting right areas – is in the north-eastern corner of the Highveld coalfield, separated from the Witbank coalfield by the pre-Karoo Smithfield ridge. Basement rocks comprise Rooiberg felsites and granites of the Bushveld Lebowa suite. These felsites and granites are often palaeo-weathered to a depth of several metres. Diabase has been recorded in the western end of the complex. Given the proximity of the Forzando complex to the edge of the basin, only an abbreviated Karoo sequence is present. This package comprises the Dwyka, characterised by tillites, diamictites and varvites, and Vryheid formation, consisting of an arenaceous sequence of sandstones and conglomerates with subordinate siltstones and coal seams.

Diverse palaeo-environments including transgressive shorelines, lacustrine, fluvial and deltaic have been recognised. Across the suite of five seams, the thickest and most ubiquitous are the S2, S4 and S5 seams. S1 is restricted to palaeo lows while S3 only occurs on the western side of the mining right. Seam splitting is a common feature. Local Forzando nomenclature recognises the following seams from the base upwards: S1, S1 lower, S2, S2 leader, S3, S4 and S5.

Most exploited is S4, whose internal composition is reasonably consistent. The S2, which presents challenges of rapid seam-width variability, was also mined at Forzando North.

In the late Jurassic era, dolerite intrusions, in the form of dykes and sills, displaced the coal seams with devolatilisation or burning of some areas of coal.

Resource evaluation

There are 1 463 boreholes in the Forzando rights area covering some 12 169ha.

The FZO v2017 geological model was built in Geovia Minex 6.3.2, using the Minex growth algorithm. All geological model information is in Cape L029, Clarke 1880 Datum. Structure (seam roof, floor and thickness), quality and topographical model grids are built on a 25m x 25m grid over the same extent, with the same origin.

The FZO v2017 model is unfaulted, but includes a major sill structure (D2 dolerite sill) that can be mapped across the modelled area. Geological risk domains have been used in reporting resources, where a set geological tonnage loss is tied to a given risk condition:

  • Dolerite sill breakthrough – 50% geological loss
  • High seam gradient (>4 degrees) – 50% geological loss
  • Dolerite sill proximity to coal – 25% geological loss.

The quality data was composited on a per-seam basis using Sable Data Warehouse™ (SDWh). For mining benches comprising more than one lithological unit (sample), a weighted average wash table is calculated from the individual sample’s wash tables. Thickness, raw relative density and yield are used as the weighting factors of weighted average wash tables.

There are no material changes in structural and quality data between the 2015 and 2017 FZO geological models. Subsequent drilling has better defined corridors of access into certain areas, which will impact life of mine (LoM) slightly where access areas may be moved slightly. In 2015, a 12,5% geological loss was applied which we changed to the application of geological losses associated with risk domains:

  • High seam gradient (>4 degrees) – 50% geological loss
  • Dolerite sill breakthrough (transgression and burning) – 50% geological loss
  • Dolerite sill proximity to coal (expected burning) – 25% geological loss.

Borehole spacing (washed coal quality points of observation), face samples and seam thickness and coal quality continuity were considered for resource classification. Total coal resource decreased (~10%) due to mining and disposal of remnant resource blocks although a clear increase in the resource categories reflects the improved level of confidence of our coal resources.

The change in resource estimates is due to the following:

  • Model refinement, FZON (1,1Mt).
  • Methodology (-2,5Mt), geological losses applied as per risk domains.
  • Disposal (-12,5Mt), remnant blocks from mined-out areas.
  • Depletion (-2,8Mt), actuals from January to December 2017.
  • New information (0,3Mt), update of geological models.

Reasonable prospects for eventual economic extraction

All criteria (table 24) have been tested and considered favourable. Seam thickness cut-off (0,50m (O/C) and 1,2m (U/G), coal quality (50% maximum raw ash, 24% minimum (DAFV)) and updated geological loss domains were applied.

Reserve evaluation

Methodology for converting from coal resources to coal reserves has been adapted from SANS 10320: 2004. Reserve estimations were done using XPAC’s mine planning software package, allowing parameters and modifying factors to be applied for reporting purposes. The 2017 geological model was used to build the 2017 reserve model.

On receipt of the geological model, an evaluation is conducted to determine areas which can be converted into reserves. The process ensures that only economically viable areas are reserved by applying key cut-off criteria and discount factors associated with conversion factors and modifying factors.

The evaluation process considers coal boundaries based on property and infrastructure proximity, as well as economic factors derived from coal quality, thickness, depth and haulage distance parameters.

The process followed is to first apply geological and mining losses to the model’s in-situ coal values, as well as mining dilution and process plant recoveries, to convert these in-situ values to product values. Qualities of washed coal are incorporated into calculations and energy contained in the product is calculated. Where applicable, coal losses are converted from tonnes to volumes and these are added to waste volumes to be handled.

Actual operating costs (per operation and mining type), both mining and processing, are applied to coal tonnes and waste volumes as applicable. An estimated income based on price and exchange rate is calculated. The outcome of this process is a set of value plots mapping the distribution of net value per ROM tonnes, per product tonnes and per energy unit. Reserves are then determined based on the best (most valuable) product, along with the optimal mining method per area/seam.

FZO complex coal reserve estimates have been derived from converting measured and indicated resources to proved and probable reserves, respectively. Inferred resources in LoMP make up less than 10% of the reserve estimates but are not reported as reserves.

Reserve estimation was conducted using XPAC mine planning software, allowing for parameters and modifying factors to be applied for reporting.

Table 13: Forzando modifying factors

UNDERGROUND
MODIFYING FACTORS     2017
RESOURCES      
> Geological losses     Domains
RESERVES      
Losses      
> Mining losses     5%
Layout parameters      
> Depth to roof     20m
> Safety factor     Tertiary panels 1,6
Main development 2,0
> Bord width     6,5m
> Barrier pillar     At least equal to pillar width
> Boundary pillar     15m
> Pillar centres     14m x 14m
Mining parameters      
> Mining height     2,10m
> Extraction factor     71%
Scheduling parameters      
> Dilution     Already included in the model

Risks

We do not know of any pertinent risks or other material conditions that may impact on the company’s ability to mine or explore, including technical, environmental, social, economic, political and other key risks.

Geological complexities (dolerite activity, floor undulation and thinning of coal seams) continuously pose challenges for coal extraction at both the west and east operations. Washout channels that occur near palaeo valleys (palaeo streams) are minor risks although, where dominant, they impact qualities adversely.

Maduka Mining and Engineering Proprietary Limited lodged an application for a prospecting right overlapping ECC rights in portions 6 and 9 (MR), portion 12 (PR) of the farm Rensburgshoop. An appeal was lodged with the DMR on 11 September 2017 and we reasonably expect this to be successful.

Operational excellence and innovation

The annexation of Kalabasfontein prospecting rights (1035 and 1170PR) to FZOS 380MR has the potential to increase the FZO operation. A mining right application will be submitted in the first half of 2018 and Exxaro reasonably expects this to be approved. An opportunity to mine previously abandoned workings at FZON is under investigation. Areas under the current discard dump and FZO east and south blocks show the best potential.