Mineral resources

The estimation process is summarised below and applies to all coal operations and projects under Exxaro’s management control. The resource competent person (CP) is actively involved throughout the process and no data is included/excluded without their consent.

The resource estimation process for mineral resources under Exxaro’s control is governed by the group’s resource estimation procedure and aligned to the SAMREC Code 2016 and SANS 10320:2004 standard. The data used for resource estimation is managed by separate commodity-specific procedures through which core recovery and logging, sampling, quality assurance and control, relative density determination and wireline logging standards are enforced. These standards were updated in 2017 to comply with SAMREC 2016 and proactively align with the SANS 10320:2017 draft standard.

The core recovery standard (>95% in coal seams for valid points of observation) as stipulated in SAMREC 2016 and SANS 10320:2017 draft standard is not empirically enforced due to unavailability of digital core recovery data for pre-2017 boreholes. However, Exxaro competent persons confirm that there is high confidence in core and sample recovery for all boreholes used for resource estimation purposes and any deviation is managed by increased geological losses within geological loss domains, downgrading resource classification, and/or redrilling boreholes.

For coal resources, relative density (air-dried) is determined by accredited laboratories using the Archimedes method in all instances except for Grootegeluk mine and the Thabametsi project, where relative density is determined using a field application of the Archimedes method. A comparative study between the field and laboratory methods was undertaken in 2015, and results indicated no significant difference.

A formal, annually-compiled and signed-off exploration strategy outlines planned activities to investigate areas of low confidence and/or geology or structural complexities to ensure resources with a high level of geological confidence are considered for mine planning. Exploration plans are available as supplementary information to the competent person’s report (CPR).

The reserve estimation process is summarised below and applies to all coal operations and projects under Exxaro’s management control. The resource competent person (CP) is actively involved throughout the process and no data is included/ excluded without their consent.

ITEM     DESCRIPTION
Resource fact pack     Lists new information since last estimation, together with a reconciliation between predicted MTIS and actual MTIS. Recommendations from internal/external audits are included.
Technical data validation     Technical validation of data to be used for resource estimation, including collar validation, gaps and overlaps checks, data distribution, etc.
Data analysis     Entails a review and analysis of the geological integrity and continuity of data in a spatial and geostatistical sense. Includes domaining and structural interpretations.
Data modelling     Geovia Minex is used for coal modelling and the Minex growth algorithm is the preferred interpolation technique. ESRI ArcGIS is used for modelling structural features. Sable Data Warehouse (SDWh) or Minex is used for coal compositing and, in both instances, representative substitute values are used for unsampled non-coal material. The geological model and structural interpretation is presented by the resource competent person (CP), aided by relevant technical specialists, to a panel comprising Exxaro lead CP and domain experts for sign-off and approval. Concept-level geological models, where applicable, are compiled for alternative interpretations and these risks are evaluated during sign-off. Feasibility-level and/ or LoMP-level geological models are based on reviewed and signed-off interpretations.
Resource classification     Resource classification follows the Exxaro estimation procedure and is aligned with SANS 10320:2004. Anomalous borehole data and structurally complex areas are accounted for and resource classification is used to control the adequacy of borehole data. Separate confidence zones are determined for structural features based on a matrix approach. The effect of extrapolation is controlled by resource classification in which classification domains are not extrapolated beyond half the average borehole spacing for the classification category. Only points of observation with applicable quality data are used for classification.
Estimation and reporting     Resource reporting uses approved cut-offs and geological loss domains followed by completing all necessary reports and audit trails. Exxaro currently uses a systematic and integrated review process that measures the level of maturity of exploration work done, the extent of geological potential, licence-to-operate and associated geological risks to establish an eventual extraction (EE). The criteria for assessing reasonable prospects for eventual economic extraction (RPEEE) are shown in table 24.

Reporting includes technical information that requires subsequent calculations to derive subtotals, totals and weighted averages. Such calculations may involve a degree of rounding and consequently introduce an error. Where such errors occur, Exxaro does not consider them material.
Review and consolidation     Individual reports are reviewed and corrections effected if necessary. Reports are endorsed by management and used to compile the consolidated mineral resource and ore reserves report.

Table 10: Exxaro considerations for reasonable prospects for eventual economic extraction

ITEM     CRITERIA     CONSIDERATIONS
Geological data     Data has been validated and signed off by competent person     Seam depth and extent, seam thickness, structure and seam quality (cut-off)
Geological model     Geological model has considered and signed off    
Structural model     Structure model was considered and signed off    
Mining     Mining assumptions considered and defined     Mining method, inputs from rock engineer and hydrogeologist
Assurance     Minimum tier 1 assurance as per Exxaro governance and assurance framework (chapter 6)     As per tier 1 requirement
Economic evaluation     A concept-level exploitation and economic evaluation that quantifies economic potential based on economic and mining assumptions, including geotechnical and geohydrological assumptions     Preliminary appraisal of layout, cost and profit
Environmental     An assessment of potential impediments is done and, if any exist, there should be a reasonable expectation that these will be resolved. Reasonable demonstration that environmental approvals can be obtained within the context of local, regional and national legislation
Tenure     Formal tenure must be demonstrated. If any potential impediments exist, there must be a reasonable expectation that these impediments will be resolved. If a prospecting right, there should be reasonable demonstration that a mining right approval can be obtained within the context of local, regional and national legislation
Infrastructure     Assumptions used should be reasonable and within known/assumed tolerances or have examples of precedence. Any potential impediments should have a reasonable expectation that they will be resolved. Power, water and transport considered
Market     A potential market for the product that is planned to be extracted from the resource with a reasonable assumption that this market is sustainable

“Reasonable prospects for eventual economic extraction must be demonstrated through the application of an appropriate level of consideration of the potential viability of mineral resources. Such a consideration must include a reasoned assessment of the geological, engineering (including mining and processing parameters), metallurgical, legal, infrastructural, environmental, marketing, socio-political and economic assumptions which, in the opinion of the competent person, are likely to influence the prospect of economic extraction. All of the issues listed in table 1, under Reasonable prospects for eventual economic extraction, must be discussed to the level appropriate for the specific investigation” SAMREC, 2016 edition

We have enhanced our current process to consider all aspects as per SAMREC 2016 (table 1, 4.3) to establish reasonable prospects for our operations and projects. We continuously examine our criteria to review the probability of extraction and to identify any areas where potential risk may exist.