Integrated report 2020
Exxaro report selector 2020
Exxaro Resources Limited
Consolidated Mineral Resources and Mineral Reserves report 2020
REPORT SELECTOR
The Mineral Resources and Mineral Reserves summarised in Summarised Group Mineral Resource and Mineral Reserve Estimates are reported as those remaining on 31 December 2020 and compared with the corresponding estimates reported on 31 December 2019. Mineral Resources are reported including Mineral Resources that have been converted to Mineral Reserves and, at 100% Exxaro ownership, irrespective of the individual operation or project's attributable shareholding. We do, however, also report Mineral Resources that fall within our LoM plan to enhance transparency. An exception to inclusive reporting is the reporting for Gamsberg and Black Mountain as Base Metal Mineral Resources and Mineral Reserves from Vedanta Resources represent Resources excluding those Mineral Resources converted to Mineral Reserves.
It is important to note that reported estimates are not an inventory of all mineral occurrences identified but a reasonable estimate of those which, under assumed and justifiable technical, environmental, legal and economic conditions, may be economically extractable at present (Mineral Reserves) and eventually in future (Mineral Resources).
Mineral Resources and Mineral Reserves are estimated on an operational or project basis and in line with the SAMREC Code for African properties, except for Vedanta's property, and the JORC Code for Australian and Vedanta properties. For Coal Resources and Coal Reserves under Exxaro management's control, estimation is in line with the SANS 10320:2004 South African guide to the systematic evaluation of Coal Resources and Coal Reserves. We are currently transitioning to the methodologies and concepts of the newly introduced SANS 10320:2020.
Comprehensive information on each operation under Exxaro management control, which supports the Coal Resource and Coal Reserve estimates, is provided in the ancillary section of this report.
Exxaro's flagship open-pit coal mine produces power station coal, variously sized metallurgical coal products, as well as semi-soft coking coal for local and international customers. There is no material change to the total Coal Resource but a movement within the Resource categories are noted. New exploration information obtained at Grootegeluk mine was used to update the geological model. As outlined earlier, the improved understanding of the geological structure within the mining area resulted in an estimated 258Mt of Inferred Resources to be upgraded to Indicated Resources. In addition, approximately 151Mt of Measured Coal Resources within the northern pit area were reclassified as Indicated, resulting in an overall increase of approximately 409Mt within the Indicated Resource category. The reclassification to Indicated is deemed insignificant and done as a proactive step to ensure a point of observation occurs within the newly interpreted faulted blocks. Focused drilling in 2021 and 2022 will be conducted to reconfirm the fault orientations.
There has been a reduction in the Proved Reserve as well as total Coal Reserves as a result of the high-value schedule that has excluded lower value coal towards the latter years of the LoM. A brief overview of the methodology followed is included in the supplementary notes.
Figure 4: Exxaro’s mining and prospecting rights in the Waterberg
The Thabametsi mining right, an area adjacent to the Grootegeluk operation, is earmarked to produce power station coal to supply a mine-mouth feed IPP plant. The project development agreement with Exxaro's partner for the IPP has lapsed and the Reserve category status has subsequently been changed from Proved to Probable.
In 2019 we reported that we relinquished the Waterberg North and Waterberg South projects. The closure activities are progressing well.
The Grootegeluk surface coal mining operation consists of a series of parallel benches advancing progressively across the deposit via a process of drilling, blasting, loading and hauling with truck and shovel fleets. The mining bench definitions in the Vryheid and overlying Volksrust formations coincide with the geological boundaries, resulting in 14 mining benches for saleable products and waste. Mining during the reporting year is reported as 54.6Mt RoM of which approximately 2.22Mt consists of metallurgical coal and largest portion of power station coal (approximately 26.55Mt) dispatched to the Matimba and Medupi power stations.
The early value re-evaluation at Grootegeluk as already discussed had several objectives. Due to the size of the deposit, there are a myriad options available to exploit the mine.
A margin ranking analysis was run to highlight high-value areas. The pit shell was then subtly readjusted to ensure that the present value of future cash flows was optimised. Economical mining practices were factored in to ensure practical low-cost mining was still sacrosanct. The lower value areas were removed or delayed with some included in areas scheduled towards the end of LoM.
The product mix was re-optimised to ensure that the mix of power station coal for Medupi and Matimba, export thermal coal and semi-soft coking coal yields the best financial results. This entails running multiple permutations and combinations of coal seams, plants and wash densities. The mine will in future transition from the central pit to the northern pit. The mechanics of this has been incorporated into the LoM schedule to ensure that waste and coal mining progresses smoothly and without interruptions to customers and cash flows.
An Eskom-tied underground mine approval has been received to execute three expansion projects, namely Matla Mine 1 access shaft, Mine 2 incline and Mine 3 decline to access the large remaining S4 and S2 underground Coal Reserves. The decline at Matla 3 is in progress and Matla Mine 1 relocation was initiated with first coal expected in the fourth quarter of 2022. The strategic intent of the exploitation strategy at Matla is to supply Eskom in accordance with the coal supply agreement regarding volumes and quality at the lowest possible cost.
Mining of the OI open-pit reserve area is progressing well. An investigation into the area, which indicated additional minable areas towards the west of OI, has been incorporated into the mine plan and Reserves following the granting of environmental approvals.
The ramp-up of production is progressing well. The box-cut strategy was re-examined to ensure that the maximum value is unlocked for stakeholders. The opencast plan was reaffirmed as the best solution and actual operational performance data was captured. The data is annually reconciled with planned parameters and updated in the LoM fact packs.
The Dorstfontein West mine incline to access S4 Coal Reserves from existing mining infrastructure has been completed. Mining of S4 is progressing well. The study was successfully completed at Dorstfontein East to obtain access for underground mining to S4 lower Coal Reserves through five portals in the current pit 2 open area and was successfully completed. Construction of the underground portal is at an advanced stage and production from this area will commence in 2021.
The Forzando North and South reserves were reassessed, under prevailing economic and cost conditions, and adjustments were made to the mine to ensure maximum value leading to a reduction in Coal Reserves. This view will be continuously updated as new information becomes available.
Matla, an Eskom-tied underground operation, extracts coal through three underground mines. Matla extracts S2 select and the lower-quality but somewhat thicker S4 in a specific scheduled relationship to blend and honour the volume and quality requirements of the Eskom agreement. It is therefore of the utmost importance to have adequate access to quality Coal Reserves to ensure the correct volumes are scheduled for the short, medium and long-term strategies. Both coal seams' mineable Reserves are rapidly diminishing within mines 2 and 3 and the unfortunate closure of Mine 1 due to pillar instability in 2015 placing a burden on the operation to comply with contractual expectations.
However, Exxaro has, since closure of Mine 1, accelerated exploration and outlined S2 and S4 Coal Resources that will be accessed through either new or existing infrastructure.
The outcome of the studies to secure long-term Coal Resources resulted in a number of expansion projects. The first was the completion of a relocation investigation that entails developing a new box-cut and tunnels to access the remaining Mine 1 S4 Coal Reserves. The study was approved and is currently under construction, expecting first coal in the fourth quarter of 2022. The LoM plans are balanced with project progress, production and the procurement of equipment aligned with the expected completion date of the new shaft access. Additional in-seam directional drilling has been completed in the area where mining is planned to commence. This information has been used to adjust the layouts of the initial panels, ensuring that the risk associated with new mining areas is minimised.
Two additional expansion projects, consisting of a decline and incline (respectively) below and above current workings at Mines 2 and 3, were approved by Eskom, unlocking S2 and S4 Coal Reserves. The decline at Mine 3, with the associated vent shaft, is under construction and first coal is expected in the second quarter of 2020. Matla accesses Coal Reserves under challenging geological and mining conditions. Thinning coal seams, variability in coal quality and roof conditions due to the impact of intrusive dykes and sills, as well as geological faulting, present challenges for coal extraction in a number of mining sections. Focused exploration activities, including surface and downhole geophysical surveys and vertical and horizontal drilling, are employed to proactively outline the impacts on mine planning. Directional surface-to-seam drilling will be implemented for the first time to investigate a number of prominent geological faults in the Mine 2 incline project area. The layouts will be optimised based on the results obtained from the drilling. Careful blending between mines and seams is required to maintain the contractual qualities while maintaining the long-term viability of the mine.
In line with Exxaro's commitment to unlock value, an expansion project to extend the LoM of Leeuwpan, an open-pit operation in Delmas, Mpumalanga, by 10 years was implemented in 2018. The updated plan incorporates changes in the price structure of the export market with higher prices for lower energy products leading to higher yields. An investigation surrounding the OI Reserve resulted in unlocking additional Coal Resources (approximately 2.7Mt) included as Probable Reserves in the LoM after all environmental approvals were secured. The market strategy for Leeuwpan is regularly assessed as it has the potential to produce products ranging from Eskom to the export market. Blending between pits must be done with precision to ensure current profitability and future sustainability.
Belfast is currently in a ramp-up phase. During the design of the mine, the planning and modifying factors used to obtain the optimum pit shell, product blend and schedule were based on theoretical numbers. During 2020, the actual conditions and performance were recorded. This data will be compared to the planning parameters either as a benchmark for improvement or to adjust the applied modifying factors. This ensures that the design and schedules are relentlessly improved and fine tuned for current and planned conditions.
The ECC complex comprises the Dorstfontein, Forzando and Tumelo operations (Figure 5). The complex comprises Dorstfontein West (an underground mine) and Dorstfontein East (an opencast and underground operation) as well as Rietkuil Vhakoni, an adjacent project awaiting approval. The Dorstfontein S4 incline project was implemented in 2018, unlocking S4's lower Coal Reserves through an incline in existing mine infrastructure. After the successful development of the incline, mining of S4 began and is progressing well. An interseam bunker was commissioned during 2020 to ensure compliance with planned production and qualities. Coal extraction from Dorstfontein East was executed from open pits 1 and 2 during the reporting year. A study was initiated to access the substantial S4 Coal Resource to the west of the open-pit areas through underground mining. Layouts for the underground area were completed and this has been included in the Reserves during 2020. Completion of construction of the underground access is imminent and production will commence in 2021.
Forzando comprises two underground mines: Forzando North and Forzando South. Both mining rights were executed in 2013 for a period of 16 years. In 2018, some historical workings were successfully accessed at Forzando North (under care and maintenance since 2014) to add to the overall product mix. However, adverse macro-economic assumptions, as well as areas excluded due to unfavourable floor gradients, negatively impacted the Coal Reserve and mining at Forzando North ceased. Mining in general is affected by geological faulting and dolerite (sill and dyke) activity, resulting in poor roof conditions and restricting access to potential Resource areas. Geological conditions affect the tempo of underground mining, which is the primary driver of cost per RoM tonnes. After tempo and cost adjustments were made, the margin ranking was recalculated using the latest price and exchange rate macros. The subsequent calculation indicated that certain Reserve blocks were not profitable to mine and these were excluded from the Reserve.
Figure 5: Exxaro’s mining and prospecting rights in Mpumalanga
