Thabametsi overview

The Thabametsi project is 22km west of the town of Lephalale and adjacent to Exxaro's Grootegeluk mine. The project area is divided into a northern opencast portion and a southern underground area. The northern portion aims to produce power station coal for an on-site IPP as part of phase 1. A feasibility study on phase 1 was successfully concluded in 2016 and studies on extending the phase and the southern project area are ongoing. In October 2016, the South African Minister of Mineral Resources and Energy announced that the Thabametsi power project, for which Thabametsi project has a 30-year coal supply agreement, had been selected as a preferred bidder in the first bid window of South Africa's coal-baseload IPP procurement programme. The subsequent process to realise this initiative has progressed during the last number of years. The project development agreement with our IPP project partner, however, lapsed during the reporting year and we subsequently changed our reporting of Proved Reserves to Probable category to address this uncertainty. Exxaro is currently ensuring that all compliance actions are executed.

Thabametsi history

Drilling on the Thabametsi project area began in 1979 during Iscor's regional exploration of the Waterberg. This investigation was prompted by positive results on adjacent farms where Grootegeluk mine began production in 1980.

As part of this exploration, one borehole was drilled on all farms of interest. On farms where results were promising, follow-up drilling was conducted in 1980/1981. During this time, eight boreholes were drilled on four of the five Thabametsi farms: McCabesvley, Jackalsvley, Zaagput and Vaalpensloop. Two boreholes were drilled in 1988 on the remaining farm Van der Waltspan to complete regional exploration of the Thabametsi project area. All regional exploration during this time, except the boreholes on Van der Waltspan, was conducted through rotary core diamond drilling using an NQ-sized (47.6mm) core barrel. The boreholes on Van der Waltspan used a T6-146-sized (123mm) core barrel.

Exploration activities began in earnest on the project area in 2008. Since the start of the latest drilling programme, 61 boreholes have been drilled on Thabametsi at a cost of around R50 million. All boreholes completed on the project site since 2008 were undertaken using a T6-146-sized core barrel to produce a 123mm diameter core.

Figure 14: Thabametsi project

Table 28: Thabametsi project history

Date range	Company	Material notes
1979 to 1988	Iscor – Iscor Mining	Exploration drilling began (seven boreholes drilled)
1989 to 2006	Kumba	51 boreholes drilled
2007 to 2015	Exxaro Resources	Prospecting right and exploration activities specifically on the project area (180 boreholes drilled)
2016 to current	Exxaro Resources	Mining right registered in 2016 is valid for 30 years (11 boreholes drilled)

Table 29: Thabametsi Coal Resource reporting criteria

Thickness cut-off (thickness and extraction height considerations)	Quality cut-offs (adb)	Geological loss (%)
<0.5m	Ash content of >65%	5%

Table 30: Thabametsi Coal Resource estimation criteria

			Item			Description
	Database		Borehole database			Sable Data Warehouse
			Data datum			LO27 WGS 84
			Number of boreholes used for Resource estimation			116
			Validation			Conducted using queries in Sable and Excel
			Data compositing and weighting			Sable Data Warehouse
	Model		Previous model date			2014
			Last model update			2015 (conclusion of 2020 update in progress)
			Geological modelling software			Geovia MinexTM
			Estimation technique			Growth algorithm
			Grid mesh size			45m x 45m
			Scan distance			1 000m
			Data boundary			300m
			Model build limits			Upper: limit of weathering and topography/collar
			Model outputs			Roof, floor and thickness grids generated for structure Coal-washability quality grids
			Changes to modelling process			None

Figure 16: Cross-section through 2015 Thabametsi geological model

Table 31: Thabametsi Coal Resource classification criteria

Resource category	Type of boreholes	Borehole spacing (Volksrustand Vryheid formations)	Structurally complex areas
Measured	Cored boreholes with applicable coal qualities	0 to 350m	(Matrix) Additional geophysically logged boreholes needed
Indicated	Cored boreholes with applicable coal qualities	350m to 500m	(Matrix) Additional geophysically logged boreholes needed
Inferred	Cored boreholes with applicable coal qualities	500m to 1 000m	(Matrix) Additional geophysically logged boreholes needed

Table 32: Thabametsi Resource and Reserve statement

Category	2020   (Mt)	2019   (Mt)	Difference   in tonnes   (Mt)	Difference   (%)	Reason for change
Measured	270	270	–	–
Indicated	749	749	–	–
Inferred	2 857	2 916	(59)	(2)	Coal Resources that fall inside the Grootegeluk LoM was included in Grootegeluk estimates
Total Coal Resources	3 876	3 935	(59)	(1)
Proved		109	(109)	(100)	Movement is due to the lapse of the IPP project development agreement
Probable	130	21	109	519
Total Coal Reserves	130	130	–	–

Notes:

• Rounding of figures may cause computational discrepancies.
• All changes more than 10% are explained.
• Mining method: OC, UG.
• Figures are reported at 100% irrespective of percentage attributable to Exxaro.
• Tonnages are quoted in metric tonnes and million tonnes (Mt). Coal Resources are quoted as MTIS and refer to remaining Resources after 31 December 2020 and 31 December 2019.
• Coal Resources are reported on MTIS basis.
• Cut-offs applied as per Resource reporting criteria table.
• Coal Resources are quoted inclusive of Coal Resources converted to Coal Reserves.

Thabametsi Reserve estimation

For the phase 1 of the IPP feasibility study, XPAC mine-scheduling software is used to derive remaining saleable Reserves from RoM Reserves in the approved pit layout. After converting the geological model's grids to the appropriate format, the floor, roof and thickness data as well as the quality data for each bench is imported into the XPAC model. With this model, validations are performed to evaluate the data for possible mistakes, such as incremental yields for each bench rising with increases in relative float densities.

The Resource category areas are also loaded into the XPAC model for Reserve categorisation. Indicated Resources are generally converted to Probable Reserves and Measured Resources to Proved Reserves after consideration of all applicable modifying factors. If one or more of the modifying factors have not been fulfilled, Measured Resource is either not converted or the Measured Resource is converted but downgraded to Probable and the associated risk is clearly stated. Inferred Resources are not converted to Coal Reserves. No Inferred Resources are included in the LoM plan.

The Coal Reserve is based on a bankable feasibility project level of investigation. The project development agreement with our IPP project partner lapsed during the reporting year and we subsequently changed our reporting of Proved Reserves to the Probable category to address this uncertainty. Exxaro is currently ensuring that all compliance actions are executed.

Thabametsi known risks

Some assumptions regarding the highwall mining method need to be confirmed at the start of the operation.

Geological structures (primarily faulting) are vital considerations for potential underground exploitation. Additional surface geophysical surveys as well as vertical and incline drilling are required to enhance the potential underground mine layouts.

Thabametsi opportunities

The Thabametsi Coal Resource is a substantial asset, including both the Volksrust and Vryheid formations with coal deposit characteristics very similar to the adjacent valuable Grootegeluk mine resource. Its location to Grootegeluk mine presents various high-potential opportunities that are currently under investigation. The potential to exploit Thabametsi both opencut as well as underground underline its value.

The geological model and classification of the Thabametsi mining area are in the last phases of completion. Drilling results to be included in the 2021 model will enhance the current level of geological confidence.

Table 33: Thabametsi RPEEE considerations

	Item			Criteria			Considered			Comment
	Geological data			Data has been validated and signed off by competent person			Yes			Geological structures, seam thickness ≥1.0m, ash content <65%. Coal qualities reported on an air-dry basis
	Geological model			Geological model was considered and signed off			Yes			2015, 2020 model update in process to conclude
	Structural model			Structure model was considered and signed off			Yes			2015 and 2020 model update in process to conclude
	Mining			Mining assumptions considered and defined			Yes			Opencast and underground
	Assurance			Minimum tier 1 assurance (Exxaro governance)			Yes			2015
	Economic evaluation			A concept-level exploitation with economic and mining assumptions, including geotechnical and geohydrological assumptions			Yes			Studies that underpin the IPP study and mining right mine works programme
	Environmental			Reasonable demonstration that environmental approvals can be obtained within the context of local, regional and national governmental legislation			Yes			Approvals and land ownership in place
	Tenure			Formal tenure must be demonstrated with reasonable demonstration that a mining right approval can be obtained within the context of local, regional and national governmental legislation			Yes			Mining right (26 years)
	Infrastructure			Assumptions used should be reasonable and within known/assumed tolerances or have examples of precedence			Yes			Current infrastructure
	Market			A potential market for the product with a reasonable assumption that this market is sustainable			Yes			IPP and current Grootegeluk steam coal market

Table 34: Thabametsi modifying factors considered in converting Coal Resources to Coal Reserves

Modifying factors	Value
Geological loss	5%
Average thickness cut-off	<1m
Quality cut-offs (adb)	Raw CV >11Mj/kg
Mining loss	*T1 – 0.5m losses to overburden *T2 – 0.25% of coal left in pit bottom
Boundary pillar	N/A
Dilution	Applied to in situ mineable Reserves due to inter-layered composition of deposit
Contamination	T2 – 0.3m
Mining recovery efficiency	No additional losses due to proposed mining method. Coal transfer between benches T1 and T2 will balance out over time as both go to same plant
Planned average slope angles	35 degrees
Practical plant yield	Crushing and screening process 98%
Strip ratio cut-off	Energy strip ratio >7Gj/ex-pit tonnes Strip ratio <0.3 cubic metre per tonne (m3/t)
Environmentally sensitive areas	No sensitive areas in pit layout
Legal	The layout is within the mining right boundary
Social	There are no socially sensitive areas in the pit layout (for example graveyards and dwellings)
Geohydrological	No areas identified in the mining area