| Share prices |
One of the key risks to achieving this goal is effective capital allocation. Globally, capital allocation has become one of the most pressing strategic issues for mining and metals companies. We believe correct capital allocation follows a process of comprehensive risk management. By analysing scenarios and impacts, and setting strict minimum investment criteria against which competing projects bid for scarce capital, we identify opportunities to preserve and grow shareholder value, refine processes and controls and remain agile in a competitive market.
| The table provides a summary of a number of growth initiatives, followed by a brief description of some projects: | |||||
| Ownership | Scope | Estimated capex |
Status | Estimated start up |
|
| Coal | GMEP | 14,6Mtpa | R9,5 billion | Construction | 2012 |
| Coal | Char phase 2 | 140-280ktpa | TBD | Feasibility | 2013 |
| Coal | Belfast | 3-5Mtpa | TBD | Pre-feasibility | 2014 |
| Coal | Market coke | 1Mtpa | TBD | Pre-feasibility | 2014 |
| Coal | Moranbah South (Australia) (50%) |
6Mtpa | TBD | Pre-feasibility | 2015 |
| Coal | Thabametsi | 6-17Mtpa | TBD | Pre-feasibility | 2016 |
| Sands | Fairbreeze mine | 300ktpa | R2,4 billion | Approved February 2011 |
2013 |
| Sands | Dry mine replacement (Australia) (100%) |
100-200ktpa | TBD | Pre-feasibility | 2013 |
| Energy | Co-generation Namakwa Sands |
14MW | TBD | Feasibility | 2012 |
| Energy | Wind energy | 40-100MW | TBD | Pre-feasibility | 2014 |
The R4,5 billion bridge loan facility for GMEP was secured in the first half of 2010 with a consortium of local and international financial institutions. First drawdown of the loan is only expected in the second quarter of 2011.
ThabametsiThe draft NIRP 2010, released in October 2010, does not cater for any new coal-fired power generation development until 2027. The draft was subjected to a public-review process in December 2010 and is expected to be finalised early in 2011 after receiving comments from all stakeholders. Due to delays in these initiatives, Exxaro’s focus is now on first developing a smaller mine for coal supply to the Limpopo IPP envisaged in the draft NIRP 2010. A bankable feasibility study as well as the public consultation required for environmental approvals will begin once the scope for the Limpopo IPP has been determined and the final NIRP 2010 promulgated. First coal production could be expected by 2015/16, but depends on the Limpopo IPP and water-supply development schedules.
Mafutha
Exxaro has a prospecting joint-venture agreement with Sasol Mining to investigate the commercial viability of developing a new coal mine in the Waterberg to supply Sasol’s potential 80 000 barrels per day inland coal-to-liquids facility. The study is still in an extended pre-feasibility stage. Mining the 170kt bulk sample for large-scale gasification testing at the Sasol Synfuels Secunda plant began in August 2009 and was completed in the second quarter of 2010. Gasification tests are expected to be complete in the first quarter of 2011.
Waterberg infrastructure development
An integrated infrastructure plan continues to be developed for the Waterberg coalfields with relevant stakeholders. Focus areas include the supply of raw water to the area, rail, road, housing and job creation. Exxaro has completed phase I of its eco-friendly housing project in Lephalale, which received an award at the 2010 Nedbank Capital Green Mining Awards in the sustainability category.
Sintel char and market coke
The Sintel char plant at Grootegeluk mine to produce reductants for the ferroalloy industry has been fully commissioned with all four retorts in operation. The plant reached overall design capacity in the last quarter of 2010. Exxaro is currently evaluating phase II expansion to produce a further 280ktpa of char as well as a study to produce market coke from semi-soft coking coal at Grootegeluk mine as part of its strategy of downstream integration and beneficiation. These studies should be completed during 2011.
Belfast
Exxaro’s application for a mining right for the Belfast project has been accepted by the Department of Mineral Resources (DMR) and is being processed. Updated specialist environmental studies as required by the national environmental management and water acts will be submitted to the relevant authorities in the first half of 2011. The pre-feasibility study was completed in December 2010 and the decision to proceed with a full feasibility study will be evaluated in the first quarter of 2011. Depending on the outcome, start-up and first production is anticipated in 2014.
Moranbah South
Exploration of the hard coking coal resource on the Moranbah South property in the Bowen Basin of Queensland, Australia, is progressing well and results obtained during the pre-feasibility study remain encouraging. We anticipate that a feasibility study will be concluded in the second half of 2012, with first production expected in 2015. Moranbah South, which is a 50% joint venture with Anglo American, has the potential to produce some 6Mtpa of premium-quality hard coking coal.
Energy
The development of Exxaro’s energy portfolio to explore opportunities in energy markets is progressing according to plan. The focus is on cleaner-energy initiatives encompassing a combination of co-generation, carbon credit trading, renewable energy, coal-bed methane development, and coal base-load project developments. Securing equity funding partners for these projects continues in parallel with investigations.
Coal-bed methane development
Development of the first five-spot test for the coal-bed methane project in Botswana, to test for economic gas flow, is in the final stages. Five wells have been drilled and four of these have been fractured. Dewatering of the well field is under way and gas flow is steadily increasing. The wells will be operated in 2011 until economical gas-flow levels have been obtained.
Clean energy initiatives: