Following the credit crisis and global economic meltdown in the second half of 2008, Exxaro is reviewing its capital expenditure programmes, including sustaining capital, as well as its project pipeline. The group will focus on the successful implementation of committed expansions while re-prioritising other identified growth opportunities.

Coal
Subsequent to Exxaro board approval in August 2008 for the coal supply agreement and the implementation of the project to expand the Grootegeluk mine at a capital cost of R9 billion, Exxaro and Eskom concluded an agreement in September 2008 for the supply of 14,6Mtpa of power station coal, for 40 years, from Grootegeluk mine to Eskom’s adjacent Medupi power station which is currently under construction. The first coal is anticipated to be supplied during the last quarter of 2011 with full production from 2014 onwards.

The development of the Diepspruit reserve at New Clydesdale is planned to produce its first coal in the second quarter of 2009. At full production, the R136 million project will produce 1,3Mt run of mine coal for beneficiation at NCC for supply to the export steam coal market.

The commissioning and start of ramp-up of the Sintel char plant at Grootegeluk mine for the production of reductants for the ferroalloy industry has been delayed to February 2009 after the failure of the refractory lining of the four retorts during the heating process. The revised plan is to commission all four retorts by the end of June 2009 with full production of 160ktpa estimated to be reached by end of 2009.

Commissioning and ramp-up to full capacity of the Mafube expansion project at a capital cost of R1,9 billion has been completed. The mine will produce 3Mtpa of export steam coal and 2Mtpa of power station coal. Exxaro’s 50% joint venture participation with Anglo Coal, although still awaiting fulfilment of all the conditions precedent, added 733kt to the overall export volumes allowing the group to take advantage of the higher average export prices experienced during the year.

Exploration of the hard coking coal resource on the adjacent properties of Moranbah South and Grosvenor South in Queensland, Australia continues to progress according to schedule. Exploration is focused on geological work to delineate long-wall mining resources. The potential for bord and-pillar mining operations will also be explored. Moranbah South has the potential to produce premium quality hard coking coal.

A pre-feasibility study and geological exploration work on a potential greenfields mine adjacent to the Grootegeluk mine with the capability of supplying the market with power station and metallurgical coal, is being progressed.

Mineral Sands
The feasibility study for the construction of the Fairbreeze mine south of the existing Hillendale mine, is being updated with start of construction targeted for the second half of 2009. Production is planned for the first half of 2011 after the mining of Braeburn and Braeburn extension in the next three years.

The feasibility study of the Port Durnford mine, located to the south-west of Hillendale mine is progressing. This mine could supply the KZN furnaces for longer than 20 years, if proven viable.

Implementation of the Tiwest Kwinana pigment expansion project for an additional 40ktpa production is on track with commissioning targeted for the first quarter of 2010. Exxaro is funding 100% of the AU$100 million expansion project.

Base Metals
Exploration activities in Turkey for zinc, lead, copper and iron ore prospects are still in the early stages with further participation being critically reviewed in the current depressed economic environment. A total of
R110 million was expensed for the year on acquisition and exploration costs.

Following Exxaro’s decision in the first half of 2008 not to participate in further 100ktpa, the project has been indefinitely postponed in the light of the substantial decline in demand for zinc metal.