4.   MINERAL RESOURCE AND RESERVES

4.3.1  

Grootegeluk Mine

The Coal Resource estimation at Grootegeluk Mine is based primarily on some 639 boreholes that cover both the mining area and the prospecting permit area. Exploration boreholes are laid out on a 500m x 500m basic grid pattern for the areas external to the approved pit layout and in filled to 250m x 250m within the approved pit layout. The cored hole is drilled to base of zone 1 + 2.5m with a large diameter core bit. The core is then logged to a 1cm resolution where required. The profile log is then compared with surrounding boreholes to ensure that correct correlation takes place and the profile is marked with the expected sample positions.

At this stage any missing section due to faulting is noted and the partial samples are not sampled to preserve the borehole database integrity. The sampling of the hole is preceded with a visual check of the borehole core with the profile and any discrepancies corrected. The coal (to cm resolution) in each sample is incorporated in a single sample suffixed “C” and the shale in a separate sample suffixed “S”. The splitting of the individual samples into coal and shale is done to alleviate high costs of analysis. The individual samples are weighed in both water and air to determine an air dried raw relative density of each sample. This information is used to recombine the sample results after analysis. All the samples are submitted to ACT Coal Laboratories, which adheres to all relevant standards and procedures and is currently in the process of being accredited with SANAS, for analysis where a very prescribed analysis route is followed by the coal and shale samples. All the borehole data (lithology, zone and sample) are captured on the mine and an electronic transfer of the analytical data is obtained from the laboratory and stored in a SABLE borehole database. The analytical data is checked and validated according to a strict set graphical comparison criteria with exceptions noted and further work undertaken.

The recombining of the individual samples is performed in the SABLE database as is all the compositing of individual samples to benches. Generally the data is in a very good state. Evaluation of the modeling procedures used in the HORIZON module of the geological modeling software MINEX, indicates a very high degree of responsibility. The correlation of benches is undertaken with a very good understanding of the deposit, sections are drawn through all sectors of the deposit and checking of the bench definitions well done. In addition the sections show that the logging of the borehole information is of a very high standard.

The statistical evaluation of the coal quality information supplied indicates good database integrity. The understanding of the statistical effects of different borehole core diameters on the interpolation technique as indicated in the resource report The process being followed to build the model is an acceptable method and the results of the post-modeling sectioning indicates that the procedure is building a coherent and reliable model of the geology that is being encountered in the mine.

The creation of grids for both the structural and quality data using the growth algorithm in HORIZON for all the relevant benches results in an exceptionally large model by industry standards. The gridding of all the washabilty data results in thousands of grids that are used to determine blast block configuration and theoretical yields at the beneficiation plants.

The complexity of the model has resulted in the rebuilding of the model only every two years. Considering the complexity of the processing and the amount of work required to build the model this is considered to be sufficient.

The use of the geological model to determine the bench configuration has been in place at the mine since 1987, where benches are determined on lithological horizons rather than artificial elevations. The pre-mining bench determination is based on the characteristics of the coal in the ground and can be summarised as follows:

• Semi-soft coking coal (10.3% ash content) from benches 2, 3 and 4, the middlings of which goes to Matimba.
  
• Thermal coal for The Matimba Power Stationfrom benches 5, 6, 7B and 9A.
  
• Metallurgical coal from benches 9B and 11.
  

The whole process is complicated by faulting and the difficulty of horizon control in the pit due to the similarity of the various lithology types.

At Grootegeluk the bench boundaries are provided to the Survey department from the geological model for each bench blast block. These are staked and are drilled to specified depths as determined from the geological model. The blast holes are geophysically logged and interpreted. The block is blasted and the coal loaded and the floors re-surveyed and a reconciliation done to determine the amount of over or under mining that has taken place.

There is a natural discrepancy between the predicted qualities and the actual qualities achieved in the beneficiation plants. This due in part to the discussion above and also due to the liberation factors achieved in core samples crushed to –13mm and RoM part beneficiated at –50mm.

The classification of the resources into Inferred, Indicated and Measured using the control point separation for the Inferred category and the use of a percentage of the 95 percentile of the ordinary kriging estimate divided by the determined kriging estimate of 10% or less determines for each bench the Measured Resource.

Each criterion of the SAMREC Code as defined in the guidelines SANS 10320 : 2004 is covered with reasonable explanation. The process followed to determine the modifying factors and in the classification of the resources and determination of the qualities and yields is sufficient to support the derivation of the declaration and can be expected to provide a reasonable estimation of the Coal Resources and Coal Reserves.

On re-assessing the classification of the resources within the Mining Authorization Area, the expected extraction of 1.6 billion tonnes from the Coal Benches translates into some 0.8 billion tonnes of saleable product. There is more than sufficient Measured and Indicated Resources (3.16 billion in-situ tonnes, discounted for geological losses, at 31 December 2004) within the Mining Authorization Area which could be converted to sufficient Reserves that would support the projected 40-year mining plan. It is SRK’s opinion that there would be little or no significant change in the mining economics if the mining layout was to be changed to remain only within the Indicated and Measured Resources. To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.8.

4.3.2

Leeuwpan Mine

Some 1,617 boreholes have been drilled in and around the Mine Authorisation Area. This borehole information has been captured according to the Kumba Standards to a resolution of a minimum of 1cm, with the standard logging codes used to capture the information. The individual geologists who have logged the boreholes are responsible for the complete capture of the related lithological and analytical information into the borehole database which is stored on the Mine. The sampling at the beginning of the exploration programme was in detail with upwards of 30 samples having been taken in the coal measures. At the beginning the sediment partings were sampled. Recent exploration results in some five samples taken in the coal measures and the sediment partings assigned default values. This practice is common accepted practice where sufficient information is available. All analysis of the sample material are done on site at the Coal and Mineral Technologies Laboratory at Delmas (Leeuwpan Colliery), which is a SANAS accredited laboratory (No. TO144). The sample procedure and number of checks and repeats appear to be according to ISO standards.

There is however a slight concern in the relative density determination with a relatively large variability in the correlation between ash content on an air dried basis and the air dried relative density. Checks done on the analytical information provided indicates that although the majority of the data are within the norms that can be expected for South African Coals, there are a minor amount of discrepancies, with 81 occurrences of RD’s of below 1.25 some with ash contents as high as 48%. It should be noted however that there are over 10 000 individual samples within the database. All the borehole data (lithology, zone and sample) are captured on the mine and an electronic transfer of the analytical data is obtained from the laboratory and now stored in a SABLE borehole database. The analytical data is checked and validated within the programme to determine variable trends within the fractional analytical data and abnormal analytical results with the physical lithological description.

The implementation of the SABLE database is relatively recent occurrence which occurred during the first quarter of 2004. Previously an in-house DB3 database was used to store, validate and composite all the geological data. The recombining of the individual samples is performed in the SABLE database as is all the compositing of individual samples to Seams. Generally the data is in a reasonable state with only minor errors encountered. The product extrapolation technique as described by the SABLE programming team is a linear extrapolation between known points and in some cases beyond the data. This can induce error. While it is very unlikely to encounter a pristine database this data could easily be validated and corrected.

Geological modeling of the composited analytical and structural data is undertaken in MINCOM’s Stratmodel and the resultant grids are exported to XPAC for Mine scheduling. Visual inspection of the computer model appeared to reflect the complexity and variability that could be expected from this type of coal deposit. Validation of the model was undertaken in a comparison of the resource calculations for the specific resource blocks and discrepancy due to the software package is in line with that encountered on other mines and mining companies with a correlation factor of approximately 0.95 being achieved. The determination of the amount of coal available in each of the resource blocks indicates a reasonable estimation. There are a

number of issues that appear to be unique to Leeuwpan Mine. The Coal Resource and Coal Reserve Statements indicate that there were numerous expectations on the right of tenure that have been propagated over a number of years.

The mine does not have security of tenure over the entire surface of the mining authorisation area. Subsequent to the mine visit, a document supplied by Kumba indicated that the application for the conversion of the farms Wolvenfontein 244IS portion 8, Rietkuil 249IR portions 1 and 2, Weltevreden 227IS portion 7, and Moabvelden 248IR portion 4 had been refused and this decision is under appeal. Based on an opinion from Kumba’s legal counsel, SRK has accepted that the conversion application should be successful and has included the coal resources on these properties in the projections.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.9.

4.3.3

Tshikondeni Mine

Some 1,558 boreholes have been drilled in and around the Mine Authorisation area. This borehole information has been captured according to the Kumba Standards to a resolution of a minimum of 1cm, with the standard logging codes used to capture the information. The individual geologists who have logged the boreholes are responsible for the complete capture of the related lithological and analytical information into the borehole database which is stored on the mine. At the current stage in the mine’s life there is no more active exploration drilling taking place. However percussion and cored surface boreholes are occasionally drilled to determine structurally complex areas close to the active mining faces. The apparent integrity of the geological data on the mine is good. Additional geological data gathering is obtained by underground horizontal drilling, pillar channel samples and grab samples from the belts. The horizontal drilling procedure used at Tshikondeni to determine more accurately the positions of major structural features close to mining faces is very similar to the practices applied in other structurally complex areas. The survey and analysis of any core recovery is handled in a reasonable manner. The channel sampling of the pillars is used to determine the accuracy of the overall geological model and determine plant feed coal qualities. The inherent limitations of this method of sampling are well-understood by the geological personnel on the mine. Belt grab samples are also used and these samples are routinely sent to the ACT laboratories, which adheres to all relevant standards and procedures and is currently in the process of being accredited with SANAS, for more detailed petrographic analysis. All the locally derived samples are analysed on the mine at the mine laboratory with the exception of the exploration boreholes and some of the belt grab samples. All RD determinations are done on the mine.

All the borehole data (lithology, zone, sample and analysis) are captured on the mine and stored in a GeoLog geological database and imported into a SURPAC block modelling package. The GeoLog geological database is used to composite the samples and washabilities before this information is imported into the SURPAC model. The SURPAC model is used to create DTMs of the upper and lower surfaces of the selected mining horizon and to assign coal qualities to individual resource blocks before this information is exported to XPAC for mine scheduling. The analytical data is checked and validated within the GeoLog programme to determine variable trends within the fractional analytical data and abnormal analytical results with the physical lithological description. An additional step of correcting the yield at certain fractions due to crushing and coreloss during drilling has been applied to compensate of the inherent softness of the coal and to better estimate the plant yield.

The incorporation of a risk matrix in the XPAC scheduling to determine the probable extraction factors and mining and in-panel geological losses. In light of the amount of information that is collected and processed, the very small deviances encountered in the coal quality reconciliation of 2%, 2% and 1% for the monthly, weekly and daily reports tends to indicate a competent database. The determination of the amount of coal available in each of the resource blocks is as stated in the section on geological modelling indicates a reasonable estimation. As only the coal that is considered to be readily mineable has been included in the resource statements with the slight exception of the corner of the Goni block that is outside of the mining authorisation.

The control point density is well within the SAMREC definitions for Indicated and Measured Resources as applied to coal and is in the opinion of SRK SAMREC compliant.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.10.

4.3.4

Arnot Colliery

The primary means of exploration is through the drilling of vertical, fully-cored (~60mm, TNW), diamond-drilled boreholes. All drilling is undertaken by established drilling companies with sufficient and relevant experience in the South African Coalfields. Core retrieved can thus be assumed to be representative of the strata penetrated, including coal Seams intersected. All core logging is currently undertaken by suitably qualified geologists with relevant experience in coal exploration and mining. Core logging is quantitative to a sufficiently high level of detail to allow for appropriate sedimentological studies, e.g. litho-stratigraphic correlation, to be undertaken, including coal resource estimation.

Since the coal Seams are relatively flat lying and undeformed with respect to folding, Seam thicknesses, as measured by logging (down-hole length), are considered to be equal to the true Seam thickness where vertical boreholes have been drilled. To SRK’s knowledge, no inclined boreholes have been drilled at Arnot during Eyesizwe’s ownership of the mine. No information regarding sample recovery was supplied, or appears to be available.

However, given that the drilling is undertaken by experienced personnel and that the logging is carried out by a suitably qualified geologist, it can be reasonably assumed that recorded, and captured, data regarding cored coal intersections are accurate and representative of the full Seam, or the select portion thereof. All intersections through coal Seams of economic interest, namely the No. 2L, and of sufficient length, typically greater than 30cm, are submitted for analysis Midlab coal laboratory in Middelburg. Arnot supplies primarily a RoM, unbeneficiated product directly to Eskom’s Arnot Power Station. Approximately 14% of the RoM is destoned in a dense-medium beneficiation plant, washing at a relative density of 2.0. Analyses are thus typically restricted to the proximate analyses, calorific value (“CV”) and total Sulphur (“TS”). Although Midlab is not SANAS accredited, SRK was not made aware of any significant discrepancies between forecast coal qualities and reconciled actual qualities (the power station also performs checks on RoM coal).

No other substantive exploration data has been supplied to SRK.

All borehole positions are surveyed (Lo system) by the mine’s survey personnel and these positions are considered accurate to allow for geological modelling to be performed. The verification of core logging and laboratory results is undertaken by the mine geologist. In the case of anomalous laboratory results, the reference sample can be analysed. Anomalous logging results can be clarified and corrected in the field before the core is destroyed. If poor drilling results in significant core losses, re-drilling of boreholes can be requested. Twinning of older boreholes can also be performed. Eyesizwe makes use of a computer-based borehole database known as the Geological Borehole Information System (“GBIS”). This database has builtin data validation procedures that are executed routinely as information is entered into the database.

Although SRK was supplied plans indicating the geographic localities of boreholes used in the geological modelling of the particular Seams within the Arnot mining areas, SRK did not independently classify the resources in terms of SANS 10320 and, therefore, cannot comment on the validity and accuracy of the SAMREC classification of resources as reported by Arnot as per the supplied Coal Resource and Coal Reserve Statement. SRK is however satisfied that sufficient boreholes, at relevant spacing, have been drilled to confidently classify the resources accordingly. SRK is therefore satisfied that the Coal Resources and Coal Reserves stated herein are SAMREC compliant.

The Minex geological modelling software programme is used to model all validated data exported from the GBIS. The Growth Algorithm is used to interpolate the various parameters between points of observation, i.e. boreholes. This algorithm is a trended geostatistical estimator and is considered to be adequate for interpolation and modelling in most South African Coalfield scenarios. Once the data is modelled, grids of controlling surfaces can be generated. Controlling surfaces include physical and coal quality parameters. Estimates of Coal Resources can then be performed for polygons defined within the gridded areas.

The definition of polygons is initially controlled by the physical and coal quality cut-off parameters applied at Arnot. These cut-off parameters, for the various Seams, are tabled in Table 4.5.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.11.

4.3.5

Matla Colliery

The primary means of exploration is through the drilling of diamond-core boreholes. Drilling is currently undertaken by several established drilling companies considered to have sufficient experience in diamond-core drilling in the South African Coalfields. Core retrieved can therefore be expected to be representative of the sedimentary successions penetrated and core recoveries to be of an acceptable standard. All holes are fully cored TNW (~60mm diameter) size. All core logging is currently undertaken by suitably qualified geologists with relevant experience in coal exploration and mining. Core logging is quantitative to a sufficiently high level of detail to allow for appropriate sedimentological studies, e.g. litho-stratigraphic correlation, to be undertaken, including coal resource estimation. Since the coal Seams are relatively flat lying and undeformed with respect to folding, Seam thicknesses, as measured by logging (down-hole length), are considered to be equal to the true Seam thickness where vertical boreholes have been drilled.

To SRK’s knowledge, no inclined boreholes have been drilled at Matla. No information regarding sample recovery was supplied, or appears to be available. However, given that the drilling is undertaken by experienced personnel and that the logging is carried out by a suitably qualified geologist, it can be reasonably assumed that recorded, and captured, data regarding cored coal intersections are accurate and representative of the full Seam, or the select portion thereof.

All intersections through coal Seams of economic interest, namely the No. 5, the No. 4 and the No. 2 and of sufficient length, typically greater than 30cm, are submitted for analysis. Matla supplies a RoM, unbeneficiated product directly to Eskom’s Matla Power Station and therefore analyses are typically restricted to the proximate analyses, calorific value (“CV”) and total Sulphur (“TS”). Matla has an on-mine laboratory, and although not SANAS accredited nor audited during the technical visit, SRK was not made aware of any significant discrepancies following discussions with relevant colliery personnel between forecast coal qualities and reconciled actual qualities (the power station also performs checks on RoM coal). Presently, the No. 5 Seam is not mined.

No other substantive exploration data has been supplied to SRK.

All borehole positions are surveyed (Lo system) by the mine’s survey personnel and these positions are considered accurate to allow for geological modelling to be performed.

The verification of core logging and laboratory results is undertaken by the mine geologist. In the case of anomalous laboratory results, the reference sample can be analysed. Anomalous logging results can be clarified and corrected in the field before the core is destroyed. If poor drilling results in significant core losses, re-drilling of boreholes can be requested.

Twinning of older boreholes can also be performed. SRK was not supplied information and/or plans indicating the total number, and geographic localities, of boreholes used in the geological modelling of the particular Seams within the Matla mining areas. SRK cannot therefore comment on the validity and accuracy of the SAMREC classification of resources as reported by Matla as per the supplied Coal Resource and Coal Reserve statement.

Given the extensive history of the mine, however, it can be reasonably assumed that sufficient boreholes have been drilled to allow for adequate geological modelling to be performed allowing for reasonable estimates of coal resources to be made. SRK is therefore satisfied that the Coal Resources and Coal Reserves stated herein are SAMREC compliant.

The Minex geological modelling software programme is used to model all validated data exported from the GBIS. The Growth Algorithm is used to interpolate the various parameters between points of observation, i.e. boreholes. This algorithm is a trended geostatistical estimator and is considered to be adequate for interpolation and modelling in most South African Coalfield scenarios. Once the data is modelled, grids of controlling surfaces can be generated. Controlling surfaces include physical and coal quality parameters. Estimates of coal resources can then be performed for polygons defined within the gridded areas. The definition of polygons is initially controlled by the physical and coal quality cut-off parameters applied at Matla. These cut-off parameters, for the various Seams, are tabled in Table 4.6 (where this information has been provided).

The Coal Resource and Coal Reserve statement as developed and submitted by Matla has been audited by SRK and, where necessary, adjustments made. The SRK – revised Coal Resources and Reserves can be seen in Table 4.12.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.12.

4.3.6

New Clydesdale Colliery

New Clydesdale Colliery has been explored, primarily through the drilling of vertical boreholes (cored), by several mining houses, namely Gold Fields of South Africa, Anglo Coal, and more recently, Eyesizwe. Over the 40 years of exploration and mining at New Clydesdale Colliery, numerous geologists have logged core, sampled coal and compiled geological models. The current geological model has incorporated into it all relevant historical information, where it has been deemed to be of a suitable quality.

The primary means of exploration is through the drilling of diamond-cored boreholes. Drilling is currently undertaken by several established drilling companies considered to have sufficient experience in diamond-core drilling in the South African Coalfields. Core retrieved can therefore be expected to be representative of the sedimentary successions penetrated and core recoveries to be of an acceptable standard. All holes are fully cored, TNW (60mm diameter) size.

All core logging is currently undertaken by suitably qualified geologists with relevant experience in coal exploration and mining. Core logging is quantitative to a sufficiently high level of detail to allow for appropriate sedimentological studies, e.g. litho-stratigraphic correlation, to be undertaken, including coal resource estimation. Since the coal Seams are relatively flat lying and undeformed with respect to folding, Seam thicknesses, as measured by logging (down-hole length), are considered to be equal to the true Seam thickness where vertical boreholes have been drilled. To SRK’s knowledge, no inclined boreholes have been drilled at New Clydesdale Colliery.

No information regarding sample recovery was supplied. However, given that the drilling is undertaken by experienced personnel and that the logging is carried out by suitably qualified geologists, it can be reasonably assumed that recorded, and captured, data regarding cored coal intersections are accurate and representative of the full Seam, or the select portion thereof.

All intersections through coal Seams of economic interest, namely the No. 4 Upper and Lower Seams, the No. 2 Seam and the No. 1 Seam and of sufficient length, typically greater than 30cm, are submitted for analysis. All selected coal Seams and sub-Seams are submitted to a coal analytical laboratory for proximate and full washability analyses. Sufficient density fractions are selected to allow for comprehensive wash-tables to be generated. All coal samples are submitted to either Babu’s Laboratory Services in Middelburg or Witlab in Witbank. Although these laboratories are not SANAS accredited facilities, no indication of poor service and/or results have been communicated to SRK. These laboratories are well-known in the region and SRK has confirmed their service standards with other users.

Sample security, preparation and handling was not discussed, neither was any information in this regarded submitted to SRK and therefore no comment can be made. SRK was not made aware of any previous audits or reviews of sampling techniques and results, however, SRK was informed that all samples with washability data have been archived at the mine and can be made available for inspection if necessary. SRK does not consider this necessary for the purposes of this technical audit.

No other substantive exploration data has been supplied to SRK.

All borehole positions are surveyed (Lo system) by the mine’s survey personnel and these positions are considered accurate to allow for geological modelling to be performed. Accurate terrain modelling is done using DTM based on flight data from 2001. All borehole collars are adjusted to this DTM.

In the Diepspruit/Middeldrift/Vaalkrans South coal resource areas, a total of 251 diamond-cored boreholes have been drilled. A total of 60 diamond-cored boreholes have been drilled in the Vaalkrans North coal resource area; 26 of the 60 were drilled to the base of the No. 4 Lower Seam.

The verification of core logging and laboratory results is undertaken by the mine geologist. In the case of anomalous laboratory results, the reference sample can be analysed. Anomalous logging results can be clarified and corrected in the field before the core is destroyed. If poor drilling results in significant core losses, re-drilling of boreholes can be requested. Twinning of older boreholes can also be performed.

The density and distribution of cored and sampled boreholes within the planned mining areas is sufficient, in terms of SANS 10320, for coal resources to be estimated with a high degree of confidence. Coal resources within the planned mining areas are considered Measured Resources.

The Minex geological modelling software programme is used to model all validated data exported from the GBIS. The Growth Algorithm is used to interpolate the various parameters between points of observation, i.e. boreholes. This algorithm is a trended geostatistical estimator and is considered to be adequate for interpolation and modelling in most South African Coalfield scenarios. Once the data is modelled, grids of controlling surfaces can be generated. Controlling surfaces include physical and coal quality parameters.

Estimates of coal resources can then be performed for polygons defined within the gridded areas. The definition of polygons is initially controlled by the physical and coal quality cut-off parameters applied at New Clydesdale Colliery. These cut-off parameters vary for the various Seams.

The Coal Resource and Coal Reserve Statement as developed and submitted by New Clydesdale Colliery has been audited by SRK and, where necessary, adjustments made. The SRK – revised Coal Resources and Reserves can be seen in Table 4.13.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.13.

4.3.7

North Block Complex

North Block Complex comprises several identified resource areas as follows:

• Eerstelingsfontein opencast;
  
• Glisa South underground; and
  
• Strathrae opencast.
  

With the exception of the Eerstelingsfontein area, the remaining two resource areas have previously been owned by various companies over the years, and therefore have been prospected in by several companies (notably Gold Fields Limited and Anglo Coal). Exploration was primarily done through drilling of vertically cored boreholes, and coal samples then taken and analysed at various coal analytical laboratories. It is not possible to comment on the historical sampling and analytical procedures, suffice it to say that the majority of the historical geological and analytical information is incorporated into the current geological and coal quality models.

The primary means of exploration is through the drilling of diamond-core boreholes. Drilling is currently undertaken by Quest Drilling, an established drilling company with sufficient experience in diamond-core drilling in the South African Coalfields. Core retrieved can therefore be expected to be representative of the sedimentary successions penetrated and core recoveries to be of an acceptable standard. All core logging is currently undertaken by Mr H Ludik, a geologist with 14 years’ experience in coal exploration and mining. Core logging is quantitative to a sufficiently high level of detail to allow for appropriate sedimentological studies, e.g. litho-stratigraphic correlation, to be undertaken, including coal resource estimation. No information regarding sample recovery was supplied, or appears to be available. However, given that the drilling is undertaken by experienced personnel and that the logging is carried out by a suitably qualified geologist, it can be reasonably assumed that recorded, and captured, data regarding cored coal intersections are accurate and representative of the full Seam, or select portions thereof. All intersections through coal Seams of economic interest, notably the No. 2 Seam, and of sufficient length, typically greater than 50cm, are submitted for analysis.

Typically two samples are generated from every intersection, an upper and a lower sample. The samples are submitted to Coal and Minerals Technology (a SANAS accredited laboratory, certification number T0144) for float and sink analysis. Analyses of the float fractions include ash content, volatile matter, inherent moisture, sulphur content, phosphorous in coal content and calorific value, while fixed carbon is calculated by difference (1 – (ash% + volatile% + moisture%)). Each sample is riffle-split after crushing to obtain two representative samples per core sample: one is analysed and one kept for reference (up to three months).

Since the laboratory is an independent, accredited laboratory, it can be reasonably assumed that its standards, procedures and equipment are of a suitably high enough standard to allow for reliable, accurate and repeatable analytical results to be derived. It is for this reason that SRK did not undertake to audit the laboratory. Sample results are later composited to derive the raw quality for the total interval sampled.

SRK has not been made aware of any previous audits or reviews of sampling techniques and results. SRK considers that current sampling techniques and methodologies along with resultant analytical results are adequate for the intended operation. Professional, independent surveyors, Eugene Pretorius and Associates (“EPA”), are contracted to North Block Complex to perform all survey work, including the setting out and resurveying of all drill holes. SRK is of the opinion that EPA conducts their work to high enough standards such that spatial information supplied to the geologist allows for accurate topographic and geological modelling to be performed. Since the coal Seams are relatively flat-lying and undeformed with respect to folding, Seam widths, as measured by logging (down-hole length), are considered to be equivalent to true Seam thickness where vertical boreholes have been drilled. To SRK’s knowledge, no inclined boreholes have been drilled.

No other substantive exploration data has been supplied to SRK.

The following are assessed independently:

•	Eerstelingsfontein Opencast Thirty-three diamond-core boreholes (60mm core diameter) have been drilled within the mining lease area. To SRK’s knowledge, no exploration has been conducted in the Eerstelingfontein block by any other parties. Approximately 55 additional boreholes are planned for this area. 30 holes will be drilled to better define the proposed box-cuts, while 25 holes will be drilled to firm up on coal physical (structural) and quality continuity within the block.
•	Glisa South Underground At least 37 diamond-core boreholes (60mm core diameter) have been drilled on portions 28, 29 and 30 of Paardeplaats 380 JT (Belfast district) to define the resource block for the Glisa South underground operations. Since the Glisa South resources have, in the past, been owned by various mining houses, exploration by those parties has undoubtedly been undertaken during those periods, and those exploration results have been incorporated into the current geological model. Exploration by Eyesizwe has also been undertaken in recent times, with several Eyesizwe geologists being involved at various stages. An additional 40 boreholes are planned for the Glisa South underground target area, however, a prospecting licence has, to date, not yet been obtained.
•	Strathrae Opencast
	–	Grootpan/Klippan: A total of 54 boreholes have been drilled to define the opencastable limits of the No. 2 Seam in this area. However, only 39 of these holes have, or appear to have, been appropriately sampled (according to information received by SRK). Only these boreholes can be used to comprehensively categorise the resources within the target mining area. No additional boreholes are planned for this opencast resource.
	–	Main Plant West Pit: A total of 83 boreholes have been drilled to define the mineable limits of coal in this area. A seasonal river traverses the area in a north-south direction and hence two pits (Pit A and Pit B) are defined. Ten additional boreholes are planned in order to determine the exact position of the box-cut in Pit A (three) and to firm up on in-pit qualities (seven).

The verification of laboratory results is undertaken by the mine geologist. In the case of anomalous results, the reference sample can be analysed. Eyesizwe makes use of a Minex-based borehole database known as the Geological Borehole Information System (“GBIS”). This database has built-in data validation procedures that are executed routinely as information is entered into the database.

The quality and quantity of data for each of the following is assessed independently:

• Eerstelingsfontein Opencast
  The distribution and density of boreholes drilled in the Eerstelingsfontein block is sufficient to allow for the Coal Resources, in terms of physical and quality continuity, to be estimated with a high degree of confidence. Coal resources within the planned mining area are considered to be Measured Resources.
  
• Glisa South Underground
  The distribution and density of boreholes drilled in the targeted underground mining area is currently insufficient to allow detailed mine planning. The resources within this area are classified as Inferred Resources.
  
• Strathrae Opencast
  The distribution and density of boreholes drilled to define the opencast resources is sufficient to allow for the resources, in terms of physical and quality continuity, to be estimated with a high degree of confidence. Coal resources within the planned mining area are considered to be Measured Resources.
  

The Minex geological modelling software programme is used to model all validated data exported from the GBIS. The Growth Algorithm is used to interpolate the various parameters between points of observation, i.e. boreholes. This algorithm is a trended geostatistical estimator and is considered to be adequate for interpolation and modelling in most South African Coalfield scenarios. Once the data is modelled, grids of controlling surfaces can be generated. Controlling surfaces include physical and coal quality parameters.

Estimates of coal resources can then be performed for polygons defined within the gridded areas. The definition of polygons is initially controlled by the physical and coal quality cut-off parameters applied at North Block Complex. These cut-off parameters, for the various Seams, are tabled in Table 4.7.

The Coal Resource and Coal Reserve Statement as developed and submitted by North Block Complex has been audited by SRK and, where necessary, adjustments made. The SRK – revised Coal Resources and Reserves can be seen in Table 4.13.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.14.

4.3.8 

Inyanda Project

The feasibility study has been completed and the documentation for the Southern resource block of 137Ha, has a detailed study of the analysis, and logging of the boreholes used to determine the Coal Resource. The resource is based on the 36 boreholes with reliable information, which translates to an average hole spacing of 195m.

Detailed sampling of the coal Seams was undertaken and analysis done in great depth. Average theoretical yields for a 6000Kcal NAR product for the 1 Seam and 2 Seam are 79.9% and 87.2%, respectively. The average parting, which consists of sandstone, is expected to be mined with both Seams concurrently with a significant decrease in the overall yield.

The effects of the dolerite sill in the floor of the 1 Seam, while not readily apparent in the gross volatiles, appears to have an effect on the coal qualities of this Seam in boreholes KB12 and KB11. Considering the amount of information gathered and the processing of the data in the opinion of SRK the resources are SAMREC compliant.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.15.

4.3.9

Mafube JV Phase II Project

The feasibility study has been completed and the documentation for the two major resource areas, Springboklaagte and Nooitgedacht, has a detailed study of the analysis, logging and modeling procedure used to determine the Coal Resource. A detailed account is provided on the discount factors used to determine the resource, based on geological risk domains. In addition full account is provided of the data distribution with respect to the boreholes used in the determination of the resource. It should be noted that remnant coal in the old Coronation colliery is being planned to be extracted on the northern edge of Springboklaagte.

It is the opinion of SRK that the Resources and Reserves stated may be considered to be SAMREC compliant. To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.16.

4.3.10  

Belfast Project

Only the No. 2 has economic potential. No major intrusions are known in the Belfast project area. The No. 2 and No. 3 Seams outcrop on the surface. No major faults have been observed in the Belfast area.

The No. 2 Seam thickness varies from the 1.0m cut-off to 4.33m with an average thickness of 2.83m. The No. 2 Seam thickness is negatively affected by interbedded in-Seam mudstone and sandstone in a limited area towards the north-east with the effect that there are significant drops in the +6,000 Kcal NAR product yield, hence the use of a 50% theoretical yield cut-off. The No. 2 Seam floor elevation is relatively flat with dips of less than 3° to the south. Sulphur is very low at less than 0.5% for all products. The significant amount of drilling done since the J T Boyd pre-feasibility study conducted in 2003 has increased the confidence in the stability of the resource with good control on the Limit of Weathering in the opencast areas. Considering the amount of recent work done on the project it is reasonable to expect that the Coal Resource determination is valid.

It is the considered opinion of SRK that the Resources and Reserves stated are considered to be SAMREC compliant. To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.17.

4.3.11

Ingcambu Project

The planned mining and obtained Mining Right is currently restricted to portion 26 of the farm Uitgevallen. The coal Seams that make up the majority of the resource are the C Lower, C Upper and in places the B Lower and B Upper Seams.

To view the SRK audited Minerals Resource and Reserve statement refer to Table 4.18.

4.3.12

Strehla Project

The Strehla Coal deposit has been evaluated using a total of 66 boreholes of which only 20 have been drilled by Kumba. These boreholes were used to construct a 3D model from which the Coal Resources were estimated. This work has outlined a total in-situ raw coal resource of 22Mt, which is classified as Indicated.

It is the considered opinion of SRK that the Resources and Reserves stated are SAMREC compliant. To view the SRK audited Minerals Resource statement refer to Table 4.19.

4.3.13

Moranbah South Project⁽¹⁾

The pre-feasibility study up-date by International Mining Consultants (“IMC”) contains a re-assessment of the data available at Moranbah South. The 77 bore holes drilled into the area on the 2km x 1km grid were used by Iscor (Kumba) and IMC to determine the Coal Resources within the EPC. The drill spacing at Moranbah South exceeds that required by the JORC Code to allow any of the resources to be reported as reserves in Australia, thus, they must be considered only as indicated and inferred resources. Although these figures are not intended to be used for public reporting purposes, IMC has re-estimated the coal resources contained within the controlled limits of EPC 548 and EPC 602 based on the JORC guidelines.

The HCK Seam is the southern equivalent of the Goonyella Middle Seam. However, in the Moranbah South area, the Seam is thinner (due to splitting) and an in-Seam parting is prevalent in the north and west, decreasing to the south and east. This parting markedly decreases product yield as it can total over 50cm thick.

Product ash content for Moranbah South after beneficiation can range from 8.5% to 9.5%. A product ash of 9.5% was selected for the 1996 pre-feasibility study, which is similar to the product ash specification for Goonyella/Riverside and Peak Downs Mines. Geotechnical considerations (as determined by IMC), however, indicate that mining in the northern area is preferable to the south. Yields will vary in the northern area depending on the product ash specification.

The coking properties of all Seams in the Bowen Basin decrease to the east as known from Goonyella and Peak Downs Mines. The HCK Seam at Moranbah South is no exception. In particular Coal Rank (RV max) increases from 1.30 at 180m cover to 1.65 at 500m of cover, with a marked change occurring at about 400m of cover.

The Information provided in the IMC pre-feasibility report suggests that a thorough assessment of the available data had been carried out and that the assessment of the Coal Resources can be considered to be reasonable.

To view the SRK audited Minerals Resource statement refer to Table 4.20.

4.3.14

SRK Audited Resource and Reserve Statements

The Table 4.8, Table 4.9 and Table 4.10 presented in this section present SRK’s audited estimates of the Coal Resource and Coal Reserve for the Kumba Coal assets. The terms and definitions are those given in the South African National Standard 10320 : 2004 Edition 1, “South African guide to the systematic evaluation of Coal Resources and Coal Reserves” developed by the SAMREC Coal Commodity Specific sub-Committee.