Exxaro Resource limited Report Selector 2018

Report Selector

Exxaro Resources Limited Mineral Resources Report


Operation overview

Dorstfontein (DCM) complex forms part of Exxaro Coal Central (ECC) and is on the northern margin of the Highveld coalfield along the boundary of the Smithfield Ridge, the boundary between the Highveld and Witbank coalfields.

DCM complex is 36km south of the town of eMalahleni and, to the south-west, the property borders the town of Kriel. It is in the Highveld magisterial district, under the jurisdiction of the eMalahleni local council, Mpumalanga, South Africa. DCM operations can be reached via the hard-topped R544/R547 roads linking the towns of Witbank and Kriel. DCM is surrounded by mineral right tenure owned by Kusile Mining to the west, the Universal Coal NCC operation to the north, the Kriel-East operation to the south and Mbuyelo Coal to the east.

Figure 21: Dorstfontein complex

The complex covers a total rights area of 7 892 hectares comprising the underground Dorstfontein West Mine (DCMW) and opencast Dorstfontein East Mine (DCME). DCMW is currently exploiting the no S2 through underground bord-and-pillar method. The operation is supported by four continuous miner (CM) sections and one drill-and-blast section. With the S2 reserves coming to an end, the operation is moving upwards to exploit the S4L through an incline development from the current S2 working. DCME is the only opencast mine in the ECC stable. Seams being exploited are mainly no S4 (S4U and S4L) and no S2 (S2U and S2L). However, where thicker than 1.0m, the no S5, S3 and S1 are also extracted. Mining activities use a truck-and-shovel method to expose and extract coal. The LoMP entails the introduction of underground extraction of S4L via an adit from one of its pits' highwalls.

A major high-tension power line from the Komati power station crosses the property, in a south-westerly direction, over the northern part of the farm Fentonia 54IS and then swings westward over portions 1, 2 and 9 of the farm Dorstfontein 71IS. A secondary high-tension power line runs along the southern boundary of the farm Welstand 55 IS and continues over portions 2 and 3 of the farm Fentonia 54IS.

DCMW mining infrastructure extends over a portion of the farm Rietkuil 558 IS and portion RE 3 of the farm Dorstfontein 71IS, while DCME mining infrastructure lies on portion 11 of the farm Welstand 55 IS. Surface infrastructure consists of mine buildings (offices, workshops and change houses), a box-cut to access the coal seams, conveyor belt systems, coal-washing plant, pollution-control dams, coal stockpile areas, truck-loading facilities with weighbridges, discard dumps and a rapid coal-loading facility (rapid loading terminal) linked to the main Richards Bay coal terminal. DCMW mainly supports the inland market (ferrochrome and charring plants). However, screened product from DCMW is trucked to DCME, forming part of its export product. Historically, DCME has always catered only for the export market but, in 2019, it will support both the domestic Eskom and export markets. DCMW run-of-mine (ROM) is beneficiated in a heavy medium coal-washing plant for various sizes. Final plant product is screened and classified into large nuts, small nuts, jumbo peas, peas and duff. ROM from DCME is also beneficiated in a heavy medium coal-washing plant to produce a product that depends on the coal characteristics and contractual requirements.

Operation history

DCM complex mining and prospecting rights cover some 7 892 hectares which have been explored from the 1950s. To date, 1 692 boreholes have been drilled. However, the 2017 geological model was built using 1 282 boreholes with wash-quality information and excluding the remaining boreholes based on a rigorous data-validation process.

Table 40: Dorstfontein operation history

  Date range       Company       Material notes
  1956       Natal Navigation Collieries Proprietary
Limited jointly with Estate Company
Proprietary Limited
      Widespread drilling of 13 boreholes on the farms
Dorstfontein 71IS, Welstand 55IS and Rietfontein 43IS
  1970       Anglo American Proprietary Limited       Drilling of 37 boreholes for more detailed cover
  1974 - 1975       South Cape Exploration Proprietary Limited       86 boreholes drilled, 340 samples analysed
  1976 - 1978       Sun Mining and Prospecting Proprietary Limited, an Anglovaal exploration company       82 boreholes drilled, 328 coal samples analysed for washing characteristics
  1980 - 1982       Anglovaal Proprietary Limited       100 boreholes drilled on the farm Dorstfontein 71IS
  1996 - 1998       Anglovaal Proprietary Limited       Drilling of 105 boreholes on the southern portion of the farm Dorstfontein 71 to support a feasibility study of the S2 mining operation at DCMW. First coal in 1997
  1999 - 2004       Total Exploration South Africa (TESA)       TESA took over the DCMW operation
  2004 - 2007       Dorstfontein Coal Mines Proprietary Limited       Total Coal South Africa (TCSA) emerged from TESA. Continuous drilling for additional exploration and mine planning. In 2007, 140 boreholes drilled for the feasibility study of the proposed S4 mining operation at DCMW. An additional 25 boreholes drilled for specialised analyses
  2008 - 2015       Dorstfontein Coal Mines Proprietary Limited       Since 2008, a total 1 022 boreholes drilled in both areas where ECC holds prospecting and mining rights. First coal recorded at DCME in 2011
  2015 - 2018       Dorstfontein Coal Mines Proprietary Limited       Exxaro acquired TCSA in 2015. Feasibility study for DCMW S4L project approved as a replacement for current DCMW S2L operations

Operation geology

Coal measures of the Highveld and Witbank coalfields are hosted in the Ecca group, which includes the Vryheid and Volksrust coal-bearing formations. All coal seams in the ECC area are hosted in the Vryheid formation which ranges in thickness from 80m to 300m. There are five major coal seams present in the area, named from the base upwards as no 1 seam (S1), no 2 seam (S2), no 3 seam (S3), no 4 seam (S4) and no 5 seam (S5).

A granitic basement high, which forms part of the Smithfield Ridge and is referred to below as the Central plateau, divides the DCM complex into two separate geological domains and the Western and Eastern Limbs can be found on either side of this plateau. S1 is only developed in the central portions of the paleo-valleys, ranging in thickness from 0.1 to 2.5m. Underground extraction of this seam is considered uneconomic due to its highly variable thickness, inferior quality, isolated occurrence and coal devolatilisation. In the DCM complex, seam splitting is generally a provenance of detrital material resulting largely from the proximity of the seam to the Smithfield Ridge and, as a result, the S2 and S4 are further subdivided into S2L, S2U and S4L and S4U, respectively.

S2L is thinnest over palaeo-highs and thickest over troughs of palaeo-valleys. Two S2L thickness domains exist in the complex: in the west (DCMW), seam thickness ranges from 0.1m to 5m and, in the east (DCME), from 0.2m to 6.0m. In the north of DCMW, the S2L exists as a single coal horizon, generally devoid of stone partings. To the south of this block, an arenaceous parting splits the seam into an upper and lower subseam. The parting separating S2U and S2L in both the west and east attains a maximum thickness of 4.5m and, in the northern portion, a minimum of 0.2m with an average of 1.5m. S2U is considered uneconomic to mine separately by underground methods but is included for the opencastable blocks. Generally, S2L is the thicker of the two subseams and has better-quality coal. As such, S2L is theoretically the mining target. However, practical mining of S2L is often problematic due to parting between two subseams S2L and S2U.

On the basis of seam thickness and coal quality, S4L is the main underground exploitation target in seam 4. Seam 4 comprises coal and minor in-seam partings and is characteristically banded with alternating dull and bright coal. The seam contains one in-seam parting of significant thickness and lateral extent with a thickness average of 0.2m but can reach 0.5m. Generally, the average thickness of S4L is 3.0m. S4U has an average thickness of 1.7m in the west and, in the east, the thickness is generally more than 1.0m, reaching 3.0m in the centre of the palaeo-valley. Seam S4U has a higher ash content and thus lower CV compared to S4L. Thickness of the S5 is generally over 1.5m. Due to a significant parting, the seam is considered uneconomic for underground extraction but can be considered for selective extraction in opencast.

Numerous Jurassic dolerites (dykes and sills) intrude the Vryheid formation at various stratigraphic levels in the area. These intrusions negatively influence the stratigraphy and coal qualities, in places. The distribution of the lower coal seams is strongly influenced by basement topography while distribution of the upper seams is controlled by present-day topography. Most affected by basement topography are S1 and S2. Seams often thin and sometimes pinch out over and against palaeo-highs. Strata (including coal) are often faulted, although displacements are rarely more than 1m. Structural displacements, resulting from intrusions of dolerite sills through seams, often complicate mining seams.

The DCM complex geology and grade continuity are largely influenced by palaeo-topography, present-day topography, surface weathering, seam thickness variation (mainly between DCMW and DCME), in-seam parting, in-seam washouts, dolerite intrusions in the form of sills and dykes, resulting in minimal to extensive zones of devolatilisation. These geological risks are well managed through extensive drilling in areas of concern, using downhole wireline logging for better definition, underground channel sampling incorporated as points as observation in the short-term model, underground face mapping generally used to track both vertical and lateral variations in the lithology to assist with reconciliations as well as structural interpretation and surface mapping, particularly of basement outcrops. The information collated from the various approaches is incorporated in the structural model, together with additional potential risks from other disciplines and represented in a GIS-based risk and opportunity domain analysis (RODA), allowing for a more integrated approach to risk management.

Figure 22: Typical SW-NE section through Dorstfontein geological model

Operation resource evaluation

All exploration boreholes are logged and sampled by experienced on-site geologists aligned and complying to logging and sampling standards and SOPs. Samples are selected according to seam boundaries, visual variation in the vitrinite content, assisted by density logs, and non-coal material present in the seam boundaries. Each sample submitted to the laboratories is accompanied by a unique sample number for validation and tracking as well as a submission list that serves as a sample advice sheet with instructions for analysis. Three major laboratories have been used over the past ten years: Australian Laboratory Services (ALS), Societe Generale de Surveillance (SGS) and CoalLab (Cotecna), all with SANAS accreditation (T0611, T0815 and T0612 respectively). All three laboratories have committed to assuring the quality of results provided to the customer by ensuring quality assurance, quality control, data validation and proficiency testing procedures are observed.

Table 41: Dorstfontein Coal Resource reporting criteria

  Thickness cut-off (thickness and extraction height considerations)       Quality cut-offs (adb)       Geological loss*
  Opencast ≤0.5m Underground ≤1.2m       Dry Ash Free Volatiles (DAFV) ≤26% Raw ash ≥50%       26% Raw ash ≥50% 10% — 50% (domains)

*A 10% standard geological loss is applied but may vary based on the consideration of structural complexity (dolerite sill breakthrough – 50% loss within determined spatial extent), seam gradient (>4 degrees – 50% loss), dolerite sill proximity to seam (25% loss).

Table 42: Dorstfontein Coal Resource estimation criteria

          Item       Description  
  Database       Drillhole database       Sable Data Warehouse  
          Data datum       Cape LO29  
          No. of drillholes used
for resource estimation
      1 282 of 1 580 boreholes in the database with washability data  
          Validation       The laboratory conducts data validation and proficiency testing on samples submitted. In the Sable Database Warehouse, additional validations are conducted on points of observation where missing data and/or duplicate data are identified and corrected. Data is exported from Sable into csv files where it is subjected to ‘coal sense’ checks  
          Data compositing and
      Data compositing is conducted per seam using a weighted value from the individual samples that make up the seam along with the RD and length of each individual sample. This is done in Geovia Minex  
          Previous model date       2016  
  Model       Last model update       2017 (peer review in 2017)  
          Geological modelling
      Geovia Minex 6.3.2  
          Estimation technique       Growth algorithm — general purpose gridding  
          Grid mesh size       25m x 25m  
          Scan distance       2 000m  
          Data boundary       200m  
          Model build limits       Upper: limit of weathering and topography/collar
Lower: basement/Dwyka
          Model outputs       Roof, floor and thickness grids generated for structure.
Raw quality and washability grids
          Changes to modelling

Table 43: Dorstfontein Coal Resource classification criteria

  Category       Type of boreholes       Borehole spacing       Structurally complex areas       Borehole/ha
  Measured       Cored boreholes with applicable coal qualities       0 — 350m       Structural complexity and coal variability (RODA) additional infill drilling       0.49
  Indicated       Cored boreholes with applicable coal qualities       350 — 500m       Structural complexity and coal variability (RODA) additional infill drilling       0.49
  Indicated       Cored boreholes with applicable coal qualities       500 — 1 000m       Structural complexity and coal variability (RODA) additional infill drilling       0.06


Table 44: Dorstfontein Resource and Reserve statement

Category  2018 (Mt)   2017 (Mt) Difference
in tonnes (Mt)
Difference (%)   Reason for changes 
Measured  156.4    158.1  (1.7) (1)   0.9Mt and -1.7Mt depletion for DCMW and DCME respectively, 0.5Mt and 0.8Mt from DCMW and DCME respectively due to better constrained geo-loss domains applied in 2018   
Indicated  137.5    142.4  (4.9) (3)  
Inferred  52.8    47.4  5.4  11   
Total Resources (UG and OC) 346.6    347.9 (1.3)  
Proved  54.3    36.5  17.3  49    Inclusion of additional reserves Depletion, 1.0Mt and 1.8Mt from DCMW and DCME respectively as well as 22.4Mt inclusion of S4L UG reserves at DCMW and 31Mt inclusion of S4L and S2L UG reserves at DCME (Fentonia area)
Probable  40.5    7.7  32.8  426   
Total Reserves (UG and OC) 94.8    44.2  50.8  115   

Rounding of figures may cause computational discrepancies

All changes more than 10% are explained

Mining method: OC - opencast, UG - underground

Figures are reported at 100% irrespective of percentage attributable to Exxaro

Tonnages are quoted in metric tonnes and million tonnes is abbreviated as Mt. Coal resources are quoted as mineable tonnes in-situ and refer to remaining resources after 31 December 2018 and 31 December 2017

Coal Resources are reported on a mineable in-situ (MTIS) basis

Coal Resources are quoted inclusive of Coal Reserves

Table 45: Dorstfontein RPEEE considerations

  Item       Criteria       Considered       Comment
  Geological data       Data has been validated and signed off by competent person       Yes       Geological structure and depositional extent, seam thickness >1.2m (UG) and >0.5m (OC), <50% ash content, >24% DAFV. Coal qualities reported on an air-dry basis
  Geological model       Geological model was considered and signed off       Yes      
  Structural model       Structural model was considered and signed-off       Yes        
  Mining       Mining assumptions considered and defined       Yes       OC and UG areas defined, aligned with exploitation strategy
  Assurance       Minimum tier 1 assurance (Exxaro governance)       Yes       Compliant — update 2018
  Economic evaluation       Concept-level exploitation with economic and mining assumptions, including geotechnical and geohydrological assumptions       Yes       Only approved economic assumptions and parameters are applied
  Environmental       Reasonable demonstration that environmental approvals can be obtained within the context of local, regional and national governmental legislation       Yes       Environmental and social concept assessment is done, applications and approvals are considered
  Tenure       Formal tenure must be demonstrated. Reasonable demonstration that a mining right approval can be obtained within the context of local, regional and national governmental legislation       Yes       Mining and prospecting rights licences are valid. Extensions or annexations will be lodged when necessary with reasonable expectations that the applications will be granted
  Infrastructure       Assumptions used should be reasonable and within known/ assumed tolerances or have examples of precedence       Yes       Current infrastructure is considered
  Market       Market/s identified — form part of an existing operation market strategy or potential market for which a conceptual market study exists       Yes       Operational strategies are aligned with existing markets


Operation reserve estimation

Scheduling of the reserve is determined using mining scheduling applications from XPAC. This is the same software used to develop the LoMP schedule.

The geological 3D model used for the reserve statement is referred to as the reserve geological 3D model. This reserve model differs from the resource model as the latter uses the full coal seam (with specific reporting assumptions) while the reserve model uses a select mining height based on practical mining heights and other modifying factors. The process ensures that the model represents practical aspects of the capabilities of production sections and their equipment.

A total of 5.7Mt of Inferred Resource is included in the LoMP, around 6% of total Coal Reserves. The majority is located along main developments that serve as access future reserve blocks well beyond the first five years of life of mine (LoM). The impact of including these Coal Resources is well understood and tested, and exploration activities are planned to upgrade these categories to a higher level.

Table 46: Dorstfontein production figures

DCME ROM (Mt) 1.94   2.20 1.85   2.44 2.48  
DCMW ROM (Mt) 1.08   1.04 1.04   1.11 1.97  
DCM COMPLEX ROM (Mt) 3.02   3.24 2.89   3.56 4.45  

Table 47: Dorstfontein modifying factors considered in converting Coal Resources to Coal Reserves

  Considerations       Underground       Opencast
  Geological loss       10 — 25%       10 — 25%
  Average thickness cut-off       1.4m       1.0m
  Quality specification       5 200kcal/kg       5 200kcal/kg
  Mining loss       0.05m       0.1m
  Depth to roof       15m      
  Safety factor       1.6 — 2.0      
  Board width       6.5m      
  Barrier pillar       At least equal to the panel pillar width      
  Boundary pillar       15m       15m
  Pillar centres       14m x 14m      
  Mining height       1.4m      
  Extraction factor       65%      
  Dilution       Already included in model       Already included in model
  Contamination       0.05m       0.10m
  Practical plant yield       Considered in reserving process       Considered in reserving process
  Environmentally sensitive areas       Areas underlying wetlands and other eco-sensitive areas are excluded from reserves. A higher safety factor is used underneath rivers and surface structures       50m cut-off away from opencast mining activities
  Legal       Mining right boundary        
  Social       Considered in reserving process        

Known risks

DCME pits 1, 2 and 3 and Vlakfontein areas are affected by dolerite activity. Risk in these areas has been accommodated in mine planning by assigning higher geological loss values to areas reasonably expected to incur losses caused by dolerite activity.

The move at DCMW from S2 to S4L will result in changes to coal quality characteristics. These changes were accommodated in mine planning and DCM product and market strategy.

DCM was informed of prospecting rights being granted at Vlakfontein and Rietkuil Vhakoni which overlap with our existing mineral rights. Appeals were timeously submitted, and DCM has reasonable expectations that the conflicts will be favourably resolved.

We do not know of any pertinent risks or other material conditions that may impact on the company's ability to mine or explore, including technical, environmental, social, economic, political and other key risks.

Operational excellence

The implementation of the incline at DCMW to access the thicker, although somewhat lower quality, S4L is progressing well. The new development will accommodate three sections and plans to add a fourth section are under review. Expansion studies at DCME to access underground Coal Reserves through the highwall at pit 2 were concluded. The significant change in Coal Reserves reflects this development.