HOW DO WE REPORT?

The annual estimation and reporting process is managed through the Exxaro geosciences policy and associated Coal Resource and Reserve reporting procedure. The documents dictate technical requirements for estimation and reporting, and include guidelines on methodologies, templates and assurance.

Both the policy and procedures are aligned with the guidelines of the SAMREC Code 2016 and, for South African coal reporting, SANS 10320:2004. Processes and calculations associated with the estimation process have been audited by internal competent persons and are audited by external consultants when deemed applicable. For mines or projects in which Exxaro does not hold the controlling interest, figures have been compiled by competent persons from the applicable companies and not audited by Exxaro.

Resource estimations are based on the latest available geological models, which incorporate all new validated geological information and, if applicable, revised seam, resource definitions and resource classifications. For Exxaro operations and projects, we use a systematic review process that measures the level of maturity of exploration work done, extent of geological potential, mineability, licence-to-operate considerations and associated geological risks/opportunities to establish eventual extraction (EE). We have enhanced our methodology to ensure that all factors for reasonable and realistic prospects for eventual and economic extraction as outlined in table 1 (4.3) of SAMREC 2016 have been reasonably considered.

For Exxaro's Coal Resources, the location, quantity, quality and continuity of quality and geology are known to varying degrees of confidence and continuously tested through exploration activities such as geophysical surveys, drilling and bulk sampling. Coal Resources are classified into Inferred, Indicated or Measured categories, based on the degree of geological confidence. Distribution of points of observation (drilling positions, trenches, etc), quality assurance and quality control in sample collection, evaluation of structural complexities and, in the case of operations, reconciliation results, are considered in classifying resources. An annually compiled exploration strategy outlines activity planned to investigate areas of low confidence and/or geological or structural complexities to ensure resources of a high level of geological confidence are considered for mine planning.

Coal Reserves are estimated using relevant modifying factors at the time of reporting (mining, metallurgical, processing, infrastructure, economic, marketing, legal, environmental, social and governmental requirements). Modifying factors are reviewed before and after reserve estimation by the persons responsible for ensuring all factors are timeously and appropriately considered. Signed-off reserve fact packs that record losses, recoveries/yields, cost, commodity prices, exchange rates and other required factors applied, are documented in each LoMP and independent competent person's report.

Reported Coal Reserves are primarily derived from Indicated and Measured Coal Resources, although limited Inferred Resources may be included in the LoMP at the discretion of the competent person. These inclusions are scrutinised and tested, and their impacts are known.

Coal Resources and Coal Reserves quoted fall within existing Exxaro mining or prospecting rights. Rights are of sufficient duration (or convey a legal right to convert or renew for sufficient duration) to enable all reserves to be mined in line with current production schedules. The only exceptions are the Grootegeluk (executed March 2011 for 30 years), Matla (executed March 2015 for 10 years) and Forzando (executed June 2013 for 16 years) operations, where adequate Reserves exist for LoMPs extending well beyond the period for which they were granted.

Environmental management including applicable authorisations that support our estimates, closure plans and allocated funding is discussed in detail in the Exxaro supplementary report, available on our website at
https://www.exxaro.com/investor/integrated-reports2018/supplementary/about-this-report.php.