Tier 1

 Tier 2

 Tier 3

Assurance is implemented on a three-tier system, aligned with the guidelines of the Exxaro Mineral Resource and reserve reporting procedure and summarised as follows:

In 2018, tier 1 assurance was undertaken for the Matla, ECC and Leeuwpan coal mines. The resource fact packs indicated that an update of the Coal Resource estimate was required, either due to additional information being available or on recommendations from previous audits. Geological data validation, data analysis and subsequent update of geological and structural models were concluded in the reporting period. The models were signed off by the applicable CPs and their supporting technical teams. On the reserve side, the Matla plan was reviewed, resulting in an update and subsequent sign-off in December 2018. In addition, the Dorstfontein and Leeuwpan operations were reviewed, leading to optimisation of the Dorstfontein and Leeuwpan life-of-mine plans.

On tier 2, technical assurance on the Matla 1 relocation and Matla Mine 3 vent shaft were conducted in the latter part of 2018. Findings included the update of geotechnical reviews of both the vent shaft and Mine 1 relocation site. These studies are progressing well. Assurance on the Grootegeluk in-pit crushing and conveyor project was concluded in the second quarter of 2018. In addition, a review of Matla's exploration strategy, standards and procedures, data management, geological modelling, resource estimation (including classification and reconciliation) and reporting were tested. There were no findings that could materially impact (>10%) the integrity of reported Mineral Resource estimates. A number of findings related to SAMREC 2016 requirements in terms of sampling chain of custody were documented. A response plan to address findings is being executed.

Tier 3 process audits were done by Ernst & Young (EY), for the Central, Grootegeluk and Forzando areas, with 28 audit findings documented. We note that none of the findings was critical (constitutes a material risk for the company). Several findings related to public reporting compliance, but these have been adequately addressed in the 2018 CPR update. Corrective measures on all findings have been actioned and no material changes to either estimates (tonnage figures reported) or operational compliance are reported.

Table 2: Findings, impact and corrective measures for tier 3 audit

							Finding				Impact				Corrective measure
			1				Inadequate safeguarding of documents				Data				Estimation procedure enforced, and gaps addressed
			2				No evidence that all competent persons were duly registered for the reporting period				Competence				Include annual proof in 2018 CPR update
			3				SAMREC table 1 reporting in CPRs did not cater for sub items				Reporting				Addressed in 2018 CPR update
			4				Outdated terminology used in the CPR report				Reporting				Addressed in 2018 CPR update
			5				Laboratory performance not reviewed by business units and not adequately discussed in the report				Reporting				Documented in 2018 CPR update and estimation procedure reviewed
			6				Reasonable Prospect for Eventual Economic Extraction (RPEEE) not standardised and does not cover all items in SAMREC Code table 1 considered in resource CPR				Reporting				Standardise and included in 2018 CPR update
			1				Limited explanation for geological domain delineation				Resource estimation				Reviewed, tested but applicable to deposit
			2				Insufficient description of Coal Resource changes				Reporting				Addressed in 2018 CPR update
			3				Unobserved geological loss factors not adequately accounted for				Resource estimation				Reviewed, current factors are valid
			4				Insufficient definitions on Coal Resource tables				Reporting				Addressed in 2018 CPR update
			5				Laboratory sample preparation not sufficiently described				Reporting				Comprehensively addressed in 2018 CPR update Estimation procedure under review
			6				No evidence of the close-out of validation findings and sign-off of geological model				Handover				Sign-off is done. Estimation procedure updated to reflect any correction done during LoMP process
			7				Coal reserve classification does not give due consideration to confidence in modifying factors				Reserve estimation				Captured in fact pack, but also include full list in CPR
			8				Sustaining capital expenditure forecast in the LOM financial model appears insufficient relative to historical spend				Reserve estimation				To be review when business plan and budget are revised
			9				The reserve competent person at operation role not clarified re Coal Reserve estimation and reporting process				Reserve estimation				Process reviewed, specific role clarified and reappointed
			10				No remedial actions recorded for deficiencies identified during management review				Reserve estimation				Standard operating procedure for management audits put in place
			1				No coal processing test work completed				Modifying factor				Validated. Comprehensive historical operational information available to support
			2				Reliability of Digital Terrain Model (DTM)				Reserve estimation				Reviewed, new survey in 2019 to update DTM
			3				Insufficient footnotes on summarised Coal Resource table				Reporting				Comprehensively addressed in 2018 CPR update, in statement and resource chapter
			4				Outline laboratories used by Forzando over the years and changes between sample preparation over time				Reporting				Comprehensively addressed in 2018 CPR update
			5				No evidence of the close-out of validation findings and sign-off of the geological model				Resource estimation				Sign-off is done. Estimation procedure updated to reflect any correction done during LoMP process
			6				Insufficient disclosure relating to Forzando South opencast Coal Reserves				Reporting				Revise fact pack to align with SAMREC table 1
			7				Coal reserve classification does not appear to give due consideration to confidence in modifying factors				Reserve estimation				Reviewed and validated. Comprehensively addressed in 2018 CPR update
			8				There was no alignment of the increasing trend in costs on the operation to the operating expenditure forecast				Reserve estimation				Continuously review costs in business unit financial model
			9				Coal reserves for Forzando North were not economically viable				Reserve estimation				Show current value, continuously review
			10				Sustaining capital expenditure forecast in the LOM financial model appears insufficient relative to historical spend				Economic assessment				To be reviewed when business plan and budget are revised
			11				Management and peer reviews have not been documented				Reporting				Outlined in 2018 CPR update
			12				A portion of the Forzando South Coal Reserves may be sterilised due to poor ground conditions				Reserve estimation				Not applicable, already mined