Our environment

Highlights

Seven (7) environmental licences (renewal and amendments) were granted

No level 3 (significant) environmental incidents were recorded

21% of the land disturbed is rehabilitated

Maintained our CDP score of B+

Water and energy intensity targets are better than industry targets

Lowlights

Still recording level 2 incidents. Target is to have no level 2 and 3 incidents

Some mines not on target in implementing alien and invasive species programmes

Rehabilitation financial provisions for captive (Eskom) mines still a challenge

Natural resources like water, air, biodiversity and land are central to our business. We focus on responsible use by conserving natural resources and reducing the burden of pollutants on the environment through: Ensuring all activities are properly authorised Complying with all statutory environmental requirements as a minimum Using energy and water as efficiently as possible Operating responsibly from the twin perspectives of compliance and natural resource use Actively participating in voluntary benchmarks, such as the global carbon and water disclosure projects Developing innovative policies and programmes to address environmental impacts and use of natural resources. Comprehensive group standards have enhanced the implementation of legal requirements and sustainable use of natural resources. These include management standards for air quality, water, energy, rehabilitation and mine closure, and environmental incident management and reporting. All Exxaro's business units have ISO 14001 accreditation, reflecting the global industry standards in place to minimise environmental impacts. All our South African operations have environmental management programmes (EMPs) as required under the Mineral and Petroleum Resources Development Act (MPRDA) and National Environmental Management Act (NEMA). These are key indicators in ensuring Exxaro remains a sustainable business. We also adopt the precautionary principle entrenched in NEMA in evaluating the environmental impacts of business opportunities. All our operations have now been granted integrated water use licences (most Exxaro business units need more than one licence). There were four new water use licences granted in 2018.

Exxaro’s green timeline

Our procedures

Energy		Water		Waste
Energy management procedure Energy efficiency plans CO2 emissions reports Responsive resource use Targets Climate change Energy-efficiency reports		Water management procedure Water management plans Water-related risk assessment Water efficiency plans Water authorisation Financial impact of water management/treatment. Water monitoring and reporting		Waste management procedure (including classification) Waste authorisation Waste handling, transportation and disposal procedure Waste management and reporting Waste efficiency reports

	Ecology		Closure and ongoing rehabilitation		Land management		Air
	Biodiversity management procedure Biodiversity impact management Biodiversity management plans Ecological effect impact procedure ECR authorisation Biodiversity monitoring and reporting Ecology efficiency reporting		Mine closure and ongoing rehabilitation procedure Integrated mine closure plan Financial provision Closure objectives – management plans Mine closure impact assessment Ongoing rehabilitation monitoring and reporting Closure and ongoing efficiency reports		Land management procedure Operational land management plan Land disposal strategy Land management efficiency reports		Air quality authorisations (AEL) Air quality management procedure Air quality impact assessment Air quality management plans Air quality monitoring and reporting Stakeholder forum Energy-efficiency reports

Building blocks to exceed compliance levels

After a strategic review of key environmental risks from Exxaro's operations, we have identified the building blocks required to ensure consistent compliance and, in time, to exceed regulatory minimums where possible.

South African mining companies are heavily regulated, with compliance centred on receiving, converting and retaining all mining rights. To ensure we continue to meet legal requirements as a minimum, compliance across Exxaro is monitored by two board-mandated entities: the sustainability, risk and compliance committee as well as the social and ethics committee.

Running all our operations with approved EMPs is fundamental to our sustainability and legal compliance. Some EMPs are being updated to align to the MPRDA and to include new developments. As applications for various projects are at different stages of regulatory assessment, we continuously engage with the relevant authorities, agencies and other stakeholders to expedite these licences.

Two new mining rights were granted and two new prospecting rights were granted.

Exxaro received no environmental stoppage directives in the review period. No fines were issued.

We completed the lengthy process of migrating our authorisations to the National Water Act (1998) two years ago. All Exxaro operations now have the required integrated water use licence.

Incident reporting

Using a standardised reporting system, all business units manage incidents effectively, resulting in a safer and more sustainable work environment. In 2018, seven level 2 incident occurred and was reported to the relevant authorities. Corrective actions to prevent recurrence were approved by authorities prior to implementation. There were no significant (level 3) incidents in 2018.

Environmental incidents – group

Level 1

Level 2

Level 3

Business unit

2018

2017

2018

2017

2018

2017

Arnot

–

14

–

–

–

–

Char plant

–

–

–

–

–

–

Durnacol

–

–

–

–

–

–

Grootegeluk

11

16

1

–

–

–

Hlobane

–

–

–

–

–

–

Leeuwpan

8

20

–

–

–

–

Matla

19

29

–

1

–

–

North Block Complex

13

4

1

–

–

–

ECC

28

1

–

–

–

–

Tshikondeni

1

1

–

–

–

–

Belfast

50

–

5

–

–

–

Total

80

85

7

1

0

0

Level 1: Minor impact and/or non-compliance.

Level 2: Intermediate impact and/or non-compliance.

Level 3: Major impact and/or non-compliance

Environmental incidents – level 2

Business unit		Description		Receiving environment		Response
Belfast		Excavator with hydraulic pipe burst. Oil spillage on both soil as well as water – ponding water collected in the excavation due to rain		Soil		Root-causes analyses performed Audits performed Risk mitigation plans implemented
		Encroachment on a wetland by the stockpiling of topsoil from berm clearing of road D1110		Wetland
		Blockage of the Klein-Komati River by temporary road towards the pit areas		Water
		Additional tipping of topsoil on stockpile encroaching on a wetland adjacent to the D1110		Wetland
		Two graves covered by Dam 5 stockpile		Soil
NBC		On the 21st of June 2018 an employee from SCM informed the sustainability department at 7:30 about a large diesel spillage at the diesel bay. The spillage was next to an abandoned Andru Diesel bowser which was suspected to have been abandoned after the spillage occurred. It is estimated +- 900 litres of diesel was spilt on bare soil		Soil
GG		Significant fire incident at reductants – plant shut down		Air and soil

Air quality

As a mining group, air quality remains a risk to Exxaro on several levels, particularly dust and other pollutants such as particulate matter (PM) including PM10 and PM2.5 from open-cast operations. Accordingly, we focus on:

• Minimising impact on the receiving environment
• Full legislative compliance
• Air quality management planning
• Risk management
• Monitoring, measurement and reporting.

Air quality management initiatives

Objectives		Critical success factors		What		When		Progress
Compliant, sustainable air quality management system, operated and controlled by trained specialists at business units		Integrated air quality management planning in core operational processes		Baseline assessments Impact assessments Optimise monitoring programme		Third quarter 2019		Baseline assessments, impact assessments and ambient monitoring review completed in business units as part of group-wide air quality management initiative

Long and short-term goals for air quality management

Goals		Target		Progress
Initiating PM10 and PM2.5 at our business units (operational and greenfield projects for baseline data)		Third quarter 2019		Monitoring initiated as a priority in some business units and greenfield projects such as Belfast and Thabametsi
Initiating PM10 and PM2.5 monitoring for all business units (operational and greenfield projects for baseline data)		Fourth quarter 2019		Dust fallout networks redesigned in all business units and greenfield sites
Meteorological monitoring to ensure availability of surface data for temperature, wind direction, wind speed, and more. This data will be used for dispersion modelling, baseline characterisation, ambient monitoring, including dust fallout monitoring and reporting, etc		Fourth quarter 2019		Meteorological stations installed in business units such as Leeuwpan, Thabametsi and Belfast, with a commitment to purchase and install more in the remaining business units
Ensuring compliance to air quality standards and guidelines in the country		Ongoing		Most business units currently monitor dust fallout and PM10. Results are assessed for compliance to national dust control regulations and ambient air quality standards for PM10

Emissions from mining operations

Open-cast mining generates dust (blasting, drilling, crushing and screening, vehicle convoys, materials handling and wind erosion of exposed operational areas). Daily mitigation measures include applying chemical dust suppressants on haul roads, watering secondary unpaved operational roads, vegetating topsoil stockpiles and overburden material.

All our mining operations monitor dust fallout rates and results are assessed against residential and non-residential limits in national dust control regulations. Although our operations are classified under the non-residential limit, some are close to residential areas or sensitive receptor areas. As such, we track our compliance against the more stringent residential limit (600mg/m²/day) instead of the non-residential limit (1 200mg/m²/day) to minimise the impact on residents.

We continue to concentrate on improving our mitigation measures for operational activities that contribute significantly to dust. This will reduce dust impacts on sensitive receptors and ensure compliance.

Comparing Exxaro's dust fallout rate in 2018 against the regulated residential and non-residential limit, all operations were within allowable annual limits.

Dust fallout – 2018

Target	2018		2017	2016	2015	2014	2013	2012
Coal: 300mg/m2/day	184		172	169	173	335	351	480

Number of exceedances of the residential limit (January to December 2018) (Number of exceedances)		Number of exceedances of the non-residential limit (January to December 2018) (Number of exceedances)

Climate change and carbon footprint

Definitions and context Scope 1: Direct greenhouse gas (GHG) emissions, measured in tonnes of carbon dioxide equivalent (tCO2e) from sources owned or controlled by Exxaro, eg emissions from diesel, petrol, gas and anthracite combusted in day-to-day mining operations. Scope 2: GHG emissions from electricity generation by Eskom, purchased by Exxaro. Scope 3: Emissions outside our control but emanating from our products or activities, eg customer burning coal sold by Exxaro. The scope 1, 2 and 3 emission protocol provides a common measurement platform to compare firms, aggregate data to national level and compare countries. South Africa has set arguably the most aggressive carbon abatement targets of any developing country: to reduce emissions by 34% below business as usual by 2020, and 42% by 2025.

Carbon footprint

Operational activities are guided by our climate-change response strategy. A steering committee oversees related improvement projects and activities, and ensures these are aligned with Exxaro's stance on climate change.

This supports a clear understanding of the risks and opportunities presented by energy and emissions in the broader sense, and enables operations to focus on managing energy, emissions and other climate change-related issues.

Our energy and carbon measurement, data management, accounting and reporting is maturing. Exxaro reports carbon emissions through CDP South Africa (the local arm of the international benchmark carbon and water disclosure projects), where we continuously report on scope 1, 2 and 3 emissions.

We base our accounting and reporting for GHG emissions on the Greenhouse Gas Protocol (www.exxaro.com) and have elected to use the operating control accounting approach for emissions.

GHG emissions

Arrows indicate movement from 2017

ktCO2e	2018		2017	2016	2015	2014	2013
Scope 1	↓ 315		324.9	323	235.2	229.8	236
Scope 2*	↑ 552		539	501	521.9	557.6	525
Total scope 1 and 2	↑ 867		864	824	757.1	787.4	761
Year-on-year change (%)	0.4		4.9	8.8	(3.8)	3.5	(48)
Scope 3**	↓ 72 928		76 462	71 697	73 847	74 768	69 737
Year-on-year change (%)	4.6		2.7	(2.9)	(1.2)	7.2	(1.3)

*Scope 2: Electricity-based emissions are derived from the grid emission factor for South Africa (0.97tCO2e/MWh).

**Scope 3: Reported emissions based on use of product sold by Exxaro. Reported emissions represent over 95% of Exxaro's scope 3 emissions.

Carbon emissions by source

Arrows indicate movement from 2017

ktCO2e	2018		2017	2016	2015	2014	2013
Electricity	↑ 552		539	501	521.9	557.6	525.3
Year-on-year change (%)	2.4		7.5	(4)	(6.8)	6.1	1.2
Source proportion (%)	64		62	66.5	68.9	70.7	68.8
Diesel	↑ 217.5		211.3	168.2	174.8	155.9	157.8
Year-on-year change (%)	2.9		25	(3)	10.8	(1.2)	(4.2)
Source proportion (%)	25		24	22.1	23.1	20	20.8
Fugitive emissions	↓ 93		94.6	84.9	56.6	67.6	77.9
Year-on-year change (%)	1.7		11	50	(19.4)	(5.8)	(7.8)
Source proportion (%)	11		11	11	7.5	8.6	9.4
Other sources	↓ 0.3		18.6	3.7	3.7	6.2	2.4
Year-on-year change (%)	74		80	1	(40)	6.9	147.3
Source proportion (%)	0.6		3	0.5	0.5	0.8	0.8

Carbon disclosure The CDP is a UK-based global climate change reporting system. This data provides valuable insights into corporate strategies and helps channel investment to companies adhering to sustainable carbon and emissions management. Exxaro participates in two programmes: CDP Climate Change (since 2008) and CDP Water (since 2010). To facilitate our reporting under the climate change programme, we manage a central data repository that records energy consumption, energy intensity performance, carbon emissions measurement and cost performance in each business unit and the group. This database is externally audited and assured each year.

We remain focused on reducing Exxaro's carbon footprint in line with our commitment to reduce energy consumption and improve energy efficiency. Given the fast-changing legislative environment and promulgation of carbon tax from 1 June 2019, reducing GHGs is a business imperative as it could affect our financial performance.

2018 total GHG emissions by scope (tCO₂e)

Arrows indicate movement from 2017

Business unit	Scope 1	Scope 2	Scope 3	Total
Arnot	↓ 2 952.5	21 379.9	0	24 332.4
Durnacol*	↓ 100.6	104	0	204.6
Grootegeluk	↑ 164 589.4	370 036	50 349 047.3	50 883 673
Hlobane*	↓ 119	15.6	0	134.5
Leeuwpan	↑ 70 968	25 438.3	5 316 926	5 413 332
Mafube	↓ 16 082.5	15 446.2	1 923.4	1 954 954.9
Matla	↓ 35 929.5	102 585	11 995 701.8	12 134 216
North Block Complex	↓ 24 370.8	5 820.1	3 261 523.4	3 291 714
Reductants	↓ 151.7	0	81 322.8	81 474.4
Tshikondeni*	↓ 43.9	1 503.6	0	1 547.5
AlloyStream**	0	0	0	0
Corporate centre	↓ 1.4	992	0	993.4
FerroAlloys	↑ 103.12	8 736.3	0	8 839.4
R&D**	0	0		0

*Operations in closure.

**Closed operations.

Energy management

Diesel and electricity are the primary sources of energy for all our business units, at 59% and 41% respectively.

Total energy consumed rose 8% in 2018 to 4 977 270 gigajoules (GJ). The increase in diesel consumption is due to concurrent rehabilitation at operating mines and higher production at Grootegeluk and Leeuwpan. For Grootegeluk and Leeuwpan, the increase in production or change in mining has a direct impact on diesel and electricity consumption.

As part of Exxaro's energy and carbon management programme, our coal operations have focused on reducing energy consumption, including projects to specifically increase the efficiency of diesel and electricity consumption. The head office technology and engineering departments initiated projects to reduce diesel consumption at all our operations, including the use of fuel additives and payload management. Future projects include developing a consolidated dashboard for fuel and electricity in various business units.

We believe all these initiatives will support the transition of our operations to greater energy efficiency, characterised by low carbon footprints and optimised energy consumption.

To facilitate energy-saving initiatives, energy-intensity targets are set annually based on the prior two-year performance for each operation and monitored monthly. These targets were reviewed at the end of 2017 and long-term (five years) targets proposed. These will be implemented in the second half of 2019.

Although electricity and diesel consumption increased in 2018, electricity and diesel intensities declined, proving we are working more efficiently. Based on production tonnes in 2018, electricity intensity of 12.9MWh/kt declined 6% from 2017, while diesel intensity of 1 592l/kt was down 4%.

Electricity consumption in coal operations – 2018

	Electricity (MWh)						Production (kt)						Electricity intensity (MWh/kt)
	2018		2017	2016	2015		2018		2017	2016	2015		2018		2017	2016	2015
Coal	543 178		527 688	518 376	566 521		41 952		39 312	37 030	40 969		12.95		13.83	12.86	13.83
Change (%)	3		1.8	(6)	(3.2)		6		6	(10)			7		7.5	1	(13)
Arnot	22 041		26 967	29 394	49 742		–		–	–	1 401		–		–	–	35.5
Reductants	–		–	–	–		–		86	54	48		–		–	–	–
Durnacol	107		99	114	139		–		–	–	–		–		–	–	–
Grootegeluk	381 480		358 101	335 041	341 932		29 698		25 538	22 601	25 554		12.85		14.02	14.8	13.4
Hlobane	16		21	20	19		–		–	–	–		–		–	–	–
Leeuwpan	26 225		25 242	25 951	27 037		4 220		3 355	3 774	2 202		6.21		7.52	6.9	12.3
Matla	105 757		107 467	109 710	108 185		6 609		7 400	7 900	7 858		16		14.52	13.9	13.8
North Block Complex	6 000		7 757	6 791	7 860		1 425		2 665	2 701	2 871		4.21		2.9	2.4	2.7
Tshikondeni	1 550		2 034	2 747	4 538		–		–	–	–		–		–	–	–

Diesel consumption in coal operations for 2018

	Diesel (kl)						Production (kt)						Diesel consumption intensity (l/kt)
	2018		2017	2016	2015		2018		2017	2016	2015		2018		2017	2016	2015
Coal	73 926		72 101	65 052	64 520		41 952		39 312	37 030	40 969		1 762		1 655	1 756	1 574
Change (%)	1		10.8	1	10.9		6		6	(10)	–		6		(5.8)	11.6	1.7
Arnot	989		1 311	1 243	1 043		–		–	–	1 401		–		–	–	744
Reductants	118		79	55	142		–		56	54	48		–		1 411	1 019	2 897
Durnacol	27		25	38	43		–		–	–	–		–		–	–	–
Grootegeluk	41 940		40 846	30 231	35 521		29 697		25 538	22 601	25 554		1 412		1 599	1 338	1 390
Hlobane	33		40	39	36		–		–	–	–		–		–	–	–
Leeuwpan	16 625		16 768	16 371	17 043		4 220		3 355	3 774	2 202		4 618		4 998	4 337	7 736
Matla	2 503		2 550	3 071	2 677		6 609		7 400	7 900	7 859		379		345	389	341
North Block Complex	8 609		10 462	9 867	8 121		1 425		2 962	2 701	2 871		6 041		3 956	3 653	2 828
Tshikondeni	8		22	35	134		–		–	–	–		–		–	–	–

Water management

Water is a strategic natural resource for South Africa and key to our business. The Exxaro water management policy defines our commitment to its sustainable use, with a strong focus on efficiency through reuse and recycling. This policy is aligned to the legislative environmental framework governed mainly by the National Water Act 36 1998. In support of the act, the Department of Water and Sanitation (DWS) has issued an integrated water resource management hierarchy that prioritises mine and waste management decisions and actions.

This hierarchy informs both our policy and strategy on mine and waste water management as:

• Pollution prevention
• Minimise environmental impacts
• Maximise water reuse and reclamation
• Responsible water discharge and disposal
• Water treatment.

Translating policy into action, our management standard on water for mining and industrial use articulates our commitment to develop and implement an effective integrated water and waste management plan across the lifecycle of a mine. This includes planning, construction, operation, decommissioning, closure and rehabilitation phases. The standard reflects management's vision to:

• Ensure a cost-effective integrated approach to water management
• Be environmentally responsible
• Be ecologically sustainable.

These management standards adhere to DWS best-practice guidelines on:

• The integrated water and waste management plan
• Stormwater management planning
• Water and salt balances
• Water-monitoring systems
• Water reuse and reclamation
• Pollution control dams
• Water efficiency performance indicators.

Progress

Water management is integral to our licence to operate. The group water strategy was approved in 2017, aiming for excellence in the following focus areas:

• Compliance
• Operational water efficiency
• Policies, standards and processes
• Water technologies
• Stakeholder partnerships.

A comprehensive programme is entrenching responsible and sustainable water management across Exxaro. It concentrates on relevant water-use and related risks – from security of supply to water efficiency and water-cost management – and manages these within current and anticipated regulatory compliance requirements. This is supported by continually enhancing our competence in water-management issues through company-wide research and skills development. We also reinforce awareness of water issues through ongoing communication and training.

We are managing water-related risks, minimising impacts, and operating efficiently through reduction, reuse and recycling. Most of our operations have water-conservation plans that support the national strategy to ensure equitable distribution of water resources that allows for business growth and protection (sustainable use).

We are also committed to protecting and improving the overall water quality by discharging treated water back into the system. Central to this are the two reverse-osmosis water-treatment plants in our Mpumalanga region as part of our long-term water management strategy. These plants have total capacity to treat 11.5 megalitres per day. The plant at Matla has been operational for three years while the plant at North Block Complex has been operational for two years.

We continue to collaborate with other mining houses and universities through the Coaltech research initiative. These research projects provide much-needed guidelines on sustainable mine-water management and mine closure. This will ultimately enhance the sustainable use of our water resources and final land-use planning.

The formation of the Mine Water Coordinating Body (MWCB) last year further strengthens our public-private collaboration by providing a platform to align our mine-water management plans with the national water resource strategy (NWRS2) and to investigate regional solutions in the Olifants River catchment of Mpumalanga.

Water-use monitoring and measurement

We maintain a centralised database on water consumption. Our water accounting methodology includes measuring water volumes and quality against efficiency and intensity targets, water-use permit conditions and internal benchmarks and trends. Our data also correlates to the reporting format of the annual submission to the CDP-Water.

The focus in 2018 was on setting site-specific targets for water intensity over a five-year period (to 2022), where water intensity is defined as total water withdrawals (excluding supply to third parties) from a resource (not recycled/reclaimed water) divided by run-of-mine (ROM), and is expressed as:

Water intensity =	water withdrawals (m3)
	ROM (tons)

Water intensity performance

Through water-conservation measures and raised awareness, all operations have reached the five-year target, except for North Block Complex's Glisa and Eerstelingsfontein mines. Exxaro reduced water withdrawals from Mokolo dam at Grootegeluk by increasing use of stored pit water in its processes as a temporary measure to reduce pit water levels.

Water-withdrawal performance

Business unit	Water sources	Target(ℓ/t)   2022		Water   intensity (ℓ/t)   2018		Water   withdrawals(kℓ)   2018
Coal		200		109		8 683 275
ECC Forzando North and South	Rain, external supplier	151		135		434 315
ECC Dorstfontein East	Rain, external supplier	360		249		444 056
ECC Dorstfontein West	Rain, municipal supply	134		98		99 172
Grootegeluk	Rain, Mokolo dam	115		91		5 187 375
Leeuwpan	Rain, boreholes	92		55		363 694
Matla	Eskom supply	215		181		1 197 247
North Block Complex: Glisa and Eerstelingsfontein	Rain	219		413		709 367*

*Due to the sale, data included up to September 2018

Hazardous waste management

Waste management is a key compliance indicator in Exxaro's social licence to operate. Our group standard enforces use of the waste management hierarchy, which in turn promotes waste prevention or minimisation, reuse, recycling, recovering energy and ensuring safe disposal of waste in line with the National Environmental Management: Waste Act 59 2008 and supporting legislation.

The total weight of hazardous waste generated at our managed coal operations in 2018 dropped 14% to 2 616 tonnes (2017: 3 058 tonnes).

2017 versus 2018 Q4 hazardous waste movement

Exxaro has submitted the Grootegeluk abatement plans for waste-tyre stockpiles as per requirements issued by the Department of Environmental Affairs (effective date: September 2017).

Biodiversity

Biodiversity means species diversity and species richness in an ecological environment. In Exxaro, our goal is to conserve biodiversity for future generations by sustainably using the resources of our mining operations and South Africa's natural resources.

To reach this goal, we have developed biodiversity action plans for our business units. The guiding principles include the best-practice standard on wetland offsets (Wetland Offsets: A Best Practical Guideline for South Africa 2014), as well as the mining and biodiversity guideline (Mainstreaming biodiversity into the mining sector. DEA, DMR, Minerals Council, SA Mining and Biodiversity Forum and SANBI, 2013).

An investment was made in 2018 on wetland rehabilitation and on biodiversity management, including wetland offsets, delineation and wetland studies, as well as biomonitoring.

In addition to complying with legislation and best practice, we aim to develop a competitive advantage through conservation and re-establishing resilient ecosystems that underscore our commitment to duty-of-care principles.

The principles of these guidelines are already incorporated into our planning and execution phases. As example, the principles of best-practice standard were used in several projects to avoid constructing infrastructure in a sensitive wetland area.

Our detailed management standard guides business units in developing infrastructure, aiming to:

• Ensure a cost-effective integrated approach to biodiversity management
• Be environmentally responsible in protecting and managing biodiversity
• Be ecologically sustainable by ensuring biodiversity-rich areas are contained within mining right areas, to manage and monitor protected and threatened Red Data species, and control declared category 1, 2 and 3 invasive plants.

Exxaro has evaluated and identified all protected vegetation units with important conservation targets and listed as protected by the national spatial biodiversity assessment report.

Exxaro also references the mining and biodiversity guideline (M&BG, 2013), the Mpumalanga biodiversity sector plan (2014), and the national freshwater ecosystem priority areas (NFEPA 2011) guidelines during proposed expansion and new projects. Information from these guidelines is considered during desktop ecological and wetland studies and includes detailed site-specific assessments to confirm the accuracy of the guidelines.

Any negative impact on biodiversity reduces the ability of communities to gather biological resources, produce biomass, decompose and recycle essential nutrients. There is increasing evidence that biodiversity increases the stability of ecosystem functions through time.

Climate change is also a major threat to global biodiversity: rising atmospheric carbon dioxide and therefore temperatures will affect species ranges, seasonal growth cycles and weather. Major extinctions are predicted as climate change drastically alters the biology of many species.

Environmental liabilities and rehabilitation

Internal annual updates

All business units annually review their financial provisions. They also consider amendments to rehabilitation plans and closure objectives based on regular EMP performance assessments.

The cost estimates of activities in the concurrent and final-closure rehabilitation programme are reviewed and adjusted where necessary. The provisions are audited biannually by Exxaro's external auditors through physical site visits and document reviews.

The financial provisioning regulations (GNR 1147) were published in December 2015. In September 2018, the department published an amendment that extended the transitional period to February 2020. Exxaro appointed external consultants at all operations to complete reports and calculations as required by GNR 1147. These reports will be finalised in 2019 for submission in 2020.

Annual process

Concurrent rehabilitation plans

All business units have a five-year concurrent rehabilitation schedule and associated budget:

• The schedules set measurable targets for each mine
• Schedules prevent backlogs building up, increasing liabilities
• Budgets enable managers to implement plans without cash flow constraints
• Concurrent rehabilitation forms part of operational tracking.

Land disturbed versus land rehabilitated (ha)		Land disturbed versus rehabilitated (ha)

Liabilities

At 31 December 2018, total land disturbed was 9 559ha and total rehabilitated 2 469ha. The Exxaro Environmental Rehabilitation Fund (EERF) and ECC trust fund provide for a portion of these liabilities, while additional bank guarantees are taken out to provide for new developments and cover any shortfalls in financial provisions. The EERF's assets are managed in an asset-and-liability modelling process that aligns the risk/return profile of the assets to the liability profile of the mines. This is done at site level, leading to each site having a specific allocation to the different asset profiles. The objective is to maximise the contribution of investment growth to the overall cost of funding for the liability provisions. An external specialist supports EERF trustees with the technical skills required for profiling and in identifying suitable structures for assessment by the trustees. Current implementation includes:

• Two income building blocks benchmarked to cash rates and investing in government treasury bills, bank and corporate paper
• Three growth building blocks targeting inflation-linked returns and investing in insurance and bank guaranteed products
• Equity-driven portfolios without explicit investment guarantees but where the portfolio manager controls capital risk by managing portfolio volatility.

Quarterly contributions to the trust are based on closure cost estimates at life of mine without considering any guarantees in place.

The trust funds earned R146 million in 2018, including cash contributions, interest earned on investments and fair-value adjustments. The fund has recorded 9% growth from an opening balance of R1 636 million in January 2018 to R1 782 million in December 2018. In addition, the group had bank guarantees of R2 971 million in place at year end. Updating these provisions biannually highlights potential rehabilitation alternatives that could decrease the long-term closure liabilities of mines.

Estimated closure costs per mine

The quantum for environmental contributions is calculated, based on relevant legislation, by both internal and external specialists:

• The Exxaro team comprises members of our sustainability department with expertise and experience in various fields of environmental management, as well as members of our finance department
• We often use independent external technical and financial specialists. In 2018, the quantum of all our operations was calculated by these specialists.

Mines as per AFS at 31 December 2018	DMR office	Estimated  immediate  closure cost  Rm	Estimated  residual  liability  Rm	Trust fund  balance  Rm	Guarantee  Rm	Immediate  shortfall to be  covered over  remaining life  of mine  Rm		Remaining  life (years)
Grootegeluk mine (including reductants area)	Limpopo	3 168	211	486	1 226	1 667		45
Thabametsi	Limpopo				885	(885)		45
Paardeplaats	Mpumalanga				88	(88)		–
Belfast	Mpumalanga	37	2		133	(94)		18
Leeuwpan MR 157 and 171	Mpumalanga	548	11	87	277	195		17
Dorstfontein East	Mpumalanga	675	83	117		641		8
Dorstfontein West	Mpumalanga	85	165	87	55	107		14
Forzando North	Mpumalanga	54	88	75		67		7
Forzando South	Mpumalanga	154	16	59	59	52		24
Tumelo	Mpumalanga	9	1	12	3	(6)		–
Operational mines		4 729	577	924	2 726	1 656
Arnot	Mpumalanga	1 123	745	268	28	1 573		–
Matla	Mpumalanga	334	47	81	130	171		21
Eskom tied mines		1 457	792	348	158	1 743
Durnacol	KZN	100	6			106		–
Hlobane	KZN	44	51			95		–
Tshikondeni	Limpopo	48	28	174	49	(147)		–
Inyanda	Mpumalanga	5				5		–
Glisa	Mpumalanga			216		(216)		–
Strathrae	Mpumalanga	27	68	90		5		–
Eerstelingsfontein	Mpumalanga				3	(3)		–
Newcastle	KZN	0	2			2		–
Gravelotte	Limpopo	2			35	(33)		–
HQ – inactive sites		36	10	30		15		–
Closed operations		262	165	510	87	(170)
Total Exxaro		6 338	1 533	1 782	2 971	3 229

Mine closure

Exxaro had six operations in active closure in 2018 – Arnot, Tshikondeni, Durnacol, Hlobane, Strathrae and Gravelotte. Understanding that operational closure, concurrent rehabilitation and land management activities directly link employees, community, environment, government and infrastructure, we are committed to:

• Ensure the operational closure process is conducted inclusively and within the legal framework
• Leave behind a positive legacy of alternative sustainable land use for our employees and local communities
• Proactively manage environmental impacts to minimise residual liabilities
• Allocate required financial resources to ensure this process is concluded
• Manage Exxaro land against to an agreed strategy.

Our closure-planning process is illustrated below:

Integrating stages of mining and mine-closure planning

Operational closure, concurrent rehabilitation and managing the land where our operations are currently located is part of our operating philosophy and moral responsibility. We actively plan our operations with closure in mind and ensure we have adequate financial resources to meet our rehabilitation commitments.

We strive to integrate land, rehabilitation and liability management in day-to-day mine planning, aiming to minimise final closure costs for each operation and optimise final land use after closure.

Social closure principles

While most closure planning relates to technical or engineering issues and the associated financial planning, social aspects are the most important part of mine closure. This includes aspects such as:

• Equipping employees with portable skills to pursue alternative employment and participate in meaningful economic activity
• Develop and implement a communication plan for employees
• Effective training for staff on their roles and responsibilities in implementing and managing the mine closure plan
• Communities will be affected by mine closure - while they may not be directly affected by environmental management strategies, health and safety issues and possible employment opportunities related to proposed strategies should be considered
• Socio-economic activities around the mine need to continue in its absence
• Conducting socio-economic impact assessments to identify the needs and expectations of all relevant stakeholders as well as economic impacts
• Assisting members of host communities affected by closure to acquire skills to participate in economic activities and provide the opportunity to use infrastructure not needed by the mining operation for their benefit
• Ensure communities have the opportunity to maintain, but preferably improve, their quality of life
• Align the closure process with community expectations. The closure plan must be in line with the requirements of that mine's social and labour plan, developed in terms of section 25 of the MPRDA
• Develop and implement an engagement plan for all relevant stakeholders (community, government, NGOs and others)
• Assist mine owners/operators achieve liability-free closure within a reasonable timeframe
• Effective implementation of the closure plan requires company and management commitment.

Mineral resources and reserves

Please refer to our comprehensive mineral resources and reserves report on our website.