Exxaro report selector 2019

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Exxaro Resources Limited
Environmental, social and governance report

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Environmental liabilities and rehabilitation

We uphold our licence to operate through

  • Mine closure and ongoing rehabilitation procedures
  • Integrated mine closure plans
  • Financial provision
  • Closure objectives (management plans)
  • Mine closure impact assessments
  • Ongoing rehabilitation, monitoring and reporting
  • Closure and ongoing efficiency reports
  • Land management procedures
  • Operational land management plan
  • Land disposal strategy
  • Land management efficiency reports

All business units review their financial provisions for mine closure and rehabilitation every year, and consider amendments to rehabilitation plans and closure objectives based on periodic environmental management programme 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 twice a year by Exxaro’s external auditors who visit sites and review documents.

In 2019, Exxaro appointed consultants to compile reports on financial provision for mine closure and rehabilitation in line with the regulation (GNR 1147) published in December 2015 and amended in September 2018 by the Department of Environmental Affairs, extending the transition period to February 2020.

Concurrent rehabilitation plans

All business units have a five-year conceptual concurrent rehabilitation plan, schedule and associated budget in place:

  • Setting measurable targets for each mine
  • Avoiding backlogs and related liabilities
  • Enabling managers to implement plans without cash flow constraints
  • Including concurrent rehabilitation in operational tracking

Annual process

Land disturbed versus land rehabilitated (ha) 2019  
Total land disturbed 10 325  
Total land rehabilitated 2 277  
Land disturbed versus land rehabilitated (ha) Land
Belfast 479   0  
Grootegeluk 3 677   0  
Arnot 830   297  
Matla 1 073   356  
Leeuwpan 1 202   55.7  
Strathrae 223   161  
Tshikondeni 198   139  
Hlobane 1 220   1 105  
Durnacol 334   147  
Forzando North 275   0  
Forzando South 209   0  
Dorstfontein East 544   17  
Dorstfontein West 61   0  
Total 10 325   2 277  

Exxaro is committed to effective and efficient rehabilitation beyond mere compliance. We believe it is a moral responsibility in the face of environmental liabilities, particularly concurrent rehabilitation within a changing regulatory landscape, inflation, a larger operating footprint and a backlog in rehabilitation against plans.

At 31 December 2019, total land disturbed was 10 325ha and total rehabilitated 2 277ha. The Exxaro Environmental Rehabilitation Fund (EERF) and ECC trust fund provide for a portion of these liabilities while additional bank guarantees provide for new developments and cover shortfalls in financial provisions.

The EERF’s assets are managed in terms of asset and liability modelling that aligns risk/return and liability on each site. The objective is to maximise investment growth in the cost of liability provisions. An external specialist supports EERF trustees with the technical skills required to profile and identify 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 portfolio managers control 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 R270 million in 2019, including cash contributions, interest on investments and fair value adjustments. The fund has recorded 15.1% growth from an opening balance of R1 782 million in January 2019 to R2 052 million in December 2019. In addition, the group had bank guarantees of R3 998 million in place at year end. Updating these provisions twice a year 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 internal and external specialists. The Exxaro team includes members of our sustainability and finance departments with expertise and experience in environmental management. We also employ independent technical and financial specialists.

In 2019, the closure costs of all our operations were calculated as R9 536 million.

Mines as per
annual financial
statements at
31 December 2019 
of Mineral
and Energy
closure cost 
Trust fund 
shortfall to 
be covered 
life of mine 
Grootegeluk mine (including Reductants area) Limpopo  3 332  393  500  1 226  2 000  38 
Thabametsi  Limpopo  108  885  (987) 30 
Paardeplaats  Mpumalanga           88  (88)   
Belfast  Mpumalanga  235     133  105  12 
Leeuwpan MR 157 and 171  Mpumalanga  634  54  148  278  261  11 
Dorstfontein East  Mpumalanga  870  39  251  239  396  14 
Dorstfontein West  Mpumalanga  49  90  162        30 
Forzando North  Mpumalanga  50  259  96  59  221 
Forzando South  Mpumalanga  134  17  85        19 
Tumelo  Mpumalanga  13  (6)
Operational mines     5 315  862  1 363  2 912  1 902    
Arnot  Mpumalanga  739  796  280  28  1 227    
Matla  Mpumalanga  533  602  85  972  78  19 
Eskom-tied mines     1 272  1 398  365  1 000  1 306    
Durnacol  KwaZulu-Natal  254  16        270    
Hlobane  KwaZulu-Natal  129  90        219    
Tshikondeni  Limpopo  19  30  191  49  (190)   
Inyanda  Mpumalanga             
Strathrae  Mpumalanga  29  66  99     (4)   
Eerstelingsfontein  Mpumalanga           (3)   
Newcastle  KwaZulu-Natal          
Gravelotte  Limpopo        35  (35)   
Headquarters: Inactive sites     37  10  33     14    
Closed operations     474  214  323  87  278    
Total Exxaro     7 061  2 475  2 052  3 998  3 486    
Mine closure

Exxaro had six operations in active closure in 2019: Arnot, Tshikondeni, Durnacol, Hlobane, Strathrae and Gravelotte. We understand that operational closure, concurrent rehabilitation and land management activities directly connect employees, communities, the environment, government and infrastructure.

Our land management goals for 2019 included transferring 90% of post-mining land to emerging farmers in local communities by 2026 while creating strategic partnerships with farmers on the land to advance agri-economies in support of government’s land redistribution policies.

Closure planning process

Integrated stages of mining and mine closure planning

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

We also strive to integrate land 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

The social aspects of mine closure are among the engineering and associated financial planning considerations, including elements such as:

  • Equipping employees with portable skills to pursue alternative employment and participation in meaningful economic activity
  • Developing and implementing a communication plan for employees
  • Effective training of staff in their roles and responsibilities to implement and manage the mine closure plan
  • Health and safety issues and potential employment opportunities for communities
  • Socio-economic activities around the mine that must continue in its absence
  • Assessments that identify the needs and expectations of all relevant stakeholders as well as socio-economic impacts
  • Assisting members of host communities to acquire skills for commercial activities and to use infrastructure not needed by the mining operation
  • Ensuring that communities have the opportunity to improve quality of life
  • ligning the closure process with community expectations so that the closure plan is in line with the requirements of the mine’s SLP developed in terms of section 25 of the Mineral and Petroleum Resources Development Act
  • Developing and implementing an engagement plan for all relevant stakeholders (community, government, NGOs and others)
  • Assisting mine owners and operators to achieve liability-free closure within a reasonable time frame
  • Committed management of effective implementation of the closure plan