Assurance

Assurance is implemented in terms of a three-tier system, aligned with the guidelines of Exxaro Mineral Resource and Mineral Reserve reporting procedure, summarised as follows.

In 2019, tier 1 assurance was undertaken for the Matla and Leeuwpan coal mines. The Mineral Resource fact packs indicated that an update of the Coal Resource estimate was required either due to additional information being available or as recommended by previous audits. Geological data validation, data analysis and subsequent updating of geological and structural models were concluded in the reporting period for the two operations and the models were signed off by the applicable competent persons and their supporting technical teams. Conversely, the review of the exploitation strategy utilising the 2018/19 updated geological model at Grootegeluk mine is progressing. All aspects captured in the Coal Reserve fact pack were reviewed and signed off, and the review and subsequent update of the LoM plan is under way. All the Mineral Reserve fact packs were reviewed in the reporting year. The Matla and Leeuwpan LoM plans were reviewed and updated. In addition, the Belfast operation was reviewed, leading to optimisation of the Belfast LoM plan.

On tier 2, technical assurance on the Matla Mine 2 Incline and Matla 3 Decline and associated vent shaft as well as Matla Mine 1 were conducted in the reporting year. Detailed findings on definition level of the project were communicated and corrected. Findings resulted in the satisfactory updating of geotechnical studies in Mine 2 and Mine 3 development areas. The actions to address outstanding findings regarding specialist blasting, enhancing roof stability, at Mine 3 Decline and drilling to define geological faulting at Mine 2 Incline are under way and tracked. The implementation of the directional surface in seam drilling at Mine 2 forms part of this corrective measure.   

The update of the geological structure model as well as the geotechnical study of the five portals that will be used to access S4 from pit 2 at Dorstfontein East were concluded, which signals finalisation of  the outstanding Resource finding requirements. Recommendations on capital estimate and technical design were updated to Exxaro standards. 

Assurance on the Grootegeluk in-pit crushing and conveyor project was concluded in the second quarter of 2019. A number of findings, including the accuracy level of the base-case truck requirements, benefits case and technical risks were highlighted, which resulted in rescoping of the project to consider the benefits of including coal and overburden in the study. The conclusion of this investigation is expected during the first quarter of 2020.

A review of the Belfast's Coal Resource, including exploration strategy, standards and procedures, data management, geological modelling, Resource estimation (including classification and reconciliation) and reporting, was conducted. No findings were noted that could materially impact (>10%) the reported Mineral Resource estimates. A number of minor findings related to SAMREC 2016 requirements, in terms of sampling chain of custody, were however documented. A response plan to address findings is being executed.

Table 2: Findings, impact and corrective measure for Belfast tier 2 review

Business unit     Finding Impact Risk Corrective measure

		1	Unclear distinction between percussion boreholes and cored boreholes		Borehole information		Low		Address in 2019 by changing percussion borehole names
		2	Seam interpretations from downhole geophysical logs clearly indicated		Borehole information		Low		Will be addressed by clearly indicating adjusted borehole lithologies and seam interpretations
Belfast		3	Closely spaces boreholes used for modelling		Resource modelling		Low		An investigation will be undertaken in 2020 to determine the effect of the closely spaced boreholes and to consider when the model is rebuilt
		4	Anomalous quality values		Resource modelling		Low		Anomalous quality values will be investigated with an update of the geological model
		5	Difference between borehole collar elevation and DTM		Resource modelling		Low		An investigation will be undertaken in 2020 to verify and/or correct the collar information on some holes
		6	Consider faulting the geological model		Resource modelling		Low		The impact of faulting the geological model will be investigated and addressed according to the outcome
		7	Constrain Resource classification to existing Resource extent		Resource estimation		Low		Implemented with the updated geological model
		8	Small changes needed for the competent persons report to be fully SAMREC-compliant		Resource reporting		Low		It will be addressed in the 2020 competent persons report

On tier 3, in 2018, process audits were done by EY for the ECC, Grootegeluk and Forzando operations with 28 audit findings documented. We noted that none of the findings were critical (constitutes a material risk for the company). Most of the findings were concluded in early 2019 with the last findings, regular contact and discussions with coal analysis laboratories, correction of the competent persons' report template to reflect cross-referencing and coal-analysis quality assurance, quality-control protocols, concluded in the second part of the year. The introduction of coal analysis quality assessment/quality control (QA/QC) resulted in an update of the exploration standard.

A Coal Resource and Coal Reserve estimation process audit by EY was conducted in 2019 for Matla mine. All controls were thoroughly tested and found to be in compliance with policies, procedures and standards. The audit accessed three categories, namely governance and reporting, Coal Resource and Coal Reserve estimation (Table 3). No material findings were reported while some improvements have been implemented.

Table 3: 2019 Coal Resource and Coal Reserve estimation process audit categories

No		Category
1		Governance and reporting: Ensuring that reporting of Coal Resources and Coal Reserves is consistently and appropriately executed (Mineral Resource and Mineral Reserve report, compliant Mineral Resource and Mineral Reserve reporting to the JSE, document management, Mineral Resource and Mineral Reserve reporting process management and strategy, competent persons' appointment and internal review of the geological model and LoM plan)
2		Coal Resources estimation: Ensuring that the Coal Resources estimation process is adequately executed (geological data validation and sign-off, geological modelling as per schedule, Mineral Resource classification compliance and Mineral Resource estimation considering RPEEE)
3		Coal Reserves estimation: Ensuring that the Coal Reserves estimation process is adequately executed (LoM policy compliance, geological model hand-over effectiveness, signed-off LoM fact pack, mine optimisation based on technical and economical parameters, mine design and scheduling considering production scheduling constraints and accurate Mineral Reserve estimation)

A decision to conduct similar audits on an annual basis from 2019 onwards was approved. Results will add to the existing independent review of our estimation and reporting process, and result in continuous improvement of activities.