Environmental liabilities and rehabilitation

We see environmental rehabilitation as an opportunity to uplift our communities, leaving a positive legacy of alternative sustainable land use.

OUR APPROACH

Due to the complex nature of environmental liabilities and rehabilitation, Exxaro adheres to several legislative frameworks that guide our management and approach. All assessments were done according to relevant regulations.

We review mine closure and rehabilitation financial provisions every year. Rehabilitation plans and closure objectives are amended after environmental management programme performance assessments. Cost estimates of activities in the concurrent and final closure rehabilitation programme are reviewed and adjusted. External auditors visit our sites, review documents and audit the provisions twice a year.

In 2021, we appointed consultants to compile reports on financial provisions for mine closure and rehabilitation. Except for ECC* and Leeuwpan, our operations were assessed in line with the regulations for financial provision for prospecting, exploration and mining operations (GNR 1147), which were published in December 2015 and amended in September 2018 by the DFFE.

New draft regulations (GN 765 in GG 45058) were issued on 27 August 2021 for comments. The proposed regulations will repeal GNR 1147. Exxaro forms part of the Environmental Policy Committee chaired by the Minerals Council and is aware of a draft of Financial Regulations published for comments on 27 August 2021. Discussions between the Minerals Council and the DMRE on the proposed regulations are still in progress. We continue engaging with all relevant parties on the financial rules attached to the entire mining industry.

External assessments were done at ECC*, Leeuwpan, Tshikondeni and Strathrea in 2021. If the new regulations are promulgated, all BUs will be assessed annually from 2022.

While we review the provisions annually, we use cutting edge systems and tools to manage environmental liabilities and rehabilitation. This year, we introduced a business analytics service to track expenses against budgeted figures. The application provides interactive visualisations and business intelligence capabilities, enabling timeous mitigation measures to be applied to fast-track concurrent rehabilitation.

Accountability and responsibility

The implementation of our policy and practices at an operational level is overseen by the sustainability manager supported by the rehabilitation team and on-site environmental specialists under the leadership of the executive head: sustainability.

* Divestment concluded in September 2021.

Blasting at Belfast

HOW WE PERFORMED

Each BU has five-year conceptual concurrent rehabilitation plans, schedules and associated budgets to:

• Set measurable targets
• Avoid backlogs and related liabilities
• Enable managers to implement strategies without cash flow constraints
• Include concurrent rehabilitation in operational tracking

The annual environmental liabilities update is illustrated below.

Inspecting the boxcut at Matla LoM project

	Land disturbed				Land rehabilitated
Land disturbed versus land rehabilitated (ha)1	2021	2020	2019		2021	2020	2019
Mpumalanga
Arnot		_	830		_		241
Belfast	600	679	479		0
Dorstfontein East	_	556	544		_	17	17
Dorstfontein West	_	61	61		_
Forzando North	_	275	275		_
Forzando South	_	209	209		_
Leeuwpan	1 693	1 294	1 202		65	56	56
Matla	1 164	1 163	1 073		356	356	356
Strathrae	223	223	223		121	161	161
Limpopo
Grootegeluk	3 848	3 772.00	3 772.00		—
Tshikondeni	198	198	198		139	139	139
KwaZulu-Natal
Durnacol	334	334	334		147	147	147
Hlobane	1 220	1 220	1 220		1 105	1 105	1 105
Total	9 280	9 984.00	10 420.00		1 933	1 981	2 222

1	ECC* mines are removed from reporting due to the divestment process.
*	Divestment concluded in September 2021.

Disturbed area is the footprint of disturbed area and includes all buildings, roads and mining areas that need to be rehabilitated, according to the Environmental Management Programme. Rehabilitated area is the area rehabilitated up to the required standard of the Environmental Management Programme and the final land use plan at which point only maintenance and monitoring is needed.

Current implementation includes:

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

Quarterly contributions to the EERF are based on closure cost estimates at LoM without considering any guarantees in place.

The Exxaro and the Matla rehabilitation trust funds (the funds) combined have shown growth of R261 million (2020: R249 million), mainly relating to cash contributions, interest earned on investments and fair value adjustments. The funds have grown by 13.0% (2020: 12.1%) from an opening balance of R2 006 million in January 2021 to R2 266 million in December 2021. In addition, Exxaro had bank guarantees of R3 606 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 operations.

Estimated closure costs per operation

Calculation of rehabilitation cost is governed by relevant legislation (GNR 1147). It is conducted by independent technical and financial specialists, and our internal sustainability and finance departments, with expertise and experience in environmental management.

In 2021, our total unscheduled closure costs were R7 581 million (2020: R8 608 million).

BUs as at 31 December 2021	DMRE office	Estimated  unscheduled  closure cost  (Rm)	Estimated  residual cost  (Rm)	Trust fund  balance  (Rm)	Guarantee  (Rm)	Funding  shortfall to  be covered  over  remaining  LoM  (Rm)	Remaining  operational  LoM  (years)
COAL
Grootegeluk (including reductants area)	Limpopo	3 992	346	995	1 226	2 117	36
Thabametsi	Limpopo	1		12	885	(896)
Belfast	Mpumalanga	552	124	619	80	(23)	12
Leeuwpan	Mpumalanga	649	191	178	277	385	8
Coal – operational mines		5 194	661	1 804	2 468	1 583
Matla	Mpumalanga	672	307	94	972	(87)	20
Coal – Eskom tied mines		672	307	94	972	(87)
Durnacol	KZN	255	13			268
Hlobane	KZN	122	94			216
Tshikondeni	Limpopo	13	6	219	49	(249)
Inyanda	Mpumalanga	5				5
Strathrae	Mpumalanga	13	85	112		(14)
Paardeplaats	Mpumalanga				53	(53)
Coastal Coal	KZN		11	5		6
Arnot	Mpumalanga				28	(28)
Coal – other		408	209	336	130	151
COAL – TOTAL		6 273	1 177	2 234	3 570	1 646
OTHER
Cennergi – Amakhala	Western Cape	54				54	25
Cennergi – Tsitsikamma	Eastern Cape	33				33	25
FerroAlloys	Gauteng	5				5	20
Inactive sites		39		32	36	(29)
OTHER – TOTAL		131	–	32	36	63
EXXARO – TOTAL		6 404	1 177	2 266	3 606	1 709

Revegetation as part of Matla's rehabilitation activities

Mine closure

Four Exxaro operations were in active closure in 2021, namely Tshikondeni, Durnacol, Hlobane and Strathrae (2020: five).

We understand that operational closure, concurrent rehabilitation, and land management activities directly connect employees, communities, the environment, government and infrastructure.

We are committed to:

• Ensuring operational closure is inclusive and within legal framework parameters
• Proactively managing environmental impacts to minimise residual liabilities
• Leaving a positive legacy of alternative sustainable land use for employees and local communities
• Allocating financial resources required to ensure process conclusion
• Managing Exxaro's land according to agreed strategy

Our land management goals for 2021 included transferring 90% of post-mining land to emerging farmers in local communities by 2026. We continued to create strategic partnerships with farmers to advance agri-economies in support of government's land redistribution policies.

Integrated stages of mining and mine closure planning

Operational closure, concurrent rehabilitation and land management are part of Exxaro's operating philosophy and moral responsibility. We actively plan our operations with closure in mind, ensuring adequate financial resources are available to meet our rehabilitation commitments.

We also strive to integrate land and rehabilitation liability management in daily mine planning. This minimises final closure costs for each operation and optimises final land use after closure. All operations report concurrent rehabilitation KPIs every two weeks on Exxaro's Middle Eye platform.

The diagram below shows the 11 aspects that must be taken into account when closing a mine.

 

Social closure principles

The social aspects of mine closure are integrated into our approach. These include the following principles:

• Equip employees with portable skills to pursue alternative employment and participation in meaningful economic activity
• Develop and implement a communication plan for employees
• Employee training to implement and manage mine closure plans
• Address health and safety issues as well as employment opportunities for communities
• Socio-economic activities that must continue after mine closure
• Identify the needs and expectations of stakeholders and socio-economic impacts
• Assist host communities to acquire skills for commercial activities and infrastructure use after mine closure
• Ensure opportunities are available to improve quality of life
• Align closure with community expectations to honour SLP commitments
• Develop and implement plans for engagement with communities, government and NGOs, among others
• Help mine owners and operators achieve liability-free closure within a reasonable timeframe
• Management's commitment to implementing the closure plan