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Independent Competent Persons Report on Sentula Mining Limited’s Nkomati Anthracite Mine SR1.1A(i) A.N. CLAY M.Sc. (Geol.), M.Sc. (Min.Eng.), Dip.Bus.Man., Pr.Sci.Nat., MSAIMM, FAusIMM, FGSSA, MAIMA, MSPE, IoD. Competent Person/Valuator S. MAZIBUKO B.Sc. (Hons) Geol., Research Analyst G. PETZER B.Sc. Hons (Geol.), Pr.Sci.Nat., MGSSA Mineral Project Analyst T. C. ORFORD B.Sc. Hons (Geol.), GDE (Min. Eng.) MGSSA, MGASA, MMINSA. Mineral Project Analyst S. DYKE MSc. (Env. Sci.), Cand. Sci. Nat. MSAIMM, MIAIASA, MGSSA Environmental Industry Advisor J.A. MYBURGH B.Sc. (Mathematics), MIASSA, MGASA. Mineral Project Analyst Reference No.:- VMD1652R Effective Date:- 9th April 2014 SR1.1A(ii); JSE12.9a Final Report Date:-April 2014
April 2014 i
Independent Competent Persons Report on Sentula Mining Limited’s Nkomati Anthracite Mine Synopsis SR1.2A(i); SV2.1 Introduction The Directors of Sentula Mining Limited (Sentula) requested Venmyn Deloitte (Pty) Limited (Venmyn Deloitte) to prepare an updated competent persons report (CPR) for the intended disposal of Coal Asset, Nkomati Anthracite Mine (Nkomati), located approximately 50 kilometres south of Komatipoort within the Mpumalanga Province of South Africa. The CPR was to be based on the latest publically available information from “An Independent Competent Persons Report on the Mineral Coal Assets of Sentula Mining Limited”, March 2011, (2011 CPR) and any subsequent resource quantifications. In preparation of Sentula’s disposal of Nkomati the updated CPR is to highlight the current value of the project. This report describes the Nkomati coal asset in terms of its historical and recent exploration data which would have a bearing on the techno-economic value of the contributing property. This CPR has been prepared in accordance with Section 12 of the JSE Listings Requirements. This CPR has been prepared in compliance with and to the extent required by the 2007 South African Code for Reporting of Mineral Resources and Mineral Reserves (SAMREC Code). Venmyn Deloitte’s professional advisors are Competent Persons as defined by the SAMREC Code. The Competent Persons and Competent Experts involved in the preparation of this CPR are members in good standing with their respective professional institutions. Venmyn Deloitte has based its review of Nkomati on information provided by Sentula, along with technical reports and information by its contractors and associates and other relevant published data. Location Nkomati is a mine, currently on care and maintenance, located approximately 50km south of Komatipoort within the Mpumalanga Province of South Africa. Tenure A new order mining right with license number MP30/5/1/2/2/89MR was executed by Nkomati Anthracite (Pty) Ltd, Company Registration Number 1980/008581/07, on 30th September 2010 and is valid until 29 September 2020. Venmyn Deloitte has enquired from Sentula as to whether there are any legal proceedings that may have an influence on the rights to explore or mine. Written confirmation from Sentula states that there are none. Ownership Nkomati is 60% held by Benicon Mining (Pty) Ltd (Benicon), a wholly owned subsidiary of Sentula, and 40% held by the Mpumalanga Economic Growth Agency (MEGA). Geology Nkomati is located within the Kangwane Coalfield. The Nkomati area has been divided into the Mangweni and Madadeni Areas, to the north and south respectively. The coal seams are numbered from oldest to youngest, i.e. 1, 2 Lower, 2 Upper, 3 and 4 Seams. The 2 Lower Seam is the best quality seam at Nkomati. Dolerite dykes and transgressive sills have devolatilised and displaced the coal seams.
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Exploration Exploration in the area is summarised in the table below. Summary Table of all Drilling to Date
Infill drilling is planned to confirm geological structure and quality distribution when the mine is operational. Mining Messina Mining acquired the Nkomati lease area during 1985 and commenced with opencast mining in October 1986. Dania Corporation bought Nkomati 5 years later, and was liquidated in 1992. Benicon bought Nkomati in 1993 and have been mining the opencast areas since that time. Underground Mining commenced in 2009. All mining ceased in 2011. The old order mining license dated 1998 was valid till October 2015. This was converted to a Mining Right on the 30th September 2010 and is valid until September 2020. The application for conversion to a mining right was submitted in 2005. Mangweni opencast production was completed in March 2009. In January 2009 underground mining commenced, at Mangweni Block, as a result of coal seam depth. Only one section was operational. With the requirement of additional coal production, opencast mining commenced at the Madadeni Block in November 2010. The mine is currently on care and maintenance and has been since 1st May 2011. The planned mining design was covered in the 2011 CPR by SRK but for completeness is repeated in the following sections. The current Life of Mine (LoM) plan is for approximately 8 years. Due to the project being disposed of, it is unlikely that Sentula will resume operations but rather the purchaser will. The planned future production is illustrated below. Graph illustrating Nkomati’s Planned Production
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
1 2 3 4 5 6 7 8
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
RO
M (t
onne
s)
Open Cast ROM Underground ROM
DATE COMPANY TOTAL NO. B/H
B/H SERIES
APPROXIMATE TOTAL METRES
B/H SPACING AREA
1984 Messina Ltd 55 NKA 3,450 100 Mangweni 1991 Dania Mining - - - - -
1993 Benicon Mining (Pty) Ltd 96 BH 5,200 100 Mangweni
2003-2008 Benicon Mining (Pty) Ltd 20 BHOH 1,400 100 Mangweni
Recent Exploration
2008 Sentula Mining (Pty) Ltd 11 NBH 1,100 100 Mangweni
2008-2009 Sentula Mining (Pty) Ltd 76 MBH 3,600 100 Madadeni
TOTAL 258
14,750
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Processing Coal processing is contracted to Ingwenya Mineral Processing (Pty) Ltd. The process plant makes use of the traditional dense-medium separation techniques. The plant throughput capacity is currently limited to 100tph ROM although a debottlenecking exercise, which involves upgrading the dense-medium cyclone capacity to 200tph ROM, would have increased the plant throughput capacity to 200tph ROM. This exercise has not been completed as it has since been postponed. Essentially, raw coal is screened and crushed to a topsize of 50mm and then deslimed at a feed preparation screen cutting at 1mm. The resulting oversize is then fed to a dense-medium cyclone which produces a float stream and a sink stream. The float stream is the 15% ash primary product (produced a yield of 67%) which is then screened and stockpiled into three size fractions (small nuts, peas and duff), ready for dispatch to customers. The cyclone sink stream is the cyclone discard which is then reprocessed at a higher relative density to produce an 18% ash secondary product at a yield of 30%. The minus 1mm fraction from the feed preparation screen is deslimed at 150µm using a desliming cyclone. The resulting oversize material is processed via a bank of spirals to produce a spiral product, which is stockpiled together with the duff material, and a spiral discard, which is dewatered and deposited onto a discard stockpile. The desliming cyclone undersize is dewatered and the recovered ultra fine coal is made available for community use. Quality control is managed by M&L Inspectorate (Pty) Ltd. Resources and Reserves The current coal resources and Reserves for Nkomati were independently estimated, classified and signed off by David Mosuwe of SRK (Pr.Sci Nat [No. 100049/05], GSSA). The resource estimate was presented in the report titled “An Independent CPR on the Material Coal Assets of Sentula Mining Limited 2011” by SRK, dated March 2011, with the resource estimates dated 28 February 2011. There is no change between this resource statement and the effective date of this report, April 2014. These summary tables have been extracted directly from the 2011 CPR. Summary Table of the Resources and Coal Seam Qualities for Nkomati, as at 28 February 2011 (SRK CPR, March 2011)
Source: Sentula Mining SRK CPR, March 2011 ,Table ES4 NOTES:- 1. Coal Resources have been reported in accordance with the classification criteria of the South African Code for the Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code). 2. Coal Resources are inclusive of Coal Reserves. 3. Coal Resources are not Coal Reserves and have not been evaluated for economic viability. 4. Coal Resources are reported on an air-dried, uncontaminated basis (ad, uc). 5. GTIS - Gross Tonnes In-situ. 6. MTIS - Mineable Tonnes In-situ.
Summary Table of the Reserves for Nkomati (SRK CPR, as at March 2011)
Source: SRK’s ‘An Independent CPR on the Material Coal Assets of Sentula Mining Limited’ 2011, Table 5-5
MINING BLOCK /
PIT
RESERVE CATEGORY
MINING METHOD
MINEABLE TONNES IN
SITU (MTIS) RESERVE
MODEL ESTIMATION ERROR (%)
LAYOUT LOSSES
(%)
EXTRACT- ABLE
RESERVE (t)
CONTA- MINATION
(%)
MINING RECOVERY
FACTOR (%)
ROM RESERVE (t) (AIR DRIED)
PRIMARY MARKETABLE RESERVE (t)
PRAC. YIELD (%)
CV (MJ/kg)
ASH (%)
VOL. (%)
FIXED CARBON (%)
SULPH. (%)
MOIST. (%)
Matedeni O/C 3,710,000 5% 5% 3,339,000 5% 90% 3,155,000 2,114,000 67.00 28.83 14.6 7.50 76.12 0.39 1.90Mangw eni U/G 1,460,000 5% 5% 1,314,000 0% 75% 985,000 660,000 67.00 28.30 15.0 8.13 74.35 0.36 1.65Matedeni U/G 820,000 5% 5% 738,000 0% 75% 553,000 370,000 67.00 28.12 15.0 7.18 74.35 0.36 1.41
5,990,000 5% 5% 5,391,000 5% 84% 4,693,000 3,144,000 66.99 28.42 14.84 7.60 74.94 0.37 1.65
No moisture correction factor w as applied to the ROM tonnes as dry mining techniques are to be used. In addition, all product qualities quoted on an air dried basis.Practical yields are obtained from the slimline borehole yields and take into account a 90% plant eff iciency.
GRAND TOTAL / AVERAGE NKOMATI RESERVES
Primary product yield percentages exclude f ines recovery and the potential secondary product.
Probable
Notes :The declared coal reserves is based upon the Measured and Indicated Coal Resources only.
Rounding dow n of tonnages to 1,000t to reflect the relative uncertainty in the estimates may result in adding inconsistencies.
PRIMARY PRODUCTAIR DRIED WASHED QUALITIES @ 15% ASH
AREA SEAM THICKNESS
VOLUME GTIS TTIS GEOLOGICAL LOSSES
TTIS CV ASH VM FC
(m2) (m) (m3) (Mt) (Mt) (%) (tonnes) (MJ/kg) (%) (%) (%)
Mangw eni A. No 2 Low er 45,100 6.24 281,424 1.49 0.42 0.38 377,390 25.74 2.5 22.1 7.4
Mangw eni B. No 2 Low er 106,000 6.51 690,060 1.52 1.05 0.95 944,002 25.74 2.5 22.1 7.4
Madadeni C. No 2 Upper 379,300 2.12 804,116 1.64 1.32 1.19 1,186,875 22.25 1.7 31 6.7 60.3
Madadeni C. OC No 2 Low er 327,000 3.67 1,200,090 1.53 1.84 1.65 1,652,524 25.32 2.1 22 7.1 68.8
Madadeni C. UG No 2 Low er 47,800 3.47 165,866 1.53 0.25 0.22 228,397 25.32 2.1 22 7.1 68.8
Madadeni C. No 1 361,000 1.21 436,810 1.52 0.66 0.6 597,556 25.93 1.9 21.2 6.2 79.7
Madadeni III. No 2 Low er 145,300 3.95 573,935 1.52 0.87 0.79 785,143
1,411,500 4,152,301 6.41 5.77 5,771,887TOTAL
AIR DRIED BASIS, UNCONTAMINATED (RAW)
BLOCK SEAM RD IM (%)RESOURCE CATEGORY MINING METHOD
Indicated 10%
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Social and Environmental compliance status Sentula has faced various challenges with environmental licensing for Nkomati. All licensing issues have been rectified, and Sentula has obtained the following licenses for Nkomati:-
• DMR EMP approval;
• DEDET environmental authorisation; and
• DWA WUL approval.
Although Sentula have made a considerable effort to align Nkomati with the relevant environmental licenses, Venmyn Deloitte recommend that an environmental legal due diligence be conducted to ascertain Sentula’s compliance with current environmental legislation. Valuation Venmyn Deloitte has performed a valuation on Sentula’s Nkomati asset using the Market and DCF methods, as appropriate, and the results are summarised in the table below:-
Sentula Mineral Asset Valuation Summary, 9th April 2014
VALUATION METHODOLGY SENTULA STAKE
PROJECT VALUE ATTRIBUTABLE VALUE
LOWER VALUE
UPPER VALUE
PREFERRED VALUE
LOWER VALUE
UPPER VALUE
PREFERRED VALUE
(ZARm) (ZARm) (ZARm) (ZARm) (ZARm) (ZARm)
Market Valuation Approach 60%
44.9 96.2 70.5 26.92 57.69 42.31 Cash Flow Valuation Approach 132.0 397.0 269.4 79.20 238.20 161.64
Based on the low level of confidence in the input parameters into the cashflow model, Venmyn Deloitte prefers the Market Valuation Approach for the valuation of Nkomati. Venmyn Deloitte concludes that the Fair Value of the mineral assets attributable to Sentula is ZAR42.31m with a lower value of ZAR44.9m and an upper value of ZAR96.2m. The valuation of exploration assets is, by nature, both subjective and uncertain. The placing of a specific monetary value on historical exploration can be misleading, and the reader is advised to consider the ranges, in which each property has been evaluated, and to further consider the technical merits of each project area and form an opinion regarding its prospectivity on the basis of the data presented in this report. Conclusion No recent drilling has been undertaken on the property, with the last drilling having occurred during 2008-2009. Infill drilling is to resume when mining begins. Resources have been declared for two areas, namely, Mangweni and Madadeni. Each area was subdivided into 2 resource blocks, MAN.A, MAN.B for Mangweni area and MAT.C and MAT.III for the Madadeni area. Nkomati is in the production stage but was placed on care and maintenance in May 2011, pending environmental approvals. Final approval was received in December 2013 however the sale process for Nkomati was already at a late stage and therefore the reopening of the operation was deferred to when the new owners would take control. Due to additional capex requirements to restart the operation it did not make sense to start operations once the sale negotiations were wrapped up. The LOM is planned to extend over eight years.
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Disclaimer and Risks Venmyn Deloitte has prepared this Competent Persons’ Report and, in so doing, has utilised information provided by Sentula and its contractors as to its operational methods and forecasts. Where possible, this information has been verified from independent sources with due enquiry in terms of all material issues that are a prerequisite to comply with the SAMREC, and SAMVAL Codes. Venmyn Deloitte and its directors accept no liability for any losses arising from reliance upon the information presented in this report. The authors of this Competent Persons’ Report are not qualified to provide extensive commentary on legal issues associated with Sentula’s right to the mineral properties. Sentula has provided certain information, reports and data to Venmyn Deloitte in preparing this Competent Persons’ Report which, to the best of Sentula’s knowledge and understanding, are complete, accurate and true and Sentula acknowledges that Venmyn Deloitte has relied on such information, reports and data in preparing this Competent Persons’ Report. No warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness or accuracy of the legal aspects of this document.
Operational Risks The businesses of mining and mineral exploration, development and production by their natures contain significant operational risks. The businesses depend upon, amongst other things, successful prospecting programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues.
Political and Economic Risks Factors such as political and industrial disruption, currency fluctuation, increased competition from other prospecting and mining rights holders and interest rates could have an impact on Sentula’s future operations, and potential revenue streams can also be affected by these factors. The majority of these factors are, and will be, beyond the control of Sentula or any other operating entity.
Forward Looking Statements This report contains forward-looking statements. These forward-looking statements are based on the opinions and estimates of Venmyn Deloitte and Sentula at the date the statements were made. The statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those forward-looking statements anticipated by Venmyn Deloitte and Sentula. Factors that could cause such differences include changes in world coal markets, equity markets, costs and supply of materials, and regulatory changes. Although Venmyn Deloitte believes the expectations reflected in the forward-looking statements to be reasonable, Venmyn Deloitte does not guarantee future results, levels of activity, performance or achievements. Venmyn Deloitte has not provided any statement on the reasonableness of current, real, nominal or discount rates, PPI, and CPI applied in the corresponding financial models and cash flows which are informed by the closure liability assessment undertaken by JA Consultancy.
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Independent Competent Persons Report on Sentula Mining Limited’s Bankfontein Coal Project
List of Contents SR1.1A(i)
1. Introduction ............................................................................................................................................................... 11 2. Scope of the Opinion ................................................................................................................................................. 11 3. Statement of Independence ...................................................................................................................................... 13 4. Reliance on other Experts ......................................................................................................................................... 13 5. Forward Looking Statements .................................................................................................................................... 14 6. Sources of Information .............................................................................................................................................. 14 7. Personal Inspection ................................................................................................................................................... 15 8. Sentula’s Corporate Structure ................................................................................................................................... 15 9. South Africa Country Profile ...................................................................................................................................... 15
9.1. Political and Economic Climate................................................................................................................... 15 9.2. Minerals Industry ........................................................................................................................................ 17 9.3. Coal and Electricity Supply Industry ........................................................................................................... 17 9.4. Legislative Framework ................................................................................................................................ 18
9.4.1. Mineral and Petroleum Resources Development Act (Act 28 of 2002) (MPRDA) ...................... 18 9.4.2. Mineral and Petroleum Resources Development Amendment Act 49 of 2008 .......................... 20 9.4.3. Mineral and Petroleum Resources Development Draft Amendment Bill (2012) ......................... 21 9.4.4. Broad-Based Socio-Economic Charter ...................................................................................... 22 9.4.5. Amendment of the Broad-Based Socio-Economic Empowerment Charter (2010) ..................... 22 9.4.6. Promotion of Beneficiation Bill ................................................................................................... 23 9.4.7. Mineral and Petroleum Resources Royalty Act (Act 28 of 2008) (MPRRA) ............................... 23 9.4.8. Institutional and Administrative Environmental and Social Regulatory Structures ..................... 24 9.4.9. Environment Conservation Act (Act 73 of 1989) (ECA) (Section 25 – Noise Regulations) ........ 24 9.4.10. National Environmental Management Act (Act No. 107 of 1998) (NEMA) ................................. 25 9.4.11. National Environmental Management: Waste Act (Act 59 of 2008) (NEM:WA) ......................... 25 9.4.12. National Water Act (Act 36 of 1998) (NWA) ............................................................................... 26 9.4.13. National Environmental Management: Air Quality Act (Act 39 of 2004) (NEM:AQA) ................. 26 9.4.14. National Heritage Resources Act (Act 25 of 1999) (NHRA) ....................................................... 27 9.4.15. National Environmental Management Biodiversity Act (Act 10 of 2004) (NEMBA) .................... 27
10. Global Coal Market Review ....................................................................................................................................... 28 10.1. Resources .................................................................................................................................................. 28 10.2. Reserves .................................................................................................................................................... 30 10.3. Supply ......................................................................................................................................................... 30 10.4. Demand ...................................................................................................................................................... 30 10.5. Future Demand ........................................................................................................................................... 31 10.6. Future Supply ............................................................................................................................................. 33 10.7. Pricing Trends............................................................................................................................................. 33 10.8. Anthracite ................................................................................................................................................... 34
10.8.1. Anthracite and Nkomati.............................................................................................................. 34 11. Nkomati Coal Project ................................................................................................................................................. 35 12. Location and Access ................................................................................................................................................. 35 13. Legal Aspects ............................................................................................................................................................ 35
13.1. Ownership .................................................................................................................................................. 35 13.1. Mineral Tenure ............................................................................................................................................ 38 13.2. Surface Rights ............................................................................................................................................ 38
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13.3. Royalties ..................................................................................................................................................... 40 13.4. Environmental and Social Compliance Status ............................................................................................ 40 13.5. Social and Environmental Practises ........................................................................................................... 43 13.6. Social Practises .......................................................................................................................................... 43 13.7. Mine Closure Provision ............................................................................................................................... 43 13.8. Closure Planning and Rehabilitation ........................................................................................................... 45 13.9. Material Contracts ....................................................................................................................................... 45
13.9.1. Nkomati Processing Plant .......................................................................................................... 45 13.9.2. Laboratory .................................................................................................................................. 46 13.9.3. Security ...................................................................................................................................... 46 13.9.4. Offtake Agreements ................................................................................................................... 46 13.9.5. Surface Transport ...................................................................................................................... 46 13.9.6. Underground Mining Equipment ................................................................................................ 46 13.9.7. Any Other Legal Issues.............................................................................................................. 46
14. Climate ...................................................................................................................................................................... 47 15. Topography ............................................................................................................................................................... 47 16. Fauna and Flora ........................................................................................................................................................ 47 17. Local Resources ....................................................................................................................................................... 47 18. Infrastructure ............................................................................................................................................................. 47
18.1.1. Water ......................................................................................................................................... 48 18.1.2. Power......................................................................................................................................... 48 18.1.3. Mining and Plant Equipment ...................................................................................................... 48 18.1.4. Security ...................................................................................................................................... 48 18.1.5. Roads ........................................................................................................................................ 49
19. Regional Geological Setting ...................................................................................................................................... 49 20. Local Geological Setting ............................................................................................................................................ 50
20.1. Basement and Dwyka ................................................................................................................................. 53 21. Historical Ownership ................................................................................................................................................. 53 22. Historical Exploration and Mining .............................................................................................................................. 53 23. Recent Exploration .................................................................................................................................................... 54
23.1. Surveying Methods ..................................................................................................................................... 55 23.2. Diamond Drilling ......................................................................................................................................... 55
23.2.1. Drilling ........................................................................................................................................ 55 23.2.2. Logging ...................................................................................................................................... 55 23.2.3. Sampling Method ....................................................................................................................... 56 23.2.4. Core Recoveries ........................................................................................................................ 56 23.2.5. Borehole surveys ....................................................................................................................... 56
23.3. Down the Hole Geophysics / Wireline Logging ........................................................................................... 56 23.4. Bulk Sampling ............................................................................................................................................. 56 23.5. Laboratory Analyses ................................................................................................................................... 56
23.5.1. Sample Preparation and Analysis .............................................................................................. 57 23.5.2. Security ...................................................................................................................................... 57 23.5.3. QA/QC ....................................................................................................................................... 57
24. Data Management ..................................................................................................................................................... 58 24.1. Data Acquisition and Validation .................................................................................................................. 58 24.2. Database Management .............................................................................................................................. 58
25. Geological Modelling and Results ............................................................................................................................. 58 25.1. Physical Results ......................................................................................................................................... 59
25.1.1. Madadeni Area .......................................................................................................................... 59 25.1.1.1. Coal Seam Characteristics ..................................................................................... 59
25.1.1. Mangweni Area .......................................................................................................................... 61 25.2. Quality Results ............................................................................................................................................ 64
25.2.1. Mangweni Area .......................................................................................................................... 64 25.2.2. Madadeni Area .......................................................................................................................... 66
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26. Coal Mining ............................................................................................................................................................... 66 26.1. Opencast Mining Method ............................................................................................................................ 67
26.1.1. Mining Equipment ...................................................................................................................... 67 26.2. Underground Mining Method ...................................................................................................................... 69
26.2.1. Underground Mining Equipment ................................................................................................ 69 26.3. Historical Production ................................................................................................................................... 70 26.4. Future Production ....................................................................................................................................... 70
27. Coal Processing ........................................................................................................................................................ 71 28. Coal Market ............................................................................................................................................................... 72 29. Resource Classification ............................................................................................................................................. 73
29.1. Previous Resource Statement .................................................................................................................... 78 29.2. Current Resource Statement ...................................................................................................................... 78 29.3. Previous Reserve Statement ...................................................................................................................... 79 29.4. Current Reserve Statement ........................................................................................................................ 81
29.4.1. Modifying Factors ...................................................................................................................... 81 30. Mineral Asset Valuation of Nkomati........................................................................................................................... 83
30.1. Mineral Asset Valuation Methodologies ...................................................................................................... 83 30.2. Valuation Date ............................................................................................................................................ 85 30.3. General Mineral Asset Valuation Assumptions ........................................................................................... 85 30.4. Market Approach ........................................................................................................................................ 86 30.5. Cashflow Approach ..................................................................................................................................... 88
30.5.1. Production Assumptions ............................................................................................................ 88 30.5.2. Coal Prices ................................................................................................................................ 88 30.5.3. Taxation ..................................................................................................................................... 89 30.5.4. Exchange Rate .......................................................................................................................... 89 30.5.5. Discount Rate ............................................................................................................................ 89
30.5.5.1. Specific Project Risk Premium (α) .......................................................................... 89 30.5.6. Capital Expenditure ................................................................................................................... 90 30.5.7. Operating Expenditures ............................................................................................................. 91 30.5.8. Rehabilitation Guarantee ........................................................................................................... 91 30.5.9. Valuation Risks .......................................................................................................................... 91 30.5.10. Valuation Results ....................................................................................................................... 91 30.5.11. Sensitivity Analysis .................................................................................................................... 92
30.6. Valuation Summary .................................................................................................................................... 94 30.7. Sources of Information and Other Experts .................................................................................................. 94 30.8. Previous Valuations .................................................................................................................................... 94 30.9. Historic Verifications ................................................................................................................................... 95 30.10. Audits, Reviews and Historic Verification .................................................................................................... 95 30.11. Forward Looking Statements ...................................................................................................................... 95
31. Risks ......................................................................................................................................................................... 95 31.1. Project Risks ............................................................................................................................................... 95 31.2. Report Risks ............................................................................................................................................... 96
32. Exploration Programme and Budget ......................................................................................................................... 96 33. Conclusions and Recommendations ......................................................................................................................... 96 34. Date and Signatures.................................................................................................................................................. 98
List of Figures SR1.1A(i)
Figure 1: Nkomati Mine - Location and Infrastructure ....................................................................................................... 12 Figure 2: Nkomati Mine - Sentula Corporate Structure ..................................................................................................... 16
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Figure 3: Global Coal Reserves (end 2012) ...................................................................................................................... 28 Figure 4: Global Coal Production (2002 - 2012) ................................................................................................................ 30 Figure 5: Coal Consumption (2002 - 2012) ....................................................................................................................... 31 Figure 6: Projected Demand for Energy ............................................................................................................................ 32 Figure 7: Coal Price History from August 2006 to June 2013............................................................................................ 34 Figure 8: Nkomati Mine - Location of Coalfields in South Africa ........................................................................................ 36 Figure 9: Nkomati Mine - Locality Plan In Relation To Local Infrastructure ....................................................................... 37 Figure 10: Nkomati Mine - Urban Area in the Nkomati Mining Right Area ........................................................................ 39 Figure 11: Nkomati Mine - Anthracite Geological and Structural Interpretation ................................................................. 51 Figure 12: Nkomati - Stratigraphic Column ....................................................................................................................... 52 Figure 13: Nkomati Mine - Mine Lease Area and Resource Blocks .................................................................................. 60 Figure 14: Nkomati Mine - Madadeni Thickness and Elevation (2 Lower Seam) .............................................................. 62 Figure 15: Nkomati Mine - Madadeni Elevation (3 Seam) ................................................................................................. 63 Figure 16: Nkomati Mine - Mangweni Thickness and Elevation (2 Lower Seam) .............................................................. 65 Figure 17: Nkomati Mine - Madadeni Cumulative Stripping Ratio ..................................................................................... 68 Figure 18: Planned Future Production .............................................................................................................................. 71 Figure 19: Nkomati Mine - Raw Coal Crushing and Screening ......................................................................................... 74 Figure 20: Nkomati Mine - Fine Coal Beneficiation – Process Flow Diagram ................................................................... 75 Figure 21: Nkomati Mine - Dense Medium Cyclone- Process Flow Diagram .................................................................... 76 Figure 22: SAMREC Classification Diagram ..................................................................................................................... 77 Figure 23: Valuation Curve for South African Coal Projects .............................................................................................. 87 Figure 24: Cashflow Sensitivity to Operating Income ........................................................................................................ 92 Figure 25: Cashflow Sensitivity to Operating Expenditure................................................................................................. 92 Figure 26: Cashflow Sensitivity to Capital Expenditure ..................................................................................................... 94
List of Tables SR1.1A(i)
Table 1: Expert Reports .................................................................................................................................................... 14 Table 2: Types of Rights Applicable in South Africa .......................................................................................................... 19 Table 3: Global Coal Reserves (end 2012) ....................................................................................................................... 29 Table 4: Predicted World Coal-Fired Generating Capacity by Country and Region (GW) ................................................ 32 Table 5: Summary List of Mineral Assets .......................................................................................................................... 35 Table 6: Legal Tenure pertaining to Nkomati .................................................................................................................... 38 Table 7: Nkomati Environmental and Social Compliance Status ....................................................................................... 41 Table 8: Nkomati and Xstrata Contractual Supply Specifications ...................................................................................... 46 Table 9: Nkomati Seam Widths ......................................................................................................................................... 50 Table 10: History at Nkomati ............................................................................................................................................. 53 Table 11: Nkomati - Summary of Historical and Recent Drilling ........................................................................................ 54 Table 12: Madadeni Coal Seams’s Thicknesses ............................................................................................................... 61 Table 13: Mangweni Coal Seam’s Thicknesses ................................................................................................................ 64 Table 14: Mangweni Area 2 Lower Seam Raw Coal Qualities (Air dry basis) ................................................................... 64 Table 15: Mangweni Area 2 Lower Seam Washed Raw Coal Qualities (Air dry, uncontaminated basis) ......................... 64 Table 16: Madadeni Area Raw Coal Qualities (Air Dried Basis, Uncontaminated) ............................................................ 66 Table 17: Madadeni Washability Weighted Averages per the Target Seams (Air Dried Basis, Uncontaminated)............. 66 Table 18: Historical Production ......................................................................................................................................... 70 Table 19: Nkomati's Coal Resources, Inclusive of Reserves, as at 28 February 2011 (SRK) ........................................... 80
April 2014 x
Table 20: Nkomati's Coal Reserves as per SRK CPR, dated 31st March 2011 ................................................................. 82 Table 21: Valuation Approaches and Methodologies ........................................................................................................ 85 Table 22: Valuation of Nkomati’s Mineral Assets using the Market Approach, 9th April 2014........................................... 86 Table 23: Mine Production Schedule ................................................................................................................................ 88 Table 24: Coal Prices Used ............................................................................................................................................... 88 Table 25: Discount Rate Calculation ................................................................................................................................. 89 Table 26: Project Specific Risk Factors ............................................................................................................................. 89 Table 27: Market Risk Premium Calculation ..................................................................................................................... 90 Table 28: Nkomati Capex Figures ..................................................................................................................................... 90 Table 29: Nkomati Opex Figures ....................................................................................................................................... 91 Table 30: Closure Liability ................................................................................................................................................. 91 Table 31: Nkomati Cashflow Valuation Results, 9th April 2014......................................................................................... 92 Table 32: An Extract of the Nkomati’s Cashflow Model ..................................................................................................... 93 Table 33: Sentula Mineral Asset Valuation Summary, 9th April 2014 ................................................................................ 94
List of Appendices SR1.1A(i)
Appendix 1 : References ................................................................................................................................................... 99 Appendix 2 : Glossary and Abbreviations........................................................................................................................ 100 Appendix 3 : Certificates of Competent Persons ............................................................................................................. 103 Appendix 4: SRK’s ‘An Independent Competent Persons’ Report on the Material Assets of Sentula Mining Limited’ March 2011 ................................................................................................................................................................................ 129
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1. Introduction SR1.1A(ii); SV2.2; JSE12.9(a) The directors of Sentula Mining Limited (Sentula) requested that Venmyn Deloitte (Pty) Ltd (Venmyn Deloitte) prepare an updated CPR on their operational coal asset, the Nkomati Anthracite Mine (Nkomati) which is intended for disposal. Nkomati is currently on care and maintenance pending an Environmental Management Plan (EMP) outstanding for the Madadeni Opencast. Nkomati is located approximately 50km south of Komatipoort, in the Mpumalanga Province of South Africa (Figure 1). Nkomati is 60% held by Benicon Coal (Pty) Ltd (Benicon Coal), which is a wholly owned subsidiary of Sentula and 40% held by Mpumalanga Economic Growth Agency (MEGA). Sentula is listed on the Johannesburg Stock Exchange (JSE). Venmyn Deloitte understands that, this updated Competent Persons’ Report (CPR) will be submitted to the JSE and form part of the documentation required for Sentula’s disposal of Nkomati. This CPR has been prepared in compliance with and to the extent required by the 2007 South African Code for Reporting of Mineral Resources and Mineral Reserves known as the SAMREC Code (SAMREC) and the 2009 South African Mineral Asset Valuation Committee Code (SAMVAL). The mineral asset valuations included in the CPR have been prepared in compliance with and to the extent required by the 2008 South African Mineral Asset Valuation Committee Code (SAMVAL Code), published under the joint auspices of the SAIMM and the GSSA. Venmyn Deloitte consents to the publication of this CPR by Sentula and to the referencing of any part of this CPR, provided that no portion is used out of context or in such a manner as to convey a meaning which differs from that set out in the whole report. The effective date of this CPR is 9th April 2014.
2. Scope of the Opinion SR1.1A (ii); SR1.1A (iii); SV2.2; JSE12.9 (e) Venmyn Deloitte has undertaken an independent technical review of the available underlying data for Nkomati in order to identify all the factors of a technical nature that would influence the future viability of the project. Venmyn Deloitte considered the strategic merits of Nkomati on an open and transparent basis. This CPR has been compiled in order to incorporate all currently available and material information to make a reasoned and balanced judgement regarding the economic merit of the coal asset reviewed. Venmyn Deloitte’s professional advisors are Competent Persons as defined by the SAMREC Code and the SAMVAL Codes, respectively. The Competent Persons involved in the preparation of this CPR are members in good standing with their respective professional institutions. The SAMREC and SAMVAL Codes are considered by Venmyn Deloitte to be a concise recognition of the best-practice due-diligence methods for these types of mineral projects and accord with the principles of open and transparent disclosure that are embodied in internationally accepted Codes for Corporate Governance. This work has been based upon technical information and a previously compiled CPR, which has been supplied by Sentula, and its subsidiary companies, and which has been independently due diligenced by Venmyn Deloitte, where possible. Venmyn Deloitte confirms that, to the best of its knowledge and having taken all reasonable care to ensure that such is the case, the information contained in the updated CPR is in accordance with the facts, contains no omission likely to affect its import, and no material change has occurred from 9th April 2014 to the date hereof that would require any amendment to the updated CPR. Venmyn Deloitte reserves the right to, but will not be obliged to, revise this report or sections therein, and conclusions thereto, if additional information becomes known to Venmyn Deloitte subsequent to the date of this report.
Figure 01
NKOMATI - LOCATION AND INFRASTRUCTURE
Sentula Mining Ltd
VMD1652_Sentula CPR_2014
SWAZILAND
MOZAMBIQUE
Kruger National Park
571
571
571
N4
Crocodile River
Komati River
O31 45’E
O26
SO
2545
’SO
2530
’S
0 5kmScale
NKOMATI MINING RIGHT BOUNDARY
Komatipoort
To NelspruitTenbosch
Oorsprong
CAPE TOWN
JOHANNESBURGJOHANNESBURGJOHANNESBURG
DURBAN
NkomatiMine
LOCALITY WITHIN SOUTH AFRICA
International BoundaryNkomati Mining Right BoundaryFarm BoundaryBuilt-up AreasGame ParksRailRail SidingPowerlinesRiversRoadsNkomati historical open plan operations (to be rehabilitated)MangweniMan AMan BMadadeniMat IIIMat C
LEGEND
April 2014 13
It must be noted that this review does not form an assurance report in accordance with the International Auditing and Assurance Standards Board (IAASB) standards.
3. Statement of Independence SR1.1A(iii); SR8A(ii); SR9A(ii); SV2.2; SV2.14; SR10A(ii); JSE12.9(c); JSE12.9(h)(xi) This updated CPR has been prepared by Venmyn Deloitte, which is an independent advisory company. Its consultants have extensive experience in preparing Competent Persons, Technical Advisors and Valuation Reports for mining and exploration companies. Venmyn Deloitte’s advisors writing this report have, collectively, more than 50 years of experience in the assessment and evaluation of coal mining and exploration projects worldwide and are members in good standing of appropriate professional institutions. Neither Venmyn Deloitte nor its staff or subcontractors have, or have had, any interest in these projects capable of affecting their ability to give an unbiased opinion and, have not received, and will not receive, any pecuniary or other benefits in connection with this assignment, other than normal consulting fees. Neither Venmyn Deloitte nor any of its personnel involved in the preparation of this updated CPR have any material interest in either Sentula or in any of the properties described herein. Venmyn Deloitte was remunerated a fixed fee amount for the preparation of this report, with no part of the fee contingent on the conclusions reached or the content of this report. Except for these fees, Venmyn Deloitte has not received and will not receive any pecuniary or other benefit whether direct or indirect for or in connection with the preparation of this report. This CPR was prepared by Venmyn Deloitte. Mr A Clay reviewed the report. Mr A Clay has relevant and appropriate experience and independence to appraise the coal assets. Mr Clay is considered a Competent Person, having more than five years’ relevant experience in the assessment and evaluation of the types of coal exploration and mining properties discussed in this report. Mr A Clay has also contributed to the preparation of this report and can be considered a Competent Valuator as defined by the VALMIN and SAMVAL codes, by way of relevant education, qualifications and experience. Competent Persons’ Certificates are presented in Appendix 3.
4. Reliance on other Experts SV2.14 Venmyn Deloitte has relied on a previously compiled CPR. The previous CPR was compiled by SRK Consulting (South Africa) (Propriety) Limited (SRK) (2011 CPR) in which it substantiated the existence of Sentula’s coal resources and coal reserves which are supported by the exploration and production results detailed in the relevant sections to follow. To satisfy the JSE disposal requirements, an updated CPR was required. No material exploration or mining has occurred since the 2011 CPR was compiled by SRK. As a result this CPR is based on the 2011 CPR. Venmyn Deloitte has relied on SRK’s Mineral Resource and Mineral Reserve estimates. No changes have been made to the estimates, and the underlying information is not available for review. The information and conclusions within this report are based on information made available to Venmyn Deloitte by Sentula and its contractors at the time of the preparation of this report. Sentula has reviewed draft copies of this report for factual errors. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Venmyn Deloitte has relied upon general information contained within the reports, articles and databases supplied. The authors of this report are not qualified to provide extensive commentary on the legal issues associated with Sentula’s and/or its subsidiaries’ right to the mineral properties. Venmyn Deloitte has obtained copies of the relevant mining and prospecting licences/authorisations, and these have been reviewed to the satisfaction of Venmyn Deloitte. No warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness or accuracy of the legal aspects of this document.
April 2014 14
5. Forward Looking Statements This report contains forward-looking statements. These forward-looking statements are based on the opinions and estimates of Sentula’s management and Venmyn Deloitte at the date the statements were made. They are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in Venmyn Deloitte’s and Sentula’s forward-looking statements. Factors that could cause such differences include changes in world coal markets, equity markets, costs and supply of materials relevant to the projects and changes to regulations affecting them. Although Venmyn Deloitte believes the expectations reflected in its forward-looking statements to be reasonable, Venmyn Deloitte does not guarantee future results, levels of activity, performance or achievements. The businesses of mining and mineral exploration, development and production, by their natures, contain significant operational risks. The businesses depend upon, amongst other things, successful prospecting programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues. Factors such as political and industrial disruption, currency fluctuation, increased competition from other prospecting and mining rights holders and interest rates could have an impact on Sentula and its subsidiaries’ future operations, and potential revenue streams can also be affected by these factors. The majority of these factors are, and will be, beyond the control of Sentula or any other operating entity.
6. Sources of Information SV2.11 Venmyn Deloitte has based its review of Nkomati on information provided by Sentula and its subsidiary companies, along with technical reports by its contractors and associates and other relevant published data. A list of the major sources of information is listed in Table 1. Table 1: Expert Reports
DATE COMPANY ACTIVITY
June 2009 The Mineral Corporation Consultancy (Pty) Ltd
Nkomati Anthracite A Review of the Coal Resource Estimates for the Mangweni and Madadeni Blocks Based
on Updated Exploration Drilling Data
March 2011 SRK Consulting (South Africa) (Pty) Ltd
An Independent Competent Persons' Report on the Material Coal Assets of Sentula Mining Limited
January 2013 Venmyn Deloitte (Pty) Ltd Independent Techno-Economic Valuation Statement for
Zyl Mining SA and Sentula Mining Limited on the Nkomati and Kangwane North, Central and South Projects
August 2013 Miranda Mineral Holdings Ltd Nkomati Anthracite Mine Acquisition Review (DD)
The 2011 CPR, compiled by SRK Consulting (South Africa) (Propriety) Limited (SRK) (2011 CPR), is the latest JSE panel reviewed and approved published report. There has been no exploration since the 2011 CPR compilation. A Due Diligence (DD) conducted by Miranda Mineral Holdings Ltd (Miranda), on Nkomati, was reported on in August 2013. The drafts of this updated CPR have been provided to Sentula and its relevant subsidiary companies, in order to identify and address any factual errors or omissions prior to finalisation. The information and conclusions within this report are based on expert reports, compiled by other consultancies, and made available to Venmyn Deloitte, by Sentula at the time of the preparation of this report. The expert reports used are listed in Table 1. Sentula has reviewed draft copies of this report for factual errors. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Venmyn Deloitte has relied upon general information contained within the reports, articles and databases detailed in Appendix 1.
April 2014 15
7. Personal Inspection Venmyn Deloitte has relied on a previously compiled CPR. The previous CPR was compiled by SRK Consulting (South Africa) (Propriety) Limited (SRK) (2011 CPR) in which it substantiated the existence of Sentula’s coal resources and coal reserves which are supported by the exploration and production results detailed in the relevant sections to follow. No site visit has been conducted by Venmyn Deloitte for the purposes of this CPR. This is due to the fact that the project has been on hold since the 2011 CPR compilation pending approval of various environmental licences. These licences have generally subsequently been renewed and accepted by the DMR, subject to public comment. Further details on the environmental permitting completed and outstanding are given in Section 13.
8. Sentula’s Corporate Structure Sentula’s corporate structure with respect to Nkomati, to be discussed in this report, is presented in Figure 2. Nkomati is 60% held by Benicon and 40% held by Mpumalanga Economic Growth Agency (MEGA). Benicon is a wholly owned subsidiary of Sentula. In terms of the legal tenure sections of this report, specific reference is made to the associated subsidiary companies holding the various rights, as appropriate, and their relationship to Sentula as set out in the corporate structure.
9. South Africa Country Profile SR1.5A(i)
9.1. Political and Economic Climate South Africa gained independence from Britain on the 31st May 1910, and was declared a republic in 1961. From 1948 until 1990, the South African political and legal systems were based upon the concept of apartheid, a philosophy of separate racial development, enforced by a white minority government. The first multiracial elections in 1994 brought an end to apartheid and ushered in black majority rule under the African National Congress (ANC), with a number of different political parties participating in the elections. The country continues to hold democratic, peaceful, free and fair elections, the last of which was won by the ANC in 2009, under the leadership of President Jacob Zuma. South Africa is the most advanced economy in Africa and provides the gateway to Sub-Saharan Africa. It is classified as a middle-income emerging market, with well-developed financial, legal and judicial systems and modern infrastructure. Between 2004 and 2008 South Africa grew economically as a result of macroeconomic stability and a global commodities boom, but growth slowed in the second half of 2008 and 2009 due to poor global economic conditions, which influenced commodity prices and demand. Gross Domestic Product (GDP) fell almost 2% in 2009, worsening the country’s already high unemployment levels. However, in 2010, 2011 and 2012, the country again reflected a positive economic growth rate, with 2.8%, 3.4% and 2.6% real GDP growth rates, respectively (CIA, 2013). South African economic policy is fiscally conservative but pragmatic. The country attempts to control inflation by keeping it within an acceptable range (3% - 6%), maintains a budget surplus, uses State-owned enterprises to deliver basic services to low-income areas and provides social grants to a quarter of the population. Currency and inflation volatility, poverty, income disparities, and poor availability of public services continue to characterise the country. However, there has been an improvement in many of these areas. The country, for instance, returned to its target inflation range in 2010, 2011 and 2012, since inflation stood at an estimated 4.1%, 5% and 5.2%, respectively, in these years compared to an estimated 7.2% inflation rate in 2009 (CIA, 2013). A dent was also made in the South Africa’s high unemployment rate, as unemployment levels also fell from an estimated 24.9% in 2011 to an estimated 24.4% in 2012 (CIA, 2013).
Figure 02
NKOMATI - SENTULA CORPORATE STRUCTURE
D792M
Coalo
fAfricaV
aluatio
n’10
Sentula Mining L
td
VMD1652_Sentula CPR_2014
100%
60%
Nkomati AnthraciteMine
40%
MEGA*
*Mpumalanga Economic Growth Agency
Sentula Mining (Pty) Ltd1992/001973/06
Benicon Coal (Pty) Ltd1993/003007/07
LOOKING IN A NORTHERLY DIRECTION FROM NKOMATI OPEN CAST MINE
LOOKING IN A NORTHERLY DIRECTION FROM NKOMATI OPEN CAST MINE
April 2014 17
9.2. Minerals Industry The minerals industry contributed 8.8% of South Africa’s GDP in 2011, but this contribution is more significant if multiplier and induced effects of mining are taken into account (COM, 2012). South Africa has a mature minerals industry developed from gold and diamond discoveries in the late 1800s. The country is the world’s largest producer of platinum, chrome and vanadium and ranks highly in the production of diamonds, coal, iron ore and base metals. South Africa hosts a number of large orebodies such as the Bushveld Igneous Complex and the Witwatersrand Basin, as well as rich diamond fields and extensive coalfields. One of the greatest challenges associated with the minerals and mining industry in South Africa is; rising costs of labour, electricity, diesel and steel, among other costs. Another challenge, which has gained headline attention in 2012, is that of labour and community unrest caused by low wages particularly among contract workers and under-resourced communities – a phenomenon that has been worsened by municipalities’ inability to provide adequate infrastructure to communities and an apartheid-era homeland system that has workers from labour-sending areas being impoverished by supporting two households. Other important concerns for the mining industry are the effect of HIV/Aids on the workforce, as well as uncertainty related to resource nationalism, including requirements for beneficiation, limitations on the export of “strategic minerals”, the introduction of a State mining company and calls for the nationalisation of mines.
9.3. Coal and Electricity Supply Industry Southern African demand for thermal coal is strong and this demand stems particularly from South Africa, where there has been heavy investment in coal-fired power stations in the past. However, South Africa is currently facing power system constraints as a result of a lack of investment in energy infrastructure in the immediate post-apartheid era when extending basic services, creating jobs and providing economic security, as well as an emphasis on sustainability issues were the dominant themes in the government’s electricity policy. However, South African State Utility Eskom Holdings Limited (Eskom) has been addressing these constraints, and has returned two previously mothballed power stations, Camden and Grootvlei, to service, with an additional mothballed power station still to be completed. It has also added the capacity of the Ankerlig and Gourikwa open cycle gas turbines and is in the process of adding capacity through its construction of the Medupi and Kusile coal-fired power stations, the Ingule pumped storage project and Sere wind farm (Eskom, 2013). Eskom’s power will also continue to come from its Arnot, Camden, Duvha, Grootvlei, Kendal, Komati, Hendrina, Klipheuvel, Koeberg, Kriel, Lethabo, Majuba, Matla, Matimba and Tutuka power stations, in addition to its pumped storage projects, in future. Eskom’s power stations have been specifically designed to burn low-grade coals which are abundant in South Africa. Every year Eskom consumes ~62% of domestically-sold coal from which it provides ~90% of the country’s electricity. South Africa has a well-established, low-risk coal mining industry, which has reputable participants, including Anglo Coal SA Limited (Anglo Coal), BHP Billiton Energy Coal South Africa (BECSA), GlencoreXstrata Coal, Exxaro Resources Ltd (Exxaro), and Sasol Ltd (Sasol) Mining. There are also an increasingly large number of junior mining companies as a result of their investing in greenfields projects and brownfield projects, divested of by the larger mining companies wishing to secure Black Economic Empowerment (BEE) credits and to sell mines that do not fit into their coal portfolios (Ryan, 2011).
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South Africa’s coal reserves rank ninth in the world, with a reported 30.2Bt of economically recoverable coal reserves. South Africa was also the seventh-largest producer in energy and volume terms in 2012, with South African coal production tonnages of 258Mt in 2012, and production in energy terms of 146.6 Million tonnes of oil equivalent units (Mtoes) (DMR, 2013; BP, 2013). Of this production, 76.0Mt of coal was exported, making coal one of South Africa’s most important export minerals (DMR, 2013). The bulk of the exports, particularly when freight charges are low, are destined for Asia (Economist Intelligence Unit, 2010). There are numerous South African coalfields, with the Witbank and Highveld Coalfields being the most economically important as they produce the highest percentage of South Africa’s saleable coal. However, given that these have been mined for some time, many are looking to the Limpopo Province for South Africa’s future production.
9.4. Legislative Framework The South African Government has an extensive legal framework within which mining, environmental and social aspects are managed. Inclusive within the framework are international treaties and protocols, and national acts, regulations, standards, and guidelines which address international, national, provincial and local management areas. South African statutory legislation and requirements relevant to the projects and considered as part of this assessment included:-
• Mineral and Petroleum Resources Development Act (Act 28 of 2002) (MPRDA);
• Mineral and Petroleum Resources Development Amendment Act 49 of 2008;
• Mineral and Petroleum Resources Development Draft Amendment Bill (2013);
• Broad-Based Socio-Economic Charter (and associated amendments, 2010);
• Promotion of Beneficiation Bill;
• Mineral and Petroleum Resources Royalty Act (Act 28 of 2008) (MPRRA);
• National Environmental Management Act (Act 107 of 1998) (NEMA);
• National Environmental Management: Air Quality Act (Act 39 of 2004) (NEM:AQA);
• National Environmental Management: Waste Act (Act 59 of 2008) (NEM:WA);
• National Environmental Management: Protected Areas Act (Act 57 of 2003) (NEM:PAA);
• Environment Conservation Act (Act 73 of 1989) (ECA) (Section 25 – Noise Regulations);
• National Heritage Resources Act (Act 25 of 1999) (NHRA);
• National Forests Act (Act 30 of 1998) (NFA);
• National Water Act (Act 36 of 1998) (NWA);
• Hazardous Substances Act (Act 15 of 1973) (HAS); and
• Mine Health and Safety Act (Act 29 of 1996) and amendments (MHSA).
The most important of these are summarised in the subsections to follow. 9.4.1. Mineral and Petroleum Resources Development Act (Act 28 of 2002)
(MPRDA) Types of rights and permits applicable to the mining industry in South Africa, as provided for in the MPRDA and amendments, are detailed in Table 2.
April 2014 19
Table 2: Types of Rights Applicable in South Africa
LICENCE TYPE PURPOSE DURATION REQUIREMENTS CONDITIONS
Reconnaissance Permission
Exploration at the reconnaissance stage.
1 year (non-renewable)
Financial ability; technical ability and work programme.
Holder does not have the exclusive right to apply for a New Order Prospecting Right (NOPR).
New Order Prospecting Right (NOPR)
Exploration at target definition stage.
Up to 5 years initially. Renewable once for 3 years.
Financial ability; technical ability; economic programme; work programme and environmental plan.
Payment of Prospecting fees. Holder has the exclusive right to apply for NOMR.
Retention Permit
Hold onto legal rights between prospecting and mining stages.
3 years initially. Renewable once for 2 years.
Prospecting stage complete; feasibility study complete and Environmental Management Plan (EMP) complete. Project not currently feasible.
May not result in exclusion of competition, unfair competition or hoarding of rights. May not be transferred, ceded, leased, sold, mortgaged or encumbered in any way.
New Order Mining Right (NOMR)
Development and production stage.
30 years initially. Renewable for further periods of 30 years. Effective for life of mine (LOM).
Financial ability; technical ability; prospecting complete; economic programme; work programme; social plan; labour plan and completed EMP.
Payment of royalties (from 2010). Compliance with Mining Charter and Codes of Good Practice on broad based BEE.
Mining Permit Small-scale mining.
2 years initially. Renewable for 3 further periods of 1 year at a time.
Life of project must be <2 years; areas must be <5ha and completed EMP.
Payment of royalties (from 2010). May not be leased or sold.
The South African government enacted the MPRDA on the 1st May 2004. It defines the State’s legislation on mineral rights and mineral transactions in South Africa. The MPRDA emphasises that the government did not accept the existence of the historic dual State and private ownership of mineral rights in South Africa and, as such, the MPRDA legislated that all mineral and petroleum resources in South Africa now vest in the State. Additional objectives of the Act include the promotion of economic growth, the development of resources to expand opportunities for the historically disadvantaged, and the socio-economic development of the areas in which mining and prospecting companies are operating. It also provides for security of tenure relating to prospecting, exploration, mining and production. A further objective of the MPRDA was to advance BEE within South Africa’s minerals industry, by encouraging mineral exploration and mining companies to enter into equity partnerships with BEE companies. The MPRDA also makes provision for the implementation of social responsibility procedures and programmes by coal resource companies. The MPRDA incorporated a "use-it or lose-it" principle, that has been applied to companies or individuals who owned mineral rights or the rights to prospect and mine prior to 2004 (Old Order Rights). These Old Order Rights were required to be transferred within specified timeframes, under the provisions of the MPRDA, into New Order Rights to prospect and mine. Once the State has granted the conversion of the Old Order Rights to New Order Rights, or has granted a New Order Right for new applications submitted after the implementation of the MPRDA, a Notarial Agreement between the State and the holder of the New Order Right is entered into. This Agreement sets out all the conditions associated with the New Order Right. New Order Rights can be suspended or cancelled by the Minister if, upon notice of a breach from the Minister of its obligations to comply with the MPRDA, or the conditions prescribed as part of its New Order Right, a breaching entity fails to rectify such a breach. In addition, in terms of the MPRDA, mining and exploration companies have to comply with additional responsibilities relating to environmental management and to environmental damage, degradation or pollution, resulting from their prospecting or exploration activities. Section 37 of the MPRDA establishes the framework for the inclusion of environmental management principles, with Section 39 establishing environmental management programme and EMP requirements. Requirements for the contents of exploration, scoping, Environmental Impact Assessment (EIA), EMPs and EMP reports are provided in Government Notice Regulations (GNRs) 49, 50, 51 and 52.
April 2014 20
Sections 41 to 47 of the MPRDA address legislative closure requirements. GNR 527 of the MPRDA addresses the financial provision for mine rehabilitation and closure and requires that the quantum of financial provision, to be approved by the Minister, must be based on the requirements of the approved EMP and include a detailed itemisation of all actual costs required for:-
• premature closure regarding:-
• the rehabilitation of the surface of the area;
• the prevention and management of pollution of the atmosphere;
• the prevention and management of pollution of water and the soil; and
• the prevention of leakage of water and minerals between subsurface formations and the surface.
• decommissioning and final closure of the operation; and
• post closure management of residual and latent environmental impacts.
GNR527 establishes the requirements for the social and labour plan (SLP). Amongst other aims, the MPRDA strives to transform the mining and production industries. The MPRDA requires the submission of the SLP as a prerequisite for the granting of mining or production rights. The SLP requires applicants for mining and production rights to develop and implement comprehensive Human Resources Development Programmes including Employment Equity Plans, Local Economic Development Programmes and processes to protect jobs and manage downscaling and/or closure (DMR). Monitoring and performance assessments, and waste management principles inclusive of pollution control and waste management, and the management of mine residue stockpiles and deposits are also included within the scope of GNR527. Blasting permits are required for any blasting activities as defined within the MPRDA.
9.4.2. Mineral and Petroleum Resources Development Amendment Act 49 of 2008 In 2008, an Amendment Bill proposed to make significant changes to the MPRDA. The Bill was signed by the President in 2009 but did not come into force at that time (Webber Wentzel, 2009). The 31st May 2013 Government Gazette noted the Amendment would come into force on the 7th of June 2013, but this announcement was followed by a further announcement in the 6th June 2013 Government Gazette that some of the amendments, including those relating to the transferability of MPRDA rights (which required Ministerial approval) and the prohibition of the amendment of rights to include additional areas or minerals, would not come into effect. Van der Want (2013) suggests that the proclamation of this Amendment was an error. While not an exhaustive list, the Amendment Act is noteworthy because it addresses the following issues:-
• it requires the prior written consent for disposal in various forms of a prospecting or mining right or an interest in such a right;
• it changes the duration of the reconnaissance permission from two years to one and allows a Regional Manager to reject a defective application with reasons within 14 days of receipt;
• it requires that the Minister refuse a prospecting right if there is a concentration of rights by the applicant and associated companies;
• it allows the Minister to impose further conditions on an applicant for mining rights to include participation by the community;
• it increases the area for which a mining permit can be issued to 5ha, but does not allow an applicant to have more than one mining permit on the same or adjacent land;
April 2014 21
• it allows for the cancellation or suspension of mineral rights if there is non-compliance with the MPRDA;
• it discusses transitional arrangements for mineral rights, including documentary proof that holders of Old Order Mining Rights are in compliance with the BEE and socio-economic objectives of the MPRDA;
• it attempts to promote the development of input and downstream industries;
• it encourages the entry of HDSAs, including women and communities with interests or rights to land, into the industry; and
• it has various forward-looking environmental provisions that were to come into effect 18 months after the promulgation of the Amendment. These include:-
• making the Minister of Mineral Resources responsible for environmental matters that relate to mining;
• requiring the simultaneous application for environmental authorisation with mineral tenure applications; and
• requiring a report on compliance with environmental authorisation with renewal applications (Legalbrief Today, 2013; Webber Wentzel, 2013).
9.4.3. Mineral and Petroleum Resources Development Draft Amendment Bill
(2012) An explanatory summary of the 2013 Amendment Bill was published in the same Government Gazette that announced that the 2008 Amendment Act was to come into force. The 2013 Amendment Bill proposes amendments to the 2008 Amendment Act and is seen as an important indicator of likely future mineral policy in South Africa (Legalbrief Today, 2013). The Amendment Bill has seen a significant amount of comment from industry players who suggest that irregularities and ambiguities are contained within. Written submissions on the Amendment Bill were to have been made by the 8th February 2013 while submissions for oral presentations on the Amendment Bill were required to be delivered by midday on the 6th September 2013 (Seccombe, 2013; Bravura, 2013). While not an exhaustive list, some of the key changes that are proposed in the Amendment Bill are the following:-
• the Minister is given the right to initiate beneficiation, including setting the level required for beneficiation, the price required for beneficiation, and the percentage of raw material inputs that are set aside for local beneficiators;
• persons who intend to export “designated minerals” are required to obtain written approval for this from the Minister. The term is not defined, but is thought to refer to what was known as “strategic minerals”, or minerals defined periodically by the State to be of strategic importance to the country;
• historic tailings, the ownership of which was contested by a high-profile De Beers court case, are now held in custody by the State rather than the historic producer of those tailings;
• associated minerals, discovered in mining, can be mined by the primary mineral rights holder. Third parties are also permitted to apply for rights over associated minerals, but will have to notify the primary rights holder of the application;
• the right to a mineral deposit is sub-divisible, but consent as to the transfer of any interest is required from the Minister;
• environmental requirements will be implemented under NEMA, and rights holders will be responsible for environmental liabilities even after a closure certificate has been issued by the Minister;
• penalties for non-compliance with various mining-related legislation and requirements are set as a percentage of annual turnover and exports;
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• the Minister is prohibited from granting a right where this would result in anti-competitive conduct and dominance by the applicant in a particular sector of the mining industry;
• the State has a right to a share in the annual profits derived from exploration or production from all new petroleum exploration and production rights;
• BEE objectives are required to be complied with in prospecting rights, where they were required to be complied with in only mining rights in the past;
• in the case of liquidation, mineral rights held fall within the insolvent estate but ministerial approval is required when they are transferred to a new owner; and
• historically disadvantaged persons are redefined to exclude white women (Tucker and Sibisi, 2013; Leon, 2013).
9.4.4. Broad-Based Socio-Economic Charter
Promulgation of the Broad-Based Socio-Economic Charter for the South African Mining Industry (also known as the Mining Charter) marked the end of protracted debates and varying interpretations of the legislation’s requirements, paving the way for the full implementation of the MPRDA. All mining and prospecting companies are required to comply with the provisions of the Mining Charter. The objectives of the Mining Charter are to:-
• promote equitable access to the State’s resources by all the people of South Africa. It required that every mining company achieved a 15% level of ownership of its mining assets by historically disadvantaged South Africans (HDSAs) by the 1st May 2009, and a level of 26% ownership by the 1st May 2014;
• substantially and meaningfully expand opportunities for HDSAs, including women, to enter the mining and minerals industry and to benefit from the exploitation of the nation’s resources. In terms of this requirement, 40% of management roles were to be held by HDSAs by 2010;
• expand the skills base of HDSAs to serve the community;
• promote employment and advance the social and economic welfare of mining communities, and the major areas from which labour is drawn to carry out exploration or mining; and
• promote the beneficiation of South Africa’s mineral commodities, whereby the companies which have facilitated downstream, value-adding activities for products they mine, could achieve an “offset” against the HDSA equity participation requirement.
Most mining companies are already implementing their own empowerment strategies. These strategies demonstrate their best endeavours to consider the issues and a willingness to accommodate the requirements when they are finally defined. Compliance with the Mining Charter is measured using a designated scorecard, which provides a practical framework against which the Minister can assess whether a company actually measures up to what was intended in the MPRDA and the Mining Charter.
9.4.5. Amendment of the Broad-Based Socio-Economic Empowerment Charter (2010) The Amendment of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry (the Charter Amendment) was released in September 2010. It was unsurprising that it retained the minimum target of 26% HDSA ownership of mining assets by 2014. However, an offsetting of HDSA ownership by as much as 11% is now possible depending on the extent of a company’s beneficiation strategies.
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BEE procurement targets in the Charter Amendment are as follows:-
• a minimum of 40% of capital goods will have to be sourced from BEE entities by 2014; and
• 70% of services and 50% of consumer goods will have to be purchased from BEE entities by 2014.
In addition, multinational suppliers of capital goods will have to contribute 0.5% a year of their annual income from South African mining firms towards a socio-economic development fund. HDSA targets for employment equity are also further refined and a minimum of 40% HDSA demographic representation is stipulated for executive management, senior management, core and critical skills, middle management and junior management by 2014. Specific annual targets are noted for human resources development, since a percentage of the annual payroll (excluding the mandatory skills levy) will have to be spent on skills development activities and be reflective of South Africa’s demographics. Skills expenditure, as a percentage of payroll, increases by 0.5% each year, with an initial target of 3% of payroll in 2010, rising to 5% by 2014. The expenditure is intended to support South African-based research and development initiatives focused on solutions in sectors such as exploration, mining, processing, technology efficiency in the use of water and energy in mining, beneficiation and environmental conservation and rehabilitation. The Charter Amendment also supports SLPs by insisting on:-
• an ethnographic community consultative and collaborative process prior to the start of a mining project; and
• a community development needs analysis, together with mining communities, of projects to be implemented in support of Integrated Development Plans, the spend of which should be proportionate to the size of the mining investment.
The Charter Amendment also calls for an upgrade of hostels to family units, a one-person-per-room occupancy rate, and support for home ownership options – all of which should be implemented by 2014. Environmental management and an improvement in the industry’s health and safety performance are also highlighted, and best-practices in these areas are specifically mentioned. The Charter Amendment also calls for annual reporting by mining companies on their levels of compliance with the Mining Charter, and notes that noncompliance with the Mining Charter and the MPRDA will result in mining companies being in breach of the MPRDA.
9.4.6. Promotion of Beneficiation Bill This is still being prepared, and is expected to provide incentives for upstream companies that facilitate downstream investments, in order to reduce the exporting of unprocessed mineral products and to promote local value addition.
9.4.7. Mineral and Petroleum Resources Royalty Act (Act 28 of 2008) (MPRRA) SR1.7A(ii) This piece of legislation incorporates the government’s intention to impose royalties on revenues derived from mineral production in South Africa. Enacted in 2008, the MPRRA was initially set to be implemented in May 2009. However, in an effort to mitigate job losses in the mining sector during the global financial crisis, the government decided to postpone the implementation of the new mineral and mining royalty regime until the 31st March 2010.
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The main purpose of the MPRDA was to provide legislation for the collection of royalties from mines, developed and operated in terms of the New Order Mining Right (NOMR), granted through the MPRDA process. The MPRDA distinguishes between refined and unrefined resources, where refined minerals have been refined beyond a condition specified by the MPRDA, and unrefined minerals have undergone limited beneficiation as specified by the MPRDA. The royalty is determined by multiplying the gross sales value of the extractor, in respect of that mineral resource, in a specified year, by the percentage determined by the royalty formula. Both direct operating expenditure (Opex) and capital expenditure (Capex) incurred is deductible for the determination of earnings before interest and tax (EBIT). The quantum of the revenue royalty on all minerals is dependent on the profitability of the company based on the following formula. For refined mineral resources the formula is:-
Royalty Rate = 0.5 + EBIT X 100
Gross Sales (refined) x 12.5
The maximum percentage for refined mineral resources is 5%. For unrefined mineral resources the formula is:-
Royalty Rate = 0.5 + EBIT X 100
Gross Sales (unrefined) x 9
The maximum percentage for unrefined mineral resources is 7%.
9.4.8. Institutional and Administrative Environmental and Social Regulatory Structures The government of South Africa is divided into national, provincial and local spheres which address environmental and social regulatory elements within the country. These spheres are distinct, but are closely interdependent and interrelated. The South African Constitution allocates legislative and administrative functions to all three spheres of government, providing for a broad and diverse platform from which government agencies can responsibly manage environmental and social aspects. The national elections, held in 2009, resulted in the allocation of environmental responsibility at national level to the Department of Water and Environmental Affairs (DWEA). Within this new ministerial function, there are two autonomous departments, namely, the Department of Water Affairs (DWA) and the Department of Environmental Affairs (DEA) (Patel, 2011). The National Environmental Advisory Forum and the Committee for Environmental Coordination are advisory bodies established by NEMA. The former has been established to advise the Minister on any matter concerning environmental management and governance, with the latter mandated to promote the integration and coordination of environmental functions by the relevant organs of state (Patel, 2011). The latter committee has not yet been constituted.
9.4.9. Environment Conservation Act (Act 73 of 1989) (ECA) (Section 25 – Noise Regulations) ECA served as the national legislative environmental framework prior to the promulgation of NEMA in 1998. The majority of ECA has been repealed by NEMA, its subsidiary legislation and other Acts. Section 25 of ECA, which addresses noise and the associated regulations (GNR 154 of 1992), are still in effect. The ECA and associated regulations control noise and regulate procedures relating to noise impact and nuisance.
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Section 4 of the regulations prohibits the generation of noise, or the allowance of noise produced or caused by any person, machine, device or apparatus or any combination thereof (ECA, 1989). Section 5 of GNR 154 of 1992 regulates the creation of a noise nuisance.
9.4.10. National Environmental Management Act (Act No. 107 of 1998) (NEMA) NEMA was promulgated in 1998 to replace ECA as the overarching national environmental legislative framework. NEMA was promulgated to give effect to the Environmental Management Policy (published in 2007), and has been subsequently amended, including the National Environmental Management Amendment Act of 2003, and the National Environmental Management Second Amendment Act, No. 8 of 2004. The EIA Regulations made in terms of ECA were replaced in 2006 by new EIA Regulations made in terms of Chapter 5 of NEMA. These Regulations have subsequently been revised and gazetted in GNR 543 on the 18th June 2010. Regulations 543, 544, 545 and 546 establish the processes to be followed to obtain an environmental authorisation and the listed activities requiring authorisation. It should be noted that previously, mining authorisations, including environmental authorisations for mining, were issued under the MPRDA and the DEA was involved, through cooperative governance mechanisms, as a commenting agency. However, this process is currently undergoing a three-stage process of change in terms of the new provisions in the National Environmental Management Amendment Act, (Act 62 of 2008) (Patel, 2011). Phase 1 details that the status quo will remain until the MPRDA amendments come into effect, with Phase 2 then coming into effect for an 18 month period. In this time, all new mining, exploration and production rights applications and renewals thereof will have to comply with the NEMA EIA Regulations, but the competent authority will remain the Minister of Mineral Regulation. However, the Minister for Water and Environmental Affairs would hear any appeals. Thereafter, in Phase 3, it is envisioned that the DEA becomes the competent authority. As such, the future potential exists for the transfer of responsibility for environmental permitting from the DMR to the DWEA. Changes relevant to Sentula at the time of transition will consist of the inclusion of mining as a listed activity and integrated environmental licensing. The principles set out in Section 2 of Chapter 1 of NEMA underpin all other related Acts and policies and form the basis of sustainable development in the country. These principles are also applicable to all organisations wishing to obtain an environmental authorisation and operate within the South African legislative framework. Chapter 5 of NEMA establishes the regulatory framework for integrated environmental management. Section 24 of NEMA establishes the requirements for obtaining environmental authorisations for listed activities, with the inclusion of undertaking impact assessment studies activities listed in terms of R544, R545 and R546. Section 24 also outlines the minimum conditions attached to environmental authorisations, monitoring and performance assessment requirements, and the procedure for mine closure on environmental authorisation. Chapter 7 of NEMA establishes compliance and enforcement, with Part 1, Section 28, detailing the duty of care principle (encompassing the remediation of environmental damage).
9.4.11. National Environmental Management: Waste Act (Act 59 of 2008) (NEM:WA) Chapter 5 of NEM:WA states that a licence is required to establish and operate a waste disposal site. Chapter 5 establishes the procedures and requirements (in terms of footprint, volume, and waste type) for the licensing of waste management activities, inclusive of the storage, transfer, recycling, treatment and/or disposal of waste. Waste that has been excluded from NEM:WA and its associated regulations include radioactive waste and mine waste residue.
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Regulations to manage contaminated land are currently being drafted, which may have future potential implications for Sentula in terms of greater licensing and management requirements. Section 19 of NEM:WA establishes activities which require a waste management licence. The activities listed include the following categories:-
• storage of waste;
• reuse, recycling and recovery;
• treatment of waste;
• disposal of waste;
• storage, treatment and processing of animal waste; and
• construction, expansion or decommissioning of facilities and associated structures and infrastructure.
Each of the listed activities has a threshold which would trigger the need for a waste management licence (various parameters are defined, inclusive of such thresholds as volumes, time, and throughputs). NEM:WA provides considerations for all holders of any waste type. A holder of waste, must, within the holder’s power, take all reasonable measures to:-
• avoid the generation of waste and where such generation cannot be avoided, to minimise the toxicity and amounts of waste that are generated;
• reduce, re-use, recycle and recover waste;
• where waste must be disposed of, ensure that the waste is treated and disposed of in an environmentally sound manner;
• manage the waste in such a manner that it does not endanger health or the environment or cause a nuisance through noise, odour, or visual impacts;
• prevent any employee or any person under his or her supervision from contravening NEM:WA; and
• prevent the waste from being used for unauthorised purposes.
Regulations to manage contaminated land are currently being drafted, which may have future potential implications for Sentula in terms of greater licensing and management requirements.
9.4.12. National Water Act (Act 36 of 1998) (NWA) The NWA stipulates that a Water Use Licence (WUL) is required for the abstraction, storage, use, diversion, flow reduction and disposal of water and effluent in terms of Section 21 of the NWA. Use of water for mining and related activities is also regulated through regulations that were updated after the promulgation of the NWA in 1999 - Government Notice (GN) 704. GN 704 addresses the regulations on use of water for mining and related activities aimed at the protection of water resources (DWAF, 2007). Inclusive within GN 704 are the control measures for activities and its regulation of the sizing, control and monitoring of water management measures.
9.4.13. National Environmental Management: Air Quality Act (Act 39 of 2004) (NEM:AQA) The National Environmental Management: Air Quality Act (NEM:AQA, Act 39 of 2004) results from the promulgation of the NEMA. NEM:AQA serves as the dominant legislative tool for the management of air pollution and related activities, and defines listed emission activities which require licensing.
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The overall objectives of NEM:AQA are to protect the environment by providing reasonable measures for:-
• protection and enhancement of the quality of air in the Republic;
• prevention of air pollution and ecological degradation;
• securing ecologically sustainable development while promoting justifiable economic and social development; and
• giving effect to Section 24(b) of the constitution to enhance the quality of ambient air for the sake of securing an environment that is not harmful to the health and wellbeing of people.
The South African government has established National Ambient Air Quality Standards in Government Notice 1210. The standard provides for various emission limits, inclusive of particulate matter (PM10), ozone (O3), carbon monoxide (CO), sulphur dioxide (SO2), and nitrogen dioxide (NO2).
9.4.14. National Heritage Resources Act (Act 25 of 1999) (NHRA) The South African Heritage Resources Agency (SAHRA) of 1999 (Act 25 of 1999 - NHRA) provides for the protection of all recognised heritage resources of South Africa that have been identified as culturally significant, or are of other special value. The NHRA provides an integrated system for the management of national heritage resources. Section 38 of the NHRA states that any person who intends to undertake a development must at the earliest stages of the development, notify the responsible Heritage Resources Authority and furnish it with details regarding the location, nature, and extent of the proposed development. Categories of heritage resources are recognised as part of the National Estate in Section 3 of the NHRA, and include:-
• geological sites of scientific or cultural importance;
• objects recovered from the soil or waters of South Africa, including archaeological and paleontological objects and material, meteorites and rare geological specimens; and
• objects with the potential to yield information that will contribute to an understanding of South Africa’s natural or cultural heritage.
9.4.15. National Environmental Management Biodiversity Act (Act 10 of 2004)
(NEMBA) NEMBA to provide for:-
• the management and conservation of South Africa’s biodiversity within the framework of the NEMA;
• the protection of species and ecosystems that warrant national protection;
• the sustainable use of indigenous biological resources; the fair and equitable sharing of benefits arising from bio-prospecting involving indigenous biological resources;
• the establishment and functions of a South African National Biodiversity Institute; and
• for matters conducted therewith.
Specifically, NEMBA has the following goals:-
• manage, conserve, and sustain South Africa’s biodiversity and its components and genetic resources; and
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• progressive realisation of the objectives identified through the implementation of the NEMBA.
The piece of legislation is underpinned by various objectives described below. NEMBA provides for the management and conservation of biological diversity within the Republic and of the components of such biological diversity, and promotes the use of indigenous biological resources in a sustainable manner, in conjunction with the fair and equitable sharing among stakeholders of benefits arising from bio prospecting involving indigenous biological resources. NEMBA aims to give effect to ratified international agreements relating to biodiversity which are binding in the Republic to provide for co-operative governance in biodiversity management and conservation, and to provide for a South African National Biodiversity Institute (SANBI) to assist in achieving the objectives of this Act.
10. Global Coal Market Review SR 5.8A(I); SV2.18 Coal is mined commercially in over 50 countries and used in more than 70 countries worldwide. Coal is readily available from a wide variety of sources in a well-supplied worldwide market and it can be transported to demand centres quickly, safely and easily by ship and rail. A large number of suppliers are active in the international coal market, ensuring competitive behaviour and efficient functioning. This section discusses the global coal market in general and the thermal coal market in particular. 10.1. Resources
Venmyn Deloitte is not aware of any calculation of global coal resources. However, British Petroleum (BP) provides a list of coal reserves globally (Table 3 and Figure 3), although whether these reserves are defined in terms of the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) Codes is uncertain.
Figure 3: Global Coal Reserves (end 2012)
Source: BP Statistical Review of World Energy June 2013
112.8 6.9
93 32.7 159.3
132.3
5.6
211.6
0.1
106.5
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
North America S. & Cent. America Europe & Eurasia Middle East & Africa
Asia Pacific
Sub-bituminous and lignite Anthracite and bituminus
Res
erve
s (M
t)
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At the outset, it is important to note that in order to estimate the global coal resources, professional experts are faced with a significant problem and that is that the CRIRSCO Codes insist that a resource can only be quantified and classified if there are “reasonable prospects for eventual economic extraction”. Table 3: Global Coal Reserves (end 2012)
REGION/COUNTRY ANTHRACITE &
BITUMINOUS (Mt)
SUB-BITUMINOUS &
LIGNITE (Mt) TOTAL (Mt) R/P RATIO
US 108,501 128,794 237,295 257 Canada 3,474 3,108 6,582 98 Mexico 860 351 1,211 88
TOTAL NORTH AMERICA 112,835 132,253 245,088 244 Brazil 0 4,559 4,559 * Colombia 6,366 380 6,746 76 Venezuela 479 0 479 292 Other S. & Cent. America 45 679 724 *
TOTAL SOUTH & CENTRAL AMERICA 6,890 5,618 12,508 129 Bulgaria 2 2,364 2,366 72 Czech Republic 192 908 1,100 20 Germany 99 40,600 40,699 207 Greece 0 3,020 3,020 50 Hungary 13 1,647 1,660 179 Kazakhstan 21,500 12,100 33,600 289 Poland 4,338 1,371 5,709 40 Romania 10 281 291 9 Russia 49,088 107,922 157,010 443 Spain 200 330 530 85 Turkey 529 1,814 2,343 33 Ukraine 15,351 18,522 33,873 384 United Kingdom 228 0 228 14 Other Europe & Eurasia 1,440 20,735 22,175 234
TOTAL EUROPE & EURASIA 92,990 211,614 304,604 238 South Africa 30,156 0 30,156 116 Zimbabwe 502 0 502 196 Other Africa 860 174 1,034 * Middle East 1,203 0 1,203 *
TOTAL MIDDLE EAST & AFRICA 32,721 174 32,895 124 Australia 37,100 39,300 76,400 177 China 62,200 52,300 114,500 31 India 56,100 4,500 60,600 100 Indonesia 1,520 4,009 5,529 14 Japan 340 10 350 265 New Zealand 33 538 571 115 North Korea 300 300 600 19 Pakistan 0 2,070 2,070 * South Korea 0 126 126 60 Thailand 0 1,239 1,239 68 Vietnam 150 0 150 4 Other Asia Pacific 1,583 2,125 3,708 88
TOTAL ASIA PACIFIC 159,326 106,517 265,843 51 GRAND TOTAL WORLD 404,762 456,176 860,938 109
Notes: * More than 500 years. Source of reserves data: Survey of Energy Resources 2010, World Energy Council. Proved reserves of coal – Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known deposits under existing economic and operating conditions. Reserves-to-production (R/P) ratio – If the reserves remaining at the end of the year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. Source: BP Statistical Review of World Energy 2013
In many cases, the sheer size and potential technical constraints associated with a coalfield mean that it may not be able to satisfy that condition for public reporting. However, the United Nations Framework Classification (UNFC) System does allow the classification of coal reserves as a strategic imperative. Unfortunately, many of the so-called coal studies do not necessarily reflect this problem. In this section of the report, coal resources are strategic numbers that are not necessarily compliant with CRIRSCO but are important to gauge coal resources available for the future of humankind.
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10.2. Reserves Total global coal reserves are estimated at 860Bt, according to BP (BP, 2013). Historically, estimates of world recoverable coal reserves have reduced from 1,174Bt in 1990 to 1,083Bt in 2000 and to 860Bt in 2012 (Figure 3 and Table 3). However, some believe that even these latest estimates may be high, are mindful of the fact that national and global coal reserves have been grossly overestimated in the past, and suggest that world coal reserves may be significantly lower than estimated (Low, 2008; Hartnady, 2009; IEE, 2010).
10.3. Supply The Asia Pacific region was the largest coal producing region in 2012 (Figure 4). The Asia Pacific region accounted for 2,606.8 million tonnes of oil equivalent units (Mtoe) of coal produced, or ~68% of coal produced, in 2012 (Figure 4). China, Australia, Indonesia and India were the dominant producers, but China was the most significant producer, producing more than 70% of Asia Pacific coal in energy terms in 2012. After the Asia Pacific region, North America produces the next highest amount of coal by energy value, although it has traditionally produced less coal in volume terms than Europe and Eurasia. Africa, South and Central America and the Middle East are the next largest coal producers by volume and energy values. This pattern is observed in consolidated global figures for 2012 (Figure 4).
Figure 4: Global Coal Production (2002 - 2012)
Source: BP Statistical Review of World Energy 2013 Coal production quantities in North America and Africa had not significantly changed between 1981 and 2008, but production tonnages dropped in 2009 in every region, except in the Asia Pacific and Middle East regions, reducing by 9.1% in North America, 7.1% in Central and South America, 6.9% in Europe and Eurasia, and 0.7% in Africa. All regions reversed this trend between 2009 and 2010, and all regions, with the exception of the Middle East, showed increases in their coal production volumes 2012.
10.4. Demand The year 2012 has shown a global increase in demand for coal although the increase has been more subdued than in previous years. Among the most significant users of coal was China, which increased its year-on-year consumption (in energy terms) by 6.1%, and India, which increased its consumption in energy terms by 9.9% in 2012 (BP, 2013).
0
500
1,000
1,500
2,000
2,500
3,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
North America S. & Cent. America Europe & EurasiaMiddle East Africa Asia Pacific
Year
Prod
uctio
n (M
toe)
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In line with this increased demand from China and India, as well as other emerging Asian nations, Asia Pacific demand is growing, whilst growth in coal demand from other regions, and particularly from the US, is subdued or even negative, as a result of environmental concerns and a switch to cheaper energy alternatives. The Asia Pacific region accounted for the bulk of coal demand by energy value in 2012, with 69%, or 2,609Mtoe, of global consumption stemming from this region in 2012 (Figure 5). North America was surpassed as the second-largest regional consumer of coal in energy terms in 2012 by Europe and Eurasia, at 13.9%, or 516.9Mtoe, of global demand. North America became the third-largest regional consumer of coal in energy terms in 2012, at 12.6% of global demand, or 468.5Mtoe, in 2012. All regions, with the exception of the Middle East and Asia Pacific, experienced a drop in coal consumption, in energy terms, in 2009, but all of the regions, with the exception of North America showed an increase in coal consumption, in energy terms, between 2011 and 2012 (Figure 5). Energy demand from South Africa and the region in general is discussed in Sections 9.
Figure 5: Coal Consumption (2002 - 2012)
Source: BP Statistical Review of World Energy 2013
10.5. Future Demand The demand for thermal coal in the future will largely depend on the extent of global reliance on coal for electricity production. Thermal coal demand is expected to increase significantly, especially on the back of increases in power and industrial production (Figure 6). While coal’s share of global electricity generation capacity is expected to grow (in terms of the number of GWs produced) in most regions, in some areas, notably Europe, there will be a reduction in the amount of electricity produced by coal because of environmental concerns. The predicted coal-fired generating capacity by region is shown in Table 4. Unsurprisingly, given many of the Asian countries’ high future coal-fired electricity consumption levels (Table 4) and limited domestic supplies of coal, many of the top importers of thermal coal are expected to be from the continent in future.
0
500
1,000
1,500
2,000
2,500
3,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
North America S. & Cent. America Europe & EurasiaMiddle East Africa Asia Pacific
Year
Con
sum
ptio
n(M
toe)
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Figure 6: Projected Demand for Energy
Source: EIA (2011b)
Table 4: Predicted World Coal-Fired Generating Capacity by Country and Region (GW)
REGION / COUNTRY HISTORY PROJECTIONS AVE.
ANNUAL % CHANGE
2007 2015 2020 2025 2030 2035 2007-2035
United States 313 325 326 327 330 337 0.3 Canada 21 14 14 14 15 16 -0.8 Mexico 7 6 6 6 7 10 1.4
TOTAL NORTH AMERICA 340 345 346 347 352 363 0.2 TOTAL OECD EUROPE 200 189 182 176 174 177 -0.4
Russia 44 44 44 44 50 61 1.1 Other 54 52 51 51 53 57 0.2
TOTAL NON-OECD EUROPE AND EURASIA 98 97 95 96 103 118 0.7
Japan 45 42 41 40 39 39 -0.5 South Korea 23 22 23 27 33 41 2.1
Australia/New Zealand 31 30 31 31 32 33 0.3 China 496 625 750 901 1,062 1,233 3.3 India 84 86 89 98 113 135 1.7
Other Asia 50 53 57 72 102 141 3.8 TOTAL ASIA 729 859 990 1,170 1,381 1,622 3.7
TOTAL MIDDLE EAST 6 5 5 5 5 5 -0.4 TOTAL AFRICA 41 41 43 47 56 70 1.9
Brazil 2 2 2 2 2 3 0.8 Other Central and South America 8 8 7 7 7 8 -0.1
TOTAL CENTRAL AND SOUTH AMERICA 10 10 9 9 9 11 0.1 GRAND TOTAL WORLD 1,425 1,545 1,671 1,849 2,080 2,366 1.8
Notes:- Totals may not equal sum of components due to independent rounding. Sources:- History: Derived from EIA, International Energy Statistics database (as of November 2009), web site www.eia.doe.gov/emeu/international. Projections: EIA, Annual Energy Outlook 2010, DOE/EIA-0383 (2010) (Washington, DC, April 2010), AEO2010 National Energy Modelling System, run AEO2010R.D111809A, web site www.eia.doe.gov/oiaf/aeo; and World Energy Projection System Plus (2010).
Coal’s share of net electricity generation stood at 40% globally in 2008, but will decrease to 35% of world electricity generation by fuel by 2020 only to increase to 37% by 2035 (Figure 6). This is according to the EIA (2011b), which has predicted that the share of net electricity generation by fuel type of various other energy fuels might increase. The EIA anticipates that renewables will increase their share of net electricity generation by fuel from 19% in 2008 to reach a high of 25% in 2020, followed by a reduction in share of net generation by fuel in 2035 to 23%. The EIA anticipates that natural gas’s share of net electricity generation by fuel will similarly increase, rising from 22% in 2008 to 24% in 2035.
0
2
4
6
8
10
12
14
2008
2015
2020
2025
2030
2035
Liquids Nuclear Natural gas Renewables Coal
Ener
gy U
se (T
rillio
n kW
h)
Year
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Coal’s significant share of net electricity generation by fuel, as well as expectations that other energy fuels will not increase their share of net electricity generation dramatically suggests that coal’s future is secure. Indeed, even if coal’s share of electricity generation by fuel falls, in volume terms coal demand is likely to increase. Predictors of the eventual demand for various fuel types typically have a reference case and then various other cases. The influence of the green economy and environmental concerns is an important differentiator between the various energy futures that are being outlined by analysts. Coal’s future, as a result, might not look so positive if there is a more wide-scale embracing of alternative energy types.
10.6. Future Supply At present, coal supply exceeds demand in line with:-
• a reduction in GDP growth and growth expectations in China and India;
• the debt crisis in the Eurozone; and
• changes to substitute fuels in the power generation market.
The lack of GDP growth in China and India has had the most significant impact on the global coal market since it has resulted in a supply glut as coal producers had been producing coal that could not be consumed at current levels of growth. This had led to power plants and other consumers in China, in particular, not accepting any more coal, despite ‘take-or-pay’ agreements sometimes being in place, and cargoes being left at Chinese ports. It had also led to the situation that Chinese power plants were reported to have full inventories and that coal traders were wary of buying coal, since they were uncertain that the price would not fall further (Cooper, 2012). The Eurozone debt crisis also continues to affect global demand for coal, since growth from this region has become sluggish. The reduced demand for coal from the Eurozone was not considered significant when China and India’s growth was at a high. However, the Eurozone crisis is exacerbating the situation of reduced growth from India and China and contributing to depressed coal prices. Other regions that are contributing to a coal supply glut are those in which coal is being replaced by substitute energy fuels in power stations. Such is the case in the US, where natural gas power plants are being built and coal-fired power plants are being converted, leading some to prophesy that it is the end of King Coal (Balassi, 2012). US coal producers have responded by redirecting their coal to other regions of the world, contributing to the supply glut and the lower coal prices, or by closing their operations. However, some believe that the global supply glut will end, as more marginal producers stop production due to the lower prices that they have to be content with obtaining and as they accept the lower growth forecasts for China and India do not support the significant increases in coal production.
10.7. Pricing Trends Thermal coal prices are based on the energy content of the quality of the coal. In the South African market, low grade coal is predominantly used in Eskom operated power stations. Low grade coal prices are based on contracts and are rarely reported in the public domain. The pricing mechanism is usually based on a cost plus basis where the price of the coal covers cost plus a margin. For high grade thermal coal, price data is available for a variety of products. The 5,900kcal coal prices, 6,000kcal coal prices, 6,200kcal coal prices and Richards Bay Free on Board (FOB) coal prices are the most popularly used prices. Figure 7 illustrates the historic prices for each of these categories.
April 2014 34
Figure 7: Coal Price History from August 2006 to June 2013
Source: INet Bridge The coal price has fluctuated significantly over the last seven years. Analysts have commented on the recent falling price of coal that can be observed in Figure 7 and suggested that the current weak coal price is due to oversupply and that only discipline in production or an unforeseen disruption to coal supply will result in the price increasing in the near term.
10.8. Anthracite Anthracite is used in a range of applications, including in the making of titanium slag, pig iron, ferrochrome, ferromanganese, silicon carbide, steel; as a fuel source in the manufacture of cement; in the generation of electricity; and in household use, among other uses (Myles, 2010). Analysts discussing the outlook of anthracite most often refer to its role as a reductant and note its role in steel production. It appears that anthracite usage in steel production is seen as a way of reducing costs, since anthracite typically sells at a lower cost than coking coal. It is believed that, having tested the viability of using this lower cost product following a spike in the coking coal price, many reductant users are familiar with the product and are unlikely to switch back to coking coal (Myles, 2010; Murphy Mining, 2012).This bodes well for the use of the product. However, the slowing of the Chinese economy remains a concern and suggests that the market for anthracite may not be that strong, particularly if steel production growth slows. In addition, the Eurozone debt crisis has resulted in decreases in demand for raw materials from the steel industry, and this region is no longer the important user of anthracite that it once was. 10.8.1. Anthracite and Nkomati
Nkomati produces an anthracite product, which it has historically sold to Xstrata (now Glencore Xstrata) under a five-year contract (Section 28). Miranda, which has proposed purchasing the mine, is believed to have concluded its own contract agreement with Glencore Xstrata. The global economic coal environment, and pricing trends in this environment, may have an influence on Nkomati, depending on the nature of the agreement signed between the future proposed purchaser of Nkomati and Glencore Xstrata.
020406080
100120140160180200220
Dec
200
6
Jun
2007
Dec
200
7
Jun
2008
Dec
200
8
Jun
2009
Dec
200
9
Jun
2010
Dec
201
0
Jun
2011
Dec
201
1
Jun
2012
Dec
201
2
Pric
e (U
SD/to
nne)
5900kCal 6000kCal 6200kCal Richards Bay
Date
April 2014 35
11. Nkomati Coal Project SR1.2A(i); SR1.2A(ii) Nkomati is both an opencast and underground coal mining operation, situated in the Kangwane Coalfield in South Africa. The operation is intended to supply both the domestic and international metallurgical coal markets and has an estimated life of mine (LOM) of more than 8 years. Nkomati is a production property operating since 1986. However Nkomati has been under care and maintenance since May 2011, pending the awarding of various environmental licences. The original mining licence was granted on the 18th February 1998 and was valid until the 19th October 2015. The superseding New Order Mining Right (NOMR) was approved on the 30th September 2010. Details pertaining to the NOMR are recorded in Table 5. The location of Nkomati in relation to the regional infrastructure and coalfields is illustrated in Figure 8.
12. Location and Access SR1.2A(i); SR1.5A(i) Nkomati is situated within the Mpumalanga province around the latitude 25.76ºS and the longitude 31.80ºE. The location of the project is illustrated in Figure 1 and Figure 9. The underground operation and nearby processing plant is approximately 46km from the town of Komatipoort. The underground area at Mangweni is 3km north of the processing plant. The existing opencast area at Madadeni is 9km south of the processing plant. The mine can be accessed via the R571 road which originates from the Crocodile Bridge gate of the Kruger National Park and heads south to Komatipoort where it crosses the N4. The national N4 highway between Nelspruit and Maputo runs north of Nkomati. The mine is also traversed by numerous main and tarred roads that provide easy access from Komatipoort and Malelane, with reasonable gravel roads to the mine. Nkomati can be divided into two areas namely, Madadeni and Mangweni, south and north respectively (illustrated in Figure 9.) Table 5: Summary List of Mineral Assets
PROJECT FARM NAMES MINERAL LICENCE TYPE HOLDER RIGHT NO. ISSUE
DATE EXPIRY DATE
AREA (ha)
Nkomati
Portion of unsurveyed land, Grobler 479 JU,
Guillaume 480 JU, Wildebeest 494 JU,
Rusplek 495 JU, Sweet Home 496 JU, Bonnie Vale 297 JU,
Excelsior 498 JU, Murray 502 JU, Fig
Tree 503 JU, Beginsel 504 JU
Coal NOMR Nkomati
Anthracite (Pty) Ltd
30/5/1/2/2/89MR 2010/09/30
2020/09/29 11,812
TOTAL 11,812
13. Legal Aspects SR1.7A(i); SR5.1A(i); SR5.2B(i-ii); SV2.3; JSE12.9(h)(iv)
13.1. Ownership Nkomati is 60% held by Sentula and 40% held by the Mpumalanga Economic Growth Agency (MEGA). The corporate structure for Sentula is illustrated in Figure 2. It is understood that Nkomati will be acquired by Miranda.
Figure 08
NKOMATI - LOCATION OF COALFIELDS IN SOUTH AFRICA
Sentula Mining Ltd
VMD1652_Sentula CPR_2014
Bela-BelaBela-BelaBela-Bela
LephalaleLephalaleLephalale
PolokwanePolokwanePolokwane
MusinaMusinaMusina
RustenburgRustenburgRustenburg
GroblersdalGroblersdalGroblersdal
-23°
S-2
4°S
-25°
S-2
6°S
-27°
S-2
8°S
-29°
S-3
0°S
-31°
S
33°E32°E31°E30°E29°E28°E27°E26°E
PRETORIAPRETORIAPRETORIA
JOHANNESBURGJOHANNESBURGJOHANNESBURG
SOUTHAFRICA
Thohoyandou
MiddelburgMiddelburgMiddelburgWitbankWitbankWitbank
PhalaborwaPhalaborwaPhalaborwa
CarolinaCarolinaCarolina
ErmeloErmeloErmelo
NewcastleNewcastleNewcastle
PIETERMARITZBURGPIETERMARITZBURGPIETERMARITZBURG
DURBANDURBANDURBAN
RICHARDS BAYRICHARDS BAYRICHARDS BAY
Scale
Port ShepstonePort ShepstonePort Shepstone
Port EdwardPort EdwardPort Edward
0 100km
VryheidVryheidVryheid
DundeeDundeeDundee
SkukuzaSkukuzaSkukuza
BarbertonBarbertonBarberton
MAPUTO
LIMPOPO
SOUTPANSBERG
MOLTENO
KLIRIVER
VRYHEID
NONGOMA
SOMKELE
HIGHVELD RAND
FREE STATE
ERMELO
UTRECHT SOUTH RAND
VEREENIGING-SASOLBURG
EVANDER
WITBANK
SPRINGBOK FLATS
ELLISRAS
KANGWANE
MoltenoMoltenoMolteno
Makhado (Louis Trichardt)Makhado (Louis Trichardt)Makhado (Louis Trichardt)
PAFURI Cape Town
JohannesburgJohannesburgJohannesburg
Durban
LOCALITY WITHIN SOUTH AFRICA
LEGEND
City / TownArterial RoadRailwayCoalfieldsCoAL Principal AssetsPower StationPower Station under contruction
AREA OF INTEREST
NKOMATI MINE
NKOMATI - LOCALITY PLAN IN RELATION TO LOCAL INFRASTRUCTURE
Figure 09
D792M
Coalo
fAfricaV
aluatio
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td
VMD1652_Sentula CPR_2014
MadadeniTownship
MangweniTownship
MPUMALANGA
Fig Tree 503 JU
Murray 502 JU
Rusplek 495 JU
Grobler 479 JU
Beginsel 504 JU
Guillaume 480 JU
Wildebeest 494 JU
Sweet Home 496 JU
Excelsior 498 JU
Bonnie Vale 497 JU
MOZAMBIQUE
Komati River
To K
omat
ipoo
rt
Mad
lang
empi
si
To Malelane
R57
1
NKOMATI MININGRIGHT BOUNDARY
Goverment Ground
0 5kmScale
31°57'0"E31°54'0"E31°51'0"E31°48'0"E31°45'0"E
25°4
2'0"
S25
°45'
0"S
25°4
8'0"
S25
°51'
0"S
Nkomati Mining Right BoundaryInternational BoundaryFarm BoundaryBuilt-up AreasPower LineRailRiversRoadsNkomati historical open plan operations (to be rehabilitated)MangweniMan AMan BMadadeniMat IIIMat C
LEGEND
April 2014 38
13.1. Mineral Tenure SR1.2A(i); SR1.7A(i) The original Mining License was granted on the 18th February 1998, valid until the 19th October 2015. The superseding New Order Mining Right (NOMR) was approved on the 30th September 2010 and is valid until 29th September 2020. The legal tenure for Nkomati is summarised in Table 6. Table 6: Legal Tenure pertaining to Nkomati
PROJECT FARM NAMES MINERAL LICENCE TYPE HOLDER RIGHT
NO. ISSUE DATE
EXPIRY DATE
AREA (ha)
Nkomati
Portion of unsurveyed land, Grobler 479 JU,
Guillaume 480 JU, Wildebeest 494 JU,
Rusplek 495 JU, Sweet Home 496
JU, Bonnie Vale 297 JU, Excelsior 498
JU, Murray 502 JU, Fig Tree 503 JU, Beginsel 504 JU
Coal NOMR Nkomati
Anthracite (Pty) Ltd
30/5/1/2 /2/89MR
2010/09/30
2020/09/29 11,812
TOTAL 11,812 Venmyn Deloitte has enquired from Sentula as to whether there are any legal proceedings that may have an influence on the rights to explore or mine. Written confirmation from Sentula states that there are none. The authors of this CPR are not qualified to provide extensive commentary on legal issues associated with Sentula’s right to the mineral properties. Sentula and its attorneys have provided certain information, reports and data to Venmyn Deloitte in preparing this Competent Persons Report which, to the best of Sentula’s knowledge and understanding, is complete, accurate and true and Sentula acknowledges that Venmyn Deloitte has relied on such information, reports and data in preparing this Competent Persons Report. No warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness or accuracy of the legal aspects of this document.
13.2. Surface Rights SR1.7A(i); SR1.7A(ii) The surface rights are held by various tribal trusts, private individuals and the South African Government, however Sentula is negotiating for the purchase of the surface rights to the Madadeni area. The mining right extends over an area of 11,812.45ha, being approximately 13km long from north to south and 11km wide from east to west at its widest point, and is situated on a portion of unsurveyed state land, and the farms Grobler 479 JU, Guillaume 480 JU, Wildebeest 494 JU, Rusplek 495 JU, Sweet Home 496 JU, Bonnie Vale 297 JU, Excelsior 498 JU, Murray 502 JU, Fig Tree 503 JU, Beginsel 504 JU. All of the land within the mining right is held by the Matsamo, Mawewe and Legudlane tribal authorities. The mine site and beneficiation area as well as all mined-out areas are held in terms of a right to occupy (RTO) in respect of 40ha of unsurveyed state land, entered into with the Matsamo Tribal Authority during 1994. The Madadeni opencast area is held in terms of a RTO entered into with the Mawewe Royal Family Trust and the Mawewe Community Trust in May 2010. The Mangweni opencast and underground area, approximately 21ha in extent, is held in terms of an RTO granted by the Legudlane Tribal Authority in 2008. The surface area can be divided into the following five main categories which are illustrated in Figure 10:-
• built up areas (towns) – approximately 30% of mining right area (Sibange; Masibekela; Kamandulo; Fig Tree; Madadeni; Mangweni and Kwalhlane);
• agricultural land (sugar cane projects) – approximately 50% of mining right area. Fig Tree A, B, C & D; Legudlane; Madadeni; Mangweni; Nbunu; Mfunfane; Shinyonkana; Spoons 7; Mangane; Sikwahlane; Ntunda B;grazing land – approximately 15% of mining right area. Unsurveyed state land; portions of the farms Grobler 479 JU; Guillaume 480 JU; Excelsior 498 JU; Murray 502 JU; Fig Tree 503 JU; Beginsel 405 JU;
NKOMATI - URBAN AREAS IN THE NKOMATI MINING RIGHT AREA
Figure 10
D792M
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fAfricaV
aluatio
n’10
Sentula Mining L
td
VMD1652_Sentula CPR_2014
MOZAMBIQUE
Kom
ati R
iver
571
NKOMATI MINE LEASE
Walda
Ntunda
Ntunda B
NJ MahlanguSecondary School
Sikwahlane
LugedlaneMbunu C
ShinyokanaFigtree A (Hoyi)
Figtree D
Figtree C
Mfunfane Mangane
Figtree B
Madadeni
Spoon 7
MbunuB
0 5kmScale
31°57'0"E31°54'0"E31°51'0"E31°48'0"E31°45'0"E
25°4
2'0"
S25
°45'
0"S
25°4
8'0"
S25
°51'
0"S
International BoundaryUrban AreasRailRiversRoadsSugarcane Fields ProjectsNkomati Mining Right BoundaryFigtree AFigtree BFigtree CFigtree DLugedlaneMadadeniMangweniMbunu BMfunfaneShinyokanaSpoons 7Mbunu CManganeSikwahlaneNtunda BOther FieldsUnderground PlantMangweniMan AMan BMadadeniMat IIIMat C
LEGEND
April 2014 40
• waterways and Wetlands – approximately 3% of mining right area. The Nkomati River and several perennial streams originating in the Lebombo mountains and flowing down to the Nkomati River; and
• present Mining area (inclusive of haul roads) – approximately 2% (Mangweni underground area, plant site and Madadeni opencast area).
13.3. Royalties
SR1.7A(ii) On completion of market contracts, the royalties payable will be finalised. The governmental and regulatory issues have been clearly stated and Venmyn Deloitte is satisfied that Sentula’s current rights are sufficient to enable Nkomati to be accepted as an asset from which future benefits can flow.
13.4. Environmental and Social Compliance Status SR1.7A(ii); SR5.2B(i); SR5.2C(iii); SR5.2C(iii) Sentula has faced various challenges with environmental licensing for Nkomati. All licensing issues have been rectified, and Sentula has obtained the following licenses for Nkomati:-
• DMR EMP approval;
• DEDET environmental authorisation; and
• DWA WUL approval.
A brief account is provided below of the challenges which have faced Nkomati in its recent history. Nkomati was issued with a directive from the Department of Water Affairs (DWA) on the 9th December 2010, in terms of Section 63(1) of the National Water Act (NWA) for engaging in water use activities without authorisation. Nkomati has been in ongoing communication with DWA and has reportedly addressed DWA’s comments in the revised Integrated Water Use Licence (WUL) application, which was resubmitted to DWA on 3rd March 2011. The licence was amended and issued by the DWA on 13th February 2013. An IWUL license audit was conducted and submitted to the DWA in October 2013. Venmyn Deloitte is not awatre of any further instructions arising from the DWA with regards to current noncompliance status.
On the 15th December 2010 the Mpumalanga Department of Economic Development, Environment and Tourism (DEDET) issued Nkomati with a written warning in terms of the NEMA for the illegal commencement of activities by operating the Madadeni pit, without environmental authorisation and DMR approval of an EMP. As such, on the 1st March 2011, in terms of Section 93 1B (I) of the MPRDA, Nkomati was directed to cease operations by the DMR. Furthermore, Nkomati was directed to resubmit an amended EMP addressing DMR and DWA comments, by 1st April 2011. Nkomati submitted the revised EMP Amendment on 11th March 2011 and received approval from the DMR on 9th April 2011. In addition, in May 2011, Nkomati was officially placed under care and maintenance pending the finalisation of the IWUL and all environmental applications for the operation.
Following approval of the EMP by the DMR in April 2011, the DMR conducted a site visit on 6 November 2012. Benicon has detailed to Venmyn Deloitte that, following the DMR’s visit, and due to the status of the mine, the DMR communicated that current practise was sufficient, and no that audit was required due to the care and maintenance condition of the mine. Following communications with the DEDET, Nkomati submitted an application for rectification of legal infringements of NEMA in terms of section 24G, addressing the unauthorised commencement or continuation of activities identified in terms of the Environment Impact Assessment Regulations. The Section 24 G Authorisation was received in November 2013. The final and most recent DEDET environmental authorisation for Nkomati was gained in November. 2013. Due to this, Benicon has detailed to Venmyn Deloitte that no compliance audits are due as of yet. Although Sentula have made a considerable effort to align Nkomati with the relevant environmental licenses, Venmyn Deloitte recommend that an environmental legal due diligence be conducted to ascertain Sentula’s compliance with current environmental legislation. Current environmental and social legislative compliance status for Nkomati is presented in Table 7.
April 2014 41
Table 7: Nkomati Environmental and Social Compliance Status ACT,
REGULATION OR BY-LAW
REQUIREMENTS SECTIONAL REQUIREMENTS PERMITTING REQUIREMENTS CURRENT COMPLIANCE STATUS
M
PRD
A,
2002
(Act
28
of 2
002)
An approved SLP is required for permitting approval, with annual compliance reporting submission.
Sections 40 - 46 of GNR 527 of 2004 39(1) and (2) of the MPRDA dictate the requirements of submission, approval and reporting of the SLP.
Approval and annual reporting to the regional DMR office on compliance in compliance with S, 200445 of GNR 527.
Nkomati has an approved SLP in terms of Section 46 of the MPRDA. Venmyn Deloitte has not verified the approved SLP. The SLP was granted on the 30th September 2010. The approved SLP is generic and does not provide information by way of planning commitments (objectives, activities, targets, budgets are not provided - except for training and local economic development (LED). The SLP is four years old and as such the LED projects listed therein are no longer relevant to the Integrated Development Plans (IDP). The SLP, although drawn up with an estimated implementation date of 2007, was only approved 30 September 2010, from which date implementation was required. The mine was however placed on care and maintenance in May 2011 and therefore the SLP’s implementation has been suspended. Benicon has detailed that, should operations at Nkomati resume, the implementation of the SLP will also recommence
NEM
A, 1
998
(Act
No.
107
of 1
998)
EIAs and EMPs are required as defined by listed activities set out under Section 24 of the NEMA, 1998.
Section 14 details the contents of an EMP, with Regulations 543, 544, 545 and 546 establishing the processes to be followed to obtain an Environmental Authorisation and the listed activities requiring authorisation.
Nkomati has an approved EMP from the DMR, and corresponding environmental authorisation from the DEDET. The EMP for the Plant and Mangweni Underground sections was approved on the 30th September 2010, with EMP approval for the Madadeni Opencast dated 11th April 2011. Section 7 of the EMP approval from the DMR requires that performance assessments, monitoring, and evaluation report must be submitted annually to the DMR office, or as determined by the Regional DMR Manager. Final DEA authorisation was granted in November 2013, and, as such, no authorisation compliance audits have yet been performed.
Section 28 addresses the duty of care, and apportionment of responsibility for remediation of environmental damage.
Section 28 details that all persons who cause, caused or may cause significant pollution or degradation of the environment must take reasonable measures to prevent such pollution or degradation from occurring, continuing or recurring, or, in so far as such harm to the environment is authorised by law or cannot reasonably be avoided or stopped, to minimise and rectify such pollution or degradation of the environment.
In May 2011 Nkomati was officially placed under care and maintenance pending the finalisation of the IWULA application and all finalisation of environmental applications for the operation. A Section 24G rectification for new activities commenced at the Madadeni Opencast was submitted on the 9th July 2012 and was granted on the 29th November 2013. Benicon has reported that the DMR conducted a site visit on 6 November 2012, following which it was decided that current practices were sufficient, and that no audit was required due to the care and maintenance.
NEM
: WA
, 200
8
(Act
59
of 2
008)
Required to establish and operate a waste disposal site, as defined by the listed activities within the Act.
Chapter 5 of the Act provides for the licensing of waste management activities, which include storage, transfer, recycling, treatment and/or disposal of waste. Radioactive waste and mine residues have been excluded from NEM:WA.
Waste Management Licence
Section 20 of the NEM:WA provides that no person may undertake a listed waste management activity without a WML. Listed activities are defined in section 19 of the NEM:WA. The activities listed include the following categories:-
• storage of waste; • reuse, recycling and recovery; • treatment of waste; • disposal of waste; • storage, treatment and processing of animal waste; and • construction, expansion or decommissioning of facilities and associated
structures and infrastructure.
April 2014 42
ACT, REGULATION OR
BY-LAW REQUIREMENTS SECTIONAL REQUIREMENTS PERMITTING
REQUIREMENTS CURRENT COMPLIANCE STATUS
Nkomati has exemption from the DWA in terms of Regulation 4(b) of GN 704 for the disposal of dirty water into the Madadeni pollution control dam. The exemption requires biannual compliance reports to the DWA. The most recent IWULA license audit was conducted in October 2013. Sentula maintain that they currently do not require a waste disposal license under NEM:WA. Sentula does not have any permanent discard or slurry disposal facilities on-site. Their intention was to dry, and sell on all discard and slurry, which would be dried in the currently licensed pollution control dams. Sentula also specify that they do not meet the thresholds for other waste such as oil rags and workshop waste. After extensive discussions with Venmyn Deloitte, Sentula have disclosed that they were in the process of building a processing waste facility. A small portion of the final wash discard was backfilled, however, Sentula have verified that the activity was in accordance with the IWUL and does not trigger NEMA. In all further discussions, Sentula has referred Venmyn Deloitte to the existing IWUL, GN704 exemption and IWUL amendment for these permissions. Although Sentula have made a considerable effort to align Nkomati with the relevant environmental licenses, Venmyn Deloitte recommend that an environmental legal due diligence be conducted to ascertain Sentula’s compliance with current environmental legislation.
NW
A, 1
998
(Act
36
of 1
998)
as
am
ende
d
A license is required for the abstraction, storage, use, diversion, flow reduction and disposal of water and effluent.
The NWA (Act 36 of 1998) stipulates that a WUL is required for the abstraction, storage, use, diversion, flow reduction and disposal of water and effluent in terms of Section 21 of the Act. Section 19 of the NWA addresses pollution prevention, and in particular the situation where pollution of a water resource occurs or might occur as a result of activities on land. Any person who owns controls, occupies or uses the land in question is responsible for taking measures to prevent pollution of water resources.
Water Use License
Nkomati received an approved WUL (as amended) from the DWA on 24th October 2012 (WUL 05/X13J/ACG1J/1864). Section 9 of the WUL requires an annual external and internal compliance audits to be undertaken and submitted to the Regional Head. The most recent IWULA license audit was conducted in October 2013.
NEM
: AQ
Act
, 200
4
(Act
39
of 2
004)
No listed activity in terms of NEM:AQA can take place without a licence.
GN 1210 establishes national Ambient Air Quality Standards, and provides limits for SO2, NO2, PM10, ozone, benzene, lead and CO.
Atmospheric Emission Licence Activities at Nkomati do not trigger the requirement for an Air Emissions License (AEL).
April 2014 43
13.5. Social and Environmental Practises SR5.2A(i); SR5.2B(i-ii); JSE12.9(h)(viii) This section serves as an update to the existing information for social and environmental operational management for Nkomati. Sentula has appointed a Group Sustainability Coordinator (GSC) and Human Resources Manager (HRM) to advise and support operations, with the inclusion of a focus on environmental as well as social and labour compliance and reporting. Geovicon CC currently contracts to Sentula for any environmental related issues. The Mine Manager is assisted by the GSC who oversees Nkomati’s external consultants, Geovicon and Safety Health and Environmental (SHE) Systems. These consultants reportedly undertake visits for the respective purposes of monthly surface water and quarterly groundwater monitoring and H&S implementation. Venmyn Deloitte has not reviewed any compliance documentation. Nkomati employs a consulting Safety Health and Environmental Controls (SHEQ) officer, with the entire mining operation managed. The SHEC manager is currently responsible for the implementation of environmental and social management commitments. Benicon has recently undertaken compliance audits for their SLP, environmental, and IWUL permits. Venmyn Deloitte is unaware of any responses arising from the respective departments.
13.6. Social Practises SR5.3C(i) As Nkomati is currently under care and maintenance, no operational social management practises are being undertaken. However, a mining forum does exist, and meets regularly. This is constituted of members of the mine, tribal authorities and local mining community committees. The SLP, although drawn up with an estimated implementation date of 2007, was only approved 30 September 2010, from which date implementation was required. The mine was however placed on care and maintenance in May 2011 and therefore the SLP’s implementation has been suspended. Benicon has detailed that, should operations at Nkomati resume, the implementation of the SLP will also recommence.
13.7. Mine Closure Provision T5.2C(iv) The South African Government has an extensive legal framework supporting closure requirements, and within which mining, environmental and social aspects are managed. Inclusive within the framework are international treaties and protocols, and national acts, regulations, standards, and guidelines which address international, national, provincial and local management areas. The role of the South African Government and the associated respective ministries can be summarised as follows:-
• the guardian of environmental (as enforced by the Constitution);
• acting as responsible mechanism to serve the public and taxpayers’ interest and to ensure a safe and healthy environment;
• promoter of sustainable development;
• final inheritor of remaining problems and mine legacies; and
• the regulator of the activities within industry.
Sections 41 to 47 of the MPRDA address legislative closure requirements.
April 2014 44
Section 41(1) requires that an applicant for a prospecting right, mining right or mining permit must, before the Minister approves the environmental management plan or environmental management programme (EMP) in terms of Section 39(4), make the prescribed financial provision for the rehabilitation or management of negative environmental impacts. The financial provision required to be submitted by the holder of a prospecting right, mining right or mining permit (in terms of Regulation 54), must evaluate and quantify the total quantum for rehabilitation and remediation of environmental impacts and associated damage, as well as close-out must be provided for by one or more of the following methods:-
• approved contribution(s) to a dedicated trust fund as provided for in terms of Section 10(1)(cH) of the Income Tax Act, 1962;
• a financial guarantee from a South African registered bank or any other bank or financial institution approved by the Director-General, guaranteeing the financial provision relating to implement the EMP in the format approved by the Director-General from time to time;
• a deposit into the account specified by the Director-General of the DMR in the format as approved by the Director-General from time to time; or
• any other method as the Director-General of the DMR may determine.
Section 41(2) provides that, if the holder of a prospecting right, mining right or mining permit fails to rehabilitate or manage, or is unable to undertake such rehabilitation or to manage, any negative impact on the environment, the Minister may, upon written notice to such holder, use all or part of the financial provision to rehabilitate or manage the negative environmental impact in question. Section 41(3) requires the holder of a prospecting right, mining right or mining permit to annually assess his or her environmental liability and increase his or her financial provision to the satisfaction of the Minister, whilst section 45, allows the Minister to recover costs in the event of urgent remedial measures. The calculation of the environmental rehabilitation liability at Nkomati has been determined by an independent cost assessment, performed by independent consultants, JA Consultancy, in March 2010. The scope was completed in line with the provisions of the Mineral and Petroleum Resources Development Act (MPRDA), 2002, as summarised in the “Guidelines for the Evaluation of the Quantum of closure - related Financial Provision Provided by a Mine” (Revision 1.6 dated 07 September 2004). The report considered the risk class type, and follows the requirements as established by the DMR. The closure cost estimate is structured in the format that is routinely used for the presentation of closure costs of mine sites in line with the MPRDA, reflecting the costs in terms of the following categories:
• infrastructure;
• mining areas;
• general surface reclamation;
• water management;
• post – closure aspects; and
• additional allowances.
The closure cost estimate quantities were taken from mine plans and maps as well as estimates of volumes of voids and spoil heaps provided by Nkomati Anthracite Pty Ltd, the Nkomati EMP was also consulted. Unit rates were obtained from data available to JA Consultancy and from consultation with the client and appropriate consideration of past estimates of the same. The estimated unscheduled and scheduled closure costs were given to be ZAR91,694,429.27, and ZAR41,329,182.51 as at March 2010, and 2040 respectively. PWC Consulting Group (Pty) Ltd (PWC) have provided an independent assessment of the reconciliation methodologies used to calculate the adjusted closure provision for the 2013 financial year, for both the Mangwani and Madadeni operations at Nkomati. Included within the PWC calculation is the assessment of the present value of the current liability, in accordance with inflation, terms and financial valuation (FV).
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In the calculation of the closure provision, PWC had noted that, for Mangweni, the 2012 financial year used the unscheduled closure cost estimate for the calculation of the closure provision (due to the mine being placed on care and maintenance). The current provision for Mangeweni is ZAR92m for unscheduled closure, and ZAR42m for scheduled closure. In March 2011 Nkomati submitted the amended EMP and provided additional guarantees of ZAR4.4m for the Madadeni opencast mine. In the updated calculation of the closure provision, PWC have noted that the 2013 financial year base cost estimate for Madadeni Open Pit amounts to ZAR14.7m. Venmyn Deloitte has not evaluated the reasonableness of the closure estimation in detail. Whilst satisfied that the closure quantum has been calculated in accordance with the requirements of the MPRDA and associated Guidelines, Venmyn Deloitte recommend that an updated, independent closure assessment (including associated scheduled and unscheduled costings) be undertaken for Nkomati.
13.8. Closure Planning and Rehabilitation T5.2C(iv) Section 42 of the MPRDA makes provision for the management of residue stockpiles and deposits. Regulations promulgated in this regard adopt the principles of waste management in the Integrated Pollution Control and Waste Management Policy and the precautionary approach followed in terms of the National Water Act (Act 36 of 1998). When considering an application to the DMR for closure, Section 43 of the MPRDA requires that all closure certificate applications be accompanied by an environmental risk report. The supporting regulations for mine closure prescribe:-
• principles for mine closure;
• the application for mine closure;
• the application to transfer environmental liabilities to a competent person;
• the qualifications of such a competent person;
• the content for an environmental risk report; and
• the content of a closure plan.
Section 46 of the MPRDA empowers the Minister, as a responsible custodian of the environment, to rehabilitate abandoned and ownerless mines (and/or dumps), to register such sites in the title deeds of land, and to transfer the liability for maintaining the rehabilitation work being undertaken to the responsible landowner. There are various rehabilitation plans for Nkomati, with various levels of detail and commitment. The rehabilitation plan for the Madadeni opencast was undertaken in April 2012 by Cabanga Concepts CC. Venmyn Deloitte recommends that a detailed review of the plans, which consolidates the various plans for the mine, be undertaken, to assess the current extent of rehabilitation planning, associated costing, and the extent to which current legal closure and rehabilitation requirements are met.
13.9. Material Contracts SR1.7A(ii), SR5.6C(iii) 13.9.1. Nkomati Processing Plant
The plant is operated by Ingwenya Mineral Processing (Pty) Ltd. (IMP). It was initially built for the original owners by Portaclone and has been partially refurbished by IMP after being under care and maintenance. A few test runs have been conducted during the last three months and the plant is capable of processing approximately 30,000t of ROM per month comfortably. It is unclear how care and maintenance has affected the processing plant. The Portaclone beneficiation plant consists of:-
• a ROM tip with screening and crushing section (capacity 200tph ROM);
• a dense-medium cyclone section (100tph ROM); and
• a spiral section and a thickener which can accommodate 200tph ROM feed.
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13.9.2. Laboratory SR5.6C(iii) The South African National Accreditation System (SANAS) International Organisation for Standardisation (ISO) accredited laboratories, Midlab cc, Advanced Coal Technologies (Pty) Ltd (MAC), and South African Bureau of Standards (SABS) Commercial (Pty) Ltd are responsible for borehole core sample analysis. Inspectorate M&L operates a laboratory on-site and is responsible for continuously monitoring the quality of the coal produced.
13.9.3. Security Security services for Nkomati are provided by Fidelity Security Services (Pty) Ltd. It is unclear how care and maintenance has affected the security agreement.
13.9.4. Offtake Agreements Xstrata South Africa (Pty) Ltd (Xstrata) entered into a five year offtake agreement with Nkomati in August 2010 for domestic material. The coal specifications pertaining to the agreement are listed in Table 8. The contract had a cancellation clause within it, with a notice period of 30 days, by either party. The contract was not cancelled when the mine ceased producing. Miranda, the current purchaser of Nkomati has since been in negotiations with Xstrata to take over with the existing contract. Table 8: Nkomati and Xstrata Contractual Supply Specifications
PROXIMATE ANALYSIS
DUFF NUTS MIN MAX MIN MAX
TM (%) 10 6 IM (%) 3 3 Ash (%) 16 16 VM (%) 8.5 8.5 FC (%) 72 73 TS (%) 0.5 0.5 Phos (%) 0.045 0.045
Nominal Size 0.5*10mm (5% max
below 0.5mm) 20*60mm (90% min
within range)
For the offtake, Miranda and Trafigura Pte Ltd accordingly expressed their willingness to enter into an exclusive marketing agreement for the sale of all Nkomati products.
13.9.5. Surface Transport As Nkomati was operational all infrastructure is in place. It is unclear how care and maintenance has affected the condition of infrastructure.
13.9.6. Underground Mining Equipment Sandvik (Pty) Ltd provides underground mining equipment on a lease which also includes a full repair and maintenance contract. It is unclear how care and maintenance has affected the equipment lease.
13.9.7. Any Other Legal Issues SR1.7A(iii); SR1.7A(iv) Venmyn Deloitte has not been made aware of any legal issues pertaining to Nkomati.
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14. Climate SR1.6A(i) Nkomati falls into an area with a sub-tropical climate within the summer rainfall region of South Africa. More than 80% of the annual rainfall occurs from October to March, with a summer rainfall pattern that varies between 550mm and 800mm per year. Nkomati experiences 85% of the annual rainfall during summer thunderstorms. The rainfall events are highly localised and can vary markedly over short distances. The gross annual evaporation for the region, measured at Barberton, is 1,635mm. During the months of September to March the mean evaporation is 157mm/m. This equated to 67% of the total mean annual evaporation. Evaporation is the lowest between the months of May to July when an average mean monthly evaporation of 90 mm occurs. Temperatures in this climate zone are generally moderate to high, although low minima can be experienced during the winter months due to clear night skies. Temperatures can vary between 39°C (maximum) to 4°C (minimum) in summer and 36°C (maximum) to -2°C (minimum) in winter. Fog occurs throughout the year, although the highest tendency occurs during November to December. The annual prevailing wind direction, during the day, summer and winter months, is northeasterly.
15. Topography SR1.6A(i); SR1.6B(i); SR1.6C(i) Topographical highs occur to the southeast of the mining area, forming part of the Lebombo Mountain range, with Ku-Hluhlu peak obtaining an elevation of 1,810mamsl. The surface elevation over the proposed mining areas ranges from 240mamsl to 250mamsl. The Komati River is the main river system draining the project area, which flows northwards to link with the Crocodile River. The Komati River runs in a north-south direction, and lies towards the western borders of the mine area. The Barberton Mountain Range is approximately 30km west of the project.
16. Fauna and Flora Nkomati Anthracite Mine is situated in the savannah biome of South Africa. The savannah biome is the largest biome in South Africa, occupying 46% of the country. The biome is typified with characteristic grassy ground layer, and a distinct upper layer of woody plants. Lower vegetation types are commonly classified as shrub veld, with the intermediate stages, as well as where dense woodland occurs, classified as bushveld. The savannah biome vegetation types dominate Nkomati area are classified further as Mixed Lowveld Bushveld. This vegetation type can be described as variously dense bush on the uplands, open tree savannah in the bottomlands and dense riverine woodland on riverbanks.
17. Local Resources The towns of Mangweni, Kwa Mandulu, Masibekela and Madadeni and its related infrastructure are situated on the proposed mining area. The infrastructure includes schools, police station, clinics and churches. These towns are a major source of manpower with respect to labour requirements.
18. Infrastructure SR5.6C(i); SR5.6C(iii)
Nkomati, although currently on care and maintenance, has all the relevant mine infrastructure already in place (Figure 1 and Figure 9). The Nkomati site plan is presented in Figure 9.
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18.1.1. Water The mine service water is supplied from the clear mine service water header tank, via a small bore High-density polyethylene (HDPE) piped system. Potable water to site is supplied from a local municipality line, into two covered storage tanks, each of 5,000 litres capacity. The tanks supply potable water to the offices, change-houses and stores offices. Collected water is used for the underground operation and the excess is pumped to surface.
18.1.2. Power Nkomati is fed via a 22kV single transmission line, running approximately 12km from Eskom’s Tonga substation to the mine’s main incoming sub-station, located at the lamp room/change house area. The 22kV supply is then stepped down to 6.6kV via a 3MVA 22/6.6kV transformer at the mine’s main incoming sub-station. There is also a 6.6kV/500V transformer installed at the main sub-station for surface lighting and small power layout.
18.1.3. Mining and Plant Equipment SR5.6C(ii) The wash plant and beneficiation equipment, laboratory equipment is the property of Nkomati. Underground mining equipment is provided by Sandvik and includes:-
• 1 x AM80 Voest Alpine miner;
• 2 x JOY 10SC22B shuttle-cars;
• 1 x ARO Roof-bolter;
• Wright 346 Load haul dump machines; and
• Mercedes road haul trucks.
Once production resumes, equipment will be sourced from a suitable contractor. With an average stripping ratio of 5.93, it is envisaged that the following equipment will be employed at Madadeni Opencast:-
• 2 x Hitachi ZX870 Excavators;
• 8 x Volvo A40 ADTs;
• 1 x CAT D6 Type Dozers;
• 1 x CAT D10T Type Push Over Dozer;
• 1 x 780 Type Drill Rigs;
• 1 x Grader;
• 1 x Water Bowser;
• 1 x Diesel Bowser; and
• 1 x Service Unit.
It is anticipated that the fleet will be reduced by 1 Excavator and 4 x ADTs when the mine reaches full steady state mining.
18.1.4. Security The operational areas have been fenced to prevent unauthorised access by people and animals. A security fence consisting of diamond mesh with barbed-wire canter secures access to the opencast pit and to the underground mining area. A mine haul road has been built between the Madadeni pit and the plant to avoid the use the public road which passes through the settlements and cattle dip located within the fenced area will be rebuilt once the community has agreed a new location.
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The high security areas such as main consumer sub-stations and stores and stock yards were well protected with high mast flood lighting and 3meter high, locked high security fencing. One area of concern with security is the close proximately of the main haul roadways and a nearby village adjacent to the site, no perimeter fence separates the two areas and this represents a safety and security issue to the mine at present. The entrance gate includes incomplete brick and mortar access-control building.
18.1.5. Roads Access from the R571 provincial tarred road to the beneficiation plant is via a dedicated contoured access road of approximately 2km. A haul road of approximately 9km connects the Madadeni open pit and beneficiation plant. A 7.5km long and 4m wide portion of this road has a compacted gravel surface and 1.3km pass through sugar cane fields and is only graded.
19. Regional Geological Setting SR4.1A(i); SR5.8A(i); SV2.5 Nkomati is located in the Kangwane Coalfield (Figure 8). The coalfield extends along the eastern border of South Africa, north of Swaziland and west of the Kruger National Park, for approximately 70km by 40km and is subdivided into northern, central and southern sections, namely the Kangwane Anthracite, Nkomati Anthracite and the Southern Anthracite, respectively. The regional geology is dominated by sedimentary sequences including sandstones, mudstones and shales of the Karoo Supergroup. Coal sequences occur in the Volksrust and Vryheid Formations of the Ecca Group. The hosting sediments are sandy to silty with local pebble beds and scattered grit. The deeply sand-covered area produced by extensive weathering in the area gently slopes in a westerly direction towards the Komati River. As a result of the deep sand cover, outcrops are limited and geological mapping was essentially based on borehole information. No clear marker beds are present. The strike of the sedimentary sequence is generally northnortheast southsouthwest and the regional dip of the strata ranges between 3° and 20° eastwards and steepens from west to east defining the Lebombo monocline with a northnortheast southsouthwest trending fold axis. Prominent faults which have affected the coal horizons appear to be strike faults with vertical throws of up to 100m. These faults dissect the coal measures into isolated blocks and accentuate the regional dip. Tensional forces that prevailed during the deformation history of the area probably contributed to fault formation including graben structures delineated by exploration drilling. Wide dolerite dykes and sills associated with formation of the Stormberg Group are common and can reach thicknesses of 100m and 170m, respectively. The intrusive dolerites in the Kangwane Coalfield create local loss of coal and bad ground conditions. The Kangwane Coalfield occurs in a narrow northsouth trending trough of Karoo Supergroup deposited unconformably on Archaean basement. The Karoo Supergroup, in chronological order, consists of:-
• thin glacial sediments of the Dwyka Group;
• coal hosted in Ecca Group sediments;
• coarse sandstones of the Beaufort Group; and
• basalt of the Stormberg Group.
The No 1, No 2/4, No 6 and No 8 Seams occur in the Volksrust Formation, and the No 3, No 5/6 and No 7 and No 9 Seams occur in the Vryheid Formation. Strata dip regionally to the east at between 3° to 20° and steepens down dip. Strike is north northeast-south southwest.
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Coal in the Vryheid Formation is generally associated with medium-grained sandstone. In the northern area, the No 1 Seam can reach up to 10m thick, but is erratically distributed, of low quality and confined to the northeast of the Coalfield, where coal is more structurally disturbed. In the southern areas, the No 7 and 9 Seams are considered potentially economic but occur sporadically. No 3 and No 5/6 Seams are the best developed and considered potentially economic. The Formation is distributed over approximately 70m. The Volksrust Formation seams occur stratigraphically 300m to 400m above Vryheid Formation, and are associated with shale and mudstone. Coal seams in the Volksrust Formation are also erratic and are rarely thicker than 2m. The Volksrust Formation is not prominent in the Project Area. Coal has been devolatised on a regional scale and locally where adjacent to intrusives. The regional alteration is due to major and common regional faulting and volcanic activity throughout the coalfield. Faulting and dykes are generally post coal deposition. Historical and regional geological information is not well correlated with exploration information and seam nomenclature differs throughout the available literature. At Nkomati, the No 1, No 2 Lower, No 2 Upper 1, No 2 Upper 2, No 3 and No 4 Seams correlate to regionally named No 2, No 3, No 5, No 6, No 7 and No 9 Seams, respectively. The stratigraphy and continuity of the various seams is illustrated in Figure 17, which illustrates the correlation of seams over the mine as well as the relationship between the various nomenclature used.
20. Local Geological Setting SR4.1A(i-iv); SV2.5 The local geology of the project is illustrated in Figure 11. The project stratigraphy is illustrated in Figure 12. Within the project area there are generally four to five discrete coal seams present within the Vryheid Formation sediments, dipping approximately 10°E. They are usually relatively thin but may reach opencast mineable widths in places. The Nkomati area has been divided into the Mangweni and Madadeni areas, to the north and south, respectively. The sedimentary succession at Nkomati comprises sandstones, mudstones and shales. Up to 4 thicker, potentially exploitable seams occur, generally towards the bottom of the package. The coal seams are numbered from bottom to top, the 1 Seam being lowest and the 4 Seam generally the highest, stratigraphically. The higher seams are only encountered in boreholes located further to the east. The thicknesses of these seams are summarised in Table 9. Table 9: Nkomati Seam Widths
COAL SEAM MANGWENI RESOURCE AREA (m) MADADENI RESOURCE AREA (m)
MIN MAX AVG MIN MAX AVG
No. 4 0.2 2.3 1.1 0.2 0.7 0.5 No. 3 0.3 2.6 1.3 0.5 1.9 1 No. 2 Upper 0.2 6.5 0.9 0.6 4.2 2.4 No. 2 Lower 2 8.7 6.1 1.4 5.8 3.6 No. 1 N/A N/A N/A 0.1 2.1 1.1
The general dip of the sediments is between 5° and 15° towards the east, with a very slight (2°) overall dip towards the south. This easterly dip is accentuated by faulting with down-throws to the east. In addition there are occasional down-throws to the west. These generally coincide with the northsouth trending dyke-like bodies, which are clearly evident on both the Madadeni and the Mangweni resource plans, and represent sill break-troughs at the coal-bearing horizons. Underground resources are located in both the Mangweni and Madadeni Blocks and open cast resources are located in the Madadeni Block. The Mangweni block is affected by two major dolerite sills and numerous north-south trending dykes of variable thickness. The structural complexity in the northern area has discouraged exploitation. Numerous sills, intruding above and below coal seams, cover a large portion of the Madadeni Block.
Figure 11
NKOMATI - ANTHRACITE GEOLOGICAL AND STRUCTURAL INTERPRETATION
Sentula Mining Ltd
VMD1652_Sentula CPR_2014
Zne1
C-JK
Q8
C-JK
C-JK
C-JKC-JK
Jle
Jt
C-JK
f4
f3
f4
f3
f2
f2
f2f1
f1
0 2kmScale
31°50'0"E
25°5
0'0"
S25
°45'
0"S
MangweniMan AMan BMadadeniMat IIIMat C
Possible FaultsRemnant LineamentsLineamentsLarge Inferred SillsMagnetic Interpreted Sills
Alluvium and Scree (Q8)Letaba Formation (Jle): Picritic LavasTshipise Member - Clarens Formation (Jt): Yellow SandstoneMikambeni & Madzaringwe Formations - Ecca Group (C-Jk)Nelspruit Granite (Zne1)Nkomati Mining Right Boundary
LEGEND
f4 f4
Figure 12
NKOMATI - STRATIGRAPHIC COLUMN
Sentula Mining Ltd
VMD1652_Sentula CPR_2014
0
10
20
30
40
50
60
70
80
(m)
Soil/Alluvium
Sandstone
Sandstone
Sandstone
Mudstone
Mudstone
Dolerite
Sandstone/Siltstone
Sandstone/Siltstone
Siltstone
No 2 Lower Seam
No 2 Upper Seam
No 3 Seam
No 4 Seam
No 2 Lower Seam
No 2 Upper 1 Seam
No 3 Seam
No 2 Upper 2 Seam
No 1 Seam
Soil/Alluvium
Sandstone
Sandstone
Sandstone
Mudstone
Siltstone
Siltstone/Mudstone
Mudstone
Sandstone
Mudstone
Mudstone
MangweniBlock
(Underground)
MatadeniBlock
(Opencast)
Pebbles
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Dolerite dykes and sills tend to devolatise, burn or displace coal seams and occasionally break through coal measures in underground operations and limit exploitation due to bad ground. 20.1. Basement and Dwyka
The basement underlying the Nkomati area consists of the same Archean granites seen outcropping to the west of the area. They provide an unconformable floor to the Dwyka tillites, which constitute the oldest sedimentary unit in the region, but are not consistently present across the entire area. Over much of the area lower Ecca sediments rest directly on the basement rocks.
21. Historical Ownership SR1.3A(i); SR1.3A(ii); SR2.3B(ii); SR1.3A(ii); SV2.4 The historical ownership and associated activities related to Nkomati are presented in Table 10. Table 10: History at Nkomati
YEAR COMPANY COMMENT
1982 Kangwane Mineral Exploration (Pty) Ltd (KME) Mineral Lease Registered
1984 Messina Limited Acquired lease to exploit on a 40/60 share basis with KME. Mining began in 1985.
1991 Dania Corporation Liquidated in 1992.
1993 Benicon Operated the open cast mine until 2006. 60% ownership in 2006.
2007 Scharrighuisen Opencast Mining (Pty) Ltd
Now known as Sentula acquired 100% ownership of Benicon.
2011 Nkomati Care and Maintenance.
22. Historical Exploration and Mining SR1.3A(i); SR2.3B(ii); SR1.3A(ii); SV2.4 The Kangwane Coalfield was discovered in Swaziland in 1897 and first documented in 1906. Four boreholes and a trial shaft were sunk in the north of the coalfield. No further work was undertaken until the 1950s with a number of boreholes being completed. Exploration was generally concentrated to the south of the coalfield. In 1953, 15 boreholes and geological mapping were completed by the Geological Survey (now the Council for Geoscience). Coal quality results were poor and the specific localities are unknown. A further two boreholes were drilled in 1975 by the Geological Survey. Historical information from the Council for Geoscience for these boreholes shows one intersected coal seams, however, these seams were not named nor do they correlate to any known seams in the Kangwane Coalfield. Little information is available on these historical boreholes. The historical boreholes were irregularly spaced and sporadic, and therefore not suitable for coal resource estimation. Exploration for anthracite commenced on the mining area in the 1970s and the first holes were drilled by the then Department Bantu Mynbou. Although the mining area covers an area of 11,512.45ha only 150ha have been drilled. The following exploration drilling has been carried out:-
• 85 boreholes have been drilled in the Madadeni area;
• 156 boreholes have been drilled in the Mangweni area; and
• 6 reconnaissance boreholes were drilled in 1979.
Miranda reported in the Due Diligence report that a total of 241 boreholes have been drilled since 1982 on this resource. Several small open pits have been mined-out around the present site office and beneficiation plant, and according to records of Nkomati, 1.2Mt of coal have been extracted from this area, since inception in 1985. The details of this exploration are not well understood. Airborne geophysical exploration data shows that a large portion of the mining area, running from north to south, along the western side of the economically minable anthracite.
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Although built up areas sterilise approximately 30% of the mining area, the remaining exploration area available remains in excess of 6000ha. The remaining exploration areas are not affected by built-up areas. This is covered by sugar cane projects and grazing land. A large portion of more than 3000 hectares below the Ecca Upper Contact has not been explored at all. Exploration work and extensive drilling directly north and south of this mining area by ZYL Ltd proved large economically mineable resources. The drilling history of the Nkomati resource area is somewhat complex and may best be summarised in Table 11. Drilling methods, sampling techniques and QA/QC procedures were not available to Venmyn Deloitte at the time of compilation of this report. Table 11: Nkomati - Summary of Historical and Recent Drilling
DATE COMPANY TOTAL NO. B/H
B/H SERIES
APPROXIMATE TOTAL METRES
B/H SPACING AREA
Historical Exploration
1984 Messina Ltd 55 NKA 3,450 100 Mangweni
2003-2008 Benicon 96 BH 5,200 100 Mangweni
2003-2008 Benicon 20 BHOH 1,400 100 Mangweni
Recent Exploration
2008 Sentula 11 NBH 1,100 100 Mangweni
2008-2009 Sentula 76 MBH 3,600 100 Madadeni
TOTAL 258
14,750
During 1979 the then Department of Bantu Mining drilled six boreholes on both sides, close to the Komati River which indicated the presence of coal in all six borehole locations. These holes were drilled over an area of approximately 8kms from north to south and 500m east to west. One of these holes proved thick seams of anthracite, in excess of 5m, and at a depth of approximately 18m deposited above the dolerite sill. Due to a lack of infrastructure no further exploration was carried out in this direct area. This area is indicated in Figure 10.
The NKA series of boreholes were captured electronically in 2003. They concentrated on what has become the current Mangweni resource area and were placed between the 2 Lower Seam outcrop and the 130m depth contour. During the drilling of the BH series, 20 BHO series holes were also drilled, these being open percussion holes for structural data. The quality data derived from these boreholes was used as the basis for the previous classification of the resources, based on the categories recognised by the SAMREC code and the supporting SANS 10320 guidelines. Nkomati has been subject to a previous resource estimate by an independent consulting company. This estimate was prepared in 2007 and was based on the exploration drilling up to that time. This included the MCL, NKA, BH and BHOH series of boreholes. The modelling produced an estimate of 6Mt GTIS in the area now known as the Mangweni Block. This estimate was extended to approximately 15Mt GTIS by increasing the extent both north and south into areas of widely spaced drilling. No further drilling has been done in this extended resource area.
23. Recent Exploration SR2.1A(i); SR2.1B(i); SR2.3A(i); SR2.3B(i); SR2.3B(i); SR2.5A(i); SR3.2A(i-vi) Recent drilling of the NBH and MBH series of boreholes by Sentula and its contractors is included in Table 11 for completeness. This drilling concentrated within the currently recognised Mangweni, and Madadeni Resource Blocks. The data derived from this drilling form the basis of the current review of the Nkomati Anthracite coal resources, which is the subject of this report. Seventy-six MBH holes were drilled during 2008-2009 and eleven NBH holes were drilled from April to July 2007. This drilling was all done at approximately 100m spacing.
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23.1. Surveying Methods SR2.2A(i) No detailed ground topographic surveying appears to have been conducted and no digital terrain maps (DTM) were supplied with the data provided. Airborne geophysics was performed. The details pertaining to this is unclear. Borehole collars were originally surveyed by a surveyor in the employ of Nkomati, but all co-ordinates were later checked by Mr W Harms, using an independent surveying system.
23.2. Diamond Drilling The recent drilling operations were overseen by GM Geotechnical. The drilling was undertaken by Geosearch (Pty) Ltd., a subsidiary of Sentula, using conventional drilling techniques to provide an NX core size for logging and sampling. These cores were logged and sampled by Mr G Mulder. Re-drills were called for in instances where the core recovery was less than 95% within the economic coal sections, unless the coal seam was severely affected by Post-Karoo intrusions. Notwithstanding re-drills, borehole data that were considered unreliable due to inappropriate drilling procedures or other reasons were excluded from the database.
23.2.1. Drilling
All boreholes were drilled in the vertical plane. Given that dips in the area are usually very small, it is accepted that there is no material difference between the apparent and true thicknesses of the coal seams.
23.2.2. Logging During the recent drilling all data was derived from the logging of boreholes and sampling of the coal seams intersected. All depths and sample positions were recorded to cm accuracy. The logging and down-hole measurements were not supported by wire-line logs. The general logging and the detail within the coal seams is considered to be of sufficient detail to support the resource classification. The core was logged and sampled in a specially constructed core yard on the Nkomati property. Logging was done using the GBIS Core Description Manual. The weathering depth and core recoveries were recorded on the borehole logs, but the core was not photographed. The coal cores were split longitudinally with a hammer and chisel to allow more precise recording of coal litho-types, and the following detailed coal seam information was recorded along with the relevant roof, floor and ply-split depths:-
• core recovery;
• coal Litho-types; and
• structural features.
In addition, a general lithological log of each hole was produced, including the following information:-
• core recovery;
• weathering depths;
• lithologies;
• structural discontinuities; and
• coal seam depths.
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Coal intersections were not photographed and no wire-line logging was done to confirm seam depths. However, the level of detail of the coal seam logging and sampling is considered sufficient to support the resource estimations.
23.2.3. Sampling Method SR3.1A(i), SR3.1A(ii), SR3.3A(iii) The coal sampling procedure adopted by GM Geotechnical followed the standard South African practice of whole core sampling in order to eliminate sampling bias. The sampling was contiguous within coal seams, and samples were generally 50cm to 150cm in length.
23.2.4. Core Recoveries The historical data pertaining to the MCL and NKA boreholes does not include information regarding core recoveries. However, the available records do not identify any instances of significant core loss and it has therefore been assumed that the core recovery, particularly over the coal intersections, was satisfactory. The BHOH series of boreholes were open holes, hence core recoveries are not applicable, but core recoveries for the BH, NBH and MBH boreholes are recorded fully on the borehole logs. Core recoveries are recorded on all of the GM Geotechnical borehole logs. GM Geotechnical report that core recoveries obtained during the recent drilling program, under their management, was generally 95% in coal. This satisfies minimum requirements in accordance with the SAMREC Code and the SANS 10320-2004 Guidelines. Core recovery measurements on site were strictly monitored by the geologist in charge. Instances of poor core recoveries were dealt with as described above.
23.2.5. Borehole surveys The locations of historical boreholes, although presumably surveyed accurately, cannot be verified. Therefore there is some risk that these collar positions may not be exact. Although it is obvious from the databases provided, that the collar positions of these historic boreholes were surveyed (X and Y co-ordinates recorded to three decimal places), no comments can be made regarding the survey methods, the accuracy of the data, or the qualifications of the surveyor. The recent exploration boreholes were initially sited in the field using a hand-held Garmin GPS, accurate to approximately 6m laterally. As explained above, the collar positions of the completed boreholes were subsequently surveyed by Borehole collars were originally surveyed by a surveyor in the employ of Nkomati, but all co-ordinates were later checked by Mr. Werner Harms, using an independent surveying system. All coordinates were recorded in the Cape Datum ellipsoid, with 31° East longitude as the central meridian.
23.3. Down the Hole Geophysics / Wireline Logging No down the hole geophysics or wireline logging has been completed at Nkomati.
23.4. Bulk Sampling SR2.4A(i); SR2.4A(ii); SR2.4B(I-iii); SR2.4C(i) No bulk sampling was carried out at Nkomati.
23.5. Laboratory Analyses SR3.3A(i-iv); SR3.4A(i) It is not known which laboratories were used to undertake the analysis of samples from the historical boreholes (pre 2007); therefore no comment can be made regarding the reliability of the historical analytical data.
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The samples from the GM Geotechnical exploration programme were transported to the laboratory, in suitable batch sizes, by GM Geotechnical personnel and on arrival at the laboratory; these samples were checked against the dispatch schedules prepared by the responsible geologist. Approximately 250 samples were submitted for analysis from the recent exploration drilling on Mangweni and Madadeni. These samples were submitted to two laboratories, namely SABS, and M&L Inspectorate, both of which are ISO/IEC 17205/2005 accredited. These laboratories are independent companies specialising in coal sampling and analysis, and are registered with the South African National Accreditation Service (SANAS). They are both utilised by other major South African coal mining companies and are subjected to regular laboratory audits. They frequently participate in recognised round robin quality control procedures, both locally and internationally, and the results and certificates are openly available. The procedure followed at the laboratory is summarised as follows:-
• the mass and true relative density of the raw samples was determined;
• the samples were then crushed to minus 25mm;
• the raw crushed samples were subjected to standard proximate analysis;
• in addition, the calorific value, total sulphur, and phosphorus contents were determined; and
• the samples were then screened to minus 0.5mm and washed at a range of wash densities from F1.40 to F1.75.
The minus 0.5mm material and each of the above float/sink fractions were subjected to standard proximate analysis, and determination of calorific value, total sulphur and phosphorus. In addition, it is reported that ash analyses and petrographic analyses were carried out, and that the forms of sulphur were also investigated, but this specialised information has not been made available for this review. No quality control procedures such as duplicate samples or external laboratory checks appear to have been performed, and no boreholes were twinned to provide duplicate coal intersections. However, current stockpiles are presently being used for detailed round-robin and standard-setting purposes, as required by the Xstrata agreement. 23.5.1. Sample Preparation and Analysis
SR2.4B(i-iii); SR3.3A(i-ii); SR3.4A(i,iii) Approximately 250 samples from the recent exploration drilling were submitted to SABS, and M&L Inspectorate laboratories. The samples were subjected to standard analysis for proximate, calorific value, total sulphur, and phosphorus content, and quality data was determined for a range of wash densities from F1.40 to F1.75.
23.5.2. Security All samples were sealed after bagging at the drilling site and delivered to the laboratory as soon as practically possible. Upon arrival at the laboratory, the laboratory accepted responsibility for them.
23.5.3. QA/QC SR2.1A(i); SR2.1B(i); SR3.1A(i-ii); SR3.3A(iv-v); SR3.4A(iii,iv) As a routine part of laboratory analyses both the primary and umpire laboratories perform their own in-house QA/QC analyses, results and procedures. Such in-house QA/QC procedures included:-
• analysis being done in duplicate on every 10th sample;
• a blank sample and a relevant CRM was analysed in parallel with the analysis of the above duplicate sample;
• ICP-OES is operated only by approved, competent and registered personnel;
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• instrumentation is always calibrated; and
• QA/QC procedures were repeated if the reference standards did not meet the required tolerances.
Venmyn Deloitte has not reviewed the QA/QC procedures and has based the QA/QC on the review conducted by SRK for the 2011 CPR. Venmyn Deloitte have contacted the relevant companies to obtain the source information, in order to satisfy this requirement but this was not provided. It must be noted that all resources and reserves were calculated independently by consultants engaged by Sentula. Venmyn Deloitte has no reason to question the capabilities of the consulting companies and merely acted as a data compilation of all completed work to date for this CPR. The resources are based upon local estimates and the tonnages quoted in the resource statement were fed into the project’s Cash Flow valuation.
24. Data Management SR2.1A(i); SR2.1B(i); SR2.1C(i)
24.1. Data Acquisition and Validation SR2.3A(i); SR3.2A(i-vi) All borehole collar and lithology information, as well as the laboratory results, are currently housed within excel spreadsheets. There has been no exploration or mining on Nkomati since compilation of the 2011 CPR. SRK audited the information supplied to them by Sentula and reported the resources according to SAMREC. Venmyn Deloitte has not verified the information used in the modelling performed, nor the techniques of data storage, or exploration methods and QA/QC applied.
24.2. Database Management The database is available, from Sentula, as excel spreadsheets. Backups are stored at Sentula’s head office in Johannesburg.
25. Geological Modelling and Results SR4.1A(ii-iv); SR4.1B(i-iv); SR4.2A(i-vi) The resource estimates and modelling for Nkomati was carried out by SRK in 2011 and reported on in the 2011 CPR. The modelling was undertaken using Surfer8® software and have not since been updated. There has been no exploration or mining at Nkomati since the mine went on care and maintenance, on in May 2011. Venmyn Deloitte has not attempted to re-model or review the SRK model and has based all geological modelling information on the 2011 SRK CPR. The underlying geological modelling data and models are not available for review and Venmyn Deloitte cannot comment on their inputs. The reader is cautioned to use care when relying upon the geological modelling results presented in this report. Drilling was concentrated in two separate areas, the Madadeni and Mangweni blocks. Six coal seams were intersected during drilling but only those considered to be economical were modelled for Nkomati. The 2 Upper, 2 Lower and 1 Seam were modelled for the northern Mangweni block. The 2 Lower was the only seam considered as economically significant, for the Madadeni Block, and as such, the only seam modelled for this block. Information from 85 boreholes, with analytical information, was used in the modelling for the Madadeni Block. Boreholes with analytical data, used in the modelling, of the Mangweni block, amounted to 156. Detailed lithological logs were not provided but seam correlations were based on elevation and coal quality. The coal seams are considered to dip gently towards the east. The geological structure was defined in the model, highlighting displacement associated with faulting of greater than 5m. Minor faulting of less than 5m has not been included in the geological model as the current borehole spacing will not highlight these areas.
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Detailed modelling of the intrusives was not in the scope of work for SRK to undertake. It was noted, in the 2011 CPR, to be of importance in order to ascertain the extent of burning and devolatisation of the coal. The area is known to have north to south trending dykes and transgressive sills occasionally affecting the economical coal seams. All boreholes drilled were used to define the coal seams’ structure and extent. Only boreholes with quality data were used in classifying the resource into Measured, Indicated and Inferred. Information pertaining to the grid estimation technique, grid size and search radius applied was not available from the information supplied. The coal seam extent grids were cut for coal seam thickness based on reasonable economic extraction. Where the coal seam depth tends towards opencast extraction the minimum mineable thickness is considered to be 0.5m. For underground extraction the minimum mineable thickness has been considered to be 1.2m. The modelling blocks have been subdivided based on coal seam physical distribution, known major seam displacements by transgressive sills, and zones of burnt coal. 25.1. Physical Results
The coal seams are sub parallel and dipping towards the east at 5 to 8 degrees across Nkomati. The physical parameters of the elevation, in mamsl, and the depth from surface of the seams’ floor and roof were modelled. The seam thicknesses were modelled and these were used as the basis for the calculation of the coal resource volumes. The coal seam is generally dipping at 5° unless on approach of a transgressive sill or in the proximity of dykes. Seam floor elevation, depth from surface and the seam thickness results are presented below for the coal per modelling block. Coal seam areal extents were cut against the limit of weathering (LOW) during modelling.
25.1.1. Madadeni Area
The Madadeni area is subdivided into two resource blocks namely MAT.C and MAT.III (Figure 13). The two blocks are divided by a dolerite intrusion. The 4 Seam is considered too thin to be of economical potential and has been excluded from the resource model. MAT.III will be targeting the 2 Upper, 2 Lower and the 1 Seams. MAT.C will target the 2 Lower Seam. Both blocks have underground and opencast areas, which are dependent on coal seam depth. MAT.C opencast cut off is a 5:1 stripping ratio and Mat.III is a 7:1 stripping ratio. 25.1.1.1. Coal Seam Characteristics
The 3 Seam was intersected by 30 boreholes of the 85 drilled and with quality data, in the Madadeni Block. The coal seam thickness range was 0.45m to 1.97m and averaged at 1.02m. The seam thins towards the edges of the resource area. There was no evidence of the 3 Seam being affected by the LOW. A total of 44 boreholes intersected the 2 Upper Seam and displayed no devolatalisation. Of the remainder 41 boreholes, 12 coal intersections were devolatised and 29 boreholes were barren. The seam thickness ranged from 0.56m to 3.87m and averaged in the upper spectrum at 2.24m thickness. The 2 Lower Seam is the most extensive seam having been intersected by 60 boreholes indicating no devolatisation, 7 intersections were devolatilised and 18 boreholes indicated no 2 Lower Seam present. The 2 Lower Seam thickness ranges from 1.36m to 5.81m and averages at 3.64m. The coal seam thickens northwards.
Figure 13
NKOMATI - MINE LEASE AREA AND RESOURCE BLOCKS
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Murray 502 JU
Rusplek 495 JU
Grobler 479 JU
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Guillaume 480 JU
Wildebeest 494 JU
Sweet Home 496 JU
Excelsior 498 JU
Bonnie Vale 497 JU
Komati River
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NKOMATI MININGRIGHT BOUNDARY
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The 1 Seam was intersected by 47 boreholes, with an additional 5 indicating burning. The remainder 33 boreholes were barren of 1 Seam. The coal seam averaged 1.12m and ranged in thickness from 0.41m to 2.15m. Consistent with the younger overlying seams, the 1 Seam thinned towards the edges of the resource blocks. Thickness and depth contours of the coal seams are illustrated in Figure 14 and Figure 15.
Table 12: Madadeni Coal Seams’s Thicknesses
MADADENI SEAM WIDTHS
4 SEAM 3 SEAM 2U (1) SEAM 2U (2) SEAM 2L SEAM 1 SEAM
MADADENI RESOURCE – NORTH WEST UNDERGROUND BLOCK
Minimum 0.76 1.06 0.29 2.30 0.24 Maximum 1.36 3.33 1.10 4.72 1.87 Average 0.99 1.79 0.79 3.88 0.99
MADADENI RESOURCE – NORTH-WEST OPENCAST BLOCK Minimum 1.75 0.58 3.56 0.48 Maximum 2.67 0.89 4.29 1.45 Average 2.37 0.75 4.00 1.13
MADADENI RESOURCE – MAIN OPENCAST BLOCK Minimum 0.59 0.74 1.09 0.09 1.36 0.41 Maximum 0.74 1.74 4.24 1.42 4.93 2.15 Average 0.64 1.24 2.67 0.58 3.68 1.26
MADADENI RESOURCE Minimum 0.14 0.56 1.59 0.17 2.34 0.53 Maximum 0.69 1.17 3.04 1.59 4.76 1.17 Average 0.40 0.87 2.59 0.56 3.51 0.90
25.1.1. Mangweni Area The Mangweni area has been subdivided into two resource blocks, namely the MAN.A and MAN.B. Both blocks are intended to be mined underground. The most significant feature of the geology is the presence of the major dolerite sill to the north and west of the resource area. This sill intersects and truncates the sequence of coal seams, particularly the 2 Lower Seam, in the area where the 2 Lower Seam approaches sub-outcrop. Only the 2 Lower Seam is considered economical in the Mangweni area. The minor seams (4, 3, and 2U (1)), are considered generally too thin to be economic underground targets and are too deep to have any opencast potential. The 2 Lower Seam was intersected by 76 of the 156 boreholes, with quality data, drilled. An additional seven boreholes intersected the 2 Lower Seam but indicated devolatisation. The barren boreholes are believed to have resulted from displacement associated with dolerite intrusives.
NKOMATI - MADADENI THICKNESS AND ELEVATION (2 LOWER SEAM)
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Nkomati RiverDoleriteAreas of burnt coalNW Underground resouce (2L seam)NW opencast resouce (2U(1), 2L, 1 seam)Resource Block - Mat IIIMain opencast resouce (3, 2U(1), 2L, 1 seam)SE underground resource (2L seam)Resource Block - Mat CContour linesBore Holes
NKOMATI - MADADENI ELEVATION (3 SEAM)
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LOCATION OF NKOMATIRESOURCE BLOCKS
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Depth and thickness contours of the Mangweni 2 Lower Seam are indicated in Figure 16. Table 13: Mangweni Coal Seam’s Thicknesses
MANGWENI SEAM WIDTHS
4 SEAM 3 SEAM 2U (1) SEAM 2U (2) SEAM 2L SEAM
MANGWENI RESOURCE – NORTH BLOCK
Minimum 0.63 0.86 0.11 0.23 2.72 Maximum 1.64 1.65 1.74 2.56 8.40 Average 1.19 1.16 0.81 0.66 6.49 Median 1.27 1.11 0.71 0.55 6.69 Intersections 10 12 23 23 29
MANGWENI RESOURCE – SOUTH BLOCK Minimum 0.51 0.40 0.21 0.28 3.47 Maximum 2.37 2.67 1.93 2.84 8.12 Average 1.24 1.28 0.79 0.81 6.39 Median 1.23 1.06 0.69 0.57 6.95 Intersections 10 12 11 9 12
25.2. Quality Results The raw quality results (RD, ash, yield, volatile matter, sulphur, CV, TM) were modelled. Isopach quality plots were not available for inclusion into this report. Coal qualities for a F1.55 are reported on as this has been determined to yield a product of 28MJ/kg to 30 MJ/kg. 25.2.1. Mangweni Area
The No 2 Lower Seams have higher qualities than the rest of the seams in the Nkomati Anthracite Area. The Mangweni Area has the better quality coal with averages of 25.74MJ/kg calorific value and lower ash of 22.1% but this only relates to the target No.2 Lower seam. Table 14 and Table 15 show the raw coal and the washed coal quality parameters for this seam, respectively. Table 14: Mangweni Area 2 Lower Seam Raw Coal Qualities (Air dry basis)
AREA SEAM NAME
RD (g/cc)
CV (MJ/kg)
IM (%)
ASH (%)
VM (%)
Mangweni Underground 2 Lower 1.54 25.74 2.5 22.1 7.4
Table 15: Mangweni Area 2 Lower Seam Washed Raw Coal Qualities (Air dry, uncontaminated basis)
AREA SEAM NAME
RD
THEORETICAL YIELD
(%) CV
(MJ/kg) ASH (%) IM
(%) VM (%)
FC (%)
SULF (%)
PHOS (%)
Mangweni Underground 2 Lower 1.55 58.53 28.59 14.6 2.6 8.1 74.6 0.56 0.027
The yield contours lie predominantly between 60% and 70% throughout both the northern and southern portions of the Mangweni resource but drop to below 40% in the burnt area east of the easternmost dolerite limb. Yields of below 40% also occur within the burnt area separating the two portions of the resource. A large part of these burnt areas exhibit yields of below 20%. The ash content averages approximately 14% in the northern resource block, as well as in the burnt area east of the dolerite, and increases significantly to over 18% in the southwestern quadrant of the southern portion.
NKOMATI - MANGWENI THICKNESS AND ELEVATION (2 LOWER SEAM)
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LOCATION OF NKOMATIRESOURCE BLOCKS
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The CV of the F1.55 washed product is fairly consistent across the area, varying generally between 28MJ/kg and 30MJ/kg. It is slightly higher in the southern block than in the northern block. The 2 Lower Seam yields 74.6% and a calorific value of 27.43MJ/kg at a cut point RD of 1.65 and a 58.5% yield with a calorific value of 28.59MJ/kg at a cut point RD of 1.55. If a slightly lower specification market is available greater yields could be obtained, or perhaps a secondary wash should be considered.
25.2.2. Madadeni Area
Between 6 and 30% of the drilled coal intersections across all the seams were devolatilised and/or burnt and as a result about 30% of the boreholes were not included in the calculations of the qualities. The anthracitic qualities of the 1 Seam and the 2 Lower Seams appear to be superior to the rest of the seams and this may be due to the heat distribution of the dolerite sills. At the Madadeni Block, MAT.C has an average raw quality of 21.90MJ/kg calorific value and 28.61% ash and the MAT.III value of 25.32MJ/kg and ash% of 21.99%. Table 16 shows the raw coal quality parameters for all the target seams for the Madadeni area seams for the north and south areas, grouped according to air dried basis volatile content. The figures represent averages weighted by thickness and RD. Table 17 summarises the washed qualities. Table 16: Madadeni Area Raw Coal Qualities (Air Dried Basis, Uncontaminated)
BLOCK NAME
SEAM NAME
RD
CV MJ/kg
ASH %
IM %
VM %
FC %
Madadeni No 2 Upper 1.63 22.25 31 1.7 6.7 60.3 No 2 Lower 1.52 25.32 22 2.1 7.1 68.8 No 1 1.55 25.93 21.2 1.9 6.2 79.7
Table 17: Madadeni Washability Weighted Averages per the Target Seams (Air Dried Basis, Uncontaminated)
SEAM RD
THEORETICAL YIELD
% CV
MJ/kg ASH % IM
% VM %
FC %
SULF %
PHOS %
No.2 Upper 1.55 52.09 28.15 16.9 1.5 7.2 74.5 0.4 0.008 No.2 Lower 1.55 68.18 28.86 14.3 2 7.4 76.4 0.38 0.009 No.1 1.55 62.01 28.84 14.4 2.1 6.4 72.3 0.43 0.019 No.2 Upper 1.65 62.99 26.69 21.2 1.6 7.1 70.5 0.34 0.01 No.2 Lower 1.65 79.86 28.06 16.2 2.2 7.2 74.4 0.34 0.01 No.1 1.65 77.55 27.25 17.2 2.6 5.9 74.5 0.39 0.021
26. Coal Mining SR1.2C(i); SR5.4A(i); SR5.4B(i); SR5.5A(i); SR5.5B(ii-iii) Messina Mining acquired the Nkomati lease area during 1985 and commenced with opencast mining in October 1986. Dania Corporation bought Nkomati 5 years later, and were liquidated in 1992. Benicon bought Nkomati in 1993 and have been mining since. The old order mining license dated 1998 was valid till October 2015. The application for conversion to a mining right was submitted in 2005. This was converted to a Mining Right on the 30th September 2010 and is valid until September 2020. Mangweni opencast production was completed in March 2009. In January 2009 underground mining commenced, at Mangweni Block, as a result of coal seam depth. Only one section was operational. With the requirement of additional coal production, opencast mining commenced at the Madadeni Block in November 2010.
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The mine is currently on care and maintenance and has been since May 2011. The planned mining design was covered in the 2011 CPR by SRK but for completeness is repeated in the following sections. The mining costs and the development capital that was appropriate for Sentula’s proposed development has been taken into account on the basis that it was to be a contract mining proposal. 26.1. Opencast Mining Method
It is proposed to mine the shallow reserves ± 6km south of the existing coal processing area near the Madadeni Township. The potential opencast resource area has an extent of 71.07ha and the No. 2 upper. No. 2 lower and No. 1 Seams will be mined using opencast methods. The seams are approximately 10m apart and the depth of mining to the top of the Upper Seam varies between 22m and 46m in the boxcut. The cumulative strip ratios vary from 3.5bcm/t to 7.8bcm/t depending on the overburden thickness, with an average of 5.93bcm/t over the total mining area as illustrated in Figure 17.
It is planned that approximately 3,020kt of coal will be mined using open casting methods over an 8 year period. Mining had commenced in the western part of the mine where a boxcut has been excavated. The mining equipment is divided into two fleets, one dedicated on overburden removal and the second fleet for coaling. The mining equipment would be responsible for the removal of overburden, interburden and coal. The topsoil is firstly removed and stockpiled for use during rehabilitation. Secondly, as much soft material as possible is removed without the use of blasting techniques. This material is stockpiled separately. Lastly the hard overburden is then drilled, blasted and excavated until the top of the coal is reached. The top seam is then blasted and removed. The process is repeated for each successive seam. The hard material is initially stockpiled on the surface but as the size of the pit increases it will be placed in the voids. This will be the first step of the rehabilitation process. Rehabilitation will commence as soon as possible with the excavated material being placed into the void in the reverse order of removal i.e. the layer removed last will be replaced first. The coal is trucked to the existing coal processing plant, a distance of ± 6km. Minimal infrastructure will be erected for Madadeni Opencast because of the short mine life and the relative proximity of existing infrastructure. A pollution control dam for the storage of contaminated water will be constructed and canals for the diversion of water will be put in place. A new road will be constructed between the pit and the existing processing plant. All the contractors will be responsible to provide their own temporary infrastructure. 26.1.1. Mining Equipment
It is planned that equipment and labour will be sourced from a suitable contractor. With an average stripping ratio of 5.93 it is envisaged that the following equipment will be employed at Madadeni Opencast:-
• 2 x Hitachi ZX870 Excavators
• 8 x Volvo A40 ADTs;
• 1 x CAT D6 Type Dozers;
• 1 x CAT D10T Type Push Over Dozer;
• 1 x 780 Type Drill Rigs;
• 1 x Grader;
• 1 x Water Bowser;
• 1 x Diesel Bowser; and
• 1 x Service Unit.
NKOMATI - MADADENI CUMULATIVE STRIPPING RATIO
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Nkomati RiverDoleriteAreas of burnt coalNW Underground resouce (2L seam)NW opencast resouce (2U(1), 2L, 1 seam)Resource Block - Mat IIIMain opencast resouce (3, 2U(1), 2L, 1 seam)SE underground resource (2L seam)Resource Block - Mat CContour linesBore Holes
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It is anticipated that the fleet will be reduced by 1 Excavator and 4 x ADT’s when the mine reaches full steady state mining. Storm water will be managed as prescribed by current legislation. Clean storm water will be directed away from the mining operations using berms and dirty water will be captured within the dirty area and directed towards the pollution control dam for settling and evaporation. The pollution control dam will be sized such that it will be able to contain the run-off from a 1:50 year storm event. Once mined, the coal will be transported to the processing plant from where it will be road dispatched to customers.
26.2. Underground Mining Method The mining layout is based on the bord and pillar system with 20m between pillar centres. This is adequate to maintain roof safety with a width to height ratio in excess of 3.5 to be maintained. 12m bord widths are to be maintained in normal circumstances, reducing to 6m without roofbolt support in special areas. The mining height will be a consequence of the AM80 Voest Alpine miner to be used, which has a working height of 1.5m to 2.5m. The 2 Lower Seam in the Madadeni North West Underground block, where the average thickness is 3.88m, will be mined in one lift. In the Mangweni resource block the average 2 Lower Seam thickness is 6.49m, providing the potential for the mining of the seam in two lifts in this area. The mining layout will result in an extraction ratio of 60% to 70%, which is to be expected for an underground bord and pillar operation. The dilution in the underground workings will be minimal because the immediate roof strata will consist of coal. Underground access is via a box cut. The box-cut is 300m by 50m surface area and is 30m deep. Adits are supported using roof bolts at adequate spacing. Mining operations are adversely affected by the dip and faulting, and the production rate and cost assumptions have been adjusted accordingly. The prevalence of local steepening of the regional dip through floor rolls is evident. The mine operates on one shift per day. A second shift will be introduced once operations have been established, the labour force stabilised and market conditions are favourable. 26.2.1. Underground Mining Equipment
The underground mining equipment details are as follows:-
• AM80 Voest Alpine miner, availability 90%, a second hand unit, overhauled by the Original Equipment Manufacturer (OEM), Sandvik which is supplying the unit on lease hire and which incorporates a full repair and maintenance contract. The unit is a fully flameproof electro-hydraulically powered miner, with 350 kW of installed motors. The machine uses water for spark suppression, dust suppression and cooling motors. The machine is continuously monitoring for methane during all mining operations. If methane is detected and is concentrated at or above a pre-set level, the detector trips the cutter head. Additional safety interlocking is incorporated into the start-up sequence, whereby the cutter head cannot be run, until water feed pressure of 10 bar is available on the machine. Unfortunately, the machine could not be viewed at the time of the visit, but it has only recently been delivered from the OEM fully overhauled, therefore the miner will be in a very good state of repair,
• two JOY 10SC22B shuttle-cars, each with expected availability of 85%, both units supplied fully overhauled from,
• ARO Roof-bolter, availability 90%, a new twin boom unit, supplied from the OEM Sandvik, which is supplying the unit on a lease hire, which also includes a repair and maintenance contract. The unit is a fully flameproof, track driven, electro-hydraulic twin boom bolter, with 90 kW of installed motors. The unit also has fitted temporary support arms in advance of the bolting operations, for operator safety. The unit also has the same degree of methane detection and safety start up interlocking found on the heli-miner. This machine was examined and found to be in an as-supplied/new condition,
April 2014 70
• Wright 346 Load haul dump machines, availability 50% and 65%, powered by Cat 3306 diesel engines. These units were recently delivered to the mine from a local overhaul company, P & N Mining Supplies. The units have a 6 months warranty on repair labour and parts supplied as part of the overhaul contract. Both units were suffering from the same transmission problems at the time of the visit. The machines were originally manufactured around 1985 and exhibited signs of age in the mainframe generally, which is expected. However, given the fact that both units are already suffering with low availability, due to breakdowns, the long term performance of both these units is a risk to the operation. These machines are maintained by the mine engineering team, with breakdown cover from the repairer company. However, the response from the repairer is very poor and the mine team has to attempt to affect repairs, which again is a risk to the operation. SRK advises that the mine looks at the use of a reputable repair and maintenance company, to ensure that the availability of both units is high,
• Mercedes road haul trucks, these are non-flameproof units, that are used to carry the coal up the mine access ramp to the raw coal stockpile in the Preparation plant. A fleet of seven units are on site for this work.
Although the equipment has the capacity to produce in excess of 50ktpm at the 2.5m seam heights, mine management has budgeted to mine between 30ktpm and 35ktpm on average mainly as a result of the complex geology and anticipated conditions.
26.3. Historical Production The historical production from Nkomati since the initial acquisition by Sentula is presented in Table 18. Table 18: Historical Production
YEAR COAL MINED
OVERALL RECOVERY
(%)
SALEABLE PRODUCT
OPENCAST/ BOXCUT
(kt)
UNDER-GROUND
(kt) EXPORT
(kt) BREEZE
(kt) NUTS
(kt) PEAS
(kt) SLURRY
(kt) OTHER
(kt)
2007 229.3 31.9 37.8 23.1 12 0.2 2008 323.1 64.8 40.9 72.3 54.8 36.8 2.8 2009 134.7 67.0 45.1 30.4 12.2 10.5 0.1 2010 84.4 148.6 65.9 79.8 66.7 25.9 26.7
26.4. Future Production Open Cast and Underground mining will take place concurrently and the number of underground sections and open cast pits will be determined by the required production output. Production was estimated to ramp up to around 250,000tpa ROM initially, with open cast ROM to increase to approximately 425,000tpa as illustrated in Figure 18.
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Figure 18: Planned Future Production
27. Coal Processing As discussed in the 2011 CPR, by SRK, the coal preparation plant at Nkomati consists of a screening and crushing section, a dense-medium cyclone module, a spiral section and a thickener. Ingwenya Mineral Processing (Pty) Ltd operates the plant on a 2*9 hour shift basis although, according to the SRK CPR, it is capable of being operated on a 3-shift basis 24 hours a day. Raw coal delivered to the plant is screened and crushed to a top-size of 50mm and stacked on the raw coal stockpile. The coal is screened at a rate of 100 tph. The raw coal is de-slimed on the feed preparation screen where the minus 1mm coal is removed using water sprays. A belt scale records the tonnage of raw coal fed to the plant. The 50mm x 1mm size fraction is mixed with magnetite and pumped to a 660mm 100tph dense-medium cyclone where the primary 15% ash product (yield of approximately 67%) is separated. The product coal is screened into three size fractions namely small nuts, peas and duff. The sized products are stockpiled separately. The cyclone sink is sent to a split drain-and-rinse screen where it is rinsed free of adhering magnetite and reprocessed at a higher RD to produce a 18% ash product at a yield of 30%. The minus 1mm material arising from the feed preparation screen is fed to a desliming cyclone cutting at 150µm. The resulting underflow (-1mm+150µm) is fed to a two-stage 200tph spiral plant. The spiral product is dewatered and stockpiled together with the duff product, ready for dispatch to customers. The spiral discard is dewatered and discharged to a discard stockpile. The desliming cyclone overflow (minus 150µm) is pumped to a thickener to recover as much water as possible for re-use. The thickener underflow is fed to settling dams where, after settling, it is recovered and made available for community use. Overall magnetite consumption is reported to be 0.6kg/t of feed material whilst water consumption is reported to be 15m3 per hour, consistent with industry averages. The quality of the coal produced is monitored by an onsite laboratory. Product samples are taken half-hourly, composited for the day and analysed for proximate analysis and phosphorous content. Hourly samples of the feed and discard coals are also taken and analysed for ash content.
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
1 2 3 4 5 6 7 8
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
RO
M (t
onne
s)
Open Cast ROM Underground ROM
April 2014 72
The plant can process 100tph of raw feed. The crushing and screening circuit has capacity of 200tph ROM, and this is equal to the capacity of the spirals and thickener section. The dense-medium cyclone, however, is rated at 100tph ROM. Therefore, from Venmyn Deloitte’s observations, the plant capacity is limited to 100tph due to the dense-medium cyclone being the throughput bottleneck and that increasing the capacity of this section to match the rest of the plant sections should enable the plant capacity to be increased to 200tph. As per the Nkomati Due Diligence Report, dated August 2013, the installation of an additional 100tph dense-medium cyclone unit, presently under construction, should increase the capacity of the plant to 200tph ROM, consistent with Venmyn Deloitte’s observations. The coal processing plant was considered to be in good operating condition by SRK, prior to the mine going on care and maintenance in May 2011. The processing plant flow diagrams are illustrated in Figure 19, Figure 20 and Figure 21.
28. Coal Market SR5.8A(i); SR5.8C(i) Nkomati produces anthracite coal (low sulphur and phosphorous) which allows the mine to operate in a niche market, with a high-demand from the metallurgical industry. One of the disadvantages of anthracite is that no recognised commodity price index exists, as anthracite prices vary considerably according to specification especially with reference to the sulphur and phosphorous content. International anthracite volumes are also insignificant when compared to the volumes of, for instance, thermal coal with its API4 index. Anthracite trading is, therefore, demand and client driven which means that anthracite prices achieved by different producers can vary dramatically at the same point in time. Xstrata South Africa (Pty) Ltd (“Xstrata”) entered into a five year offtake agreement with Nkomati in August 2010. In terms of this agreement, Xstrata agrees to acquire duff and small nuts with the specifications as reflected in the table below:-
SPECIFICATION DUFF NUTS
MAX MIN MAX MIN
Total moisture (%) 10.00 6.00 Inherent moisture (%) 3.00 3.00
Ash content (%) 16.00 16.00 Volatile matter (%) 8.50 8.50 Fixed carbon (%) 72.00 73.00
Total phosphorus (%) 0.05 0.05
Nominal size (mm) 0.5MM*10MM(5% MAX>0.5MM) 20MM*60MM(90%MIN
WITHIN RANGE)
NOTE:-BASIS UNKNOWN It is understood that the proposed purchaser of Nkomati, Miranda, has concluded a similar agreement with Glencore Xstrata and that Nkomati, which is in close proximity to Glencore Xstrata’s Lydenburg operations will continue to receive 100% of Nkomati’s anthracite.
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29. Resource Classification All information in this CPR that relates to exploration targets, exploration results, coal resources and coal reserves is based upon information compiled in the 2011 CPR by SRK and in the Resource Estimate: Nkomati Anthracite Mine, 2013 by PC Meyer Consulting. Venmyn Deloitte has reviewed the Mineral Resources where possible, however as the underlying data is not readily available for review, Venmyn Deloitte has relied upon the Mineral Resource estimated by SRK in 2011, as is. No material mining or exploration has taken place post-estimation, and Venmyn Deloitte considers these to be the most up to date. Venmyn Deloitte has reviewed the underlying 2011 CPR together with the cash flow model that has been prepared separately and in conjunction with Sentula. Having taken into account the latest production plans (GM Geotechnical and PC Meyer, 2013), operating costs and potential coal prices we consider that there are reasonable and realistic prospects for economic extractions as per SAMREC 21. All coal resources and coal reserves are classified according to the SAMREC Code and SANS10320:2004 which outline the standard method of reporting of coal resources and coal reserves through the application of the various technical parameters. These technical parameters are set out in the SAMREC 2007 Resource Classification Diagram for a thin multiple coal seam deposits (Figure 22). Only boreholes with analytical data are to be considered for classification. If boreholes are missing analytical data, the classification will have less supporting confidence and will be classified as part of reconnaissance coal. All resource tonnages quoted are to include the associated coal quality. Raw coal qualities are quoted on an air dry basis whilst washed product is reported on an as received basis. If a deposit is structurally influenced by faulting and intrusives and where geological and grade continuity is questionable, the CP may decide as to additional boreholes as to those set out within the SAMREC guidelines. Coal resources and reserves are reported in this way to fully demonstrate clarity and transparency. Venmyn Deloitte believes that this method provides the reader with a full understanding of the resources and reserves quoted. The resources are presented in the following standard manner for all projects:-
• Gross Tonnes In Situ (GTIS), application of mineral tenure boundaries and a 0.5m seam thickness cut-off. This is the simplest form of resource declaration;
• Total Tonnes In Situ (TTIS), application of geological losses to GTIS; and
• Mineable Tonnes In Situ (MTIS), application of basic mining parameters such to TTIS. The basic mining parameters include a seam thickness cut off based on the mining method chosen and mine plan layout losses.
• The reserves are presented, post the application of the modifying factors, in the following standard manner:-
• MTIS Reserves, quoted at the specified mining height and including layout losses;
• Run of Mine (ROM) Reserves, application of extraction (or mining recovery), dilution (or contamination) and moisture correction factors; and
• Marketable (or Saleable for SAMREC) Tonnes, application of the coal processing yields.
It must be noted that all resources and reserves were calculated independently by consultants engaged by Sentula. Venmyn Deloitte has no reason to question the capabilities of the consulting companies and merely acted as a data compilation of all completed work to date for this CPR. There have been no material changes since the 2011 CPR. The reserves are based upon local estimates and the tonnages quoted in the reserve statement were fed into the project’s Cash Flow valuation. The basis for the reserve estimations, as compiled by SRK and PC Meyer are discussed in detail in the relevant project sections.
NKOMATI - RAW COAL CRUSHING AND SCREENING
Figure 19
D792M
Coalo
fAfricaV
aluatio
n’10
Sentula Mining L
td
VMD1652_Sentula CPR_2014
Jaw Crusher
Stockpile
Grizzley Undersize
RoM
Plant Feed Raw Coal Feedto DM Cyclone
NKOMATI - FINE COAL BENEFICIATION - PROCESS FLOW DIAGRAM
Figure 20
D792M
Coalo
fAfricaV
aluatio
n’10
Sentula Mining L
td
VMD1652_Sentula CPR_2014
Thickener
SumpSump Sump
To Product
To TailingsDisposal
Spiral
Cyclone Cyclone Cyclone
To Discards
From De-slimeScreen Underpan
NKOMATI - DENSE MEDIUM CYCLONE - PROCESS FLOW DIAGRAM
Figure 21
D792M
Coalo
fAfricaV
aluatio
n’10
Sentula Mining L
td
VMD1652_Sentula CPR_2014
Sump
Sump
To Fine CoalCircuit
Cyclone
Discard
Duff
Peas
Small Nuts
Sump
PreparationScreen
Raw Coal Feedfrom RoM Stockpile
Grizzly Screen
Floats(drain/wash)
Sinks(drain/wash)
Magnetic Separator
Figure 22
SAMREC CLASSIFICATION DIAGRAM
Sentula Mining Ltd
VMD1652_Sentula CPR_2014Source: SAMREC 2007
COALRESOURCES
INFERRED
INDICATED
MEASURED
PROBABLEMineable In-situ,ROM, Saleable
PROVEDMineable In-situ,ROM, Saleable
COALRESERVES
Increasinglevel of
geoscientificknowledge
and confidence
Reported as in situestimates
Reported as mineablein situ, ROM and
Saleable estimates
RELATIONSHIP BETWEEN EXPLORATION, MINERAL RESOURCES AND RESERVES
Indicated 1,000 500
Inferred 4,000 2,000
Measured 500 250
SAMREC RESOURCE CATEGORY
MAX DISTANCE BETWEEN POINTS OF
OBSERVATION (m)
MAX. HALO RADIUS (m)
Consideration of mining, coal processing, economic, marketing, legal, environmental,
social and governmental factors(the 'modifying factors')
April 2014 78
29.1. Previous Resource Statement SR1.3B(i) Venmyn Deloitte is not aware of any previous coal resource statement that has been issued by Sentula during the period under review. Venmyn Deloitte understands that this mineral asset has changes ownership a couple of times in the last two decades and there is no information concerning the coal resources that has been made available to Venmyn Deloitte. It should be noted that various consultants have re-estimated the coal resources as detailed in the section above and the results are not materially different to the results estimated by SRK in 2011 and Hence Venmyn Deloitte is comfortable to use the coal resources declared by SRK in the 2011 CPR.
29.2. Current Resource Statement SR1.2B(i); SR2.3B(i); SR2.5A(i); SR4.1B(i,iii,iv); SR5.7B(ii-iii); SR7B(i-iv); SR8B(i-iv); SR9A(i-ii); SR9B(i); SR10B(i); SV2.6 Coal resources were estimated separately for each seam in each block based on the following parameters:-
• seam thicknesses and stripping ratios for each seam/sector are arithmetic averages;
• average coal qualities for each seam are weighted by seam thickness and relative density (RD);
• stripping ratio are 5:1 for MAT.C and 7:1 for the MAT.III;
• seam areal extents were measured digitally and a zero dip was assumed;
• geological loss of 10%;
• dolerite areas, apart from the portion in the main development were excluded from the resource estimates;
• devolatilised or burnt intersections were excluded from quality calculations;
• no allowance was made for contamination; and
• coal qualities are determined on a raw air dried basis (adb).
The specific thickness cut-off has not been recorded in the 2011 CPR and the updated resources and reserves of SRK. In the absence of clarity we have assumed that the industry standard of a 0.5m minimum cut-off has been applied. However, having unsuccessfully used all means at our disposal to obtain this information, Venmyn Deloitte cannot attest to this issue. The reader of the report is advised to exercise caution in this matter. The resource estimate was presented in the report titled “An Independent CPR on the Material Coal Assets of Sentula Mining Limited 2011” by SRK, dated March 2011, with the resource estimates dated 28 February 2011. There is no change between this resource statement and the effective date of this report, April 2014. As discussed by Miranda in the Due Diligence report dated August 2013, Nkomati ceased operations in March 2011, contradictory to what Venmyn Deloitte have been informed by Sentula. However, if mining continued, it was for a maximum period of three months with a total ROM of 90,000 for the three months. There is no information on the methods and assumptions applied in the latest resource estimate report, entitled: Resource Estimate: Nkomati Anthracite Mine, by SRK in the 2011 CPR, therefore the resource estimate has been used as is. The current resource estimates were signed off by SRK on the 28th February 2011. The resource CP was David Mosuwe of SRK (Pr.Sci Nat [No. 100049/05], GSSA). The current Resource Statement is summarised in Table 19. These Mineral Resource tables have been extracted directly from the 2011 CPR as is. The coal resources summarised are inclusive of reserves. The washability qualities, as presented in the 2011 CPR, are elaborated on in Table 15 and Table 17.
April 2014 79
Venmyn Deloitte have contacted the relevant companies to obtain the source information, in order to satisfy this requirement but this was not provided. It must be noted that all resources and reserves were calculated independently by consultants engaged by Sentula. Venmyn Deloitte has no reason to question the capabilities of the consulting companies and merely acted as a data compilation of all completed work to date for this CPR. The resources are based upon local estimates and the tonnages quoted in the resource statement were fed into the project’s Cash Flow valuation. The basis for the resource estimations, as compiled by SRK are discussed in detail in the relevant project sections. Venmyn Deloitte has reviewed the Mineral Resources where possible, however as the underlying data is not readily available for review, Venmyn Deloitte has relied upon the Mineral Resource estimated by SRK in 2011, as is. No material mining or exploration has taken place post-estimation, and Venmyn Deloitte considers these to be the most up to date. Venmyn Deloitte’s Competent Person, in accordance with the SAMREC Codes, Mr A Clay, is a qualified geologist, a registered Professional Natural Scientist (Reg. No. 400105/88). Mr A Clay has the relevant experience required to perform the activity he is undertaking. Venmyn Deloitte has relied upon the resource statement as estimated in the 2011 CPR and the 2013 Due Diligence. The specific thickness cut-offs and their relevance to the proposed mining methods has not been recorded in the 2011 CPR and the Due Diligence of PC Meyer. In the absence of clarity we have assumed that the industry standard of a 0.5m minimum cut-off has been applied. However, having unsuccessfully used all means at our disposal to obtain this information, Venmyn Deloitte cannot attest to this issue. The reader of the report is advised to exercise caution in this matter. The details on full seam versus partial coal seam mining, impact of seam dip on mining underground and dip cut-off has not been recorded in the 2011 CPR and the Due Diligence of PC Meyer. In the absence of clarity we have assumed that the industry standard of a 0.5m minimum cut-off has been applied. However, having unsuccessfully used all means at our disposal to obtain this information, Venmyn Deloitte cannot attest to this issue. The reader of the report is advised to exercise caution in this matter. The coal quality cut-offs and the definitions of burnt, devolatilised and normal anthracite have not been recorded in the 2011 CPR and the Due Diligence of PC Meyer. Having unsuccessfully used all means at our disposal to obtain this information, Venmyn Deloitte cannot attest to this issue. The reader of the report is advised to exercise caution in this matter. The coal qualities used to define the resource areas, yield cut-offs and target coal quality in washed products have not been recorded in the 2011 CPR and the Due Diligence of PC Meyer. However, having unsuccessfully used all means at our disposal to obtain this information, Venmyn Deloitte cannot attest to this issue. The reader of the report is advised to exercise caution in this matter.
29.3. Previous Reserve Statement Venmyn Deloitte is not aware of any previous coal reserves statement, accompanied by a detailed mine plan that has been issued by Sentula since the 2011 CPR. Venmyn Deloitte understands that this mineral asset has changes ownership a couple of times in the last two decades and there is no information concerning the coal reserves that has been made available to Venmyn Deloitte.
April 2014 80
Table 19: Nkomati's Coal Resources, Inclusive of Reserves, as at 28 February 2011 (SRK)
AREA SEAM THICKNESS
VOLUME GTIS TTIS GEOLOGICAL LOSSES
TTIS CV ASH VM FC
(m2) (m) (m3) (Mt) (Mt) (%) (tonnes) (MJ/kg) (%) (%) (%)
Mangw eni A. No 2 Low er 45,100 6.24 281,424 1.49 0.42 0.38 377,390 25.74 2.5 22.1 7.4
Mangw eni B. No 2 Low er 106,000 6.51 690,060 1.52 1.05 0.95 944,002 25.74 2.5 22.1 7.4
Madadeni C. No 2 Upper 379,300 2.12 804,116 1.64 1.32 1.19 1,186,875 22.25 1.7 31 6.7 60.3
Madadeni C. OC No 2 Low er 327,000 3.67 1,200,090 1.53 1.84 1.65 1,652,524 25.32 2.1 22 7.1 68.8
Madadeni C. UG No 2 Low er 47,800 3.47 165,866 1.53 0.25 0.22 228,397 25.32 2.1 22 7.1 68.8
Madadeni C. No 1 361,000 1.21 436,810 1.52 0.66 0.6 597,556 25.93 1.9 21.2 6.2 79.7
Madadeni III. No 2 Low er 145,300 3.95 573,935 1.52 0.87 0.79 785,143
1,411,500 4,152,301 6.41 5.77 5,771,887
NOTES:-
6. MTIS - Mineable Tonnes In-situ.
1. Coal Resources have been reported in accordance with the classification criteria of the South African Code for the Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code).
2. Coal Resources are inclusive of Coal Reserves.
3. Coal Resources are not Coal Reserves and have not been evaluated for economic viability.
4. Coal Resources are reported on an air-dried, uncontaminated basis (ad, uc).
5. GTIS - Gross Tonnes In-situ.
TOTAL
Source: Sentula Mining SRK CPR, March 2011 ,Table ES4
AIR DRIED BASIS, UNCONTAMINATED (RAW)
BLOCK SEAM RD IM (%)RESOURCE CATEGORY MINING METHOD
Indicated 10%
April 2014 81
29.4. Current Reserve Statement The current coal reserve quantification was based on the coal reserves quantified by SRK in the 2011 CPR. It should be noted that at the date of the 2011 CPR there was no material further mining that was conducted on the mineral asset. The mine was put under care and maintenance in the same month with the coal reserve declaration date. Hence, Venmyn Deloitte confirms that there are no material changes to the coal reserves that were declared by SRK. The coal reserves are not materially different from that quantified previously. These Mineral Reserve tables have been extracted directly from the 2011 CPR and are presented in Table 20. Venmyn Deloitte has reviewed the Mineral Reserves where possible, however as the underlying data is not readily available for review, Venmyn Deloitte has relied upon the Mineral Reserve estimated by SRK in 2011, as is. No material mining or exploration has taken place post-estimation, and Venmyn Deloitte considers these to be the most up to date. As previously discussed Venmyn Deloitte’s Competent Person, in accordance with the SAMREC Codes, Mr A Clay, is a fully competent geologist who has the relevant experience required to perform the activity he is undertaking. Venmyn Deloitte has relied upon the reserve statement as estimated in the 2011 CPR and the 2013 Due Diligence. As all mine planning and forecasting was performed on the 2011 reserves, the SRK 2011 coal reserves are considered to be the current estimated reserves. The only material change that has happened between the coal reserves declaration date and the date of this report is the changes in the macroeconomics such the coal prices and the cost of production. These have since been updated as detailed in the relevant section of this report. Venmyn Deloitte confirms that this coal reserves is economically extractable at the current forecasted macroeconomics. Venmyn Deloitte has reviewed the underlying 2011 CPR together with the cash flow model that we have prepared separately and in conjunction with Sentula. Having taken into account the latest production plan (GM Geotechnical and PC Meyer), operating costs and potential coal prices we consider that there are economically mineable as per SAMREC 32. 29.4.1. Modifying Factors
Venmyn Deloitte has reviewed the Sentula financial model based on the estimated production, mining and processing costs and capital expenditure to demonstrate the economic viability of extracting these coal reserves. Venmyn Deloitte considers the modifying factors to be reasonable and that they have been correctly applied in the derivation of reserves. The modifying factors applied to derive the Nkomati Coal Reserves are as follows:-
• an export/ domestic anthracite coal price of USD100/t for the primary product, at an exchange rate of ZAR10.6 to the USD. The inclusion of the middling’s fraction would result in upside potential to the project. Commodity prices and exchange rates used to estimate the economic viability of Coal Reserves are based on long term forecasts applied at the time the estimate was completed;
• an average total cash operating cost of ZAR215/ROM t for the opencast mining and ZAR370/ROMt for the underground mining was utilised. For further detail, please refer to Section 30.5;
• processing plant efficiency of 90%;
• an average primary product practical yield of 67% and an average middling’s product practical yields of 30% of the discards were estimated based on the results of historical production statistics. However, the middling product has not considered for the coal reserve declaration;
• the continuous miner was located at the mine at the time of the reserve estimation and should have been used to calculate the reserves, as stated;
• with respect to legal tenure, this has been assessed in more detail in Section 13.1;
• with respect to the environmental issues, these have been dealt with in more detail in Section 13.4;
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Table 20: Nkomati's Coal Reserves as per SRK CPR, dated 31st March 2011
MINING BLOCK /
PIT
RESERVE CATEGORY
MINING METHOD
MINEABLE TONNES IN
SITU (MTIS) RESERVE
MODEL ESTIMATION ERROR (%)
LAYOUT LOSSES
(%)
EXTRACT- ABLE
RESERVE (t)
CONTA- MINATION
(%)
MINING RECOVERY
FACTOR (%)
ROM RESERVE (t) (AIR DRIED)
PRIMARY MARKETABLE RESERVE (t)
PRAC. YIELD (%)
CV (MJ/kg)
ASH (%)
VOL. (%)
FIXED CARBON (%)
SULPH. (%)
MOIST. (%)
Matedeni O/C 3,710,000 5% 5% 3,339,000 5% 90% 3,155,000 2,114,000 67.00 28.83 14.6 7.50 76.12 0.39 1.90Mangw eni U/G 1,460,000 5% 5% 1,314,000 0% 75% 985,000 660,000 67.00 28.30 15.0 8.13 74.35 0.36 1.65Matedeni U/G 820,000 5% 5% 738,000 0% 75% 553,000 370,000 67.00 28.12 15.0 7.18 74.35 0.36 1.41
5,990,000 5% 5% 5,391,000 5% 84% 4,693,000 3,144,000 66.99 28.42 14.84 7.60 74.94 0.37 1.65
No moisture correction factor w as applied to the ROM tonnes as dry mining techniques are to be used. In addition, all product qualities quoted on an air dried basis.Practical yields are obtained from the slimline borehole yields and take into account a 90% plant eff iciency.
GRAND TOTAL / AVERAGE NKOMATI RESERVES
Primary product yield percentages exclude f ines recovery and the potential secondary product.
Probable
Notes :The declared coal reserves is based upon the Measured and Indicated Coal Resources only.
Rounding dow n of tonnages to 1,000t to reflect the relative uncertainty in the estimates may result in adding inconsistencies.
PRIMARY PRODUCTAIR DRIED WASHED QUALITIES @ 15% ASH
April 2014 83
• mining recovery efficiency and extraction factor of 90% and model estimation error of 5% on both the opencast and underground Coal Reserves. However for the declaration of the Coal Resources the appropriate geological losses were applied depending on the geological confidence;
• no surface/residual moisture of ~3.0% was considered and inherent moisture of 1.6% was utilised;
• assumed contamination of 5% for the opencast coal reserves and approximately 0% for the underground coal reserves. This figures has been based upon industry averages;
• in the estimation of coal reserves, Venmyn Deloitte assumed that all regulatory applications will be reasonably approved and the current approvals will continue to be valid; and
• primary product yield percentages exclude fines recovery and any potential secondary product.
Saleable Coal Reserves are reported on an as sold and air dried basis. No superficial moisture is added as the Saleable Reserves are sold on an air dried basis. For logistical purposes relating to coal transport, the addition of 3% moisture to the Saleable Tonnes is required to account for superficial moisture.
30. Mineral Asset Valuation of Nkomati Venmyn Deloitte was commissioned by Sentula to perform an independent valuation of the mineral assets belonging to Sentula using the SAMVAL Code. To this end, appropriate valuation methods will be used and each mineral asset will be examined on its merits and demerits. Venmyn Deloitte’s Competent Valuator, in accordance with the SAMREC Codes, Mr A Clay, is a qualified geologist, a registered Professional Natural Scientist (Reg. No. 400105/88). Mr A Clay has the relevant experience required to perform the activity he is undertaking. Venmyn Deloitte has relied upon the resource and reserve statement as estimated in the 2011 SRK CPR, which is the basis for this valuation. 30.1. Mineral Asset Valuation Methodologies
SV2.8, SV2.9 Any decision to apply a valuation technique will depend principally on the stage to which the project has been developed, the geological confidence and the potential of the mineral asset to demonstrate reasonable and realistic prospects for eventual economic extraction. The valuation approach for a greenfields project will be substantially different from that applied to a well-drilled, extensively explored mineral asset. Changes in the value of a mineral asset are associated with increasing confidence through increased knowledge, as well as the greater degree of probability of it being brought to account. An appropriate valuation recognises these possibilities. Furthermore, a valuation exercise may produce different outcomes for the same mineral asset depending on which valuation method has been applied and, therefore, a realistic and reasonable range of values will be given. Since the individual projects are at different stages of production and development, different valuation approaches will be adopted in accordance to the SAMVAL Code. The three main different valuation approaches as stipulated in the SAMVAL Code are the Cost Approach, Market Approach / Comparative Approach and the Income Approach / DCF Approach. The valuation approaches incorporate the respective Mineral Resource and Mineral Reserve categories on the following basis:-
• stage of development;
• level of geological confidence in the interpretation of the geology and mineralisation;
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• the depth of the defined Mineral Resources and Mineral Reserves relative to surface i.e. whether the undeveloped Mineral Resources are likely to be mined early, or later in the production plan, and at what relative cost;
• the availability of existing mining infrastructure and mineral production within the project area, i.e. whether the undeveloped Mineral Resources and Mineral Reserves are likely to be mined as an extension of a pre-existing operation; and
• relative difficulty or ease of mining conditions largely due to complex geological structures, and whether or not they are conducive to mechanised mining.
In conducting mineral asset valuations, Venmyn Deloitte considers the following categories of mineral assets:-
• Exploration Areas - properties where mineralisation may or may not have been identified, but where a mineral or petroleum resource has not been identified;
• Advanced Exploration Areas - properties where considerable exploration has been undertaken and specific targets have been identified that warrant further detailed evaluation, usually by drill testing, trenching or some other form of detailed geological sampling. A resource estimate may or may not have been made but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the prospects to the resource category;
• Pre-Development Projects - properties where mineral or petroleum resources have been identified and their extent estimated (possibly incompletely) but where a decision to proceed with development has not been made. Properties at the early assessment stage, properties for which a decision has been made not to proceed with development. Properties on care and maintenance and properties held on retention titles are included in this category if mineral or petroleum resources have been identified, even if no further valuation, technical assessment, delineation or advanced exploration is being undertaken;
• Development Projects - properties for which a decision has been made to proceed with construction and/or production, but which are not yet commissioned or are not yet operating at design levels;
• Operating Mines - mineral properties, particularly mines and processing plants that have been commissioned and are in production; and
• Defunct Property: - a Mineral Asset on which the Mineral Resources and Mineral Reserves have been exhausted and exploitation has ceased and that may or may not have residual; assets and liabilities.
• Dormant Property:- a Mineral Asset is not being actively explored or exploited, in which the Mineral Resources and Mineral Reserves have not been exhausted and may or may not be economically viable.
According to these categories, Nkomati mineral asset of Sentula have been classified as a Dormant Property. Where insufficient confidence exists in the technical parameters of a mineral deposit, or mineral asset, to classify resources, valuation methods mainly rely on the principle of historical cost. This implies that a mineral asset’s value is related to the money spent on its acquisition, plus a multiple of the exploration expenditure, depending upon the degree to which its prospectivity has been enhanced by exploration. Once resources have been classified, then market comparisons can be made on a monetary value per unit of mineralisation (e.g. ZAR/t). After technical studies establishing the basis for future economic exploitation have been carried out, Discounted Cash flow (DCF or Cash flow) methods are applicable and all the methods used to identify a reasonable transaction value.
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As the confidence in mineral resource estimates is increased, i.e. from Inferred Mineral Resources to Indicated Mineral Resources and Measured Mineral Resource, so is the veracity of the valuation. Table 21 summarises the valuation approaches and the underlying methodologies that Venmyn Deloitte adopts in mineral asset valuation. In other words, Table 21 illustrates the link between a project's development status and the most appropriate valuation methodology.
Table 21: Valuation Approaches and Methodologies VALUATION APPROACH
VALUATION METHODOLOGY
DORMANT PROPERTIES
EXPLORATION PROPERTIES
MINERAL RESOURCES
DEVELOPMENT PROPERTIES
MINING PROPERTIES
DEFUNCT PROPERTIES
Cash flow DCF Yes No Yes Yes Yes No Sales/Market Comparisons Comparable Yes Yes Yes Yes Yes Yes
Cost Multiple of Historical Cost Yes Yes Yes No No Yes
Certain valuation methods are more widely used and may be more generally acceptable as industry practice than others, although this could change over time. Some methods can be considered to be primary methods for valuation while others are secondary methods or rules of thumb considered suitable only to check valuations by primary methods but it is imperative to use at least two methods. In performing the valuation of the Sentula Nkomati mineral asset, Venmyn Deloitte has relied on the Market and DCF Approaches, as deemed appropriate in Table 21.
30.2. Valuation Date SV1.9 The effective date of the Valuation is 9th April 2014.
30.3. General Mineral Asset Valuation Assumptions SV2.8; SV2.9 Nkomati has been valued using appropriate methodologies as described in the relevant project sections to follow. These valuations have been based on a number of specific assumptions as discussed in the relevant project sections, including the following general assumptions, as relevant:-
• that all information provided to Venmyn Deloitte, by Sentula and its contractors can be relied upon;
• that the valuations are with respect to the face value of the mineral assets only;
• that the legal status of the mineral rights and statutory obligations were fairly stated;
• that the mineral licences will be kept valid and that they can be converted to mining licences in the future;
• that expired prospecting rights will be successfully renewed;
• that the prospecting rights and mining rights will be kept valid;
• that all other regulatory approvals for exploration and mining will be timeously obtained;
• that the corporate structures and on-going activities are fairly presented;
• that reliance can be placed on the Financial Statements and Management Accounts provided by Sentula;
• that reliance can be placed on the current mineral resource and/or reserve statements;
• that the coal quality lends itself to the production of a marketable product;
• that Sentula and its subsidiaries would continue as going concerns and would continue to be fully funded; and
• that Sentula would be able to secure markets and offtake for any future operations.
Venmyn Deloitte made due enquiry into these issues to be satisfied of the potential impact on the mineral asset valuation.
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Venmyn Deloitte has relied upon and assumed the accuracy of the information provided to it in deriving its opinion. Where practical, Venmyn Deloitte has corroborated the reasonableness of the information provided to it for the purpose of its valuation, whether in writing or obtained in discussion with management of Sentula, by reference to publicly available or independently obtained information. Venmyn Deloitte’s valuations are based on current economic, regulatory, market as well as other conditions. Subsequent developments may affect these valuations, and Venmyn Deloitte is under no obligation to update, review or re-affirm its valuations based on such developments.
30.4. Market Approach The Market Approach relies on the principle of “willing buyer, willing seller” and requires that the amount obtainable from the sale of the asset is determined as if in an arm’s length transaction. However, in order to arrive at reasonable market values with which to compare any mineral asset undergoing valuation, appropriate recent and historical transactions must form the basis. Figure 23 summarises Venmyn Deloitte’s database of recent unit market valuations within the context of the coal markets, with reference to the respective resource and reserve classifications. Venmyn Deloitte was able to carry out a comparable transaction valuation of mineral assets where the coal resources have been declared on the basis that recent market valuations of a similar nature provide the proxy for value. Venmyn Deloitte has utilised its entire coal transaction database to derive an appropriate comparable transaction value. Venmyn Deloitte maintains a database of coal transactions of various qualities and unit market capitalisations of coal operating companies, which is continually updated. This information is collated to produce a Coal Valuation Curve and is illustrated in Figure 23. This curve demonstrates the range of indicative market-related values of ZAR/t contained coal attributed to the different categories of Coal Resources and more importantly, it demonstrates that the unit values associated with the KwaZulu Natal coalfield relative to the overall South African Coalfields’ valuation range. Specifically high grade thermal and anthracite projects are highlighted. The quantification of the discount is a subjective one but Venmyn Deloitte is of the opinion that the ranges defined are reasonable in light of historic transactions and consideration of the following:-
• location of the mineral deposits;
• proposed mining method;
• the quality of the coal deposits;
• the classified coal resources;
• infrastructure and logistics; and
• timing of potential exploitation.
The unit values have been generated using the coal valuation curve (Figure 23) and these have been multiplied by the contained Gross In-Situ Tonnage (GTIS) of the coal deposits. Nkomati was valued using the Market Approach valuation method and a summary is shown in Table 22 and Figure 23:-
Table 22: Valuation of Nkomati’s Mineral Assets using the Market Approach, 9th April 2014
PROJECT SENTULA STAKE GTIS UNIT VALUE (ZAR/t) TOTAL PROJECT
VALUE (ZAR/t) PREFERRED
(Mt) LOWER UPPER LOWER UPPER 100% ATTR
SENTULA ATTR
Nkomati
60% 6.41 7.00 15.00 44.87 96.15 70.51 42.31 TOTAL/AVERAGE 6.41 7.00 15.00 44.87 96.15 70.51 42.31
VALUATION CURVE FOR SOUTH AFRICAN COAL PROJECTS
Figure 23
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0.01
0.10
1.00
10.00
100.00
0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
2013 Company EV KwaZulu Natal Witbank and Ermelo Coalfields Historic Transactions Recent Transactions Valuations Soutpansberg Coalfield Waterberg Coalfield Thuli Coalfield
RESOURCE TARGET INFERRED INDICATED MEASURED
ZAR
per
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e In
- Si
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oal R
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Nkomati Value Range
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The value range derived from the Market Approach is between ZAR44.89m (low valuation) and ZAR96.15m (upper valuation), and a Fair Value of ZAR70.51m on a 100% attributable basis. This valuation range was calculated from the range of unit values as defined by the Market Approach calculated based on other Anthracite and high grade thermal projects in the KwaZulu Natal coalfields. The value range reflects the level of confidence attached to the respective coal resources. The population of historic market transactions and valuations provides an indication of reasonability.
30.5. Cashflow Approach The Cashflow Approach relies on the “value-in-use” principle and requires determination of the present value of future cash flows over the useful life of the mineral asset. The objective of the DCF valuation is to apply the proposed and realistic technical and economic parameters described in the relevant sections in this report, using the known information and experience on similar projects as a basis of exploitation, and to cross-check the result with Venmyn Deloitte’s coal valuation curve envelope. To this end, Venmyn Deloitte has researched and used the most appropriate and realistic input assumptions with respect to mining, economic, environmental and other relevant issues to provide a valuation profile which reflects the business case of Nkomati as accurately as possible within the constraints of the existing information. The outputs of the valuation were principally NPV and IRR under the current mining, metallurgical, and economic environment. All input assumptions, which have been sourced from documentation, provided by Sentula, as well as from the public domain, were independently reviewed by Venmyn Deloitte for reasonableness and where necessary, changed to reflect the current economic climate. The selection of the DCF method was influenced by the ability of the methodology to capture the pertinent technical and economic aspects of the projects and the historical information available, to enable an informed investment decision on the projects. Applicable financial model inputs and factors were researched and used in preparing the DCF model. The results of this valuation would be an indicator of the present value of the project given the quality and quantity of information given and the quality of the estimates made on some inputs of the model. The sub-sections that follow identify the input assumptions that were used in the cashflow model, how these were derived (where applicable) and their sources. 30.5.1. Production Assumptions
The following production assumptions have been used in the DCF model. The mine production schedule and primary yield for both the opencast and underground portions are presented in Table 23. Table 23: Mine Production Schedule
OPEN CAST UNDERGROUND PRODUCT YIELD (ROM tonnes) (ROM tonnes) (%) Year 0 0 0 0 Year 1 270,000 0 67% Year 2 -7 420,000 240,000 67% Year 8 268,929 98,000 67%
30.5.2. Coal Prices
The plan presented to Venmyn Deloitte by Sentula is for the anthracite coal mined at Nkomati to be exported. Venmyn Deloitte therefore used a real FOB Richards Bay coal price for anthracite of USD100/tonne over the LOM. The price used is shown in Table 24. Table 24: Coal Prices Used
DESCRIPTION UNIT VALUE
Export Anthracite Price (USD/tonne) 100.00
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30.5.3. Taxation In South Africa, the current company tax rate is 28% after full recovery of all capital expenditure deducted in the year it is expended. The calculated royalty rate for the project is based on the formula provided in the 2008 edition of the Mineral and Petroleum Royalty Act. The project values calculated include all estimated capital expenditure, together with a provision for the replacement of on-going (Stay-in-Business (SIB)) capital. The capital expenditure incurred by a mining company qualifies for a deduction in full in the year in which it is spent. Since most mining capital cannot be written off in the year in which it is incurred, if insufficient taxable revenue is generated in any single year, the unredeemed capital balance is carried forward to the next tax year.
30.5.4. Exchange Rate Venmyn Deloitte used a ZAR/USD exchange rate of ZAR10.5/USD in the DCF model.
30.5.5. Discount Rate The nominal discount rate used in the DCF model assumes 100% equity and is calculated using a build-up method. The discount rate consists of the South African risk free rate based on a R186 bond plus the JSE market risk premium plus a project specific risk premium. The yield on a R186 bond is 8.30%, and the JSE market risk premium is 6.50%. The project specific risk premium of 5.50% accounts for project specific risk factors that will be further explained in section 10.5.5.1. This works out to a nominal discount rate of 20.30%, and at an inflation Rate of 6.00%, the Real discount rate is 13.40%. The key inputs in the calculation of the real discount rate used in the DCF model are summarised in Table 25. Table 25: Discount Rate Calculation
DESCRIPTION UNIT VALUE
RSA Inflation Rate (%) 6.0% RSA Risk Free Rate (%) 8.3% Market Risk Premium (%) 6.5% Project Specific Risk Premium (%) 5.5% Nominal Discount Rate (%) 20.3% Real Discount Rate (%) 13.4%
30.5.5.1. Specific Project Risk Premium (α)
In addition to the market risk premium, Venmyn Deloitte has added a specific project risk premium, which varies with level of knowledge and ranges within 2% and 10% and is weighted according to 19 critical project development factors. The various project specific risks for Nkomati were derived from the generic individual mining project risk components shown and described in Table 26. Table 26: Project Specific Risk Factors
FACTOR DESCRIPTION Reserves The confidence level in the declared mineral reserve
Metal Prices Reasonability of assumed price levels based on volatility and long term forecasts
Operating Costs The confidence in the estimates of operating costs
Social & Environmental The social and environmental factors that have a bearing on the project
Political and Country General market perception of the mining industry in operating country
Location The proximity of the project to infrastructure Capital Costs The confidence in the capital cost estimates Management Management experience
Ownership Status of mining rights, exploration rights and ownership of project
Taxation Likelihood of changes in royalty and tax regime in operating country
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FACTOR DESCRIPTION Recovery Confidence in eventual economic extraction of minerals
Data Quality Quality of technical information and QA/QC processes Geology Structural complexity of the orebody Cost Inflation Reasonability of cost escalation assumptions Mining and Processing Methods Risk associated with mining and processing methods
Stage of Development Pre-production, producing or end of life Life of Mine How long the project will operate Scale of Project Project size Expansion Ability to increase reserves.
Venmyn Deloitte calculates the project specific risk premium α as [α = ∑ µi xi], where xi is the maximum estimated contribution to α for the factor listed, and µi is the sensitivity to that factor. Qualitatively we rank the sensitivity to the factors as low, normal, above normal and high. A low rank gives a sensitivity factor of 0, a normal rank gives 0.1, a higher than normal rank gives 0.4 and a high rank gives 1.A summary of the calculation of the market risk premium is shown in Table 27:- Table 27: Market Risk Premium Calculation
FACTOR
α RANK FACTOR SENSITIVITY (x%) µ
Reserves 3.00 Normal 0.10 Commodity Prices 3.00 Above Normal 0.40 Operating Costs 2.50 Above Normal 0.40
Political and Country Risk 2.25 Above Normal 0.40 Social And Environmental 2.00 Normal 0.10 Location 1.50 Normal 0.10 Capital Costs 1.50 Above Normal 0.40 Management 1.00 Normal 0.10 Ownership 1.00 Normal 0.10
Taxation 0.80 Normal 0.10 Recovery 0.80 Above Normal 0.40 Data Quality 0.60 Above Normal 0.40 Geology 0.50 Normal 0.10 Cost Inflation 0.40 Normal 0.10 Mining Processing Method 0.40 Normal 0.10
Development Stage 0.20 Above Normal 0.40 Life Of Mine 0.20 Normal 0.10 Scale of Project 0.20 Normal 0.10 Expansion 0.10 Normal 0.10
TOTAL α 5.45
30.5.6. Capital Expenditure The capital expenditure figures that have been used in this report are shown in Table 28. Table 28: Nkomati Capex Figures
DESCRIPTION UNIT VALUE
Redevelopment Capex (ZARm) 40.30 Underground Mining Equipment (ZARm) 65.44 Plant Refurbishment and Expansion (ZARm) 25.95 Ongoing Capital (ZARm) 15.13 Recommissioning Costs (ZARm) 2.50
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30.5.7. Operating Expenditures The operating expenditure figures that have been used in this report are shown in Table 29. Table 29: Nkomati Opex Figures
DESCRIPTION UNIT VALUE
Contractor Mining OC (ZAR/tonne) 215.00 Contractor Mining UG (ZAR/tonne) 370.00 Crushing and Screening (ZAR/tonne) 5.95 Washing (ZAR/tonne) 47.58
Discard Handling (ZAR/tonne) 13.87 General Surface Engineering (ZAR/tonne) 1.19 Power and Water (ZAR/tonne) 3.57 Fixed Production Costs (ZARm) 1.19 Administration (ZARm) 7.14 Security (ZARm) 1.43
Private Royalty (ZAR/tonne) 7.73 Rehabilitation Monitoring (ZAR/tonne) 0.24 Transport Costs (ZAR/tonne) 120.00 Loading Costs (ZAR/tonne) 5.00 Port Costs (USD/tonne) 12.50
30.5.8. Rehabilitation Guarantee In terms of the MRPDA, mining companies are required to submit a mine closure and rehabilitation guarantee calculated as per the South African Department of Mineral Resources (DMR) guidelines. The closure liability as provided by Sentula management and used in the DCF model are Table 30. Table 30: Closure Liability
DESCRIPTION UNIT VALUE
Closure Liability (ZARm) 112.00 Future Closure Cost Provision (ZAR/tonne) 2.97
30.5.9. Valuation Risks Venmyn Deloitte relied on inputs from the 2011 SRK CPR, Sentula management and Venmyn Deloitte’s benchmarking database and information from the public domain to construct this cashflow model. Venmyn Deloitte has verified the inputs provided wherever possible, however low confidence in some key inputs has been identified.. Some of these inputs are:-
• historically the Total Saleable Yield actually achieved in the Processing Plant was less that the currently stated 67% standard primary yield used in the report;
• the financial model assumes all the product will be exported, however, in the past that was not the case; and
• opex and capex figures are escalated from the 2011 report, and has not been re-estimated based on a new production plan.
For this reason, the cashflow valuation is reported on, but is not relied upon in determining the project value.
30.5.10. Valuation Results Venmyn Deloitte used these parameters and modifying factors to construct an independent cashflow model in constant money (real) terms. The cashflow valuation results are shown in Table 31 and an extract of Nkomati cashflow model is given in Table 32.
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Table 31: Nkomati Cashflow Valuation Results, 9th April 2014 DESCRIPTION VALUE
Real Discount Rate (%) 13.44 TOTAL NPV (100% ATTRIBUTABLE) (ZARm) 269.44
Total Saleable Coal Recovered (Mt) 3.14 Implied Unit Value per Resource Tonne (ZAR/t) 38.22 Sentula Stake in Nkomati 60
NKOMATI ATTRIBUTABLE NPV (ZARm) 161.66 The value range for Nkomati based on the DCF approach is ZAR132m to ZAR397m with a fair value of ZAR269m.The attributable value to Sentula is ZAR161.66m for Nkomati based on a 60% stake.
30.5.11. Sensitivity Analysis Venmyn Deloitte performed sensitivity analyses to the NPV generated and the results indicated that the NPV is most sensitive to factors affecting income (plant yield and coal prices) as shown in Figure 24, Figure 25 and Figure 26:-
Figure 24: Cashflow Sensitivity to Operating Income
Figure 25: Cashflow Sensitivity to Operating Expenditure
-100.00
0.00
100.00
200.00
300.00
400.00
500.00
600.00
80% 90% 100% 110% 120%
NPV
(ZA
Rm
)
Percentage of Factor
9.4% 11.4% 13.4% 15.4% 17.4%
-100.00
0.00
100.00
200.00
300.00
400.00
500.00
600.00
80% 90% 100% 110% 120%
NPV
(ZA
Rm
)
Percentage of Factor
9.4% 11.4% 13.4% 15.4% 17.4%
TABLE 32: AN EXTRACT OF THE NKOMATI'S CASHFLOW MODEL
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YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEARUNIT 0 1 2 3 4 5 6 7 8
MININGOpen Cast ROM (tonnes) 3 058 928.80 0.00 270 000.00 420 000.00 420 000.00 420 000.00 420 000.00 420 000.00 420 000.00 268 928.80Open Cast Primary Practical Yield (%) 67.00% 0.00% 67.00% 67.00% 67.00% 67.00% 67.00% 67.00% 67.00% 67.00%Open Cast Primary Product (tonnes) 2 049 482.30 0.00 180 900.00 281 400.00 281 400.00 281 400.00 281 400.00 281 400.00 281 400.00 180 182.30Underground ROM (tonnes) 1 538 000.00 0.00 0.00 240 000.00 240 000.00 240 000.00 240 000.00 240 000.00 240 000.00 98 000.00Underground Primary Practical Yield (%) 67.00% 0.00% 0.00% 67.00% 67.00% 67.00% 67.00% 67.00% 67.00% 67.00%Underground Primary Product (tonnes) 1 030 460.00 0.00 0.00 160 800.00 160 800.00 160 800.00 160 800.00 160 800.00 160 800.00 65 660.00Total ROM (tonnes) 4 596 928.80 0.00 270 000.00 660 000.00 660 000.00 660 000.00 660 000.00 660 000.00 660 000.00 366 928.80Total Primary Product (tonnes) 3 079 942.30 0.00 180 900.00 442 200.00 442 200.00 442 200.00 442 200.00 442 200.00 442 200.00 245 842.30OPERATING INCOMEPrimary Product Sales (ZARm) 3 233.94 0.00 189.95 464.31 464.31 464.31 464.31 464.31 464.31 258.13Marketing Fee (ZARm) (64.68) 0.00 (3.80) (9.29) (9.29) (9.29) (9.29) (9.29) (9.29) (5.16)Total Operating Income (ZARm) 3 169.26 0.00 186.15 455.02 455.02 455.02 455.02 455.02 455.02 252.97OPERATING EXPENDITUREContractor Mining OC (ZARm) (657.67) 0.00 (58.05) (90.30) (90.30) (90.30) (90.30) (90.30) (90.30) (57.82)Contractor Mining UG (ZARm) (569.06) 0.00 0.00 (88.80) (88.80) (88.80) (88.80) (88.80) (88.80) (36.26)Crushing and Screening (ZARm) (27.34) 0.00 (1.61) (3.93) (3.93) (3.93) (3.93) (3.93) (3.93) (2.18)Washing (ZARm) (218.74) 0.00 (12.85) (31.40) (31.40) (31.40) (31.40) (31.40) (31.40) (17.46)Discard Handling (ZARm) (21.04) 0.00 (1.24) (3.02) (3.02) (3.02) (3.02) (3.02) (3.02) (1.68)General Surface Engineering (ZARm) (5.47) 0.00 (0.32) (0.79) (0.79) (0.79) (0.79) (0.79) (0.79) (0.44)Power and Water (ZARm) (16.41) 0.00 (0.96) (2.36) (2.36) (2.36) (2.36) (2.36) (2.36) (1.31)Truck Product Loading (ZARm) (15.40) 0.00 (0.90) (2.21) (2.21) (2.21) (2.21) (2.21) (2.21) (1.23)Fixed Production Costs (ZARm) (9.52) 0.00 (1.19) (1.19) (1.19) (1.19) (1.19) (1.19) (1.19) (1.19)Administration (ZARm) (57.10) 0.00 (7.14) (7.14) (7.14) (7.14) (7.14) (7.14) (7.14) (7.14)Security (ZARm) (11.42) 0.00 (1.43) (1.43) (1.43) (1.43) (1.43) (1.43) (1.43) (1.43)Private Royalty (ZARm) (23.81) 0.00 (1.40) (3.42) (3.42) (3.42) (3.42) (3.42) (3.42) (1.90)Rehabilitation Monitoring (ZARm) (1.09) 0.00 (0.06) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.09)Future Closure cost provision (ZARm) (13.67) 0.00 (0.80) (1.96) (1.96) (1.96) (1.96) (1.96) (1.96) (1.09)Transport Costs (ZARm) (369.59) 0.00 (21.71) (53.06) (53.06) (53.06) (53.06) (53.06) (53.06) (29.50)Port Costs (ZARm) (404.24) 0.00 (23.74) (58.04) (58.04) (58.04) (58.04) (58.04) (58.04) (32.27)Total Operating Expenditure (ZARm) (2 421.57) 0.00 (133.40) (349.20) (349.20) (349.20) (349.20) (349.20) (349.20) (192.98)CAPITAL EXPENDITUREExploration Capex (ZARm) (40.30) 0.00 (5.00) (5.04) (5.04) (5.04) (5.04) (5.04) (5.04) (5.04)Underground Mining Equipment (ZARm) (65.44) 0.00 (12.11) (34.93) (18.41) 0.00 0.00 0.00 0.00 0.00Plant Refurbishment (ZARm) (25.95) 0.00 (20.00) 0.00 0.00 0.00 0.00 0.00 0.00 (5.95)Ongoing Capital (ZARm) (15.13) 0.00 (1.89) (1.89) (1.89) (1.89) (1.89) (1.89) (1.89) (1.89)Recommissioning Costs (ZARm) (2.50) 0.00 (2.50) 0.00 0.00 0.00 0.00 0.00 0.00 0.00Working Capital (ZARm) 0.00 0.00 (10.00) 0.00 0.00 0.00 0.00 0.00 0.00 10.00Total Capital Expenditure (ZARm) (149.33) 0.00 (51.49) (41.86) (25.35) (6.94) (6.94) (6.94) (6.94) (2.88)Royalty Rate (%) 0.50% 0.50% 0.50% 0.50% 0.50% 1.74% 2.46% 2.46% 2.53%Royalty Payment (ZARm) (44.42) 0.00 (0.93) (2.28) (2.28) (2.28) (7.91) (11.18) (11.18) (6.40)Tax Payment (ZARm) (78.64) 0.00 0.00 0.00 0.00 0.00 (15.32) (24.56) (24.56) (14.20)Post Tax Cash Flow (ZARm) 475.30 0.00 0.32 61.69 78.20 96.61 75.65 63.15 63.15 36.51Accumulated Cash Flow (ZARm) 0.00 0.32 62.01 140.21 236.83 312.48 375.63 438.79 475.30Discounted Cash Flow (ZARm) 269.44 0.00 0.28 47.93 53.57 58.33 40.27 29.63 26.12 13.31
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Figure 26: Cashflow Sensitivity to Capital Expenditure
30.6. Valuation Summary SV2.10, SV2.15 Venmyn Deloitte has performed a valuation Sentula’s Nkomati asset using the Market and DCF methods, as appropriate, and the results are summarised in Table 33:-
Table 33: Sentula Mineral Asset Valuation Summary, 9th April 2014
VALUATION METHODOLGY SENTULA STAKE
PROJECT VALUE ATTRIBUTABLE VALUE
LOWER VALUE
UPPER VALUE
PREFERRED VALUE
LOWER VALUE
UPPER VALUE
PREFERRED VALUE
(ZARm) (ZARm) (ZARm) (ZARm) (ZARm) (ZARm)
Market Valuation Approach 60%
44.9 96.2 70.5 26.92 57.69 42.31 Cash Flow Valuation Approach 132.0 397.0 269.4 79.20 238.20 161.64
Based on the low level of confidence in the input parameters into the cashflow model, Venmyn Deloitte prefers the Market Valuation Approach for the valuation of Nkomati. Venmyn Deloitte concludes that the Fair Value of the mineral assets attributable to Sentula is ZAR42.31m with a lower value of ZAR26.92m and an upper value of ZAR57.69m. The valuation of exploration assets is, by nature, both subjective and uncertain. The placing of a specific monetary value on historical exploration can be misleading, and the reader is advised to consider the ranges, in which each property has been evaluated, and to further consider the technical merits of each project area and form an opinion regarding its prospectivity on the basis of the data presented in this report.
30.7. Sources of Information and Other Experts SV2.11 All technical data was sourced from Sentula, their subsidiaries or documents as outlined in Section 4 of this report.
30.8. Previous Valuations SV1.12 SRK valued Nkomati at ZAR279m using the DCF approach in the Sentula Coal CPR March 2011.
-100.00
0.00
100.00
200.00
300.00
400.00
500.00
600.00
80% 90% 100% 110% 120%
NPV
(ZA
Rm
)
Percentage of Factor
9.4% 11.4% 13.4% 15.4% 17.4%
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30.9. Historic Verifications SV2.17 No verification of historic performance parameters could be carried out.
30.10. Audits, Reviews and Historic Verification SV2.19 No audits or reviews of the Mineral Asset Valuation have been conducted, and a historic verification of the performance parameters on which the Mineral Asset Valuation is based cannot be presented.
30.11. Forward Looking Statements SV2.10 This report contains forward-looking statements. These forward looking statements are based on opinions and estimates of Sentula management and Venmyn Deloitte at the date the statements are made. They are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause such differences include changes in world coal markets, equity markets, costs and supply of materials relevant to the projects, and changes to regulations affecting them. Although we believe the expectations reflected in the forward-looking statements to be reasonable, Venmyn Deloitte cannot guarantee future results, levels of activity, performance or achievements.
31. Risks SR6A(i); SR6B(i); SR10A(i); SR10B(i); SV2.10; JSE12.9(h)(x)
31.1. Project Risks This section will be further expanded upon in further studies by the relevant specialists, as economic and mining risk factors fall outside the scope of this resource report and the expertise of the Competent Person. Some risks are associated with the deposit and are briefly discussed. Nkomati is inherently exposed to normal operational risks associated with exploration, development and production projects in general, and South Africa in particular. The success of the projects depends largely on successful prospecting and development programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical or economic issues. Nkomati is located within South Africa. Sentula is therefore significantly exposed to the South African economy in general, and the South African coal mining industry in particular. Factors such as political and industrial disruption, currency fluctuation and interest rates could have an impact on future operations, and potential revenue streams can also be affected by these factors. Seam continuity poses a risk to mine planning and productivity because of the dolerite sill transgressions. It is possible that more dolerite dykes and faults than those intersected during exploration exist in the project area. Shallow seams can be subject to unforeseen localised weathering. Resource boundaries for the resource blocks were not well defined in the information given to Venmyn Deloitte and as such the resource block boundaries may not be accurate. Groundwater may impact mine productivity, water pumping systems and water disposal. The mine layout, infrastructure configuration, equipment requirements, manpower requirements, ventilation and utility requirements all pose possible risks to production.
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Nkomati has faced significant challenges in the past. Venmyn Deloitte recommends that the Project commence with application for a further extension of the environmental authorisation to ensure continuance with current legislative requirements and that a key focus on meeting legislation is a focus going forward. The modifying factors described in Section 29.4.1 are subject to change over time and as such should be considered as part of the project risks. Given the extended timeframe development between estimation and current day, Venmyn Deloitte recommend that the closure estimate be recalculated to, at the very least, include current inflation for contractor rates. Venmyn Deloitte relied on inputs from the 2011 CPR, Sentula management and Venmyn Deloitte’s benchmarking database and information from the public domain to construct this cashflow model. Venmyn Deloitte has verified the inputs provided wherever possible, however low confidence in some key inputs has been identified. For this reason, the cashflow valuation is reported for completion, but is not relied upon in determining the project value.
31.2. Report Risks Venmyn Deloitte has relied on information provided by Sentula and its contractors. Where possible, this information has been verified from independent sources. Sentula has reviewed this report prior to its publication to identify factual errors and/or omissions. The authors of this report are not qualified to provide extensive commentary on legal issues associated with Sentula’s right to the mineral properties. Sentula has provided certain information, reports and data to Venmyn Deloitte in preparing this report, which to the best of Sentula’s knowledge and understanding, are complete, accurate and true and Sentula acknowledges that Venmyn Deloitte has relied on such information, reports and data in preparing this report. No warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness or accuracy of the legal aspects of this document. This report contains forward-looking statements. These forward-looking statements are based on the opinions and estimates of Venmyn Deloitte and Sentula at the date the statements were made. The statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those forward-looking statements anticipated by Venmyn Deloitte and Sentula. Factors that could cause such differences include changes in world coal markets, equity markets, costs and supply of materials, and regulatory changes. Although Venmyn Deloitte believes the expectations reflected in the forward-looking statements to be reasonable, Venmyn Deloitte does not guarantee future results, levels of activity, performance or achievements.
32. Exploration Programme and Budget SR1.1A(ii); SR5.4B(i); JSE12.9(e); JSE12.9(e)(i-iii); JSE12.9(h)(vi) There is no planned exploration at present. It is expected that once production recommences, ongoing exploration will recommence. The financial model provides for ZAR5.04m per year totalling ZAR40.30m over the LOM.
33. Conclusions and Recommendations Nkomati is currently on care and maintenance. The anthracite product targeted is intended for the metallurgical market. The mine is currently (since May 2011) on care and maintenance due to outstanding environmental documentation required by legislation. Some of the outstanding requirements have since been met. Final approval of the outstanding environmental licence was received in December 2013 however the sale process for Nkomati was already at a late stage and therefore the reopening of the operation was deferred to when the new owners would take control. Due to additional capex requirements to restart the operation it did not make sense to start operations once the sale negotiations were wrapped up.
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Due to the igneous and structural complexity of Nkomati it is recommended that detailed geological modelling be performed. A modelling report detailing the geostatistical methodology used in the modelling process is acquired by Sentula from the company who performed the latest geological modelling. Due to the resource blocks not being well defined in the information given to Venmyn Deloitte, it is recommended that the exact resource block boundaries are confirmed with the areas where resource tonnages are reported. Schematics of all quality information should be prepared for clarity purposes. The plant design is based on the traditional dense-medium separation techniques. The plant throughput capacity is currently limited to 100tph ROM although a debottlenecking exercise, which involves upgrading the dense-medium cyclone capacity to 200tph ROM, would have increased the plant throughput capacity to 200tph ROM. This exercise has not been completed as it has since been postponed. Sentula has faced various challenges with environmental licensing for Nkomati. All licensing issues have been rectified, and Sentula has obtained the following licenses for Nkomati:-
• DMR EMP approval;
• DEDET environmental authorisation; and
• DWA WUL approval.
Although Sentula have made a considerable effort to align Nkomati with the relevant environmental licenses, Venmyn Deloitte recommend that an environmental legal due diligence be conducted to ascertain Sentula’s compliance with current environmental legislation.
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34. Date and Signatures Yours Faithfully,
SR11B(iii); SV2.13; SV2.14 A.N. CLAY M.Sc. (Geol.), M.Sc. (Min.Eng.), Dip.Bus.Man., Pr.Sci.Nat., MSAIMM, FAusIMM, , FGSSA, MAIMA, MSPE, IoD. Competent Person/Valuator G. PETZER B.Sc. Hons (Geol.), Pr.Sci.Nat., MGSSA Mineral Project Analyst
J.A. MYBURGH B.Sc. (Mathematics), MIASSA, MGASA. Mineral Project Analyst
T. C. ORFORD B.Sc. Hons (Geol.), GDE (Min. Eng.) MGSSA, MGASA, MMINSA. Mineral Project Analyst S. DYKE MSc. (Env. Sci.) Cand. Sci. Nat, MIAIASA, MGSSA Environmental Industry Advisor Effective Date: 9th April 2014
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Appendix 1 : References SR1.3A(i); SV2.11
AUTHOR DATE TITLE SOURCE Allix, M Jul-05 Volatile times for South African steel industry www.bdlive.co.za
Balassi, J 2012 As gas heats up, coal sector burns less brightly http://in.reuters.com Benjamin, C Jul-05 SA diamonds languish in the rough www.mg.co.za Bodley, D, Bruch, S, Ralijaona, A, and Sithole, R
Jul-05 The South African Iron Ore Cluster Harvard Business School
BP 2010 BP Statistical Review of World Energy BP BP 2011 BP Statistical Review of World Energy BP BP 2012 BP Statistical Review of World Energy BP BP 2013 BP Statistical Review of World Energy BP BP Jul-05 BP Statistical Review of World Energy BP Bravura Jul-05 Commencement of the MPRDA Amendment Bravura June Newsletter 2013 Chamber of Mines (COM) Jul-05 Annual Report www.bullion.org
CIA Jul-05 World Factbook-South Africa www.cia.gov
Cooper, M 2012 Asian thermal coal prices collapse as demand, defaults weigh on market http://www.platts.com
Department of Mineral Resources (DMR) Jul-05 Provisional Mineral Production and Sales Statistics
(July 2013) DMR
DMR 2013 Yearly Mineral Statistics DMR Energy Information Administration (EIA)
Accessed 2010 Government website content www.eia.doe.gov/
Energy Information Administration (EIA) 2011b International Energy Outlook 2011 www.eia.doe.gov/
Energy Information Administration (EIA) 2011a Short-Term Energy and Summer Fuels Outlook www.eia.doe.gov/
Ernst & Young 2011 Business risks facing mining and metals 2011-2012 www.ey.com
Hartnady, CJH 2009 South Africa’s falling coal reserves (Review Article) INet Bridge 2013b SA steel production up 1.1% www.enca.com INet Bridge 2013a SA Steel Production Down in May www.fin24.com
Legalbrief 2012 Inga hydropower project battles to get off the ground www.legalbrief.co.za
Legalbrief Today Jul-05 MPRDA amendment process fleshed out www.legalbrief.co.za
Leon, P Jul-05 MPRDA amendments may further damage investor confidence www.politics.web
Low, D 2008 What future for Coal in South Africa The Oil Drum Europe (www.theoildrum.com)
Miranda Mineral Holdings Limited Aug-13 Nkomati Anthracite Mine Acquisition Review (DD)
Murphy Mining 2012 Anthracite Murphymininginternational.com Musaba, L 2010 The Southern African Power Pool www.sari-energy.org
Myles, L 2010 The Demand for Anthracite Larry Myles Reports, Special Energy Report
Reuters 2012b Update 2- China power output to hit 2-yr low, slow coal production –NDRC Report Af.reuters .com
Reuters 2012 BHP pull-out a problem for Inga project www.iol.co.za
Royal Haskoning DHV Sep-13 High Level Desk Top Mine Planning and Scheduling of the Bankfontein Coal Project for Sentula Mining
Seccombe, A Jul-05 Miners cry foul over proposed amendments to industry regulation www.bdlive.co.za
SRK Consulting Mar-11 An Independent Competent Persons’ Report on the Material Coal Assets of Sentula Mining Limited
The Mineral Corporation Nov-09
Nkomati Anthracite: A Review of the Coal Resource Estimates for the Mangweni And Matadeni Blocks Based on Updated Exploration Drilling Data
Tucker, C, Sibisi, S Jul-05 Brief overview of the main amendments proposed in the Mineral and Petroleum Resources Development Draft Amendment Bill 2012
www.bowman.co.za
Van der Want Jul-05 Amendments to the South African mining law – a controversy in the making www.lexology.com
Venmyn Deloitte Jan-13
Independent Techno-Economic Valuation Statement for ZYL Mining SA and Sentula Mining Limited on Nkomati and angwane North, Central and South Projects
Webber Wentzel Jul-05 Mineral and Petroleum Development Amendment Act, 2008
Webber Wentzel Mining, Energy and Natural Resources e-Alert
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Appendix 2 : Glossary and Abbreviations SR10A(ii)
ABBREVIATION/ TERM EXPLANATION
α Specific company risk premium 3D 3 Dimensional AFT Ash Fusion Temperatures amsl Above mean sea level Analytica Holdings Analytica Holdings (Pty) Ltd ANC African National Congress Anglo American Anglo American plc Anglo Coal Anglo Coal SA Limited, Anglo American plc’s Coal Division
API4 The API 4 index is the benchmark price reference for coal exported out of South Africa’s RBCTand is used in physical and over-thecounter contracts.
AusIMM Australian Institute of Mining & Metallurgy
β Beta value, is measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole
BBBEE Broad-based black economic empowerment BECSA BHP Billiton Energy Coal South Africa (Pty) Ltd BEE Black economic empowerment BH Borehole BH/100ha boreholes/ 100ha BP British Petroleum B.Sc. Bachelor of Science degree B.Sc .(Hons) Bachelor of Science Honours degree Bt Billion tonnes Capex Capital Expenditure CAPM Capital Asset Pricing Model CO Carbon Monoxide CPR Competent Persons’ Report CRIRSCO Committee for Mineral Reserves International Reporting Standards CV Calorific Value DAF Dry Ash Free DCF Discounted cash flow DEA Department of Environmental Affairs (for South Africa) Dip Diploma DMR Department of Mineral Resources DTM Digital Terrain Model DWA Department of Water Affairs EAA Environmental Assessment Act EBIT Earnings before interest and tax EIA Environmental Impact Assessment/ Energy Information Administration EIMS Environmental Management Services (Pty) Ltd EISs Environmental Impact Statements EMP Environmental Management Plan/ Programme EMPR Environmental Management Programme Report ESIA Environmental and Social Impact Assessment Eskom Eskom Holdings Limited, South Africa’s State power utility Exxaro Exxaro Resources Limited FC Fixed Carbon FGSSA Fellow of the Geological Society of South Africa FOB Free on board FSAIMM Fellow of the South African Institute for Mining & Metallurgy GDP Gross domestic product GJ Giga Joule GPS Global Positioning System GSSA Geological Society of South Africa GTIS Gross Tons In situ GW GigaWatt ha Hectare HAS Hazardous Substances Act HDSAs Historically disadvantaged South Africans IAASB Internal Auditing and Assurance Standards Board I&AP Interested and Affected Parties IDP2 Inverse Distance to the Power of 2 IFRS International Financial Reporting Standards IM Inherent Moisture Inspectorate M&L Inspectorate M & L (Pty) Ltd IRR Internal Rate of Return
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ABBREVIATION/ TERM EXPLANATION
ISO International Organization for Standardization IWUL Integrated Water Use Licence IWWMP Intergrated Waste and Water Management Plan JSE Johannesburg Stock Exchange Limited Kd Cost of Debt Ke Cost of Equity Capital kg Kilogram km Kilometre kV kilo Volt kVA kilo Volt Amp LOM Life of mine m Metre / million m2 Square metres m3 Cubic metre MA Mining Area MAusIMM Member of the Australian Institute of Mining & Metallurgy MEWA Ministry of Environment, Wildlife and Tourism MGSSA Member of the Geological Society of South Africa MHSA Mine Health and Safety Act MIA Mine Infrastructure Area Min.Eng Mining Engineer Mining Charter Broad-based Socio-Economic Charter for the South African Mining Industry MJ Mega Joules MJ/kg MegaJoule per kilogram mm Millimetre Mm3 Million cubic metres MMA Mines and Minerals Act MMAO Mines and Minerals Act Order MOA Memorandum of Understanding MPRDA South African Minerals and Petroleum Resources Development Act MPRRA Minerals and Petroleum Resources Royalty Act MQWMA Mines, Quarries, Works and Machinery Act MR Mining Right MSAIMM Member of the South African Institute for Mining & Metallurgy M.Sc. Masters degree in Science Mt Million tonnes Mtoe Million tonnes oil equivalent MTIS Mineable Tonnes In Situ Mtpa Million tons per annum MW Mega Watt N/A Not applicable NEMA National Environmental Management Act NEM:AQA National Environmental Management: Air Quality Act NEMBA National Environmental Management Biodiversity Act NEM:PAA National Environmental Management: Protected Areas Act NEM:WA National Environmental Management : Waste Act NFA National Forests Act NHRA National Heritage Resources Act NMRA National Monuments and Relics Act NOMR New Order Mining Right NO2 Nitrogen Dioxide NOPR New Order Prospecting Right NPV Net Present Value NWA National Water Act OECD Organisation for Economic Co-operation and Development Opex Operating expenditure PEMs Prospectivity enhancement multiplier PL Prospecting Licence PM 10 Particulate Matter Pr.Sci.Nat Professional Natural Scientist PSD Particle Size Distribution Ptn Portion Q Quarter RBCT Richards Bay Coal Terminal RD Relative density RE Remaining extent Rf Risk free rate
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ABBREVIATION/ TERM EXPLANATION
RMB Rand Merchant Bank ROM Run of mine ROPO Recognised Overseas Professional Organisation Rm The expected return on the market portfolio
R/P Ratio The reserves to production ratio. This ratio provides an indication of how long coal reserves in a particular country will last.
SABS South African Bureau of Standards SACU Southern African Customs Union SADC Southern African Development Community SAHRA South African Heritage Resources Agency SAIMM South African Institute for Mining & Metallurgy SAMREC South African Code for Reporting of Mineral Resources and Mineral Reserves SAMVAL The South African Code for the Reporting of Mineral Asset Valuation SANAS South African National Accreditation System SANBI South African National Biodiversity Institute SANS The South African Guide to the Systematic Evaluation of Coal Resources and Coal Reserves Sasol Sasol Limited SHE Safety, Health and Environment Shell Shell SA SIB Stay in business SLP Social and Labour Plan SO2 Sulphur Dioxide SRK SRK Consulting (South Africa) (Pty) Limited Surfer Surfer ™ Modelling Software SWMP Storm Water Management Plan t Tonnes tc Corporate Tax Rate TS Total Sulphur TTIS Total tons in situ UNFC United Nations Framework Classification US United States USBM US Bureau of Mines USD United States Dollar μ1 Sensitivity towards a particular factor
VALMIN The Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports 2005
Venmyn Deloitte Venmyn Deloitte (Pty) Ltd WA Water Act WACC Weighted Average Cost of Capital WMA Waste Management Act WUL Water Use Licence WULA Water Use Licence Application WWA Waterworks Act x1 Maximum estimated contributor to α for the factor listed ZAR South African Rand ZARm Million South African Rands
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Appendix 3 : Certificates of Competent Persons SR11A(i); SV2.13 Name of Staff: Andrew Neil Clay Position: Managing Director, Minerals Industry Advisor, Competent Person and Competent Valuator Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: 1st Floor, Block G, 173 Rivonia Road, Sandton, 2146 Profession: Geologist Date of Birth: 16 April 1955 Years with Firm/Entity: 27 Nationality: British Membership in Professional Societies:
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION Member Canadian Institute of Mining, Metallurgy and Petroleum 2006 Advisor JSE Limited Listings Advisory Committee 2005 Advisor JSE Issuer Services 2008 Member JSE Issuer Mining Sub-committee 2009 Associate Member American Association of Petroleum Geologists 2005 Member South African Institute of Directors 2004 Fellow Geological Society of South Africa 2003 Member American Institute of Mineral Appraisers 2002 Member South African Institute of Mining and Metallurgy 1998 Fellow Australasian Institute of Mining and Metallurgy 1994 Member SACNASP 1988 Member Investment Analysts Society of South Africa 1990 Member Society of Petroleum Engineers 2009 Member Project Management Institute 2011 Expert Hong Kong Stock Exchange 2012
Involvement in Code Writing:
POSITIION PROFESSIONAL CODE DATE OF INVOLVEMENT Chairman South African Oil & Gas Committee (SSC) 2011 - present Member South African (SAICA) extractive industries deliberations 2003 - present Member International Minerals Valuation Code (IMVAL) 2012 – present Representative Investment Analysts Society on the SSC (IAS) 2009 - present Initiator SAMREC / IAS Award 2002 - present Advisor JSE Listing Requirements (Section 3 On-going obligations) 2002 - present Working Group Member SAMREC Code (Oil & Gas) 2005 - present Working Group Member SAMVAL Code 2001 – present Working Group Member SAMREC Code (Re-write Sections 1 – 5) 2005 - present Working Group Member SAMREC Code (Re-write) 2003 - present Working Group Member SAMREC Code (First Version) 1996 - 2001
Mr Clay currently has a special interest in incorporating oil and gas reporting procedures into the general application of mineral asset valuation. Involvement in Fund Management:
POSITIION FUND DATE OF INVOLVEMENT Member of Investment & Audit Committee New Africa Mining Fund (NAMF) 2007 - present
Director Strategic African Mineral Investment Fund (SAMI) 2008 - present
April 2014 104
Fairness Opinions:
YEAR CLIENT SECURITIES EXCHANGE
JURISDICTION TRANSACTION
TYPE IMPLIED VALUE (USDm)
DESCRIPTION
2013 Platinum Australia ASX Scheme of
arrangement 50 Independent Technical Expert Report
2011 Optimum Coal JSE
The specific offer of ZAR38.00 in cash per ordinary share by an external party
Independent Professional Expert Report
2011 Chrometco JSE Acquisition of an Interest in Line-Chem
66.6 Independent Professional Expert Report
2011 Wesizwe JSE
Financing Solution for the Development of Wesiswe’s Project 2
227 Indpendent Professional Expert Report
2010 Sylvania ASX Issuing new ordinary shares 34 Independent Professional Expert Report
2009 Chrometco JSE Acquisition of interest 8.3 Independent Professional Expert Report
2009 Metorex JSE Disposal of 6.3% interest 5.7 Independent Professional Expert Report
2009 Braemore Resources JSE Acquisition of
interest 36.3 Independent Professional Expert Report
2007 Diamondcore/BRC JSE Acquisition 50 Independent F&R for Diamondcore
2006 LionOre International TSX
Acquisition notification documentation.
650 Independent Technical and Valuation Fatal Flaws Report and F&R opinion for the Board of LionOre. Not published as an F&R.
2005 Diamond Core JSE Category I Merger 10.0
Independent CPR on the mineral assets of Samadi Resources SA (Pty) Ltd and Diamond Core Resources Limited.
2005 LionOre International TSX
Acquisition notification documentation.
110.0 Tati Nickel Review of Mineral Resources.
2005 Aquarius JSE 26% BEE 150.0
Independent Techno-Economic Valuation and Fair and Reasonable Opinion on the PIC, IDC, DBSA 26% Empowerment Transaction. Documents waived for the secondary listing.
2004 Barplats JSE Offer to Barplats Minorities 60.0
Offer by Platinum Consortium to take out Implats. The SRP insisted our report be prepared in full. In the end Investec wrote the Fair and Reasonable but was fully reliant upon the Venmyn work as demonstrated in the circular.
2004 Zimplats ASX
Collapse of the Makwiro Structure for shares to Implats.
38.0 Fair Value calculation in a corporate restructure.
2003 Amplats JSE Acquisition price calculation for Unki Platinum.
Confidential
Preparation of an Independent Techno-Economic Valuation Report and Fair and Reasonable Opinion. Document not used as the transaction became immaterial for reporting purposes.
2003 Aquarius Platinum (South Africa) (Pty) Ltd
ASX
Opinion on the value of a Refinery Agreement.
10.0 Fair & Reasonable Opinions for Aquarius Platinum for the Impala Refinery Commitments.
2002 Consolidated African Mines Limited.
JSE
CAM acquired 40% of the Letseng diamond mine for CAM shares.
10.0 Preparation of an Independent Techno-Economic Valuation Report and Fair and Reasonable Opinion. Document used in full.
2002 Zimplats ASX
Implats aquired a controlling interest in Zimplats by acquiring Aurion Gold shares.
50.0 Preparation of an Independent Techno-Economic Valuation Report and Fair and Reasonable Opinion. Document used in full.
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YEAR CLIENT SECURITIES EXCHANGE
JURISDICTION TRANSACTION
TYPE IMPLIED VALUE (USDm)
DESCRIPTION
2002 Aquarius ASX
Aquarius aquires 65% in ZCE Platinum Limited.
50.0 Preparation of an Independent Techno-Economic Valuation Report and Fair and Reasonable Opinion. Document used in full.
2000 DiamondWorks TSX
Lyndhurst a South African Company takes control of Canadian junior Diamondworks.
20.0
Preparation of an Independent Techno-Economic Valuation Report and Fair and Reasonable Opinion. Document used in full and special representation required in Toronto to explain the transaction and the assets.
1999 New Mining Corporation JSE
Listing and acquisition documentation.
50.0
Complicated transaction and full Independent Techno-Economic Valuation prepared with Fair and Reasonable Opinion included in our report. This satisfied the JSE and the SRP.
1996
West Witwatersrand Gold Holdings Limited
JSE Section 440k Offer 20.0
Independent Competent Persons Report on the Offer by Durban Deep to West Wits under Section 440k. Document included in circulars to both shareholders. Our Fair and Reasonable Opinion was specifically requested by the SRP.
Detailed Tasks Assigned:
YEAR CLIENT COMMODITY DOCUMENTATION
2013 Busitema / Greenstone Mining Gold Resource Review 2013 Sylvania Grasvally Chrome Valuation 2013 Resource Generation Coal Technical Review
2013 Great Western Minerals Steenkampskraal Rare Earths PFS
2013 Taung Gold / Ncondezi Gold Technical Review 2013 Nkomati / Keaton Energy Coal Resource Review 2013 Rand Refinery / Deloitte Audit Gold Audit 2013 TRX Buckreef Remodelling Gold 3D Model 2013 Bauba Chrome Valuation 2013 Memor Chrome Cash Flow 2013 Forrest Oil Oil and Gas Valuation 2013 Glencor Xstrata Ferrochrome Audit 2013 Eureka Gold Technical Statement 2013 Aura Coal Exploration 2013 Nkwe PGE Technical Review 2013 Lesego Broadtec Beijing PGE Due Diligence 2013 Zyl Sentula Coal Valuation 2013 Samancor CITIC Chrome Valuation 2013 Jubilee Platinum Platinum Valuation 2013 Gold One Tulo Gold Gold Valuation 2013 Eureka Delta Gold Gold Technical Statement 2013 Exarro Iron Valuation 2013 Deloitte Grindrod Manganese Audit 2013 Aquarius PGE Review 2012 Banro Lugushwa Gold Technical Review 2012 Araxa Rare Earths NI 43-101 2012 Bauba Platinum Technical and Economic Assessment 2012 IFC Mining Technical and Economic Assessment 2012 Central Rand Gold Gold CPR 2012 Lanxess Chrome Technical and Economic Assessment 2012 Loncor Ngayu Gold Mineral Resource Valuation 2012 Loncor Makapela/Mangajuripa Gold Mineral Resource Valuation
2012 Pering Listing Hong Kong Zinc Lead / Base metals
CPR
2012 Stonebridge Hanieal Mozambique Gold Corporate Advice and Project setup 2012 Stonebridge Zim Gold Gold Corporate Advice and Project setup 2012 Terra Nova Manica Investment Gold Technical and Corporate Valuation 2012 PSIL Arbitration Expert Witness 2012 AngloCoal Coal Valuation 2012 Virgil Mining Gold Technical Report 2012 Sikhuliso Harmony Dumps Gold Corporate Transaction Advice 2012 Smart Carbon Combrink Coal Coal Technical Report and Valuation 2012 Optimum Coal Coal Independent Opinion 2012 Wits Gold Gold CPR and Valuation 2012 Pan African Resources Gold CPR and Valuation 2012 Banro Gold Technical Report and Valuation
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YEAR CLIENT COMMODITY DOCUMENTATION
2012 Harmony Evander Gold Full CPR and Valuation 2012 Boynton PGM Pre-feasibility Study 2012 Sudor Coal Coal Valuation 2012 NMIC Gold Technical Report and Valuation 2011 SSC Mandarin Gold Independent Corporate and Technical Advisor 2011 Harmony Gold CPR 2011 Afrisam Cement Independent Valuation 2011 Chromex Chrome Hong Kong Listing 2011 Banro Gold Independent Technical Statement 2011 Nkomati Capital Coal Independent Valuation Statement 2011 Chrometco Chrome Independent Valuation 2011 Scinta Coal Independent Technical Statement and Valuation 2011 Seque Manganese Manganese Prospectivity and Scoping Study 2011 Sable PGE Prospectivity and Drilling Density CP 2011 Taung Gold Hong Kong Listing 2011 Maghreb Minerals Zinc CPR 2011 Veremo Iron Updated Technical Statement on Veremo 2011 Smart Carbon Coal Strategic Advisor 2011 Sephaku Cement Technical and Economic Documentation 2011 Axmin Gold Technical and Economic Documentation 2011 Absa Vanadium Vanadium Vanadium Project Valuation 2011 BCL Dumps Nickel Scoping Study 2011 AMRT Copper/Gold Scoping Study 2011 Jindal Mining Coal Techno-Economic Statement on the Mbili Coal Project 2011 Essar RioZim Various Corporate Transaction 2011 SEW Trident Coal Transaction and Valuation Planning 2011 PSIL Uranium Strategic Valuation 2011 Kibo Mining Gold/Various Tanzanian Assets 2011 Nkomati Coal Coal Technical and Valuation Work 2011 Wesizwe PGE Fairness Opinion 2010 Namane Coal Technical Assessment 2010 Bauba Platinum Platinum Independent Strategic Technical Advisor 2010 Evraz Mapochs Independent Valuation
2010 African Copper Copper Independent Mass Balance and Orebody Fatal Flaws Assessment
2010 Advanced Mineral Recovery Technologies Gold Independent Sampling and Mass Balance Report
2010 Xstrata Coal Coal Independent Valuation Certificate 2010 Sephaku Cement Independent Technical Review 2010 White Water Resources Gold Independent Competent Persons’ Report 2010 White Water Resources Gold Independent Technical Statement 2010 Platmin Platinum Independent Techno-Economic Reports and Valuation 2010 West Wits Mining Gold Independent Prospectivity Review 2010 SSC Mandarin Gold Independent Corporate and Technical Review 2010 Ultra Tech Cement Independent Techno-Economic Statements 2010 Taung Gold Independent Technical Review 2010 Taung Gold Independent Valuation Statement 2010 Sylvania PGMs Independent Technical and Valuation Experts Report 2010 Mzuri Capital Gold Independent AIM Compliant Competent Person’s Report 2010 Kalagadi Manganese Independent High Level Techno-Economic Review 2010 Lesego Platinum Independent Techno-Economic Valuation Report 2010 Lesego Platinum Independent Executive Summary 2010 G&B Resources Li Independent Prospectivity Review
2010 Miranda Coal Independent Technical Resource and Valuation Statement
2010 Loncor Gold Independent Techno-Economic Valuation Report 2010 Gentor Resources Copper Indpendent Techno-Economic Report 2010 ETA Star Coal Independent Valuation Report 2010 AfriSam Cement Independent Technical Review 2010 Buildmax Cement Independent Short-Form Competent Report 2010 Anglo Platinum Platinum Independent Valuation of the PGM Assets 2010 Nyota Minerals Gold Independent Inferred Resource Estimate 2010 Absolute Holdings Platinum Independent Competent Persons’ Report 2010 AfriSam Cement Independent Technical Review 2010 African Copper Copper Mass Balance and Orebody Fatal Flaws Assessment 2010 Ruukki Platinum Short-Form Techno-Economic Statements 2010 Umbono Capital PGMs Independent Competent Persons’ Report 2010 Anglo Platinum PGMs Independent Mineral Asset Valuation 2010 Zambia Copper Investments Copper Mineral Asset Valuation 2010 White Water Resources Gold Short-Form Valuation Statements 2010 Central African Gold Gold NI 43 – 101 Technical Report 2010 Platmin Platinum Updated NI 43 – 101 Technical Report 2009 G & B Resources Uranium Independent Competent Persons’ Report
April 2014 107
YEAR CLIENT COMMODITY DOCUMENTATION
2009 Kalagadi Manganese Independent Techno-Economic Review 2009 Sephaku Cement Cement Indendent Competent Persons’ Report 2009 Metorex Gold Independent Fairness Opinion 2009 Kivu Resources Pegmatites Independent prefeasibility study 2009 Kalagadi Manganese Manganese Independent Tehno-Economic Review 2009 Taung Gold Gold Independent Competent Person’s Report 2009 Sylvania Resources Platinum Independent Technical and Valuation Expert’s Report
2009 Ernst & Young Jordan Gold Independent Valuation Report on mineral assets of a Gold Mining Concession in Ethiopia
2009 Dwyka Resources Gold Independent Technical Statement on Tulu Kapi Gold Project
2009 G & B African Resources Pot Ash Independent Prospectivity Review
2009 Central African Gold Gold Information Memorandum in the form of NI 43-101 Compliant Technical Statement
2009 Braemore Resources Platinum Fairness Opinion 2009 New Dawn Gold Independent Technical Statement 2009 Investec Cement Independent Technical Review of CILU Cement assets 2009 IBI Iron ore Independent Technical Resource Statement 2009 Chrometco Chrome Fairness Opinion 2009 Rand Uranium Uranium Mineral Resource Review and Modelling 2008 Signet Mining Coal Independent valuation of coal assets 2008 Lesego Platinum PGMs Independent Competent Person’s Report for JSE Listing 2008 Norilsk Nickel Nickel Review of business strategy
2008 Minero Group Zinc/Lead Review of business strategy and Competent Person’s Report
2008 Paramount Mining Diamonds Independent Technical Statements 2008 Anglo Platinum PGMs Independent Technical Report and valuation 2008 Demindex Diamonds Review of business strategy and Technical Advice 2008 Investec Cement Due Diligence and valuation of Cilu Cement 2008 DGI Copper/Cobalt Independent Technical Statements 2008 Abalengani Platinum Review of plant and valuation 2008 Absolute Holdings Quarry valuation 2008 Metorex Copper/Cobalt Fairness Opinion 2008 Investec Cement Due diligence on Sephaku assets 2008 Kivu Resources Tantalite Tantalite strategic planning and valuation 2008 Tantilite Resources Tantalite Independent Technical Report 2008 DGI Copper/Cobalt Independent Technical Statement and valuation 2008 Uramin Uranium, Resourse Review and Technical Statements
2008 Harmony Gold Mining Au, Uranium Independent Technical Statements and Strategic business plan
2008 Harmony Gold Uranium Cooke Dump Resource and Finacial Valuation 2008 Harmony Gold Au Uranium Resevre and Resource Audit for the group
2008 Nkwe Platinum PGMs Independent Technical Statement and Competent Person’s Report
2008 Highveld Steel & Vanadium Corporation Steel, Vanadium Independent Resource and Reserve planning
2008 African Minerals Diamonds Independent Technical Statements 2008 Continental Coal Coal Independent Technical Report 2008 Industrial Base Metals Base Metals Base Metal Refinery Audit 2007 Crushco Industrial Minerals Independent valuation 2007 Kimberley Consolidated Mining Diamonds Independent valuation 2007 LionOre Mining Nickel. PGMs Technical and economic valuation 2007 PBS Group PGMs Project review 2007 Western Areas Au Independent valuation 2007 Harmony Gold Mining Au. Uranium Independent scoping and valuation 2007 Great Basin Gold Au Independent valuation for BEE transaction 2007 BRC/Diamondcore Resources Diamonds Valuation and Opinion provider
2007 Urals Investors Diamonds Au. PGMs and Oil and Gas Independent Transaction Report
2007 Energem Diamonds Indepndent Technical Statement for Koidu 2007 Xstrata Cr Independent CGT and Valuation advice
2007 PWC Magnetite Mine Review Magnetite Independent Mineral Resource Review and Valuation for apportionment calculations
2007 Magnum Resources Ta Independent Mineral Resource Review 2007 Gaanahoek Coal Deposit Coal Prospectivity Review 2007 DRDGold Au Emperor Gold Mines independent forensic review 2007 Kimberley Diamonds Corporation Diamonds Independent Listings Documentation 2007 Rockwell Diamonds Transhex Transaction Documentation 2007 Rockwell Diamonds Independent Mineral Resource Review 2007 Caledonia Mining Au Independent Disposal Documentation Eersteling 2007 Caledonia Mining Au Independent Disposal Documentation Barbrook 2007 Adsani Tantalite Refinery Ta Independent Technical Report
2006 LionOre Ni Base Metals Independent Valuation of Falconbridge International and Nikkelverk Refinery
April 2014 108
YEAR CLIENT COMMODITY DOCUMENTATION
2006 LionOre/BCL Ni Base Metals Independent Technical and Economic Valuation 2006 Vanamin V Independent Report for disposal 2006 Kurils Islands Au Independent Technical Report NI43-101 2006 Mgart Armenia Au Independent Assessment and Valuation for AIM 2006 Zimbabwe Mining Bill All Preparation of industry submission to government 2006 Energem Oil & Gas Preparation of National Instrument Compliance 2006 Ncondedzi Coal Coal Technical & Corporate Listing Documentation 2006 Metallon International - Armenia Gold & Base Metals Prospectivity & Exploration Programme Preparation 2006 Hood Tantalite Tantalite Independent Techno Economic Valuation Report 2005 Letseng Diamonds Independent Competent Person’s Report for disposal
2005 Zimplats Tenements Platinum Group Metals Independent Competent Person’s Report for disposal
2005 DRD Gold Fair & Reasonable
2005 ARM Madikwa Platinum Group Metals Independent Valuation for Impairment Calculation
2005 Harmony Competitions Tribunal Gold Independent Expert Witness 2005 Ecca Holdings Bentonite Independent Industry Review 2005 Harmony Randfontein 4 Shaft Gold Independent Valuation 2005 Gallery Gold Gold Independent Competent Person’s Report for disposal 2005 Stuart Coal Coal Independent Competent Person’s Report for disposal 2005 Elementis Chrome Chrome Independent Industry Review 2005 Diamond Core Diamonds Independent Competent Person’s Report 2005 Diamond Core Diamonds Fair & Reasonable Statement 2005 Kensington Resources Diamonds Independent Inspection & Certification of Laboratory
2005 Bayer Valuation Chrome Independent Valuation for Economic Empowerment Transaction
2005 Pangea Diamonds Diamonds Independent Competent Person’s Repor 2005 LionOre International Nickel Tati Nickel Review of Mineral Resources.
Aquarius PSA2 Independent Competent Person’s Repor 2005 Aquarius Platinum Marikana Mineral Resources Review.
2005 LionOre International Nickel Nkomati Due Diligence and Transaction Value Calculations.
2005 LionOre International Nickel World Nickel market study for group corporate work.
2004 Avgold Limited Gold Fair & Reasonable Opinion on the Methodologies applied and Values attributed to the Mineral Assets of ET Cons
2004 Aquarius Platinum Update of Independent Valuation of Mimosa
2004 Aquarius Platinum
Independent Techno-Economic Report and Fair and Reasonable Opinion tot the PIC, DBSA and IDC on the 26% BEE Transaction for AQPSA – Document waived by the JSE.
2004 Mimosa Mining Company Platinum Mineral Resource and Ore Reserve Review 2004 Zimplats Platinum Zimplats Makwiro Valuation and Corporate Restructuring 2004 Assmang Manganese CGT Valuation 2004 Aquarius Platinum CGT Valuation 2004 Sishen South Iron CGT Valuation 2003 Unki Platinum Project Platinum CGT Valuation
2003 Hernic Ferrochrome (Pty) Ltd, Itochu Corporation Chromite Independent valuation of the Stellite Chromite Mine Joint
Venture.
2003 African Diamond Holdings (Pty) Ltd Diamonds
Independent techno-economic due diligence and valuation of African Diamond Holdings marine diamond concessions and diamond cutting operation in Walvis Bay, Namibia.
2003 Unki Platinum Project, Zimbabwe Platinum Techno-Economic Valuation Report & Fair & Reasonable Opinion
2003 Transvaal Ferrochrome Ltd Ferrochrome Independent Competent Person’s Report and Valuation as a bankable Document for Australian Stock Exchange
2003 Aquarius Platinum (SA) (Pty) Ltd Platinum Independent Competent Person’s Report and Valuation for the Everest South Project
2002 Zimbabwe Platinum Mines Ltd Platinum Independent valuation of Zimplats relative to the value of the Impala Platinum Ltd/AurionGold Ltd transaction.
2002 Mitsubishi Corporation Ferrochrome Expansion Report and Valuation on Hernic Ferrochrome (Pty) Ltd.
2002 Aquarius Platinum Ltd Platinum Acquisition Report on ZCE Platinum Ltd including the due diligence and valuation of Mimosa Mine in Zimbabwe.
2002 Freddev Gold Valuation of Mineral Rights & Royalties 2002 Barnex Gold Valuation of Mineral Rights & Royalties 2002 Western Areas Gold WA4 Project : Valuation of Mineral Rights & Royalty
Agreement 2002 Mitsubishi Ferrochrome Expansion report and valuation 2002 Aquarius Platinum Acquisition Report 2001 Northam Platinum Valuation 2001 Mitsubishi Corporation Ferrochrome Due Diligence, Valuation and Acquisition Report
April 2014 109
YEAR CLIENT COMMODITY DOCUMENTATION
2001 Amcol Due Diligence Bentonite Independent due diligence and valuation on G&W 2001 Zimplats Impala Raising Platinum Circular to shareholders valuation report 2000 African Minerals Varied Independent competent person’s report 2000 Barnato Exploration Limited Varied Competent person’s report 2000 Durban Deep Gold Independent valuation report 2000 Iscor Limited Varied Independent valuation of exploration assets 1999 Harmony Gold Mining Co Ltd Gold Harmony / Kalgold / West Rand Cons 1999 Leighton Contractors Tin Pre-feasibility study Pemali Tin (Indonesia) 1999 Mitsubishi Ferro-Chrome Techno-economic valuation of Hernic Chrome 1998 Barnex Ltd Wits Gold Due diligence 1998 Camco Diamonds Independent Competent Person’s Report and valuation 1998 Crown Mines and DRD Wits Gold Valuation 1998 Egyptian Government Phosphate Due diligence and valuation 1998 Great Fitzroy Mines Copper Competent Person’s Report and Valuation 1998 Iscor Mining Greenstone Gold Due diligence and valuation 1998 JCI Ltd Wits Gold Competent Person’s Report 1998 Randgold & Exploration Co Ltd Gold Competent Person’s Report 1998 Western Areas Wits Gold Competent Person’s Report 1997 CBR Mining Coal Due diligence 1997 Durban Roodepoort Deep Ltd Wits Gold Competent Person’s Report 1997 G&W Base Bentonite Due diligence 1997 JCI Ltd Wits Gold Competent Person’s Report 1997 Opaline Gold Greenstone Gold Competent Person’s Report 1997 Penumbra Coal Due diligence 1997 Randgold & Exploration Co Ltd Greenstone Gold Competent Person’s Report 1997 Rondebult Colliery Coal Due diligence 1996 African Mining Corporation* Alluvial Gold Project valuation 1996 Australian Platinum Mines NL Platinum Due diligence 1996 Benoni Gold Holdings Ltd Wits Gold Competent Person’s Report 1996 Consolidated Metallurgical Industries Ferrochrome Competent Person’s Report and valuation 1996 Durban Roodepoort Deep Ltd Wits Gold Competent Person’s Report 1996 Harmony Gold Mining Co Ltd Wits Gold Competent Person’s Report 1996 JCI Ltd Wits Gold Valuation 1996 Rand Leases Properties Ltd Wits Gold Competent Person’s Report and valuation 1996 Randgold & Exploration Co Ltd Wits Gold Due diligence 1995 African Mines Limited* Greenstone Gold Project valuation 1995 Barney-Seidle Arbitration Granite Project valuation arbitration 1995 Mopet Oil* Oil and Gas Market analysis facilitator 1995 Randgold & Exploration Co Ltd Wits Gold Competent Person’s Report and valuation 1995 Randgold Durban Deep Wits Gold Competent Person’s Report and valuation 1995 Randgold Harmony Unisel Merger Wits Gold Competent Person’s Report and valuation 1994 Aurora Exploration Varied - Industrials Competent Person’s Report and valuation 1994 Consolidated Mining Corp Wits Gold Due diligence and valuation 1994 CRA (Australia) Iron Ore Due diligence 1994 Durban Roodepoort Deep Ltd Wits Gold Competent Person’s Report and valuation 1994 Ghana Gold Mines* Greenstone Gold Due diligence and valuation 1994 Gold Fields of SA Ltd Wits Gold Competent Person’s Report and valuation 1994 Hernic Chrome Ferro-Chrome Valuation and Strategic Analysis 1994 Inca Magnesium Due diligence and valuation 1994 Mitsubishi Ferrochrome Due diligence and valuation 1994 Namco* Diamonds Competent Person’s Report and valuation 1994 Randgold & Exploration Co Ltd Wits Gold Due diligence 1993 Namibia Oil & Gas licence
applications Oil & Gas Working with Paul Blair licence applications
1993 Atomic Energy Commission Uranium Strategic Analysis 1993 Eskom Base metals Strategic Analysis 1993 JCI Wits Gold Financial Planning Analysis (Rehabilitation) 1993 Lonrho Platinum Financial Planning Analysis (Rehabilitation) 1993 Rand Mines Properties Varied Mineral rights evaluation 1992 Barbrook Gold Mines Greenstone Gold Ore resource modelling and mine valuation 1992 Rand Merchant Bank Copper Ore resource modelling and project valuation 1992 Rembrandt Platinum Mine valuation (Northam Platinum) 1992 West Rand Cons Wits Gold Ore resource modeling and mine valuation 1991 Rand Merchant Bank Wits Gold Ore reserve evaluation (Westonaria Gold Mine) 1991 Rembrandt (Gold Fields of SA) Varied Due diligence, valuation and strategic analysis 1991 Standard Merchant Bank Greenstone Gold Due diligence and valuation (Eersteling Gold Mine) 1990 Sequence Oil and Gas Oil & Gas Due Diligence Report 1990 Atomic Energy Corporation Nuclear Fuels Strategic analysis 1990 Consolidated Mining Corp Wits Gold Due diligence and valuation 1990 Eskom Copper/Zinc Strategic Market Analysis (Toll Smelter potential) 1990 Freddies Minerals Feldspar - Industrials Due diligence 1990 Industrial Machinery Supplies Coal Strategic analysis and valuation (Bricketting plant) 1990 Knights Gold Mine Wits Gold Competent Person’s Report
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YEAR CLIENT COMMODITY DOCUMENTATION
1990 Rand Merchant Bank Diamonds Due diligence and valuation (Alluvial Mine) 1990 Corex Oil & Gas Evaluation of prospectivity 1990 Rand Merchant Bank Lead/Zinc Due diligence and valuation (Miranda Mine) 1990 Rand Mines Varied Corporate Strategic Analysis 1990 Rhogold Wits Gold Ore resource modeling 1990 Rice Rinaldi Coal Due diligence and valuation 1990 Sub Nigel Gold Mine Wits Gold Due diligence and valuation 1990 Zaaiplaats Tin Mine Tin Due diligence and valuation 1989 Avontuur Diamond Mines Diamonds Due diligence and valuation 1989 Granite Consolidated Mining Granite Due diligence and valuation 1989 Osprey Gold Mine Greenstone Gold Due diligence and valuation 1989 Rand Leases Gold Mine Wits Gold Ore resource modeling 1989 Rand Merchant Bank* Varied Mineral portfolio analysis (Swanson Rights) 1989 Rhovan Vanadium Competent Person’s Report and valuation 1989 Vanamin Severrin Mining Vanadium Due diligence and valuation 1989 Zimco Andalusite Competent Person’s Report and valuation 1988 Mullet Slate Slate Due diligence and valuation 1988 Rand Merchant Bank Wits Gold Risk assessment analysis (Peritus Exploration) 1988 Wit Nigel Gold Mine Wits Gold Ore resource modelling
Key Qualifications: Mr Clay has been a serving professional in the minerals industry since 1977 when he undertook field mapping and a professional apprenticeship within the Rhodesian Geological Survey. This was at a time when fieldwork and practical application of geological principals was still fundamental to the development of geology as a science. Following this, Mr Clay has dedicated his career to the commercial incorporation of first principles scientific process to the description, reporting and valuation of mineral assets. Having worked for a number of years with mining companies, both underground and in corporate, Mr Clay became a founding member of Venmyn in 1988. At this time the company was closely associated with Rand Merchant Bank. This relationship enabled him to pursue the process of linking technical and financial valuation. Since that time Mr Clay has been involved in growing Venmyn and is presently the Managing Director and major shareholder. He has been involved in developing a style of reporting at Venmyn which has become internationally recognised as compliant shorter form reporting. The emphasis of the work is on concise and graphical reporting, bullet points and descriptive graphics for ease of presentation and shareholder appreciation. He has been involved in the writing of numerous codes the South African Code for the Reporting of Mineral Resources and Reserves (SAMREC Code) and is currently on the committee writing the South African Code for the Valuation of mineral projects (SAMVAL Code). He is presently involved in the oil and gas industry where his expertise in valuation is being used to determine the relationship between the reporting methodologies in this industry relative to the rest of the mineral industry. Mr Clay’s key areas of expertise lie in the detailed financial valuation of mineral and mining projects using discounted cash flow models. In this regard he has undertaken over 25 valuations for eight different commodities over the last four years. Details of the valuations and other assignments are tabled above. These valuations have been used in listing and merger documentation both in local and international stock exchanges and for the private use of the companies concerned. Education:
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
B. Sc Hons. Geology University College Cardiff 1976
M. Sc. Econ. Geol. Economic Geology (awarded Corstorphine Medal for Best M.Sc. Thesis) University of the Witwatersrand 1981
GDE Graduate Diploma in Mining Engineering University of the Witwatersrand 1986 M. Sc. Mining Engineering University of the Witwatersrand 1988 Dip. Bus. M. Diploma in Business Management Damelin College 1983 Tax Mgmt Tax Management and Planning University of the Witwatersrand 1988
April 2014 111
Employment Record:
POSITION COMPANY JOB DESCRIPTION DURATION
Managing Director Venmyn Deloitte
• Mr Clay serves as the Managing Director of Venmyn Deloitte and is responsible for the company’s strategic process as well as finances, budgeting and operations;
• Venmyn operates as a subsidiary of Deloitte Consulting, serving as a techno-economic consultancy for the resources industry on a world wide basis;
• Mr Clay has been a key member of the SAMREC Working Group, responsible for compiling the SAMREC Code;
• Served on the JSE/SAMREC working committee for the development of the JSE Section 12 requirements;
• Serves on the Readers Panel for the JSE; • Mr Clay is director of the advisory business and provides hands-on
services to all the company’s major clients; • His expertise in financial valuation is particularly appropriate for
ensuring market to market presentation of both the technical and financial issues of resources projects;
• Course leader for the Witwatersrand University and Continuing Education programme on Compliance in the Minerals Industry; and
• Mr Clay has a special interest in the proposed International Accounting Standards “IAS” Extractive Industries rules for determining NAV and NPV calculations in the minerals industry.
2012 - present
Managing Director and Founding partner
Venmyn Rand (Pty) Ltd
• Mr Clay serves as the Managing Director of Venmyn and is responsible for the company’s strategic process as well as finances, budgeting and operations;
• Venmyn operates as a techno-economic consultancy for the resources industry on a world wide basis;
• Mr Clay has been a key member of the SAMREC Working Group, responsible for compiling the SAMREC Code;
• Served on the JSE/SAMREC working committee for the development of the JSE Section 12 requirements;
• Serves on the Readers Panel for the JSE; • Mr Clay is director of the advisory business and provides hands-on
services to all the company’s major clients; • His expertise in financial valuation is particularly appropriate for
ensuring market to market presentation of both the technical and financial issues of resources projects;
• Course leader for the Witwatersrand University and Continuing Education programme on Compliance in the Minerals Industry; and
• Mr Clay has a special interest in the proposed International Accounting Standards “IAS” Extractive Industries rules for determining NAV and NPV calculations in the minerals industry.
1997 - 2012
General Manager RMB Resources Rand Merchant Bank
• Continuing business functions detailed below; • Also valuing, managing and marketing investment projects of the
Resources division including deal structuring and corporate finance. 1996 – 1997
Managing Director and founding partner
Venmyn Rand (Pty) Ltd
• Techno-economic evaluation of a wide range of mineral resource projects using cashflow, market capitalisation, option pricing and other comparative methods.
1987 – 1996
Senior Geologist Rand Mines Ltd • Resident senior gold mine geologist responsible for the development and implementation of modern computerised ore reserve evaluation techniques at Harmony Gold Mine and Durban Roodepoort Deep Gold Mine.
• Transferred to head office where he was responsible for all gold mine ore reserve valuation functions. This computer work involved the development and planning of very large databases for orebody modelling.
1981 – 1988
Senior Geologist Zimro (Pty) Ltd (Industrial Minerals Division of AAC)
• Market development and application of a wide range of industrial and base minerals.
1979 – 1981
Geologist Geological Survey of Zimbabwe
• Mapped a 100 km² area of granite-greenstone terrain and assisted in the compilation of a Bulletin over the area.
• Assisted the small mining sector with geological advice on gold, copper, gemstones and industrial minerals.
1975 – 1979
Languages: English: Excellent
April 2014 112
Certification: I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience. _________________Date: 12th November 2013 Full name of staff member: Andrew Neil Clay
April 2014 113
Competent Valuator’s Statement:
I, Andrew Neil Clay, M.Sc.(Geol), M.Sc.(Min.Eng) Dip.Bus.M, MSAIMM, FAusIMM, FGSSA, MAIMA,SPE Pr.Sci.Nat., do hereby certify that:-
1. I am a Corporate Minerals Advisor of
Venmyn Deloitte
First Floor, Building 33
The Woodlands
20 Woodlands Drive
Woodmead
South Africa
2. I have more than 30 years experience in the minerals industry, from field geology, research, and mineral resource management to commercial due diligence and evaluation of a wide range of local and international mineral assets. In addition, I have more than 20 years of experience working with commercial banks and financial institutions on transactions in the minerals industry, and have been involved in the preparation of numerous codes and rules for compliance and reporting in the public domain.
3. I am a member/fellow of the following professional associations:
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION
Member Canadian Institute of Mining, Metallurgy and Petroleum 2006 Advisor JSE Limited Listings Advisory Committee 2005 Advisor JSE Issuer Services 2008 Member JSE Issuer Mining Sub-committee 2009 Associate Member American Association of Petroleum Geologists 2005 Member South African Institute of Directors 2004 Fellow Geological Society of South Africa 2003 Member American Institute of Mineral Appraisers 2002 Member South African Institute of Mining and Metallurgy 1998 Fellow Australasian Institute of Mining and Metallurgy 1994 Member South African Council for Natural Scientific Professions 1988 Member Investment Analysts Society of South Africa 1990 Member Society of Petroleum Engineers 2009 Chairman South African Oil & Gas Committee (SSC) 2011 Member International Minerals Valuation Council (IMVAL) 2012 Representative Investment Analysts Society on the SSC (IAS) 2009 Member Project Management Institute 2011 Expert Hong Kong Stock Exchange 2012
4. To the best of my knowledge, information and belief, the report contains all scientific and technical information required to be disclosed to make the report not misleading.
5. To the best of my knowledge, information and belief all facts presented in the report are correct.
6. I am independent of Sentula and it’s subsidiaries, have no bias with respect to the assets that are the subject of the report, have no present or prospective interest in the subject, property or assets, or the parties involved with this assignment.
7. I have read the definition of “competent person” set out in the SAMREC Code and certify that be reason of my education, affiliation with a professional association (as defined in the SAMREC Code) and past relevant work experience, I fulfill the requirements to be a Valuator for the purposes of SAMREC Code and SAMVAL Code.
April 2014 114
Dated this 12th November 2013 at Johannesburg, South Africa
_________________Date: 12th November 2013 Full name of staff member: Andrew Neil Clay
April 2014 115
Name of Staff Member: Gail (Petzer) Clarke (Pr.Sci.Nat 400154/12) Position: Senior Consultant Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: 1st Floor, Block G, 173 Rivonia Road, Sandton, 2146 Profession: Geologist Date of Birth: 15 February 1984 Years with Firm/Entity: Joined March 2014 Nationality: South African Membership in Professional Societies:-
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION/REGISTRATION
NUMBER Member Geological Society of South Africa 2006 Professionally Registered South African Council of Natural Scientific Professionals 400154/12
Key Qualifications:- Gail Petzer studied at the University of KwaZulu Natal, Durban where she undertook her Bachelor of Science degree in Geology and later, her Honours in Geology. Gail joined the Venmyn team in March 2014. She brought with her 7 years geological experience from the mining and consulting industry. Her key responsibilities in her previous place of employment are listed below. Education:
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
B.Sc. Geology University of Natal, Durban 2005
B.Sc. (Honours) Geology University of KwaZulu Natal, Durban 2008
Publication:
DEGREE/DIPLOMA FIELD YEAR
Publication (Co-authored) Petrological discrimination among Precambrian dyke swarms: Eastern Kaapvaal Craton (South Africa); Precambrian Research 183 (2010) 501-522
2010
Employment Record:
POSITION COMPANY JOB DESCRIPTION DURATION
Senior Geologist Mindset Coal Assistance in financial evaluations for scoping projects, exploration, modeling, resource and reserve estimations, auditing, due diligence advisory, prefeasibility and feasibility advisory, locally and abroad.
2013
Project Geologist RungePincockMinarco
Geological modelling of coal deposits in the African Region, including Mozambique, Botswana and South Africa, resource and reserve estimations, assistance in natural gas quantification in Australia, due diligence advisory, prefeasibility and feasibility advisory, client and managerial interactions both locally and internationally and project management.
2012
Complex Geologist Xstrata Geological modelling, resource and reserve estimations, managing the drilling, managing the grade controllers, mentoring students and providing relevant information to mining, planning and senior management.
2011
Geology Specialist BHP (BECSA)
Managing people, coaching graduates, geological modelling, resource and reserve estimations, and providing necessary information to mining, planning and senior management. Further responsibilities included managing the drilling programme and managing the on-site coal laboratory, acting in the capacity of the chief geologist when the need arose
2009 - 2010
Graduate Geologist Anglo Coal
Pit inspection, underground grade/horizon control and mapping, data capturing, provide necessary information to the production personnel so as to optimise the mining and planning process, and act as the divisional geologist with a shaft and an opencast pit under my responsibility.
2008 – 2009
Contract Geologist IFMSA Borehole logging and underground mapping 2007
Vacational Student Anglo Coal Field mapping, core logging, coal quality data manipulation and completion of projects allocated to the vocational students
Demonstrator UKZN Assisting and guiding students in the fields of: mineralogy, basic theoretical map work and field mapping. 2005-2007
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Languages:- English: Excellent Afrikaans: Excellent Certification:- I, the undersigned, certify that to the best of my knowledge and belief, the above data correctly describes me, my qualifications, and my experience.
______________________Date: 9th April 2014 Gail (Petzer) Clarke
April 2014 117
Name of Staff Member: Sinenhlanhla Mazibuko Position: Research Analyst Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: Building 33, 1st Floor, The Woodlands, 20 Woodlands Drive, Woodmead, 2052 Profession: Geologist Date of Birth: 22 October 1991 Years with Firm/Entity: Joined January 2014 Nationality: South African Membership in Professional Societies:-
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION Member Geological Society of South Africa 2014
Detailed Tasks Assigned:-
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
2014 Sentula Coal Compilation of an updated CPR for the intended disposal of their
Coal Asset Nkomati.
Bauba PGEs Assisted with editing the CPR on their South African PGE assets for updated listing on the JSE.
Key Qualifications:- Sinenhlanhla Mazibuko studied at the University of the Witwatersrand where she undertook her Bachelor of Science degree in Geology and later, her Honours degree in Geology at the University of Pretoria. As part of her honours degree, she undertook a study detailing the mineralogical characterisation of the various pyrite types of the Barberton Greenstone Belt. Sinenhlanhla joined the Venmyn Deloitte team in January 2014. Her current areas of expertise include conducting research and collecting information, particularly on mineral companies, reporting on a variety of data and sources, compiling databases for assisting senior management with mineral asset valuation. She also contributes towards Competent Persons’ Reports for company listings on various international stock exchanges, as well as other regulatory reporting. Education:-
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
B.Sc. Geology University of the Witwatersrand 2011 B.Sc. (Honours) Geology University of Pretoria 2013
Employment Record:-
POSITION COMPANY JOB DESCRIPTION DURATION
Research Analyst Venmyn Deloitte (Previously Venmyn Rand)
Venmyn Rand operates as a techno-economic consultancy for the resources industry on a worldwide basis. Responsibilities at Venmyn include:-
• compilation of databases; • compiling technical and geological information into reports
which are compliant with the SAMREC and JSE listing rules; and
• high level research for multiple facets of mineral projects.
January 2014 to Present
Languages:- English: Excellent Afrikaans: Fair IsiZulu: Excellent
April 2014 118
Certification:- I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience. ______________________Date: 15th April 2014 Sinenhlanhla Mazibuko
April 2014 119
Name of Staff Member: Tarryn Claire Orford Position: Mineral Project Analyst Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: First Floor, Building 33, The Woodlands, 20 Woodlands Drive, Woodmead Profession: Geologist Date of Birth: 26 March 1987 Years with Firm/Entity: Joined March 2010 Nationality: South African Membership in Professional Societies:-
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION Member Geological Society of South Africa 2010 Member Geostatistical Association of South Africa 2011 Member Mineralogical Society of South Africa 2011
Fair and Reasonable Opinions:-
YEAR CLIENT SECURITIES EXCHANGE
JURISDICTION TRANSACTION
TYPE IMPLIED VALUE (USDm)
DESCRIPTION
2012 Chrometco JSE Purchase of
assets for shares. 21.6 Independent Professional Expert Report.
Detailed Tasks Assigned:-
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
Hambledon Gold Gap Analysis and CPR on the Sekisovskoya Gold Mine in Kazakhstan.
Bauba PGEs Completed a CPR on their South African PGE assets for updated listing on the JSE.
Ecobank Gold Completed a review of a financial model to assist a client to obtain financing for a gold asset located in the Democratic Republic of the Congo.
Village Main Reef Water Assessment of Flooding and Pumping arrangements in the Klerskdorp Gold Basin, South Africa.
Banro Gold Completed a Feasibility study for the Namoya Project, Democratic Republic of the Congo.
Ashkari Chrome Fatal Flaws Analysis on 11 chrome assets in Zimbabwe.
Bauba PGEs Update of the Mineral Resource estimates for the Bauba Projects, Bushveld Complex, South Africa.
African Nickel Nickel Completed a market review for Nickel in South Africa.
Western Utilities Corporation Intangible Assets Independent high level evaluation of intangible Acid Mine Drainage technology assets for Financial Year end statements.
Capital Works Clay Review of a Clay Mine, in South Africa, for Fatal Flaws to assist with an Investement Decision.
Loncor Gold Compiling several sections for a NI 43-101 Preliminary Economic Assessment on the Makapela Prospect, Democratic Republic of the Congo.
Banro Gold Verifying geological model and Mineral Resource estimates for the Lugushwa Project, Democratic Republic of the Congo.
ZYL/Sentula Valuation Coal Valuation for various coal assets in the Kangwane Coalfield, South Africa, for potential merger discussions.
2012
Deloitte UK Iron Ore Review of Technical and Business Model on an Iranian Gold Project for guidance on an investment decision.
Eureka Gold Short Form Technical Report and guidance on a defunct gold mine, Zimbabwe.
Deloitte Canada Iron Ore Audit Assistance on Mont Wright Mine, Canada.
SARS Coal Mineral Asset Valuation on various assets within South Africa held by Umthombo Resources.
G&B African Resources REE’s, W, Li Compilation of a CPR as part of listing requirements for their Zimbabwean assets.
SEW Trident Iron Ore Technical on-site assistance in identifying mineralisation concessions in Guinea.
Chrometco Chrome Compilation of a valuation letter for mineral assets in the Bushveld Complex, South Africa.
Rukwa Coal Compilation of a CPR and technical documentation on their coal assets in Tanzania.
Bauba PGEs Update of the Bauba’s Mineral Resources in the Bushveld Complex, South Africa.
Loncor Gold Verification of geological modelling and Mineral Resource estimation and parameters for the Makapela Project, Democratic Republic of the Congo.
April 2014 120
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
Izingwe and BRL Magnetite Techno-Economic Statement on the Mokopane Magnetite Project, Northern Limb, Bushveld Complex, South Africa.
Razita Mining Various Short Form Prospectivity Reviews on various New-Order Prospecting Rights under application over South Africa.
2011
Lesego PGEs Strategic Assistance during exploration, project development and resource estimation for an Bushveld Project, South Africa.
Evraz Highveld Steel and Vanadium Magnetite and Iron Ore
Update of Annual Resource Statement for Mapochs Mine and technical assistance for future development of the asset in the Bushveld Complex, South Africa.
Sable Platinum Platinum and Vanadium Strategic Technical Assistance on geology and exploration on some Bushveld Complex platinum projects, South Africa.
Sylvania Chrome Techno-Economic Statements on chrome dump projects, South Africa.
2011
PSIL Uranium Techno-Economic Statement on a uranium deposit in Kazakhstan.
African Consolidated Resources Gold Review and geostatistical analysis on some greenstone belt gold projects located in Zimbabwe.
Realm Resources PGEs Techno-Evaluation Statement on some Bushveld Complex platinum assets, South Africa.
Lesego PGEs Mineral Resource Update for their Bushveld Complex project, South Africa.
Boynton PGEs Pre-Feasibility Study on the Western Bushveld Complex Magazynskraal Project, South Africa.
Aura Coal A prospectivity Review on a coal Project in Nigeria.
Pan African Resources Gold A Fatal Flaws Review of a gold tailings retreatment project near Barberton, South Africa.
National Mining Corporation Gold And Base Metals A Scoping Study on gold and base metal projects in Ethiopia.
2010
Central African Gold Gold Technical Statement and Update of Resource Statement on a greenstone gold deposit in Zimbabwe.
JCI Exploration Uranium Technical Review document on a Greenfields uranium project in the Northern Cape, South Africa.
Absolute Holdings PGEs Compilation and research on three Bushveld Complex platinum projects for three Techno-Economic Valuations and a CPR.
AfriSam Cement Data collection, research and proofreading for a Technical Review of numerous limestone, aggregate, sandstone, and dolomite assets, South Africa.
Keldoron Coal Mining Coal Independent Valuation on coal assets in the Klipriver Coalfield, KwaZulu Natal, South Africa.
Banro Gold Assistance with compilation of CPRs on a number of gold projects in the Democratic Republic of Congo.
Buildmax Sand Short Form CPR on some sand mineral assets, South Africa.
Ultratech Coal Technical and Valuation report on various coal projects, South Africa.
Gentor Base Metals CPR and Technical Review of ophiolite deposits in Oman.
Coal of Africa Coal Supporting documentation for valuation of coal assets in the Ermelo, Soutpansberg, Limpopo and Highveld Coalfields, South Africa.
Bauba Platinum PGEs Technical assistance and Technical Statement on three Bushveld Complex platinum projects, South Africa.
Key Qualifications:- Tarryn Orford studied at the University of Pretoria where she undertook her Bachelor of Science degree in Geology and later, her Honours in Geology. As part of her honours degree, she undertook a study detailing the effect of metamorphism by the Bushveld Complex on the Transvaal Supergroup. Tarryn joined the Venmyn team in March 2010. She brought with her 1 years experience in tutoring at University of Pretoria as well as vacation work for Digby Wells and Associates. Her current area of expertise includes preparation of SAMREC and National Instrument compliant technical documents, interpretation and analysis of mineral project data, preparation of technical diagrams and geostatistics to provide technical assistance during early stages of exploration. In 2013, Venmyn became Venmyn Deloitte, a wholly owned subsidiary of Deloitte Consulting South Africa. Since joining Venmyn, Tarryn has been involved in a number of projects including Competent Person’s Reports, Technical Reports, Due Diligence Studies, Mineral Resource and Mineral Reserve Statements and Techno-Economic Valuations, Fatal Flaw Evaluations and has provided technical assistance to a number of companies over a wide range of commodities including Platinum Group Minerals, gold, coal, uranium, base metals, iron ore, manganese, magnetite, Rare Earth Elements, sand and clay. These projects included many technical field visits throughout South Africa and globally, including Ethiopia, Guinea, Botswana, Tanzania, Benin, Zimbabwe, the DRC and Kazakhstan. Tarryn has completed her Graduate Diploma in Engineering (GDE) in Mining Engineering specialising in Mineral Resource Evaluation through the University of the Witwatersrand.
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Education:-
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
B.Sc. Geology University of Pretoria 2008 B.Sc. (Honours) Geology University of Pretoria 2009 Graduate Diploma in Engineering
Mining Engineering specialising in Mineral Resource Evaluation University of the Witwatersrand 2013
Employment Record:-
POSITION COMPANY JOB DESCRIPTION DURATION
Mineral Project Analyst
Venmyn Deloitte (Previously Venmyn Rand)
Venmyn Rand operates as a techno-economic consultancy for the resources industry on a worldwide basis. Responsibilities at Venmyn include:-
• data processing for technical reports; • compilation of due diligences, prospectivity reviews,
technical reports, mineral resource and mineral reserve statements;
• compiling technical and geological information into reports which are compliant with the SAMREC and JSE listing rules; and
• high level research for multiple facets of mineral projects.
March 2010 to Present
Geology Tutor University of Pretoria
Assisted students with practical tasks and assignments including identification of hand specimens and preparation for tests and exams.
January to July 2009
Geography Tutor University of Pretoria
Assisted students with practical tasks and assignments. Marking and overseeing tasks and exams.
January to July 2009
Student Geologist Digby Wells and Associates
Assistance on project specific work and a desktop study in the environmental field, secretarial work and general assistance to employers.
June 2009 to July 2009
Languages:- English: Excellent Afrikaans: Excellent French: Basic Certification:- I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience.
______________________Date: 21st January 2014 Tarryn Claire Orford
April 2014 122
Name of Specialist: Sarah Dyke Position: Environmental Industry Advisor Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: First Floor, Building 33, The Woodlands, 20 Woodlands Drive, Woodmead Profession: Natural Environmental Scientist Date of Birth: 2 December 1985 Years within field of Practise: 5 Nationality: South African Membership in Professional Societies:-
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION Member Geological Society of South Africa 2013 Member SACNASP – Candidate 2012 Member International Association of Impact Assessors 2010 Member South African Institute for Mining and Metallurgy 2013 Member Prince 2 Project Manager 2012
Detailed Tasks Assigned:-
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
2014 UIS Gold Review of the status of the environmental permitting, performance and compliance in alignment with Namibian legislative requirements.
2014 Cronimet Chrome Detailed review of the rehabilitation and closure quantum estimates for the Cronimet Chrome Mine, South Africa.
2014 Namoya Gold Gold
Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a TSX listing in accordance with the NI43-101 Code requirements.
2014 Hambledon Mining Gold
Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a LSE listing in accordance with the JORC Code requirements.
2014 ArcelorMittal Temirtau JSC (AM Temirtau) Iron ore
High level review of the rehabilitation and closure quantum estimates for the ArcelorMittal Orken LLP Group assets for the 2013 Financial Year.
2014 Barplats Platinum High level review of the rehabilitation and closure quantum estimates for the Barplats assets on the Eastern limb of the BIC, South Africa.
2013 Kilembe Copper Cobalt Company Copper/Cobalt
Environmental liability estimation and high level review of the current standing environmental liability at KCCL operations and KML closed mining operations in Uganda
2013 Unimin Diamonds Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a competent persons report and JSE listing.
2013 Great Western Minerals Group REE Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a NI-43-101 listing.
2013 Resource Generation Coal Review of the status of the environmental permitting, performance and compliance as part of a detailed financial due diligence.
2013 Petropavlovsk Gold
High level review of the rehabilitation and closure quantum estimates, and assessment of compliance with country statutory requirements, in conjunction with alignment to International Best Practice.
2013 Cronimet Chrome Mining (Pty) Ltd Chrome
High level review of the rehabilitation and closure quantum estimates for the Cronimet Chrome Mine, Limpopo province, South Africa.
2013 Banro Gold Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a NI-43-101 listing.
2013 NECSA Uranium
Independent Competent Persons Review of Provisions for the Decontamination and Waste Disposal provisions for the South African Nuclear Energy Corporation SOC Limited and its Group Companies.
2013 Continental Coal Coal Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a JSE listing.
2013 Keegan Resources Gold
Review of the status of the environmental permitting, performance and compliance in alignment with requirements for a TSX listing.
April 2014 123
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
2013 Rockgate Capital Uranium Current – acting as independent advisory consultant to the investment team for all environmental licensing and permitting requirements for the project from PFS to DFS phases.
2013 Resource Generation Coal
High level review of the status of the environmental permitting, performance and compliance, and reasonability of environmental liability provision for a technical Competent Persons Report
2013 Citic UA & IMR Ferrochrome
Review of current ESIA as composed by a local practitioner, gap analysis with reference to public consultation, specialist assessments, international best practises, standards and guidelines. Review of national legislation and international socio-environmental commitments, treaties and obligations. Project management and composition of updated environmental impact assessment report, including assessment and integration of all relevant international best practises, guidelines and standards (International Finance Corporation, World Bank Group Equator principles and specific environmental health and safety guidelines, equator principles).
2012 Kumba Iron Ore Iron Ore
Revision of current closure plans, the standardisation of a closure reporting framework and risk assessment methodology as well as alignment to existing Company Policy. Scope of work included the a high level review of the status of the clients’ mining permits, environmental and social authorisations, and approvals required from regional and local agencies. Also undertaken was the verification of the procedures to be executed before the mine and processing plant could be commissioned.
2012 Optimum Colliery Coal
Revision of current closure plans, the standardisation of a closure reporting framework and risk assessment methodology as well as alignment to existing Company Policy. Scope of work included the a high level review of the status of the clients’ mining permits, environmental and social authorisations, and approvals required from regional and local agencies. Also undertaken was the verification of the procedures to be executed before the mine and processing plant could be commissioned.
2012 Uranium One/ Mantra Resources Uranium
Review of current ESIA as composed by a local practitioner, gap analysis with reference to public consultation, specialist assessments, international best practises, standards and guidelines. Review of national legislation and international socio-environmental commitments, treaties and obligations. Project management and composition of updated environmental impact assessment report, including assessment and integration of all relevant international best practises, guidelines and standards (International Finance Corporation, World Bank Group Equator principles and specific environmental health and safety guidelines, equator principles).
2011 Eurasian Natural Resources Corporation Platinum
Amendment to an environmental feasibility study for the second largest proposed mine in Zimbabwe. Assessment included gap analysis, assessment of the liabilities associated with the activities as well as the environmental legal compliance of the sites. Scope of work undertaken inclusive of the following:- Lead Project Manager; Baseline assessment and descriptions; Definition of scope of work for project; Specialist ToR provision and management; Scoping report; Consultation with I&APs, Authorities and Traditional Leaders; Compilation of socio-economic impact assessment; Budget control and invoicing; Administration and project management; and Review and incorporation of National and International legislation, and associated necessary permits and licenses.
2011 Boynton Investments Coal
Scoping study, focus on the environmental permitting requirements, focus on environmental issues relating to mine residue disposal and management, compliance with national legislative requirements and international IFC standards.
2010 Chromex Chrome
Water Use License Applications, update of water use license application report following alterations in surface infrastructure, compilation and submission of additional information required by the competent authority, stakeholder consultation
2010 Confidential Nickel
Environmental scoping study, focus on the environmental permitting requirements, specifically environmental issues relating to mine residue disposal and management. Assessment of compliance with National legislative requirements and International IFC standards.
April 2014 124
YEAR CLIENT COMMODITY PROJECT DESCRIPTION
2010 Eurasian Natural Resources Corporation Coal
Environmental feasibility study for the proposed mine, including background data gathering, gap analysis, compliance with national legislation and international requirements, background information documentation compilation, compilation of scoping study for licensing and authorisation process, and to provide the baseline for Environmental Impact assessment. Compilation of Exploration EMP, and water monitoring programme.
Key Qualifications:- Sarah Dyke studied at the University of Johannesburg where she undertook her Bachelor of Science degree in Zoology and Biochemistry, and later, her Master Degree in Zoology, working as a student at both the University of Johannesburg (South Africa), and the University of Antwerp (Belgium). The research focused on the effects of acid volatile sulphides and total organic carbon upon the ability of riverine sediments to bind potentially harmful compounds (i.e. pesticides and industrial wastes).This information is particularly relevant when applied to the current acid mine drainage challenges facing South African river systems. This research will further the knowledge of toxins, particularly those of an industrial, mining and agricultural nature, upon the aquatic environments. Sarah joined the Venmyn team in April 2012. She brought with her 3 years’ experience from working at Epoch Resources, an environmental engineering firm, where she managed environmental feasibility projects at both a national and international scale. In 2013, Venmyn became Venmyn Deloitte, a wholly owned subsidiary of Deloitte Consulting South Africa. Since joining Venmyn, Sarah has been involved in a number of projects including Competent Person’s Reports, Technical Reports, Due Diligence Studies, Fatal Flaw Evaluations and has provided technical assistance to a number of companies over a wide range of commodities including Platinum Group Minerals, gold, coal, uranium, base metals, iron ore, manganese, Rare Earth Elements, sand and clay. In her current role, Sarah focuses on governance planning, programme management and implementations, environmental enterprise risk management, environmental strategy development and execution planning, impact management and planning, environmental management systems alignment and implementation, performance and assurance, and due diligence. Sarah has taken part in numerous national and international projects, with key countries including Italy, Uganda, Kazakhstan, Namibia, Russia, Mali, Tanzania, Zimbabwe, Mozambique, DRC, and within South Africa Education:-
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
Degree B.Sc. Zoology and Biochemistry University of Johannesburg 2007 Degree B.Sc. Hons. Zoology University of Johannesburg 2008 Degree M.Sc. Zoology University of Johannesburg 2012 Course Environmental Law Certification Course University of Potchefstroom 2011 Course Environmental Management Systems Certification Course University of Potchefstroom 2012 Course Environmental Management Systems – Lead Auditor Course University of Potchefstroom 2013 Course Mining Engineering – Competent Persons’ Course University of Witwatersrand 2013
Employment Record:-
POSITION COMPANY JOB DESCRIPTION DURATION
Environmental Industry Advisor
Venmyn Deloitte (Previously Venmyn Rand)
Venmyn Rand operates as a techno-economic consultancy for the resources industry on a worldwide basis. Responsibilities at Venmyn include:-
• independent environmental programme management and implementation
• environmental enterprise risk management • environmental performance and assurance • due diligence • independent review • contribution to prospectivity reviews, and technical reports
for technical public reports on various international stock exchanges.
April 2012 to Present
April 2014 125
POSITION COMPANY JOB DESCRIPTION DURATION
Environmental Scientist Epoch Resources
Responsibilities included:- • environmental and social impact assessments
• environmental feasibility studies
• environmental management programmes
• environmental legislative reviews
• environmental licensing and stakeholder consultations
2010 to 2012
Zoology Tutor University of Johannesburg
Assisted students with practical tasks and assignments. Marking and overseeing tasks and exams.
January 2008 to January
2010
Research Scientist University of Johannesburg
Researching documentation on current available studies on aquatic river health testing systems in South Africa. Testing of the water systems which compose the Nylsvley river system in the Limpopo Province, according to the physiological Assessment Index (PAI) as well as the recognized methods by Bath et. Al (1999). Utilization of the university's assessment equipment (incorporating the mass spectrophotometers, both MS and OES, reporting on the current health status of the system according to assessment protocols available
January 2008 to October
2008
Languages:- English: Excellent Afrikaans: Good Certification:- I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience. _________________ Date: 21st April 2014 Sarah Dyke
April 2014 126
Name of Staff Member: Jacobus Adriaan Myburgh Position: Mineral Project Analyst Name of Firm: Venmyn Deloitte, a subsidiary of Deloitte Consulting South Africa (Pty) Ltd Address: Building 33, 1st Floor, The Woodlands, 20 Woodlands Drive, Woodmead, 2052, South Africa Profession: Analyst Date of Birth: 31 December 1984 Years with Firm/Entity: Joined January 2010 Nationality: South African Membership in Professional Societies:
CLASS PROFESSIONAL SOCIETY YEAR OF REGISTRATION Member Investment Analyst Society of South Africa 2012 Member Geostatistical Association of South Africa 2012
Fair and Reasonable Opinions:
YEAR CLIENT SECURITIES EXCHANGE
JURISDICTION TRANSACTION
TYPE IMPLIED VALUE (USDm)
DESCRIPTION
2011 Wesizwe JSE Acquisition 280 F&R opinion document to the exchange
2010 Sylvania ASX Share conversion 190 F&R opinion letter to the board
2010 Ultratech Cement JSE Acquisition 50 Independent F&R for Ultratech Cement on Xstrata Assets
2011 Optimum Coal JSE Acquisition 400 F&R opinion letter to the board 2011 Forbes Manhattan RSAs Acquisition 20 SARB approval 2011 Sikhuliso RSA Acquisition 30 Value Determinition 2012 Chrometco JSE Acquisition 10 F&R opinion letter to the board
Detailed Tasks Assigned:
YEAR CLIENT COMMODITY PROJECT DESCRIPTION SITE VISIT
2013
Gold One Gold Techno Economic Statement Y Citic and Samancor Ferrochrome Independent Mineral Asset Valuation Zyl and Sentula Coal Independent Mineral Asset Valuation Platinum Australia PGM Independent Mineral Asset Valuation Y
2012
Tanzania Royalty PEA PEA Y Frontier Rare Earths PEA PEA Umcebo Coal Valuation Statement NMIC Gold PFS Andulela Kilken PGE Valuation Statement Y Chrometco Chrome Valuation Statement Central Rand Gold Gold CPR Coal of Africa Coal Corporate Model Sekoko Coal Valuation Statement Gem Diamonds Diamonds Valuation Statement Metmar Coal Valuation Statement Jimbe Minerals Nickel Prospectivity Review Glencore Coal Deloitte Audit Richards Bay Minerals Mineral Sands Deloitte Audit Y
2011
Nkomati Capital Coal Techno Economic Valuation PSIL Uranium Techno Economic Valuation Wesizwe Platinum Techno Economic Valuation Gem Diamonds Diamonds Independent Project Valuations Lesego Platinum Statistical Analysis Y Sephaku Fluorspar Independent Project Valuations Nkomati Capital Coal Valuation Statement Wesizwe Platinum Valuation Statement Namane Elandslaagte Diamonds Valuation Statement Y
PSIL Uranium Valuation Statement Sudor Coal Coal Valuation Statement
April 2014 127
YEAR CLIENT COMMODITY PROJECT DESCRIPTION SITE VISIT
Realm Resources Platinum Valuation Statement Y AEMFC Coal Valuation Statement Lodestone Namibia Iron Ore Valuation Statement African Copper Copper Valuation Statement Y
Karbochem Power Generation Valuation Statement
Miranda Minerals Coal Valuation Statement Anglo Namibian Prospects Base Metals Valuation Statement
Umcebo Coal Valuation Statement Gem Diamonds Diamonds CPR Banro Gold CPR Y Sephaku Fluorspar CPR Platmin Platinum CPR Y Harmony Gold CPR Y Miranda Minerals Coal PEA and PFS Pan African Resources,BTRP Gold Fatal Flaws review
2010
African Copper Copper Feasability Study Miranda Mineral Holdings Coal Independent Project Valuations
White Water Resources Gold Independent Project Valuations
Chrometco Limited Chromite Independent Project Valuations Sekoko Coal Independent Project Valuations West Wits Gold/Uranium Statistical Analysis Central African Gold Gold Statistical Analysis Worldwide Mineral Strategists Gold Statistical Analysis
Rooderand Chromite Chrome Valuation Statement African Copper Copper Valuation Statement Sekoko Coal Valuation Statement
Key Qualifications: Mr Iaan Myburgh has a degree in Mathematics from the University of Pretoria. He joined Venmyn in January 2010. During the time he has worked with Venmyn, he has specialised mainly in the market review for different commodities as well valuation of mineral projects using the market approach method and discounted cash flow method. He is also a candidate in the CFA program having passed the second level exam in 2013. Education:
DEGREE/DIPLOMA FIELD INSTITUTION YEAR
B.Sc. Mathematics University of Pretoria 2008
Employment Record:
POSITION COMPANY JOB DESCRIPTION DURATION
Mineral Industry Analyst
Venmyn Rand (Pty) Ltd
Venmyn provides compliance and valuation reporting services to the minerals industry. Responsibilities at Venmyn include:- • Compiling technical and geological information into reports which are
compliant with the SAMREC and JSE listing rules; • High level research for multiple facets of mineral projects; • Valuation of mineral projects; and • Background research of information for CPR’s and Technical
Statements.
2010 – present
April 2014 128
Languages: English: Excellent Afrikaans: Excellent Certification: I, the undersigned, certify that to the best of my knowledge and belief, these data correctly describe me, my qualifications, and my experience.
_______________________Date: April 2014 Jacobus Adriaan Myburgh
April 2014 129
Appendix 4: SRK’s ‘An Independent Competent Persons’ Report on the Material Assets of Sentula Mining Limited’ March 2011 Available following internet link:- http://www.sentula.co.za/?page_id=36
April 2014 130
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