coal 2011A review of South Africa’s coal sector

Coal 2011

The material contained in this report was compiled by Shona Kohler and the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg, South Africa. To subscribe to Research Channel Africa or purchase this report contact: Creamer Media, Tel: +27 11 622 3744 or email subscriptions@creamermedia.co.za.

Published: August 2011

Cover pictures by Creamer Media

Key developments 1

Overview of South Africa’s coal market 2–12

Demand Local demand: Eskom Local demand: Other Export sales

Operational challenges Export logistics Cost containment Safety Labour issues Skills shortages Environmental issues General corporate activity

Major companies 13–20Anglo American Thermal CoalBHP Billiton Energy Coal South AfricaExxaro ResourcesOptimum Coal HoldingsSasol MiningXstrata Coal South Africa Company profiles

Smaller companies 21–29Bisichi MiningCoal of Africa LimitedContinental CoalForbes & Manhattan Coal CorporationKeaton EnergyMiranda MineralsResource GenerationSentula MiningSouth African Coal Mining HoldingsTotal Coal South AfricaUniversal CoalWescoalCompany profiles

Selected Coal Projects in South Africa 30–35 AATC: Zibulo, New Largo Becsa: Douglas/Middelburg optimisaiton, Klipspruit Exxaro Resources: Grootegeluk Medupi expansion,

Thabametsi Optimum Coal: Boschmanspoort, Kwagga North,

Schoonoord Sasol Mining: Thubelisha, Impumulelo, Shondoni,

Mafutha Xstrata Coal South Africa: Atcom East, Tweefontein,

ZonnebloemProjects under development by smaller companies

Prospects 36

Main sources 37–38

List of abbreviations

TABLE OF CONTENTS

AATC – Anglo American Thermal CoalAEMFC – African Exploration Mining and Finance CorporationARM – African Rainbow MineralsAtcom – Arthur Taylor Colliery Opencast MineBecsa – BHP Billiton Energy Coal South AfricaBEE – black economic empowermentCoAL – Coal of Africa LimitedDEA – Department of Environmental AffairsDMO – Douglas/Middelburg optimisationDMR – Department of Mineral ResourcesIDC – Industrial Development CorporationIPP – independent power producerJV – joint ventureKZN – KwaZulu-NatalMPRDA – Mineral and Petroleum Resources Development ActNUM – National Union of MineworkersRBCT – Richards Bay Coal TerminalResGen – Resource GenerationRoM – run-of-mineSynfuels – synthetic fuelsSACMH – South African Coal Mining HoldingsTCSA – Total Coal South AfricaTFR – Transnet Freight RailUasa – United Association of South AfricaXCSA – Xstrata Coal South AfricaZAC – Zululand Anthracite Colliery

Coal 20111

KEy dEvELOPMENTS

October 2010: Sasol Mining concludes the R1.8-billion Ixia coal black economic-empowerment transaction with WIPCoal Investments.

November 2010: Coal of Africa agrees to buy the Chapudi coal exploration project in Limpopo for $75-million.

January 2011: BHP Billiton Energy Coal South Africa announces that it will divest some of its currently undeveloped coal prospecting rights to focus on its existing operations.

February 2011: South Africa’s Minister of Mineral Resources calls on mining major Anglo American to take a cue from its peer BHP Billiton and shed some of its coal rights to allow new participants to enter the coal exploration market.

February 2011: South Africa’s Minister of Mineral Resources Susan Shabangu announces that she reserves the right to take corrective measures to ensure that South Africa has sufficient coal for power generation, but backs off the widely expected step of declaring coal a strategic resource.

February 2011: Energy coal company Keaton Energy announces plans to acquire a 74% stake in South African export coal producer Leeuw Mining.

March 2011: Junior mining company South African Coal Mining Holdings announces the lifting of the suspension of its shares on the JSE.

March 2011: Sasol Mining reports it has set aside R8-billion for its coal mine replacement programmes.

March 2011: The Richards Bay Coal Terminal puts plans to increase its export capacity on hold until 2015, owing to delays in expanding the rail capacity that delivers to the terminal.

April 2011: Keaton Energy indicates that its contract with South African power utility Eskom has been extended from 16.5-million tons over seven years to 20.8-million tons over ten years.

May 2011: Exxaro Resources reports it is looking to sell three of its Mpumalanga coal deposits.

June 2011: Resource Generation increases its offtake agreement with India’s RPG Group from 37-million tons over 20 years to 139-million tons over 38 years.

June 2011: The Richards Bay Coal Terminals revises its export target for 2011 downwards, to 63.4-million tons.

June 2011: Rio Tinto confirms that, once it concludes the takeover of Riversdale, it intends selling Riversdale’s South African asset, the Zululand Anthracite Colliery.

July 2011: More than 150 000 coal miners belonging to South Africa’s powerful National Union of Mineworkers prepare to go on strike after wage negotiations with representatives of the country’s Chamber of Mines reach a stalemate.

July 2011: Optimum Coal reports it has increased its production by 21% to 17.1-million tons for the financial year.

July 2011: TSX-listed Forbes & Manhattan Coal celebrates a secondary listing on the JSE.

July 2011: Firestone Energy and Sekoko Resources call off negotiations with India’s Jindal Steel over the development of coal properties in the Waterberg area of Limpopo.

August 2011: South Africa’s coal strike ends as employers and unions sign a two-year wage agreement and reach a consensus on other conditions of employment.

Coal 2011 2

Coal is of critical importance to the South African energy economy. It is the source of 93% of the country’s electricity, 70% of its primary energy and 30% of its petroleum liquid fuels. It is also the country’s leading mineral revenue generator, recording sales valued at R65-billion in 2009, compared to R58-billion for platinum-group metals and R49-billion for gold.

Local demand for coal is growing, particularly from electricity utility Eskom, which is pursuing a massive capacity expansion programme that includes significant new coal-fired facilities.

At the same time, demand for South African coal on the export market is rising, particularly from countries such as India and China, and South African coal-mining companies are benefiting from increased prices for their export coal.

While Eskom and the export market have, historically, had differing coal quality requirements, a tension has, nevertheless, emerged in the coal industry, between the need to meet national energy demands and the need for producers to deliver optimal investor returns. Some contend that the power balance has shifted towards the interests of the shareholders of the mining companies, to the detriment of the national interest.

As a result, there have been calls from some quarters for coal to be declared a “strategic mineral”, to be explored, developed and exploited in a way that primarily guarantees security of domestic power supply. This could include the prescription of export quotas and restrictions on the export of the types of coal used by Eskom, and the introduction of price controls. While government has resisted these calls, the Minister of Mineral Resources Susan Shabangu has pleaded with the coal-mining industry to work with government to meet the expected Eskom shortfall. Further, the Minister has indicated that she “reserves the right” to take corrective measures to ensure that South Africa has sufficient coal for power generation, and contends that a balance needs to be found between pursuing the principles of the free market while taking into account the needs of the country.

While this debate continues, the reality is that South African coal exports are already being limited, not by government intervention in an effort to ensure domestic coal supply, but rather as a result of logistical constraints that are limiting coal deliveries to the country’s coal export terminal in Richards Bay. Specifically, the rail line that runs from the country’s key coal-mining area to Richards Bay is operating at below capacity and, even at full capacity, is unable to deliver the volume of coal that is available for export. Companies in the sector contend this is one of the key constraints to the future growth of South African coal mining.

The bulk of South Africa’s coal-mining operations are based in Mpumalanga, which contains the Witbank,

Highveld and Ermelo coalfields, and accounts for about 84% of the country’s coal production. There are also operations in the country’s Limpopo province, in the Waterberg and Soutpansberg coalfields, and in the Free State province. There are also a number of anthracite mines in KwaZulu-Natal (KZN).

The Witbank and Highveld fields still contain significant coal reserves. However, as concentrated mining is depleting the coal in these fields, extraction is becoming more technically challenging. Consequently, coal miners are looking to mine small shallow pillars, despite the attendant risks associated with this type of mining. Coal producers are also looking to the extensive but little-exploited Waterberg coalfield to replace the declining resources of the Witbank coalfield.

While the Waterberg is a large coal resource, some believe that there are formidable obstacles to the field’s large-scale development. For example, the Waterberg has thick coal seams, embedded in siltstones and shales, which mean that extraction will be harder and will require more input costs than other fields. In fact, extracting coal in the Waterberg will reportedly cost in the region of R300/t, which is double the usual cost of extraction. Mining the Waterberg is also challenging as a result of a lack of infrastructure, with the field being far from industrialised locations. The Waterberg also has a shortage of water, which is needed in the treatment of coal, and has limited transport facilities.

In total, South Africa has 19 identified coalfields, although there are only about seven that are currently being mined. Some have, in fact, never been mined at all. For example, the coalfield in the Springbok Flats, in Limpopo, is huge but has never produced any coal, owing to the fact that it contains uranium, and there are questions about whether coal containing uranium can be burned, and whether the uranium can be extracted from the coal.

South Africa is in the process of developing a coal roadmap to provide an update of the country’s coal inventory and to develop scenarios and come up with a preferred trajectory for the South African coal industry. It is expected that this roadmap could be released by mid-2012.

dEMANdSouth Africa’s coal-mining operations produce about 250-million tons of RoM coal a year. Of the saleable production, the bulk is sold locally, with only a relatively small portion being exported. For example, in 2009, 75% of the total saleable coal produced in South Africa was sold inland. However, owing to the delivery of differing qualities of coal to local and export customers, the coal sold locally was only worth 53% of the total sales value of the country’s coal production for that year.

OvErviEw OF SOuTh AFriCA’S COAL MArKET

Coal 20113

Global thermal coal demand and supply

Global thermal coal demand is expected to be some 739-million tons in 2011. Key demand countries are China and India, which are expected to account for 15% and 12% of total demand in 2011 respectively. The demand from these countries has risen strongly in recent years, with China’s demand having represented just 7% of total global demand as recently as 2007. India’s demand in 2007 was 6% of the global total.

Global thermal coal demand is expected to rise to 894-million tons in 2015. At that time, Chinese demand is expected to represent 14% of the total, and Indian demand is expected to account for 16% of the total.

Thermal coal supplies are expected to be 718-million tons in 2011, rising to 908-million tons in 2015. Currently, key supply countries are Indonesia and Australia, followed by Russia, Colombia and South Africa. These same countries are expected to account for the bulk of thermal coal supply in 2015.

Global thermal demand and supply forecastdemand (mt) 2007 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F

W Europe 135 136 127 106 113 118 120 117 115

E Europe 36 35 31 33 39 41 46 49 51

US 29 28 19 15 15 16 18 19 19

Other Atlantic 26 27 24 25 26 28 32 34 36

Total Atlantic 225 225 201 179 193 202 215 220 221

Asia, inc 366 371 432 503 521 552 577 606 638

Japan 120 121 106 113 114 114 114 114 112

Korea 66 72 80 89 90 90 92 99 106

Taiwan 57 56 53 57 60 62 66 68 70

China 40 35 80 114 109 112 112 118 125

India 35 36 60 75 88 109 121 130 145

Other Pacific 16 16 20 22 25 30 33 35 35

Total Pacific 382 388 452 525 546 582 610 641 673

Total demand 607 612 653 705 739 784 825 861 894

% chnge yoy 3.3% 0.9% 6.6% 8% 4.9% 6% 5.2% 4.3% 3.9%

Supply (mt) 2007 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F

Australia 112 126 139 141 148 180 195 211 222

Indonesia 195 200 233 275 280 293 315 333 353

China 45 36 18 14 14 14 14 14 14

Vietnam 25 17 24 18 16 16 16 16 16

South Africa 66 62 65 67 69 74 76 80 80

Russia 72 72 82 87 83 87 89 89 89

Colombia 65 69 63 71 74 80 85 90 94

Other 27 31 28 34 33 33 36 39 40

Total Supply 607 612 653 708 718 777 826 872 908

% change yoy 3.3% 0.9% 6.6% 8.4% 1.4% 8.2% 6.3% 5.6% 4.1%

National balance – – – 3 -22 -7 1 11 13

F - forecast

Sou

rce:

GTI

S, M

acqu

arie

Res

earc

h, F

ebru

ary

2011

W Europe106

E Europe33

USA15

Japan, Korea,Taiwan

259

China14/114USA

16

Colombia72

S Africa66

Indonesia275

Vietnam18

Russia81

Australia141

8 into North Asia

India75

16

6

55

10510

115

5123

9

40

9

15

36

27

ExporterImporterChina imports/exports

Estimated tradeflows in 2010

Figures in million tons

Thermal coal flows in million tons

Sou

rce:

GTI

S, M

acqu

arie

Res

earc

h, F

ebru

ary

2011

Coal 2011 4

Local demand: Eskom

Domestic coal consumption is dominated by the electricity supply sector, with Eskom being the largest domestic consumer of coal. In the utility’s 2011 financial year, it burnt 124.7-million tons of coal, accounting for the largest portion of inland coal sales.

The utility sources about 70% of its coal requirements from three of the coal majors – AATC, Exxaro Resources and Becsa. Xstrata Coal also supplies Eskom, although on a smaller scale than the other companies.

AATC reportedly produced 36.4-million tons of Eskom coal in 2010, representing 63% of the company’s total South African coal production for the year. Its Kriel, New Denmark and New Vaal collieries supply coal to Eskom’s Kriel, Tutuka and Lethabo power stations respectively on long-term cost-plus contracts. Additional tonnage is provided to the utility on medium-term contracts from the Goedehoop, Kleinkopje, Landau and Zibulo mines, while AATC’s JV operation with Exxaro, Mafube, supplies coal to Eskom’s Arnot power station. AATC is also currently developing the New Largo mine, which is expected to be one of the key supplies to Eskom’s new Kusile power station, to which it will deliver about 14-million tons of coal a year.

Exxaro is also a major supplier to Eskom, with almost 80% of the company’s output being power station coal. The Arnot and Matla mines supply Eskom’s Arnot and Matla power stations on a cost-plus basis. When the contracts for these mines were entered into, Eskom agreed to provide the capital for the development of the mines, while the mining company would receive a management fee, in addition to the operating costs. The current agreement to supply Eskom with the output of the Matla mine runs until 2023. However, the life of the mine has been extended to 2046. As a result, Exxaro and Eskom have engaged in discussions around a new contract.

Exxaro’s Leeuwpan and North Block Complex mines are also able to deliver power station coal, and its Grootegeluk mine supplies Eskom’s Matimba power station in terms of a 40-year supply contract. The Grootegeluk Medupi project will enable the mine to also deliver to Eskom’s new Medupi power station. Delivery will start in 2011, to build a stockpile, and will ramp up to fll supply of 14.6-million tons a year by 2015. The mine is contracted to deliver at this rate for a period of 40 years.

Becsa supplied about 64% of its production in the 2010 financial year to Eskom. This included the sale of coal from the company’s Douglas/Middelburg operation

to Eskom’s Duvha power station, and the sale of coal from Becsa’s Khutala mine to the Kendal power station, in Mpumalanga.

Xstrata also supplies coal to Eskom. For example, the company’s Goedgevonden JV with ARM Coal has a 17-year agreement to supply 3.5-million tons a year of thermal coal to Eskom’s Majuba power station, in Mpumalanga. The agreement will run until 2026.

The critical nature of coal to the effective functioning of Eskom is clear in the identification of coal as one of the contributing factors to the electricity supply crisis that unfolded in South Africa in early 2008. The utility argued at the time that much of its plant underperformance could be attributed to load losses associated with poor quality coal, exacerbated by low coal stockholdings, as well as handling difficulties associated with wet coal. However, it must also be noted that key shortcomings in Eskom’s own plant maintenance programmes also contributed to the crisis.

Since that time, Eskom has been pursuing discussions with its coal suppliers on the issue of coal volumes and quality. As a result, certain of these challenges have been resolved. For example, the utility had reported relatively high coal-related load losses at its Duvha and Matla power stations over a number of years, with these two facilities accounting for almost 80% of Eskom’s total system losses in 2009/10. In response, Eskom negotiated improved coal-quality specifications with the suppliers to these facilities, and deliveries according to the new specifications began in early 2011. The results have been notable. Load losses at Duvha, for example, have almost halved from the peak levels of between 850 MW and 1 000 MW.

Eskom has also sought to resolve the issue of low coal stockpiles, having replenished these to about 40 days, up from 10 days at the time of the electricity supply emergency. It has also set up standard operating processes that have helped to ensure that coal remains dry, which is yielding results. For example, tarpaulins are being installed to shield portions of the coal from the rain, and covers were expected to be in place at all Eskom power stations by March 31, 2011.

Nevertheless, the utility continues to voice concerns over the security of coal supply, including the supply of the required quality. It has also expressed concern over the price it may have to pay for its required supply in coming years, warning that there could be a steady migration towards export parity coal pricing, which would result in an economically destabilising surge in local power prices, which are already rising strongly.

Eskom has explained that these concerns are a result of the increasing diversion of South African coal, including the lower quality coal traditionally provided to Eskom, to lucrative export markets, in particular India. The utility contends this has placed it in direct competition with export customers and, as a result, there has been a “marked” deterioration in the coal it receives.

The Chamber of Mines, however, has strongly denied Eskom’s claims, with the mining body’s CE Bheki Sibiya boldly claiming that “there is no coal supply or quality crisis”.

Eskom Coal Summaryyear ended March 31

2011 2010 2009 2008 2007

Coal burnt (million tons)

124.7 122.7 121.2 – –

Coal purchased (million tons)

126.2 121.8 132.6 – –

Coal stock days

41 37 41 13 29

Sou

rce:

Com

pile

d fro

m

Esk

om a

nnua

l rep

ort 2

011

Coal 20115

Sibiya has debunked the allegation that increasing quantities of South African coal are being exported, citing figures that show that coal exports from South Africa have, in fact, fallen by over eight-million tons since 2005 and, while there has, indeed, been growth in exports to India, he outlines that this should not have affected the quality of coal available to Eskom.

In fact, Sibiya contends the average quality of coal delivered to Eskom has not changed significantly over the past decade. Further, he reveals that the quality is broadly in line with the average parameters set out in the supply specifications in the contracts between Eskom and coal-mining companies.

Sibiya has also explained that, in general, Eskom burns coal with an average calorific value of 19.22 MJ/kg, but within a range of between 17 MJ/kg and 22 MJ/kg. The average ash content of the coal burned by Eskom is 29.6%, within a range of 21% to 36%. However, the traditional European market for South African coal accepts coal with a calorific value of 27.5 MJ/kg and an ash content of less than 20%. Further, the Indian market generally accepts South African coal with a calorific value of 25 MJ/kg and a maximum ash content of 20%. Thus, Sibiya maintains that the export market does not accept the quality of coals that are traditionally sold to Eskom.

With regard to Eskom’s concerns over the price of coal, various mining groups have pointed out that Eskom will not have to pay high global prices for the mineral, owing to the lower quality that it acquires and, as most coal companies supplying Eskom are close to power stations, the utility makes savings on transport costs. Further, the cost of coal is reportedly only a small portion of the price charged for electricity, meaning that, even if the price of coal does rise, it should not have an overwhelming effect on electricity prices.

In light of the points made by the Chamber of Mines and various mining companies, the coal-mining industry has decried the calls for government to introduce “heavy-handed mechanisms” to regulate the sector. Mechanisms that were suggested included the prescription of export quotas and restrictions on the types of coal used by Eskom, and the introduction of price controls. Eskom’s argument is that South Africa’s coal resources should be developed and exploited in the national interest.

The Chamber contends such interference in a voluntary market-based system could lead to significant distortions and unintended consequences for the country.

There is, however, international precedent for government intervention in the coal market. In countries such as China, India, Brazil and Australia, for example, government intervention ensures security of domestic coal supply. Along similar lines, Indonesia is considering legislation that will ban the export of low-grade coal by 2014.

The Indonesian intervention could enhance the difficulties Eskom is expecting, as Indonesia is currently South Africa’s key competitor in the export of coal to Asian markets. With limits placed on Indonesian exports, demand for South African coal on the export market could increase.

Nevertheless, for now, the South African government has resisted Eskom’s calls to intervene in the coal market.

Rather, the Minister of Mineral Resources has pleaded with the coal-mining industry to work with government to meet Eskom’s requirements. Further, the Minister has indicated that she “reserves the right” to take corrective measures to ensure that South Africa has sufficient coal for power generation.

Eskom’s build programme will result in an increase in coal consumption to 160-million tons a year in 2020, and it is believed that the utility has secured about 80% of this requirement through various existing and new supply deals.

Aside from the major coal producers, some of the companies that will be supplying Eskom include Firestone Energy and Sekoko Resources, Keaton Energy and Vunene Mining.

In January 2011, Eskom signed a supply contract with Firestone Energy and Sekoko Resources. The deal will see the JV partners delivering 525 000 t/y of coal to Eskom from April 2012 to March 2015. Thereafter, the companies will deliver one-million tons of coal for a period of three years. Negotiations are in progress for the Sekoko/Firestone JV to supply Eskom with 2.3-million tons of coal a year until 2032.

Junior coal miner Keaton Energy also has an agreement to supply Eskom, and the company will be delivering 20.8-million tons of coal to the electricity utility over a 10-year period. The contract was originally for 16.5-million tons of coal over seven years, but was later expanded to the higher level of supply. Eskom has also requested improved quality specifications than were contained in the original contract, with a concomitant price adjustment. Production ramp-up began in May 2011, at a rate of 50 000 t/m, increasing to 175 000 t/m within four months. Towards meeting this contract, Keaton is developing its Vanggatfontein project.

Eskom has also engaged in talks with Vunene Mining over a possible five-year coal supply deal for the recommissioned Camden power station. The coal will be mined at the Usuthu colliery, which was previously owned by Eskom.

Despite the agreements that Eskom has concluded with various junior coal-mining companies, and the contracts that the utility has for existing and new supply from major coal miners, the security of coal supply to South Africa’s electricity generation sector beyond 2020 is unclear. Eskom estimates that investment of some R100-billion in new coal projects will be needed between now and 2020 to meet its ongoing coal requirements.

Doyen coal commentator Gerald McCloskey has suggested that Eskom considers the possibility of mining coal for its own use, pointing out that coal-to-liquids producers such as Sasol have gained significant advantages from self-mining from the point of view of security of supply at efficient cost. It is unclear whether this is an option that Eskom would contemplate.

In the meantime, the utility may receive some support from South Africa’s State-owned mining company, the AEMFC, which is reportedly aiming to be one of South Africa’s top five coal producers by 2020. The AEMFC’s first coal-mining project, Vlakfontein, opened in early

Coal 2011 6

2011. The mine is expected to supply coal to Eskom and to function strategically as a coal supplier to prevent future energy shortages.

Local demand: OtherAside from the electricity industry, South Africa’s most significant user of coal is the synfuels sector, with synfuels company Sasol using over 40-million tons of coal a year in the production of liquid fuels and chemicals. This accounts for about 25% of local coal sales.

Sasol is largely self-sufficient with regard to the provision of coal feedstock for its facilities. The company’s mines in Mpumalanga supply Sasol Synfuels’ coal-to-liquids plant in Secunda, while its Mooikraal mine, in the Free State, supplies coal to Sasol Infrachem’s facility in Sasolburg. In addition, Sasol purchases about five-million tons of coal a year from Anglo Coal’s Isibonelo mine, as part of a 20-year external purchasing agreement, which will continue until 2025. In 2010 AATC reported reduced demand from Sasol.

In JV with Exxaro, Sasol is considering the possible development of a new coal mine to supply its proposed Mafutha coal-to-liquids facility. The project is currently in an extended prefeasibility stage. A sample of 170 000 t of coal has been extracted to test its suitability for gasification.

Coal is also used by South Africa’s metallurgical industry, dominated by ArcelorMittal South Africa. Exxaro is one of the companies that supplies to ArcelorMittal South Africa, and in the year to June 2010, increased demand from the steelmaking company saw Exxaro’s sales of coking coal to the domestic market increase by 29%.

A new supplier to ArcelorMittal South Africa will be CoAL, in which the steelmaker owns a 16.3% stake. ArcelorMittal is expected to buy the first production from the Vele and Makhado projects, which are currently under development by CoAL, with rail partnerships being negotiated between the two companies for the life of these mines.

Other domestic demand sectors for coal include the cement and bricklaying industries. Local coal is also sold to merchants and traders, and to non-Eskom power stations.

Export salesHistorically, Europe was the primary destination for South African coal exports having, until recently, been the recipient of 90% of the country’s total coal shipments. However, over the past few years, the proportion of coal delivered to Europe has fallen, while Eastern markets, including India and China, have started receiving an increasing portion of the country’s coal exports.

This shift is easily evident if coal shipments from the RBCT are assessed. In 2005, for example, 65% of all coal shipments were ‘Atlantic’, while Indian demand was relatively low, at 5% of the total, and there was no demand from China. By 2010, an estimated 15% of all RBCT exports were going to China, while some 30% were being delivered to Indian buyers. Meanwhile, deliveries to Atlantic markets fell to about 20% of South Africa’s coal exports in the same period.

South African coal companies are making specific mention of their deliveries to India. For example, XCSA reported that, as a result of Indian demand for thermal coal, its exports to India increased by about 130% in 2009. Meanwhile, Anglo American’s 2010 annual report showed that about 30% of AATC’s exports are being delivered to India.

Even the smaller coal companies are benefitting from Indian demand. For example, in June 2011, it was reported that ResGen had signed a $16-billion coal supply agreement with India’s Integrated Coal Mining, a unit of the RPG Group. This will see the delivery of 139-million tons of coal from ResGen’s Boikarabelo project, which is currently under development in the Waterberg.

At the same time as South Africa’s coal export destinations have been changing, the amount of coal shipped from South Africa has been declining. In 2005, 71.4-million tons of coal were exported from South Africa, while in 2010, only 63.4-million tons were exported.

This decline is largely a result of logistical constraints on the State-owned rail line that delivers to the country’s coal export terminal in Richards Bay. (Further details on the logistical constraints are outlined under the Operational Challenges heading)

OPErATiONAL ChALLENGESExport logisticsThe bulk of South Africa’s coal exports are delivered to international markets through the Richards Bay Coal Terminal (RBCT), situated on the north coast of KZN.

Anglo American’s Khanyisa project

To ensure security of electricity supply, Anglo American is considering the development of a 450 MW discard coal-fired power project. By July 2011, the company was undertaking due diligence on the tender documentation for what could emerge as a large-scale independent power producer (IPP) project, and had prequalified seven bidders.

The proposed project, known as the Khanyisa IPP, is being pursued as a build-operate-and-own development, with Anglo American providing the land, coal and water, as well as an offtake agreement.

The group aims to conclude a 25-year power purchase agreement with the eventual developer, with an option to extend the term. It is intended that the IPP will supply its entire capacity to Anglo American operations.

The coal will be recovered from dumps associated with historical mining operations, including the Kleinkopje, Greenside and Landau collieries, in Mpumalanga, which have sufficient reserves for the IPP to operate for over 30 years.

The project will still need to be approved by Anglo American once it has evaluated the bids and agreed the final terms with the selected developer. Although the primary motivation for the project is security of supply, the IPP tariff plus the cost of using the network will also be assessed against its expectations of future Eskom power prices.

Coal 20117

The terminal, which is the largest facility of its type in the world, has the capacity to export 91-million tons of coal a year from a 2.2 km quay with six berths, four shiploaders and a stockyard capable of holding 8.2-million tons. This capacity was a achieved through the so-called Phase V expansion project, commissioned in May 2010. Prior to the commissioning of the Phase V capacity, the RBCT was able to export 72-million tons of coal a year.

Exports through the RBCT are largely limited to the shareholders of the terminal – Anglo Operations, Becsa, Exxaro Coal, Kangra Coal, Koornfontein Mines, Optimum Coal Holdings, Sasol Mining, South Dunes Coal Terminal Company, TCSA and Xstrata South Africa – although since about 2007, a portion of the terminal’s export capacity, known as the Quattro allocation, has been available to 16 qualifying BEE companies.

The administration of the Quattro allocation has recently been under scrutiny. In early 2011, the Department of Mineral Resources (DMR) stripped Mhlatuze Bay Coal Administrators of its administration responsibilities for the Quattro allocation, and replaced Mhlatuze with Ubu Logistics. The department cited the misappropriation of at least R5.5-million and other irregularities as the reason behind this decision. However, some Quattro members have expressed discontent over the manner in which the situation was handled, and Mhlatuze itself has disputed its removal, claiming that it had informed stakeholders, including the DMR, of the fraud in July 2010.

Some contend that the unilateral replacement of Mhlatuze with Ubu Logistics, which has former Public Enterprises Minister Alec Erwin as a director, is an example of increasing government interference in the coal market. One Quattro exporter contends that the DMR used the Mhlatuze situation, as an excuse to shift the management of the scheme to a group of politically connected individuals.

The Quattro allocation is currently about four-million tons a year, and some contend that this is insufficient to give emerging black-owned coal companies a foothold in the export market, although certain coal exporters with Quattro entitlement have been noted for not having sufficient production to utilise their full quotas.

Nevertheless, it is possible that the Quattro allocation could be expanded. For example, it has been suggested that Eskom Enterprises could contribute some three-million tons of RBCT entitlement to the system. This entitlement dates back to a time when Eskom traded some product offshore.

Further, a reorganisation of the Quattro allocation is taking place as a result of the Phase V expansion at the RBCT. The additional 19-million tons of capacity made available, as a result of the expansion, has been allocated to empowered participants in the market. Some of the companies that have qualified for this capacity currently have Quattro allocations, which they will forfeit when they start using their RBCT allocations. However, this will not be immediate. Rather, the companies will migrate from the Quattro system to general RBCT capacity over a period of three to four years.

By mid-2011, some 700 000 t/y of Quattro entitlement had been reallocated as a result of the migration to Phase V. Two new coal exporters – Coastal Fuels and Silver Unicorn Trading – were granted an entitlement of 175 000 t/y each in June 2011, and a further two entitlements of the same capacity remain available.

Despite the increasing availability of export capacity at the coal terminal, South Africa’s coal exports remain constrained. This is a result of challenges on the rail line running from the coal-mining areas of Mpumalanga to the coal terminal in KZN. Coal-mining companies contend that these logistical constraints are preventing them from benefitting from the upswing in global coal demand and prices.

Operated by State-owned Transnet Freight Rail (TFR), the coal line currently has a nameplate capacity of 71-million tons a year. This is significantly less than the 91-million tons of capacity available at the RBCT, and the situation is exacerbated by the fact that TFR’s actual delivery figures fall well short of its capacity. In 2010, the line only delivered about 63-million tons of coal to the RBCT, meaning that the terminal was only able to export at that level, despite the availability of the Phase V capacity.

At a coal price of $129/t, the South African coal exporting industry could be losing out on some $2.5-billion in revenue a year, owing to the capacity gap between the rail line and the coal terminal rising to more than $3-billion in revenue a year, when taking into account the rail line’s failure to operate at capacity.

TFR is seeking to bring its delivery figures in line with its capacity, and previously indicated that it expected to rail 73-million tons of coal to the RBCT in the financial year to March 2012. Participants in the industry are doubtful, however, as to whether this will be achieved. Meeting the target would require TFR to deliver at an average rate of 6.4-million tons a month from June 2011, until the year end in March 2012. The entity came close to this figure for June 2011, when it railed six-million tons, however, this figure fell to 5.1-million tons the following month.

Based on assurances from TFR in late 2010, the RBCT forecast that it would export 70-million tons in 2011. Following severe derailments on the coal line early in the year, the RBCT revised this down to 68-million, and a further downward revision, to 63.4-million tons, was announced in June. If exports of 63.4-million tons are achieved, 2011 coal export figures will be in line with those of 2010. Some believe, however, that exports could be as low as 61-million tons in 2011, which was the level achieved in 1999. It has been reported that there continue to be problems on the return link, taking empty wagons away from the terminal.

In this context, where TFR is unable to deliver all the coal that is available for export, questions exist as to how the available capacity should be allocated. There have been reports that TFR is giving priority access to BEE companies, at the expense of other RBCT participants.

Coal 2011 8

Some Quattro scheme members are having more coal delivered to the RBCT than expected, with the result that the scheme’s allocated stockpile space is full. This poses certain risks. For example, where stockpile coal is made up of product blended from a number of different producers, the risk of spontaneous combustion is higher.

TFR is pursuing an expansion programme intended to increase the capacity on its coal line to 81-million tons a year by 2015/16. This will include the purchase of new locomotives, as well as the widening of the Midvaal tunnel, through which only one train is currently able to pass at a time.

TFR is imposing significant tariff increases on its coal line, which it justifies on the basis of its planned capacity expansion. Coal companies explain that the transport utility is demanding that they accept “take or pay” penalty clauses. The mining companies want TFR to agree to similar penalty conditions should it fail to provide the trains as agreed.

It should be noted Transnet previously indicated that a capacity of 81-million tons would be achieved by 2014, showing that there is some slippage of the schedule. Further, even after the expansion on the coal line, TFR’s coal capacity will continue to fall short of the capacity at the RBCT. As a result, the RBCT has put plans to further expand its export volumes on hold until 2015, while it waits for TFR to close the gap.

One option under consideration by TFR is to boost its coal capacity through shifting 15-million tons a year of general noncoal freight off the coal line onto a proposed alternative rail link through Swaziland. The proposed loop is likely to run from Ermelo into Swaziland towards Mbabane and then to Matata before ending in Richards Bay. This would relieve congestion on the Ermelo–Richards Bay corridor, and could later facilitate the integration of capacity to serve the Waterberg, where future coal-mining developments are likely to take place.

Transnet is also hoping to improve its efficiencies and productivity by returning to a scheduled timetable. During the global economic slowdown, when export demand for commodities was low, TFR moved away from an operational schedule. The company now intends to have 60% of all its rail operations back on schedule by the end of 2011.

Some companies are seeking to avoid the difficulties at the RBCT by rather exporting through the Matola terminal, in Mozambique. For example, CoAL has a one-million-ton-a-year export allocation at this facility, and has exercised its option to participate in an expansion at Matola.

Other companies are considering participation in a proposed Trans Kalahari Freight Corridor, which may be constructed between Gaborone and Walvis Bay. Exxaro is one such company. However, this project may only come online in 2020.

Cost containmentDuring 2010, the profitability of South African coal miners was adversely affected by the strength of the local currency against the US dollar. Many companies

in the sector began implementing cost-saving strategies in an effort to maximise profits. Some companies have reported significant success in this regard. For example, Sasol Mining reported a cost saving of R125-million in the 2010 financial year, and is aiming to save about R400-million a year in costs by 2012.

Cost saving strategies are taking various forms at different companies. For example, Xstrata Coal is undertaking an organisational restructuring that will transform its largely underground South African coal mines into three large-scale, primarily opencast, mine complexes, with lower cost profiles. As part of this process, the company’s iMpunzi underground mines were closed in 2008 and operations at the Waterpan colliery have ceased. The company has also put its Mpumalanga division mines up for sale. By 2012, almost 80% of the company’s production will be from opencast operations.

Exxaro’s cost-saving effort could see retrenchments taking place across various divisions of the company, which contends that the move is also aimed at improving productivity and streamlining its organisational structures. In late 2010, the company warned that some 300 jobs may be at risk in this regard. The relevant unions – Solidarity, the National Union of Mineworkers (NUM) and the United Association of South Africa (Uasa) – declared a dispute over the retrenchment plans.

SafetyAs most of South Africa’s coal mines are opencast operations, the sector does not suffer from the same safety challenges present in many of the country’s underground mines, particularly the deep-level gold mines. Some operations in the industry have, in fact, been commended for their safety performance. For example, it was reported in April 2011 that AATC’s Isibonelo mine, in Mpumalanga, had been awarded the DMR’s safety flag for 2010/11. This flag is awarded to mines showing the greatest reduction in the number of days lost owing to accidents when comparing two consecutive three-year periods.

Labour issuesIn July 2011, coal output at some of South Africa’s largest coal operators – including AATC, Exxaro, Optimum Coal and Xstrata – was halted owing to labour action.

Mineworkers, represented by three unions – the NUM, Solidarity and Uasa – went on strike after wage negotiations with the country’s Chamber of Mines reached a stalemate. The parties held talks mediated by the Commission for Conciliation, Mediation and Arbitration, which indicated that the unions had jointly submitted more than 50 demands. After only two negotiating sessions, the talks deadlocked, and a certificate of nonresolution was issued, paving the way for strike action.

The NUM was demanding a 14% pay increase and Solidarity was demanding 12%. The Chamber, which represents AATC, Delmas Coal, Exxaro Coal Mpumalanga, Kangra Coal, Optimum Coal and Xstrata Coal, responded with an offer of 8.5% for lower wage

Coal 20119

categories and 7% for higher categories. The initial offer from the mining companies had been 4.5% for the lowest paid workers and 4.2% for all other employees.

The week-long strike came to an end at the beginning of August, when employers and unions signed a two-year wage agreement and reached a consensus on other conditions of employment. In 2011, miners, artisans and officials will receive an 8% salary increase, and operators will get a 9% increase. Wages for entry-level workers will increase by between 10% and 10.5%. Unions and coal employers also agreed on a 7.5% increase for miners, artisans and officials in 2012, and 8.5% for operators. Entry level wages in 2012 will increase by 10%. The agreement will also see an increase in employer contributions to medical aid schemes and living-out/housing allowances.

Wage disputes were also declared with companies not represented by the Chamber of Mines. For example, also in July 2011, the NUM declared a wage dispute with Exxaro’s coal operations that are not affiliated with the chamber. The NUM was demanding 14%, while the company was offering 7%.

A protracted strike in the sector could have had serious implications for the South African economy, owing to its dependence on coal-fired electricity. Power utility Eskom indicated, at the start of the strike, that it had enough coal stockpiled at its power stations for an average of 38 days. The company also reported having contracts with certain customers for voluntary electricity reductions and supply interruptions. However, the utility was concerned over the risks of depleting its stockpiles, and cautioned on the difficulties it would face in replenishing the stockpiles after the strike was concluded.

Economists have warned that double-digit wage increase demands, which are well over inflation, are making South Africa unattractive as an investment destination. The country’s workforce is perceived as more expensive and less efficient than those in South Africa’s emerging market rivals.

Certain companies, however, are making notable efforts to forge improved relationships with labour. For instance, Sasol Mining introduced a management–trade union partnership forum in 2009 and contends this has encouraged constructive, open relations with employees and has helped to ensure a stable production environment. The company, which is not part of the Chamber of Mines, had experienced a depletion of its stock in 2009, owing to an unprotected strike.

Skills shortagesOne of the key challenges facing sectors across the South African economy is that of skills shortages. The coal-mining industry is no exception, and it appears that companies struggle to access the required skills at all levels of operation.

The University of the Witwatersrand’s School of Chemical and Metallurgical Engineering contends little is currently being done to improve the limited education and skills training in the fields of coal mining and production. While many universities are teaching subjects in mineral

economics, safety, rehabilitation and the socioeconomic aspects of coal, education is lacking in other technical disciplines of coal in general.

South Africa has a limited knowledge base to enable effective teaching in the sector, and companies with coal-production operations rely heavily on retired professionals.

There is also a shortage of trained coal exploration geologists. Some retirees are reportedly available as consultants but there are few specially trained, younger, coal exploration geologists. This is a significant challenge for the sector, as all new or expanding mining ventures require fully competent coal geologists to, for example, accurately calculate resources, reserves and the quality and marketability of a potential exploration site, and to sign off potential reserves in the bankable documents when applying for funding.

In equipping their lower level workers with the necessary skills, many companies are making use of simulation devices. These can train operators to handle heavy machines, such as dump trucks, continuous miners, drilling rigs and drag lines, as well as smaller machines, such as bakkies.

Sasol Mining, for example, is developing its own simulators to train its staff and better measure and improve productivity. The company has various training and retention strategies intended to ensure that technology is used more effectively.

Environmental issuesMany of the mining companies operating in South Africa’s coal-mining industry indicate an awareness of the need to conduct their operations in an environmentally sustainable manner.

For example, AATC has commissioned two mobile flare units at its New Denmark mine, in Mpumlanga, to reduce the methane emissions from its ventilation boreholes. The use of methane-drainage flaring is expected to reduce the mine’s greenhouse-gas emissions by 15%.

Becsa has also recognised the need to control emissions and has committed to investing $300-million over five years from June 2007 to support the research, development and demonstration of low-emissions technologies, including ‘clean coal’ and carbon sequestration technologies.

Another important environmental issue for the coal-mining industry is water, with a speaker at the inaugural South African Water and Energy Forum, held in February 2011, calling for a moratorium on new coal-mining operations in the Vaal river catchment area until the impact on the water resources is fully understood and adequate mitigation can be guaranteed.

Anglo Coal contends there are a number of ever-advancing measures and technologies available to remediate and recycle the water contaminated by mining. The company also contends its operations are currently water neutral, as it has installed water treatment plants in the recent past to neutralise acid mine water and desalinate mine water to produce drinking water for communities in which it operates. For example, at

Coal 2011 10

Emalahleni, the company is converting millions of litres of water from underground coal mines into clean water and is supplying some 25 Ml of drinking water to the local municipality each day. The company has already invested close to R300-million in this venture, and a R700-million-plus expansion of the project is on the cards for 2013.

Similarly, Sasol Mining has made a substantial investment in a mine water and brine treatment plant, treating 2 302 Ml of water in 2010.

In addition, the Coaltech Research Association has spent about R15-million over the past three years on various coal research projects, including research into dry-coal benefication technology.

Despite the seeming awareness of environmental responsibility by many companies, the media continues to report on cases of environmental transgressions. For example, in July 2011, it was reported that the departments of Water and Environmental Affairs had begun an investigation into the illegal activities of Shanduka Coal, in Middelburg. A team of Green and Blue Scorpions (environment and water inspectors) found that the mine did not comply with government regulations on the environment and the National Water Act.

Another company that has faced environmental challenges is CoAL. In November 2010, the company received a notification of the Mpumalanga Department of Economic Development, Environment and Tourism’s intention to issue a compliance notice in relation to activities undertaken at CoAL’s Mooiplaats colliery. An environmental management inspector stated in a letter that the colliery had contravened section 24F (1) of the National Environmental Management Act by having undertaken certain mining activities at the colliery, in 2008, prior to environmental authorisation having been given. Further, a number of alleged transgressions were said to have been uncovered by the Department of Environmental Affairs (DEA) during an August 2010 site visit to Mooiplaats. These included mining in a wetland and the polluting of a stream that drained into the Witpunspruit and eventually the Vaal river.

The environmental precompliance notice against CoAL has subsequently been withdrawn. Had the notice been issued, CoAL would have been forced to halt activities at the operation.

Meanwhile, the company continues to face opposition to its Vele project, in Limpopo, owing to its location next to the Mapungubwe World Heritage site. Having previously put the project on hold owing to environmental misssteps, in July 2011, the DEA gave the project environmental approval. The department indicated that the environmental authorisation conditions for the project would ensure the integrity of the World Heritage site. The mine falls outside the core and buffer areas of the Mapungubwe World Heritage site, the Mapungubwe National Park and the Greater Mapungubwe Trans-Frontier Conservation Area.

Nevertheless, all activities at the site requiring the use of water have been put on hold, as a coalition of

nonprofit organisations is appealing Vele’s integrated water use licence.

General corporate activityThe corporate activity that led to the high level of BEE in South Africa’s coal-mining industry is clearly a positive step towards achieving government’s transformation goals.

However, certain commentators believe that some of the more recent coal-related corporate activity has hinted at declining business conditions and a possible lack of confidence in the South African sector. This lack of confidence could be tied to fears of increasing government interference in the sector, as well as to the logistical challenges facing the expansion of coal exports.

For example, Becsa announced in January 2011 that it would be divesting some of its currently undeveloped coal prospecting rights, including Hartogshof, T-Project, Davel, Pegasus, Theunissen, Waterberg, Newcastle, Ermelo and Remhoogte.

The company explained it is of the belief that there are other industry members better positioned to develop these rights, potentially converting them into mining rights, in a more timely way. It invited exploration, mining and development companies to participate in a public tender for these rights, and received interest from various BEE companies. It also advertised the rights in China and India, which have voracious appetites for coal.

Becsa contends that the sale of these rights will enable it to focus more on its existing operations, and points to its Douglas/Middelburg projects as evidence of an ongoing commitment to South Africa. However, it must be noted that these projects involve replacement rather than new output, and the company is not showing evidence of output growth. Some coal-mining commentators continue to view the move as a sign that the company is losing interest in its South African investment.

Nevertheless, South Africa’s Minister of Mineral Resources publicly commended Becsa for its decision to sell the prospecting rights, claiming the move was a good opportunity to bring new participants into the coal market. She urged other companies in the sector, specifically Anglo American, to take a cue from Becsa and shed some coal rights to allow new companies to enter the coal exploration market.

Another company that has decided to sell some noncore prospecting rights is Exxaro, which announced in May 2011 that it would sell its Arnot South, Kranspan and Vaalbult prospecting rights, in Mpumalanga, to focus on its existing operations and development projects. The rights range in size from about 10-million tons to 30-million tons of in-situ coal resource. Exxaro believes the sale is an opportunity for another coal industry player to bring the prospecting rights to operation, thus unlocking the value of the assets.

Meanwhile, in February 2011, AATC started the formal sale process for its Kleinkopje colliery, in Mpumalanga. Again, this decision is viewed as a possible lack of confidence in the local coal sector, as the mine has up to 20 years of remaining economic life.

Coal 201111

BEE in the coal sector

There has been significant black economic-empowerment (BEE) activity in the South African coal-mining industry, including as a result of partnerships, disposals and equity transactions involving key companies in the sector.

The coal sector’s efforts to achieve BEE are a result of South Africa’s Mineral and Petroleum Resources Development Act (MPRDA), which requires evidence of BEE for the granting of new prospecting and mining rights, as well as for the conversion of old-order mining rights to new-order mining rights.

Within this legislation is a so-called use-it-or-lose-it principle, whereby mining houses holding unutilised reserves and mothballed operations will lose the rights to exploit these assets after a certain period. This provision in the Act has freed up several coal deposits that larger companies have deemed uneconomic to mine, to the benefit of BEE companies. Further, a number of transactions in the sector have seen the larger operators disposing of noncore assets to existing BEE companies, or to facilitate the establishment of new BEE companies.

While the BEE requirements of the MPRDA apply to all sectors of South Africa’s mining industry, the coal-mining sector has seen a higher degree of transformation than has been seen in the mining of most other minerals in the country. Further, this transformation has taken place over a relatively short space of time. For example, the number of BEE companies in the coal-mining sector increased from two in 2002 to 29 in 2008, and the contribution of these companies to South Africa’s coal output increased from about 10% to almost 50% in the same period.

It is believed that this growth may be a result of the nature of coal mining in South Africa, with the country’s coal deposits generally being shallow and, thereby, allowing for easier and less expensive exploitation. Shallow deposits are amenable to mining by opencast methods, which are less technically challenging than underground methods, and contract mining is prevalent in the coal-mining industry, with the result that BEE coal miners do not require technical expertise to operate.

As mentioned, the country’s second-largest coal producer – Exxaro Resources, is one of South Africa’s largest BEE companies. Exxaro was formed as a result of a R16-billion transaction, involving empowered mining company Eyesizwe Coal, which was established in 2001 after it won the strongly-contested bid to acquire the New Coal assets on offer from Anglo Coal and the company then known as Billiton’s Ingwe Coal. In terms of the deal that resulted in the formation of Exxaro, Kumba Resources’ coal, base metals and industrial minerals assets and 20% of its iron-ore assets were merged with Eyesizwe Coal. The balance of Kumba’s iron-ore assets went into the newly formed Kumba Iron Ore. Exxaro subsequently acquired Anglo American’s Namakwa mineral sands operation, in the Western Cape, and a 26% interest in Black Mountain Mining, which produces lead and zinc concentrate.

In addition to being involved in the formation of Exxaro, Anglo Coal has pursued other BEE ventures. For example, the company owns a 73% stake in Anglo American Inyosi Coal, which was formed in mid-2010 and is valued at about $1-billion. The remaining 27% is held by Inyosi, a BEE consortium led by the Pamodzi and Lithemba consortia (66%) with the Women’s Development Bank and a community trust holding the remainder. Anglo American Inyosi Coal owns various producing mines and greenfield projects.

Similarly, BHP Billiton has also pursued additional BEE transactions. For example, through the spin-off of two noncore mining assets – Optimum Collieries and Koornfontein mines – Becsa facilitated the establishment of Optimum Coal Holdings, which is currently 60% black-owned, -controlled and -managed. In terms of the original transaction with Becsa, Optimum has to remain at least 50.1% black controlled until May 2014.

In September 2010, Sasol Mining concluded a R1.8-billion BEE transaction resulting in the formation of a new company, Ixia Coal. In terms of the deal, Sasol Mining has a 49% shareholding in Ixia, and WIPCoal Investments, which is owned by WIPHold and Mining Women Investments, owns 51%. Ixia Coal Funding, a subsidiary of Ixia Coal, holds a 20% stake in Sasol Mining.

The Ixia transaction was financed through equity and a combination of third-party and Sasol funding. The debt will be repaid from future dividends by Sasol Mining. Sasol and WIPCoal Investments are now seeking to identify a suitable mining asset that will transform Ixia into an operational mining company.

Sasol contends that the Ixia transaction has placed the group in a good position to comply with the mining charter’s ownership target of 26% by 2014.

Xstrata’s BEE credentials are supported by a R2.4-billion transaction that the company concluded in 2006 with African Rainbow Minerals (ARM). This deal saw the establishment of a new majority black-owned coal-mining company – ARM Coal. Xstrata owns 49% of ARM Coal, with the remaining 51% being held by ARM. In terms of the transaction, ARM Coal acquired a 20.1% equity-based participation in Xstrata’s existing South African assets, a 51% shareholding in the Goedgevonden project and access to Xstrata’s interest and allocation in the RBCT.

BEE transactions have also been concluded by some of the smaller players in the market, as well as by emerging coal miners and development companies. For example, TCSA has a BEE arrangement with Mmakau Mining. Mmakau’s investments in Total’s mining operations are held by Mmakau Mining and empowerment vehicle Mmakau Coal, in which Mmakau Mining holds a 51% stake and TCSA the remaining 49%. Mmakau Coal has a 26% shareholding in the Forzando North and South mines.

Another smaller company in the sector to have concluded a BEE transaction is Bisichi Mining, which owns and operates the Black Wattle colliery, in Mpumalanga. In fact, Bisichi was one of the first coal-mining participants to achieve BEE status, through the conclusion of an empowerment transaction with Endulwini Resources in 1999. However, the relationship between Bisichi Mining and Endulwini soured in 2006, with the companies finally parting ways in April 2008 following the resolution of the dispute. In terms of the settlement entered into by the parties, Endulwini Resources agreed to drop all legal actions and counteractions. Bisichi Mining became the full owner of Black Wattle, and the company agreed to pay R10-million to Endulwini Resources and the Mhlaba Dube Trust. Bisichi Mining subsequently embarked on a search to find a new empowerment partner and, in October 2010, announced that JSE-listed BEE group Vunani had acquired a 37.5% equity stake in Black Wattle. Vunani, which will not be directly involved in the operation of the mine, financed the acquisition through a structured vendor-finance agreement, under which it will repay the debt through dividends earned from the investment. It envisages repaying the entire debt within three to five years.

Coal 2011 12

Other activity in the coal sector that could be seen as demonstrating a lack of confidence in the local coal industry includes the announcement by XCSA in March 2010 that it was undertaking a “strategic review” of its operations in South Africa’s Mpumalanga province, including the Spitzkop and Tselentis collieries. It has since put these operations up for sale.

Further, in November 2010 Rio Tinto announced the $75-million sale of its substantial 1.04-milion Chapudi project, in Limpopo, to CoAL. The price tag on the Chapudi transaction is believed to be low for the quality of the asset, with Chapudi having some one-billion tons of Jorc-compliant resource, of which 90-million tons is in the measured category, 220-million in the indicated category and 730-million tons in the inferred category.

Instead of developing Chapudi, Rio Tinto chose to pursue the multibillion dollar acquisition of a majority share in Riversdale Mining, which owns coal assets in Mozambique. Interestingly, it was reported in June 2011 that, once the takeover of Riversdale has been finalised, Rio Tinto will sell Riversdale’s only South African asset, the Zululand Anthracite Colliery (ZAC). Rio Tinto contends that ZAC does not fit the group’s core business, as its size is very small relative to its other operations and the company does not trade in anthracite. The asset has a potential 20-year lifespan.

Some contend that the spate of disposals in the coal-mining sector could be linked to increasing investor uncertainty, which is being fuelled by calls for the nationalisation of the country’s mines, although it is generally considered that nationalisation will not be pursued as a policy option in the near term.

A number of deals in the coal sector have fallen through in recent months. Sekoko Resources and Firestone Energy, for example, called off negotiations with India’s Jindal Steel in July 2011. The companies had been discussing two coal properties in the Waterberg area, in terms of a nonbinding memorandum of understanding. However, Sekoko contends that a transaction would have adjusted the ownership interests in the properties. Meanwhile, the Industrial Development Corporation (IDC) has begun funding the development of the Waterberg coal project by approving the first drawdown of the funding facility by Sekoko Resources.

Another deal that fell through in mid-2011 was a potential reverse takeover, involving Shanduka Resources and Sentula Mining. The R2.1-billion transaction would have seen Shanduka acquiring a 51.9% interest in Sentula through injecting its 30% stakes in Kangra Coal and Shanduka Coal into Sentula. However, the Shanduka shareholders did not approve the exchange of shares and the deal collapsed. Had the deal proceeded, the role of Sentula in South Africa’s coal-mining industry would have changed from being primarily a mining services company to being a notable coal producer.

Meanwhile, junior miner Wescoal announced in February 2011 that it was terminating its proposed R45-million acquisition of mining company Nungu Trading 341, after analysis showed that Nungu’s potential coal resource had declined from 11.6-million tons to 2.8-million tons.

Wescoal has also been facing difficulties with former mining contractor Sutha Civils. In March 2011, a dispute arose between the two companies and, in July 2011, Sutha launched legal action against Wescoal, filing for the liquidation of Wescoal Mining. Wescoal submitted an urgent application to set aside the application for liquidation, however, Sutha effectively abandoned its action against Wescoal after it failed to represent its case in the North Gauteng High Court. Wescoal has subsequently indicated that it will pursue a damages claim against Sutha, its managing director and an independent consultant.

Another coal company that has been in court over its future is Miranda Minerals. The company’s former CEO Ron Nel served an application on the company in July 2011, seeking for Miranda to be placed under supervision and for rescue proceedings to be instituted. The board of Miranda has indicated its intention to oppose the application, claiming that the company is not financially distressed and that business rescue proceedings will not be beneficial. It has been suggested that a battle is under way for control of Miranda. This started after Dubai investor Global PS began increasing its stake in the company after an initial investment in September 2010. In August 2011, Global PS committed to providing Miranda with R10-million in short-term funding, in addition to a R6.6-million facility previously given to the miner that will mature in January 2012.

In other corporate activity, TSX-listed Forbes Coal debuted on the JSE at the end of July 2011. The company explained that the secondary listing would enable it to pursue acquisition opportunities on the continent, while also providing an additional source from which capital could be obtained, although the listing process did not entail any capital raising.

Also seeking a listing on the JSE is Namane Energy, which is an early-stage player in the Waterberg coalfields. The group has five properties in the area, three of which contain more than 1.4-billion tons of mineable reserves.

Meanwhile, Optimum Coal has acquired two prospecting rights in close proximity to its Koornfontein operation, in Mpumalanga. It is expected that these rights could extend Koornfontein’s life by 12 years. The company plans to construct an overland conveyor from the prospecting rights area to Koornfontein, and to use Koornfontein’s processing plants to wash the coal.

In July 2011, the Competition Commission approved JSE-listed Keaton Energy’s acquisition of a 74% interest in South African export coal producer Leeuw Mining in a deal valued at R140-million. Leeuw owns and operates the Vaalkrantz anthracite colliery, in KZN, has a 207 000 t/y participation interest in the RBCT’s Quattro export programme, a dedicated rail siding and several new-order mineral rights. The company’s Koudelager, Balgray and Mpati anthracite projects, and the Braakfontein thermal coal project, also in KZN, will complement Keaton’s existing Vanggatfontein and Sterkfontein ventures in Mpumalanga. The deal, which will also bring a global coal trader on board, refinanced Leeuw Mining and saved 400 jobs.

Coal 201113

Five key mining companies – Anglo American Thermal Coal (AATC), Exxaro Resources, Sasol Mining, BHP Billiton Energy Coal South Africa (Becsa) and Xstrata Coal South Africa (XCSA) – account for over 80% of the country’s yearly saleable coal output. The balance is produced by myriad smaller companies.

AATC produced 68.5-million tons of coal in 2010, including 58-million tons that were mined in South Africa, making AATC South Africa’s largest coal producer. Of the company’s South African production in 2010, 63% was sold to local electricity utility Eskom, 2% was sold to local synthetic fuels (synfuels) operations owned by Sasol, and 2% was sold to other local industrial customers. The remainder of the company’s production for the year was exported. AATC’s exports from South Africa take place through the Richards Bay Coal Terminal (RBCT), in which Anglo American holds a 27% share.

In addition to its South African operations, AATC owns a one-third interest in the Cerrejón mine, in Colombia. Anglo American also owns various metallurgical coal interests around the world. These are housed in a separate metallurgical coal business unit.

AATC delivered an operating profit of $710-million in 2010. Of this, $426-million was generated by the company’s South African activities. The company’s South African operating profit for the year was affected by the strength of the local currency, although this impact was partly offset by a significant increase in average export thermal coal prices.

Exxaro Resources is a diversified mining company with interests in coal, mineral sands, base and industrial metals and iron-ore. The company’s coal interests produced 46.8-million tons of coal in 2010, making it South Africa’s second-largest coal producer. The company is one of the largest suppliers of coal to Eskom, with almost 80% of its output in 2010 being power station coal. Exxaro also supplies other local customers, such as steelmaker ArcelorMittal South Africa, as well as selling significant quantities of coal on the export market. The company exports through the RBCT, where it has an export entitlement of 6.3-million tons a year, although logistical constraints on the country’s rail lines are currently limiting Exxaro’s exports to about three-million tons a year.

Exxaro is one of South Africa’s largest black economic-

empowerment (BEE) companies, recording group revenue of R17.15-billion in 2010. The company’s coal operations were the source of R10.52-billion, or 61%, of this revenue.

Sasol Mining, which is a wholly owned subsidiary of petrochemical group Sasol, produced 42.6-million tons of coal in the year ended June 30, 2010. The company’s coal output largely provides gasification feedstock and utilities coal to Sasol’s Synfuels and Infrachem plants. Sasol mining also exported three-million tons of coal through the RBCT in its 2010 financial year.

Sasol Mining recorded an operating profit of R815-million in the year to June 30, 2010, representing 3% of the broader Sasol group’s operating profit for that period.

Becsa is South Africa’s fourth-largest coal producer, recording an output of 30.46-million tons in the year ended June 30, 2010. Of this, 64% was supplied to Eskom, and the balance was exported through the RBCT, in which Becsa has a 24% shareholding. The company, formerly known as Ingwe Collieries, is a wholly owned subsidiary of diversified mining group BHP Billiton. Becsa’s production represents just short of 50% of the energy coal produced by the BHP Billiton group, which also has operations in New Mexico, Australia and Colombia.

XCSA, which is part of global diversified metals and mining company Xstrata, produced 17.7-million tons of coal in 2010, making it South Africa’s fifth-largest coal producer. The company’s output represents about 27% of the larger Xstrata group’s thermal coal output, with other contributors to the group’s total output including mines in Australia and America.

Xstrata’s South African operations recorded a revenue of $1-billion in 2010 and an operating profit of $102-million. Production from these mines is expected to be supported in coming years by projects that are under development.

BEE company Optimum Coal Holdings, which is South Africa’s sixth-largest producer of coal, produced 17.1-million tons of run-of-mine (RoM) coal in the financial year ended June 30, 2011. This included 6.8-million tons of export-quality coal, and 6.8-million tons of coal suitable for consumption by Eskom. The company recorded a revenue of R3.36-billion in the year to June 30, 2010, and a profit of R229.66-million.

MAJOr COMPANiESSouth Africa’s top five coal producers

Company Output

Anglo American Thermal Coal58-million tons (year ended December 31, 2010)

Exxaro Resources46.8-million tons(year ended December 31, 2010)

Sasol Mining42.6-million tons (year ended June 30, 2010)

BHP Billiton Energy Coal South Africa

30.46-million tons (year ended June 30, 2010)

Xstrata Coal South Africa17.7-million tons(year ended December 30, 2010)

Sou

rce:

Com

pile

d fro

m th

e an

nual

resu

lts o

f the

var

ious

com

pani

es

Coal 2011 14

Anglo American Thermal CoalAnglo American Thermal Coal holds the thermal coal interests of the Anglo American group. The company has operations in South Africa and Colombia. Together these operations produced 58-million tons of coal in 2010. The company owns 73% of Anglo American Inyosi Coal, a black economic-empowered (BEE) mining company valued at about $1-billion. The balance of shares in Anglo American Inyosi Coal are owned by a BEE consortium led by Pamodzi Coal and Lithemba. Anglo American Thermal Coal owns a 27% stake in the Richards Bay Coal Terminal.

Leadership: Norman Mbazima (CEO)

year ended december 31, 2010 year ended december 31, 2009

Operating profit$710-million $426-million

(from South African operations)$721-million $442-million

(from South African operations)

Share of group operating profit(including operation in Colombia)

7% 15%

Production

68-million tons (total) 58-million tons (total South Africa)

21.6-million tons (thermal South Africa) 36.4-million tons (Eskom)

69-million tons (total) 58-million tons (total South Africa)

22.2-million tons (thermal South Africa) 36.2-million tons (Eskom)

Operations in South Africa

Goedehoop, Mpumalanga

Ownership: 100% Type: Four underground mines, two mini pits Product: Primarily export coal Output: About 7.5-million saleable tons a year

Greenside, Mpumalanga

Ownership: 100% Type: Underground. Forms part of the South African Coal Estates complex, which also includes the Landau and Kleinkopje mines Product: Primarily export coal, and a small quantity of domestic product Output: About 3.1-million saleable tons a year

Kleinkopje, MpumalangaOwnership: 100% Type: Openpit. Forms part of the South African Coal Estates complex, which also includes the Greenside and Landau mines Product: Primarily steam coal for the export market, and small quantities of product for domestic sale

Zibulo, Mpumalanga

Ownership: 73% (an Anglo American Inyosi Coal operation) Type: Underground and openpit. Recently commissionedProduct: Export coal, secondary middlings sold on the local market Output: Seven-million tons a year from the underground mine; one-million tons a year from the openpit mine

Landau, Mpumalanga

Ownership: 100% Type: Openpit. Forms part of the South African Coal Estates complex, which also includes the Greenside and Kleinkopje mines Product: Export and local sales, including to Eskom Output: 3.1-million tons a year of export coal, 900 000 t/y for the local market

Mafube JV, Mpumalanga

Ownership: 50%. The remaining 50% is owned by Exxaro Resources Product: Export and local Output: 2.5-million tons a year of low-ash coal for the export market; 1.7-million tons a year of steam coal for the domestic thermal market.

Kriel, Mpumalanga

Ownership: 73% (an Anglo American Inyosi Coal operation) Type: Underground and openpit Product: Local sale to EskomOutput: Ten-million tons a year

New Denmark, Mpumalanga

Ownership: 100% Type: Underground Product: Domestic product for sale to Eskom Output: Five-million tons a year

New Vaal, Free State

Ownership: 100% Type: Opencut Product: Domestic product for sale to Eskom Output: 18-million tons a year

Isibonelo, Mpumalanga

Ownership: 100% Type: Opencast Product: Domestic product for sale to Sasol Output: Five-million tons a year

Phola coal processing plantOwnership: 50% owned by Anglo American Inyosi Coal, 50% owned by Becsa Type: Coal processing facility

Norman Mbazima

Coal 201115

Anglo American Thermal CoalProjects in South Africa

Zibulo, Mpumalanga

Status: The project was substantially complete by the end of 2010 Value: $517-million Duration: Not stated Expected output: Not stated

New Largo, Mpumalanga

Status: Feasibility Value: $1.7-billion Duration: First production expected in 2013 and full production in 2017 Expected output: 15-million tons a year of thermal coal

Elders, Mpumalanga

Status: Not stated Value: Not stated Duration: First production expected in 2016 and full production in 2020 Expected output: 12.8-million tons a year of thermal coal

Contact details

Postal addressPO Box 61587 Marshalltown 2107 South Africa

Telephone: +27 11 638 9111Fax: +27 11 638 3221Website: www.angloamerican.co.za

BhP Billiton Energy Coal South AfricaBHP Billiton Energy Coal South Africa (Becsa), formerly known as Ingwe Collieries, is a wholly owned subsidiary of diversified mining group BHP Billiton. Becsa produces energy coal for the South African domestic and export markets from three primary coal-mining operations. The company sold about 64% of its production in the 2010 financial year to Eskom, and exported the balance through the Richards Bay Coal Terminal, in which it owns a 24% share. The reserve lives of the Becsa mines at current production rates range from 11 to 24 years.

Leadership: Manie Dreyer (president – Becsa)

year ended June 30, 2010 year ended June 30, 2009

revenue (BHP Billiton Energy Coal) $4.27-billion $6.52-billion

Production 30.46-million tons 29.90-million tons

Operations

Douglas/Middelburg, Mpumalanga

Ownership: 100% Type: Opencut Product: Medium-rank bituminous thermal coal, most of which can be beneficiated for the European and Asian export markets. Also produces domestic product for sale to Eskom’s Duvha power station. Output: 14.7-million tons (year ended June 30, 2010)

Khutala, Gauteng

Ownership: 100% Type: Opencut and underground Product: Medium-rank bituminous thermal coal for domestic sale to Eskom’s Kendal power station Output: 10.87-million tons (year ended June 30, 2010)

Klipspruit, Mpumalanga

Ownership: 100% Type: Opencut Product: Medium-rank bituminous thermal coal, most of which can be beneficiated for the European and Asian export markets. Output: 4.89-million tons (year ended June 30, 2010)

Phola coal processing plantOwnership: 50% owned by Becsa, 50% owned by Anglo American Inyosi Coal Type: Coal processing facility

Contact details

Postal address: PO Box 61820Marshalltown 2107 South Africa

Telephone: +27 11 376 Fax: +27 11 834 3290Website: www.bhpbilliton.com

Manie dreyer

Coal 2011 16

Exxaro resourcesExxaro Resources is one of the largest black economic-empowerment mining companies listed on the JSE. The group has a portfolio that includes coal, mineral sands, base metals and industrial minerals, as well as having exposure to iron-ore. The company is South Africa’s second-largest coal producer, producing over 45-million tons a year.

Leadership: Sipho Nkosi (CEO Exxaro Resources); Mxolisi Mgojo (executive general manager Exxaro Coal)

year ended december 31, 2010 year ended december 31, 2009

Group revenue R17.15-billion R15-billion

Group profit for the year R5.24-billion R1.02-billion

Coal’s contribution to group revenue R10.52-billion R9.73-billion

Production 46.80-million tons 45.26-million tons

Operations

Grootegeluk, Limpopo

Ownership: 100% Type: Openpit Product: Power station coal for sale to Eskom, semisoft coking coal (export and local sale), steam coal (export and local sale) Sales: 14.9-million tons power station coal, 1.75-million tons semisoft coking coal, 1.58-million tons steam coal (year ended December 31, 2010)

Leeuwpan, Mpumalanga

Ownership: 100% Type: Openpit Product: Power station coal for sale to Eskom, steam coal (export and local sale)Sales: 1.81-million tons power station coal, 1,16-million tons steam coal (year ended December 31, 2010)

Inyanda, Mpumalanga

Ownership: 100% Type: Openpit Product: Steam coal, primarily for export Sales: 1.78-million tons (year ended December 31, 2010)

Sipho Nkosi

Coal 201117

Exxaro resources

Arnot, Mpumalanga

Ownership: 100% Type: Underground Product: Power station coal for sale to Eskom Sales: 4.17-million tons (year ended December 31, 2010)

Matla, Mpumalanga

Ownership: 100% Type: Underground Product: Power station coal for sale to Eskom Sales: 12.27-million tons (year ended December 31, 2010)

North Block Complex, Mpumalanga

Ownership: 100% Type: Underground Product: Power station coal for sale to Eskom, steam coal for local sale Sales: 2.24-million tons power station coal, 518 000 t of steam coal (year ended December 31, 2010)

New Clydesdale, Mpumalanga

Ownership: 100% Type: Underground Product: Power station coal for sale to Eskom, steam coal primarily for export Sales: 96 000 t power station coal, 710 000 t steam coal

Tshikondeni, Limpopo

Ownership: 100% Type: Underground Product: Coking coal for sale locally to ArcelorMittal South Africa Sales: 260 000 t (year ended December 31, 2010)

Mafube, MpumalangaOwnership: 100% Product: Steam coal primarily for export Sales: 1.32-million tons (year ended December 31, 2010)

Mafube JV, MpumalangaOwnership: 50%. The remaining 50% is held by Anglo American Thermal Coal Product: Power station coal and steam coal for local and export sale Sales: 949 000 t power station coal, 32 000 t steam coal (year ended December 31, 2010)

Projects in South Africa

Grootegeluk Medupi expansion, Limpopo

Status: Under development Value: R9.5-billion Duration: First production is expected in 2012 and full production in 2015 Expected output: The project will expand the production of the Grootegeluk mine from 19-million tons a year to 34-million tons a year

Thabametsi, Limpopo

Status: Prefeasibility Value: R10-billion Duration: First coal could be delivered in 2016 Expected output: Between 6-million and 17-million tons of coal a year

Sintel Char Phase 2, Limpopo

Status: Feasibility Value: Not stated Duration: The project could be implemented in 2013 Expected output: 140 000 t/y

Belfast, Mpumalanga

Status: Prefeasibility Value: Not stated Duration: Start up is expected in 2014 Expected output :Two-million tons a year of A-grade thermal coal

Market coke project, Limpopo

Status: Prefeasibility Value: R510-million Duration: The project could be implemented n 2014 Expected output: 750 000 t/y of market coke

Mafutha (with Sasol Mining), Limpopo

Status: Prefeasibility Value: Not stated Duration: Not stated Expected output: Not stated

Contact details

Postal addressPO Box 9229Pretoria 0001 South Africa

Telephone: +27 12 307 5000Fax: +27 12 323 3400Website: www.exxaro.com

Coal 2011 18

Optimum Coal holdingsJSE-listed Optimum Coal is currently the sixth-largest producer of thermal coal in South Africa and the country’s fourth-largest thermal coal exporter, with a Richards Bay Coal Terminal export entitlement of 8.44-million tons a year, of which eight-million tons a year is available for company use, with the balance committed to the Quattro programme. In the year ended June 30, 2011, the BEE company produced 17.1-million tons of run-of-mine (RoM) coal, including 6.8-million tons of export coal and 6.8-million tons of Eskom coal. The company was formed when BHP Billiton Energy Coal South Africa (BECSA) decided to spin off two of its noncore mining assets.

Leadership: Mike Teke (CEO)

year ended June 30, 2010 year ended June 30, 2009

revenue R3.36-billion R3.97-billion

Profit for the year R229.66-million R747.16-million

Production 10.8-million tons (attributable saleable) Figure not available

Operations

Optimum collieries, Mpumalanga Ownership: 100% Type: Underground and opencast Product: Export and local product Output: 13.97-million tons RoM (year ended June 30, 2011)

Koornfontein mine, Mpumalanga Ownership: 100% Type: Underground Product: Export and local product Output: 3.13-million tons RoM (year ended June 30, 2011)

Projects

Kwagga North (brownfield), Mpumalanga Status: Under development Value: R741-million Duration: Completion is expected in 2012 Expected output: Not stated

Schoonoord (brownfield) Status: Bankable feasibility Value: R180-million Duration: Not stated Expected output: Not stated

Vlakfontein, Mpumalanga Status: Advanced feasibility Value: Not stated Duration: Not stated Expected output: Not stated

Overvaal, Mpumalanga Status: Prefeasibility Value: Not stated Duration: Not stated Expected output: Not stated

Mpefu, Mpumalanga Status: Exploration Value: Not stated Duration: Not stated Expected output: Not stated

Remhoogte, Mpumalanga Status: Under developmentValue: Bought for R235-millionDuration: Not statedExpected output: Four-minillion tons a year of RoM product that will yield an estimated 2.5-million tons a year of export-quality coal and an estimated 400 000 t/y Eskom middlings product

Contact details

Postal addressPO Box 411333 Craighall2024 South Africa

Telephone: +27 11 325 0403Fax: +27 11 325 0392Website: www.optimumcoal.com

Mike Teke

Coal 201119

Sasol MiningSasol Mining is a wholly owned subsidiary of petrochemical group Sasol. The mining company provides gasification feedstock and utilities coal to Sasol’s Synfuels and Infrachem plants. The company also undertakes export activities through an allocation at the Richards Bay Coal Terminal. Sasol Mining is facing the prospect of replacing three of its large old coal mines – Twistdraai, Brandspruit and Middelbult – with three new collieries. The company has concluded a R1.8-billion black economic-empowerment (BEE) transaction, resulting in the establishment of BEE company Ixia Coal, in which Sasol Mining holds a 49% share.

Leadership: Herman Wenhold (MD Sasol Mining)

year ended June 30, 2010 year ended June 30, 2009

Operating profit R815-million R1.59-billion

Share of group operating profit 3% 6%

Production 42.6-million tons 39.1-million tons

Operations

Sigma: Mooikraal, Free State Ownership: 100% Type: Underground Product: Domestic product for use by Sasol Output: Two-million tons (year ended June 30, 2010)

Bosjesspruit, Mpumalanga Ownership: 100% Type: Underground Product: Domestic product for use by Sasol Output: 7.6-million tons (year ended June 30, 2010)

Brandspruit, Mpumalanga Ownership: 100% Type: Underground Product: Domestic product for use by Sasol Output: Eight-million tons (year ended June 30, 2010)

Middelbult, Mpumalanga Ownership: 100% Type: Underground Product: Domestic product for use by Sasol Output: 8.5-million tons (year ended June 30, 2010)

Syferfontein, Mpumalanga Ownership: 100% Product: Domestic product for use by Sasol Output: 9.9-million tons (year ended June 30, 2010)

Twistdraai, Mpumalanga Ownership: 100% Product: Export Output: 6.6-million tons (year ended June 30, 2010)

Projects

Thubelisha (Twistdraai replacement), Mpumalanga

Status: Under development Value: R3.39-billion Duration: First production is expected to come on stream in 2012, ramping up to full production over three years Expected output: 10.6-million tons a year

Impumulelo (Brandspruit replacement), Mpumalanga

Status: Under development Value: R4.71-billion Duration: First production is expected in 2014, ramping up to full production over four yearsExpected output: Ten-million tons a year

Shondoni (Middelbult replacement), Mpumalanga

Status: Funds have been made available for basic development Value: R160-millionDuration: Earmarked for 2015 Expected output: Not stated

Mafutha (with Exxaro Resources), Limpopo Status: Prefeasibility Value: Not stated Duration: Not stated Expected output: Not stated

Contact details

Postal addressPrivate bag X1015 Secunda 2302 South Africa

Telephone: +27 17 614 1111Fax: +27 17 614 5036Website: www.sasol.com

herman wenhold

Coal 2011 20

Xstrata Coal South AfricaXstrata Coal South Africa (XCSA) is part of global diversified metals and mining company Xstrata, the world’s largest producer of export thermal coal and the fifth-largest producer of coking coal. XCSA is one of South Africa’s largest coal producers and exporters. In 2006, it concluded a R2.4-billion black economic-empowerment deal with African rainbow Minerals (ARM), which led to the establishment of a new majority black-owned coal-mining company, ARM Coal.

Leadership: Murray Houston (COO XCSA) (No picture available)

year ended december 31, 2010 year ended december 31, 2009

Operating profit $102-million $111-million

Revenue $1-billion $977-million

Share of group operating profit 1.3% 2.5%

Production 17.7-million tons Figure not available

Operations

Goedgevonden, Mpumalanga Ownership: Joint venture between XCSA (74%) and ARM Coal Type: Opencast Product: Thermal coal for export sale and the local market Output: Ramping up to full production of seven-million tons a year (including 3.5-million tons of export thermal coal and 3.5-million tons for domestic sale)

iMpunzi division (consists of the Arthur Taylor Colliery Opencast Mine [Atcom] and the Atcom East project), Mpumalanga

Ownership: 100%Product: Bituminous coal for export

Tweefontein division (consists of the Boschmans and Witcons mines), Mpumalanga

Ownership: 100% Type: Underground and opencastProduct: Export and domestic coal

Mpumalanga division (consists of the Spitzkop and Tselentis mines), Mpumalanga

Ownership: 100% Type: Underground and opencastProduct: Primarily export coal

Projects

Atcom East, Mpumalanga Status: Ramping up to full integrated production Value: $407-million Duration: The project is expected to reach full production in 2011 Expected output: 5.7-million tons a year of run-of-mine (RoM) coal and 3.1-million tons of saleable thermal product

Tweefontein optimisation, Free State Status: Feasibility value: Not stated duration: Output could start in 2013 Expected output: The project will increase the output from 8.7-million RoM tons to 13.6-million RoM tons

Zonnebloem Status: Feasibility to be undertaken in 2012 Value: Not stated Duration: Could enter production in 2016 Expected output: Not stated

Contact details

Postal addressPrivate Bag X1 Melrose Arch 2076 South Africa

Telephone: +27 11 772 0600Fax: +27 11 772 0699Website: www.xstrata.com

Coal 201121

In addition to the small number of large coal producers that are responsible for the bulk of South Africa’s coal output, there are a number of small and medium-sized producers, some of which have been operating in the country for many years. For example, Total Coal South Africa (TCSA), a subsidiary of French multinational energy company Total, has been active in South Africa since the early 1970s, when it joined British Petroleum and General Mining to develop a 100-million-ton coal reserve. The company loaded its first coal at the RBCT in December 1978, and continues to be a shareholder of the export terminal and an important coal exporter.

Most of the smaller producers in South Africa’s coal sector, however, have entered the market in recent years. For example, Coal of Africa Limited (CoAL) only started producing in 2008, while Wescoal, which had been engaged in coal trading for some 15 years, decided to resposition itself as a primary coal producer when it acquired a mining asset in 2009. Keaton Energy, which mined out its Klip colliery in 2009, began producing again in late 2010 from its Vanggatfontein project, in Mpumalanga.

There are also a number of participants in the market that are investigating and developing coal projects that will be brought into production in the coming years. Some of these, such as the projects being pursued by Sekoko Resources and Resource Generation (ResGen) are based in South Africa’s Waterberg coalfield.

Many of the emerging coal companies in South Africa, such as ResGen, CoAL, Continental Coal and Universal

Coal, are listed elsewhere, such as Sydney, London and Toronto, although some are also listed on the JSE. TSX-listed Forbes Coal has also recently listed on the JSE. Other companies in the sector have uniquely South African origins, with some resulting from BEE opportunities and ventures.

Coal is also one of the commodities being targeted by South Africa’s State-owned mining company, the African Exploration Mining and Finance Corporation (AEMFC), which is aiming to be one of the country’s top five coal producers by 2020.

Many of the smaller coal producers in South Africa face difficulties in accessing the export market, owing to logistical constraints. Nevertheless, it is believed that there are significant opportunities for such companies to supply the local market. In addition to the 125-million tons of coal required by Eskom every year, local industrial demand also amounts to about 16-million tons a year.

While the presence of a large number of smaller companies in the coal sector has been positive in terms of broadening the spread of wealth derived from this sector, the fragmented nature of the industry also has certain negative implications. These include the fact that smaller companies lack the weight needed to prompt government to tackle the existing logistical constraints that are limiting further export growth. The fragmented nature of the sector could also hamper any efforts on the part of the industry to fund and build its own logistical infrastructure.

SMALLEr COMPANiES

Bisichi MiningBisichi Mining owns a 62.5% stake in the Black Wattle colliery, situated near Middelburg. The company’s partner in this Venture is JSE-listed black economic-empowerment company Vunani, which acquired a 37.5% interest in the venture in late 2010. Bisichi Mining has also recently concluded an agreement with the owner of a neighbouring property, Blue Nightingale Trading, to buy additional coal reserves.

Leadership: Andrew Heller (No picture available)

year ended december 2010 year ended december 2009

Group revenue £32.83-million £29.02-million

Revenue from South African operations £27.81-million -

Profit/(loss) for the year (£1.27-million) £3.67-million

Production 1.46-million tons (RoM) 1.26-million tons (RoM)

Operations

Black Wattle, Mpumalanga Ownership: 62.5% Bisichi Mining, 37.5% Vunani Type: Opencast Product: High-quality export steam coal, low phosphorous metallurgical coal and coal for Eskom Output: 1.46-million tons (run-of-mine) (2010)

Contact details

Postal addressPO Box 1704 Middelburg 1050

Telephone: +27 13 243 5840Fax: +27 13 243 5861Website: www.bisichi.co.uk

Coal 2011 22

Coal of Africa LimitedASX, JSE- and Aim-listed Coal of Africa (CoAL) is involved in the acquisition, exploration and development of thermal and metallurgical coal projects in South Africa. The company entered the export market in the 2010 financial year, with the production from its Mooiplaats colliery, in Mpumalanga, and has various other projects under development. One of its key projects, Vele, in Limpopo, has been plagued with delays, largely related to its location in a geographically sensitive area, adjacent to a World Heritage site. CoAL has also recently acquired the Chapudi coal project from Rio Tinto and its JV partner Kwezi Mining for $75-million. Steelmaker ArcelorMittal South Africa owns a 16.3% stake in CoAL.

Leadership: John Wallington

year ended June 2010 year ended June 2009

Revenue $113.79-million $35.76-million

Profit/(loss) for the year ($101.44-million) ($14.2-million)

Production 2.55-million tons (RoM)

Operations

Mooiplaats, Mpumalanga Ownership: 100% Type: Underground Product: High-quality thermal coal Output: 560 000 t primary product, 95 426 t middlings product (year ended June 30, 2010)

Woestalleen, Mpumalanga Ownership: 100% Type: Opencast Product: Thermal coal for the export market and Eskom Output: 1.03-million tons (six months to June 30, 2010)

Projects

Vele, Limpopo Status: Has received environmental approval, but an appeal has been launched against the integrated water use licenceValue: R350-million (phase one); R2.65-billion (Phase 2) Duration: Unclear, owing to numerous delays Expected output: One-million tons a year (phase one); five-million tons a year (Phase 2)

Makhado coking coal, Limpopo Status: A mining right application has been accepted by the Department of Mineral ResourcesValue: R500-million (Phase 1), R2.7-billion (full development cost) Duration: Not stated Expected output: One-million tons a year (Phase 1), five-million tons a year (full development)

Holfontein, Mpumalanga CoAL is seeking to sell this asset.

Contact details

Postal addressPO Box 1401 Kelvin 2054 South Africa

Telephone: +27 11 785 4510Fax +27 11 807 6654Website: www.coalofafrica.com

John wallington

Coal 201123

Continental CoalASX-listed coal-mining junior Continental Coal has two operating mines – Vlakvarkfontein and Ferreira – that together produce two-million tons a year of thermal coal for the export and domestic markets. The company, which currently supplies between 85% and 90% of its production to Shanduka Resources, is targeting a run-of-mine (RoM) production rate of seven-million tons a year by 2012, towards which it has several projects under development. Some of the company’s interests – including in the Ferreira mine, the Delta processing operation, and the Penumbra and De Wittekrans projects – were acquired through the acquisition of a majority share in Mashala Resources, in which Continental Coal is currently acquiring the outstanding 35.9%.

In the future, the c.ompany is hoping to become a significant supplier to Eskom. Other future ambitions extend into Botswana, where the company has exploration interests and is part of a consortium, which has been shortlisted by the government of Botswana to participate in the running of the Trans-Kalahari rail link between Gaborone and Walvis Bay.

Leadership: Don Turvey (CEO)

year ended June 30, 2010 year ended June 30, 2009

Profit/(loss) for the year ($27.46-million) ($14.91-million)

Production 63 877 t -

Operations

Vlakvarkfontein, Mpumalanga Type: Opencast Product: Domestic thermal Output: 432 565 t RoM (2010 calendar)

Ferreira, Mpumalanga Type: Opencast Product: Export thermal coal Output: 942 950 t RoM (2010 calendar)

Delta processing Type: Coal processing facility

Projects

Penumbra, Mpumalanga Status: Development was expected to start in June 2011 Value: R284-million (including a contingency of R23-million) Duration: First production is expected in early 2012, ramping up to full capacity by the third quarter of the year Expected output: 500 000 t/y of primary export thermal coal and 120 000 t/y of secondary domestic-quality thermal coal

De Wittekrans Status: In August 2011, Continental Coal confirmed an initial Joint Ore Reserves Committee- (Jorc-) compliant saleable coal reserve of about 44-million tons for the project, comprising 16.2-million tons of proven reserves and 27.6-million tons of possible coal reserves.

An estimated 27% of the total saleable reserves at the project are to be mined from the proposed opencast operation, with 73% to be mined from the proposed underground mine development. The initial Jorc-compliant saleable coal reserves for the project have been prepared as part of the bankable feasibility study currently being finalised Value: R500-million Duration: Ramp-up of the project could take place by mid-2012 Expected output: Not stated

Vlakplaats Status: In May 2011 it was reported that Continental Coal had received government consent for the acquisition of the Vlakplaats coal project Value: R32.5-million has been set aside to fund the project through to the completion of a bankable feasibility study. Duration: Not stated

Contact details

Postal addressPO Box 787646 Sandton City 2146 South Africa

Telephone: +27 11 881 1420Fax: +27 11 881 1423Website :www.conticoal.com

don Turvey

Coal 2011 24

Forbes & Manhattan Coal CorporationJunior coal miner Forbes & Manhattan Coal Corporation owns and operates two mines in northern KwaZulu-Natal (KZN), as well as two processing plants. It acquired these assets in April 2010, from Slater Coal for R600-million and will acquire an outstanding 23.25% interest in March 2012. It is planning to triple production from its operations within the next three to four years. Forbes Coal expects to export between 60% and 70% of its production and has an export allocation at the Richards Bay Coal Terminal of 1.1-million tons over the next three years. The company is listed in Toronto, and has recently achieved a secondary listing on the JSE. It is considering further acquisitions in South Africa, in KZN and Mpumalanga, as well as in Mozambique and Zimbabwe, when more political certainty is achieved.

Leadership: Stephen Theron (CEO)

year ended december 31, 2010 year ended december 31, 2009

Revenue $15.66-million –

Comprehensive profit/(loss) $10.98-million –

Operations

Magdalena, KZN Ownership: majority owned by Forbes Coal, which will acquire the outstanding share in March 2012 Type: Opencast and underground Product: High-grade bituminous coal Output: 556 000 t (FY2011)

Aviemore, KZN Ownership: majority owned by Forbes Coal, which will acquire the outstanding share in March 2012 Type: UndergroundProduct: Anthracite Output: 92 000 t saleable (FY 2011)

Projects

Magdalena expansion, KZN Status: Not disclosed Value: $9.7-million (FY2011), $12.4-million (FY2012) Duration: Anticipated output to be achieved by mid-2012 Expected output: Will boost production at the Magdalena mine to one-million tons a year Province: NZN

Aviemore expansion, KZN Status: Not stated Value: $160 000 (FY2011), $3.7-million (FY2012) Duration: Not stated Expected output: Will boost production at this mine to 400 000 t Province: KZN

Contact details

Postal addressPO Box 71 Toronto Ontario Canada M5H 2M5

Telephone: +416 861 1685Fax: +416 861 8165Website: www.forbescoal.com

Stephen Theron

Coal 201125

Keaton EnergyJSE-listed Keaton Energy is a coal exploration and development company. Its first producing mine, the Klip colliery, has been mined-out, and the company has recently brought its Vanggatfontein project into production in Mpumalanga. Keaton is aiming to produce two-million tons of saleable coal a year in the medium term, increasing to five-million tons a year over a longer trajectory. In July 2011, South Africa’s Competition Commission unconditionally approved Keaton’s acquisition of a 74% stake in Leeuw Mining and Exploration in a R140-million transaction. Leeuw owns and operates the Vaalkrantz anthracite colliery, in KwaZulu-Natal (KZN), has a 207 000 t/y participation in the Richards Bay Coal Terminal’s Quattro export programme and a dedicated rail siding and several new-order mineral rights over other KZN properties.

Leadership: Paul Miller

year ended March 2010 year ended March 2009

Revenue R21.96-million R5.42-million

Profit/(loss) for the year (R3.52-million) R4.84-million

Operations

Vaalkrantz, KZN Acquired as part of the July 2011 Leeuw Mining & Exploration deal

Vanggatfontein, Mpumalanga Type: Opencast and underground Product: High quality metallurgical coal and power station coal Output: First production from Phase 1 was achieved in December 2010, while production from Phase 2 was expected by July 2011. The company expects to achieve its targeted sales of two-million tons of coal a year from the Vanggatfontein project in 2012. The first phase will produce 30 000 t/m. Province: Mpumalanga

Projects

Sterkfontein, Mpumalanga Status: Feasibility Value: Capital estimates for project development are expected in the second quarter of 2012. Duration: Not stated Expected output: Not stated

Braamspruit, Mpumalanga Status: Exploration Value: Not stated Duration: Not stated Expected output: Not stated

Contact details

Postal addressPostnet suite 464 Private bag X51 Bryanston 2021 South Africa

Telephone: +27 11 317 1700Fax: +27 11 463 4759Website: www.keatonenergy.co.za

Paul Miller

Coal 2011 26

Miranda MineralsJSE-listed Miranda Minerals is a mineral exploration investment and holding company. The company’s coal-related activities are focused on the Klipriver coalfield, in northern KwaZulu-Natal, where it has been granted 14 prospecting rights and one mining right. In mid-2011, the company’s former CEO Ron Nel served an application seeking for Miranda to be placed under supervision and for rescue proceedings to be instituted. The board of the company “vigorously” has opposed the application.

Leadership: Glen Poff

year ended August 2010 year ended August 2009

Income R36.78-million -

Total comprehensive income/(loss) (R19.45-million) (R8.82-million)

Projects

Sesikhona, KZN Value: About R30-million Duration: The company intends for this project to come on stream in 2011 Status: Development of the project started in May 2010 Expected output: 40 000 t/m of saleable coal

Glencoe (including Uithoek, Burnside, Boschhoek and Wasbank), KZN

Status: An environmental- impact assessment for the Burnside prospecting right was submitted in the first half of 2010 Value: Not stated Duration: Not stated Expected output: Not stated

Contact details

Postal addressPO Box 1045 North Riding 2162 South Africa

Email: info@mirandaminerals.comWebsite: www.mirandaminerals.com

resource GenerationASX- and JSE-listed Resource Generation (ResGen) is seeking to develop high-grade energy related resources into competitive mining operations. The company’s interests include coal and uranium prospects in South Africa, Australia and Cameroon. The most advanced of these is the Boikarabelo coal project, in South Africa’s Waterberg, for which a 30-year mining right was awarded in July 2011. The company is engaged in discussions with Eskom and Transnet, regarding a contract for the supply of three-million tons a year of domestic grade thermal coal to the power utility’s Mpumalanga power stations, and the transportation of six-million tons a year of export and domestic coal from late 2013.

Leadership: Paul Jury (MD) (No picture available)

year ended June 30, 2010 year ended June 30, 2009

Revenue $982 000 $398 000

Profit/(loss) for the year ($3.28-million) ($15.15-million)

Projects

Boikarabelo, Limpopo Value: R4.5-billion Duration: The first phase will enter production in late 2013. The second phase is planned for 2018. Status: ResGen’s 74% Ledjadja Coal has been granted a 30-year mining licence for the project Expected output: Phase 1 will produce six-million tons a year of product coal. Phase 2 will increase output to 20-million tons of product coal.

Contact details

Postal addressPO Box 5384 Reitvallei Rand 0174 South Africa

Telephone: +27 12 345 1057Fax: +27 86 539 3792Website: www.resgen.com.au

Former Miranda CEO ron Nel

Coal 201127

South African Coal Mining holdingsSouth African Coal Mining Holdings (SACMH) is an embattled junior coal miner. The company’s mines were placed on care-and-maintenance in 2009, and its shares were suspended on the JSE in 2010, after an audit where doubts were raised as to whether the company was a going concern. Trading was resumed in March 2011, and the company is bringing its mines back into production. SACMH reportedly expects to use its full rail allocation on the line to the Richards Bay Coal Terminal in 2011, and is investigating additional export allocation, which it contends will enable it to achieve a more sustainable operation. The company is currently reliant on Indian group JSW Energy, which is its controlling shareholder, for all funding including short- and long-term requirements.

Leadership: Antony Rayment (CEO) (No picture available)

2010 2009

Revenue Figures not available Figures not available

Operations

Ilanga and Umlabu, Mpumalanga Product: Primarily export coal Output: The mines were placed on care and maintenance in March 2009. They are now being returned to service, and SACMH expects that they will achieve joint production of 125 000 t/m.

Contact details

Postal addressPO Box 55190Northlands2116South Africa

Telephone: +27 10 001 9460Website: www.sacmh.co.za

Sentula MiningThe core business of Sentula Mining, which has been listed on the JSE since 1993, is mining services, with the group offering services such as opencast mining, earthmoving and exploration drilling. The company is also, however, seeking to carve a place for itself as a coal miner, and owns a 60% share in an anthracite mine in South Africa, as well as having interest in Zambia and Botswana. However, the company’s mining ambitions were dealt a blow in mid-2011 when a potential reverse takeover involving Shanduka Resources, which would have transformed Sentula into a notable coal miner, fell through.

Leadership: Robin Berry

year ended March 31, 2010 year ended March 31, 2009

Group revenue R2.18-billion R2.99-billion

Revenue from Nkomati anthracite R72.14-million Figure not available

Group profit R231.04-million R278.65-million

Operating profit/(loss) for Nkomati (R8.17-million) Figure not available

Production Not stated Not stated

Operations in South Africa

Nkomati anthracite, Mpumalanga Ownership: 60% Sentula, 40% Mpumalanga Economic Growth Agency Type: Underground and opecncast Product: Anthracite Production at Nkomati has been halted owing to an environmental issue. In March 2011, discussions were under way to resolve this matter.

Projects in South Africa

Bankfontein/Schoongezicht, Mpumalanga Status: ExplorationValue: Not statedDuration: Not statedExpected output: Combined yearly sales of 1.5-million tons

Contact details

Postal addressPO Box 76Woodlands office parkWoodmead2080

Telephone: +27 11 656 1303Fax: +27 11 656 1300Website: www.sentula.co.za

robin Berry

Coal 2011 28

Total Coal South AfricaTotal Coal South Africa (TCSA) is a wholly owned subsidiary of French multinational energy company Total. The company has been active in South Africa since the early 1970s. TCSA’s empowerment partner is Bridgette Radebe’s Mmakau Mining. The black economic-empowerment company’s investments in Total’s mining operations are held by Mmakau Mining and empowerment vehicle Mmakau Coal, in which Mmakau Mining holds a 51% stake and TCSA the remaining 49%. Mmakau Coal has a 26% shareholding in Forzando North and South mines.

Leadership: Jean-Pierre Junqua (MD) (No picture available)

Operations

Dorstfontein, Mpumalanga Ownership: 74% TCSA; 26% Mmakau Mining Product: Local (ferrometal industry) and export product Output: One-million tons run-of-mine (RoM); 700 000 t saleable The mine is nearing the end of its production life, and will be replaced by Dorstfontein West

Forzando north and south, Mpumalanga Ownership: 74% TCSA, 26% Mmakau Coal Type: Underground Product: Primarily export coalOutput: 3.2-million tons RoM

Tumelo, Mpumalanga Ownership: TCSA 49%, Mmakau Mining 49% Type: Not stated Product: Primarily export Output: 500 000 t/y

Projects

Dorsfontein East, Mpumalanga Status: Not stated Value: Not stated Duration: Not stated Expected output: One-million RoM tons a year

Dorstfontein West, Mpumalanga Status: Commissioning phase Value: Not stated Duration: Expected to be operational in Q3 2011 Expected output: 3.2-million RoM tons a year, two-million saleable tons a year

Schurvekop, Mpumalanga Status: Exploration

Brakfontein, Mpumalanga Status: Exploration

Eloff, Mpumalanga Status: Exploration

Contact details

Postal address PO Box 2344Saxonwold2132South Africa

Telephone: +27 11 441 6800Fax: +27 11 880 0245

Forzando North mine, in Mpumalanga Tumelo mine, in Mpumalanga

Coal 201129

universal CoalASX-listed Universal Coal is an emerging near-term coal production and development company with interests in various projects in South Africa, including three thermal coal proejcts – Kangala, Roodekop and Brakfontein – and two coking coal projects – Berenice/Cygnus and Somerville. The company holds a 70.5% interest in Kangala and a 50% interest in Roodekop, and is staged to earn up to 50% in the remaining three projects.

Leadership: Tony Weber (CEO), Tony Harwood (chairperson) (No picture available)

year ended June 30, 2010 year ended June 30, 2009

Revenue - -

Profit/(loss) (£2.82-million) (£2.32-million)

Projects

Kangala, Mpumalanga Value: A$12.5-million Duration: Not stated Status: Resource upgrade announced in the beginning of 2011; bankable feasibility study expected to be completed before the end of 2012 Expected output: Three-million tons a year run-of-mine (RoM)

Roodekop, Mpumalanga Duration: Targeting the start of production in 2012 Status: The final drilling phase for the project was completed in the March 2011 quarter Expected output: 1.5-million tons a year RoM

Brakfontein, Mpumalanga Duration: Targeting the start of production in 2013 Status: Drilling was under way by early 2011 Expected output: 1.5-million tons a year RoM

Berenice, Limpopo Status: First phase drilling programme completed by July 2011

Somerville, Limpopo Status: Inferred drilling is expected to take place in 2011

Contact details

Postal addressPO Box 2423Brooklyn Square0075South Africa

Telephone: +27 12 460 0805Fax: +27 12 460 2417Website: www.universalcoal.com

wescoalJSE-listed Wescoal is a black economic-empowerment company involved in the buying, selling and beneficiation of coal. It sources and distributes coal to customers in the local industrial and petrochemicals sectors. The company has also recently diversified into the mining of coal through the acquisition of the Khanyisa mine in 2009. In March 2011, a dispute arose between Wescoal and Sutha Civils, one of the contractors engaged to mine at Khanyisa. In July 2011, Sutha launched legal action against Wescoal, filing for the liquidation of Wescoal Mining. Wescoal submitted an urgent application to set aside the application for liquidation. Sutha failed to represent its case in the North Gauteng High Court, effectively abandoning the action. Wescoal subsequently indicated that it would pursue a damages claim against Sutha, its managing director and an independent consultant.

Leadership: André Boje

year ended March 31, 2011 year ended March 31, 2010

Group revenue R557.61-million R353.9-million

Mining division revenue R242.8-million Figure not available

Group profit/(loss) for the year (R43.76-million) R5.71-million

Production 967 000 t 185 000 t (Khanyisa only contributed for a single quarter following its acquisition)

Operations

Khanyisa, Mpumalanga Ownership: 100% Type: Opencast Product: Primarily coal for Eskom Output: 967 000 t (of which 885 000 t was sold to Eskom)

Contact details

Postal addressPO Box 133Krugersdorp1740South Africa

Telephone: +27 11 954 2721Fax: +27 11 954 6737Website: www.wescoal.com

André Boje

Coal 2011 30

Future demand scenarios for South African coal generally support project development. Eskom, which dominates local coal demand, contends that, while it has secured about 80% of its coal requirements to 2020, some R100-billion in new coal-mining investment is needed over the next ten years to ensure ongoing coal supply security. This is despite the reduced emphasis on coal-fired power in South Africa’s electricity planning scenarios. Further, demand for South African coal is expected to remain strong in export markets.

In this context, there are a number of coal-mining projects under development in South Africa by established operators and emerging producers. Questions exist, however, as to whether these developments will be sufficient to meet future demand.

Eskom is facing the prospect of having to extend the lifespans of some of its power stations from the normal 50 years to 60 years, and the utility expects that this, together with delays in the building of new coal mines, could result in a shortfall of some 1.5-billion tons of coal over the next 30 years. The situation could be exacerbated by some 520-million tons if, as the electricity utility has suggested, Eskom-grade coal is delivered to export customers.

Uncertainties regarding the future of South Africa’s coal-mining sector may be causing project delays. In particular, as a result of logistical constraints, companies may be reluctant to invest in projects that will expand production when it is unclear how the additional output will be delivered to the export market. Project decisions are possibly also being affected by concerns over increasing government interference in the sector.

AATC: Zibulo, New LargoIn its 2010 annual report, AATC explains that it is focused on expanding its strong standing in the export market, while maintaining a significant position in the domestic market in South Africa. By the end of 2010, the company had substantially completed a major programme of investment, including the development of the Zibulo (previously Zondagsfontein) mine and investigations into an expansion at the Cerrejón mine, in Colombia.

The $517-million Zibulo project was substantially completed by the end of 2010. At that time, the opencast operation was at full production, and four of the eight production sections at the underground operation had been deployed. The washing plant, which is a 50:50 joint venture (JV) with Becsa, was fully commissioned and was operating at 80% of its planned monthly production. Completion of the man and materials shaft was expected in the second quarter of 2011.

AATC has also started a feasibility study on the New Largo project, in Mpumalanga, which has been identified by Eskom as a primary coal supplier to the Kusile power station. New Largo is expected to produce some 15-million tons of thermal coal a year from an opencast

operation that will cost an estimated $1.7-billion to develop. A draft scoping report was available for review in April and May 2011. If the project proceeds, first delivery is scheduled for 2013, with full production expected in 2017.

Another potential project in the pipeline for AATC is the Elders project.

Becsa:douglas/Middelburg optimisation, KlipspruitBecsa concluded two major projects in Mpumalanga during 2010.

The $975-million Douglas/Middelburg optimisation (DMO) project will contribute 10-million tons a year of export thermal coal and 8.5-million tons a year of domestic thermal coal to Becsa’s prodcution. This was done through including the use of reserves across the Douglas and Middelburg Mine Services collieries and the development of new mining areas with low strip ratio coal. The project was completed in September 2010, and will have a mine-life up to 2034.

The Klipspruit mine expansion project increased output at this opencast operation from 4.8-million tons a year to 8-million tons a year. The project also included the development of a 16-million-ton-a-year coal processing plant, called the Phola coal processing plant, in a 50:50 JV with Anglo Coal. The plant, processing eight-million tons a year from each of the JV partners, is located in the Klipspruit surface area and was constructed by Anglo Coal. Some $450-million was budgeted for the development of Klipspruit, but only $400-million was spent. The project was completed in the first quarter of 2010.

Exxaro resources:Grootegeluk Medupi expansion, ThabametsiExxaro Resources is undertaking a R9.5-billion project to expand production at its Grootegeluk mine, in Limpopo, from 19-million sales tons a year to 34-million sales tons a year. Design work on this project, known as the Grootegeluk Medupi expansion project, was nearing completion by February 2011 and, at that stage, some 90% of the major construction packages for the project had been placed. Supply of coal from the project is expected to start in the second quarter of 2012, and full production is expected from 2015. Output will be delivered to Eskom’s new Medupi power station.

Meanwhile, following the release of the draft National Integrated Resource Plan in October 2010, Exxaro modified its development plans for its coal resources in the Waterberg. As a result, the company’s proposed R10-billion Thabametsi mine, in Limpopo, will now be

SELECTEd COAL PrOJECTS

Coal 201131

developed on a smaller scale than originally planned. The mine will be focused on supplying coal to an IPP that Exxaro is helping to develop in the province. Originally, the mine was intended to supply coal as part of Eskom’s multisite baseload IPP programme. The project is currently in the prefeasibility stage, and start-up could take place in 2016. The mine could produce between six-million tons of coal a year and 17-million tons of coal a year.

Other projects under consideration by Exxaro are the sintel char Phase 2 project, in Limpopo, which is in the feasibility stage and could start production in 2013; and the Belfast and market coke projects, in Mpumalanga and Limpopo respectively, which are both in prefeasibility and could start production in 2014.

Optimum Coal:Boschmanspoort, Kwagga North, SchoonoordOptimum Coal reported in September 2010 that it plans to invest R3-billion in capital projects over the next three years. The company estimated capital expenditure of R897-million in FY2011, R1.2-billion in FY2012 and R997-million in FY2013.

Optimum has recently completed the R558-million Boschmanspoort underground mine at its Optimum colliery, in Mpumalanga, and currently under development is the Kwagga North project, also at the Optimum colliery. Kwagga North is a tonnage replacement project valued at R741-million. The project is expected to be completed in 2012 and will operate for some 21 years. By May 2011, a new boxcut had been established, a dragline walkway completed, and development of the necessary surface infrastructure was under way.

The company is also undertaking a bankable feasibility study on the Schoonoord project.

Sasol Mining:Thubelisha, impumulelo, Shondoni, MafuthaSasol Mining has three mine replacement projects under development. That should ensure that the company does not have to source coal from elsewhere once three of its key mines reach the end of their lifespans in the near future. This will ensure uninterrupted coal supplies for the company’s export activities and synfuels operations. Sasol has budgeted R8-billion for its coal-mine replacement programmes.

The R3.39-billion Thubelisha mine, in Mpumalanga, is set to replace the Twistdraai operation. The project, which is already under construction, is due for completion in the first half of 2012. The sinking of the three shafts for this project will require a capital investment of R500-million, while the overland conveyor, the bunkers and the associated infrastructure will cost R850-million. The balance will be spent on surface infrastructure, including electricity and road works. Thubelisha will have the capacity to produce 10.6-million tons of coal a year for supply to the export market and Sasol Synfuels.

The R4.71-billion Impumulelo mine, in Mpumalanga, is set to replace the Brandspruit operation. Board approval for this project was obtained in the 2010 financial year, and construction is set to start in 2011. The mine is expected to enter production in 2014, ramping up over a period of four-years, and will have the capacity to produce ten-million tons of coal a year.

Sasol Mining has also allocated R160-million for the development of the Shondoni project, in Mpumalanga, which is earmarked to replace the Middelbult mine by 2015.

Sasol Mining is also considering the development of a coal mine to produce feedstock for its proposed Mafutha synfuels project, which will be an 80 000 bbl/d coal-to-liquids facility. If it goes ahead, the Mafutha mine project, which is an extended prefeasibility stage, would be a JV between Sasol Mining and Exxaro Resources. A sample of 170 000 t of coal has been extracted to test its suitability for gasification. It is expected that the Mafutha mine will be an opencast truck-and-shovel operation.

Xstrata Coal South Africa:Atcom East, Tweefontein, ZonnebloemXstrata Coal South South Africa has one project that is ramping up to full production and another two projects that it is considering developing in Mpumalanga.

The company is ramping up to full production at its Arthur Taylor Colliery Opencast Mine (Atcom) East project, which will produce an estimated 5.7-million tons a year of RoM coal and 3.1-million tons a year of saleable thermal product for the domestic and export markets. The $407-million project included the purchase of mining equipment, the upgrade of the existing coal handling and preparation plant and the construction of new infrastructure. It also included a new workshop, central hard park areas and new water management infrastructure. Atcom East will have an estimated 26-year mine life.

Xstrata is also considering a project to expand its Tweefontein mine. A prefeasibility study on this so-called optimisation development was concluded in 2009, and a feasibility study was expected in early 2011. Output from the project could start in 2013, increasing the Tweefontein mine’s production from 8.7-million RoM tons to 13.6-million RoM tons.

Also under consideration is the development of a greenfield Zonnebloem mine, on which a feasibility study will be taken in 2012. This project could enter production in about 2016, if the project goes ahead.

Projects under development by smaller participants in the marketAustralian miner ResGen, which has assets in South Africa and Tasmania, is in the process of developing the Boikarabelo coal project, in Limpopo. In July 2011, the company’s 74%-owned Ledjadja Coal was granted

Coal 2011 32

a 30-year mining licence for the project, which has probable reserves of 636-million tons, a measured resource of 204-million tons, an indicated resource of 551.7-million tons and an inferred resource of 1.5-billion tons. An application for an integrated water use licence is expected in the third quarter of 2011, and arrangements for main power supply from Eskom continue.

The mine will be developed in two phases. The first phase will deliver about 120-million tons of RoM coal a year, which will equate to about six-million tons of product coal. Of this, three-million tons are destined for the export market and three-million tons will be used domestically. Production from this phase of the project is expected to start in late 2013. The second phase of the project, planned for 2018, will involve ramping up production to 20-million tons of product coal. ResGen is seeking to raise an initial R4.5-billion in project financing.

Emerging miner CoAL is engaged in the development of the Vele colliery. The first phase of the project, which will cost some R450-million, is expected to initially produce one-million tons of coking coal a year. A second phase development, which will require a further R2.65-billion in funding, could expand production to five-million tons a year.

The project has been plagued by delays, many of which are related to its location on the edge of the Mapungubwe World Heritage site, with a range of environmental organisations having lobbied to put a halt to the project. In 2010, the DEA issued a directive forcing CoAL to halt activities at the project site, owing to environmental missteps.

Since that time, CoAL has agreed to pay a R9.5-million penalty, as part of a precondition for the DEA to consider and decide upon the rectification application relating to an environmental authorisation for the project, and in early July 2011, the DEA gave the project environmental approval. Later in the month, however, Vele was forced to put a halt to operations at the site requiring the use of water, owing to an appeal by a coalition of environmental organisations against the company’s integrated water use licence.

CoAL is also involved in the development of the Makhado coking coal project, in Limpopo. The full-scale plan for this project is based on the production of five-million tons of coking coal a year. The first phase of the project will produce one-million saleable tons a year. A capital investment of R500-million is required, with the cost of a full-scale development estimated at R2.7-billion. A timeframe for the project has not been stated, for which a new-order mining right application was made in March 2011.

Sekoko Resources and Firestone Energy are developing the Waterberg coal project, in Limpopo, which will include the Smitspan and Vetleegte mines. Smitspan has a substantial measured thermal coal resource, while the Vetleegte mine will mine a substantial metallurgical coal deposit. It is expected that a 1.5-million-ton-a-year

mine will be economically viable within the first five years of operation.

Construction of the project is expected to cost some R500-million and, in July 2011, South Africa’s State-owned IDC started funding the project, having approved the first drawdown of funds for mine development costs.

The project is owned by the Sekoko Waterberg Colliery (40%) – in which the IDC has a 33% equity interest, with the balance being held by Sekoko Resources – and Firestone Energy (60%).

First production from the project is expected in 2012.Keaton Energy has recently completed the development

of the Vanggatfontein coal mine, from which it expects to sell two-million tons of coal a year from 2012. The project was brought on stream in phases. The first phase, developed at a cost of some R158-million, entered production in late 2010, and the second phase, costing R225-million, started production in mid-2011.

The company is now considering the development of its Sterkfontein project, which is in the feasibility stage. Capital estimates for the development of the mine are expected in the second quarter of 2012.

Aim-listed Sable Mining Africa, along with its South African investment partner Delta Mining Consolidated, also has several projects in the pipeline. These include the Springbok Flats and Rietkuil projects, in Mpumalanga, both of which are in the early stages of development.

Wescoal has been granted a new-order prospecting right by the DMR over certain portions of the Vlaklaagte farm near Witbank, in Mpumalanga. The portions of the farm covered by the prospecting right have an inferred resource of 20.1-million tons of coal consisting of four economically recoverable seams. Further exploration drilling is being undertaken to raise the confidence level to measured status, following which an application for a new-order mining right will be submitted.

Sentula Mining has two projects – Bankfontein and Schoongezicht. Bankfontein could produce one-million tons of coal a year, of which half would be thermal coal for Eskom, and the other half would be suitable for export or non-Eskom domestic markets.

Acquired by Continental Coal in November 2010, the Penumbra project, in Mpumalanga, is in the process of being developed. The forecast development cost for this venture is R284-million, including a contingency of R23-million. First production is expected in early 2012, ramping up to full capacity by the third quarter of 2012. Full capacity is expected to be 500 000 t/y of primary export thermal coal and 120 000 t/y of secondary domestic-quality thermal coal. The export product will be railed from the company’s existing rail siding through to the RBCT, under existing rail contracts, and sold under existing offtake agreements. Development was scheduled to begin in June 2011. Other projects in Continental’s portfolio include the De Wittekrans and Vlakplaats developments, in Mpumalanga.

Coal 201133

Selected coal projects in South Africa

Company Project name LocationProjected annual

outputvalue duration Status

Anglo American Thermal Coal

Zibulo Mpumalanga Not stated $517-million Not stated. The project was substantially complete by the end of 2010.

Anglo American Inyosi Coal

New Largo Mpumalanga 15-milion tons a year of thermal coal

$1.7-billion First production is expected in 2013 and full production in 2017.

The project is in the feasibility stage. A draft scoping report was available for review in April and May 2011.

Anglo American Inyosi Coal

Elders Mpumalanga 12.8-million tons a year of thermal coal

Not stated First production is expected in 2016, and full production should be reached by 2020.

Not stated.

BHP Billiton Energy Coal South Africa

Douglas/Middelburg optimisation

Mpumalanga 10-million tons a year of export thermal coal and 8.5-million tons a year of domestic thermal coal.

$975-million The project entered the execution phase in February 2008 and was completed in September 2010.

Completed.

BHP Billiton Energy Coal South Africa

Klipspruit opencast coal mine expansion

Mpumalanga The project is intended to increase output at this operation from 4.8-million tons a year to eight-million tons a year.

$450-million was budgeted for the project, but only $400-million was spent.

The project was approved in December 2007 and was concluded in the first quarter of 2010.

Completed.

Coal of Africa Limited

Vele coal project Limpopo Phase 1 will produce one-million tons a year. Phase 2 will increase output to five-million tons a year.

Phase 1: R350-million Phase 2: R2,65-billion

The schedule is to be revised following delays owing to environmental concerns which halted construction in August 2010.

In early July 2011, CoAL received environmental approval for the project. However, later in the month it was forced to stop all activities at the site requiring the use of water owing to an appeal against its integrated water use licence.

Coal of Africa Limited

Makhado coking coal project

Limpopo The first phase of the project will produce one-million tons a year of coking coal, increasing to five-million tons a year once the full project has been developed.

R500-million for phase one. The full development cost will be R2,7-billion.

Not stated. A mining right application was accepted by the Department of Mineral Resources in March 2011.

Continental Coal

Penumbra Mpumalanga The project will produce some 500 000 t/y of primary export thermal coal and 120 000 t/y of secondary domestic-quality thermal coal.

R284-million First production is expected in early 2012, ramping up to full production by the third quarter of the year.

Development on the project was set to begin in June 2011.

Continental Coal

De Wittekrans Not stated Not stated R500-million Ramp-up of the project could take place by mid-2012

Bankable feasibility studies were due to be completed by June 2011. S

ourc

e: C

ompi

led

from

info

rmat

ion

publ

ishe

d in

Min

ing

Wee

kly

Coal 2011 34

Sou

rce:

Com

pile

d fro

m in

form

atio

n pu

blis

hed

in M

inin

g W

eekl

y

Selected coal projects in South Africa

Company Project name LocationProjected annual

outputvalue duration Status

Exxaro Resources

Grootegeluk Medupi expansion

Limpopo The project will expand the production of the Grootegeluk mine from 19-million tons a year to 34-million tons a year

R9,5-billion First production is expected in 2012. Full production is expected in 2015.

Under development.

Exxaro Resources

Thabametsi Limpopo Between six-million and 17-million tons of coal a year

R10-billion First coal could be delivered in 2016.

The project is in the prefeasibility stage. The scale of the project has been reduced.

Exxaro Resources

Sintel char phase 2

Limpopo 140 000 t/y Not stated. The project could be implemented in 2013.

The project is in the feasibility phase.

Exxaro Resources

Belfast coal project

Mpumalanga Two-million tons a year of A-grade thermal coal.

Not stated. Start up of this project is expected in 2014.

The project is in the prefeasibility stage.

Exxaro Resources

Market coke Limpopo 750 000 t/y of market coke.

R510-million The project could be implemented in 2014.

The project is in the prefeasibility stage.

Firestone Energy and Sekoko Coal

Waterberg coal project (Smitspan and Vetleegte)

Limpopo 1.5-million tons a year within the first five years of operation.

R500-million. First production is expected in 2012.

In July 2011, the Industrial Development Corporation authorised the first drawdown of funds for mine development costs.

Keaton Energy

Vanggatfontein Mpumalanga At full production, the project will produce two-million tons a year. The first phase will produce 30 000 t/m.

Phase 1: R158-million Phase 2: R225-million

Not stated. In production.

Keaton Energy

Sterkfontein Mpumalanga Not stated. Not stated. Not stated. The project is in the feasibility stage. Capital estimates are expected in the second quarter of 2012.

Optimum Coal Holdings

Boschmanspoort underground project

Not stated. Not stated. R558-million Not stated. Recently completed.

Optimum Coal Holdings

Kwagga North Not stated. Not stated. R741-million Completion is expected in 2012.

Under development.

Optimum Coal Holdings

Schoonoord Not stated. 26-million tons of run of mine coal over the course of the mine life.

R180-million Not stated. The project is at the bankable feasibility stage, and negotiations are under way with Eskom regarding an offtake agreement.

Resource Generation

Boikarabelo Limpopo Phase 1 will produce six-million tons a year of product coal. Phase 2 will increase output to 20-million tons of product coal.

R4,5-billion The first phase will enter production in late 2013. The second phase is planned for 2018.

Resource Generation’s 74%-owned Ledjadja Coal has been granted a 30-year mining licence for the project.

Coal 201135

Selected coal projects in South Africa

Company Project name LocationProjected annual

outputvalue duration Status

Sasol Mining Thubelisha Mpumalanga 10,6-million tons a year to supply the export market and Sasol Synfuels.

Capital expediture of R3.39-billion has been approved

First production is expected to come on stream in 2012, ramping up to full production over three years.

Under development. The project will replace the Twistdraai mine.

Sasol Mining Impumulelo Mpumalanga 10-million tons Capital expediture of R4.71-billion has been approved

First production is expected in 2014, ramping up to full production over four years.

The project is under development. The mine will replace the Brandspruit mine.

Sasol Mining Shondoni Not stated Not stated R160-million for basic development

The mine is earmarked to replace Middelbult by 2015.

Sasol has allocated expenditure for basic development of the project.

Sasol Mining and Exxaro Resources

Mafutha Limpopo Not stated Not stated Not stated. The project is in the prefeasibility stage. A bulk sample from the project was mined in 2010, for gasification tests in 2011.

Xstrata Coal South Africa

Arthur Taylor Colliery Opencast Mine (Atcom) East

Mpumalanga 5,7-million tons a year of run-of-mine coal and 3,1-million tons a year of saleable thermal product.

$407-million The project is expected to reach full production in 2011.

Ramping up to full integrated production.

Xstrata Coal South Africa

Tweefontein optimisation

Not stated The project will increase the output at this operation from 8.7-milion RoM tons to 13.6-million RoM tons.

Not stated. Output could start in 2013.

The project is in the feasibility stage.

Xstrata Coal South Africa

Zonnebloem Not stated. Not stated. Not stated. The project could enter production in about 2016.

A feasibility study on this greenfield project will be undertaken in 2012. S

ourc

e: C

ompi

led

from

info

rmat

ion

publ

ishe

d in

Min

ing

Wee

kly

wescoal’s Khanysia colliery, in Mpumalanga

Coal 2011 36

While the Chamber of Mines has strongly contested Eskom’s claims that it is facing a coal-supply shortfall owing to increased exports, the fact remains that the utility is concerned about future security of coal supply.

Certainly, Eskom is expected to remain heavily dependent on coal for many years to come, despite the fact that the prevalence of coal in the utility’s overall energy mix is set to decline. In total, Eskom has estimated that it will require about 160-million tons of thermal coal a year by 2020 to generate sufficient power to meet domestic demand. Thereafter, however, Eskom’s coal demand is expected to taper off, reaching 50-million tons a year by 2040.

It was reported in February 2011 that Eskom had secured 95% of its coal requirements up to 2018 through contracts and commitments, including the necessary coal supplies for the two new coal-fired power stations currently under production – Medupi and Kusile. The coal-mining companies involved in supplying Medupi and Kusile are investing significant funds in expansions to meet the required demand.

Eskom expects, however, that further significant new investments will have to be made in the coal-mining industry to meet the utility’s future demand. In fact, the utility has suggested that the industry needs to spend some R100-billion between now and 2020, and R175-billion over the next 20 years to ensure sufficient supplies for its plants.

Eskom’s view that additional investment in the coal sector is needed is supported by coal analyst Xavier Prevost, who is of the opinion that finding and studying new coal reserve blocks to replace the production of some of the large collieries is imperative.

By 2020, about half of South Africa’s economically recoverable coal resource is expected to have been exhausted. In this same year, South African coal production is expected to reach its peak, and output will decline thereafter, reaching yearly levels of 250-million tons by 2037, and then halving to 125-million tons a year by 2063. This is according to a report in the South African Journal of Science, which also reveals that the country’s remaining coal reserves are about 15-billion tons, which is significantly less than the 50-billion tons previously estimated by government.

However, Prevost believes that concern about South Africa’s dwindling coal reserves is unfounded. He estimates that the country has about 33.1-billion tons of coal reserves, which is sufficient for between 40 and 50 years of supply.

It is believed that the long-term future of South Africa’s coal-mining sector lies in the Waterberg, which looks likely to become the dominant producing coalfield once the main resources in the country’s existing key coalfields are depleted. However, achieving production from the Waterberg will be dependent on the establishment of the necessary infrastructure to deliver coal from this region to Eskom’s power stations in Mpumalanga, as well as to deliver coal to the RBCT for export.

In fact, it is not just coal-mining in the Waterberg that is dependent on the development of appropriate infrastructure. Participants throughout the coal industry agree that it is essential that the current logistical constraints on the rail line to the RBCT are resolved if South African coal exporters are to perform at their peak.

PrOSPECTS

Coal loading at Exxaro’s Grootegeluk mine, in Limpopo

Coal 201137

Anglo American. Annual report 2010.

BHP Billiton. Annual report 2010.

Bisichi Mining. Annual report 2010.

Continental Coal. Annual report 2010.

Eskom. Annual report 2010.

Exxaro Resources. Annual report 2010.

Forbes & Manhattan Coal Corporation. Investor presentation July 2011.

Keaton Energy. Annual report 2010.

Mining MX. CoAL in $75m deal for Rio Tinto’s Chapudi (November 29, 2010).Mining MX. Transnet hikes coal tariffs (March 24, 2011).Mining MX. RBCT shelves expansion plans (March 30, 2011).Mining MX. Eskom in talks with Vunene on coal deal (April 6, 2011).Mining MX. Keaton’s Eskom contract extended (April 7, 2011).Mining MX. Govt makes progress on Quattro quotas (June 10, 2011).Mining MX. RBCT again chops coal export target (June 21, 2011).Mining MX. Transnet to favour junior coal exporters (June 22, 2011). Mining MX. Shanduka finds a new suitor (June 29, 2011).Mining MX. Shanduka under fire for ‘non-compliance’ (July 11, 2011).Mining MX. Firestone, Sekoko call off Jindal talks (July 13, 2011).Mining MX. Coal law could benefit SA exporters (July 20, 2011).Mining MX. IDC begins funding Waterberg coal project (July 21, 2011).

Mining Weekly. Black-owned Optimum Coal to invest R3bn over next three years (September 24, 2010).Mining Weekly. Atcom project on track for completion (December 10, 2010).Mining Weekly. Eskom says renegotiated coal specs starting to deliver at Duvha, Matla (January 25, 2011).Mining Weekly. Xstrata coal output down on weaker SA, Australia production (February 1, 2011).Mining Weekly. Anglo should follow BHP in releasing South African coal rights – Shabangu (February 2, 2011).Mining Weekly. Minister reserves corrective coal action right, pleads for industry cooperation (February 2, 2011).Mining Weekly. Wescoal walks away from R45m Nungu acquisition (February 9, 2011).Mining Weekly. Keaton in R140m Leeuw deal, coal-trading tie-up (February 14, 2011).Mining Weekly. Exxaro expresses frustration with service levels on coal mine (February 24, 2011).Mining Weekly. Sasol sets aside R8bn for coal replacement projects (March 7, 2011).Mining Weekly. BHP sees strong interest for SA coal rights, to sell by June (March 9, 2011).Mining Weekly. SACMH share suspension lifted (March 25, 2011).Mining Weekly. SACMH prepares to optimally use rail allocation in 2011 (April 1, 2011).Mining Weekly. Eskom extends Vanggatfontein coal contract – Keaton (April 7, 2011).Mining Weekly. Need to diversify education for SA’s coal industry (April 29, 2011).Mining Weekly. Anglo’s Isibonelo colliery honoured for the greatest reduction in lost-time injuries (April 29, 2011).Mining Weekly. ResGen extends coal offtake deal with India’s RPG (June 8, 2011).Mining Weekly. Coal road map to be released by mid-2012 (June 21, 2011).Mining Weekly. Continental moves to buy rest of Ferreira mine owner Mashala (July 1, 2011).Mining Weekly. Vele enviro conditions will ensure the integrity of Mapungubwe – DEA (July 8, 2011).Mining Weekly. ResGen awarded mining right for Waterberg coal mine (July 25, 2011).Mining Weekly. Coal workers down tools in South Africa, gold miners to follow (July 25, 2011).Mining Weekly. Miranda to oppose business rescue application (July 26, 2011).Mining Weekly. Optimum Coal boosts FY output to 17.1Mt (July 28, 2011).Mining Weekly. Forbes Coal starts trading on JSE (July 28, 2011). Mining Weekly. Emerging miner aiming to triple production by end of 2012 (July 29, 2011).Mining Weekly. SA coal strike ends as employers, unions sign 2-year wage deal (August 1, 2011).Mining Weekly. Miranda continues to oppose business rescue application – chair (August 3, 2011).

MAiN SOurCES

Coal 2011 38

Miranda Minerals. Annual report 2010.

Optimum Coal Holdings. Annual report 2010.

Sasol. Annual report 2010.

Sentula. Annual report 2010.

Wescoal. Annual report 2010.

Xstrata. Annual report. 2010.

www.angloamerican.co.zawww.bhpbilliton.comwww.bisichi.co.ukwww.coalofafrica.comwww.conticoal.comwww.exxaro.comwww.forbescoal.comwww.keatonenergy.comwww.mirandaminerals.comwww.optimumcoal.comwww.resgen.com.auwww.sasol.comwww.sentula.co.zawww.universalcoal.comwww.wescoal.comwww.xstrata.com

To subscribe to Research Channel Africa or purchase this report contact:

Creamer Median Tel: +2711 622 3744n Fax: +2711 622 9350n Email: subscriptions@creamermedia.co.za

Coal 2011The material contained in this report was compiled by the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg, South Africa.

The information contained in this report has been compiled from sources believed to be reliable, but no warranty is made as to the accuracy of such information.

This document is designed to be used as a source of information for subscribers to Creamer Media’s Research Channel Online and Creamer Media’s MiningWeekly.com Research and is not to be reproduced or published for any other purpose.

In particular, the report may not be republished on any other websites, or Intranet sites or be distributed by email outside of the subscribing company.

The report draws on information published in Engineering News and Mining Weekly, as well as from a range of other sources, and should provide an invaluable and easy-to-read snapshot of key industrial sectors.

© Copyright Creamer Media (Pty) Ltd