independent competent persons report - kangala

94
Coffey Mining (SA) Pty Ltd (2006/030152/079) VAT Number (415 023 9327) Block D, Somerset Office Estate, 604 Kudu Street, Allen’s Nek 1737 Roodepoort, South Africa www.coffey.com/mining Kangala (ELOF) Coal Project Independent Competent Persons Report Prepared by Coffey Mining (South Africa) on behalf of: Universal Coal Plc For personal use only

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Page 1: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd (2006/030152/079) VAT Number (415 023 9327)

Block D, Somerset Office Estate, 604 Kudu Street, Allen’s Nek 1737 Roodepoort, South Africa www.coffey.com/mining

Kangala (ELOF) Coal Project

Independent Competent Persons Report

Prepared by Coffey Mining (South Africa)

on behalf of:

Universal Coal Plc

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Author(s):

Alan Goldschmidt Senior Consultant - Resources

BSc(Hons),GDE (Mining),( Pr.Sci.Nat.)

David van Wyk Associate Consultant BSc (Geol), (FGSSA,

MGSSA, Pr.Sci.Nat)

Ken LombergRegional Manager –

Southern Africa

BSc (Hons), (MGSSA,

Pr.Sci.Nat.)

Kees DekkerSenior Consultant -

Resources

Bsc (Hons), MBA,

(MGSSA, Pr. Sci.Nat)

Date: 31 May 2010

Project Number: JUNI06

Copies: Universal Coal Plc (2)

Coffey Mining –

Johannesburg

(1)

Document Review and Sign Off

Alan Goldschmidt Author

Ken Lomberg Supervising Principle

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Page 3: Independent Competent Persons report - Kangala

GeoCoal Services

Fax/Telephone 046 624 4791 Cell 082 852 6522 Postal address P. O. Box 1026 Port Alfred 6170

Residential address: 26 Croyden Circle Port Alfred E-mail [email protected]

KANGALA (ELOF) COAL PROJECT Independent Competent Person’s Report

I David van Wyk (ID number 4806125084083) consent to the inclusion of the resource statements

generated by myself as an associate of Coffee Mining. This includes a document review and the

inclusion of all plans and data generated by myself contained in the updated CPR of the Kangala Coal

Project.

David van Wyk BSc (Geol), (Pr.Sci.Nat. FGGSA MGSSA)

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Page 4: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

Table of Contents –

EXECUTIVE SUMMARY ........................................................................................................................ i!

1! Introduction................................................................................................................................. 1!

1.1! Scope of Work .................................................................................................................. 1!

1.2! Participants....................................................................................................................... 2!

1.3! JORC and SAMREC Codes ............................................................................................... 3!

1.4! Site Visits and Data Reviewed ............................................................................................ 4!

1.5! Property Description .......................................................................................................... 5!

1.5.1! Location ................................................................................................................... 5!

1.5.2! Physiography and Infrastructure .................................................................................. 6!

1.6! The South African Coal Mining Industry ............................................................................. 9!

1.6.1! Production ................................................................................................................ 9!

1.6.2! Demand .................................................................................................................. 10!

1.7! Mineral and Surface Rights and Approvals Critical to Project .............................................. 13!

1.8! Permitting ...................................................................................................................... 14!

1.9! Disclaimer ...................................................................................................................... 14!

2! Geology ..................................................................................................................................... 15!

2.1! Regional Geology ........................................................................................................... 15!

2.2! Local Geology ................................................................................................................ 16!

3! Exploration ................................................................................................................................ 17!

3.1! Exploration History ......................................................................................................... 17!

3.1.1! Drilling Density....................................................................................................... 18!

3.1.2! Data Location, Digital Terrain Model and Topographic Control ................................... 21!

3.1.3! Drill Core Logging .................................................................................................. 21!

3.1.4! Sampling, Analytical Procedures and Checks ............................................................. 21!

3.2! Planned Exploration Programmes ..................................................................................... 22!

4! WOLVENFONTEIN Coal Resources ......................................................................................... 24!

4.1! Sample Data Assumptions for Modelling Purposes ............................................................. 24!

4.2! Methodology .................................................................................................................. 24!

4.2.1! Data Verification ..................................................................................................... 24!

4.2.2! Borehole summary................................................................................................... 25!

4.2.3! Geological modelling ............................................................................................... 28!

4.2.4! Coal Resource Estimation ........................................................................................ 31!

4.3! Gross and Mineable In-situ Resources and Raw Qualities .................................................... 33!

4.4! Physical Seam Characteristics........................................................................................... 37!

4.5! Coal Quality and Products ................................................................................................ 38!

5! MIDDELBULT AND MODDERFONTEIN Coal Resources........................................................ 45!

5.1! Sample Data Assumptions for Modelling Purposes ............................................................. 45!

5.2! Methodology .................................................................................................................. 45!

5.2.1! Data Verification ..................................................................................................... 45!

5.2.2! Geological Modelling .............................................................................................. 46!

5.2.3! Coal Resource Estimation ........................................................................................ 46!

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Coffey Mining (SA) Pty Ltd

5.3! Gross In-situ Coal Resource Volumes and Raw Qualities .................................................... 46!

5.3.1! Middelbult .............................................................................................................. 46!

5.3.2! Modderfontein ........................................................................................................ 52!

5.4! Gross In-situ Resources ................................................................................................... 53!

5.4.1! Relative Density ...................................................................................................... 53!

5.4.2! Statement of Gross In-situ Resources ........................................................................ 53!

5.5! Mineable In-situ Resources .............................................................................................. 54!

5.5.1! Minimum Mining Parameters ................................................................................... 54!

5.5.2! Geological Loss....................................................................................................... 56!

5.5.3! Geotechnical Considerations..................................................................................... 57!

5.5.4! Summary of Assumptions Underlying the Mineable Coal Resource Estimation ............. 57!

5.5.5! Mineable Coal Resource Statement and Classification ................................................ 57!

EXECUTIVE SUMMARY ........................................................................................................................ i!

1! Introduction................................................................................................................................. 1!

1.1! Scope of Work .................................................................................................................. 1!

1.2! Participants....................................................................................................................... 2!

1.3! JORC and SAMREC Codes ............................................................................................... 3!

1.4! Site Visits and Data Reviewed ............................................................................................ 4!

1.5! Property Description .......................................................................................................... 5!

1.5.1! Location ................................................................................................................... 5!

1.5.2! Physiography and Infrastructure .................................................................................. 6!

1.6! The South African Coal Mining Industry ............................................................................. 9!

1.6.1! Production ................................................................................................................ 9!

1.6.2! Demand .................................................................................................................. 10!

1.7! Mineral and Surface Rights and Approvals Critical to Project .............................................. 13!

1.8! Permitting ...................................................................................................................... 14!

2! Geology ..................................................................................................................................... 15!

2.1! Regional Geology ........................................................................................................... 15!

2.2! Local Geology ................................................................................................................ 16!

3! Exploration ................................................................................................................................ 17!

3.1! Exploration History ......................................................................................................... 17!

3.1.1! Drilling Density....................................................................................................... 18!

3.1.2! Data Location, Digital Terrain Model and Topographic Control ................................... 21!

3.1.3! Drill Core Logging .................................................................................................. 21!

3.1.4! Sampling, Analytical Procedures and Checks ............................................................. 21!

3.2! Planned Exploration Programmes ..................................................................................... 22!

4! WOLVENFONTEIN Coal Resources ......................................................................................... 24!

4.1! Sample Data Assumptions for Modelling Purposes ............................................................. 24!

4.2! Methodology .................................................................................................................. 24!

4.2.1! Data Verification ..................................................................................................... 24!

4.2.2! Borehole summary................................................................................................... 25!

4.2.3! Geological modelling ............................................................................................... 28!

4.2.4! Coal Resource Estimation ........................................................................................ 31!

4.3! Gross and Mineable In-situ Resources and Raw Qualities .................................................... 33!

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Page 6: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

4.4! Physical Seam Characteristics........................................................................................... 37!

4.5! Coal Quality and Products ................................................................................................ 38!

5! MIDDELBULT AND MODDERFONTEIN Coal Resources........................................................ 45!

5.1! Sample Data Assumptions for Modelling Purposes ............................................................. 45!

5.2! Methodology .................................................................................................................. 45!

5.2.1! Data Verification ..................................................................................................... 45!

5.2.2! Geological Modelling .............................................................................................. 46!

5.2.3! Coal Resource Estimation ........................................................................................ 46!

5.3! Gross In-situ Coal Resource Volumes and Raw Qualities .................................................... 46!

5.3.1! Middelbult .............................................................................................................. 46!

5.3.2! Modderfontein ........................................................................................................ 52!

5.4! Gross In-situ Resources ................................................................................................... 53!

5.4.1! Relative Density ...................................................................................................... 53!

5.4.2! Statement of Gross In-situ Resources ........................................................................ 53!

5.5! Mineable In-situ Resources .............................................................................................. 54!

5.5.1! Minimum Mining Parameters ................................................................................... 54!

5.5.2! Geological Loss....................................................................................................... 56!

5.5.3! Geotechnical Considerations..................................................................................... 57!

5.5.4! Summary of Assumptions Underlying the Mineable Coal Resource Estimation ............. 57!

5.5.5! Mineable Coal Resource Statement and Classification ................................................ 57!

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Page 7: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

List of Tables

Table 1.6.1_1 – South Africa’s Coal Reserves and Production Relative to Global Statistics (2008) 9!

Table 1.7_1 – Summary of Prospecting Rights Beneficially Held via Universal Coal Development 1 (Pty) Ltd 13!

Table 1.7_2 – Listing of Surface Rights and Titles over Granted Prospecting Rights 13!

Table 3.1.1_1 – SAMREC Requirements for Coal Resource Classification from SANS 10320 18!

Table 3.1.1_2 – JORC Requirements for Coal Resource Classification 18!

Table 3.2_1 – Kangala Coal Project – Prospecting Budget 23!

Table 3.2_2 – Exploration Expenditure Programme for Each Property 23!

Table 4.2.2_1 – Wolvenfontein Borehole Summary 25!

Table 4.2.2_2 – Wolvenfontein Roof, Floor and Width Statistics 27!

Table 4.2.2_3 – Wolvenfontein Roof, Raw Coal Composite Values 28!

Table 4.2.4_1 – Wolvenfontein Average Relative Densities per Seam 33!

Table 4.3_1 – Wolvenfontein Gross and Mineable In-Situ Coal Tonnages for Wolvenfontein 34!

Table 4.3_2 – Wolvenfontein Main Resource Area - Gross and Mineable In-Situ Coal Tonnages and Raw Coal Qualities. 34!

Table 4.3_3 – Wolvenfontein Southern Resource Area - Gross and Mineable In-Situ Coal Tonnages and Raw Coal Qualities. 34!

Table 4.3_4 – Gross In-Situ Tonnages and Raw Qualities for the Major Coal units in the Main Resource Area at Wolvenfontin.34!

Table 4.3_5 – Gross In-Situ Coal Tonnages and Raw Qualities for the Coal Plies and In-seam Partings within the Main Resource

Area at Wolvenfontein.. 36!

Table 4.5_1 – Washabilities Coal Plies and In-seam Partings, Northern Resource Area at Wolvenfontein. 39!

Table 4.5_2 – Washabilities for the Selected Mining Units within the Main Resource Area at Wolvenfontein (Air-dried basis) 39!

Table 4.3.1_1 – Mid (No. 4) Seam Raw Coal Qualities at Middelbult. 48!

Table 5.3.1_2 – No.2 Seam Raw Coal Qualities at Middelbult 50!

Table 5.3.2_1 – Middle Seam Raw Coal Qualities at Modderfontein 52!

Table 5.3.2_2 – Middle Seam Raw Coal Qualities at Modderfontein 52!

Table 5.4.1_1 – Relative Densities Used for the Various Seams at Middelbult 53!

Table 5.4.2_1 – Gross In-Situ Tonnage for Middelbult 54!

Table 5.5.2_1 – Geological Losses Applied to the Coal Seams at Middelbult 57!

Table 5.5.5_1 – Estimated Coal Resources of the Kangala Coal project 58!

Table 5.5.5_2 – Summary of Mineable In-Situ Tonnage and Qualities at Middelbult 59!

List of Figures

Figure 1.3_1 – Relationship between Resources and Reserves and Degree of Knowledge 4!

Figure 1.5.1_1 – Map Showing Geographic Location of the Kangala Coal Project Mineral Properties 5!

Figure 1.5.2_1 – Map Showing Physiography and Infrastructure at Wolvenfontein Portions 1 and R/E of Portion 2 6!

Figure 1.5.2_2 – Map Showing Physiography and Infrastructure at Middelbult Portions 40 and 82 7!

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Coffey Mining (SA) Pty Ltd

Figure 1.5.2_3 – Map Showing Physiography and Infrastructure for Modderfontein Portion 1 8!

Figure 1.6.2_1 – Diagram Showing Power Demand and Power Station Capacities over Time 11!

Figure 1.6.2_2 – Diagram Showing Power Demand and Supply as Forecast by Eskom 11!

Figure 1.6.2_3 – Port (RBCT) capacity vs. rail and export capacities 12!

Figure 2.1_1 – The Witbank Coalfield (After Smith and Whittaker, 1986 15!

Figure 2.2_1 – Kangala Schematic Coal Stratigraphic Column 17!

Figure 3.1.1_1 – Borehole Location and Drill Density at Wolvenfontein 19!

Figure 3.1.1_2 – Borehole Location and Drill Density at Middelbult 20!

Figure 3.1.1_3 – Borehole Location and Drill Density at Modderfontein 20!

Figure 4.2.3_1 – Typical Coal Seam Profile at Wolvenfontein 29!

Figure 4.2.4_1 – Seam SB Resource Classificaation at Wolvenfontein 32!

Figure 4.2.4_2 – Seam SM Resource Classificaation at Wolvenfontein 32!

Figure 4.4_1 – Mid Seam Depth below Surface at Wolvenfontein 37!

Figure 4.4_2 – Mid Seam Thickness at Wolvenfontein 37!

Figure 4.4_3 – Bottom Seam Depth below Surface at Wolvenfontein 38!

Figure 4.4_4 – Bottom Seam Thickness at Wolvenfontein 38!

Figure 4.5_1 Mid Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.60 at Wolvenfontein 40!

Figure 4.5_2 – Mid Seam Yield (%)(air-dried basis) distribution at a wash RD of 1.60 at Wolvenfontein 40!

Figure 4.5_3 Bottom (Ply BA) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 41!

Figure 4.5_4 – Bottom (Ply BA) Seam Yield (%)(air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 41!

Figure 4.5_5 Bottom (Ply BB) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 41!

Figure 4.5_6 – Bottom (Ply BB) Seam Yield (%)(air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 41!

Figure 4.5_7 Bottom (Ply BC1) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.60 at Wolvenfontein 42!

Figure 4.5_8 – Bottom (Ply BC1) Seam Yield (%)(air-dried basis) distribution at a wash RD of 1.60 at Wolvenfontein 42!

Figure 4.5_9 Bottom (Ply BC2) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 43!

Figure 4.5_10 – Bottom (Ply BC2) Seam Yield (%)(air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein 43!

Figure 4.6_1 Map Showing the Stripping Ratio for the Mining Selection (cubic metres/tonne) at Wolvenfontein 44!

Figure 5.3.1_1 Map Showing the Depth to Roof Contours for Mid (No. 4) Seam at Middelbult 47!

Figure 5.3.1_2 – Map Showing the Thickness Contours for Mid (No. 4) Seam at Middelbult 47!

Figure 5.3.1_3 – Map Showing the Raw Calorific Value Contours for Mid (No. 4) Seam at Middelbult 48!

Figure 5.3.1_4 – Map Showing the Depth to Roof Contours for No. 2 Seam at Middelbult 49!

Figure 5.3.1_5 – Map Showing the Thickness of 2 Seam at Middelbult 50!

Figure 5.3.1_6 – Map Showing the Thickness of 2 Seam at Middelbult 51!

Figure 5.5.1_1 – Map Showing the Coal Resource Outline for the Mid (No. 4) Seam at Middelbult 55!

Figure 5.5.1_2 – Map Showing the Coal Resource Outline for No. 2 Seam at Middelbult 56!

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Page 9: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

List of Appendices

Appendix 1 – Curriculum Vitae of Technical Experts

Appendix 2 – Country Profile and Explanation of Mining Title as it Applies in South Africa

Appendix 3 – Prospecting Work Programme – Kangala Coal Project

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Page 10: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

Kangala (Elof) Coal Project Page: i Independent Competent Person’s Report – 31 May 2010

EXECUTIVE SUMMARY

Coffey Mining (SA) (Pty) Limited (Coffey Mining) was appointed by Universal Coal plc (“Universal Coal”)

to complete an Independent Competent Person’s Report (“CPR”) of the coal bearing potential of the

Kangala (ELOF) Project Area.

The area under consideration incorporates three prospecting rights in the Delmas District of the

Mpumalanga Province, South Africa, collectively referred to as the Kangala Coal Project. Table 1 lists

the mineral rights held by Universal Coal Development 1 (Pty) Ltd, a 100% owned subsidiary of

Universal Coal plc.

Table 1 Kangala Coal Project

Summary of New Order Prospecting Rights Beneficially Held

Property Permit Number Size (ha)Licence

Expiry Date

Universal Coal Beneficial Interest

(%)

Middelbult 235 IR, Portion 40 & 82 MP30/5/1/1/2/641PR 942 05/11/2011 70.5

Wolvenfontein 244 IR, Portion 1and R/E of Portion 2 MP30/5/1/1/2/904PR 951 05/11/2011 70.5

Modderfontein 236 IR, Portion 1 MP30/5/1/1/2/639PR 127 05/11/2011 70.5

Total 2020

The Project area is located 80km due east of the centre of Johannesburg next to the operating coal

mines Leeuwpan and Stuart Coal, close to excellent road and railway infrastructure and within a radius

of 70km from four coal-fired power stations.

The Kangala Project area may be classified as a multiple seam deposit type and hosts three seams,

namely the Top, Mid and Bottom seams. The Top and Mid seams can possibly be correlated with the

No. 5 and No. 4 and No. 3 seams, respectively and the thicker Bottom seam appears to represent a

combination of the No. 2 and No. 1 seams.

Within the project area the Mid and Bottom seams are of economic interest. The thickness of the Mid

seam ranges 0.98 m to 3.74 m and consists of high quality bright to dull coal. The Bottom Seam

consists of alternating coal and carbonaceous shale layers and is between 8.45 m and 17.5 m thick,

Within local basement lows it can attain a thickness of up to 30m

Table 2 summarises the estimated coal resources of the Kangala Coal Project. Based on the drillhole

density, 33.5% of the resources have been classified by Coffey Mining as Measured and the balance as

Indicated and Inferred in terms of the JORC and SAMREC codes.

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Coffey Mining (SA) Pty Ltd

Kangala (Elof) Coal Project Page: ii Independent Competent Person’s Report – 31 May 2010

Table 2 Kangala Coal Project

Estimated Coal Resources of the Kangala Coal Project

Resource Area

Gross In-Situ

Tonnes (‘000

tonnes)

Geological Loss (%)

Mining Loss (%)

Mineable In-Situ Tonnes (‘000 tonnes)

Coal Resource Classification

Total Attributable to Universal Coal

Wolvenfontein

Mid (No. 4) Seam 927 10 10 751 529 Measured

Mid (No. 4) Seam 125 10 10 101 71 Indicated

Mid (No. 4) Seam 1,249 20 10 899 634 Inferred

Bottom (No. 2) Seam 34,257 10 10 27,748 19,562 Measured

Bottom (No. 2) Seam 30,917 20 10 22,260 15,693 Inferred

Grand Total Wolvenfontein 67,475 51,760 36,489

Middelbult

Mid (No. 4) Seam 12,227 25 10 8,253 5,818 Inferred

Bottom (No. 2) Seam 25,208 25 10 17,016 11,996 Inferred Grand Total Middelbult 37,435 25,269 17,815

Grand Total Resource Tonnes

104,910 77,028 54,304

The JORC and SAMREC compliant gross coal resources at Kangala total 104.91 million tonnes (in

situ before losses) and the mineable coal resources are estimated to be 77.03 million tonnes (in situ

after losses). Total attributable resources to Universal Coal are 54.3 million tonnes. The Bottom

(No. 2) seam accounts for 78% of the total coal resource at Kangala.

The Kangala Project hosts bituminous coal that would have to be selectively mined, blended and

beneficiated to produce a saleable product. Laboratory-scale washability tests indicate that the coal

seams at Kangala could yield between 25% - 30% of 26 Mj/kg CV (air dried) primary product,

suitable for the domestic and export steam coal markets. The balance of the saleable coal is suitable

for local power generation (Eskom). All of the coal is expected to be accessible by open pit mining

techniques at an average stripping ratio of less than 2:1 Cubic metres/tonne.

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Page 12: Independent Competent Persons report - Kangala

Coffey Mining (SA) Pty Ltd

Kangala (Elof) Coal Project Page: iii Independent Competent Person’s Report – 31 May 2010

GLOSSARY OF TERMS, ABBREVIATIONS AND UNITS

Word Definition

amsl above mean sea level

Analyses Process of determining chemical properties of a coal sample

Ash Is a measure of the non combustible material in coal expressed as a percentage

Bituminous coal A medium quality coal mostly used in raising steam for the generation of electricity

Borehole Core or chips extracted form a cylindrical hole during drilling

Borehole log A graphical representation of the information revealed by vertical diamond drilling

cm Centimetre

CP Competent Person

CPR Competent Person’s Report

CV Calorific Value being a measure of contained heat measured in MJ/kg

CSV Comma Separated Values, the most common import and export format for spreadsheets and databases

DAF vols or DAFVM or Dry-ash-free volatiles

The volatiles expressed as percentage without the other proximate analyses (Ash and moisture)

DEAT Department of Environment and Tourism (South Africa)

DM dense medium

DME Department of Minerals and Energy

DMS dense medium separation

DTM digital terrain model

EMP Environmental Management Plan

EMPR Environmental Management Programme Report

g Grams

GDP Gross Domestic Product

GTIS Gross Tonnes In-situ with no modifying factors

Ha or Hectare A measurement of area 100m by 100m

HQ Diamond drill core size 63.5mm in diameter

Injula Injula Mining Operations (Pty) Ltd

in situ tonnage Measure of mass of coal in the ground containing inherent moisture

ISO International Standards Organisation

JORC The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

JSE Johannesburg Securities Exchange

m Metre

MJ/kg Mega Joule per kilogram

MPRDA South African Minerals and Petroleum Resources Development Act of 2002 (ACT No. 28 of 2002)

Mt Million Tonnes

Mt/a Million Tonnes per annum

MTIS Mineable Tonnes In-situ

MW Mega Watt

RBCT Richards Bay Coal Terminal

RD Relative Density

ROM Run of Mine

SAMREC South African Code for Reporting Mineral Resources and Mineral Reserves

SANS South African National Standard

SANAS South African National Accreditation System

Stripping Ratio or SR The amount of overburden that must be removed to gain access to a unit amount of coal, expressed as cubic metres of overburden to tonnes of coal. A stripping ratio commonly is used to express the maximum volume or weight of overburden that can be profitably removed to obtain a unit amount of coal.

T Tonnes

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Coffey Mining (SA) Pty Ltd

Kangala (Elof) Coal Project Page: 1 Independent Competent Persons Report – 31 May 2010

1 INTRODUCTION

1.1 Scope of Work

In April 2008 Coffey Mining was appointed by Universal Coal Plc (“Universal Coal”) to

complete an Independent Competent Person’s Report (“CPR”) of the Kangala Coal Project.

The CPR assessed the reliability of the information available for the exploration areas and

the potential of the coal deposit.

Following a drilling programme in 2008 and 2009 that included thirty seven surface cored

drillholes on the farm Wolvenfontein 244 IR, Universal Coal requested Coffey Mining (South

Africa) to update the 2008 CPR.

Universal Coal, incorporated in England and Wales, and its subsidiaries, incorporated in

South Africa, (together “the Group”) are focused on exploration for coal in the Republic of

South Africa. Universal Coal, through a wholly owned South African subsidiary, Universal

Coal Development 1 (Pty) Ltd, concluded the purchase of a 70.5% share of the prospecting

rights that comprise the properties referred to as the Kangala Coal Project, constituting

certain portions of the farms Wolvenfontein, Middelbult and Modderfontein, from Injula

Mining Operations (Pty) Ltd (“Injula”).

The current directors of Universal Coal have an interest in Injula. None of the past directors

of Universal Coal or its promoters has any interest (current or past) in Injula, its associated

parties, or in the coal project which is the subject of this report.

All units are metric, unless otherwise stated i.e. tonnes are reported as metric tonnes. All

tonnages are quoted on an air dry basis.

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Coffey Mining (SA) Pty Ltd

Kangala (Elof) Coal Project Page: 2 Independent Competent Persons Report – 31 May 2010

1.2 Participants

The participants consist of a number of technical experts that were brought together by

Coffey Mining to complete the 2008 CPR and this updated CPR. These are the “Competent

Persons” as defined in the SAMREC code, Sections 9 and 10 and in terms of Section 10 of

the JORC Code (The resumes are presented in Appendix 1). The participants in the review

and their individual areas of responsibility are listed as follows:-

Alan Goldschmidt, Coffey Mining Senior Consultant – Resource Geology

(BSc (Hons) Geology, B.Com, Pr.Sci.Nat, MGSSA) – Primary author, CPR update.

David van Wyk, Associate Consultant (Geocoal Services).

(BSc (Geol), Pr.Sci.Nat, FGSSA, MGSSA) (SACNASP Registration number. 401964/83) -

Data review, geological interpretations, coal resource estimation for the Middelbult and

Modderfontein properties, report preparation. He is the competent person for the

Modderfontein & Middlebult resource estimates.

David van Wyk is a registered natural scientist and is conducting the CPR under the

auspices of the South African Council for Natural Scientific Professionals (“SACNASP”),

280 Pretoria Street, Silverton, which is a body recognised by SAMREC. David van Wyk is

also familiar with and adheres to the new South African Minerals and Petroleum Resources

Development Act of 2002 (ACT No. 28 of 2002) and the revised SAMREC 2007 code and

the commodity specific coal code, namely SANS 10320:2004, the South African Guide to

the systematic evaluation of coal resources and coal reserves. Mr. van Wyk resides at

26 Croyden Circle, Port Alfred, South Africa.

Mr. van Wyk has more than 27 years experience in the South African Coal industry. He has

a BSc. Geology degree from Rhodes University; is a Past President, fellow and member of

the Geological Society of South Africa. He is a council and executive member of the South

African Council for Natural Scientists and has written a number of published and

unpublished articles on coal. He is also a qualified coal plant operator.

Nico Denner, Consultant (Gemecs)

(BSc(Hons) Geology, MBA, Pr.Sci.Nat, MGSSA) - Data review, geological interpretations,

coal resource estimation for Wolvenfontein property, report preparation. He is the

competent person for the Wovenfontein resource estimate.

Mr. Denner has involved in mineral resource estimation for more than 10 years. He has

specialised in resource modelling and resource estimation. Nico Denner is a registered

natural scientist and is conducting the CPR under the auspices of the South African Council

for Natural Scientific Professionals (“SACNASP”), 280 Pretoria Street, Silverton, which is a

body recognised by SAMREC. Nico Denner is also familiar with and adheres to the new

South African Minerals and Petroleum Resources Development Act of 2002 (ACT No. 28 of

2002) and the revised SAMREC 2007 code and the commodity specific coal code, namely

SANS 10320:2004, the South African Guide to the systematic evaluation of coal resources

and coal reserves. For the past three years has worked as a geological consultant dealing

primarily with coal and platinum projects. Nico Denner presently works as part of Gemecs

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(Pty) Ltd, an independent group of consultants. Their office is located in Visiomed Office

Park, 269 Beyers Naude Drive, Blackheath, South Africa.

Kees Dekker, Associate Audit Manager

(MSc (Geoch), B.Com, MBA, Pr.Sci.Nat) (SACNASP Reg. No. 400236/06) – author, Initial

CPR document.

Kathleen Body, Coffey Senior Consultant – Resources

(BS (Geol) Pr.Sci.Nat) - Peer review

Independence is assured by the fact that the Competent Persons, or any of the Competent

Person’s staff and associates involved in this report, do not hold any equity in Universal

Coal or Injula or their subsidiary or associated companies, or have a direct or indirect

interest in any project that is the subject of this report. Fees for the preparation of this report

are being charged at standard rates with expenses reimbursed at cost. Payment of fees

and expenses is in cash and is in no way contingent upon the conclusions drawn in this

report.

1.3 JORC and SAMREC Codes

This report has been compiled in compliance with the, guidelines of the Australasian Code

for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC). The

CPR has also been compiled in compliance with the recommendations and guidelines set

out in the revised 2007 South African Code for The Reporting of Exploration Results,

Mineral Resources and Mineral Reserves (SAMREC) Code, and all participants of this

report qualify as Competent Persons in terms of the JORC and SAMREC Codes.

Within the cover of the SAMREC Code, particular reference is taken of Section 6,

Commodity Specific Reporting For Coal as well as the guidelines laid out in

SANS 10320:2004 (South African Guide to the systematic evaluation of coal resources and

coal reserves). This standard provides a detailed framework for reporting on coal resources

and reserves for the purpose of the Securities Exchanges and defines common terminology

to be used in public reporting with the SAMREC Code.

Figure 1.3_1 is a diagram showing the relationship between the level of geological

knowledge and resource categories.

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Figure 1.3_1 JORC: Relationship between Resources and Reserves and Degree of Knowledge

Source: JORC Code

1.4 Site Visits and Data Reviewed

Mr van Wyk visited the project area on 8 August 2007 and again on 15 August 2007.

The data and information made available to Coffey Mining are summarised as follows:-

! The initial geological report, dated May 2007, which was written by MJ Malan of Injula,

based on historical borehole data and reviewed by Coffey Mining.

! Electronic copies of the borehole coordinates, detailed borehole logs and analytical

data (raw and washed) and hard copies of the original logsheets and analytical sheets,

which were purchased from the Council for Geoscience, South Africa.

! This report is an update of a previous CPR compiled in March 2008. It includes

information derived from more recent surface drilling within the Wolvenfontein area.

The Drilling of thirty seven diamond cored drillholes was completed in August 2009.

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1.5 Property Description

1.5.1 Location

The Kangala Coal Project is located approximately 65km east of Johannesburg in the

Delmas District, Mpumalanga Province (Figure 1.5.1_1). The nearest towns are Delmas,

Devon and Leandra.

Figure 1.5.1_1 Map Showing Geographic Location of the Kangala Coal Project Mineral Properties

The Kangala Coal Project consists of portions of three properties, referred to as

Wolvenfontein, Middelbult and Modderfontein.

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1.5.2 Physiography and Infrastructure

The topography of the various properties is typical rolling Highveld savannah grasslands

with some dams, pans and small rivers. There are wetland areas that could influence the

location of any opencast operations.

Wolvenfontein

The topography of the Wolvenfontein property is flat lying to gently undulating, varying from

1,560m amsl in the east to 1,590m a.m.s.l. in the west and north (Figure 1.5.2_1). Two

northeast flowing streams drain the farm. Marshes are associated with the streams. The

land use of the portions to which this report refers is predominantly arable land (dry land).

The property is surrounded by adjoining farms. The Delmas-Nigel tarred road (R42)

traverses the farm in the south.

Figure 1.5.2_1 Map Showing Physiography and Infrastructure at Wolvenfontein Portions 1 and R/E of Portion 2

Middelbult

The Middelbult property is flat lying, varying from 1,570 metres a.m.s.l. in the northeast to

1,605 metres amsl in the southwest (Figure 1.5.2_2) and drained by two northeast flowing

tributaries of the Bronkhorstspruit River. The land use of the portions to which this report

toW

eilaagte

R42

Nigel

35 Km

Delmas

6 Km

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refers, is predominantly arable land under irrigation. A marsh is associated with the stream

in the southern part of the farm. The Springs-Delmas tarred road and the Johannesburg-

Witbank railway line are situated two kilometres to the north.

Figure 1.5.2_2 Map Showing Physiography and Infrastructure at Middelbult Portions 40 and 82

Modderfontein

The Modderfontein property is flat-lying, with the topography averaging 1,580m a.m.s.l. and

sloping gently towards the east (Figure 1.5.2_3). No streams are present on Portion 1. The

land use is predominantly arable land.

The property is bounded by adjoining farms in the north, west and south and smallholdings

on the east. A tar road linking the R555 with the R50 traverses the farm in the southeast. A

homestead and farming complex is located towards the southern part of the property. The

N12 highway from Johannesburg to Witbank passes one kilometre to the south.

MIDDELBULT 235 IR

0 1000 2000 4000 m

SCALE

N

40

00

0

35

000

2 895 000

2 900 000

Topograhic Contours (20m)

Roads Drainage

Railway line

Rights Granted

1620

1600

1580R555Springs

25 Km

Delmas

2 Km

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Figure 1.5.2_3 Map Showing Physiography and Infrastructure for Modderfontein Portion 1

RIETKOL 237 IR

MODDERFONTEIN 236 IR

46

000

1

2 890 000

44

000

N

0 1 km 2 km

SCALE

Topograhic Contours (20m)

Roads

2 892 000

1580

1560

Rights Granted

N12

Delmas

15 Km

Johannesburg

50 Km

to the

R50

to

Katbosch

fontein

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1.6 The South African Coal Mining Industry

1.6.1 Production

In 2007, South African mines produced 247.7 million tons (Mt) of coal. Of this 182.8Mt were

sold locally for R19.7 billion, and 67.7Mt realised R24.4 billion on export markets. South

Africa has estimated recoverable coal resources of R31 billion tons in 2007. In terms of coal

production South Africa is ranked sixth (6th). South Africa has extensive coal resources and

reserves (Table 1.6.1_1).

The South African coal industry remains highly concentrated, with almost 90% of the

saleable coal being supplied by only five mining groups in 2006: Anglo Coal, BHP Billiton

Limited, Sasol Limited, Exxaro Resources Limited and Xstrata Plc. Of the ROM coal

produced approximately 53% was derived from open cast mining, with the remaining

underground production predominantly by bord-and-pillar (38% ROM coal), stooping (5%)

and longwall (3%).

As most of the coal currently being mined in South Africa occurs as thick seams at relatively

shallow depths, it is amenable to mining by relatively cheap production techniques. In 2008

South Africa was rated as the 5th largest holder of coal reserves in the world at 48.0 billion

tonnes (Table 1.6.1_1).

Table 1.6.1_1

Project Kangala Coal Project

South Africa’s Coal Reserves (Anthracite and Bituminus) and Production Relative to Global Statistics (2008)

Country Reserves

# Production

#

Mt % Mt %

China 2,200 14.6 2,782 40.6

US 108,950 25.5 1,063 15.5

India 54,000 12.7 512 7.5

Australia 36,800 8.6 402 5.9

Russian Federation 49,088 11.5 327 4.8

South Africa 30,408 7.1 250 3.7

Indonesia 1,721 0.4 229 3.3

Germany 152 0.0 192 2.8

Poland 6,012 1.4 144 2.1

Kazakhstan 28,170 6.6 115 1.7

Turkey 7,814 1.8 86 1.3

Ukraine 15351 3.6 77.3 1.1

Other 26,006 6.1 679 9.9

Total 426,672 100.0 6,859 100.0 # BP Statistical Review of World Energy 2009

There are indications that India and the Far East will be a growing market for South African

lower quality coal, with domestic production in these areas not capable of supplying a

rapidly increasing demand for electrical power. For

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1.6.2 Demand

South Africa’s indigenous energy resource base is dominated by coal. Internationally, coal

is the most widely used primary fuel, accounting for about 36% of the total fuel consumption

of the world’s electricity production. Coal meets about 88% of South Africa’s primary energy

needs.

Electricity, as a key strategic economic sector, underpins government’s growth and

development objectives. The Department of Minerals and Energy has several policies to

ensure an adequate supply of electricity-generation capacity and that the distribution

infrastructure is maintained.

Ever increasing demand for electricity in an expanding economy has brought the era of

excess capacity to an end. Eskom’s net generating reserve margin is about 8% compared

to the internationally accepted range of between 15% and 18%. Between October 2007 and

February 2008, the country suffered major supply interruptions as load shedding had to be

implemented to manage the energy shortage.

Eskom’s power stations are ageing. In many cases, refurbishment is necessary to extend

their economically useful life. Continued high-load factors at the stations (required to meet

demand) has put severe stress on all parts of the plant as they are frequently required to

operate outside initial design parameters. These loads require a high level of planned

maintenance.

Additional power stations and major power lines are being built to meet rising electricity

demand in South Africa. The approved capacity expansion budget is R343 billion to 2013

and is expected to grow to more than a trillion rand by 2026. Ultimately, Eskom will have to

double its capacity to 80,000 MW by 2026.

Eskom announced its intention to begin diversifying its primary energy mix (using less coal)

five years ago. It is building open-cycle gas turbines at Atlantis and Mossel Bay, of which

1,024 MW was commissioned in 2007 in record time. In addition, Eskom plans to build a

100MW wind facility in the near future, pending licensing approvals. Feasibility studies

continue regarding other renewable-energy and gas-plant initiatives.

Figure 1.6.2_1 shows the power demand – capacity relationship over time to illustrate the

urgent need for additional power generation capacity in South Africa.

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Figure 1.6.2_1 Diagram Showing Power Demand (in MW) and Power Station Capacities over Time.

From Wood and Mackenzie Research Consulting

The South African power producer Eskom has announced a R150 billion capital expansion

programme for the five years until 2012 aimed at increasing its power generation capacity

by 22,000MW by 2017. Although Eskom has a policy of reducing its reliance on coal from

88% currently to 78% by 2012, mainly by increasing use of nuclear energy, coal will still be

the predominant source of energy (Figure 1.6.2_2). Eskom expects to have to raise its coal

purchases by about 44.9 million tons a year by 2025 to meet the forecast power demand,

according to a statement by Rob Lines, acting General Manager – Generation Primary

Energy of Eskom, in January 2007.

Figure 1.6.2_2 Diagram Showing Power Demand and Supply as Forecast by Eskom.

HENDRINA

MATIMBA

KENDAL

MAJUBA

CAMDEN RTS

OCGTINGULA

MEDUPI

0

10,000

20,000

30,000

40,000

50,000

60,000

55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60

Year

Me

ga

wa

tt In

sta

lle

d

55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60

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Another major demand component is the export of higher grade coal, predominantly to

Europe. South African coal exports to India in 2009 exceeded 22Mt over double that of

2008. There are indications that India and the Far East will be a growing market for South

African lower quality coal, with domestic production in these areas not capable of supplying

a rapidly increasing demand for electrical power.

The RBCT Phase V project will result in an increase of the export capacity from 72Mt/a to

91Mt/a by the end of the first quarter in 2010. The 19Mt/a coal export capacity increment

will be divided between RBCT (9Mt/a), South Dunes Coal Terminal (6Mt/a) and to the new

coal exporters grouped together as the Coal Industry Task Team (4Mt/a).

Figure 1.6.2_3 illustrates that historically and in the future export and rail capacity

consistently falls short of projected RBCT capacity.

Figure 1.6.2_3 Port (RBCT) Capacity vs. Rail and Export Capacities.

From Wood Mackenzie Research Consulting

Universal Coal has no export allocation through RBCT, which can only be applied for upon

completion of a bankable feasibility study. Previously coal producers without access to

RBCT were at a significant disadvantage, robust internal demand for coal has resulted in

prices at mine gate being similar for inland coal and export coal of similar qualities. Given a

continuation of surplus export capacity local purchasers of coal will have to compete at least

in the short to medium term with coal prices set on the global market.

77 77 77 77 77 77 7879

81

96 96 96 96 96 96 96 96 96 96 96 96

50

55

60

65

70

75

80

85

90

95

100

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Year

Mt

Port Capacity Rail Capacity Exports

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1.7 Mineral and Surface Rights and Approvals Critical to Project

Coffey Mining has been provided documentation by Injula confirming that the New Order

Prospecting Rights have been granted to Injula on Middelbult, Modderfontein, and part of

Wolvenfontein. Table 1.7_1 summarises the current status of the mineral rights.

Table 1.7_1

Kangala Coal Project

Summary of New Order Prospecting Rights Beneficially Held via Universal Coal Development 1 (Pty) Ltd

Asset Permit Number Interest

(%) Status

Licence Expiry Date

Licence Area (ha)

Comments

Prospecting Right in Middelbult 235 IR, Portion 40 & 82

MP30/5/1/1/2/641PR 70.5 Exploration 5/11/2011 942 Section 11

granted

Prospecting Right in Wolvenfontein 244 IR, Portion 1and R/E of Portion 2

MP30/5/1/1/2/904PR 70.5 Exploration 5/11/2011 951 Section 11

granted

Prospecting Right in Modderfontein 236 IR, Portion 1

MP30/5/1/1/2/639PR 70.5 Exploration 5/11/2011 127 Section 11

granted

Total 2020

The prospecting rights were granted under the terms and conditions contained in the

Mineral and Petroleum Resources Development Act, 2002 (Act no. 28 of 2002) (MPRDA).

This act grants the owner exclusive prospecting rights as well as the exclusive right to apply

for a Mining Right, which Universal Coal applied for in May 2009. Injula and Universal Coal

have entered into agreements with most of the current surface right holders to ensure a

good working relationship. Copies of the agreements have been made available to Coffey

Mining. A listing of surface rights and titles is presented in Table 1.7_2.

Table 1.7_2

Kangala Coal Project

Listing of Surface Rights and Titles over Granted Prospecting Rights

Property Size (Ha)

Surface Rights

Owner Access

Agreements

Wolvenfontein 244 IR, Portion 1 and R/E of 2 951 Kallie-Madel Trust Yes

Middelbult 235 IR, Portion 40 & 82 942 Portion 40: VV2 Eiendomme

Portion. 82: JF Du Plessis Yes

Modderfontein 236 IR, Portion 1 127 MJ Potgieter No

The background on the South African mining law is presented in Appendix B. For

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1.8 Permitting

The Environmental Management Plan (EMP) as required in Section 39 of the MPRDA has

been approved by the Department of Minerals and Energy and the Financial Guarantee for

rehabilitation has been provided.

To the best of Coffey Mining’s knowledge there are no legal reasons, or outstanding legal

proceedings that could prevent any activities planned by Universal Coal or any of its

subsidiaries or associated companies.

Coffey Mining considers the coal resources are stated in accordance with JORC and

SAMREC requirements.

1.9 Disclaimer

Coffey Mining has based its work on the Kangala project area on information largely

provided by Universal Coal. This information includes third party unpublished information.

Coffey Mining has endeavoured, by making all reasonable enquiries, to confirm the

authenticity and completeness of the third party technical data upon which this report is

based. However, Coffey Mining does not warrant the authenticity or completeness of any

such third party information. A final draft of this report was provided to Universal Coal, along

with a written request to identify any material errors or omissions.

Neither Coffey Mining, nor the authors of this report, is qualified to provide extensive

comment on legal facets associated with ownership and other rights pertaining to the

Kangala project area. Coffey Mining did not see or carry out any legal due diligence

confirming the legal title of the properties that form part of the Kangala project area.

Coffey Mining considers the coal resources for the Kangala project area stated in

accordance with the guidelines contained in the JORC Code (2003).

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2 GEOLOGY

2.1 Regional Geology

The Kangala project is located within the Springs-Vischkuil block on the western edge of the Witbank

Coalfield (Figure 2.1_1).

In the Springs-Vischkuil block the coal seams are inconsistently developed, and where present, more

closely resemble those of the South Rand Coalfield. Three seams, namely the Top, Mid and Bottom

seams are recognized. The Top and Mid seams can possibly be correlated with the No. 5 and No. 4

and No. 3 seams of the Witbank Coalfield and the thicker Bottom seam appears to represent a

combination of the No., 2 and No. 1 seams.

Figure 2.1_1

Kangala Coal Project The Witbank Coalfield (After Smith and Whittaker 1986)

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2.2 Local Geology

The characteristics of the coal seams present within the Kangala project area are detailed below (refer

to Figure 2.2_1):

Top Seam (5 Seam): The Top seam is generally between 0.5m and 1m thick and consists of dull to

bright coal with thin intercalated shale bands. The seam is located approximately 20m above the Mid

Seam and irregularly distributed in the area.

Mid Seam (4 Seam): Measurements of the thickness of the Mid seam vary between 0.98 m to 3.75m.

The Mid seam consists of high quality bright to dull coal with high sulphur content (mostly sulphide-

type). A carbonaceous shale inseam parting, between 5cm and 10 cm thick, may be present. The

seam can yield 65% to 75% RB1-type export thermal coal after washing.

Bottom Seam (2 Seam): The thickness of the Bottom seam is usually between 8.45m and 17.5m, but

can attain thicknesses of up to 30m within local basement lows. The seam is located approximately

1.5m below the Mid Seam and consists of four coal plies, namely the BA, BB, BC and BD bands,

separated by carbonaceous shale partings, between 35 cm and 83 cm thick:

The BA coal ply varies in thickness from 0.5 m to 2.75 m, averaging 1.17 m. At Kangala the

BA band typically consists of dull coal and is split into two units by a carbonaceous shale

parting (BAP) approximately 35 cm thick. The BA band (inclusive of the parting) can yield

between 40% and 45% Eskom quality coal at a wash density of 1.90 g/cm3.

The BB coal ply is approximately 1m thick and is separated from the BA band by an

approximately 30 cm thick shale parting. The BB band typically consists of dull to lustrous

coal. The BB coal band can yield approximately 70% Eskom quality coal at a wash density of

1.90.

The BC coal ply is on average 8.6 m thick and consists of an upper (BC1) and lower (BC2)

unit usually separated by a 10 cm thick carbonaceous shale parting. The BC coal band is

separated from the BB coal band by an approximate 35cm thick carbonaceous shale parting.

The BC1 unit is approximately 4.1 m thick and consists typically of bright to dull coal capable

of yielding between 30% and 65% 26 Mj/kg CV coal at a wash density of 1.60. The BC2 unit

is on average 4.5m thick and consists of dull to lustrous coal yielding approximately 75% to

80% Eskom grade coal at a wash density of 1.90.

The BD coal ply is sporadically developed, varying in thickness from 0.5 m to up to 9 m within

basement lows. The BD coal band typically consists of up to 5 coal units separated by

carbonaceous shale partings between 10 cm and 90 cm thick. The coal is dull and of a poor

quality.

The coal measures are underlain by Dwyka tillites between 1 m and 20 m thick, averaging 11.6 m. The

underlying basement consists of dolomite and chert of the Malmani Group and typically displays karst

features.

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Figure 2.2_1

Kangala Schematic Coal Stratigraphic Column

.

3 EXPLORATION

3.1 Exploration History

Prospecting for coal at Kangala started in the 1980’s and at that time was carried out by the

companies Southern Sphere (Pty) Ltd and Ingwe Coal Corp. Ltd. Data is available from 28

boreholes that formed part of this initial exploration programme. After examination of the

available data Coffey Mining consider it reasonable to assume that all past drilling was

diamond drilling using conventional equipment and TNW core size. This is borne out by the

mass of coal sample reported which corresponds to standard TNW core. Coal measures in

the Witbank - Springs coalfield are normally drilled either by HQ wireline or TNW diamond

drilling. For

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Universal Coal commenced with follow-up exploration in 2008 and to date has completed 37

holes on the Wolvenfontein property. All drilling was diamond drilling using conventional

equipment and TNW core size. As with the historical data intersections are vertical and

intersection widths are regarded as true thicknesses given the near horizontal nature of the

seams.

3.1.1 Drilling Density

Wolvenfontein resources have been reported according to JORC code and Australian

Guidelines for Estimating and reporting of coal. The guidelines differ to those of SAMREC in

terms of resource classification and borehole coverage.

The SAMREC requirements for coal resource classification from SANS 10320 are

summarised in Table 3.3.1_1 and those of JORC in Table 3.3.1_2

Table 3.1.1_1

Kangala Coal Project

SAMREC Requirements for Coal Resource Classification from SANS 10320

SAMREC Classification Boreholes Grid Approx.

Ha/boreholeQualification

Inferred coal resource 1 3km 1,000 Taking into account lateral continuity

Indicated coal resource 1 500m 25 Multiple seam deposit

Indicated coal resource 1 1km 100 Thick interbedded seam

Measured coal resource 1 350m 12.5 Both analytical and physical

Table 3.1.1_2

Kangala Coal Project

JORC guidelines for Coal Resource Classification from Australian Guideline for coal 2003

JORC Classification Boreholes Grid Approx.

Ha/boreholeQualification

Inferred coal resource 1 4km 1,600

Indicated coal resource 1 1km 100 None

Measured coal resource 1 500m 25

The recent drilling at Wolvenfontein has resulted in sufficient data being available for the Main

Resource area (the northern extent) to be mostly classified as a Measured coal resource. For

the Southern Resource area at Wolvenfontein and the other properties drilling is generally

sparse and not sufficient for coal resource qualification higher than an Inferred coal resource

category. For

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Figure 3.1.1_1

Kangala Coal Project Borehole Location and Drill Density at Wolvenfontein

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Figure3.1.1_2 Borehole Location and Drill Density at Middelbult

Figure 3.1.1_3 Borehole Location and Drill Density at Modderfontein

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3.1.2 Data Location, Digital Terrain Model and Topographic Control

As part of the most recent drilling at Wolvenfontein, the collar coordinates of the 37 holes

drilled (WN244_001 to WN224_0333, WN244_035 to WN244_037 and WN244_039) were

surveyed by a qualified surveyor from Trevor Cuflin Surveys. Additionally, over 1700 further

points were surveyed over the Main Resource Block for the purpose of creating an accurate

Digital Terrain Model (DTM) where opencast mining is planned.

For the historical data, there is no evidence in any of the reports, plans or borehole logs of any

certified surveyors submitting certified co-ordinates and elevations. Borehole co-ordinates

were recorded on most of the borehole graphic logs and these corresponded to those in the

Council for Geoscience database. Where the coal is deep, no topographic control was

available and the elevation of the boreholes collars were assigned an elevation derived from

the regional digital terrain model. For the purpose of this exercise, this is sufficient, but it will

be necessary to create a more accurate Digital Terrain Model (DTM) where opencast mining

is planned. This could be a source of error and the proposed drilling programme, which is

provided for in the budget, will have to twin boreholes to verify the positions and elevations of

at least two boreholes per property. Once the proposed drilling programme is complete, it is

recommended that a topographic DTM is modelled by digitising contours from the orthophotos

or flown (helicopter laser) survey before the results of the drilling programme are modelled.

3.1.3 Drill Core Logging

For the historical data, the Council for Geoscience provided copies of the filed graphic

borehole logs, analysis sheets and core recovery sheets. Although the presentation of the

logs could be improved, the data is considered accurate and reliable. It is noted that core

recoveries have been calculated. The core is considered to have been logged by

experienced geologists. The analyses were done either by McLachlan and Lazar (Pty) Ltd or

Ingwe Coal’s Koornfontein Mine coal laboratory. There is no record of samples being split for

inter lab umpire analyses, duplicates for cross checks or round robins between the

laboratories. Both coal laboratories had excellent reputations for coal analyses at that time

and are therefore considered to have provided reliable analyses. The data is considered of a

sufficient standard for coal resource estimation.

For the 2008 and 2009 drilling at Wolvenfontein, the core was logged by competent geologists

from Coffey Mining and Geosphere Drilling, with suitable experience of the coal deposits of

the greater Elof area. The logging data is considered of a sufficient standard for coal resource

estimation.

3.1.4 Sampling, Analytical Procedures and Checks

Graphic sample logs were provided for the historical holes by the Council for Geoscience and

it is considered that this was done by competent geologists.

Apart from the most recent drilling programme at Wolvenfontein, the rest of the drilling,

sampling and logging was undertaken in the 1980s. For this historical data, the procedures in

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obtaining and recording the data could not be verified. The verification of the historical

analyses was undertaken by examining the relationships between, inter alia, Calorific Value

(CV), ash, density and volatile matter to confirm that they are valid for the type of coal.

The laboratories used for the historical analyses were, at the time that the samples were

analysed, not SANAS accredited laboratories, but participated in coal laboratories round

robins that produced acceptable results. These laboratories currently have good reputations,

but remain uncertified. The laboratory procedures were not documented in any of the

historical reports. Data verification has been completed on the historical data by Coffey

Mining as far as is practically possible. It is recommended that the proposed drilling

programmes include twinned holes to verify historical data and to increase the confidence

level of the historical data.

Boreholes WN224_001 to WN224_006 were geologically sampled by Coffey Mining SA and

boreholes WN244_007 to WN244_039 by Geospere Drilling. Downhole wireline geophysical

surveys were conducted by Geoline Services. The sampling intervals were based on

downhole density plots and completed in accordance with the sampling procedures used by

Total Coal South Africa (Pty) Ltd on their adjacent project. The laboratory used for analyses

was Inspectorate M & L Coal Laboratory in Middelburg, which has an ISO 17025 accreditation

from SANAS. Standard laboratory quality control and quality assurance procedures were

undertaken by Inspectorate M&L laboratory. Further checking of sample FROM and TO

distances was performed on data that was formatted for use in the GBIS software.

3.2 Planned Exploration Programmes

Coffey Mining recommends the completion of the following borehole programmes at Kangala,

including the twinning of holes to verify the previous drilling programme information.

Furthermore the following exploration procedures should be adhered to:

! Downhole geophysics (wireline logging) should be done for all new drillholes,

! All cores should be photographed.

! All sampling intervals should be determined using the wire line logging.

! All analyses should be completed at Inspectorate M & L Coal Laboratory in Middelburg.

In addition, an aeromagnetic survey should be commissioned to help establish the location of

dolerite dykes and sills.

Table 3.2_1 summarises the clients cost estimate of the proposed future prospecting works

programme to be completed at the Kangala Coal Project. The detail prospecting works

programme is attached as Appendix 3.

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Table 3.2_1

Kangala Coal Project

Prospecting Budget

Phase Activity Planned Holes Number of

Samples

Period Cost

(Rand)

1 Data review, Mapping - - 3 Months Completed

2Wolvenfontein Measured Resource Drilling

38 (2,520 m) 660 6 Months Completed

3Middelbult & Modderfontein Measured Resource Drilling

50 (2,460m) 615 9 Months 3,807,000

Total 88 1,275 18 Months 3,807,000

Table 3.2_2 presents the estimated budget expenditure over time and for each property. The

focus of attention will in future be largely on Middelbult and Modderfontein.

Table 3.2_2

Kangala Coal Project

Exploration Expenditure Programme for Each Property

Property Year Ending 30/6/10

(R’000)

Year Ending 30/6/11

(R’000)

Total

(R’000)

Middelbult 1,598 1,598 3,196

Modderfontein 611 - 611

Total 2,209 1,598 3,807

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4 WOLVENFONTEIN COAL RESOURCES

4.1 Sample Data Assumptions for Modelling Purposes

The assumptions made in compiling the structural and quality model, based primarily on data

received from Universal Coal, are that:

! All data from drilling and sampling was reliable

! The borehole collars had been accurately surveyed

! All sampling was correctly labelled and reported against correct sample ID’s

! Core recoveries and core losses were accurately determined

! The laboratory results were correctly reported

4.2 Methodology

4.2.1 Data Verification

The following data were received from Universal coal in electronic format:

! Borehole collar survey file

! Borehole lithology descriptions

! Borehole seam unit interpretations

! Downhole geophysical logs

! Surface survey points

! Original analytical reports sheets from the coal laboratory.

A new borehole database was created in Micromine GBIS. All the relevant borehole

information was imported into this borehole database. This included borehole collars,

lithological descriptions, unit interpretations, geophysical logs, raw and fractional analyses.

Lithological descriptions were verified against the downhole geophysical logs, and coal seam

correlations validated. Coal sample positions were verified against coal seam occurrences,

and raw coal analyses were compared to lithological descriptions.

A number of analytical tests and routines were used to validate all the raw and washability

data as received from the laboratory. Anomalies were identified, queried and corrected were

possible, otherwise flagged and removed from the final modelling dataset.

A number of non coal partings were identified that was only analysed as raw coal. These

were mainly carbonaceous shales and siltstone layers. To ensure proper washability

estimation, and to accurately estimate the total product yield of each seam, dummy

washability curves were generated for these non coal partings within GBIS at relevant float For

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fractions. All the samples were normalised in GBIS to produce cumulative washability curves

for each sample, that was used in the modelling of the coal products.

4.2.2 Borehole summary

A total of 42 boreholes are present in the database. Of these 5 boreholes are historical holes,

and 37 current boreholes drilled by Universal Coal. Only 8 boreholes did not intersect any

coal. This was mainly due to the basement topography, weathering or dolerite intersections.

A list of boreholes is presented in Table 4.2.2_1. Borehole types are used to identify coal and

non coal boreholes. Types defined as follow:

! M – Coal present, used for coal modelling

! DWK – No coal intersected due to Dwyka basement

! DMT – No coal intersected due to dolomite basement

! DOL – No coal intersected due to dolerite intersection

! H – Historical borehole with coal

! HNC – Historical borehole – no coal present

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Table 4.2.2_1

Kangala Coal Project

Wolvenfonttein Borehole Summary

BHID X Y Z TYPE EOH

WN244001 "34088.600 "2898337.200 1587.700 M 66.73

WN244002 "34061.600 "2898761.800 1591.700 M 45.83

WN244003 "34494.100 "2898742.300 1591.600 M 39.20

WN244004 "33660.000 "2898610.600 1588.600 DWK 30.00

WN244005 "34243.600 "2899200.700 1593.800 M 67.62

WN244006 "33651.500 "2899169.000 1590.500 M 59.11

WN244007 "33781.633 "2897988.476 1584.576 DMT 47.22

WN244008 "34024.491 "2897927.274 1583.603 DOL 35.24

WN244009 "34346.179 "2897962.076 1579.327 M 29.26

WN244010 "34529.786 "2898241.575 1583.503 M 29.32

WN244011 "34283.493 "2898239.557 1585.063 DWK 29.22

WN244012 "34053.957 "2898154.946 1585.411 M 23.24

WN244013 "33782.579 "2898239.833 1585.823 M 67.94

WN244014 "33784.370 "2898490.807 1588.058 M 53.22

WN244015 "34034.679 "2898491.654 1589.655 M 83.22

WN244016 "34283.856 "2898489.646 1589.033 M 47.32

WN244017 "34534.594 "2898492.028 1587.901 M 54.57

WN244018 "34282.100 "2898740.337 1592.140 M 53.30

WN244019 "33783.400 "2898740.330 1589.992 M 59.24

WN244020 "33534.591 "2898740.164 1589.244 M 55.80

WN244021 "33284.289 "2898987.329 1587.287 M 47.30

WN244022 "33534.501 "2898991.854 1592.176 M 65.24

WN244023 "33800.422 "2899003.525 1594.065 M 55.55

WN244024 "34029.963 "2898991.150 1595.188 M 65.30

WN244025 "34283.428 "2898991.415 1594.090 M 47.24

WN244026 "34035.627 "2899296.585 1596.179 M 71.30

WN244027 "33845.159 "2899294.560 1594.573 M 53.27

WN244028 "33538.398 "2899287.398 1590.865 M 59.24

WN244029 "33286.613 "2899250.306 1587.005 M 47.24

WN244030 "33531.842 "2899495.032 1584.260 M 65.27

WN244031 "33795.382 "2899548.285 1590.934 M 41.30

WN244032 "34034.349 "2899542.748 1595.739 M 53.30

WN244033 "33935.519 "2899753.352 1585.765 M 41.30

WN244035 "33283.439 "2898736.195 1588.723 DWK 35.30

WN244036 "33441.328 "2898263.400 1582.192 M 53.24

WN244037 "33279.617 "2897735.122 1582.254 DMT 29.27

WN244039 "33148.687 "2900239.909 1587.671 M 71.24

DM127 "33784 "2900095 1585 HNC 20.00

DM132 "34125 "2901152 1592 H 55.00

DM138 "33491 "2901815 1594 H 50.00

DMMT344 "32600 "2899669 1577 H 20.00

WF2 "32818 "2900876 1587 HNC 20.00For

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A summary of the seam roof and floor elevation as well as seam thickness for each seam is

summarised in Table 4.2.2_2:

Table 4.2.2_2

Kangala Coal Project

Wolvenfontein Roof, Floor and Width Statistics

Borehole Top Bottom Seam!

Name Elevation Elevation Thickness

DM132 1552 1552 0.43

DM138 1565 1562 2.77

WN244001 1548 1547 0.83

WN244002

WN244003

WN244005 1553 1551 2.17

WN244006 1548 1547 0.92

WN244009

WN244010

WN244012

WN244013 1550 1550 0.53

WN244014

WN244015 1549 1548 1.69

WN244016

WN244017

WN244018 1572 1570 1.48

WN244019

WN244020 1563 1562 1.12

WN244021

WN244022 1560 1559 0.96

WN244023 1556 1555 1.13

WN244024

WN244025

WN244026 1561 1558 2.35

WN244027 1564 1563 0.90

WN244028 1564 1562 1.28

WN244029 1560 1559 0.96

WN244030

WN244031

WN244032

WN244033

WN244036

WN244039 1548 1546 1.76

Mean_Value!!: 1557 1556 1.33

Max_Value!!!: 1572 1570 2.77

Min_Value!!!: 1548 1546 0.43

No.!Samples!: 16 16 16

Seam!M

Borehole Top Bottom Seam!

Name Elevation Elevation Thickness

DM132 1551 1542 9.18

DM138 1561 1552 9.21

DMMT344 1571 1567 3.66

WN244001 1544 1522 22.87

WN244002 1563 1549 14.27

WN244003 1568 1555 13.04

WN244005 1549 1529 20.84

WN244006 1546 1532 14.55

WN244009 1562 1557 4.74

WN244010 1572 1571 1.26

WN244012 1567 1565 1.46

WN244013 1548 1519 29.49

WN244014 1563 1549 13.52

WN244015 1546 1526 20.79

WN244016 1565 1553 11.57

WN244017 1559 1542 16.84

WN244018 1570 1557 12.70

WN244019 1557 1548 8.57

WN244020 1561 1545 16.49

WN244021 1564 1554 9.95

WN244022 1559 1543 15.28

WN244023 1554 1543 11.43

WN244024 1569 1551 17.68

WN244025 1562 1555 6.60

WN244026 1557 1540 17.05

WN244027 1562 1547 15.70

WN244028 1562 1546 15.69

WN244029 1558 1541 17.16

WN244030 1542 1531 11.27

WN244031 1572 1560 11.81

WN244032 1571 1554 17.01

WN244033 1571 1557 13.22

WN244036 1564 1563 1.39

WN244039 1545 1520 25.13

Mean_Value!!: 1560 1547 13.28

Max_Value!!!: 1572 1571 29.49

Min_Value!!!: 1542 1519 1.26

No.!Samples!: 34 34 34

Seam!B

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No sampling data were available for the historical boreholes. Only 10 SM seam and 26 SB

seam intersections were sampled in the recent boreholes. The Raw coal composite values

for each borehole is summarised in Table 4.2.2_3:

Table 4.2.2_3

Kangala Coal Project

Wolvenfontein Roof, Raw Coal Composite Values

4.2.3 Geological modelling

Geological modelling was performed using Gemcom MinexTM software. Minex provides the

best geology and mine planning tools for coal and other stratified deposits, ensuring

resources are evaluated accurately and mined efficiently. The typical coal seam profile of the

Wolvenfontein area consists of two main seams, each consisting of a number of intraseam

partings as illustrated in Fig 4.2.3_1. The two main seams were labelled as SM – Mid Seam,

and SB – Bottom Seam.

Borehole RD AS IM VM CV TS FC

Name gm/cc % % % MJ/kg % %

DM132

DM138

WN244001

WN244002

WN244003

WN244005

WN244006

WN244009

WN244010

WN244012

WN244013 1.66 35.7 3.1 7.6 18.5 1.07 53.6

WN244014

WN244015

WN244016

WN244017

WN244018 1.73 52.9 5.1 16.7 11.5 0.61 25.4

WN244019

WN244020 1.56 32.4 4.4 24.5 20.4 1.79 38.7

WN244021

WN244022 1.47 19.9 4.2 30.1 23.9 3.09 45.8

WN244023 1.39 13.2 4.4 32.2 27.8 4.15 50.3

WN244024

WN244025

WN244026 1.69 47.5 3.5 20.0 14.7 2.52 29.0

WN244027 1.39 11.0 4.8 32.5 27.3 2.71 51.7

WN244028 1.36 14.2 1.8 31.0 27.0 1.21 53.0

WN244029 1.41 14.8 2.7 20.5 27.4 2.55 62.0

WN244030

WN244031

WN244032

WN244033

WN244036

WN244039 2.04 73.0 2.9 8.5 4.0 1.38 15.6

Mean_Value!!: 1.61 36.1 3.7 21.8 18.5 2.08 38.5

Max_Value!!!: 2.04 73.0 5.1 32.5 27.8 4.15 62.0

Min_Value!!!: 1.36 11.0 1.8 7.6 4.0 0.61 15.6

No.!Samples!: 10 10 10 10 10 10 10

SEAM!M

Borehole RD AS IM VM CV TS FC

Name gm/cc % % % MJ/kg % %

DM132

DM138

DMMT344

WN244001

WN244002

WN244003

WN244005

WN244006

WN244009 1.85 59.3 3.2 12.6 10.1 0.65 24.9

WN244010 1.82 49.7 3.1 14.3 14.1 0.33 32.9

WN244012 2.12 72.6 3.4 9.8 5.4 0.16 14.2

WN244013 1.76 45.5 3.9 16.9 14.8 0.76 33.6

WN244014 1.74 45.6 3.0 12.3 14.4 0.82 39.0

WN244015 1.71 42.9 4.4 18.0 15.3 1.03 34.7

WN244016 1.67 36.8 4.8 15.1 17.3 0.79 43.4

WN244017 1.73 42.4 3.9 18.1 15.3 0.59 35.7

WN244018 1.69 39.7 4.9 15.1 16.0 0.89 40.3

WN244019 1.71 44.4 2.6 16.7 14.5 0.59 36.3

WN244020 1.76 48.2 4.3 17.2 13.6 1.18 30.3

WN244021 1.86 57.1 7.1 7.6 8.9 0.66 28.2

WN244022 1.72 41.4 4.2 18.5 15.6 0.93 35.8

WN244023 1.63 33.9 4.5 19.5 18.8 1.20 42.2

WN244024 1.71 42.9 4.5 16.4 15.3 0.72 36.1

WN244025 1.64 36.5 4.1 15.8 17.8 1.79 43.6

WN244026 1.77 40.2 4.3 19.3 16.1 1.78 36.1

WN244027 1.70 38.9 4.4 20.5 16.6 0.89 36.2

WN244028 1.68 39.8 3.7 16.5 16.6 2.24 40.0

WN244029 1.67 37.5 3.7 17.3 17.4 2.77 41.5

WN244030 1.9 61.1 5.1 7.2 7.3 1.15 26.5

WN244031 1.69 42.9 3.8 16.4 15.4 2.76 36.9

WN244032 1.79 50.0 3.8 14.9 13.2 0.85 31.3

WN244033 1.65 36.6 4.4 16.8 17.7 1.32 42.2

WN244036 2.02 72.0 1.9 11.8 4.9 0.14 14.3

WN244039 1.77 51.7 3.0 10.2 12.7 0.54 35.1

Mean_Value!!: 1.73 44.2 4.1 15.8 14.8 1.14 35.9

Max_Value!!!: 2.12 72.6 7.1 20.5 18.8 2.77 43.6

Min_Value!!!: 1.63 33.9 1.9 7.2 4.9 0.14 14.2

No.!Samples!: 26 26 26 26 26 26 26

SEAM!B

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Figure 4.2.3_1

Typical Coal Seam Profile at Wolvenfontein

Ply A2 0.33m

Mid Seam

Bottom Seam A Unit

Bottom Seam B Unit

Bottom Seam C Unit

Bottom Seam D Unit

0.98m

Ply BB 0.80m

Ply A1 0.68m

Ply BC1 4.08m

Ply BC2 4.60m

Ply BD1 0.70m

Ply BD2 0.93m

Ply BD3 0.54m

Ply BD4 0.59m

MP

BAP

BP1

BP2

BCP

BP3

BP4

BP5

Coal

Carbonaceous shale

Tillite

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These two main seams were modelled on their own to determine the coal structure over the

project area. The Mid Seam is subdivided into three units namely:

! MT – Top coal portion

! MP – inseam parting

! MB – Bottom coal portion.

Similarly the Bottom coal seam is subdivided into 4 coal and 3 intra seam partings namely:

! BA – Bottom seam A Unit

! BP1 – Inseam parting

! BB – Bottom seam B Unit

! BP2 – Inseam parting

! BC – Bottom seam C Unit

! BP3 – Inseam parting

! BD – Bottom seam D Unit

Lastly the 4 coal units within the Bottom seam are subdivided into smaller units according to

the presence of additional inseam partings as illustrated in fig 4.2.3_1.

Sections were used across the resource area to ensure all these correlations are consistent,

and were verified against the lithological logging as well as downhole geophysical logs.

Structural models were created of each of these sets of units to enable detailed resource

reporting of seams, seam units and detailed seam splits.

The surface topography (as surveyed) was used to validate the collar elevations of the

boreholes. The collars were used together with the surface survey observations to construct

a surface topography grid in Minex on a 15x15m grid, covering all of the potential coal

resource area. In each borehole the limit of softs, weathering as well as potential free dig

depths were recorded, enabling the modelling of these layers across the resource area.

These volumes are important for mine planning purposes.

The stratigraphical sequence was verified in Minex (including gaps and overlaps) before

structural modelling commenced. Each coal seam, unit and partings were modelled on a grid

of 25x25m, based on the average borehole spacing in the project area. Roof and floor

surfaces were created in 3D for each layer, as well as a thickness grid for each seam. Coal

extrapolation was limited to 125m from the last borehole which is half the average borehole

spacing. Lastly the pre-Karoo topography surface was constructed using the Dwyka or

basement floor intersection in each borehole. The final structural model were created, using

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the topographic surface, weathering limit and basement floor as cutting surfaces to remove

coal where it intersects these surfaces.

Raw coal qualities were modelled for each seam and unit as mentioned above. Qualities

modelled are: RD (Relative density), CV (Calorific Value), AS (Ash), IM (Inherit Moisture), FC

(Fixed carbon), VM (Volatile matter) and TS (Total Sulphur). All qualities reported hereafter

are on an air dried basis. A lateral composite were calculated within Minex, based on the

seam/unit that was selected for the model. Grids for each quality variable were created on a

25x25m grid, and used to report the raw coal qualities.

Coal product washablities were performed for a number of different coal products as specified

below:

! Primary coal product at a wash RD of 1.60.

! Primary coal product at a wash RD of 1.90.

! Primary coal product at a CV of 26.0MJ/kg, and secondary product at a CV of 20.5MJ/kg.

The washability modelling was done using the washability module in Minex. Thereafter for

each product, each variable were estimated using the Minex gridding system, to enable

reporting of these qualities for each seam, unit and layer as defined.

4.2.4 Coal Resource Estimation

The main resource area was identified using the following cut-off parameters on the Bottom

seam:

! Seam thickness <1.0m excluded

! Raw ash >60% excluded

! The wetland boundary in the south and the farm boundary in the west were used to

terminate the resource extents

! The wetland in the central area was used to separate the Main Resource Area from the

Southern Resource Area (Figure 3.1.1_1).

The area to the south of the wetlands, has limited borehole coverage, including a number of

historical boreholes without analytical data. Due to the presence of some positive coal

intersections, and the proximity to the main resource area, a southern resource block could be

identified. No coal quality cut-offs were applied in defining the resource, due to limited

borehole analytical data. Coal in this area is mainly classified as an inferred resource.

Resource classification was done according to the JORC code guidelines. Borehole spacing

up to 500m was used to classify a measured resource, and up to 1000m to classify an

indicated resource. Only boreholes where the relevant seam was analysed were considered

as point observations to be used for resource classification. Figures 4.2.4_1& 4.2.4_2

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illustrate the resource class for each seam. SB is classified as measured (green) across the

resource area, whereas SM is classified mainly as measured (green) and parts as indicated

(yellow). Inferred resources are shown in grey.

Figure 4.2.4_1 Seam SB Resource Classification at

Wolvenfontein

Figure 4.2.4_2 Seam SM Resource Classification at

Wolvenfontein

In situ coal resources were reported for each seam within the resource boundary area only. A

seam thickness of less than 0.5m was excluded for both the SM and SB seams. Raw coal

qualities and RD’s were applied to the coal volumes according to the modelled grids across

the area. Average relative densities per seam/unit at Wolvenfontein are summarized in Table

4.2.4_1.

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Table 4.2.4_1

Kangala Coal Project

4.3 Gross and Mineable In-situ Resources and Raw Qualities

Gross in-situ resources for the Wolvenfontein area are presented in Table 4.3_1. Resources

are reported for both the SM and SB seams, excluding a seam thickness of less than 0.50m.

Gross in situ coal resources for the Wolvenfontein resource area amount to 67.475 million

tonnes. A geological loss of 10% for both seams is suggested in the main resource area to

make provision for potential geological losses that might occur in the area. Due to increased

uncertainty, as well as expected dolerite intrusions, a geological loss of 20% is suggested for

the southern resource area. In situ tonnes after geological and mining losses (MTIS) amount

to 51.760 million tonnes. Gross in situ tonnes and Mineable in situ tonnes are presented

below in table 4.3_1.

Seam RD Unit RD Layer RD

SM 1.61 MT 1.54 MT 1.54

MP 2.19 MP 2.19

MB 1.66 MB 1.66

SB 1.77 BA 1.83 BA1 1.79

BAP 2.05

BA2 1.71

BP1 2.04 BP1 2.04

BB 1.64 BB 1.64

BP2 2.04 BP2 2.04

BC 1.64 BC1 1.63

BCP 1.83

BC2 1.63

BP3 2.03 BP3 2.03

BD 1.82 BD1 1.77

BP4 2.03

BD2 1.76

BP5 2.07

BD3 1.75

BP6 2.00

BD4 1.75

BP7 2.00

BD5 1.75

Wolvenfontein

Average!relative!densities!per!seam/unit

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Table 4.3_1

Gross and Mineable In-Situ Coal Tonnages for Wolvenfontein

The in-situ resources for the Main Resource area (refer to Figure 3.1.1_1) with Raw coal

qualities is presented in Table 4.3_2:

Table 4.3_2

Gross and Mineable In-Situ Coal Tonnages and Raw Qualities (air-dried basis) for the Main Resource area at Wolvenfontein

Resources for the Southern resource area are presented in Table 4.3_3.

Table 4.3_3

Gross and Mineable In-Situ Coal Tonnages and Raw Qualities (air-dried basis) for the Southern Resource area at Wolvenfontein

Both coal seams are subdivided into a number of units and partings as described in detail

under 4.2.3 and illustrated in Fig 4.2.3_1. A summary of the resources for the Major Coal

Units and partings within the Wolvenfontein Main Resource Area is presented in Table 4.3_4.

SEAM CLASS GROSS Geological! In!situ Mining Mineable!In!situ

In!situ!Tonnes Loss Tonnes Loss Tonnes

SM MEASURED !927!000 10% 834!300 10% !750!870

SM INDICATED !125!000 10% 112!500 10% !101!250

SM INFERRED 1!249!000 20% 999!200 10% !899!280

TOTAL!SM 2!301!000 1!946!000 1!751!400

SB MEASURED 34!257!000 10% 30!831!300 10% 27!748!170

SB INFERRED 30!917!000 20% 24!733!600 10% 22!260!240

TOTAL!SB 65!174!000 55!564!900 50!008!410

TOTAL!SEAMS 67!475!000 57!510!900 51!759!810

MAIN!RESOURCE!AREA

AREA SEAM CLASS GROSS Geological! In!situ Mining Mineable!In!situ SEAM_THICK RD CV AS IM VM FC TS

NAME In!situ!Tonnes Loss Tonnes Loss Tonnes (m) (MJ/kg) (%) (%) (%) (%) (%)

Resource SM MEASURED !927!000 10% 834!300 10% 750!870 0.98 1.52 21.1 29.5 3.8 24.3 42.4 2.24

Resource SM INDICATED !125!000 10% 112!500 10% 101!250 0.98 1.68 15.7 42.6 4.1 13.5 39.5 1.09

TOTAL!SEAM SM TOTAL!SEAM 1!052!000 946!800 852!120

Resource SB MEASURED 34!257!000 10% 30!831!300 10% 27!748!170 14.05 1.73 14.9 43.8 4.1 16.2 35.9 1.21

TOTAL!SEAM SB TOTAL!SEAM 34!257!000 30!831!300 27!748!170

TOTAL!SEAMS TOTAL!SEAMS 35!309!000 31!778!100 28!600!290

RAW!COAL!QUALITY

AREA SEAM CLASS GROSS Geological In!situ Mining Mineable!In!situ SEAM_THICK RD CV AS IM VM FC TS

NAME In!situ!Tonnes Loss Tonnes Loss Tonnes (m) (MJ/kg) (%) (%) (%) (%) (%)

SouthRes SM INFERRED 1!249!000 20% !999!200 10% !899!280 1.30 1.93 8.0 63.1 2.9 11.1 22.9 1.48

SouthRes SB INFERRED 30!917!000 20% 24!733!600 10% 22!260!240 17.50 1.76 13.0 49.8 3.5 11.4 35.4 0.94

TOTAL 32!166!000 25!732!800 23!159!520

RAW!COAL!QUALITY

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Table 4.3_4

Gross In-Situ Coal Tonnages and Raw Qualities (air-dried basis) for the Major Coal Units and Partings within the Main Resource Area at Wolvenfontein

MAJOR!COAL!UNITS!AND!PARTINGS

CLASS SEAM INSITU_TONNES AREA COAL_AREA COAL_VOLUME SEAM_THICK RD CV AS IM VM FC TS

MT !867!400 1!446!992 986!557 599!454 0.61 1.44 24.4 19.4 4.1 26.2 50.2 2.32

MP !169!500 1!446!992 634!975 77!455 0.12 2.19 1.1 87.1 2.5 6.8 3.6 0.60

MB !139!600 1!446!992 711!297 89!615 0.13 1.53 22.0 25.2 5.1 25.6 44.1 1.93

TOTAL!PARTING !169!500

TOTAL!COAL 1!007!000

TOTAL!SEAM 1!176!500

BA 2!733!700 1!446!992 1!293!722 1!515!767 1.17 1.8 12.8 49.4 3.8 16.3 30.5 1.63

BP1 !857!900 1!446!992 1!279!333 417!793 0.33 2.05 4.3 74.2 3.0 11.2 11.5 0.90

BB 1!669!600 1!446!992 1!291!845 1!033!869 0.80 1.61 18.9 32.7 4.8 20.0 42.5 1.40

BP2 !881!200 1!446!992 1!323!750 432!311 0.33 2.04 4.1 73.3 2.9 12.2 11.6 1.50

BC 19!700!100 1!446!992 1!396!319 12!030!693 8.62 1.64 18.9 32.8 4.8 18.4 44.0 1.29

BP3 2!202!300 1!446!992 1!286!215 1!075!028 0.84 2.05 3.6 75.0 2.7 11.9 10.5 0.58

BD 5!778!700 1!446!992 1!253!684 3!201!749 2.55 1.80 12.6 50.2 3.1 13.8 32.9 1.10

TOTAL!PARTING 3!941!400

TOTAL!COAL 29!882!100

TOTAL!SEAM 33!823!500

TOTAL!SEAMS 35!000!000

RAW!COAL!QUALITY

RAW!COAL!QUALITY

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A summary of the resources for the individual coal plies and in-seam partings within the

Wolvenfontein Main Resource Area is presented in Table 4.3_5.

Table 4.3_5

Gross In-Situ Coal Tonnages and Raw Qualities (air-dried basis) for the Detail Coal Plies and In-seam Partings within the Main Resource Area at Wolvenfontein

The BC Unit of the Bottom seam is the most prominent and consistently developed coal ply

and represents 72% of the proposed mineable resources at Wolvenfontein.

The high quality Mid seam represents approximately 4.5% of the proposed mineable

resource.

The sulphur content and volatile matter content of the coal seams generally decreases

downwards from the Mid seam to the base of the Bottom seam.

COAL!PLYS!AND!IN!SEAM!PARTINGS

CLASS SEAM INSITU_TONNES AREA COAL_AREA COAL_VOLUME SEAM_THICK RD CV AS IM VM FC TS

MT !867!400 1!446!992 986!557 599!454 0.61 1.44 24.4 19.4 4.1 26.2 50.2 2.32

MP !169!500 1!446!992 634!975 77!455 0.12 2.19 1.1 87.1 2.5 6.8 3.6 0.60

MB !139!600 1!446!992 711!297 89!615 0.13 1.53 22.0 25.2 5.1 25.6 44.1 1.93

TOTAL!PARTING !169!500

TOTAL!COAL 1!007!000

TOTAL!SEAM 1!176!500

BA1 1!508!600 1!446!992 1!268!073 861!252 0.68 1.75 15.0 43.2 4.0 17.6 35.3 1.82

BAP !524!900 1!446!992 1!171!106 255!649 0.22 2.05 4.0 73.6 2.8 11.4 12.3 1.80

BA2 !665!200 1!446!992 1!180!490 390!713 0.33 1.70 15.9 40.4 4.3 18.8 36.5 1.17

BP1 !856!700 1!446!992 1!278!082 417!233 0.33 2.05 4.3 74.2 3.0 11.2 11.5 0.90

BB1 1!669!700 1!446!992 1!291!845 1!033!869 0.80 1.61 18.9 32.7 4.8 20.0 42.5 1.40

BP2 !880!200 1!446!992 1!323!750 431!833 0.33 2.04 4.1 73.3 2.9 12.2 11.6 1.49

BC1 9!110!800 1!446!992 1!365!665 5!577!954 4.08 1.63 19.1 32.0 5.2 18.4 44.4 1.41

BCP !177!500 1!446!992 1!271!826 95!754 0.08 1.85 10.6 55.8 3.2 16.3 24.7 0.62

BC2 10!341!900 1!446!992 1!370!670 6!311!456 4.60 1.64 18.9 33.1 4.4 18.2 44.4 1.20

BP3 2!202!300 1!446!992 1!286!215 1!075!028 0.84 2.05 3.6 75.0 2.7 11.9 10.5 0.58

BD1 1!518!900 1!446!992 1!241!798 866!549 0.70 1.75 14.2 45.7 3.3 14.3 36.7 1.21

BP4 !606!000 1!446!992 1!131!068 293!595 0.26 2.07 5.3 71.8 2.6 11.9 13.7 0.31

BD2 1!866!000 1!446!992 1!154!841 1!071!047 0.93 1.74 15.1 42.6 3.2 13.7 40.5 1.17

BP5 !702!800 1!446!992 743!202 336!166 0.45 2.09 2.8 78.7 2.9 11.0 8.1 0.60

BD3 !742!500 1!446!992 775!733 419!860 0.54 1.77 14.6 45.4 3.4 16.1 35.2 0.75

BP6 !75!600 1!446!992 462!312 37!827 0.08 !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!!

BD4 !174!000 1!446!992 511!108 99!471 0.19 !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!!

BP7 !9!500 1!446!992 114!483 4!783 0.04 !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!!

BD5 !92!600 1!446!992 132!625 52!947 0.40 !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!!

TOTAL!PARTING 6!035!500

TOTAL!COAL 27!690!200

TOTAL!SEAM 33!725!700

TOTAL!SEAMS 34!902!200

RAW!COAL!QUALITY

RAW!COAL!QUALITY

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4.4 Physical Seam Characteristics

The following sections provide details of the physical characteristics for the various coal

seams present at Wolvenfontein.

Mid Seam

The Mid seam occurs from 10m below surface to in excess of 40m below surface within

basement lows in the northern and central part of the area (Figure 4.4_1). The average depth

for the Mid seam is approximately 31 m below surface.

Figure 4.4_2 illustrates the distribution and thickness of the Mid seam at Wolvenfontein. The

Mid seam varies in thickness from 0.5 m to 2.50 m and is absent or eroded along the

basement highs in the central and southern part of the Main Resource area.

Bottom Seam

The Bottom seam is present from 10m below surface in the southwest of the Main Resource

area to up to 50m below surface within basement lows in the northern and central part of the

Figure 4.4_1 Mid Seam Depth below Surface at Wolvenfontein

Figure 4.4_2 Mid Seam Thickness at Wolvenfontein

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deposit (Figure 4.4_3). The average depth for the Bottom seam is approximately 36 m below

surface.

Figure 4.4_4 illustrates the thickness of the Bottom seam at Wolvenfontein. The Bottom seam

varies in thickness from 6.0 m to up to 30.0 m within a prominent basement low in the

northeast of the Main Resource area, averaging 14.05 m in thickness.

Figure 4.4_3 Bottom Seam Depth below Surface at Wolvenfontein

Figure 4.4_4 Bottom Seam Thickness at Wolvenfontein

4.5 Coal Quality and Products

Coal washability was performed as described in paragraph 4.2.3. Wash product yields and

qualities are reported for the different selections at different wash products. Table 4.5_1

provides a summary of the coal qualities for the relevant seams, units and layers within the

Northern Resource area at Wolvenfontein. Table 4.5_2 provides a summary of the coal

qualities for the proposed mining units in the Northern Resource area at Wolvenfontein. For

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Table 4.5_1

Washabilities for the Detail Coal Plies and In-seam Partings within the Northern Resource Area at Wolvenfontein (Air-dried basis)

Table 4.5_2

Washabilities for the Selected Mining Units within the Main Resource Area at Wolvenfontein (Air-dried basis)

COAL!PLYS!AND!IN!SEAM!PARTINGS

CLASS SEAM INSITU_TONNES PYL PCV PAS PIM PVM PTS PWD PYL PCV PAS PIM PVM PTS PWD PYL PCV PAS PIM PVM PTS PWD SYL SCV SAS SIM SVM STS SWD

MT !867!400 77.2 27.5 11.7 4.1 31.0 2.52 1.60 79.8 27.1 12.8 4.1 30.7 2.75 1.90 70.0 27.1 13.3 3.7 30.4 2.9 2.24 14.1 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

MP !169!500 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

MB !139!600 73.7 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 92.0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 49.8 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 44.5 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

TOTAL!PARTING !169!500

TOTAL!COAL 1!007!000

TOTAL!SEAM 1!176!500

BA1 1!508!600 24.4 23.6 21.2 4.5 26.4 3.14 1.60 48.8 20.1 29.9 4.3 22.3 2.54 1.90 11.5 26.0 16.5 3.9 30.0 2.95 1.47 24.6 20.5 28.6 4.4 22.2 2.87 1.75

BAP !524!900 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BA2 !665!200 21.8 21.1 24.7 4.2 25.0 1.35 1.60 60.3 18.1 35 4.1 20.7 1.24 1.90 12.1 26.0 16.4 4.5 28.7 1.62 1.48 22.2 20.5 29.4 4.2 22.2 1.17 1.64

BP1 !856!700 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 3 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BB1 1!669!700 46.2 23.8 21.2 5.2 24.2 1.08 1.60 71.7 21.6 26.4 5.0 22.4 1.08 1.90 24.9 26.0 16.6 5.1 26.9 1.15 1.52 38.9 20.5 28.9 4.9 20.6 1.01 1.79

BP2 !880!200 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BC1 9!110!800 46.0 25.5 17.1 5.7 21.8 0.94 1.60 74.3 22.4 24.4 5.4 20.4 1.04 1.90 38.7 26.0 16.2 5.7 22.3 0.92 1.59 21.6 20.6 28.3 5.1 19.5 1.17 1.75

BCP !177!500 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BC2 10!341!900 44.3 24.4 19.9 4.5 21.3 0.87 1.60 81.4 20.6 28.8 4.4 19.1 0.83 1.90 22.5 26.0 16.2 4.5 22.2 0.96 1.50 41.5 20.5 29.3 4.5 18.9 0.85 1.77

BP3 2!202!300 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BD1 1!518!900 17.5 21.8 26.3 3.7 16.9 1.27 1.60 39.4 17.8 35.6 3.8 15.1 1.05 1.90 6.3 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 15.8 20.5 29.4 3.7 15.9 1.25 1.65

BP4 !606!000 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BD2 1!866!000 25.2 22.8 23.4 3.5 17.3 0.85 1.60 62.8 19.4 31.9 3.2 15.1 1.07 1.90 7.1 26.0 15.1 3.5 20.3 1.51 1.42 39.4 20.5 29.0 3.3 15.3 1.00 1.79

BP5 !702!800 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 0 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 0 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BD3 !742!500 8.5 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.60 30.3 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 1.90 3.2 !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! 9.8 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BP6 !75!600 !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BD4 !174!000 !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BP7 !9!500 !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

BD5 !92!600 !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!! !!!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

PRODUCT!AT!RD!1.60 PRODUCT!AT!RD!1.90 PRODUCT!AT!CV!26.0 SECONDARY!PRODUCT!AT!CV!20.5

PRODUCT!AT!RD!1.60 PRODUCT!AT!RD!1.90 PRODUCT!AT!CV!26.0 SECONDARY!PRODUCT!AT!CV!20.5

MINING!SELECTIONS

CLASS SEAM INSITU_TONNES PYL PCV PAS PIM PVM PTS PWD PYL PCV PAS PIM PVM PTS PWD PYL PCV PAS PIM PVM PTS PWD SYL SCV SAS SIM SVM STS SWD

!!!!!!!! MM 1!192!000 68.0 27.0 12.8 4.6 30.6 2.52 1.60 72.3 26.3 14.6 4.5 30.0 2.66 1.90 65.8 26.8 14.2 3.9 30.4 2.94 2.18 7.7 !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!! !!!!!!!!!

TOTAL!SEAM SM 1!192!000

!!!!!!!! MAB 6!126!000 22.1 23.9 20.9 4.9 24.8 1.66 1.60 38.8 21.1 27.6 4.7 22.3 1.59 1.90 11.8 26.0 16.5 4.7 27.9 1.94 1.50 18.8 20.5 28.9 4.8 21.1 1.52 1.70

!!!!!!!! MC1 9!110!000 46.0 25.5 17.1 5.7 21.8 0.94 1.60 74.3 22.4 24.4 5.4 20.4 1.04 1.90 38.7 26.0 16.2 5.7 22.3 0.92 1.59 21.6 20.6 28.3 5.1 19.5 1.17 1.75

!!!!!!!! MC2 10!523!000 43.6 24.4 19.9 4.5 21.3 0.87 1.60 80.0 20.6 28.8 4.4 19.1 0.83 1.90 22.1 26.0 16.2 4.5 22.1 0.97 1.50 41.3 20.5 29.3 4.5 18.9 0.84 1.76

!!!!!!!! MD 8!104!000 9.9 22.6 24.4 3.3 17.3 1.05 1.60 21.6 18.5 34.0 3.4 15.3 0.93 1.90 1.2 26.0 15.6 3.3 21.9 1.50 1.41 9.5 20.5 30.1 3.2 16.2 0.93 1.59

PRODUCT!AT!RD!1.90 PRODUCT!AT!CV!26.0 SECONDARY!PRODUCT!AT!CV!20.5PRODUCT!AT!RD!1.60

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The CV (Mj/kg) and yield distribution for the Mid Seam are illustrated in Figures 4.5_1 and 4.5_2. The

Mid seam is typically a good quality coal that yields (68%) 27.0 Mj/kg CV product with low ash, high

volatiles and high sulphur content.

Figure 4.5_1 Mid Seam CV (Mj/kg) (air-dried basis) distribution at a

wash RD of 1.60 at Wolvenfontein

Figure 4.5_2 Mid Seam Yield (%)(air-dried basis) distribution at a

wash RD of 1.60 at Wolvenfontein

The CV (Mj/kg) and yield distribution for Ply BA of the Bottom seam are illustrated in Figures

4.5_3 and 4.5_4.

The BA ply consists generally of high-ash dull coal and prominent intra-seam carbonaceous

shale parting that yields (± 50%, inclusive of the carbonaceous parting) D-grade steam coal

suitable for domestic power production (Eskom) at a wash density of 1.90.

The CV (Mj/kg) and yield distribution for Ply BB of the Bottom seam are illustrated in Figures

4.5_5 and 4.5_6.

The BB ply consists generally of dull to bright coal that yields (± 71%) D-grade steam coal

suitable for domestic power production (Eskom) at a wash density of 1.90.

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Figure 4.5_3 Bottom (Ply BA) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein

Figure 4.5_4 Bottom (Ply BA) Seam Yield (%)(air-dried basis)

distribution at a wash RD of 1.90 at Wolvenfontein

Figure 4.5_5 Bottom (Ply BB) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein

Figure 4.5_6 Bottom (Ply BB) Seam Yield (%)(air-dried basis)

distribution at a wash RD of 1.90 at Wolvenfontein

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The CV (Mj/kg) and yield distribution for Ply BC1 of the Bottom seam are illustrated in Figures

4.5_7 and 4.5_8.

The BC1 ply consists generally of bright coal that yields between 20% and 60% (± 39%

average) 26 Mj/kg CV primary product suitable for domestic and export steam coal markets

and an addition ± 21% secondary product suitable for domestic power generation (Eskom).

The CV (Mj/kg) and yield distribution for Ply BC2 (inclusive of the BCP parting) of the Bottom

seam are illustrated in Figures 4.5_9 and 4.5_10.

The BC2 ply consists of bright to dull coal that yields D-grade (± 80% average) steam coal

suitable for domestic power production (Eskom) at a wash density of 1.90.

Ply BD of the Bottom seam typically yields a low CV, low volatile coal.

Figure 4.5_7 Bottom (Ply BC1) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.60 at Wolvenfontein

Figure 4.5_8 Bottom (Ply BC1) Seam Yield (%)(air-dried basis)

distribution at a wash RD of 1.60 at Wolvenfontein

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4.6 Stripping Ratio and Mining Parameters

The coal at the Northern Resource area of Wolvenfontein is typically shallow and all

extractable by open-pit.

The mining selection at Wolvenfontein, based on seam thickness and product qualities, are

defined as follows (refer to Table 4.5_2):

! MM is equivalent to SM seam

! MAB is the combination of plies BA, BP1, BB, and BP2 of the Bottom seam.

! MC1 is equivalent to ply BC1 of the Bottom seam.

! MC2 is the combination plies BCP and BC2 of the Bottom seam.

! MD is the combination of the remaining BD and DP plies of the Bottom seam.

The stripping ratio, expressed as cubic metres of overburden and partings (for the

abovementioned mining selection) that need to be removed per ton of coal, is shown in Figure

5.3.1_6. The diagram illustrates that the stripping ratio is low and predominantly below 2:1,

averaging approximately 1.60:1 if the BD ply is excluded from the mining selection.

Figure 4.5_9 Bottom (Ply BC2) Seam CV (Mj/kg) (air-dried basis) distribution at a wash RD of 1.90 at Wolvenfontein

Figure 4.5_10 Bottom (Ply BC2) Seam Yield (%)(air-dried basis)

distribution at a wash RD of 1.90 at Wolvenfontein

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Figure 4.6_1 Map Showing the Stripping Ratio for the Mining Selection (cubic

metres/tonne) at Wolvenfontein

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5 MIDDELBULT AND MODDERFONTEIN COAL RESOURCES

5.1 Sample Data Assumptions for Modelling Purposes

The assumptions made in compiling the physical and analytical models based primarily on the

historical data are that:-

! All data from previous drilling and sampling was reliable.

! The boreholes had been accurately surveyed.

! All sampling was correctly labelled and reported against the correct sample ID’s.

! Core recoveries and core losses were accurately determined.

! The laboratory results were correctly reported.

5.2 Methodology

5.2.1 Data Verification

For all the available data the following verification procedures were conducted where

appropriate. The borehole logs and tables in the geological reports were verified and

captured into an excel database. All available hard copy borehole logs were checked against

the digital database. This database was made read only to prevent any of the data being

corrupted. The database consisted of the borehole name, the X & Y co-ordinates, the collar

elevation, the depth to the roof and floor of each seam. From this information the widths of

each seam as well as the elevations of the roof and floor of each seam were calculated.

The analytical data was captured in a similar manner but in three CSV files, a header record,

a samples record and an analyses record. These files were also made read only to prevent

data being corrupted. A number of check algorithms were run to check for negative seam

widths and partings. The algorithms standardise wash fractions, calculate raw Relative

Densities (“RD”) from proportion of raw ash in the samples as well as using the standard

methodologies for compositing samples using width and raw RD using

WashProduct ®.software.

The analyses files were read into a database for verification, composting and washing

simulation. Numerous check routines verified the data, composited the samples as well as

simulating and reporting quality outputs. The mining block limitations were set based on the

following parameters:-

! Width.

! Dolerite sill breakthroughs.

! Quality and farm boundaries. For

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5.2.2 Geological Modelling

Geological modelling was performed using 3D Surfer Software ®. All roof and floor elevations

were gridded using a normalised kriging algorithm. Grid sizes were determined by borehole

spacing and a minimum grid size of 25 metres. Grids in areas that did not meet the minimum

criteria were excluded from the coal resource area and were blanked out. (Seam width of 1m,

Dry Ash Free Volatile Material (DAFVM) of 26%, CV 16MJ/kg). Volumes were then calculated

for each of the coal resource blocks by subtracting the elevation floor grid from the elevation

of the roof grid surface. The volume was then multiplied by the average Raw RD to calculate

the Gross In-situ Tonnage (GIST).

5.2.3 Coal Resource Estimation

Only the estimated geological loss factor was taken into account to determine a mineable

tonnes in-situ (MTIS) resource for each resource block. This factor accounts for losses that

may occur resulting from geological features that have not been identified from the current

borehole spacing.

Qualities and yields were simulated using the Washproduct Software®. Yields and Raw

Qualities for each resource block were simulated and then tabulated.

A number of parallel exercises were previously conducted by the author and by Coffey Mining

with other Software modelling packages such as Datamine ® and Minex ® and no significant

differences were observed.

5.3 Gross In-situ Coal Resource Volumes and Raw Qualities

The gross-in-situ volumes and raw qualities for the various coal deposits were established for

seams thicknesses in excess of 1m. The following sections give details of the coal

characteristics for the deposits of the Middelbult and Modderfontein properties.

5.3.1 Middelbult

Mid (No 4) Seam at Middelbult

Figure 5.3.1_1 illustrates that the Mid (No 4) Seam coal is shallowest in the northwest with a

depth of 12 metres below surface increasing in depth towards the south east where it exceeds

28m. The average depth for the Mid (No. 4) seam is 20m below surface.

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Figure 5.3.1_1 Map Showing the Depth to Roof Contours for Mid (No. 4) Seam at Middelbult

Figure 5.3.1_2 is a graphical interpretation of the Mid (No. 4) Seam thickness, which is best

developed in the northwest at 7.4m getting progressively thinner to the southwest at a width of

0.6m for an average width of 3.3m over the area.

Figure 5.3.1_2 Map Showing the Thickness Contours for Mid (No. 4) Seam at Middelbult

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The contoured raw CV for the Mid (No. 4) seam presented in Figure 5.3.1_3 expressed in

MJ/kg varies from 12MJ/kg to 21MJ/kg with the highest values in the south and north and an

average value of 16MJ/kg.

Figure 5.3.1_3 Map Showing the Raw Calorific Value Contours for Mid (No. 4) Seam at Middelbult

Table 5.3.1_1 gives a summary of the raw coal qualities for the Mid (No. 4) Seam coal

resources at Middelbult before modifying factors were applied to define the mineable coal

resource.

Table 5.3.1_1

Kangala Coal Project

Mid (No. 4) Seam Raw Coal Qualities at Middelbult

Seam Statistic Moisture

%

Ash

%

Volatiles

%

Fixed Carbon

%

DAF Vols

%

Sulphur

%

CV (MJ/kg)

Mid (4U + 4L) Average 3.81 36.37 25.12 34.70 41.99 2.14 17.83

Mid (4U + 4L) Maximum 5.02 41.42 30.63 45.18 42.53 3.29 25.64

Mid (4U + 4L) Minimum 3.24 19.16 23.30 31.47 40.40 1.66 15.28

The table shows that the average raw qualities are slightly below Eskom requirements. The

coal in this area has a high reactivity and with a de-stoning plant or selective mining the

quality would be acceptable to Eskom for the Lethabo Power Station.

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Bottom (No. 2) Seam at Middelbult

Figure 5.3.1_4 shows how Bottom (No. 2) Seam at Middelbult sub-outcrops in the east and

becomes progressively deeper to the west where it reaches a maximum depth of over 45

metres.

Figure 5.3.1_4 Map Showing the Depth to Roof Contours for Bottom (No. 2) Seam at Middelbult

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Figure 5.3.1_5 depicts the thickness contours for Bottom (No. 2) Seam at Middelbult.

Figure 5.3.1_5 Map Showing the Thickness of Bottom (No. 2) Seam at Middelbult

The average qualities of Bottom (No. 2) Seam at Middelbult as shown in Table 5.3.1_2 are

slightly below Eskom requirements and would possibly have to be de-stoned to increase the

Calorific Value to satisfy Eskom.

Table 5.3.1_2

Kangala Coal Project

Bottom (No. 2) Seam Raw Coal Qualities at Middelbult

Moisture

%Ash % Volatiles %

Fixed

Carbon %

DAF Vols

%Sulphur % CV (MJ/kg)

Average 3.22 39.39 15.31 42.08 26.36 1.50 17.73

Maximum 4.64 50.50 28.87 50.50 37.48 4.10 23.31

Minimum 2.64 20.43 9.80 33.80 16.25 0.77 13.42

Stripping Ratio at Middelbult

The coal at the Northern Resource area of Middelbult is typically shallow and extractable by

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The all seam strip ratio, expressed as cubic metres of overburden and partings that need to

be removed per ton of coal, is shown in Figure 5.3.1_6. The diagram illustrates that the

stripping ratio is low and is predominantly below 3, whereas the South African industry uses

as rule of thumb that coal available at a ratio below 7 is suitable to open cast mining.

Figure 5.3.1_6 Map Showing the All Seam Strip Ratio at Middelbult

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5.3.2 Modderfontein

Mid (No. 4) Seam at Modderfontein

In the absence of borehole data within the granted area no iso-contours could be generated

for the Mid (No. 4) Seam, which is known to be present from boreholes on neighbouring

properties, obtained from the Geosciences Council. Table 5.3.2_1 has estimated raw coal

qualities for Mid (No. 4) Seam at Modderfontein based on the analyses of samples from the

adjoining properties.

The average qualities of the Mid (No. 4) Seam at Modderfontein are slightly below Eskom

requirements. The coal in this area has high sulphur content and would possibly have to be

de-stoned to lower the sulphur content and increase the Calorific Value to satisfy Eskom.

Table 5.3.2_1 Kangala Coal Project

Mid (No. 4) Seam Raw Coal Qualities at Modderfontein

Moisture %

Ash % Volatiles %Fixed

Carbon % DAF Vols

%Sulphur % CV (MJ/kg)

Average 3.71 32.51 21.54 42.24 33.77 2.47 19.84

Maximum 4.70 38.70 25.60 44.60 45.23 3.19 22.47

Minimum 1.80 25.50 14.90 38.47 20.50 1.48 17.49

Bottom (No. 2) Seam at Modderfontein

Table 5.3.2_2 has estimated raw coal qualities for Bottom (No.2) Seam at Modderfontein

based on the analyses of samples from the adjoining properties. The average raw qualities of

the Bottom (No. 2) Seam at Modderfontein are well below Eskom requirements and selective

mining and de-stoning would be required to increase the raw quality of the coal to an

acceptable quality for Eskom.

Table 5.3.2_2

Kangala Coal Project

Bottom (No. 2) Seam Raw Coal Qualities at Modderfontein

Moisture %

Ash % Volatiles %Fixed

Carbon % DAF Vols

%Sulphur % CV (MJ/kg)

Average 4.40 48.67 13.61 33.32 29.00 0.39 14.36

Maximum 5.90 67.10 20.26 40.83 75.04 1.23 19.15

Minimum 3.84 36.13 8.80 17.30 14.42 0.01 6.08

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Stripping Ratio at Modderfontein

In the absence of borehole data within the granted area the stripping ratio could not be

determined. However, the area shows similar seam characteristics as at Wolvenfontein and

Middelbult and it can be assumed that the stripping ratio is low, allowing for extraction of the

coal by open-cast methods.

5.4 Gross In-situ Resources

5.4.1 Relative Density

Table 5.4.1_1 summarises the relative densities used for the various seams to convert

calculated coal volumes to gross tonnes in-situ (GTIS) coal resources.

The values are derived from washing algorithms that derive the relative densities from the

percentage raw ash in the seam if it has not been reported by the laboratory.

Table 5.4.1_1 Kangala Coal Project

Relative Densities Used for the Various Seams at Middelbult

Area Seam Relative Density Used

Middelbult Mid (No. 4) Seam 1.75

Bottom (No. 2) Seam 1.74

5.4.2 Statement of Gross In-situ Resources

Table 5.4.2_1 presents the estimated gross tonnes in-situ for Middelbult.

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Table 5.4.2_1

Kangala Coal Project

Gross Tonnes In-Situ Tonnage for Middelbult

Resource Area Size

(Hectares)

Average

Width

(metres)

Volume

(‘000 m3)

Relative

Density

Gross Tonnes In-Situ

(‘000 tonnes)

Total 70.5%

Attributable

Middelbult

Mid (No. 4) Seam 187 3.74 6,987 1.75 12,227 8,620

Bottom (No. 2) Seam 171 8.45 14,488 1.74 25,208 17,772

Grand Total Middelbult 37,435 26,392

5.5 Mineable In-situ Resources

5.5.1 Minimum Mining Parameters

Introduction

In terms of the JORC and SAMREC Codes, portions of a deposit that do not have a

reasonable prospect for eventual economic extraction must not be included in the coal

resource statement. Applying minimum economic parameters to the contoured seam

characteristics in Section 5.3 provides coal resource outlines to which other conversions

factors can be applied to yield MTIS.

Mid (No 4) Seam at Middelbult

This resource area was defined by a seam width of >1m, 26% DAF volatiles and a Raw CV of

16MJ/kg. Figure 5.5.1_1 presents the result.

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Figure 5.5.1_1

Map Showing the Coal Resource Outline for the Mid (No. 4) Seam at Middelbult

Bottom (No. 2) Seam at Middelbult

This coal resource was also defined by a seam width of >1m, 26% DAF volatiles and a Raw

CV of 16MJ/kg., with the result presented in Figure 5.5.1_2.

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Figure 5.5.1_2

Kangala Coal Project

Map Showing the Coal Resource Outline for the Bottom (No. 2) Seam at Middelbult

Within these areas a 10% mining loss factor has been applied to convert global in situ coal

resources to mineable in situ coal resources to account for expected losses that are caused

by not reaching the planned, or estimated extremities of the coal seams included in the global

in situ resource.

5.5.2 Geological Loss

The geological losses applied to the various seams and in the various areas are summarised in Table 5.5.2_1. The estimated losses are based on recognised methods for applicable geological losses depending on the level of confidence in the estimated GTIS with 15% applicable for a drill density for Measured Coal Resources to 35% for Inferred Coal Resources.

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Table 5.5.2_1

Kangala Coal Project

Geological Losses Applied to the Coal Seams in the Middelbult area

Area Seam Geological Losses Assumed (%)

Middelbult Mid (No. 4) Seam 25

Bottom (No. 2) Seam 25

5.5.3 Geotechnical Considerations

The modifying factors have not included any specific geotechnical considerations, because of

the absence of such information. Any losses related to geotechnical factors are included

under geological losses and are based on historical experience. The Witbank-Springs Coal

Field has been mined for more than 100 years. Experience of mining and geological losses

due to geotechnical impacts in underground mining and opencast mining are well documented

and cognizance of this has been taken.

5.5.4 Summary of Assumptions Underlying the Mineable Coal Resource Estimation

To convert the GTIS to mineable tonnes in-situ (“MTIS”) the following assumptions and

modifying factors have been applied:-

! Raw Relative Density (RD) is based on the averages for each seam obtained from the

available analyses for each area.

! Dry ash free volatile cut off for coal resource estimation was 26% (which is the accepted

value for South African Coal when unaffected by weathering or dolerite intrusions).

! Minimum seam thickness of 1m.

! Geological losses of between 20% and 35%, depending on drilling density and coal

resource classification.

! A mining loss of 10%

! All tonnages and qualities are quoted air dry.

! Minimum CV of 16 (MJ/kg)

5.5.5 Mineable Coal Resource Statement and Classification

The Mineable Coal Resource estimate for the Middelbult area is presented in Table 5.5.5_1

together with the associated JORC and SAMREC Code resource classification. Total

attributable resources to Universal Coal are 17.815 million tonnes. Of this total the deeper

No.2 Seam accounts for 67% of the coal resource. The product quality of No. 2 Seam would

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be at a raw ash content of approximately 40%. Upgrading of coal by means of selective

mining of better quality subunits, dense medium separation or de-stoning would be required

for certain areas to achieve an Eskom quality product.

Drilling density in the Middelbult area is in the order of a 1km grid and this is sufficient to

report mostly Inferred Resources in terms of the JORC/SAMREC Code confidence levels.

The proposed additional drilling is designed to upgrade the Coal Resource classification.

Table 5.5.5_2 summarises the resources at Middelbult together with the most important coal

qualities. It is noted that the average raw volatile values are low compared to the applied dry

ash free volatile cut-off of 26% because the latter is applied after the moisture and ash

contents have been removed.

Table 5.5.5_1Kangala Coal Project

Estimated Mineable Coal Resources at Middelbult

Resource Area

Gross In-Situ Tonnes

(‘000 tonnes)

GeologicalLoss (%)

Mining Loss % Mineable In-Situ Tonnes

(‘000 tonnes)

Classification

Total Attributable to Universal Coal

Middelbult

Mid (No. 4) Seam 12,227 25 10 8,253 5,818 Inferred

Bottom (No. 2) Seam 25,208 25 10 17,016 11,996 Inferred

Grand Total Middelbult 37,435 25,269 17,815 Inferred

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Table 5.5.5_2

Kangala Coal Project

Summary of Mineable In-Situ Tonnage and Qualities at Middelbult

Seam Mineable In-Situ Tonnes (‘000 tonnes) Average Raw Coal Qualities

Total 70.5% Attributable CV (%) Ash (%) Volatiles (%) Sulphur (%)

Middelbult

Mid (No. 4) Seam Inferred 8,253 5,818 16.17 41.99 19.25 0.95

Bottom (No. 2) Seam

Inferred 17,016 11,996 17.73 39.39 15.31 1.50

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Appendix 1

Curriculum Vitae of Technical Experts

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S U M M A R Y C V – A l a n G o l d s c h m i d t

Qualifications BSc, University of Cape Town, South Africa – 1986

BSc (Hons) University of Cape Town – 1987

GDE (Postgraduate Diploma in Mining Engineering) WITS University, South Africa – 1991

Experience Alan has some 20 years experience in the minerals industry. He has been involved in exploration and mine geology. His expertise is project management, reserve, and resource estimation. Primarily he has been involved with geological block models and geostatistical resource estimation.

Employment Summary

2008 – Present

Coffey Mining, South Africa Senior Resource Geologist

2004 – 2008 SRK Consulting Associate Consultant

2001 – 2004 AST Group (GMSI) Solutions Engineer

2000 – 2001 Anglo American Corporation Senior Resource Geologist

1989 – 2000 Western Areas Limited Geologist

1988 – 1989 Johannesburg Consolidated Investments Ltd Mine Geologist

1986 – 1987 University of Cape Town Research Assistant

1983 – 1985 Harmony Gold Mine Student Geologist

Areas of Expertise Mine and Exploration Geology; Mineral Reserve and Resource reviews, estimation and classification; Geological Mapping/Logging; Database Compilation and Management.

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S U MM A R Y C V – D a w ie v a n W yk

Qualifications BSc Geology and Geography (Rhodes University)

Experience Private consulting service to the coal exploration and mining industry. Mineral rights investigations, GGT, New Minerals Development Bill. The supervision of geological functions on collieries. Departmental business plans, budgets, maintenance of mineral rights, investigations into coal bed methane and discard dumps. The provision of geological services in the form of acquisition, exploration and evaluation of potential new and group coal reserves. Maintenance and design of geological database and filing systems. Underground grade control, coal preparation, plant-mine reconciliation’s, budgeting and execution of major drilling programmes. Strategic planning, reserve rationalisation studies and computerisation of all geological data and daily production. Underground mapping, managing underground and surface diamond drilling, grade control, structural interpretations and dolomite and sinkhole investigation.

Employment Summary

1998 – present GeoCoal Services Private consulting service

1994 – 1998 Ingwe Coal Corporation Manager Geology RSA and Resources

1987 – 1994 Randcoal Services Assistant Consulting Geologist

1983-1987 Douglas Collieries Chieft Geologist

1980 – 1983 Rietspruit and Duvha Opencast Services Chief Geologist

1978 – 1980 Vandyksdrift Colliery Mine Geologist

1973 – 1978 Stilfontein Gold Mining Co (Gencor) Mine Geologist / Chief Geologist

1971 – 1973 St. Albans College Pretoria Geography and Science teacher

Areas of Expertise Extensive experience in the coal exploration and mining industry. Experience in Gold and Diamond mining.

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S U MM A R Y C V – N i c o D e n n e r

Qualifications

MBA (2000-2002) University of Potchefstroom.

B.Sc. Geology (Hons.) (1994) Rand Afrikaans University (RAU), Johannesburg. (UJ)

B.Sc. Geology (1991-1993) University of Potchefstroom.

Experience

Nico has over 14 years of experience in the mining industry, mainly on coal and platinum. During his

career he was employed as mine and exploration geologist, as well as mineral resource manager. He

was involved in numerous mining projects including opencast and underground operations as well as

shaft sinking projects and exploration projects. At Lonmin Platinum he acted as the competent person

for the reporting of resource estimations at the Marikana operations. During his career at Gemecs, Nico

has undertaken a number of coal and platinum resource estimation projects.

Employment summary

2007-Present. Gemecs (Pty) Ltd. Geological consultant

2005-2007. Lonmin Platinum. Mineral Resource Manager

2001-2005. Lonmin Platinum – Manager Geology

1998-2001. Lonmin Platinum - Mine & Snr Mine geologist.

1995-1998. Ingwe Coal (BHP) – Mine Geologist

Areas of Expertise

Resource modelling and resource estimations. Exploration and Mine Geology.

General Info

Name: Nico Johan Denner

Address: Unit 16, Building 5, Visiomed Office park, 269 Beyers Naude Drive, Blackheath Ext 1.

Registration number: SACNASP 400060/98

Membership: GSSA, SEG

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S U MM A R Y C V – K a t h l e e n B o d y

Qualifications B.S Arts and Sciences (Geology) , University of Massachusetts, USA (1986)

Registered Professional Natural Scientist (Pr.Nat.Sci.)(Registration no: 400071/07)

Experience Kathleen has 14 years in exploration and mineral resource evaluation in gold, uranium, copper, platinum and fluorite including target generation, evaluation of prospects through to pre-feasibility stage, and geological due diligence on acquisition targets. Database development and data management programs include both in prospect evaluation and regional scale mining activity. She has successfully transferred oil-field well-logging technology to the hard rock environment.

Employment

Summary

Mar 2006 – Present

Coffey Mining SA (Pty) Ltd Senior Consultant - Resources

Apr 2005 -2006

eReservation Systems, Golden Pond, Canada Geological Advisor

Nov 2004 –April 2006

Independent Researcher and Analyst/Geological Consultant

Oct 2004 - Social Research for Sustainable Development (Pty) Ltd Director

May 1998 – Nov 2004

Own Side Line Business

Nov 1995 - Apr 1998

Gold Fields Trust –Goldfields of South Africa, Foreign Ventures Senior Geologist

Feb 1995 - Nov 1995

Gold Fields Trust –Goldfields of South Africa, Witwatersrand Gold Exploration Geologist

Feb 1994 – Feb 1995

Gold Fields Trust –Goldfields of South Africa, Remote Sensing Unit Geologist

Mar 1988 – Feb 1994

Gold Fields Trust –Goldfields of South Africa, Witwatersrand Gold Exploration Post-Graduate Geologist /Geologist

Nov 1985 – Mar 1988

US Peace Corps Volunteer, Lesotho

Areas of Expertise Structural geology, geological modelling and mineral resource estimation, data management, geological due diligence

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Appendix 2 Country Profile and Explanation of Mining Title as it Applies in South Africa

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Appendix 2: Country Profile and Explanation of Mining Title as it Applies in South Africa

South Africa gained independence from Britain on 31st May 1910 and was declared a republic in 1961.

From 1948 until 1990, the South African political and legal system was based upon apartheid, a

philosophy of separate racial development, underwritten and enforced by white minority governments.

After an extended period of international political pressure and economic sanctions against South

Africa’s policies, the South African government agreed to negotiate a new democratic constitution. In

April 1994, the African National Congress (ANC) became the first democratically elected ruling party.

The new constitutional Bill of Rights provides extensive guarantees, including equality before the law

and a prohibition against discrimination; the right to life, privacy, property, freedom and security of the

person, a prohibition against forced labour; and the freedom of speech.

Economy

South Africa is considered to have the most advanced economy on the African continent and it also

provides the gateway to Sub-Saharan Africa. It is classified as a middle-income emerging market with

well developed financial, legal and judicial systems and modern infrastructure.

South Africa’s gross domestic product is estimated at US$527.4bn for 2005 with an annual real growth

rate of 4.5 per cent. South Africa’s inflation rate has decreased over the last ten years and is estimated

at 4.6 per cent for 2005. South Africa’s exports amounted to US$50.9bn for 2005.

Minerals Industry

South Africa has a mature minerals industry developed from gold and diamond discoveries in the late

1800’s. The country is the world’s largest producer of platinum, gold, chrome and vanadium and ranks

highly in the production of coal, diamonds, iron ore and other base metals. The country’s minerals

industry has primarily been developed by large mining houses over the last century. South Africa hosts

a number of large ore bodies, such as the Bushveld Igneous Complex and Witwatersrand Basin, as well

as extensive coal fields. In terms of the Mineral and Petroleum Resources Development Act 280 of

2002 (“MPRDA”) are owned by the State. Currently, the greatest risks pertaining to the mining industry

in South Africa are the uncertainties arising from the new legislation. These uncertainties relate to

security of tenure i.e. the issuing of new order rights and the conversion of old order rights, as well as

meeting the Black Economic Empowerment (“BEE”) requirements.

Mining Title

The mining industry in South Africa has traditionally been controlled by the “big six” mining houses:

Anglo American - De Beers, Gencor - Billiton, Goldfields, JCI, Anglovaal and Rand Mines, which

dominated gold, platinum, chrome, coal and base metal production in South Africa. With a new

democratic constitution and rising costs from ageing mines came sweeping changes in the industry.

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Appendix 2: Country Profile and Explanation of Mining Title as it Applies in South Africa

Historical Perspective - Legislative Development

Since about 1860, mining regulation in South Africa has continuously evolved to keep pace with

changing technological, economic, and socio-political needs to grow and sustain the country’s

world-class mining industry.

Enactment of the Minerals Act, No. 50 of 1991 (Minerals Act) marked the consolidation of a

substantial legislative modernisation that began in the 1960s. After the first democratic elections in

1994, all government policies and legislation were subject to fundamental review. A White Paper

(governmental discussion document) on minerals and mining policy was published in October

1998. Mine health and safety was given first priority with enactment of The Mine Health and

Safety Act, 1996 (Act No 29 of 1996). The Parliament of South Africa passed The Mineral and

Petroleum Resources Development Act, 2002 (MPRDA) in August 2002, which was subsequently

promulgated by the State President (Government Gazette, 1 May 2004). The MPRDA accordingly

took effect from 1 May 2004 onward.

Mineral and Petroleum Resources Development Act, 2002

The MPRDA sets out the mechanics for converting mineral rights previously held under the

Minerals Act to mineral rights recognised under the MPRDA. Accordingly, in addition to describing

the new legislation, the following sections also refer to relevant background and provisions of the

Minerals Act.

From Private Ownership to State Custodianship

Unique features of the Minerals Act were that it allowed mineral rights to be held privately and that

these rights were severable from rights to particular minerals and surface rights in a particular

property. Over the years, the South African system of mineral rights had consequently developed

into a dual system in which some mineral rights were owned by the State and some by private

holders (mostly farmers). This was on the basis that, in the South African context, mineral rights

are a common-law concept as opposed to the situation in most other countries where mineral

rights are granted by the State in terms of mineral legislation.

This concept of state custodianship of mineral rights (now embodied in the MPRDA) has now

replaced the common law principles previously embodied in the Minerals Act. Enactment of the

MPRDA now places South Africa in line with global mineral ownership principles.

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MPRDA - Mechanics

The two-stage system under the Minerals Act, that required consent from the mineral owner and

subsequent application to the state for a prospecting or mining authorisation, has now been replaced

under the MPRDA by providing for the Minister to grant prospecting and mining rights directly.

Prospecting and mining rights are limited real rights in respect of the minerals and the land concerned,

which entitle the holder not only to prospect or mine but to carry out all other activities incidental to

prospecting or mining. These rights can also generally be traded with the consent of the Minister.

A prospecting right may be granted for up to five years and may be renewed once for a period not

exceeding three years. Mining rights are granted for a maximum of 30 years but are renewable for an

indefinite number of further periods, each of which may not exceed 30 years. Security in the transition

between prospecting and mining is enhanced in that the MPRDA stipulates that the holder of a

prospecting right has the exclusive right to apply for and be granted a mining right.

Unlike the Minerals Act, in terms of which all applications for the same mineral on the same land have

to be treated as competing applications, the new MPRDA provides that applications received on

different dates will be dealt with in order of receipt. Only those received on the same day will

consequently become competing applications. Another important improvement over the Minerals Act is

the provision for the disclosure of prospecting information once prospecting has been completed. This

requirement should significantly reduce exploration costs in previously explored areas.

The MPRDA has allowed a significant number of international junior mining and exploration companies

to become active in the country for the first time.

Transitional Arrangements

The objects of Schedule II of the MPRDA are to:-

! ensure that security of tenure is protected in respect of prospecting and mining operations being

undertaken;

! give the holder of an old-order right an opportunity to comply with the new MPRDA; and

! promote equitable access to the nation’s mineral resources;

In order to ensure a smooth transition, all applications for prospecting permits, mining authorisations,

consent to prospect or mine, and all environmental management programmes which had been lodged

in terms of the Minerals Act, but not finalised or approved before 1 May 2004 (the date on which the

new MPRDA took effect), are regarded as having been lodged in terms of the MPRDA.

Schedule II of the MPRDA places rights previously recognised under the Minerals Act into four main

categories, three of which are particularly relevant to Injula. For

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Appendix 2: Country Profile and Explanation of Mining Title as it Applies in South Africa

The following definitions stated in Schedule II of the MPRDA are important:-

! ‘“old order prospecting right” – means any prospecting lease, permission, consent, permit or

licence, and the rights attached thereto, listed in Table 1 to this Schedule in force immediately

before the date on which this Act took effect (1 May 2004) and in respect of which prospecting is

being conducted;

! “old order right” – means an old order mining right, old order prospecting right or unused old order

right, as the case may be;

! “unused old order right” – means any right, entitlement, permit or license listed in Table 3 to this

Schedule in respect of which no prospecting or mining was conducted before this Act took effect;

Any old-order prospecting right, as substantiated by a valid prospecting permit issued in terms of the

Minerals Act, continued to be in force until 1 May 2006, subject to the terms and conditions under which

it was granted, provided that the holder lodged the right for conversion within the preceding two-year

period together with certain prescribed information. A specific requirement for conversion was that

prospecting operations must have been conducted on the property prior to conversion and certified that

the intention to continue prospecting existed.

Similarly, any old-order mining right, as substantiated by a valid mining authorisation issued in terms of

the Minerals Act, continued to be in force for a period of five years until 1 May 2009 (the effective date

of MPRDA), subject to the terms and conditions under which it was granted, provided that the holder

lodges the right for conversion within a five-year period together with certain prescribed information. Of

special importance are the requirements that mining operations must have been conducted on the

property, the intention to continue mining, as well as submission of a prescribed social and labour plan.

The applicant for conversion must also provide an undertaking that, with details of the manner in which,

he or she will give effect to the objects of the MPRDA pertaining to empowerment of HDSA and

economic growth and development.

Unused old-order rights, i.e. rights in respect of which no prospecting or mining was being conducted

immediately before 1 May 2004, continued to be in force for up to one year until 1 May 2005. Within this

period of one year, the holder of such an unused old-order right had the exclusive right to apply for a

prospecting or mining right in terms of the MPRDA.

Environmental management programmes approved in terms of the Minerals Act will remain in force

under the MPRDA.

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Appendix 2: Country Profile and Explanation of Mining Title as it Applies in South Africa

Empowerment Charter and Scorecard

Recognising South Africa’s unique history and in pursuance of the objects of the MPRDA, Section 100

requires the Minister to develop a broad-based Socio-Economic Empowerment Charter that will set the

framework, targets and timetable for effecting the entry of HDSA into the mining industry. Since it is a

specific requirement of the MPRDA that the granting of a mining right will expand opportunities for

HDSA, this important Charter was released in October 2002, well in advance of the coming into

operation of the MPRDA.

Targets, timeframes and commitments are discussed in respect of each of the following facets of

empowerment:-

! Human resource development.

! Employment equity (target: 40% participation in management by HDSA in 5 years).

! Non-discrimination against foreign migrant labour.

! Mine community and rural development.

! Housing and living conditions.

! Procurement.

! Ownership and joint ventures (target: 26% ownership by HDSA in 10 years).

! Beneficiation.

A scorecard has been developed to measure the performance of each mining company in respect of

each of these facets. In practice, this will be used to judge applications for mining rights as well as

applications for converting old-order mining licenses into new-order mining rights.

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Appendix 2: Country Profile and Explanation of Mining Title as it Applies in South Africa

Environmental Management

The MPRDA’s requirements for environmental management during prospecting and mining operations

are largely similar to those contained in the Minerals Act. However, now they have been aligned with

the principles and objectives of the National Environmental Management Act, 1998 (Act No 107 of

1998), which is the principal Act governing all environmental matters in South Africa.

Applicants for a mining right are required to conduct an environmental impact assessment and submit

an environmental management programme, while applicants for a prospecting right, mining permit or

reconnaissance permission have to submit an environmental management plan. Prospecting and

mining rights only become effective on the date that the corresponding environmental management

plan or programme has been approved.

In view of long delays, that have often been experienced during the processing of environmental

management programmes in terms of the Minerals Act, new time limits for consultation and approval,

stipulated by the MPRDA, are to be welcomed. Other government departments now have 60 days in

which to comment on environmental management plans or programmes and approval must be done

within 120 days from lodgement of the plan or programme.

Requirements for making financial provision for the remediation of environmental damage, as well as

for the issuing of a closure certificate, are now included in the MPRDA as opposed to the situation

under the Minerals Act where they were dealt with in terms of regulations issued under the Minerals

Act. New features include the requirement that financial provision must be in place before approval of

the environmental management plan or programme and the fact that application for a closure certificate

now becomes compulsory upon lapsing of the right or cessation of activities.

The Mineral and Petroleum Royalty Bill

The logical conclusion of the South African Government’s programme to reform the existing minerals

and mining laws is that the State, now the custodian of those minerals, will impose a royalty. This will

bring the South African dispensation in line with most of the other major mining jurisdictions in the

world, e.g. Canada, Australia, USA. The Government intends to provide for imposition of royalties in

the Mineral and Petroleum Royalty Bill.

The revised bill defines the base of the royalty as “the aggregate of amounts received by or accrued to

the extractor” minus beneficiation cost and transport charges between seller and buyer of the

concentrate. The off-mine charges are therefore been deductible from the royalty base. The

implementation date of the Royalty Bill was 1 May 2009, but this has been deferred to 2010.

Electronic copies of the MPRDA and other regulations can be found at the DME’s website:

www.dme.gov.za.

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Appendix 3 Prospecting Work Programme – Kangala Coal Project

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Appendix 3: Prospecting Work Programme – Kangala Coal Project

The Kangala Coal Project is located approximately 5-10km south of Delmas, Mpumalanga, South

Africa, within the Witbank Coalfield. The project comprises portions of the farms Wolvenfontein

244IR, Middelbult 235IR and Modderfontein 236IR.

Universal Coal proposes an exploration programme designed to verify historical exploration results

and determine the coal deposit limits.

The planned exploration programme is summarised below:-

Phase 1: Data review (3 months) - Completed

Involved the compilation and interpretation of all available historical information and the estimation

of the coal resource base and the coal deposit limits.

Kangala Coal Project

Data Review Budget

Activity Cost (Rands)

Data Acquisition Completed

Data Compilation Completed

Geological Modelling, resource estimation and Competent Persons Report Completed

Equipment and Tools Completed

Total Completed

Phase 2: Classification of Wolvenfontein as a Measured Resource (Completed)

This phase entailed drilling of diamond core holes (conventional TNW) on a 250m x 250m

staggered grid (Figure 1) over the Wolvenfontein projected coal deposit. Approximately 38 holes,

totalling 2,520m were completed at an average drill density of one hole per 12 hectares.

Approximately 660 samples of the coal seams were submitted for proximate analysis (i.e.

moisture, ash, volatile matter, fixed carbon and sulphur content of raw and washed coal) and

determination of the calorific value. Sampling was based on lithological and compositional

characteristics of the coal seams as verified by the down-hole geophysical survey (density) data. .

Kangala Coal Project

Phase 2 Budget

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Appendix 3: Prospecting Work Programme – Kangala Coal Project

Activity Cost (Rands)

Drilling (2,520m at R450/m) Completed

Down hole Geophysics Completed

Surveying Completed

Analysis (660 Samples at R3,000 per sample) incl. of check samples Completed

Geological Services (6 Months) Completed

Geological model and resource estimation Completed

Logistics, consumables Completed

Rehabilitation Completed

Total Completed

Phase 3: Additional Work Required: Middelbult, Modderfontein and southern part of

Wolvenfontein (9 months)

This phase entails infill drilling of diamond core holes (conventional TNW) on a 350m x 350m

staggered grid (Refer to Figure 2). Approximately 50 holes, totalling 2,460m are proposed to be

completed at an average drill density of 1 hole per 12 hectares. Samples (approximately 615) of

the coal seams are proposed to be submitted for proximate analysis (i.e. moisture, ash, volatile

matter, fixed carbon and sulphur content of raw and washed coal) and determination of the

calorific value. Sampling will be based on lithological and compositional characteristics of the coal

seams as verified by the down-hole geophysical survey (density) data.

Kangala Coal Project

Phase 3 Budget

Activity Cost (Rands)

Drilling (2,460m at R450m) 1,312,000

Down hole Geophysics 80,000

Surveying 10,000

Analysis (615 Samples at R3,000 per sample), incl. of check samples 1,875,000

Geological Services (3 Months) 150,000

Geological model and resource estimation (inclusive of CPR) 300,000

Logistics, consumables 50,000

Rehabilitation 30,000

Total 3,807,000

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Appendix 3: Prospecting Work Programme – Kangala Coal Project

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Figure: 1 Map Showing the Planned Drill Grid for Phase I Exploration

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Figure: 2 Map Showing the Planned Drill Grid for Phase II Exploration

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