Following the credit crisis and global economic meltdown in the second half of 2008, Exxaro is reviewing its capital expenditure programmes, including sustaining capital, as well as its project pipeline. The group will focus on successfully implementing committed expansions while reprioritising other identified growth opportunities.

Coal  

Grootegeluk Medupi expansion

Exxaro board approval for the coal supply agreement and implementation of the project to expand Grootegeluk mine, at a capital cost of R9 billion, was obtained in August 2008. In September 2008 an agreement was concluded with Eskom for the supply of 14,6Mtpa of power station coal for 40 years from Grootegeluk mine to Eskom’s adjacent Medupi power station, currently under construction. The first coal is to be supplied in the last quarter of 2011 with full production from 2014.

Waterberg mine

A pre-feasibility study and geological exploration work on a potential greenfields mine adjacent to Grootegeluk mine is being progressed. This potential mine has the capability of supplying the market with power station and metallurgical coal.

Sintel char project

The commissioning of the Sintel char plant at Grootegeluk mine to produce reductants for the ferroalloy industry is behind schedule. This is due to delays experienced with construction contractors. Ramp-up of the facility began in August 2008 but was delayed to February 2009 when the refractory lining of the four retorts failed during the heating process. All retorts should be commissioned by end-June 2009, with full production of 160ktpa estimated by the end of the year.

Market coke

A feasibility study on producing high-quality market coke from semi-soft coking coal produced at Grootegeluk mine is under review.

Mafube coal mine

Commissioning of the Mafube expansion project, at a capital cost of R1,9 billion, in which the group is a 50:50 joint venture partner with Anglo Coal, has been completed and ramp-up to full capacity was reached by end-2008. At full production, the mine will produce 3Mtpa of export steam coal and 2Mtpa of power station coal.

Inyanda coal mine

Commissioning of the beneficiation plant at the R290-million Inyanda mine was successfully completed in the second quarter of 2008. Full production of 1,5Mtpa, mostly for the export market, was exceeded by the end of the year.

The Blackhill railway siding has been successfully commissioned and is being operated at design capacity. This is currently the only train-loading facility in Exxaro where Jumbo railway wagons can be loaded to full capacity.

Eerstelingsfontein reserve

All mining authorisations and regulatory approvals for mining the Eerstelingsfontein reserves near Belfast to supply 1Mtpa of product to the local market have been obtained. Full production is expected by the second quarter of 2009.

Moranbah South resource

Exploration of the hard coking coal resource on the adjacent properties of Moranbah South and Grosvenor South in Queensland, Australia, in joint venture with Anglo Coal Australia, is progressing according to schedule. Exploration is focused on geological work to delineate long-wall mining resources. The potential for bord-and-pillar mining operations will also be explored. Moranbah South has the potential to produce large volumes of premium-quality hard coking coal.

Diepspruit reserve

Development of the Diepspruit reserve at New Clydesdale (NCC) is planned to produce its first coal by the second quarter of 2009. At full production, the R136-million project will produce 1,3Mtpa run-of-mine coal for beneficiation at NCC for supply to the export steam coal market.

Co-generation project

Exxaro formed a joint venture with Promethium Carbon to develop co- and on-site generation projects of up to 200MW each. The bankable feasibility phase for some of these projects is nearing completion and discussions are under way with host parties on offtake agreements and contractual arrangements. It is anticipated that three projects will be initiated in 2009.

Botswana Gas project

Exxaro has concluded an agreement with Sekaname (Pty) Limited to begin a coal-bed methane exploration programme in Botswana. The focus of the study will be to prove economic gas fl ow rates from coal-bed methane seams. The purpose of the joint venture, in which Exxaro has a 75% interest, is to explore the feasibility of creating a gas-based energy business.

Mineral sands

Fairbreeze mine

The feasibility study for the construction of the Fairbreeze mine, south of the existing Hillendale mine, is being updated with start of construction targeted for the second half of 2009. Production is planned for the first half of 2011 after mining Braeburn and Braeburn extension in the next three years.

Port Durnford mine

The feasibility study for Port Durnford mine, south-west of Hillendale mine, will be completed in 2010. This mine could supply the KZN furnaces for more than 20 years, if proven viable.

Centane deposit

A drilling campaign to confirm the Shell-Rhoex results for the Centane deposit in Eastern Cape took place in August 2008. Samples analysis will be completed in 2009.

Toliara Sands

The Toliara Sands project’s feasibility study for the Ranobé deposit in south-western Madagascar is still under way. Further process work is being done on ilmenite product from the Ranobé deposit. An aerial radiometric and magnetic survey was completed for the northern Monombo-Marombe area. Results from this survey will determine whether to continue with further drilling.

Kwinana pigment expansion

Implementation of the TiwestKwinana pigment expansion project for an additional 40ktpa production is on track, with commissioning targeted for the first quarter of 2010. Exxaro is funding 100% of the A$100-million expansion project.

Dongara

The Dongara feasibility study, which forms part of the Tiwest joint venture, is under way and will be completed by 2009. Given the increased life expectancy of the Tiwest current dry mine operation at Cooljarloo, production at Dongara is not planned to start before 2011. This deposit has the potential to provide feedstock to the Tiwest mineral separation plant for six years. Alternatives for Dongara are being investigated. Exploration at Cooljarloo West has started and will continue in 2009.

Base and other metals

Turkey iron ore and base metal opportunity

Exploration activities in Turkey are still in their early stages with further participation being critically reviewed in the current depressed economic environment. The area includes zinc, lead copper and iron ore prospects. A total of R110 million was expensed for the year on acquisition and exploration costs.

More than 11 000 metres of mainly iron ore-focused exploration drilling was completed between April and October 2008. Exploration activities have been suspended for the winter and will resume again in the second quarter of 2009.

Technical evaluation on a bulk ore sample is also in progress at the Exxaro research and development test facilities. Results are expected towards the end of 2009.

Chifeng refinery

The feasibility study to expand Chifeng refinery by a further 100ktpa was completed in the first half of 2008. After reviewing the prospect, Exxaro concluded that the planned expansion does not meet its investment criteria, and decided not to participate. The expansion plans have since been indefinitely delayed as a result of the substantial decline in demand for zinc metal.