CAPITAL EXPENDITURE AND PROJECT PIPELINE

Exxaro has completed the review and prioritisation of its capital expenditure and project pipeline subsequent to the global economic downturn. The group will focus on the successful implementation of committed expansions and projects which meet its investment hurdle rate within a board approved mandate.

Coal
The expansion of the Grootegeluk mine to supply Eskom’s station coal for 40 years, is progressing in line with the planned schedule to supply the first coal during the last quarter of 2011. Full production from 2014 onwards is envisaged. The project, at an estimated capital cost of R9 billion, is in the detailed engineering design phase and orders will be placed during the next six months for long lead capital items.

The pre-feasibility study and geological exploration work on a potential greenfields mine adjacent to the Grootegeluk mine (Thabametsi mine) with the capability of supplying the market with power station and metallurgical coal is being progressed with planned completion by the end of 2009. The development is aligned with Eskom’s request for proposals for stations.

An integrated infrastructure plan is being implemented for the Waterberg coal fields together with the relevant stakeholders focusing on the supply of housing, water, rail and road infrastructure.

Exxaro entered into a prospecting joint venture agreement with Sasol Mining (Pty) Limited (Sasol) for the development of a new coal mine in the Waterberg to supply Sasol’s project (Project Mafutha). The development is in the pre-feasibility stage with the mining of a bulk sample being planned before the end of 2009 for large-scale testing at the Sasol Synfuels Secunda plant.

Exxaro concluded an option agreement with Coal of Africa Limited which affords Exxaro a minority participation right in the Makhado coking coal project in the Limpopo province. The exercise of the option is subject to a detailed technical and economical due diligence on the project.

Two of the four retorts of the Sintel Char plant at Grootegeluk mine for the production of reductants for the ferroalloy industry that had been delayed after the failure of the refractory lining, have been commissioned with the first char produced during June 2009. The other two retorts will be commissioned by the end of October 2009 with full production of 140ktpa of char estimated to be reached during 2010. The quality of the product is in line with market expectations and the entire production offtake has been secured.

The potential bord-and-pillar mining operation pre-feasibility study of the hard coking coal resource on the Moranbah South properties in Queensland, Australia, has commenced with exploration drilling being prioritised to finalise this study during the first half of 2010. Exploration work on the potential long-wall mining project is also progressing according to plan to confirm that Moranbah South can produce premium quality hard coking coal in conjunction with our joint venture partner Anglo Coal Australia.

Mineral Sands

The approval of the mining right for the Fairbreeze C Extension portion of the Fairbreeze project, which in the past prevented this project from proceeding, was granted. However, in light of prevailing market conditions, the project is currently under review.

The feasibility study of the Port Durnford project, located to the south-west of Hillendale mine, was completed during the first half of 2009. This mine could supply the KZN furnaces for longer than 20 years, however, current economic conditions are impacting negatively on the financial viability of the project. This project is therefore currently also under review.

The development of a mine in Madagascar (Toliara Sands project) will not be economically viable due to the deposit size, grades, location and infrastructure development required. Exxaro does not plan any further exploration in this area and is in the process of exiting from the option agreement.

The 100% funded Exxaro pigment plant expansion at Kwinana, at an expected cost of AU$100 million, remains on track and on budget for commencement in the first half of 2010.

As a result of the increased life expectancy of Tiwest’s existing dry mining operations will now only cease in 2011. A pre-feasibility study of the Dongara mine was completed in 2008. However, in the current economic circumstances, the project payback period is insufficient to warrant investment. As an alternative, a pre-feasibility study to replace the dry mining capacity with an expansion of the Cooljarloo dredge operation is underway and will be completed in the fourth quarter of 2009.

An exploration programme to identify an inferred or indicated resource on the Tiwest Cooljarloo West tenements will involve the drilling of 25 000 metres in the second half of 2009 to confirm intial exploration results.

Base Metals and Ferrous Metals

The commercialisation of the AlloyStream™ technology progressed to pre-feasibility level for a site at Coega. Further work on forming strategic alliances is continuing to optimise the business case for the development of the manganese project. A successful campaign on the beneficiation of nickel ore was also completed. Optimisation studies to fast track the development of both the manganese and nickel projects are in progress.