Rusticana Desktop Study Report Final Report March 2015

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Desktop Study Report for

Rusticana Coal Exploration Project

Mpumalanga,

Republic of South Africa

Effective Date: 01.03.2015

Competent Persons:

Lovemore Mauled, DipHE Geol (ZSM)

Cert. Nat. Sci (Geol. Sciences)

200250/13

Troth Saindi(Director, Geoservices):

B.Sc Hons. (Geology),Pr. Sci. Nat (Geol. Sciences)

400171/13

68 Summerfields

Gibson Drive West

Buccleuch

Sandton

2090

Republic of South Africa

Tel: 011 053 9042 Fax: 086 519 3425

Email: [email protected]


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Desktop Study Report for Rusticana Coal Project, Mpumalanga.

Prepared by Geoservices and Communications RSA (Pty) Ltd

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EXECUTIVE SUMMARY

Geoservices and Communiccations RSA (Pty) Ltd was commissioned by Mr Amos Maswanganyi ofPhandasiphile Mineral Resources (Pty) Ltd to undertake a desktop study of the Rusticana Coal

Project situated in the Highveld Coal Field situated in the Administrative/Magisterial District of

Standerton in Mpumalanga. The aim of this exercise was to create a geological model, produce

an exploration target, estimate an exploration budget, ascertain a fair value for the asset and

ultimately determine the potential of this project for coal, and if possible (with availability of

sufficient data) estimate the tonnage of the resource (to an inferred category).

Drill hole information was obtained in electronic format from the Council for Geoscience. Coal

Seam depth data was obtained for drill holes within 5 km of the project area. However, very

little geological information (and no coal seam quality data) is available in the public domain

regarding any historical boreholes within the Rusticana coal project boundaries. In the southern

regions of the Highveld coal field, only the No. 4 Seam, and in much localised areas the No. 2

Seam, attain mineable dimensions of economic importance.

The resultant geological model shows that the coal seams either abut against (or also lie below)

the palaeo-high topography in the east with seam 4 being the most widespread, followed by

seam 2.

However, the few historical boreholes with data found within 5km of the project are not

sufficient to come up with a resource estimate. This data has, however indicated that Rusticana

project area can be a potentially good coal exploration target that requires further work to be

done to move the project up the value curve.

A drilling programme to upgrade this resource from an exploration target to inferred and

indicated resource has been attached in Appendix 2. This drilling should take about 8.5 months

to complete and cost (including a Competent Persons Report) approximately ZAR 32 million

(VAT included).

Only one historical hole was identified within the project area (BH 1943823). However, limited

data for the same borehole was found from the public domain.

If the Rusticana Coal Project area can be upgraded from a coal occurrence/exploration target

through inferred to an indicated resource, via the proposed drilling programme, without there

being a decrease in the resource size, then the possible upside potential value could increase.


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DISCLAIMER AND RISKS

This report was prepared by Geoservices and Communications RSA (Pty) Ltd (Geoservices). In the

preparation of the report, Geoservices has utilised information relating to operational methods and

expectations provided to them by various sources. Where possible, Geoservices has verified this

information from independent sources after making due enquiry of all material issues that are required in

order to comply with the requirements of the SAMREC Code. Geoservices and its directors accept no

liability for any losses arising from reliance upon the information presented in this report.

OPERATIONAL RISKS

The business of mining and mineral exploration, development and production by their nature containsignificant operational risks. The business depends upon, amongst other things, successful prospecting

programmes and competent management. Profitability and asset values can be affected by unforeseen

changes in operating circumstances and technical issues.

POLITICAL AND ECONOMIC RISK

Factors such as political and industrial disruption, currency fluctuation and interest rates could have an

impact on future operations, and potential revenue streams can also be affected by these factors. Themajority of these factors are, and will be, beyond the control of any operating entity.


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TABLE OF CONTENTS

1 INTRODUCTION AND TERMS OF REFERENCE 62 SCOPE OF THE PROJECT AND REPORT 63 COMPETENT PERSONS DECLARATION 74 GENERAL INFORMATION 7

4.1 Project Description and Location 74.2 Size of the Licence Area 74.3 Access and Transport Infrastructure 114.4 Climate and Topography 124.5 General Vegetation 134.6 Adjacent Properties 134.7 Infrastructure 15

4.7.1 Power Supply 154.7.2 Water Supply 16

4.7.3 Communication 164.8 Legal Aspects and Tenure 16

4.8.1 Prospecting Rights 164.8.2 Shareholding 174.8.3 Surface Rights 174.8.4 Royalties 184.8.5 Environmental Assessment 184.8.6 Other Agreements 18

5 HISTORY OF THE PROJECT 185.1 Prior Ownership 185.2 Historical Exploration and Development 195.3 Historical Coal Resources and Core Reserves 195.4 Historical Production 19

6 REGIONAL GEOLOGY 217 COAL SEAMS 228 LOCAL GEOLOGY 26

8.1 Coal Quality 298.1.1 Important Parameters of Coal 298.1.2 Rusticana Coal Quality 30

8.2 Drainage 318.3 Historical Drill Holes 318.4 Economic Geology (Seam Quality) 338.5 Exploration Potential 33

8.5.1 Rusticana Farm Coal Exploration Potential 348.6 Coal Resource Classification 35

8.6.1 Types of Coal 358.6.2 Rusticana Coal Resource Classification 36

9 COMMODITY MARKET ASSESSMENT: COAL 379.1 Coal Consumption 379.2 Market Approach 389.3 Previous Evaluation 389.4 Risk Analysis 39

10 EXPLORATION PROGRAMME 3911 CONCLUSION AND RECOMMENDATIONS 4012 DATE AND SIGNATURES 4213 REFERENCES 4314 APPENDICES 43


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TABLES

Table 1: Summary of the prospecting right being investigated 6

Table 2: Details of prospecting right held by Phandasiphile Mineral Resources (Pty) Ltd 17

Table 3: Rusticana farm tile deed number and owner 18

Table 4: Historical drill holes with coal data 20

Table 5: General summary of the Highveld Coal Seams 23

Table 6: Typical analytical results for the Highveld Coal Field 29

Table 7: Geological log extract of boreholes BH 1943945 and BH 1944292 30

Table 8: Extract of lithological log from borehole BH 1943945 35

Table 9: Principle Risk Rusticana Coal project 38

Table 10: SAMREC Code for Coal Exploration Guidelines 39

Table 11: Estimated Exploration Expenditure 40

FIGURES

Figure 1: Location of the Rusticana Coal Project Area. ................................................................ 8

Figure 2: Rusticana Coal Project in relation to surrounding towns ................................................... 9

Figure 3: Coal fields of South Africa ..................................................................................... 10

Figure 4: Infrastructure Project area in relationship to Railway lines, Towns and roads. .................... 11

Figure 5: Infrastructure Project area in relationship to Railway lines, Towns and roads. .................... 11

Figure 6: Plantation of Soya Beans on farm Rusticana ............................................................... 13

Figure 7a: Power stations in Mpumalanga in relation to Rusticana Coal Project ................................ 14

Figure 7b: Other Coal projects adjacent to the Rusticana Coal Project ........................................... 15

Figure 8: Power / Electricity Infrastructure ........................................................................... 16

Figure 9: Rusticana Coal project Plan and Boundaries ................................................................ 17

Figure 10: Historical Boreholes drilled in and around Rusticana farm ............................................. 19

Figure 11: Geological Map and historical drill hole positions in the Rusticana Project area ................... 20

Figure 12: Lithostratigraphic subdivisions of the Karoo Supergroup ................................................ 21

Figure 13: Typical Stratigraphic Profile through the Highveld Coal Field ......................................... 24

Figure 14: Stratigraphic column showing the coal seams ............................................................ 25

Figure 15: Rusticana Local Geology Map ................................................................................ 26

Figure 15a: Local Geology showing surrounding geology ............................................................. 27

Figure 16: Coal Seamthickness isopach for Rusticana farm .......................................................... 28

Figure 17: Geology and drainage around the Rusticana Coal Project .............................................. 31

Figure 18: Distribution of historical boreholes around Rusticana farm ............................................ 32

Figure 19: Drillholes with coal seam data (red circles) .............................................................. 32

Figure 20: Some typical stratigraphic columns in the highveld coal field (after Jordan 1986) ................ 34

Figure 21: Seam No 4 historical drill hole intersections at Rusticana ............................................. 35

Figure 22: Favorable geological location of the Rusticana Coal Project ........................................... 41


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1 INTRODUCTION AND TERMS OF REFERENCE

Geoservices and Communications (Pty) Ltd (Geoservices) was commissioned by Mr. Amos

Maswanganyi to undertake a desktop study on the potential of the prospecting license held by

Phandasiphile Mineral Resources (Pty) Ltd (Phandasiphile).

This Report is a full evaluation of the farm Rusticana 660 IR which forms the Rusticana Coal

Project. The report is a compilation of the information obtained during literature search as well

as data supplied to Geoservices by Amos Maswanganyi. Some of the drill hole information was

obtained electronically (in Excel format) from the Council for Geoscience (CGS) database.

This data was used for purposes of building a geological model and produce an exploration target

of the project area, but the drill hole information could not be physically verified by

Geoservices. Included in the report are the findings of the reconnaissance exploration trip

undertaken to the license area on the 16th

of February, 2015.

The project is located on theHighveld Coal Field in Mpumalanga Province.

The following table summarises the prospecting right which is the focus of this report:-

Table 1: Summary of the Prospecting Right being investigated

Farm NameProspecting Right

No.

Date

GrantedExpiry Date Area (ha) Applicant

Rusticana 660 IR MP30/5/1/1/2/4930PR 08/05/2014 07/05/2017 1763.74

Phandasiphile

Mineral Resources

(Pty) Ltd

The effective date of the report is 01stMarch, 2015.

This report is an open and transparent disclosure of all material information that investors and

their professional advisors would reasonably require, for the purpose of making a reasoned and

balanced judgment regarding the exploration potential of the licence. The competent persons

involved in this Report are members in good standing with their respective professionalinstitutions.

2 SCOPE OF THE PROJECT AND REPORT

The scope of the project was to collect and compile the historical and current data for the

Rusticana Coal Project. Once the data had been compiled into a suitable format, a geological

model was created and but a resource estimate could not be determined due to insufficient

data. An exploration programme and estimated budget was also completed that would take the

asset up the value curve.


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3 COMPETENT PERSONS DECLARATION

Geoservices and Communications RSA (Pty) Ltd (Geoservices) is an independent mineral

exploration and project management company. Neither Geoservices nor its staff have any

interest capable of affecting its ability to give an unbiased opinion, and will not receive any

pecuniary or other benefits in connection with this assignment, other than normal consulting

fees. The authors of this Report are members in good standing of appropriate professional

institutions. The qualifications and professional registrations of the competent persons who have

contributed to this evaluation are provided at the end of this Report. In compiling this Report,

Geoservices has relied upon information supplied by Amos Maswanganyi, the Council for

Geosciences and data researched on the public domain such as the world-wide web/internet.

The following persons are responsible for the preparation of the Report:-

Geological Valuation: Lovemore Mauled:

DipHE Geology, AZSM, GSSA, Cert. Nat. Sci (Geological Sciences) Reg. No. 200250/13.

Geological Valuation: Troth Saindi

B.Sc. (Earth Sciences), B.Sc. Hons (Geology), MGSSA

Pr.Sci.Nat (Geological Sciences) Reg. No.400171/13

The authors of this report herein solemnly declare that they have been on site at the Rusticana

coal project on 16thFebruary, 2015 for verification of literature data.

4 GENERAL INFORMATION

4.1 Project description and location

The Rusticana coal project is located in the Mpumalanga Province of South Africa (seeFigure 1

andFigure 2)approximately 125 km south east of the city of Johannesburg and approximately 35

km W of Standerton in Mpumalanga; 32km ENE of Villiers and 32km SW of the town of

Greylingstad. The population of Standerton is approximately 74021 whilst the population ofVilliers is around 11240 according to the GeoNames geographical database.

4.2 Size of License Area

The Rusticana coal project covers a total of 1763.74 hectares and covers the whole of farm

Rusticana 660 IR.


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Figure 1: Location of the Rusticana Coal Project Area.

.


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Figure 2: Rusticana Coal Project in relation to surrounding towns


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Rusticana Coal Project, Mpumalanga Desktop Study 2015

Prepared by Geoservices & Communications RSA (Pty) Ltd

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The Rusticana coal project area is located near the south western edge of the Highveld coal

field. Figure 3 depicts the location of major South African coal fields, showing the position of

the Rusticana coal project on the Highveld coal field.

Figure 3: Coal fields of South Africa


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4.3 Access and Transport Infrastructure

Standerton, Villiers, Greylingstad and surrounding areas have a well-developed road and rail

infrastructure. A railway line running NW to SE is located approximately 20.7 km from the centre

of the Rusticana coal project and another segment of the railway line (running NE-SW) lies

approximately 22.3 km SE of the project area. Numerous roads connect the project area withthe nearby towns of Standerton, Villiers and Greylingstad.Figure 4 illustrates the general road

and rail infrastructure of the region. Figure 5 illustrates the well graded gravel road that runs

east west on the Rusticana property linking the towns of Standerton and Villiers.

Figure 4: Infrastructure Project area in relationship to Railway lines, Towns and roads.


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Figure 5: Infrastructure Project area in relationship to Railway lines, Towns and roads.

4.4 Climate and topography

The elevation of the Rusticana Prospect area ranges from 1509 to 1 579 mamsl. Generally, the

surface topography of the project area is fairly flat with a gentle dip towards the south.

The Standerton region is characterized by moderate summers and dry and cold winters. The

average midday temperature ranges from 14C to 26C. The annual rainfall varies between 650

750 mm with most rainfall occurring during summer. Rainfall is lowest in July and highest in

January.

Thick soils cover the landscape which is mostly under cultivation. Crops mainly grown in the

area are maize, soya beans and sorghum. Much of the vegetation has, however, been cleared to

be utilized for mixed farming activities.


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Figure 6: Plantation of Soya beans on farm Rusticana.

4.5 General vegetation

The natural vegetation in any arable areas has been replaced with cultivated crops. Remaining

grassland areas are used for cattle grazing. The grass cover in these areas is relatively thin.

Trees and tiny shrubs occur only along drainage lines and in areas of rocky outcrops.

Due to the cultivation of the land, there are very few (if any) areas of natural grassland

remaining.

4.6 Adjacent Properties

Mining in the Highveld coal field was largely initiated by the development of the coal-fired Kriel

and Matla power stations. Collieries were established to supply feed stock to these power

stations. There are five mines owned by Sasol mines around the Secunda area. All the Sasol

mines are dedicated coal suppliers to the Sasols operations where the coal is used as a

feedstock in the production of liquid fuels and chemicals (SACSMM18). Forzando and Dorstfontein

Collieries produce coal for export, whereas Anglos New Denmark Colliery near Standerton is a

dedicated supplier of coal to Eskoms Tutuka power station. Figure 7 below shows some of the

power stations on the Highveld coal field.


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Figure 7a: Power Stations in Mpumalanga in relation to Rusticana Coal Project

Rusticana coal project area is adjacent to other potential coal projects: Anglo American project

lies adjacent to the north east of Rusticana while the intensely drilled New Denmark project lies

30 to 35 km north east of Rusticana (Figure 7b).

Silver Bank coal project lies 12 to 15 km north west of the Rusticana project.

Rusticana Project therefore is one area in the Highveld coal field that needs more work to be

done as it lies in a potential coal field as evidenced by the existence of some of the coal

producing projects within the coal field.


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Figure 7b: Other Coal projects adjacent to the Rusticana Coal Project

4.7 Infrastructure

4.7.1 Power Supply

This region is well served by power lines and electrical sub-stations. These power transmission

lines serve mines, industry, farms and local settlements in the area. Figure 8 depicts the

Rusticana coal project area in relation to adjacent roads, power lines and railway lines.


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Figure 8: Power/ electricity infrastructure

4.7.2 Water Supply

The southern-most part of Rusticana coal project lies adjacent to the Vaal River so water supply

should be plentiful. However, it should be noted that the proximity of the Vaal could result in

environmental issues regarding this water usage. Man-made dams are found on the Rusticana

farm property.

4.7.3 CommunicationsTelephonic communication at the project areas would be either via cellular telephone networks

or via landline services.

4.8 Legal Aspects and Tenure

4.8.1 Prospecting Rights

The legal aspects and tenure relating to the Project are detailed in the table below and a copy

of the relevant prospecting right has been included in Appendix 1 of this report. The

prospecting rights were registered with the Department of Minerals & Energy on the 8

th

May 2014.


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Table 2 summarises the details of the prospecting right while Figure 9 (below) shows the map of

the prospecting right area.

Table 2:Details of Prospecting Right Held by Phandasiphile Mineral Resources (Pty) Ltd

Farm Name Prospecting RightNo.

DateGranted

Expiry Date Area (ha) Applicant

Rusticana 660 IR MP30/5/1/1/2/4930PR 08/05/2014 07/05/2017 1763.74

Phandasiphile

Mineral Resources

(Pty) Ltd

Figure 9: Rusticana Coal Project Plan and Boundaries

4.8.2 Share Holding

Mr Amos Maswanganyi holds 100% of the shares in Phandasiphile Mineral Resources (Pty) Ltd.

4.8.3 Surface Rights

The Rusticana coal project area is predominantly located on privately owned land. The company

would have to seek approval from the landowners for the surface use of any of this land, even

though it is within the boundaries of the prospecting permit.


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The following table (Table 3) lists the owner and title deed numbers for the Rusticana Coal

Project Area.

Table 3: Rusticana Farm Title Deed Number and Owner

Farm Portion Owner Title Deed No.

Rusticana 660 IR 1 Andre Tonkin Family Trust T47996/1995

Rusticana 660 IR 2 Interstate Clearing 060 (Pty(Ltd) T889/2012

Rusticana 660 IR 3 Junior Tonkin Family Trust T5938/2011

Rusticana 660 IR 4 Andre Tonkin Family Trust T47996/1995

Rusticana 660 IR 5 Tonika Boeredery cc T8852/1990

Rusticana 660 IR 6 Odendaals

Remaining extent

4.8.4 Royalties

There are no royalties or payment agreements in place at this stage that Geoservices is aware

of.

4.8.5 Environmental AssessmentNo environmental impact assessment (EIA) studies have been conducted to date. An

environmental management programme (EMP) was submitted with the mineral rights application

in order to get the prospecting rights executed. An environmental impact assessment (EIA)

will follow if the project delivers an economical mineable deposit. Rehabilitation of the

environment as close as possible to current status will be required after the completion of the

exploration programme.

4.8.6 Other Agreements

Geoservices is unaware of any other agreements which will materially affect exploration, mining

and production at the project.

5 HISTORY OF THE PROJECT

5.1 Prior Ownership

Anglo American Coal previously owned the project site.


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5.2 Historical Exploration & Development

Anglo American Coal drilled one borehole, BH 1943823, near the western boundary of the

project area (Figure 10). Geological information such as log sheets, sample data or other

findings obtained for this particular drill hole was availed by Mr Maswanganyi.

Figure 10: Historical boreholes drilled in and around Rusticana Farm

5.3 Historical Coal Resources & Coal Reserves

Currently no coal resources or reserves are available in the public domain and therefore none

are stated.

5.4 Historical Production

According to all known information available no mining activities have taken place on this

property.

Data available for the drill holes that are near Rusticana project area is shown in the table

below (Table 4).


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Table 4: Historical drill holes with coal data

BH Y X FROM TO THICKNESS

3049312 -265807.35 285244.79 212.2 215.28 3.08

1942326 -265753.51 285406.49 0 0 0

1944292 -265751.91 285456.16 182.83 183.97 1.14

1943945 -265812.4 285533.13 191.93 194.07 2.14

3007853 -270116.15 285315.74 173 174.8 1.8

1943823 -265926.1 285357.7 186.25 186.94 0

Numerous other historical drill holes exist in the vicinity of the project area drilled by Anglo

American Coal and various other companies (Figure 11 below). One drill hole was drilled on the

south western boundary of the Rusticana project but there is limited data available for it

(sourced out from Mr Amos Maswanganyi).

Figure 11: Geological Map and Historical Drill Hole Positions in the Rusticana Project Area

Information from CGS was used to determine the exploration potential of this project area, but

no drill hole logs could be verified.


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6 REGIONAL GEOLOGY

South Africas coal deposits form part of the Permian age Karoo Supergroup which was deposited

on the Gondwanaland supercontinent. The Main Karoo basin is underlain by the Kaapvaal Craton

in the north and the Namaqua-Natal Metamorphic Belt in the south. The Karoo Supergroup

upwards from the base is sub-divided into the Dwyka Group, Ecca Group, Beaufort Group,

Molteno Formation, Elliot Formation, Clarens Formation and the volcanic rocks of the

Drakensberg Group. The vast majority of coal beds occur in the Ecca Group, but coal also occurs

in the Beaufort Group and the Molteno Formation.

The various lithostratigraphic subdivions of the Karoo Supergroup are shown in Figure 12 below.

Figure 12: Lithostratigraphic subdivisions of the Karoo Supergroup

During coal deposition, fluvio-deltaic complexes prograded in a southerly direction across an

epicontinental platform, resulting in the infilling of pre-existing glacial valleys. These glacial

valleys controlled the flow of water during deposition as well as the extent and position of the

swamps and resultant coal development. Present day coal beds are restricted to some of these

valleys.


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The Highveld Coalfield is located in south-eastern Mpumalanga Province, immediately south of

the Witbank Coalfield. The width of the coalfield is some 95km, stretching from Nigel and

Greylingstad in the west to Davel in the east, and is about 90km long, from just north of Kriel to

beyond Standerton in the south and covers an area of approximately 7,000km2. After the

Witbank Coalfield, the Highveld Coalfield is the next largest producing coalfield, on a tonnage

basis, in South Africa.

The coalfield is host to up to five coal Seams contained within the middle Ecca Group sediments

of the Karoo Supergroup. The Karoo Supergroup comprises sediments ascribed to deposition in

glacial to fluvio-glacial and from shallow marine to fluvio-deltaic environments. The Karoo

Supergroup comprises the following Groups (in decreasing age), although not all Groups are

completely represented in the Highveld Coalfield to the present day erosion surface: Dwyka,

Ecca, Beaufort, Stormberg and Drakensberg.

The Ecca Group comprises sediments from the following formations (in decreasing age):Pietermaritzburg, Vryheid and Volksrust.

The five identified coal Seams contained in the Vryheid Formation (middle Ecca Group) are

named, from the base up, as follows: Number 1 Seam (No. 1 Seam, S1), Number 2 Seam (No. 2

Seam, S2), Number 3 Seam (No. 3 Seam, S3), Number 4 Seam (S4 whichconsists of a dull to dull-

lustrous coal which is normally only suitable for local power generation, or Sasol feed-stock) and

Number 5 Seam (No. 5 Seam, S5).

In certain areas of the coalfield, the No.4 and No.2 Seams are split by clastic partings and in

those areas the Seams are called the No.4 Upper and Lower Seams and the No. 2 Upper andLower Seams.

The coalfield is characterised by the fact that in the northern regions, all the coal seams, with

the exception of the No.3 Seam, attain mineable thicknesses with economic potential, while in

the southern regions, only the No.4 Seam, and in very localised areas the No. 2 Seam, attain

mineable dimensions of economic importance.

The depth to the coal seams increases in a southerly direction, e.g. the No.4 Seam can be mined

by opencast in the Kriel (northern) district, while it occurs at a depth of around 200m in the

Standerton (southern) district. The coal Seams are generally flat-lying to gently undulating with

a slight regional dip to the south.

Structurally, the coalfield is relatively undeformed with no prominent folding having been

identified. Small-scale faulting (less than 1m) is not uncommon although large-scale faulting is.

The only large-scale displacements identified are almost always associated with transgressive

dolerite sills, intruded during the waning stages of the Karoo times.

There are two major sills in the coalfield, named the Older and Younger sills. The Older dolerite

sill is non-porphyritic, generally coarse grained and heavily jointed. It occurs at or near thesurface and weathers relatively easily. It attains a thickness of up to 90 m and consists of


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composite sills or a series of splits (which can be up to 40 m thick). The younger sill is

porphyritic. It varies from 5 m to 80 m in thickness and has a finer grain than the older sill.

These sills transgress the coal horizon in various places resulting in the formation of burnt coal

and the displacement of seams, particularly in the central and southern parts of the Highveld

coal field.

These intrusive dolerite sills and dykes are related to the Drakensberg Formation flood basalts.

The dolerite intrusions adversely affect the coal Seams in the vicinity of the intrusions in terms

of coal quality by devolatilising and burning the coal. Large areas of coal have been rendered

uneconomical due to the effects of dolerite intrusions.

The most important economic coal seams are the No.4 Seam and the No.2 Seam. The No.4 Seam

accounts for approximately 80% of the economically recoverable coal within the Highveld

Coalfield. The No. 2 and No. 4 Seams are mined in the northern parts of the coalfield while only

the No. 4 Seam is mined in the southern parts. The bulk of the coal produced is consumed inpower stations and for the production of syn-fuels. A very limited quantity is exported.

7 COAL SEAMS

The Highveld coal field has up to 5 identified coal seams. Information on these seams is

summarised below inTable 5 below.

Table 5: General summary of the Highveld coal seams

Seam No Approximate Thickness Comment

1 1.5 to 2m

Thick near the Town of Arnot but patchy

elsewhere

2 up to 6.8m Appearance and quality varies

3 -- Not common

4 2.5 to 6.5m Dull coal

5 1.8m Bright coal

The Rusticana Project is situated in Highveld coal field whose typical stratigraphy is shown in

Figure 13 below. A dolerite sill of the Karoo dolerite suite lies in the north-west part of theproject. The main economically exploitable coal seams are seam 2 and seam 4. These seams are

expected to lie at depths greater than 150m. The general stratigraphy of the area comprises

siltstone that overlies sandstone, gravel and diamictite. Flaser bedding, cross lamination, cross

bedding, bioturbation and glauconite form the primary sedimentary structures. Interlaminated

mudstone/claystones exist within the area.

Figure 14 below shows that the number 4 coal seam can be subdivided into Seam 4 Upper (4U),

Seam 4 (4) and Seam 4 lower (4L) whilst the number 2 seam is subdivided into Seam 2 Lower (2L)

and Seam 2 (2). The strata overlying the No. 4 seam (the seam of major economic importance inthe coalfield) consist of thick competent sandstone which generally forms good roof.


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Alternating sandstone and gravel portions also exist in the area and they are very common

towards the base of the sequence where they overlie the granitic basement rocks.

At Rusticana the coal bearing Vryheid formation/Madzaringwe formation covers a total area of

approximately 1345 hectare whilst the area covered by the dolerite sill is approximately 333

hectares. Rocks of the Volksrust formation occur in the southern most edge of the project area

which is also adjacent to the northern bank of the Vaal river.

Figure 13: Typical Stratigraphic Profile through the Highveld coal field


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Figure 14: Stratigraphic column showing the Coal Seams


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8 LOCAL GEOLOGY

Generally, terrain is flat to gently undulating. A NW-SE Karoo dolerite sill occurs in the north

western portion if the project area. The coal bearing Vryheid formation (called the Madzaringwe

formation in the Pafuri coalfield) covers the majority of the Rusticana coal project and abuts (or

lies under) the Karoo dolerite sill. The southern-most portion of the project area (adjoining the

Vaal river) is covered by rocks of the Volkrust formation of the Ecca group. The No. 1 Seam in

the Highveld coal field is thin and mainly discontinuous whilst No. 2 Seam ranges between 1.5m

4m thick on average. Irregular shale partings range from approximately 0.11.0 m in thickness.

(LS Jeffrey (2005), Characterisation of South African Coal Fields).

Figure 15: Rusticana local geology map


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Figure 15a. Local Geology map showing surrounding geology

The No. 3 Seam is thin, discontinuous and of poor quality). Generally the No. 4 Seam is 1m to 12

m thick. It is laterally continuous and is the most economically important seam in the area. A

sandstone parting of approximately 2m to 15 m separates No. 4 Upper Seam (14 m) from No. 4

Lower Seam (412 m); thin while a discontinuous No. 4A Seam occurs above No. 4 Upper in

places). The No. 5 Seam can attain thicknesses ranging from 1m-2m.

Structurally, east-west grabens with relatively large throws can be expected. Transgressive or

conformable sills resulted in faulting and tilting of the coal in some areas. Dykes in the coal field

can reach thicknesses of 1m to 4 m. These dykes are ubiquitous and their major direction of

trend is east-west. Minor north-south and north-east trending dykes result in destruction and

burning of the seams. Poor roof and groundwater conditions are common due to the presence of

dykes in some areas of the coal field.

Seam thickness isopachs (Figure 16) modelled for Rusticana farm indicate that 60% of the area is

covered with potential coal seam thickness of 1.0m to 1.5m, and about 12% of the farm has

potential coal seam thickness of 1.5m to 2.0m while only 9% of the farm depicts an isopach of


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0.5m to 1.0m coal seam. These modelled seam thicknesses could be indicative of Seam No. 4

being the widely distributed seam on the farm.

Figure 16: Coal Seam Thickness Isopach for Rusticana

Rusticana Coal Thickness Isopach

Due to insufficient drill hole data on the farm, confident tonnage calculations cannot be

performed for Rusticana farm based on these thicknesses and areas from the models.

It should also be noted that in the case of the Rusticana coal project not much geological

information is available yet to confirm some of the above statements. Very minimal data

(geological logs or complete drill hole data) were obtained for the properties that are in the

vicinity of the project area.


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8.1 Coal Quality

8.1.1 Important parameters of coal

Calorific Value (CV)

The calorific value of coal describes how much energy it can produce when burnt. It is

measured as heat per unit of weight, thus the units are million joules per kilogram

(MJ/Kg).

The Ash Composition (ASH)

The ASH is the non-combustible inorganic residue that remains after coal is completely

combusted.

Volatile Matter (VOL)

This is all coal constituents, with the exception of moisture, which are released upon

heating in the absence of air.

Fixed Carbon (FC)Fixed carbon is used as an index of the yield of coke/char expected upon carbonization.

Total Sulphur Content (TS)

Sulphur content is measured as it represents a possible source of environmental pollution

upon combustion. Thus, a coal with low sulphur is preferred for combustion purposes.

Seam Thickness

The measured seam thickness (vertical/true) of each individual seam in a drill hole.

A typical suite of analysis results of various coal operations in the Highveld coalfield is shown in

Table 6Error! Reference source not found.below.

Table 6: Typical analytical results for the Highveld coal field.

% CV H2O Ash VM S

V E RSF I RoVrand MJ/kg % % % %

Strip Mining 33 4 25 38 0.59 20.4 5.5 27.2 23.4 0.9

Bord and Pillar 33 5 27 35 0.65 23.4 4.2 21.2 22.8 0.7

Matla Nos. 2, 4 and 5 Bord and Pillar 30 4 26 40 0.6 22.4 5.6 21.8 25.2 1.2

New Denmark No. 4 Longwall Stoping 26 4 29 41 0.62 21.7 4.3 26.4 22.5 1.0

Bosjesspruit No. 4 Lower Seam Bord and Pillar 22 4 36 38 0.61 22.5 5.1 22.2 21.4 1.0Brandspruit No. 4 Lower Seam Bord and Pillar 20 5 31 44 0.63 22.9 5.1 20.1 22.6 0.6

Middelbult No. 4 Lower Seam Bord and Pillar 28 2 27 43 0.62 23.9 4.9 19.4 24.1 0.8

Twistdraai No. 4 Lower Seam Bord and Pillar 21 3 37 39 0.6 22.4 4.5 23.3 22.6 1.1

Syferfontein Nos. 4 and 5 Bord and Pillar - - - - - 20.7 5.4 27.3 24.7 0.8

Maceral Analysis (%)Mine

Kriel No. 4

Seam Type of Mining

The No. 2 Seam contains low-grade bituminous coal with an ash content of 2235% and a CV of

2023 MJ/kg. In areas where the No. 2 Seam is of better quality and has good washability

characteristics, like in Leandra, a coal product of 27 MJ/kg at yields of greater than 70% can be

produced.


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The No. 4 Seam generally contains mainly low-grade bituminous coal with an ash content of 20

35% and a CV of 1825 MJ/kg. However, the ash content can increase to 40% and CV can drop to

15 MJ/kg in the upper one to two metres. In areas where the seam is much thicker the ash can

be as low as 21% with the CV about 23 MJ/kg in the lower three to four metres of the seam

(Jordaan). The No. 4 Upper Seam quality is extremely variable but the seam generally contains

low-grade bituminous coal with approximately 25% ash content and a CV of 22 MJ/kg (Jordaan).

The No. 5 Seam has better quality coal than the other seams, with a raw in situ CV of > 25

MJ/kg, ash and volatile matter contents of 19% and 32% respectively. It can be a source of

metallurgical coal, such as is mined at the No. 2 Mine at Kriel Colliery (Barker). (source:

Characterization of the coal resources of South Africa L.S. Jeffrey)

8.1.2 Rusticana Coal Quality

Only two boreholes (BH 1944292 & BH 1943945) drilled close to the Northern boundary ofRusticana farm (Figure 10) have coal quality data which cannot be used to conclusively reveal

the quality of coal expected on the farm.

The associated coal seam qualities obtained for the drill holes BH 1944292 and BH1943945 are

shown in table 7 below:

Table 7: Geological Log extract of Boreholes BH1943945 and BH1944292

BHID Sea m na me Se am ra nk ample fro Sa mple to Rd from Rd to Yie ld a lorific value H2O Ash Vola tilesFixed ca rbon Sulphur

1943826

1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] S EAM 191.93 192.54 F140 F150 4.4 24.39 5.3 16.6 26.3 51.8 1.03


1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] S EAM 191.93 192.54 F160 F170 32.2 19.05 5.1 41.5 20.9 32.5 0.871943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL)] SEAM 191.93 192.54 RAW * 100 20.25 5.2 31.1 22 41.7

1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 191.93 192.54 S170 * 9.5 13.47 4.4 46.3 19.2 30.2 1.61

1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL)] SEAM 192.54 192.74 RAW * 100 2.98 2.2 80 10 7.8


1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 192.74 194.07 F150 F160 8.9 21.25 5 24.8 24.2 46 0.64


1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL)] SEAM 192.74 194.07 RAW * 100 14.87 4.8 40 18.8 36.4

1943945 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 192.74 194.07 S170 * 60.5 11.97 4.3 47.4 17 31.3 0.77

1944292 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 182.83 183.97 F150 F160 5 21.54 5.4 25.5 25 44.1 1.55



1944292 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 182.83 183.97 RAW * 100 13.15 4.4 48.5 16.8 30.3

1944292 NO. 4 [SPRINGS-WITBANK/HIGHVELD (COAL) ] SEAM 182.83 183.97 S180 * 41.8 7.24 3.6 64.7 13.2 18.5 1.88

1943823

In borehole BH1943945 a maximum RAW calorific value of 20.25 MJ/kg and ash content 31.1%

were obtained. The coal yielded higher calorific value of 24.39 MJ/kg (maximum) at a wash

fraction/density of F150 with an associated ash content of 16.6%. However, the yield was very

low at 4.4%.

The ash content was also generally high in the RAW analyses for both drillholes BH 1943945 and

1944292. In the later, the RAW CV was a low 13.15MJ/kg with a high ash content of 48.5%. The

coal qualities are generally low.

However, the variations in the coal quality and coal seam thicknesses (and behaviour) between

the Platkop area and the Rusticana project as well as other surrounding area can only be

confirmed by way of drilling at Rusticana because the available information is not sufficient to

justify making any conclusions or making accurate geological and quality inferences.


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8.2 Drainage

The area around Rusticana coal project is surrounded by numerous rivers (see Figure 17 below).

Within the project area the rivers are found more towards the western portion. The farmers in

the area have harnessed the water in these rivers by constructing dams for usage in their

agricultural activities. All the rivers flow towards the Vaal River in the south.

Figure 17: Geology and Drainage around Rusticana Coal project

8.3 Historical Drill holes

The area around the Rusticana coal project was extensively drilled in the past (see Figure 18).

The greatest concentration of the drill holes occur in the areas to east and north east of the

project area. However, there is little information on the geology and no information on the

quality of the coal seams intersected by the drill holes.


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Figure 18: Distribution of historical boreholes around Rusticana

The few drill holes with coal intersection (thickness) data are shown as red circles in Figure 19

below.

Figure 19: Drill holes with Coal seam data (red circles)


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8.4 Economic Geology (Seam quality)

At the moment there is no data available regarding the coal seam quality for the one drill hole

within the Rusticana coal project.

8.5 Exploration Potential

According to Jeffrey (2005) the Highveld Coalfield reserves are important to the long-term life of

Sasols Sasol Synthetic Fuels (SSF) and Sasol Chemical Industries (SCI), which requires 40 million

tons a year. It is likely that production will continue for a considerable number of years.

In the Highveld coalfield generally 5 seams are developed (after A.B. Cadle and quoted by

Snyman and Barclay, 1989), with the number 2 and 4 seams sometimes split into a Lower and

Upper accumulation of coal. The seams are generally between 0 and 300m below surface

(Jeffrey, 2005). The seams developed in this coalfield tend to have higher concentrations of

inertinite (lowering the CV of the coal) but the inter-channel areas tend to have higher vitrinite

concentrations and thus higher calorific values (especially the number 4 lower and number 5

seam in this coalfield).

Jeffrey (2005) sums the seams up as follows:

- No. 1 Seam is thin and mainly discontinuous,

- No. 2 Seam is 1.5m to 4 m thick on average with irregular shale partings of 0.1 1.0 m thick.

No zoning is present as in the Witbank Coalfield,

- No. 3 Seam is thin, discontinuous and has poor quality,

- No. 4 Seam is laterally continuous and is the most economically important. A 2m to 15msandstone parting separates No. 4 Upper Seam (1m to 4m in thickness, but discontinuous)

from No. 4 Lower Seam (4m to 12m in thickness). The No. 4 lower seam occurs above No. 4

Upper seam in places, and

- No. 5 Seam is between 1m and 2m in thickness.

At the Twistdraai colliery the number 3 and the number 4 lower seams converge into a single

unit within the mining area. Figure 20 shows typical stratigraphic sections in various areas within

the Highveld coalfield.

Some dolerite sills up to 80m thick are developed within the Highveld coalfield. One sill occurs

in northwest of the prospecting area. Its thickness is not yet known. Dolerite dykes occur

sporadically and are generally 1 to 4m in thickness and strike east-west as a rule but sometimes

north-south or north-east. Dykes can lead to poor roof conditions in underground mines as well

as unfavourable ground water conditions (Jeffrey, 2005).


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Figure 20: Some Typical Stratigraphic Columns in the Highveld coalfield (after Jordan 1986)

8.5.1 Rusticana Farm Coal Exploration Potential

Potential of coal occurring on Rusticana is demonstrated by the fact that the historical drill

holes (whose information is available) around Rusticana have shown that they intersected mainly

seam 4. Seam 4 is general the main economic seam in the Highveld coal field. The coal seam

zone becomes thicker towards the south east reaching thicknesses of up to 3.94m in the east of

the project boundary (BH. 1943945).


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Figure 21: Seam 4 historical drill hole intersections at Rusticana

In BH 1943945 the coal zone bears an inter-seam parting of 34cm. An extract of the lithological

log sheet is shown below:-

Table 8: Extract of lithological logfrom Borehole BH 1943945

Farm

Name BH No. From (m) To (m)

Thickness

(m) Lith Comments

PLATKOP 1943945 191.93 194.07 2.14 COAL COAL

PLATKOP 1943945 191.93 192.45 0.52 COAL SCATTERED;

PLATKOP 1943945 192.45 192.54 0.09 COAL COAL; SHALY; DULL

PLATKOP 1943945 192.54 192.74 0.20 LUTITE MUDSTONE


PLATKOP 1943945 192.88 193 0.12 COAL COAL; CONCHOIDAL FRACTURE; DULL

PLATKOP 1943945 193 193.16 0.16 COAL COAL; BRIGHT; DULL LUSTROUS


PLATKOP 1943945 193.24 194.07 0.83 COAL SCATTERED;

8.6 Coal Resource Classification

The coal resources of the Rusticana coal project can be classified as an exploration target at the

moment. No sufficient data is currently available for the project area to be classified into any

confidence categories based on drill hole spacing, QAQC and geology. Such classification is

required in accordance with the SAMREC Code (2007 Edition) and The South African Guide to the

Systematic Evaluation of Coal Resources and Coal Reserves (SANS 10320:2004).


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The following is a description of the minimum drill hole Spacing as specified by the SANS code:

Measured Coal Resource is quantified by a minimum of eight boreholes with quality data

per 100 ha (approximately 350m spacing) for all deposit types.

An Indicated Coal Resource is quantified by a minimum of four boreholes with quality

data per 100ha (approximately 500m spacing) for multiple seam deposit types.

Inferred Coal Resources is quantified by a minimum of one borehole with quality data per

100ha (approximately 1000m spacing) for multiple seam deposit types.

Reconnaissance Coal Resources is quantified by a minimum of one borehole with quality data per

200ha (approximately 2000m spacing) for multiple seam deposit types

8.6.1 Types of Coal

Coal has differing physical and chemical characteristics, which vary depending upon where it is

found. It is second only to oil as an energy source used by the world. Coal is also one of the

largest commodities transported by ship or rail line worldwide.

Metallurgical Coal

Metallurgical coal, also known as coking coal, supplies the heat and carbon used in the steel mill

process to make steel products. The high temperatures created from the use of coke gives steel

its strength and flexibility, so it can be used in bridges, buildings, and automobiles.

While metallurgical coal is primarily used by steel companies, it is also used by a variety of other

industrial users to heat and power foundries, cement plants, paper mills, chemical plants and

other manufacturing and processing facilities. Metallurgical coal is less abundant than steam

coal and can be used either for making coke or as a replacement for steam coal.

Steam Coal

Steam coal, also known as thermal coal, is the worlds most abundant fossil fuel and is found in

many parts of the world. It is generally lower in carbon content and higher in moisture content

than metallurgical coal. Steam coal is used primarily as fuel by utilities to generate electrical

power. It is also used by industrial facilities to produce steam, electricity or both.

8.6.2 Rusticana Coal Resource Classification

The coal resources of the Rusticana coal project can be classified as a coal occurrence or anexploration target at the moment. There is very insufficient data that is currently available for

the project area to be classified into any confidence categories based on drill hole spacing,

QAQC and geology. Such classification is required in accordance with the SAMREC Code (2007

Edition) and The South African Guide to the Systematic Evaluation of Coal Resources and Coal

Reserves (SANS 10320:2004).

The following is a description of the minimum drill hole Spacing as specified by the SANS code:

Measured Coal Resource is quantified by a minimum of eight boreholes with quality data

per 100 ha (approximately 350m spacing) for all deposit types.


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An Indicated Coal Resource is quantified by a minimum of four boreholes with quality


Inferred Coal Resources is quantified by a minimum of one borehole with quality data per

100ha (approximately 1000m spacing) for multiple seam deposit types.

Reconnaissance Coal Resources is quantified by a minimum of one borehole with quality


9 COMMODITY MARKET ASSESSMENT: COAL

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. About 77 % of South Africa's primary energy needs are provided by

coal. This is unlikely to change significantly in the near future owing to the relative lack of

suitable alternatives to coal as an energy source. Many of the deposits can be exploited atextremely favourable costs and, as a result, a large coal-mining industry has developed.

South Africa is the worlds sixth largest coal exporting country, exporting an estimated 62Mt of

coal in 2008 (Source: http://www.worldcoal.org/resources/coal-statistics/).

9.1 Coal Consumption

Coal plays a vital role in power generation and this role is set to continue. Coal currently fuels

39 % of the worlds electricity and this proportion is expected to remain at similar levels over

the next 30 years.

Consumption of steam coal is projected to grow by 1.5 % per year over the period 2002-2030.

Lignite, also used in power generation, will grow by 1 % per year. Demand for coking coal in iron

and steel production is set to increase by 0.9% per year over this period.

The biggest market for coal is Asia, which currently accounts for 54 % of global coal consumption

although China is responsible for a significant proportion of this. Many countries do not have

natural energy resources sufficient to cover their energy needs, and therefore need to import

energy to help meet their requirements. Japan, Chinese Taipei and Korea, for example, import

significant quantities of steam coal for electricity generation and coking coal for steel

production.

It is not just a lack of indigenous coal supplies that prompts countries to import coal but also the

importance of obtaining specific types of coal. Major coal producers such as China, the USA and

India, for example, also import quantities of coal for quality and logistical reasons.

Coal will continue to play a key role in the worlds energy mix, with demand in certain regions

set to grow rapidly. Growth in both the steam and coking coal markets will be strongest in

developing Asian countries,where demand for electricity and the need for steel in construction,

car production, and demands for household appliances will increase as incomes rise.


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World coal consumption was essentially flat in 2009, the weakest year since 1999. For the first

time since 2002, coal was not the fastest-growing fuel in the world.

South Africa currently accounts for 92 % of the coal consumed on the African continent and is

expected to continue to account for much of Africas total coal consumption for the foreseeable

future.

9.2 Market Approach

The following table summarises the project parameters used in the valuation for Rusticana.

Table 9: Principle Risk- Rusticana coal project

Principle Risk Comment

Depth

The property has mining potential for underground mining, due to a depth of the seams of

150m and lower. The seams do not outcrop within the project boundaries. Drillingintersected seam 4 at 1,334 m a.m.s.l in drill hole 3007853. intersected at 70m below

surface.

Scale of Project

(Resource potential)

The project has the potential of a large size operation if drilling yields positive results.

Mining Method Due to the depth of the seams the mining operations point to underground operations.

Infrastructure

The current infrastructure includes a railway line on the north of the Rusticana property.

Tarred all-weather roads,are in the proximity of the property. Electricity is supplied in the

area via the national grid with telecommunications being readily accessible.

Data Quality

There is not yet a SAMREC compliant resource on the Rusticana project. However, the

amount of geological and analytical data that is currently available warrants that additional

drilling should be undertaken.

Title/OwnershipThe Prospecting Rights for the Rusticana coal project belong to Phandasiphile Mineral

Resources (Pty) Ltd.

Geological Complexity

The coal seams extend across the coalfield and are relatively un-deformed by geological

action. Dolerite intrusives can devolatise the coal if proximal to the seams. Some faulting is

present.

Deposit type Highveld coalfield multiple seam

Stage of development Greenfields (Early) Stage Drilling

Strategic High

Ability to increase

Mineral Resource

Medium to high

Social andEnvironmental

Phandasiphile is a 100% Black-owned company. The necessary EMP for the Rusticana

coal project was approved for the execution of the prospecting right. The required provision

of ZAR15000 for the rehabilitation of prospecting activities has been paid to the DMR.

Total

Note: As the valuation parameter increases, the project value will increase and the risk profile will decrease.

9.3 Previous Valuation

No valuation on the property is available in the public domain.


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9.4 Risk Analysis

As per SAMREC Code guidelines, no risk assessment is required as the project is in the

exploration phase.

10 EXPLORATION PROGRAMME

In order to quantify the postulated exploration target, an exploration programme should be

implemented. It is always advisable to de-risk the project CAPEX (Capital Expenditure) by

carrying out the exploration in stages or phases.

Both the SAMREC and JORC guidelines are prescriptive in terms of the drilling density and the

type of drill holes that required for a compliant resource estimate to be made.

Table 10: SAMREC Code for Coal Exploration Guidelines

Classification Confidence Level ParameterMeasured High confidence


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The farm covers an area of 1,763.74ha, which means that 18 boreholes (5,400m) will be

sufficient for an Inferred Coal Resource and 20 additional holes (6,000m) to increase the

confidence level to the Indicated category. The indicated portion will be a sub-set of the

inferred area to keep the initial capital outlay to the minimum.

The exploration cost, including project management, drilling (inferred and indicated),

environmental rehabilitation, assaying (proximate and washability), down-hole geophysics and

the estimation of a resource contained in a competent persons report is set out in Table 11

below. The total estimated exploration cost for an Indicated resource is R32million (including

VAT).

Table 11: Estimated Exploration Expenditure

ActivityResourceCategory

Hectare Metres (m) Time (months) Cost (ZAR)

Aerial Geophysics Inferred 1 763.74 2 695,029

Drilling Inferred 1 763.74 5,400 2.6 12,789,474

Drilling Indicated 1763.74 6,000 2.9 14,210,526

CPR Indicated 1763.74 1 438,596

SUB-TOTAL 11,400 8.5 28,133,625

VAT (@ 14%) 3,938,708

TOTAL 32,072,333

11CONCLUSIONS AND RECOMMENDATIONS

Potential of coal occurrence on Rusticana farm exists. This is based on the farms favourable

underlying geology which is dominated mainly by the coal-hosting Vryheid/Madzaringwe

formation (Figure 22), and coupled with historical borehole data from boreholes BH 1944292, BH

1943945 (on the north and north eastern side of Rusticana boundary) and borehole BH 3007853

(on the south western side of the farm) which intersected coal seam No. 4 from 1.14m to 3.94m

thick.

However, this data is not sufficient to conclusively indicate that such thick seams would exist in

the whole property hence drilling is recommended.

The Rusticana coal project is a project of significant size and located strategically close to

Eskoms power stations, rail, road and electricity infrastructure. Local labourers will come from

the nearby settlements and towns of Greylingstad, Villiers and Standerton. Considering the

depth of the coal seams, the projects feasibility will need to be strategically approached.


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Figure 22: Favourable geological location of the Rusticana coal project.

The unavailability of lithological and quality data from the numerous historical drill holes result

in a fairly poor understanding of the geology of the area. However, the major recommendation

is that of implementing an initial drilling program to an inferred category. If the results of the

initial drilling campaign are positive, then, the area can be drilled to take the resource to a

higher classification category of an indicated resource. The proposed drilling program would

require that the data be backed up by some QA/QC information.

Exploration and drilling is required to push this project further up the value curve by upgrading

it into an indicated resource category. This exploration (for an Indicated category) should take

about 8.5 months to complete and cost (including a Competent Persons Report) approximately

ZAR 32 million (including VAT)(see Appendix 3).

It will be recommended that if planned boreholes fall in cultivated crop fields, they will be

moved to the nearest open farm road or open space that can be accessed without damaging

crops. In this regard, it will also be necessary that coordination and liaising with the farmers

should be of utmost importance.


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DATE AND SIGNATURES

Yours faithfully,

_______________________________ ______________________________

Lovemore Mauled

DipHE. Geology

AZSM, GSSA, Cert. Nat.Sci (Geol.Sci)

Senior Exploration Geologist

Troth Saindi

B.Sc. Hons (Geol.), Pr.Sci.Nat (Geology)

MGSSA

Director

Effective Date of Report: 1stMarch, 2015


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12REFERENCES

The following references were used during the compilation of this report:-

Article

Date Company / Website / Journal

Authors /

Editors Title

1986 Mineral Deposits of Southern AfricaSteyn PPA and

Van der Linde PJHighveld Coalfield

2006 The Geology of South Africa (CGS) Johnson MR, et alSedimentary Rocks of the

Karoo Supergroup

www.sasol.investoreports.com/sasol_ar_2006

http://mg.co.za/article/2014-06-19power-stations-are-deadly-

internal-report-reveals

Kumba website

An Independent competent

persons report on the mining

assets of Exxaro Resources

Limited.

13APPENDICES

APPENDIX 1 Registered Prospecting Right

APPENDIX 2a Rusticana Phase 1 Drilling Plan (Reconnaissace)

APPENDIX 2b - Rusticana Drilling Plan (500m Grid)

APPENDIX 3 Updated Drilling Programme

APPENDIX 4 - Field photographs for the trip undertaken in February 2015


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APPENDIX 1 Registered Prospecting Right


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APPENDIX 2a Rusticana Phase 1 Drilling Plan (Reconnaissace)


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APPENDIX 2b: Rusticana Drilling Plan (500m Grid)


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APPENDIX 2c: Approximate Seam Roof Depths from Ground Surface

APPENDIX 3 Updated Drilling Programme

ActivityResourceCategory

Hectare Metres (m) Time (months) Cost (ZAR)

Aerial Geophysics Inferred 1,763.74 2 695,029

Drilling Inferred 1,763.74 5,400 2.6 12,789,474

Drilling Indicated 1,763.74 6,000 2.9 14,210,526

CPR Indicated 1,763.74 1 438,596

SUB-TOTAL 11,400 8.5 28,133,625

VAT (@ 14%) 3,938,708

TOTAL 32,072,333


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APPENDIX 4 Field photographs for the trip undertaken in February 2015


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Documents

Rusticana Desktop Study Report Final Report March 2015