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Corporate Identity Brief

What is Corporate Identity (CI)?A companys CI is the look and feel that is associated with and attributedto that company. It is more than just the logo; rather, it is the way we, as a company,portray ourselves through a range of media to the outside world.

TYPE

Primary typeface

45 Helvetica LightABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Secondary typeface

66 Helvetica Medium ItalicABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Electronic typeface (to be used in DTP software)

The graphic typeface (Arial) is to be used on printapplications produced in DTP software.

The PANTONE Matching System (PMS) is preferred inprint for its colour accuracy. Where it is not possibleto use PANTONE colours, the CMYK process equivalentsmay be substituted.

The RGB (monitor colour) equivalents are only forelectronic use, for example in television, websites andaudio-visual presentations.

All colours must always be solid.

The logo and typeface may only be used in the primarycolour palette shown above or in white, reversed out ofthese colours.

The logo may not be used as a background element.

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The positioning guide above and below showshow the elements of the logo work together,and how much clear space must be left aroundthe identity when using copy or other graphicelements. This space is a function of X whichis the height of the entire logo.

The identity may only be used in full colour,on a white or a black background.

Core logo colours

PANTONEPMS 186 CC 0M 100Y 81K 4R 231G 10B 39

COLOUR USAGELOGO AND LOGOTYPE

1/2X 1/2X

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Questions relating to corporate identity

Please contactName SurnameKeaton Energy Holdings LimitedEmail: [email protected]

Keaton Energy Holdings LimitedTel: +27 (11) 317 1700 ¥ Fax: +27 (11) 463 4759Ground Floor, Eland House, The Braes, 3 Eaton RoadBryanston, Sandton

Primary colours

Secondary colours

P A N T O N EPMS 5473 CC 82M 0Y 28K 52R 0G 73B 80


GROUP COAL RESOURCE AND COAL RESERVE 2015

SUPPLEMENT TO THE INTEGRATED ANNUAL REPORT

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development projects 29

9.2.1 Moabsvelden 29

9.2.2 Braakfontein 33

9.2.3 Koudelager 36

9.2.4 Sterkfontein 38

9.2.5 Roodepoort 42

9.2.6 Bankfontein 44

9.2.7 Mooiklip 47

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\ Keaton Energy \ GROUP COAL RESOURCE AND COAL RESERVE REPORT 2015

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Coal Resource and Reserve Statement

1. Introduction Our coal portfolio consists of two operating assets and a

number of exploration properties, grouped into two broad geographic regions. The Witbank/Highveld region comprising the Vanggatfontein operation and Moabsvelden development project located approximately 15km east of the town of Delmas, and the Sterkfontein, Roodepoort and Bankfontein exploration properties located near to the towns of Bethal, Kriel and Breyten in the Mpumalanga province respectively. The KwaZulu-Natal (KZN) region comprises the Vaalkrantz anthracite operation and the Koudelager, Balgray and Mooiklip anthracite exploration properties as well as the Braakfontein feasibility-stage thermal exploration project. Each colliery and project is discussed in detail in section 9 of this report.

Our Coal Resource management strategy seeks to strengthen the group’s coal reserve position, to systematically replace depleted reserve tonnes and to create growth opportunities through ongoing exploration and resource evaluation. The fundamental principles are to ensure compliance with public regulatory codes and standards through integrity, transparency and materiality in reporting, and to inform stakeholders on the status of the group’s core asset base. Realistic prospects for eventual economic extraction has been the emphasis in the compilation of this Coal Resource and Coal Reserve Statement.

The information in this report is presented on a group and

regional basis in appropriate detail, summarising the current

status and changes at each operation, reserve replacement and growth project. This report should be read in conjunction with the Integrated Annual Report (IAR), which provides additional information regarding the operations and their financial performance.

As at the end of March 2015 Keaton Energy holds a total managed Coal Resource of 390.1 million tonnes (Mt) (attributable 264.3Mt) and a corresponding total managed Coal Reserve of 90.9Mt (attributable 67.3Mt) net of 4.0Mt depletion for the period. The effective date of this report is 31 March 2015.

Important notes:●● Coal Resources are reported inclusive of Coal Reserves, net of mining depletions;

●● All Coal Resources and Coal Reserves reported are managed by Keaton Energy unless otherwise stated;

●● Rounding-off of figures in this report may result in minor computational discrepancies. Where this occurs it is not deemed significant;

●● All references to tonnes (t) and/or tons are metric units;●● All Coal Resource tonnes are reported on an air dried (AD) basis, with Coal Reserve tonnages reported on an as received (AR) basis; and

●● The Coal Resources and Coal Reserves are estimates at a point in time and will be affected by changes in coal market pricing, currency fluctuations, regulatory costs and other operating parameters.

Note: For abbreviations and a glossary of terms please refer to page 52.

SWAZILAND

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Mooiklip ProjectBalgray Project

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Figure 1: Keaton Energy Locality Map


2. Compliance and reporting basis This Coal Resource and Coal Reserve Statement has been

compiled consistent with the terms of The South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (the SAMREC Code, 2007 as amended July 2009). Under the SAMREC Code particular reference is made to the South African Guide to the Systematic Evaluation of Coal Resources and Coal Reserves – South African National Standard (SANS 10320:2004). Reporting is also in accordance with section 12.11 of the JSE Listings Requirements.

The respective Coal Resource and Coal Reserve tables are compiled from comprehensive independent statements received from appointed independent CPs. Each CP has sufficient, relevant experience in the style of mineralisation, type of deposit, mining method and activity for which they have taken responsibility, to qualify as a CP as defined in section 9 of the SAMREC Code. The CPs have signed off their respective estimates and consent to the inclusion of same into this report in the form and context in which they appear. Each CP is independent of the issuer and has no interest in the projects for which they take responsibility capable of affecting their ability to give an unbiased opinion and, have not received, and will not receive, any pecuniary or other benefits in connection with the estimates presented, other than normal consulting fees. It is noted that Dr PJ Hancox has an indirect beneficial interest in KEHL through the holding of 350 000 shares in the company. None of the remaining CPs have any material interest in either KEHL or in any of the properties described in this report.

The condensed Coal Resource and Coal Reserve Statement was compiled from relevant data extracted from the respective contributing CP reports by Mr Graham Stacey. Mr Stacey is the Lead Competent Person, registered with the South African Institute of Mining and Metallurgy ((SAIMM, PO Box 61127, Marshalltown, 2107), registration number 701319), holds a BSc Eng (Mining) (University of the Witwatersrand (WITS)) and an MBA (WITS) and a Mine Manager’s certificate (coal). He is a mining engineer with 20 years’ experience in mining project development and is an independent consultant to Keaton Energy Holdings Limited. He has provided written consent to the inclusion in this report of the SAMREC compliant Coal Resource and Coal Reserve estimates in the form and context in which they appear.

3. Competent Persons The Coal Resource estimations and classifications for the

Vanggatfontein, Vaalkrantz, Braakfontein, Koudelager and Sterkfontein assets were prepared under the supervision of Dr Philip John Hancox of Caracle Creek International Consulting Coal Proprietary Limited (CCIC Coal, PO Box 9062, Devon Valley, 1715). Dr Hancox is a member in good standing of the South African Council for Natural Scientific Professions (SACNASP: Private Bag X450, Silverton, 0127, registration number 400224/04) as well as a member and fellow of the Geological Society of South Africa and the Society of Economic Geologists. He is also a lifetime member of the Geostatistical Association of South Africa, an executive committee member of the Fossil Fuel Foundation, and a core member of the Prospectors and Developers Association of Canada. He has 17 years’


experience in the South African coal industry, holds a PhD from WITS University, and has authored a number of published and unpublished academic articles on the Karoo Basin and its contained coal deposits, as well as over 70 peer-reviewed scientific papers on various aspects of sedimentary geology, basin analysis, coal and palaeontology. He is also a regular presenter and contributor at coal conferences, and was a member of the SABS TC-27 Working Group, which recently completed a re-write of the SANS 10320 coal guidelines.

The Moabsvelden, Bankfontein and Roodepoort Project

Coal Resource estimates and classifications were prepared by Mr Kobus Dippenaar of Gemecs Proprietary Limited ((Gemecs, PO Box 652252, Benmore, Sandton, 2010)). Mr Dippenaar holds a BSc Honours degree in Geology from the University of Pretoria and is a member in good standing of SACNASP (registration number 400079/94). Mr Dippenaar has over 24 years’ experience in the mining industry, mainly on coal geology and environmental disciplines. During his career he was employed as mine, project and exploration geologist, as well as environmental manager at a number of different operations in South Africa. The respective estimates are extracts of Competent Persons’ reports authored by Mr Dippenaar in compliance with the recommendations and guidelines set out in the SAMREC Code.

The Vanggatfontein Colliery and Moabsvelden Project Coal Reserve estimates and classifications were prepared by Mr Leon Raaths of Miptec Consulting Proprietary Limited

Coal Resource and Reserve Statement continued

(PO Box 40084, Reyno Ridge, 1049). Mr Raaths holds a BTech Mining degree, a BSc in Operations Research and an MBL. Mr Raaths is registered with the SAIMM (registration number 702015). Mr Raaths has 25 years’ experience in coal mining, the largest portion of which was on technical and project disciplines, where the determination of Coal Reserves was part of his responsibility. This was largely for BHP’s South African collieries, Xstrata South Africa, CIC Energy and now as an independent consultant for various smaller operations. Mr Raaths is currently responsible for all short, medium and long-term planning as well as data management and reconciliations for Keaton’s Vanggatfontein Colliery. Mr Raaths is also a member of the South African Colliery Manager’s Association (SACMA).

The Vaalkrantz Colliery Coal Reserve estimate and classification was prepared under the supervision of Mr Piet van der Linde of Mindset Mining Consultants Proprietary Limited (Mindset, 298 Stokkiesdraai Street, Pretoria, 0165). Mr van der Linde holds a National Higher Diploma in Mining Engineering and a Mine Manager’s Certificate (coal). Mr van der Linde is a registered Professional Certified Engineer with the Engineering Council of South Africa ((ECSA, Private Bag X691, BRUMA, 2026), registration number 200690043), has 36 years’ experience in the mining industry, 19 of which were in the coal sector. Mindset has been involved in operational planning in a consulting capacity at Vaalkrantz Colliery since September 2008.

The respective CPs are listed below with reference to the respective operations and projects for which they have taken responsibility.

Operation/project*

Holding company

Coal Resource estimate

Coal Reserve estimate

Vanggatfontein Colliery Keaton Mining Proprietary Limited

Dr PJ Hancox, CCIC Coal Mr L Raaths, Miptec

Moabsvelden Project Xceed Resources Limited Mr K Dippenaar, Gemecs Mr L Raaths, Miptec

Vaalkrantz Colliery Leeuw Mining & Exploration Proprietary Limited

Dr PJ Hancox, CCIC Coal Mr P van der Linde, Mindset Mining Consultants

Braakfontein Project Leeuw Braakfontein Colliery Proprietary Limited

Dr PJ Hancox, CCIC Coal N/A

Koudelager Project Leeuw Mining & Exploration Proprietary Limited


Sterkfontein Project Keaton Mining Proprietary Limited


Roodepoort Project Xceed Resources Limited Mr K Dippenaar, Gemecs N/A

Bankfontein Project Xceed Resources Limited Mr K Dippenaar, Gemecs N/A

* As the Balgray Project Mining Right Application remained in process at the date of this report, the project geology is not reported on in this report.

Copies of the respective CP reports are available from Keaton Energy on request.


4. Definitions of Coal Resources and Coal Reserves

The following Coal Resource and Coal Reserve definitions are extracts from the SAMREC Code.

An “Inferred Coal Resource” is that part of a Coal Resource for which volume or tonnage and coal quality can be estimated only with a low level of confidence. It is inferred from geological evidence and sampling and assumed physical continuity with or without coal quality continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, information that is limited or of uncertain quality and reliability.

An Inferred Coal Resource is defined by the coal in the full seam above the minimum thickness cutoff and relevant coal quality cutoffs, as defined by the Competent Person, which meets the criteria for reasonable and realistic prospects of eventual economic extraction. An Inferred Coal Resource is quantified by a minimum of one (1) cored borehole with coal quality data per 100ha (approximately 1km spacing) for multiple seam deposit types which categorises all of Keaton Energy’s coal deposit types.

An “Indicated Coal Resource” is that part of a Coal Resource for which tonnage, densities, shape, physical characteristics and coal quality can be estimated with a moderate level of confidence. It is based on information from exploration, sampling and testing of material gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are appropriate to confirm physical continuity, while the locations are too widely or inappropriately spaced to confirm the continuity of the coal quality. However, such locations are spaced closely enough for such continuity to be assumed.

An Indicated Coal Resource is defined by the coal in the full seam above the minimum thickness cutoff and relevant coal quality cutoffs, as defined by the Competent Person, which meets the criteria for reasonable and realistic prospects of eventual economic extraction. An Indicated Coal Resource is quantified by a minimum of four (4) cored boreholes with coal quality data per 100ha (approximately 500m spacing) for multiple seam deposit types.

A “Measured Coal Resource” is that part of a Coal Resource for which tonnage, densities, shape, physical characteristics and coal quality can be estimated with a high level of confidence. It is based on detailed and reliable information from exploration, sampling and testing of material gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm physical and coal quality continuity.

A Measured Coal Resource is defined by coal in the full seam above the minimum thickness cutoff and relevant coal quality cutoffs, as defined by the Competent Person, which meets the criteria for reasonable and realistic prospects of eventual economic extraction. A Measured Coal Resource is quantified by a minimum of eight (8) cored boreholes with coal quality data per 100ha (approximately 350m spacing) for all deposit types.

The classification of Coal Resources into Inferred, Indicated and Measured categories is therefore a function of increasing geological confidence in the estimate based on the density of points of observation, the physical continuity of the coal seams, the distribution and the reliability of the coal sampling data, the coal quality continuity, the reliability of the geological model, and the evaluation method. Factors that contribute to the uncertainty in Coal Resource estimation include the key constraints used to construct the geological model, seam thickness variations and coal quality distribution within the geological model.

A “Probable Coal Reserve” is the economically mineable material derived from a Measured or Indicated Coal Resource or both. It is estimated with a lower level of confidence than a Proved Coal Reserve. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a pre-feasibility study for a project or a life-of-mine plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such modifying factors must be disclosed.


A “Proved Coal Reserve” is the economically mineable material derived from a Measured Coal Resource. It is estimated with a high level of confidence. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a pre-feasibility study for a project or a life-of-mine plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such modifying factors must be disclosed.

A “Mineable In Situ Coal Reserve” is the tonnage and coal quality, at specified moisture content, contained in coal seams, or sections of seams, that are proposed for mining, adjusted by the application of the geological loss factors. Sufficient information must be available to enable conceptual or detailed mine planning, and such mine planning must have been undertaken.

A “Run-of-Mine (ROM) Coal Reserve” is the tonnage and

coal quality of mineable in situ Coal Reserves that are expected after all geological losses, mining losses, mining dilution, contamination and moisture content factors have been applied.

A “Saleable Coal Reserve” is the tonnage and coal quality that will be available for sale, either in the raw ROM state at a specified moisture content or after beneficiation of the ROM Coal Reserve has produced materials at specified qualities, moisture contents and size ranges.

5. Coal Resource estimation methodology Prior to the acquisition of Xceed Resources in February

2014, all of Keaton Energy’s Coal Resource estimates were compiled by Dr PJ Hancox from CCIC Coal. Subsequent to the acquisition of Xceed in February 2014, for continuity, the Coal Resource estimates for the contributing Xceed assets continue to be compiled by Mr K Dippenaar of Gemecs. The respective modelling and estimation methodologies applied by the respective CPs are described here for completeness. While the electronic modelling packages differ, the fundamental estimation and classification approaches are unlikely to yield material variances in the estimated tonnages and categorisations. In any event, the guiding principle behind Coal Resource categorisation relies on drillhole densities for the respective coal resource categories defined above.

5.1 CCIC Coal The geological models and volume and tonnage estimations

for the Vanggatfontein, Vaalkrantz, Braakfontein, Sterkfontein and Koudelager assets were generated using the CAE Datamine Studio 3™ software (Studio 3). In preparation for the geological model and estimation of the Coal Resource, three separate databases were compiled and validated, these being the collar, lithology and raw quality databases. The limit of weathering and depth of soft overburden were identified where possible. In many instances historical drilling results were received/acquired from various sources which required validation. This is done on a case-by-case basis and depends on the reliability of the source and CCIC Coal’s view on the veracity of data capture processes. In each case, CCIC Coal takes a view on whether the historic data was sufficiently reliable and verifiable before inclusion into resource models.



To avoid estimation errors caused by differences in seam thicknesses, quality control performed on the qualities database involved ensuring that the sampling intervals matched the coal intervals in the lithology logs. Where differences were recorded between the coal thicknesses in the sampling and lithology logs, the sampling intervals were considered to reflect the true thickness, and the lithology logs were adjusted accordingly. Where possible these were also compared with the wireline logs.

As a first pass of the modelling procedure, distances between borehole collars were measured to establish the approximate borehole spacing. The wireframes of the geological model were extended beyond the outermost boreholes by one third of the average drill spacing or to a fixed boundary such as the property boundary, projected outcrop and/or limit of weathering. Wireframes of the seams were produced and checked for geological integrity. The final wireframes of the different seams were verified and limited against the property boundaries. These wireframes were then used to create block models consisting of cells 50m x 50m x seam thickness. Raw qualities were estimated into these cells using the inverse distance squared (IDP2) method with a search radius depending on the average borehole spacing. The minimum number of samples was set as one and the maximum number of samples at five.

Prior to the estimation of volumes and tonnages, which were undertaken on the block model, the resource categories were established according to SAMREC guidelines by calculating the average number of boreholes per 100ha (BH/100ha).

In order to estimate the gross tonnes in situ (GTIS), a thickness cutoff was applied depending on an opencast or underground mining method, as well as a raw ash cutoff of 50%, and a dry ash-free volatile matter cutoff depending on the coal type (>24% for bituminous coal, 24% to 16.5% for devolatilised/lean coal, <16.5% for devolatilised anthracitic coal). Furthermore, the average estimated raw relative density was used for the tonnage estimation. A geological loss factor depending on the resource category, structural complexity, dolerite intrusions and level of weathering was applied to the GTIS in order to receive total tonnes in situ (TTIS) or mineable tonnes in situ (MTIS) as the case may be, dependent upon whether any selective mining was planned

for the resource. Geological losses of 10% for Measured, 15% for Indicated and 20% for Inferred Coal Resources are universally applied. No modelling error is applied.

The final estimates are therefore discounted to incorporate CCIC’s view of the anticipated geological conditions based on experience from regional operations and projects.

5.2 Gemecs Geological, structural and coal quality models were

constructed for the Moabsvelden, Bankfontein and Roodepoort projects using Gemcom MinexTM (Minex) modelling software. Seam floor and roof elevations, seam thickness, raw air-dried coal qualities, topography, limit of weathering and strip ratio (BCM/t) were modelled for each of the in situ coal seams. All the potential resource coal seams and the parting bands were modelled.

All core boreholes were logged by Mr Kobus Dippenaar of Gemecs, following Gemecs’ in-house logging procedure and standards, and samples submitted to Noko Analytical Services (Noko Labs) in Emalahleni. Noko Labs received South African National Accreditation System (SANAS) accreditation in August 2011. Gemecs is satisfied that the coal quality data supplied by Noko is accurate and reliable, and that the appropriate sample preparation techniques and control checks were implemented.

All borehole and analytical data is imported to GBIS geological borehole database and validated. Stringent analytical quality validation testing is carried out by Gemecs on all boreholes as part of validation and verification routines that are available in the GBIS borehole database and Minex software. Any boreholes failing these checks are omitted from the modelling process. A minimum of 95% sampling coverage is applied to all seams to enable coal quality modelling.

Resource boundaries are based on the occurrence of the seams and the mineral right boundaries. Total seam thickness rather than selected and sampled sub-plies are used in the modelling process. The Minex general algorithm, also known as the growth technique, is used for modelling (gridding) of both structural and quality parameters and the gridding was conducted on a mesh size of 25m x 25m within a polygon limit for the existing data. A surface grid of



the topography is created using a digital terrain model imported in .dxf format. A weathering surface determined by the limit of weathering as recorded in each borehole is also created. This is a very important surface as it defines the sub-outcrop limits and lateral extent of the seams. No Coal Resources are estimated between the surface grid (TOPS) and the limit of weathering surface (LOW).

Quality grids for raw as well as washed coal qualities and yields are modelled. All the reported coal qualities, i.e. CV, Ash, VM, FC, IM, TS, TP and yield are modelled per coal seam to enable raw and washability reporting. Various coal quality grids were modelled on a project-by-project basis depending on market specifications.

Principally, the main criteria for resource classification are the number of boreholes intersecting a particular coal seam(s) within a specified area and the confidence in projecting the coal quality across each seam based on the analysis performed on core samples from individual borehole intersections. Classification is guided by the following: borehole density; geological and grade continuity; geological structure and its influence on mining; and geological complexity. The borehole density and spatial distribution of cored boreholes, sampled and analysed for raw ash content, is sufficient to allow for confident extrapolation of physical and quality parameters between boreholes and also allows for the Coal Resources to be adequately categorised into Inferred, Indicated and Measured Resources as per the SAMREC Code. Coal Resource classification based on borehole density (points

of observation supported by analytical data) is as follows: Measured: 8 boreholes per 100ha (350m x 350m grid), Indicated four boreholes per 100ha (500m x 500m grid spacing), Inferred: one borehole per 100ha (approximately 1km x 1km grid). Geological losses of 10% for Measured, 15% for Indicated and 20% for Inferred Coal Resources are universally applied. No modelling error is applied.

The final estimates are therefore discounted to incorporate Gemecs’s view of the anticipated geological conditions based on experience from regional operations and projects.

6. Coal Reserve estimation methodology Coal Reserves are declared for the operating Vanggatfontein

and Vaalkrantz Collieries and the Moabsvelden development project. Coal Reserve estimates for the opencast Delmas assets, Vanggatfontein and Moabsvelden, have been compiled by Mr Leon Raaths of Miptec Mining Consultants. The estimate for the underground KwaZulu-Natal asset has been estimated by Mindset. While the resource estimation process is not dissimilar for opencast versus underground assets, the mode of mine design and Coal Reserve estimation is somewhat different for the different styles of mining. Each of the respective consultants’ methodologies is therefore described here.


6.1 Miptec In the first instance it is important that the geological and

mining modelling packages provide a primary order-of-magnitude cross-check of the in situ volumes, relative densities and tonnages. Miptec utilises RPM Global’s OpenCutCoal XPac package as the pit design and scheduling software which provides this first GTIS handshake on the basis of the primary exploration inputs, both structural and quality. With a <2.5% variance in GTIS estimates the XPac model is deemed to have agreed the gross in situ structure and quantum.

A rigorous life of mine (LOM) scheduling exercise is then set up, with reserving modifying factors informed by experience in the current Vanggatfontein pits, from both a pit planning and coal processing point of view. Modifying factors applied in each reserving process are listed in the respective sections of this report. In-pit seam losses and practical coal processing plant yield are therefore the key parameters which are constantly monitored and modified in the forward-looking models to inform realistic expectations of future production. Experience at Vanggatfontein since commencement in 2010 clearly leads to improved prediction of mine and plant output. Only Indicated and Measured Coal Resources are included for life of mine scheduling purposes. In the event that an Indicated or Measured Coal Resource block is geographically stranded and cannot be accessed without including Inferred Coal Resources into the schedule, that block is excluded. In this instance additional drilling will be recommended in order to upgrade the appropriate coal blocks to at least an Indicated categorisation before the stranded block could be considered in LOM and reserve scheduling.

In general terms, resource blocks for which an Indicated Coal Resource categorisation has been applied qualify as a Probable Coal Reserve, and blocks for which a Measured Coal Resource categorisation has been applied qualify as Proved Coal Reserve.

Miptec’s LOM schedule then provides the basis for the economic modelling of the draft coal reserve which is conducted in-house by Keaton Energy. The colliery financial

model itself is then provided to Miptec for a cross-check of the application of the schedule provided and ultimately the economics of the coal reserve over the full mine life.

6.2 Mindset Electronic modelling of the Vaalkrantz resource by Mindset

was carried out using very much the same process flow. The respective geological model grids, provided by CCIC Coal, are audited and verified in terms of global GTIS estimates. Structural and/or quality variations are queried and dealt with directly.

Mindset similarly imports seam grids into RPM Global’s Underground Coal XPac software and panel designs, pillar designs, panel layouts, schedules and production volumes generated electronically. At Vaalkrantz the reserving modifying factors are applied informed by experience on the Gus and Alfred horizons since Keaton Energy’s involvement in December 2011. Mindset’s long-term involvement at Vaalkrantz, from feasibility, construction, mine development through to operational management, positions them well to provide the best possible view of the mineable reserve in a challenging geological setting. As noted above, only Indicated and Measured Coal Resource blocks accessible from existing infrastructure are included for life of mine scheduling and reserving purposes. In general terms, resource blocks for which an Indicated Coal Resource categorisation has been applied qualify as a Probable Coal Reserve, and blocks for which a Measured Coal Resource categorisation has been applied qualify as Proved Coal Reserve.

The LOM production schedules generated then provide the basis for the economic modelling of the draft reserve estimates which are conducted in-house by Keaton Energy.

7. Group Coal Resource and Reserve summary Coal Resources and Coal Reserves reported for the period

ended 31 March 2015 are summarised and compared with the 31 March 2014 estimates in Table 1. Material variances between the 2014 and 2015 estimates are discussed in section 8 and the respective operation and project estimates are addressed in detail in section 9.



Table 1: Keaton Energy Holdings Group Coal Resource and Coal Reserve Summary as at 31 March 2015 (2014 values have been corrected to reflect exact numbers published as at 31 March 2014)

At 31 March 2015 At 31 March 2014

Coal Resource (MTIS) (AD)# ROM Coal Reserve (Mt) (AR)# Coal Resource (MTIS) (AD)# ROM Coal Reserve (Mt) (AR)#

InferredMt

Indicated Mt

MeasuredMt

Total Coal Resource

MtProbable

MtProved

Mt

Total ROM Coal

ReserveMt

InferredMt

Indicated Mt

MeasuredMt

Total Coal Resource

MtProbable

MtProved

Mt

Total ROM Coal

ReserveMt

Vanggatfontein Colliery – 33.0 86.3 119.3 9.4 39.8 49.2 – 62.5 83.1 145.6 5.9 51.3 57.2 5 seam – 2.7 2.7 5.4 0.6 1.5 2.1 – 2.9 3.5 6.4 0.8 2.2 3.0 4 seam – 15.9 48.6 64.5 4.5 21.4 25.9 – 45.9 38.5 84.4 3.1 27.0 30.1 2 seam – 14.4 35.0 49.4 4.3 16.9 21.2 – 13.7 41.1 54.8 2.0 22.1 24.1

Moabsvelden Project – – 54.7 54.7 3.9 35.9 39.8 – 2.0 53.5 55.5 1.2 41.4 42.6 5 seam – – 2.8 2.8 0.1 2.7 2.9 – – 3.0 3.0 – 2.7 2.7 4 seam – – 23.2 23.2 2.2 16.7 18.9 – 0.8 24.8 25.6 1.2 18.1 19.3 2 seam – – 24.2 24.2 1.4 14.0 15.4 – 1.0 21.8 22.8 – 17.4 17.4 1 seam – – 4.5 4.5 0.2 2.4 2.6 – 0.2 3.9 4.1 – 3.2 3.2

Bankfontein Project 11.0 5.1 – 16.1 – – – 11.0 5.1 – 16.1 – – – A seam 0.5 – – 0.5 – – – 0.5 – – 0.5 – – – B lower seam 5.6 3.9 – 9.5 – – – 5.6 3.9 – 9.5 – – – C lower seam 2.3 1.1 – 3.4 – – – 2.3 1.1 – 3.4 – – – D seam 2.6 0.1 – 2.7 – – – 2.6 0.1 – 2.7 – – –

Roodepoort Project 4.7 11.6 8.9 25.1 – – – 5.3 12.2 8.8 26.3 – – – 2 upper seam 2.2 7.2 5.6 15.0 – – – 2.5 7.6 5.6 15.7 – – – 2 lower seam 1.8 3.2 2.1 7.1 – – – 2.0 3.4 2.1 7.5 – – – 1 seam 0.6 1.1 0.9 2.6 – – – 0.6 1.2 0.9 2.7 – – – 1A seam 0.1 0.0 0.2 0.4 – – – 0.2 – 0.2 0.4 – – –

Sterkfontein Project 40.6 50.2 – 90.9 – – – 40.6 50.2 – 90.8 23.6 – 23.6 4 seam 40.6 50.2 90.9 – – – 40.6 50.2 – 90.8 23.6 – 23.6

Vaalkrantz Colliery – 11.5 – 11.5 2.0 – 2.0 – 15.2 – 15.2 2.5 0.2 2.7 Alfred seam – 8.2 – 8.2 1.6 – 1.6 – 9.6 – 9.6 1.9 0.1 2.0 Gus seam – 3.3 – 3.3 0.4 – 0.4 – 5.6 – 5.6 0.6 0.1 0.7

Braakfontein Project – 60.1 – 60.1 – – – – 64.9 – 64.9 24.9 – 24.9 Top seam – 36.6 – 36.6 – – – – 39.7 – 39.7 13.6 – 13.6 Bottom seam – 23.4 – 23.4 – – – – 25.2 – 25.2 11.3 – 11.3

Koudelager Project 0.9 11.4 – 12.3 – – – 0.9 11.4 – 12.3 – – – Upper Alfred seam – 2.4 2.4 – – – – 2.4 – 2.4 – – – Lower Alfred seam – 1.1 1.1 – – – – 1.1 – 1.1 – – – Gus seam 0.9 0.5 1.4 – – – 0.9 0.5 – 1.4 – – – Upper Dundas seam – 2.1 2.1 – – – – 2.1 – 2.1 – – – Lower Dundas seam – 5.3 5.3 – – – – 5.3 – 5.3 – – –

Total 57.2 182.9 149.9 390.1 15.3 75.6 90.9 57.8 223.5 145.4 426.7 58.1 92.9 151.0

Keaton attributable* 33.1 125.5 105.7 264.3 11.3 56.0 67.3 33.2 155.3 102.4 290.9 43.0 68.7 111.7 # Full project Resources and Reserves are stated, AD – air dried, AR – as received.

* Bankfontein and Roodepoort Projects 15% held by Keaton Energy, all other collieries/projects held 74% by Keaton Energy.

Coal Resources reported in this summary table are quoted inclusive of Coal Reserves.

Rounding may result in minor variances in totals presented in this table.



8. Material movements in comparable Coal Resources and Coal Reserves estimates

8.1 Operations The Coal Resource estimate for Vanggatfontein Colliery

was impacted upon by the removal of wetland resources below a newly delineated wetland on the Western Resource Block (WRB). The net tonnage loss totalled 19.0Mt on an MTIS basis. ROM depletion for the period amounted to 3.65Mt from the 5, 4 and 2 Seams. The combined MTIS Coal Resource fell 18% (16% net of depletion) from 145.7Mt to 119.3Mt as a result. Net of depletion, the Vanggatfontein ROM Coal Reserve reduced 8% (57.2Mt to 49.2Mt) as a result of delays in the diversion of the provincial road to enable the extension of the VG3 and VG4 pit endwalls. The newly delineated WRB wetland has had no effect on the Coal Reserve estimate.

At Vaalkrantz a 15% reduction in the Alfred seam resource from 9.6Mt to 8.2Mt was as a result of premature extraction of infrastructure from the southern extremities of both the Enyati and West Adits due to deteriorating mining conditions adjacent to the Enyati dolerite sill which cuts through the Alfred horizon at both shafts. Mining conditions adjacent to the sill simply deteriorated earlier than anticipated, meaning that several advance panels which had been planned closer to the intrusion were abandoned and excluded from the current Coal Reserve footprint.

Similarly, a 41% reduction in the Gus seam resource from 5.6Mt to 3.3Mt resulted from the prudent exclusion of remnant blocks previously considered mineable but no longer accessible using current infrastructure. These blocks will be reconsidered in future if infrastructure to those blocks is re-established net of a 0.35Mt depletion. The total Vaalkrantz ROM Coal Reserve reduced 26% (13% net of depletion) from 2.7Mt to 2.0Mt, consisting of a 0.35Mt

depletion for the period as well as the exclusion of remnant blocks currently considered unmineable as discussed above. Reserve replacement remains a challenge at Vaalkrantz and numerous greenfield and brownfield opportunities within the existing Mining Right boundary are being investigated on an ongoing basis.

8.2 Growth projects A fundamental decision was taken to withdraw the Coal

Reserve estimates previously declared as at 31 March 2014 for the Sterkfontein and Braakfontein projects. Both estimates have been withdrawn on the basis of the merit and veracity of economic studies as well as prevailing market conditions.

After a detailed re-assessment of the previously declared

Sterkfontein Project Coal Reserve estimate by the responsible CP, it was evident that the estimate had been compiled on the basis of the findings and conclusions of a Concept Study compiled by independent consultant RSV Enco Consulting Proprietary Limited during May 2013. At the time the CP was of the view that the underground life-of-mine production schedule and associated economic study had been conducted in sufficient detail to support the declaration of a Coal Reserve for the project. However, notwithstanding the relative confidence in the project and its economics, the SAMREC Code sections 33 and 34 are clear on the level of study required for the declaration of Probable and Proved Coal Reserve estimates. In terms of these guidelines, therefore, the Coal Reserve previously declared has been formally retracted from Keaton Energy’s 31 March 2015 Coal Resource and Coal Reserve estimate.

There was no change to the Sterkfontein 90.9Mt (MTIS) Coal Resource estimate declared at 31 March 2014.


The Braakfontein Project has historically been the subject of two independent feasibility studies, as well as a May 2013 concept study which essentially stood as an update of a 2009 feasibility study. In December 2014 Mindset was again commissioned to compile a new feasibility study on the project in order to understand the impact of recent exploration drilling and prevailing coal market and economic conditions. Braakfontein has to date been designed primarily as an export colliery with a secondary thermal quality product for sale domestically. The continued decline in the price of international seaborne thermal coal has clearly changed the manner in which South African coal projects are viewed from a marketing point of view. Braakfontein is therefore currently being studied to determine the optimal product mix as a key determinant of the project’s feasibility. The 31 March 2014 Coal Reserve estimate has been withdrawn pending the finalisation of the Mindset 2015 feasibility study which is expected during the fourth quarter of the 2015 calendar year. The results of that study will clearly form the basis of an updated Coal Reserve estimate during FY16.

The Braakfontein Project MTIS Coal Resource reduced 7% from 64.9Mt to 60.1Mt on the back of a re-model of the resource incorporating the results of the 33 decline structure open percussion holes drilled during the last quarter of the 2014 calendar year. Additional data for 35 historic boreholes was also acquired during 2014 which included structural and partial quality information which was incorporated into the re-model.

The Moabsvelden geological model was updated to include six additional core boreholes drilled during December 2014 resulting in a 0.8Mt (1%) reduction in the MTIS Coal Resource. The Moabsvelden ROM Coal Reserve reduced 7% from 42.6Mt to 39.8Mt exclusively due to a wetland buffer increase from 50m to 150m and the knock-on effect on the MV1 pit box-cut position and the mineability of sections of the long-term MV3 pit. The 150m wetland buffer has been recommended by the Department of Water and Sanitation (DWS) as a condition of the Moabsvelden IWUL. While this buffer remains a draft recommendation, it has been applied in estimating the Moabsvelden Coal Reserve.

There were no changes to the Koudelager, Bankfontein and Roodepoort Project Coal Resource estimates reported as at 31 March 2014.

In summary, total managed Coal Resources therefore came off 9% from 426.7Mt to 390.1Mt, and total managed ROM Coal Reserve reduced 37% from 151Mt to 90.9Mt (net of depletions) for the reasons outlined above. The withdrawal of the Sterkfontein and Braakfontein Coal Reserve estimates accounted for the large majority of the Coal Reserve movement.

9. Detailed Coal Resource and Coal Reserve estimates and exploration results

9.1 Operations9.1.1 Vanggatfontein Colliery Operations on Vanggatfontein commenced during 2010

with the construction of the 100 tonne per hour (tph) 5 seam plant which was commissioned in November 2010. The Eskom coal supply agreement for washed 2 and 4-seam product was signed in March 2011 with the 500tph 2 and 4-seam coal handling and processing plant (CHPP) commissioned in May 2011. The opencast 5, 4 and 2-seam operation generates of the order of 300ktpm run of mine from a conventional truck and shovel operation. Saleable production from the 5-seam plant averages approximately 25ktpm, Eskom saleable production averages approximately 185ktpm. The operation is largely outsourced with mine management retained by Keaton Energy.

The Vanggatfontein Mining Right (309MR), held by 74% Keaton Energy subsidiary Keaton Mining Proprietary Limited, covers the farm Vanggatfontein 251IR, an area of 1 651.98ha. The right is valid for a period of 20 years from 23 February 2010 expiring on 22 February 2030. The Vanggatfontein Mining Right polygon is illustrated in Figure 2.

Surface rights over portions 3, 4, 5 and 9 (a portion of portion 8) of the farm Vanggatfontein 251IR are held by Keaton Mining. All opencast operations planned around the current Coal Reserve will be conducted within these property boundaries.

9.1.1.1 Geology, Coal Resource and Coal Reserve Geological setting The surface geology on Vanggatfontein is dominated by

outcrops and sub-crops of sedimentary rocks of the Ecca Group (Vryheid Formation), with Transvaal Supergroup (Hekpoort Formation) also present at the surface in the far


east of the project area. The pre-Karoo basement to the project area consists of rocks of the Transvaal Supergroup. Boreholes that have penetrated through the Dwyka Group into the basement intersect mainly Malmani Group dolomites, as well as metasedimentary rocks and lavas of the Hekpoort Formation. An inconformity of the order of 1 800 million years old therefore separates the Transvaal Supergroup rocks from the overlying Karoo Supergroup. During this vast span of time the dolomites of the Transvaal Supergroup in particular were subject to a number of stages of karstification and weathering and this has an important impact on the nature of the overlying successions in a number of ways.

In places both the Vanggatfontein East Resource Block (ERB) and West Resource Block (WRB) host the complete sequence of the Witbank Coalfield coal seams, namely the numbers 1, 2, 3, 4 and 5 seams, although the 3 seam is not usually developed and the 5 seam is eroded away in places. The stratigraphy of the East Resource Block (ERB) and West Resource Block (WRB) may be subdivided into three main sequences, these being a basal 2-seam sequence, overlain by the 4-seam sequence, which in turn is overlain by the 5-seam sequence.

The prime economic seams are the 5, 4 and 2 seams which are mined using opencast methods.

Adjacent projects/operations The Vanggatfontein Property is bordered by a number of

active collieries, the most important and nearest neighbours are discussed.

Privately owned Canyon Coal holds the Phalandwa Colliery located approximately 7km north-north-west of Vanggatfontein. Mining commenced in October of 2010 and the mine produces high-quality sized products from the 4 and 2 seams.

Stuart Coal is a similarly privately held coal company operating two pits located approximately 10km west of Vanggatfontein. Stuart Coal produces both thermal and domestic boiler products from the 4 and 2 seams. Little more detailed information is publicly available.

Contiguous to the west of Vanggatfontein lies Sable Mining’s Rietkuil Property, an undeveloped coal project with a current SAMREC compliant GTIS resource of 199Mt (157Mt in Measured and 42Mt in the Indicated Resource categories respectively). Publicly available information suggests that while Rietkuil targets the same seams as Vanggatfontein, the depositional nature of the seams is sporadic and will require numerous pits which will carry significant development costs. The project remained undeveloped at the date of this report.

Universal Coal Plc holds the Brakfontein Thermal Coal Project situated directly to the south of the Vanggatfontein Mining Right and targets largely the 4 and 2 seams. The project is reported to host a JORC compliant coal resource of 75.8Mt (GTIS) of which 31.7Mt are in the Measured, 39.4Mt Indicated and 4.7Mt Inferred. A pre-feasibility study was completed on the project Q4 2014, however, no further detail is available on the development status of the project.

Exploration history Data from the Council of Geoscience (CGS) shows that

between 1962 and 1963 a total of 40 boreholes were drilled on the property by Brakfontein Navigation Steam Collieries, with an additional hole drilled by the CGS itself (no date available). The 5, 4 and 2 coal seams were intersected in the historical drilling programmes, and all of the holes, with the exception of one in the east, intersected coal. Only borehole collar co-ordinates and coal intersections were made available to Keaton. Analytical results were not included in the information received from the CGS.

Between 2007 and 2010 three phases of exploration drilling were undertaken by Keaton Energy on the property, with a total of 230 boreholes drilled including seven twin, and five orientated geotechnical boreholes. In 2011 an additional 12 boreholes were drilled, mainly to increase the level of understanding of the ERB geology.

All exploration resource drilling undertaken by Keaton to date has been vertically oriented diamond drilling using conventional equipment and TNW (60mm), or NQ (47.6mm) core size. All boreholes were logged and sampled by either CCIC, CCIC Coal or Keaton geologists. Lithological logging was undertaken using standard logical letter coding reflecting the lithology and sedimentary structures. Sampling was based on a combination of physical appearance of the split coal and on analysis of the down hole wireline logs. The coal was analysed at Inspectorate M&L Laboratories in Middleburg (now part of the Bureau Veritas Group).

Previous Coal Resource estimates Several historic coal resource estimates have been

prepared for the Vanggatfontein Project. Each of these is discussed briefly below:●● Van Wyk and Dekker (Coffey Mining, 2008) – as part of the listing documents for admission to the JSE, a GTIS estimate of 171.5Mt was published, split into number 5 seam (3.6Mt); number 4 seam (84.5Mt) and number 2 seam (83.4Mt). A key variance between this estimate and the 2015 estimate is the fact that low volatile coal reported at the time was classified as pseudo-anthracite and reported separately. Low-volatile coals are now excluded on the basis of a minimum DAFVOL of 24%;

●● D Van Wyk (Geocoal, 2009) – GTIS estimate of 184.8Mt split into number 5 seam (7.8Mt); number 4 seam


(106.3Mt) and number 2 seam (70.7Mt). The key movement between the two Van Wyk estimates was largely on the back of significantly more in-fill drilling;

●● Hancox (CCIC Coal, 2010) – a total GTIS figure for the ERB only of 84.1Mt, of which 19.3Mt was in the Indicated category and 64.8Mt in the Measured category. This estimate was for the ERB only and therefore a sub-set of the Van Wyk 2009 estimate);

●● Hancox (2012) – a total GTIS figure of 61.6Mt (57.2Mt Measured; 4.4Mt Indicated) was estimated for the ERB only, split into 2.8Mt for the 5 seam, 33.3Mt for the 4 seam and 25.6Mt for the 2 seam;

●● Hancox (CCIC Coal, 2013) – a total GTIS figure for the ERB only of 74.1Mt (3.06Mt Indicated, 71.06Mt Measured), split 2.6Mt for the 5 seam, 38Mt for the 4 seam and 33.6Mt for the 2 seam;

●● Hancox (CCIC Coal, 2014) – in a return to the historic estimation methodology and to again report on the WRB which increased the reportable tonnage to 157.0Mt on a GTIS basis (87.4Mt Measured, and 69.5Mt Indicated) split 6.9Mt for the 5 seam, 91.5Mt for the 4 seam and 58.5Mt for the 2 seam.

FY15 exploration and development summary In March of 2015 an additional six cored boreholes were

drilled on the Mining Right area, mainly at the western fringe of the ERB. Structural intercepts were available at the date of this report and were therefore used in the updated 2015 structural model. Quality results were, however, pending at the time and were therefore not available for the quality update.

No further feasibility studies were conducted during FY15.

Coal Resource estimate (CCIC Coal) The Vanggatfontein Colliery Coal Resource estimate was

again prepared under the supervision of independent CP Dr PJ Hancox of CCIC Coal. A high-level coal resource estimation methodology as applied by CCIC Coal is presented in section 5.1 of this report, the detail will therefore not be repeated here.

As at 31 March 2014 it was decided to return to a global estimation basis for the entire Mining Right polygon in place of reporting on the ERB only as the block which has a direct impact on the life of the operation. To avoid losing touch with the quantum and quality of the balance of the Vanggatfontein deposit, the geological model was reconstructed to avoid the application of the non-geological D2543 provincial road as the western boundary of the ERB. The geological database was therefore re-modelled to estimate the global colliery Coal Resource including both the ERB and WRB.

The 31 March 2015 estimation followed the same rationale, with two material changes to the coal resource tonnage declared. Subsequent to the 31 March 2014 estimate, an updated wetland delineation study was conducted for the entire property as part of the Integrated Water Use Licence Application (IWULA) process. As a result of this update and the application of a 100m wetland buffer the WRB Coal Resource estimate came off 19.0Mt on an MTIS basis. Run-of-mine depletion from the VG2, VG3 and VG4 pits for the period amounted to 3.65Mt. The combined MTIS Coal Resource estimate fell by 18% (16% net of depletion) from 145.7Mt to 119.3Mt.

The 31 March 2015 Coal Resource estimate is summarised in Table 2 and illustrated in Figure 2.

Coal Reserve estimate (Miptec) In order to streamline the Coal Reserve estimation process,

with particular reference to the importing of electronic coal resource grids into XPac opencast planning and scheduling software, independent consultant KJB Geoservices Proprietary Limited was commissioned to audit the Coal Resource model and to provide the feed grids to Miptec for reserving purposes. The rationale for the audit was around yield variances picked up between the respective CCIC Coal export grids and the Miptec XPac equivalent inputs. The discrepancies were picked up as a result of the global colliery remodel integrating the ERB and WRB. In order to guarantee the consistency of reconciliations, an independent review of the existing Datamine model was commissioned. The review provided a third-party audit of the current model as well as providing more compatible source grids for life-of-mine planning and resultant Coal Reserve estimation processes.

The unconstrained KJB Geoservices Coal Resource grids were therefore utilised by Miptec for pit design and Coal Reserve estimation using RPM Global’s XPac Opencut Coal pit design and scheduling software. Tonnages, qualities and product yield variances compared favourably and the new geological grid transfer was accepted as accurate.

The modifying factors utilised for the 31 March 2014 Coal Reserve estimate resulted in accurate predictions in the resultant mining schedules for FY15. The correlation between the 2014 budget and actuals was above average on in situ waste, ROM, saleable coal reserve and associated qualities. The modifying factors for the 31 March 2014 Coal Reserve estimate were therefore accepted as accurate prediction metrics and adjusted only on mining model variances in order to arrive at the 31 March 2015 estimates.



VanggatfonteinColliery

Table 2: Vanggatfontein Colliery 31 March 2015 Coal Resource estimate

Coal Resource (MTIS) (AD)* Raw coal qualities (AD)

Inferred Indicated MeasuredTotal Coal Resource

RD (g/cc)

IM(%)

AS(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam – 2.7 2.7 5.4 1.59 4.3 30.6 23.3 41.8 20.3 1.15 35.84 seam – 15.9 48.6 64.5 1.72 3.9 40.2 17.7 38.2 16.4 1.04 31.72 seam – 14.4 35.0 49.4 1.69 3.6 37.3 19.4 39.7 17.4 0.98 32.8

Total – 33.0 86.3 119.3

*Resource cutoffs: Thickness >0.5m, raw ash <50%, raw DAFVOL >24%

0 1000m

Delmas

15km

Leandra

25kmO28 50'E O28 51'E O28 52'E O28 53'E

O26

10'S

O26

11'S

O26

12'S

Vanggatfontein 5 seam

f f

Transnet pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST

Figure 2: Vanggatfontein Colliery Coal Resource and tenure diagrams

0 1000m

Delmas

15km

Leandra

25kmO28 50'E O28 51'E O28 52'E O28 53'E

O26

10'S

O26

11'S

O26

12'S


f f

Transnet pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST

Project boundaryIndicated Coal ResourceMeasured Coal ResourceInterpreted faultBoreholeMined-out areasWetlandPipelineSecondary road


0 1000m

Delmas

15km

Leandra

25kmO28 50'E O28 51'E O28 52'E O28 53'E

O26

10'S

O26

11'S

O26

12'S


f f

Transnet pipeline

f

fWRBNORTH

ERBNORTH-WEST

ERBNORTH

VG1

ERBSOUTH

WRBSOUTH

WRBCENTRAL

Figure 2: Vanggatfontein Colliery Coal Resource and tenure diagrams

0 1000m

Delmas

15km

Leandra

25kmO28 50'E O28 51'E O28 52'E O28 53'E

O26

10'S

O26

11'S

O26

12'S


f f

Transnet pipeline

WRBNORTH

ERBNORTH-WEST

ERBNORTH

ERBNORTH-EAST

VG1

ERBSOUTH

WRBROAD

WRBCENTRAL

f

f



In addition to the GTIS model grids, the Mining Right polygon, wetland delineations, road and Transnet pipeline servitudes and mined out areas defined the selection of areas to be mined and the resultant Mineable in Situ Coal Reserve estimate which is summarised in Table 3.

Table 3: Vanggatfontein 31 March 2015 Mineable in Situ Coal Reserve estimate

Mineable in situ Coal Reserve (AR) Mineable in Situ Coal Reserve qualities (AD)

Probable Proved

Total Mineable in Situ

Coal ReserveRD

(g/cc)IM(%)

AS(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam 0.5 1.6 2.1 1.59 4.3 29.9 23.0 42.8 20.7 1.23 35.0 4 seam 4.4 20.8 25.2 1.72 3.9 39.3 18.1 38.6 16.6 1.11 32.02 seam 4.8 18.5 23.3 1.69 3.6 35.1 20.4 40.8 18.3 0.97 33.4

Total 9.7 40.9 50.6 1.70 3.8 37.0 19.4 39.8 17.5 1.05 32.7

The following modifying factors were applied to the Mineable in Situ Coal Reserve in order to derive the ROM Coal Reserve: Coal thickness >1m Volatile matter >15% Calorific value (CV) >10MJ/kg Contamination added 4% Surface moisture added 4% Processing yield modification 83% Layout, mining losses 12% on 5 seam, 16% on 2 and 4 seams Wetland buffer at original ground level 100m

The application of these loss and contamination factors resulted in a 92% recovery on the 5 seam and 87% on the 4 and 2 seams. The resultant average ROM stripping ratio for the life-of-mine plan based on the above modifying factors is 2.54BCM/t.

The 31 March 2015 ROM Coal Reserve estimate is summarised in Table 4.

Table 4: Vanggatfontein 31 March 2015 Run-of-Mine Coal Reserve estimate

ROM Coal Reserve (AR) ROM Coal Reserve qualities (AD)

Probable ProvedTotal ROM

Coal ReserveRD

(g/cc)IM(%)

AS(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam 0.6 1.5 2.1 1.59 4.3 31.1 22.1 42.4 19.8 1.18 34.2 4 seam 4.5 21.4 25.9 1.72 3.9 41.0 17.4 37.7 15.9 1.07 31.6 2 seam 4.3 16.9 21.2 1.69 3.6 36.6 19.6 40.2 17.6 0.93 32.8

Total 9.4 39.8 49.2 1.70 3.8 38.7 18.5 39.0 16.8 1.02 32.2


Net of depletion, the Vanggatfontein ROM Coal Reserve reduced 8% as a result of the exclusion of a number of low-volatile blocks on the periphery of pits VG3, VG5, VG6 (an extension of VG4) and VG7 (an extension of VG3). These low-volatile areas relate largely to the 4 seam which were excluded on the basis of the Eskom Coal Supply Agreement minimum cutoff of 20.0% on a washed basis, meaning that the stripping ratio of the remaining 2 seam became excessive and did not meet the minimum in situ strip ratio cutoff of 5BCM/t.

Delays in the diversion of the D2543 provincial road to enable the extension of the VG3 pit endwall also resulted in a minor reduction in the ultimate VG3/VG7 pit footprint.

However, these losses were offset to an extent by the inclusion of mining blocks along the boundaries of the VG5 and VG4/VG6 pits respectively. For clarity, the cost of diverting the provincial road in order to facilitate the future extension of the VG3 and VG4 pits to the south-west has been incorporated into the Vanggatfontein financial model for reserving purposes.

After accounting for a 3.65Mt depletion for the period, the net ROM Coal Reserve reduction amounted to 4.35Mt for the reasons noted.

The newly delineated WRB wetland has had no effect on the Coal Reserve estimate.

The 31 March 2015 Saleable Coal Reserve estimate is summarised in Table 5.

Table 5: Vanggatfontein 31 March 2015 Saleable Coal Reserve estimate

Saleable Coal Reserve (AR) Saleable Coal Reserve qualities (AD)

Probable ProvedTotal Saleable Coal Reserve

Practicalyield

(%)IM(%)

ASH(%)

VOLS(%)

FC(%)

CV(MJ/kg)

TS(%)

5 seam 0.3 0.8 1.1 50.9 4.3 14.2 28.1 53.4 26.8 0.704 seam 2.6 12.4 15.0 58.3 3.9 26.8 20.9 48.5 21.6 0.932 seam 2.9 12.0 14.9 71.0 3.6 26.9 22.2 47.2 21.6 0.83

Total 5.8 25.2 31.0 62.7 3.8 26.4 21.7 48.1 21.8 0.86

On the basis of current planning, the Vanggatfontein ROM Reserve will therefore be fully depleted at the Mining Right expiry date of 22 February 2030.

Future exploration Formal drilling to upgrade the entire Mining Right area to a Measured Coal Resource drill hole spacing, assuming an 8bh/100ha

drilling density, would require an additional 12 boreholes at an average depth of between 80m and 100m each. The estimated cost to achieve this is presented in Table 6.

Table 6: Vanggatfontein Colliery Measured Coal Resource drilling cost estimate

ItemCost(Rm)

Drilling (~1 020m) 1.65Field services and geology 0.15Consumables 0.02Laboratory testwork 0.26Down-the-hole geophysics 0.05

Total 2.13

It is important to note that this programme has not been formalised for FY16, the importance of a full measured grid from an

operational perspective is less of a priority during the coming year than near-term production drilling for short to medium-term planning purposes. Drilling during FY16 will therefore be conducted on an ad hoc basis as localised geological circumstances dictate.


Operational risks Vanggatfontein has enjoyed continuous operational

improvement over the last two years. Key risks going forward will relate to improved mining efficiencies, specifically related to the reduction of in-pit seam losses, as well as continuing to ensure the delivery of top-end service and plant availability from our key mining and coal processing contractors.

From a Coal Resource point of view and the impact on future Coal Reserves, our ongoing mining to geology reconciliations are becoming refined and provide a very good predictive measure of expected future mining and coal processing output. We will continue to improve on those reconciliations in order to constantly improve our understanding of future planned production.

Risks to Coal Resource and Coal Reserve estimates Keaton Energy is not aware of any additional data or

information not included that would have a material impact on the geological model or the resultant Coal Resource and Coal Reserve estimates.

9.1.1.2 Environmental permitting The following environmental authorisations required for the

continued operations at Vanggatfontein are in place:●● An approved EMP in terms of section 39(4) of the MPRDA dated 7 April 2014; an Integrated Water Use Licence (IWUL) awarded by the Department of Water and Sanitation (DWS) in January 2015. The water uses approved include the following:

– Section 21(a) – authorised to abstract domestic and process water from six boreholes situated at the mine;

– Section 21(b) – authorised to store 100m3 of treated water in a reservoir;

– Section 21(c) – impeding or diverting the flow of water in a watercourse. KEHL is authorised to cross an unnamed tributary of the Wilge River;

– Section 21(g) – disposing of waste in a manner which may detrimentally impact on a water resource; and

– Section 21(i) – Altering the bed, banks, course or characteristics of a watercourse. KEHL is authorised to cross an unnamed tributary of the Wilge River.

An Environmental Authorisation in terms of the National Environmental Management Act (NEMA) was received in September 2009 from the Mpumalanga Department of Agriculture and Land Administration, Directorate: Environmental Impact Management.

All environmental approvals are therefore in place to enable continued operations on Vanggatfontein. These approvals are listed in Appendix 1.

9.1.2 Vaalkrantz Colliery Underground operations at Vaalkrantz anthracite operation

under the management of Leeuw Mining & Exploration Proprietary Limited (LME) commenced in 2003 with the Alfred and Gus seams exploited from twin portals at the Enyati Adit. Operations had, however, been ongoing on adjacent properties since the 1960s. During 2002 Anglo Coal disposed of its KwaZulu-Natal (KZN) coal assets to LME which included exploration tenements adjacent to the defunct Enyati Colliery which had mined coking coal and anthracite to the south of the current operational footprint. Other operators had similarly mined anthracite from the



Alfred seam immediately north and west of Anglo Coal’s tenements during the 1980s and 1990s. Subsequent to the acquisition of Anglo Coal’s assets in 2002, the feasibility of a new underground operation with coal handling and processing plant (CHPP) was demonstrated in 2002 and operations commenced at the Enyati Adit during 2003.

In 2009 the West Adit was commissioned, similarly mining both the Alfred and Gus horizons from a hillside excavation. In December 2011 Keaton Energy concluded the acquisition of a 74% interest in LME and assumed management control of the Vaalkrantz operation.

Underground operations are made complex due to the frequency of dolerite intrusions into pre-existing structural faults. Large lateral sills fed by these intrusions give the coals in the area their anthracitic qualities through partial devolatilisation, but equally create a challenging underground environment. Mining of the seams at Vaalkrantz takes place within a number of sill/dyke bounded blocks with stone development being a fundamental component of mining.

Conventional bord and pillar underground mining is employed with conventional drill and blast operations on the thicker Alfred horizon and scoop assisted drill and blast operations on the thinner Gus horizon.

The Vaalkrantz CHPP has a 110tph nameplate feed capacity and produces a range of sized anthracite products for domestic and offshore markets requiring a range of different specifications, largely based on ash and volatile content. Vaalkrantz produces a range of anthracite products with ash contents of between 16% and 32%.

The operation comprises two Mining Rights located approximately 25km east of the town of Vryheid in the KwaZulu-Natal province as follows:●● 225MR covering an area 7 638.04ha executed on 5 May 2009 valid for 15 years expiring on 4 May 2024; and

●● 211MR covering an area of 436.3ha executed on 11 April 2013 for a five-year period expiring on 10 April 2018.

The combined Vaalkrantz Mining Right footprint is illustrated in Figure 3.

Surface Rights over portions 3, 4 and 5 of the farm Rustplaats 165HU, remaining extents of portions 1 and 8 of the farm Langkrans 367HU, remaining extent of portion 3 of the farm Bloemendal 18ha and the remaining extent of the farm Vaalkrantz 306HU totalling 1 953.4ha are held by LME. All areas impacted upon by surface infrastructure and operations are therefore held by LME.

9.1.2.1 Geology, Coal Resource and Coal Reserve Geological setting Vaalkrantz Colliery is located on the eastern edge of the

Vryheid Coalfield and hosts the Fritz, Alfred, Gus, Dundas and Coking seams. The strata of the Vryheid Coalfield are moderately to heavily faulted in places, with displacements of up to 150m recorded. Major faults are often associated with dolerite sill transgressions pre-dating the intrusions. Apart from where locally tilted by dolerite intrusions, the coal seams and strata, are generally flat lying although gently undulating with a regional dip to the south of less than three degrees.

The surface geology over the Vaalkrantz Project area is dominated by outcrops and sub-crops of Jurassic-aged dolerite, as well as sedimentary rocks of the Vryheid Formation of the Ecca Group. The Vaalkrantz Project area consists of a dolerite-capped mountain (Pondwaan hill), the slopes of which are formed by rocks of the Vryheid Formation.

Only the Gus and the Alfred seams on the Vaalkrantz lease area currently have economic potential, both of which are mined using underground methods at Vaalkrantz. The Gus seam is generally bright and thinly banded with a thin parting commonly developed in the top third of the seam. Although this parting is usually mudstone or siltstone and only a few centimetres thick, in the north and south of the project area it becomes sandstone and can reach at least 0.23m in thickness. The Gus seam roof is dominantly coarse-grained, thickly bedded sandstone, up to 14m thick, which forms the parting between the Alfred and Gus seams. The Gus seam averages 1.01m in thickness, with a minimum thickness of 0.40m and maximum thickness of 1.50m. The depth to the roof of the Gus seam ranges from outcrop to about 200m.

The Alfred seam ranges in thickness from 0.21m in the extreme south-west of the resource area, to 4.57m in the north-west, averaging 2.35m. The depth of the Alfred seam below surface ranges from sub-crop to around 135m. On the basis of coal quality, the Alfred seam has previously been divided into two plies – a lower select portion, and an upper non-select portion. The select seam averages 1.61m in thickness, ranging from 0.97m to 2.32m and comprises dominantly mixed lustrous and bright coal with subordinate dull lustrous bands. The thickness of non-select coal increases from zero in the south to 1.58m in the north, averaging 0.75m. Mudstone or siltstone often forms the base of the mainly dull coal to carbonaceous mudstone non-select portion of the seam. The immediate roof of the seam comprises about 2m of interlaminated siltstone and sandstone, which forms a weak roof. Above this is the base of a 7m to 10m sandstone channel fill. The basal units of the fill are fairly thin (<0.4m) and interlayered with siltstone (Anglo Coal, 2001).


Page 22 \ Keaton Energy \ GROUP COAL RESOURCE AND COAL RESERVE REPORT 2015

Two major dolerite sills have been identified on Vaalkrantz that impact on the resources, these being the Enyati and Matshongololo sills. The porphyritic Enyati sill is approximately 20m thick and strikes south-west to north-east across the resource area, dipping to the south-west, uplifting the southerly resource block by about 90m. The older Matshongololo dolerite sill is approximately 20m thick and underlies most of the resource area. It generally remains horizontal but may, however, transgress the coal seams in the east and the north of the project area. As the sill remains quite close to the coal seams, it has a profound effect on the rank and quality of the coals, the Gus seam in particular. A third major dolerite sill, the Ngwibi, occurs well above the coal seams. It is not believed to have any influence on the seams’ disposition or quality.

Minor dolerites, both sills and dykes, are abundant. An approximately north to south trending intrusion, probably an offshoot of the Enyati sill, uplifts the eastern portion of the resource (Block 3) area by about 12m. This intrusion appears to be associated with many stringers and subsidiary thin sills, which invade both the Gus and Alfred seams along its strike length.

Adjacent projects/operations A number of defunct coal mining operations exist adjacent

to Vaalkrantz Colliery which mined coal from the same coal seams. As many as 14 collieries operated in the Vryheid region during the 1980, the most important among these include the Enyati, Hlobane, Natal Anthracite, Natal Ammonium, Leeuwnek, Rietvlei and Tselentis Collieries which operated in close proximity to Vaalkrantz. The only

underground operation adjacent to Vaalkrantz still producing is Chris Viljoen’s Rietvlei Gus seam operation immediately north of the Vaalkrantz 225MR boundary located approximately 1.4km north of Vaalkrantz’ West Adit.

Exploration history A total of 84 core boreholes were drilled by Anglo Coal prior

to 2001 leading to the development of the Vaalkrantz Colliery in 2003 under LME. An additional 13 core boreholes were drilled by LME during 2007 and 2008.

With the inclusion of portions 4 and 5 of Rustplaats 165HU to Mining Right 225MR, a further 89 boreholes were added to the database from various sources, as well as a further 26 boreholes drilled subsequent to Keaton’s acquisition of 74% of LME in 2011, all drilled under the supervision of CCIC Coal.

The current geological database therefore comprises a total of 212 boreholes. Due to the fragmented nature of the respective drilling campaigns, in particular the non-Anglo Coal data recently acquired for campaigns conducted during the 1980s and 1990s, the database comprises boreholes with a combination of intercept-only data to full raw qualities with washabilities. The current coal resource estimates and categorisations are therefore premised upon holes with quality information only. While holes with structural/intercept information are included in the model, the estimate classifications are based on boreholes with quality data only.


It is also worth noting a key differentiator between the Highveld and Witbank coals is the challenge posed by both mountainous topography and dense forestation. Drilling can only be conducted from accessible locations, which renders certain potential resource blocks difficult to drill to the required density. That said, regardless of the drilling density, localised dolerite activity remains a challenge in understanding lateral structural and quality continuity.

It is important to note that in the evaluation of previous geological models and resource statements, CCIC Coal did not have sight of all of the original recovery, lithological or coal logs, sampling sheets and/or ticket books pertaining to the respective drilling campaigns, and were therefore not able to satisfy themselves as to the authenticity or accuracy of such work, nor that such hard copy data was correctly transcribed into electronic format. While the quality of some of the presented data required verification, most of the data was captured by qualified geologists. As such CCIC Coal accepted the source data as provided and verified historical records where possible through reconciliations with actual coal intercepts, qualities and washabilities.

CCIC Coal is also satisfied that the information provided is both appropriate and valid, and furthermore considers that with respect to all material technical matters, it has undertaken appropriate and adequate research to ensure compliance, both in terms of the level of investigation and the level of disclosure.

Previous Coal Resource estimates Two historic coal resource statements exist for the

Vaalkrantz Project prior to Keaton Energy’s involvement. Unfortunately, none of the estimates present full raw qualities making comparisons problematic as the impact of quality cutoffs cannot be assessed.●● Anglo Coal (2001) – an Information Memorandum dated February 2001 documents a total (full Alfred plus Gus seams) GTIS coal resource of 20.12Mt, which with a 15% geological loss applied gave a TTIS estimate of 17.11MT. The key difference between this figure and the current estimate is that the current resource is reported at a 50% Ash and 0.8m thickness cut-off (no cut-offs are stated for the Anglo Coal report), with a considerably thicker Alfred seam in Blocks 3 and 4. A significant part of the Anglo Coal resource is now excluded from the current resource as mined out or excluded on the basis of prospects for eventual economic extraction;

●● Whyte (2005) – reports a GTIS resource of 16.91Mt (quoted as MTIS), which with a 15% geological loss derived a 12.51Mt estimate.

Subsequent to the Whyte (2008) estimate and Keaton Energy’s involvement since December 2011, annual coal resource estimates have been prepared by CCIC Coal and have not differed materially until the 31 March 2015 estimate. The variance in the 2015 estimate is described below.

FY15 exploration and development summary An additional 16 core boreholes were drilled during FY15,

focusing on the new Rustplaats (RPS2 Block) and Block 3 resource areas at a total cost of R2.4 million. Drilling was all conducted under the supervision of CCIC Coal using drilling contractor Discovery Drilling and laboratory analyses conducted by Vryheid Coal Laboratory, the only independent coal analysis laboratory in Vryheid.

Coal Resource estimate (CCIC Coal) Coal Resource estimation was again conducted by

CCIC Coal. Modelling and Coal Resource estimation methodologies are detailed in section 5.1.

A 15% Alfred seam resource reduction from 9.6Mt to 8.2Mt was as a result of premature extraction of infrastructure from the southern extremities of both the Enyati and West Adits due to deteriorating mining conditions resulting from the impact of the Enyati dolerite intrusion. The Enyati Block previously included in the Alfred seam Coal Resource estimate has been excluded on this basis removing 1.05Mt. The Alfred seam depletion for the period totalled 0.3Mt (net reduction of 12%).

Similarly, a 41% reduction in the Gus seam resource from 5.6Mt to 3.3Mt resulted from the prudent exclusion of remnant blocks previously considered mineable but no longer accessible using current infrastructure. The Block 3, Block 4 and Enyati resource blocks have been removed on this basis removing 2.18Mt from the Gus resource. These blocks will be reconsidered if infrastructure to those blocks is re-established. Gus depletion for the period totalled 0.06Mt.

The total Coal Resource therefore came off 24% from 15.1Mt to 11.5Mt (21% net of depletion). The Vaalkrantz Coal Resource estimate is summarised in Table 7 and illustrated in Figure 3.

ROM Coal Reserve estimate (Mindset) The reserving process at Vaalkrantz has again been

conducted by Mindset. Mindset has maintained an ongoing involvement in the operation of and planning for the operation since LME’s acquisition of Anglo Coal’s KZN assets in 2002. The reserving process is broadly presented in section 6.2, however, the mechanics of the mine design and scheduling process are worth expanding upon in this difficult underground environment.


Vaalkrantz Colliery


0 2000m

Vryheid 25km

Swart Umfolozi 20km

O27

46'S

O27

47'S

O27

48'S

O27

49'S

O27

50'S

O27

51'S f f

Vaalkrantz Alfred

f

f

ff

f

f

f

f

f

f

Block 2

Block 3

Block 4

Block 5

Alfred seam sub-outcropBlock 1Rustplaats

165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

O31 00'E O31 01'E O31 02'E O31 03'E O31 04'E O31 05'EO30 59'E

Figure 3: Vaalkrantz Colliery Coal Resource and tenure diagrams

Table 7: Vaalkrantz Colliery 31 March 2015 Coal Resource estimate

Coal Reserve (Mt) (AD)* Raw coal qualities (AD)

Indicated MeasuredTotal Coal Resource

RD (g/cc)

IM(%)

ASH (%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

Alfred seam 8.2 – 8.2 1.65 2.7 29.5 5.6 61.5 21.8 0.89 8.2Gus seam** 3.3 – 3.3 1.70 2.6 27.4 8.0 62.3 23.1 0.89 11.6

Total 11.5 – 11.5

* Cutoff parameters: Thickness >0.8m, raw ash <50%, raw DAFVOL <16.5%** 0.6Mt RPS2 Block cut-off parameters: Thickness >0.7m, raw ash <50%, 16.5%<, DAFVOL <24%

0 2000m

Vryheid 25km

Swart Umfolozi 20km

O27

46'S

O27

47'S

O27

48'S

O27

49'S

O27

50'S

O27

51'S f f

Vaalkrantz Alfred

f

f

ff

f

f

f

f

f

f

Block 2

Block 3

Block 4

Block 5

Alfred seam sub-outcropBlock 1Rustplaats

165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

O31 00'E O31 01'E O31 02'E O31 03'E O31 04'E O31 05'EO30 59'E

Project boundaryIndicated Coal ResourceInterpreted faultBoreholeMined-out areasSecondary road


0 2000m

f

Vryheid 25km

Swart Umfolozi 20km

f

fff

f

f

f

O27

46'S

O27

47'S

O27

48'S

O27

49'S

O27

50'S

O27

51'S

O31 00'E O31 01'E O31 02'E O31 03'E O31 04'E O31 05'EO30 59'E

f f

Vaalkrantz Gus

Block 2

RPS1

Block 3

Block 5

Block 1Rustplaats 165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

Figure 3: Vaalkrantz Colliery Coal Resource and tenure diagrams


The 31 March 2015 Coal Resource estimate is summarised in Table 7 and illustrated in Figure 3. In the first instance, the CCIC Datamine model provides the respective Alfred and Gus seam grids with Coal Resource cutoffs applied

including minimum seam thickness. Mindset’s initial assessment of these grids in XPac result in a number of queries relating to Coal Resource structure, raw qualities, seam washabilities and modelled extent. These queries are dealt with and a mineable in situ Coal Reserve determined prior to the application of panel layouts. The 31 March 2015 Mineable in Situ Coal Reserve estimate is presented in Table 8.

Table 8: Vaalkrantz Colliery 31 March 2015 Mineable in Situ Coal Reserve estimate

Mineable in situ Coal Reserve (AR) Mineable in situ qualities (AD)

Probable Proved

Total Mineablein Situ

Coal ReserveRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

Alfred seam 3.5 – 3.5 1.65 2.7 29.5 5.6 61.5 21.8 0.89 8.21Gus seam 0.7 – 0.7 1.70 2.6 27.4 8.0 62.3 23.1 0.89 11.60

Total 4.2 – 4.2

A number of Coal Resource blocks were excluded from the Mineable in Situ Coal Reserve estimate on the basis of either coal washability or accessibility using current infrastructure. If the economics of a resource block had not yet been confirmed the block was removed.

Panel layouts were then applied in the respective mining blocks. Panel and pillar design was based on the Salamon and Oravecz’s design principles. Allowances were made for areas with known geological disturbances, poor roof conditions, and other factors affecting mining. The mine layouts and Reserve determination were based on maximum extraction in advance mining, no pillar extraction was included.

The following modifying factors were applied to the Mineable In-Situ Coal Reserve in order to arrive at the ROM Coal Reserve:

Coal thickness Gus >0.75m Alfred >0.9m Geological losses 20% Panel volumetric extraction Alfred 67% Gus 64% Layout/mining losses 5% Contamination added Gus 3% Alfred 0.3m roof shale Surface moisture added 4% Processing yield modification 83% Process yield cutoff 40% (practical)



The 31 March 2015 ROM and Saleable Coal Reserve estimates are summarised in Table 9 and Table 10 respectively.

Table 9: Vaalkrantz Colliery 31 March 2015 Run-of-Mine Coal Reserve estimateROM Coal Reserve (AR) ROM qualities (AD)

Probable ProvedTotal ROM

Coal ReserveRD

(g/cc)IM(%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS(%)

DAFVOL (%)

Alfred 1.6 – 1.6 1.65 2.6 29.4 5.8 62.2 21.2 0.71 8.46 Gus 0.4 – 0.4 1.70 3.0 23.3 5.4 68.3 23.9 0.80 7.30

Total 2.0 – 2.0

Table 10: Vaalkrantz Colliery 31 March 2015 Saleable Coal Reserve estimateSaleable Coal Reserve (AR) Saleable Coal Reserve qualities (AD)

Overall yield

Productratio Probable Proved

Total Saleable

Coal Reserve

IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS(%)

TP(%)

Alfred seam 56% 0.90 – 0.90Alfred LA duff

48%

36% 0.28 – 0.28 3.5 16.0 9.5 71.0 30.0 <1.0 0.04Alfred LA peas 13% 0.10 – 0.10 3.5 16.0 9.5 71.0 30.0 <1.0 0.04Alfred LA nuts 16% 0.12 – 0.12 3.5 16.0 9.5 71.0 27.0 <1.0 0.04Alfred HA peas 17% 0.13 – 0.13 3.5 24.0 9.5 63.0 28.0 <1.0 0.04Alfred HA nuts 18% 0.14 – 0.14 3.5 24.0 9.5 63.0 27.0 <1.0 0.0432% Ash 8% 0.13 – 0.13 4.5 32.0 4.8 58.7 22.0 1.30 0.02Gus seam 69% 0.38 – 0.38Gus LA duff

61%

39% 0.14 – 0.14 3.0 13.0 9.0 75.0 30.0 1.20 0.01Gus LA peas 17% 0.06 – 0.06 3.0 13.0 9.0 75.0 30.0 1.20 0.01Gus LA nuts 15% 0.05 – 0.05 3.0 13.0 9.0 75.0 30.0 1.20 0.01Gus HA peas 15% 0.05 – 0.05 4.5 18.0 6.0 71.5 30.0 1.30 0.01Gus HA nuts 14% 0.05 – 0.05 4.5 18.0 6.0 71.5 30.0 1.30 0.0132% Ash 8% 0.03 – 0.03 4.5 32.0 4.8 58.7 22.0 1.30 0.02

Total 65% 1.28 1.28

Net of depletion, the total Vaalkrantz ROM Coal Reserve reduced 26% (13% net of 0.35Mt depletion for the period) from 2.7Mt to 2.0Mt, which accounts for the exclusion of blocks considered unmineable using current infrastructure. In particular the accessibility of the West Adit Block 2 east Gus seam is still being investigated, as is the marketability of the lean-quality Gus resource in the RPS2 block.

On the basis of current planning, the Vaalkrantz ROM Coal Reserve will be depleted prior to the expiry of the 225MR on 4 May 2024.

Future exploration An additional 13 boreholes are planned during H1 FY16 specifically to clarify structure and quality gaps within reserved mining blocks

currently included in the LOM model. The budget for these boreholes is presented in Table 11.

Table 11: Vaalkrantz Colliery in-fill drilling cost estimate

ItemCost(Rm)

Drilling (~1 095m) 0.80Field services and geology 0.18Consumables 0.03Laboratory testwork 0.38Down-the-hole geophysics 0.07

Total 1.46



Operational risks It has been stated that the underground operations in the

KZN anthracite business are challenging. Operations at Vaalkrantz will continue to be so. Our election to streamline our mining contracting structure to a single underground operator will provide a greater degree of flexibility to re-assign production sections to alternate shafts and/or seams without issues related to resource allocation to specific contractors which was a feature of Vaalkrantz in the past.

Ongoing vertical core drilling as well as horizontal rotary drilling continue ahead of our production faces as far as is practically possible considering the surface terrain. Localised geological features will continue to make underground planning challenging. Having a single mining contractor on the mine further provides flexibility in terms of dyke development crew re-assignment between shafts.

More frequent scheduled interactions between the newly appointed mine management team and independent CP Dr JP Hancox and his team have also been instituted to ensure a greater degree of geological and mine planning continuity. Our ability to predict future mining conditions and qualities is our single most important risk at Vaalkrantz and a huge effort is being made to ensure that we continue to improve these functions.

Risks to Coal Resource and Coal Reserve estimates Resource estimation criteria in South Africa, specifically the

recommended hole spacing/drill hole density criteria for multiple-seam deposit types, represent an unavoidable risk

to coal resource categorisation in KZN. Due care has been exercised by the respective CPs in the interpretation of geological data for the Vaalkrantz Coal Resource and Coal Reserve in terms of structural and quality continuity. Unlike the coal seams of the Highveld and Witbank coalfields which demonstrate significantly more predictable lateral continuity in terms of both structure and quality, KZN coals are inherently more fragmented with meaningfully larger dolerite intrusion density.

It is therefore notable that the risks associated with the estimation of KZN Coal Resources and Coal Reserves are greater than the equivalent estimates on other South African Coalfields. Keaton Energy is fully aware of these risks and the resource modelling and estimation processes are applied with due care and consideration and take account of these inherent risks.

9.1.2.2 Environmental permitting With the successful execution of the section 102

amendment to Mining Right 225MR which resulted in the incorporation of portions 4 and 5 of the farm Rustplaats 165HU into the pre-existing 225MR, the amended EMP for the enlarged Mining Right is approved. Approved EMPs are therefore in place for both active Vaalkrantz Mining Rights 225MR and 211MR.

An Integrated Water Use Licence Application (IWULA) for the colliery was initially submitted in 2010 and had not been resolved at the date of this report. Issues relating to site stormwater management are delaying the award of the IWUL on Vaalkrantz.


9.2 Exploration and development projects9.2.1 Moabsvelden The Moabsvelden project is held by 74% Keaton Energy

subsidiary Neosho Trading 86 Proprietary Limited (Neosho). The property is located approximately 15km east of the town of Delmas, Mpumalanga, and approximately 3km north-west of Vanggatfontein Colliery. As a result of Keaton’s acquisition of 100% of the shares in Australian Stock Exchange listed Xceed Resources Limited in February 2014, Neosho became an indirect 74% held Keaton subsidiary. The remaining 26% historically disadvantaged South African (HDSA) stake in Neosho is held by three individuals – DL Sikhosana, AP Sikhosana and ME Dhladla.

The Moabsvelden Mining Right (10025MR) covers an area of 250ha and is valid for a period of 18 years from 16 October 2013 expiring on 15 October 2031.

The Surface Rights over portion 8 of Moabsvelden 248IR are held by Stuart Coal subsidiary Phillem Beleggings Proprietary Limited. Negotiations around the acquisition of the Surface Rights by Neosho Trading were at an advanced stage as at the date of this report. A draft sale and purchase agreement was in the final stages of negotiation with Phillem Beleggings. It is unlikely that Surface Rights will present limitations in terms of future mining.

9.2.1.1 Geology, Coal Resource and Coal Reserve Geological setting Moabsvelden is located on the western edge of the Witbank

Coalfield hosting the typical 1 to 5 coal seam sequence, numbered from the base up. The project area is characterised by an approximately 18m thick bottom seam combination of the 4 upper, 4 mid and 4 lower, 2 upper and 2 lower and number 1 seams.

The coal seams are underlain by Dwyka tillites between 1m and 20m thick. The underlying basement consists of dolomite and chert of the Malmani Group and typically displays karst features. Coal was intersected in all boreholes on the property with the exception of three boreholes in the south-western corner of the property where the paleo-high was intersected. The average thickness of the bottom seam is 18.8m. This seam shows consistent lateral continuity with respect to internal partings and thin individual layers which has is confirmed by geophysical logs.

The 5 seam is located stratigraphically approximately 11m above the 4 upper seam and is limited to the central part of the property. In the northern and western areas of the property the 5 seam is interpreted to have been eroded away.

Adjacent projects/operations Moabsvelden portion 8 lies approximately 3km north-west

of the Vanggatfontein operation. The relevant regional operations and projects are discussed in section 9.1.1.

Exploration history All exploration drilling on the Moabsvelden property has

been conducted by Keaton Energy subsidiary Neosho Trading 86 Proprietary Limited. 10 Core boreholes were drilled during 2010, and a further 32 core boreholes drilled during 2011. A further six core holes were drilled during December 2014 to better understand the coal structure and quality within the planned box-cut, as well as to generate a sample for submission to Eskom for combustion testwork. The current geological database therefore consists of a total of 48 boreholes with an average of 19 core boreholes with quality data per 100ha.



Vaalkrantz Colliery

Moabsvelden

Wetland(excluded from resource estimate)

Palaeo highno-coalzone

Delmas

14km

Kendal17km

Leandra30km

O28 48'E O28 49'E

0 500m

O26

09'S

O26

10'SPan

Vanggatfontein

Colliery 2.2kmFarm road

Stuart CoalAttenuation Dam

MoabsveldenFigure 4: Moabsvelden Project Coal Resource and tenure diagram

Table 12: Moabsvelden Project 31 March 2015 Coal Resource estimate

Coal Resource (MTIS) (AD)# Raw coal qualities (AD)

Inferred Indicated MeasuredTotal Coal Resource

RD (g/cc)

IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam – – 2.8 2.8 1.72 4.3 40.0 22.8 32.9 16.6 0.99 40.94 seam – – 23.2 23.2 1.66 4.2 35.1 20.4 40.4 17.6 0.96 33.82 seam – – 24.2 24.2 1.62 3.8 33.2 21.1 41.9 18.6 0.75 33.71 seam – – 4.5 4.5 1.68 3.3 38.2 19.1 39.4 17.3 0.68 32.7

Total – – 54.7 54.7# Resource cutoffs: Thickness 0.5m, Ash 50%, DAFVOL >27%.

Wetland(excluded from resource estimate)

Palaeo highno-coalzone

Delmas

14km

Kendal17km

Leandra30km

O28 48'E O28 49'E

0 500m

O26

09'S

O26

10'SPan

Vanggatfontein

Colliery 2.2kmFarm road

Stuart CoalAttenuation Dam

Moabsvelden

Project boundaryMeasured Coal ResourceBoreholeWetlandSecondary road

Moabsvelden Project


FY15 exploration and development summary Six core boreholes were drilled during December 2014 to

generate a washed primary combustion sample for submission to Eskom. A project implementation report (PIR) detailing the feasibility parameters for a 2.4Mtpa opencast operation on Moabsvelden was completed during March 2015. The PIR represents a major overhaul of the bankable feasibility study previously compiled by Neosho trading prior to Keaton Energy’s acquisition of Xceed in February 2014.

Previous Coal Resource estimates Gemecs has been involved in resource estimation for the

project since inception. The first coal resource estimate was published in a July 2013 CPR. The total MTIS coal resource published on behalf of Xceed Resources at the time is summarised as follows:●● 53.6Mt Measured Coal Resource; and●● 2.0Mt Indicated Coal Resource.

As no further drilling had been conducted in the intervening period, this estimate was carried forward by Gemecs on behalf of Keaton Energy as at 31 March 2014.

Coal Resource estimate Since commencement of exploration on Moabsvelden, all

exploration and Coal Resource estimation on Moabsvelden has been conducted under the supervision of CP Mr Kobus Dippenaar of Gemecs. From a continuity point of view, subsequent to Keaton Energy’s acquisition of Xceed Resources Limited in February 2014, it was decided to retain Mr Dippenaar as CP for the Coal Resource estimation on Moabsvelden rather than to commission CCIC Coal to remodel the property. The Gemecs Coal Resource estimation methodology is summarised in section 5.2 and will not be repeated here.

The Moabsvelden geological model was updated to include the structural and quality results of the six additional holes drilled during December 2014. The additional drilling and re-model resulted in a 0.8Mt (1.4%) reduction in the MTIS resource from 55.5Mt to 54.7Mt.


Coal Reserve estimate (Miptec Proprietary Limited) Initial pit planning and feasibility work conducted on

Moabsvelden on behalf of previous owner Xceed Resources Limited during 2012 and 2013 contemplated a 3Mtpa integrated operation on the Moabsvelden Mining Right property. The limited surface area available for box-cut spoil deposition, plant infrastructure and coal discard deposition was a glaring shortcoming in the feasibility study which needed to be addressed in a revised operational design.

Following Keaton Energy’s acquisition of the Moabsvelden Project as part of the February 2014 Xceed Resources Limited acquisition, a complete re-design of the Moabsvelden operation was commissioned in order to integrate Moabsvelden into the Vanggatfontein operation as a satellite pit. It was therefore logical that pit planning for both Vanggatfontein and Moabsvelden be conducted by the same designer. Miptec was commissioned to re-visit the Moabsvelden design and to develop a revised LOM schedule with associated Coal Reserve estimates.

The Miptec reserving process described previously was thus conducted in the same manner as reported for Vanggatfontein. The resultant Mineable in Situ Coal Reserve estimate is presented in Table 13.

Table 13: Moabsvelden Project 31 March 2015 Mineable in Situ Coal Reserve estimate

ROM Coal Reserve (AR) Mineable in-situ coal qualities (AD)

Proved Probable

Total Mineable

in Situ Coal Reserve (Mt)

RD (g/cc)

IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam 2.9 0.1 3.0 1.72 4.3 42.3 21.8 31.6 15.9 1.10 40.94 seam 17.5 2.3 19.7 1.66 4.2 36.9 20.2 38.7 16.8 0.95 34.22 seam 14.6 1.5 16.1 1.62 3.8 36.1 20.8 39.4 17.5 0.72 34.51 seam 2.5 0.2 2.7 1.68 3.3 36.3 19.6 40.8 17.9 0.82 32.5

Total 37.5 4.1 41.6 1.65 4.0 37.0 20.5 38.6 17.1 0.86 34.7

The following modifying factors were applied to the MTIS Coal Reserve to derive the ROM Coal Reserve: Coal thickness >1m Volatile matter >15% CV >10MJ/kg Contamination added 4% Surface moisture added 4% Processing yield modification 83% Layout, mining losses 12% on 5 seam, 16% on 2 and 4 seams

The application of these loss and contamination factors resulted in a 92% recovery on the 5 seam and 84% for the 4, 2 and 1 seams. The resultant average ROM stripping ratio for the life-of-mine plan based on the above modifying factors is 2.88BCM/t.



The Moabsvelden ROM Coal Reserve reduced 6.3% from 42.6Mt to 39.9Mt exclusively due to the wetland buffer increase from 50m to 150m and the knock-on effect on the MB1 pit box-cut position and the mineability of sections of the MB3 pit.

The 31 March 2015 ROM and Saleable Coal Reserve estimates are summarised in Table 14 and Table 15 respectively.

Table 14: Moabsvelden Project 31 March 2015 Run-of-Mine Coal Reserve estimate

ROM Coal Reserve (AR) ROM qualities (AD)

Proved ProbableTotal ROM

Coal ReserveRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

5 seam 2.7 0.1 2.8 1.76 4.3 43.6 21.2 30.9 15.5 1.07 40.64 seam 16.7 2.2 18.9 1.71 4.2 38.0 19.6 38.2 16.3 0.92 33.92 seam 14.0 1.4 15.4 1.67 3.8 37.2 20.2 38.9 17.0 0.7 34.11 seam 2.4 0.2 2.6 1.73 3.3 37.4 19.0 40.3 17.4 0.79 32.1

Total 35.9 4.0 39.8

The Moabsvelden ROM Reserve will therefore not be fully depleted at the Mining Right expiry date of 15 October 2031. On the basis of current planning, the right will need to be extended in due time to enable the complete depletion of the Coal Reserve.

Table 15: Moabsvelden Project 31 March 2015 Saleable Coal Reserve estimate

Saleable Coal Reserve (AR) Saleable qualities (AD)

Probable Proved

Total saleable

Coal Reserve

Practicalyield

(%)IM

(%)ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

5 seam 0.1 1.9 2.0 35.0 4.3 14.5 27.7 53.4 26.4 0.884 seam 1.3 10.2 11.5 64.1 4.2 28.6 21.6 45.6 20.4 0.952 seam 1.0 10.3 11.3 75.6 3.8 29.2 22.0 45.1 20.2 0.661 seam 0.2 1.9 2.1 68.2 3.3 31.6 20.7 44.4 19.7 0.71

Total 2.6 24.3 26.9 67.1

Future exploration A further four box-cut delineation core boreholes are

planned for the first quarter of FY16 which will provide geotechnical, structural and quality confirmation within the revised box-cut footprint. The cost of this programme is estimated to be R0.75 million. Production drilling in advance of the mining face will continue on an ongoing basis which will cover a two-year production horizon. The density and type of drilling will be determined on the basis of expected geological conditions.

Operational risks The future development of Moabsvelden now depends on

the conclusion of the IWUL, the finalisation of the Eskom CSA and conclusion of the related HDSA/BBEEE transactions in order to satisfy the 50% + one share requirements for new Eskom supply agreements. Clearly there is a timing risk to the project, but the commercial terms upon which the CSA is concluded will determine project returns. Keaton’s experience at Vanggatfontein from an operational perspective, as well as being a key Eskom supplier, position Moabsvelden well from a risk point of view. Learnings from Vanggatfontein will be valuable for the greater Delmas operation going forward.


information not included that would have a material impact on the geological model or the resultant Coal Resource and Coal Reserve estimates.

9.2.1.2 Environmental permitting The following environmental authorisations for Moabsvelden

are currently in place:●● An approved EMP in terms of section 39(4) of the MPRDA dated 16 October 2013; and

●● An Environmental Authorisation in terms of the National Environmental Management Act (NEMA), received 3 September 2013 from the Mpumalanga Department of Economic Development and Tourism.

Prior to commencement of mining on Moabsvelden the only outstanding authorisation is an IWUL for which an IWULA was submitted in June 2012. The IWUL was recommended for issuance in March 2014 but with a 250m wetland protection buffer. Discussions and presentations around this wetland protection remain the final obstacle in the award process, however, our most recent interaction suggests a 150m buffer to be the most likely outcome. Timing of conclusion of this process is difficult to predict.


9.2.2 Braakfontein Keaton Energy acquired the Braakfontein thermal coal

project as one of the contributing LME assets in December 2011. The project is located approximately 10km south-east of the town of Newcastle in KZN. Prior to Anglo Coal’s disposal of its KZN portfolio to LME in 2002, a significant body of work had been conducted on the asset. All the development work on the project culminated in the compilation of a feasibility study in 2008/9 which contemplated a fully integrated opencast and underground operation on the Top and Bottom seams of the Klip River Coalfield. The coal process design included circuits for the production of export and domestic thermal quality products, with logistics designed to accommodate rail deliveries to Richards Bay and to domestic power stations. Unlike the balance of the LME portfolio, Braakfontein hosts thermal quality bituminous coals more typical of the Witbank and Highveld Coalfields rather than anthracitic seams typical of the Vryheid Coalfield.

The Braakfontein Mining Right 143MR is held by Leeuw Braakfontein Colliery Proprietary Limited (LBC), a 100% subsidiary of LME, and covers an area 1 951.66ha over the remainder of the farm Drycut 8198HU, the remainder of Madadeni 15961HU and the remainder of Braakfontein 4278HU in the magisterial district of Newcastle, KZN. The majority of the project Coal Resource underlies the remainder of Braakfontein 4278 over which Surface Rights are held by LME. The Mining Right was executed on 29 August 2007 valid for a period of 30 years expiring on 28 August 2037.

9.2.2.1 Geology, Coal Resource and Coal Reserve Geological setting The Braakfontein Project lies on the northern part of the

Klip River Coalfield targeting the thermal quality Bottom (number 2B or Gus) and Top (number 3 or Alfred) seams which are separated by an approximately 12m thick sandstone parting. The seams average 2.2m (Top) and 1.9m (Bottom) in thickness. Characteristic of the Klip River Coalfield, the seams on Braakfontein display elevated sulphur values, with sulphur content of 1.90% and 1.24% for the Top and Bottom seams respectively. The Braakfontein resource forms a syncline with a north-south central axis with both Top and Bottom seams sub-outcropping on both eastern and western flanks of the resource meaning that the project will comprise both opencast and underground mining methods, with the large majority being underground.

The surface geology is dominated by outcrops and sub- crops of sedimentary rocks of the Vryheid Formation of the Ecca Group, with Jurassic-aged intrusives of the Ingogo sill at surface in the south.

Adjacent projects/operations A number of collieries and exploration plays are currently

active on the Klip River Coalfield. Current operations include Shanduka Coal’s Springlake Colliery located north-west of Dundee approximately 25km south of Braakfontein; and Forbes Coal’s Magdalena and Aviemore collieries located immediately north of Dundee.

Other exploration projects in the region include Ikwezi Mining’s Newcastle Project, Miranda Mineral Holdings Limited’s Yarl and Seshikhona projects. Of these, the most important in terms of comparison with Braakfontein is Ikwezi Mining’s Ntendeka Project (Newcastle Project Phase 1), which is located contiguous to the south of the Braakfontein Mining Right boundary. An investor presentation dated February 2012 notes the Ntendeka Colliery to be Ikwezi Group’s main focus, with a total published resource of 290Mt, with a JORC compliant ROM Coal Reserve estimate of 16Mt. The main focus of this project is reported to be the Top seam of the Klip River Coalfield).

The now defunct Kilbarchan Colliery which supplied thermal coal to the decommissioned Ingagane Power Station is located approximately 10km south-west of Braakfontein.

Exploration history The majority of the geological information pertaining to the

Braakfontein Project was generated by Anglo Coal. Prior to 2001, a total of 105 boreholes were drilled in the vicinity of the Braakfontein property by the Council for Geoscience (CGS), Anglo Coal (97) and other companies (35). Subsequent to LME’s acquisition of Anglo Coal’s KZN assets in 2002 a further 28 boreholes were drilled by LME between 2002 and 2010, 17 in-fill core holes by Keaton Energy during 2013 as well as a further 33 percussion holes during FY15.

The property has also been the subject of several feasibility exercises. During late 2008/early 2009 a feasibility study review was commissioned by the Vitol energy trading group (Vitol). Mindset was commissioned to conduct the feasibility review with a view to implementing an operation on Braakfontein on behalf of LME and Vitol. The outcome of the 2008 feasibility review was a decision to commence with opencast operations funded by Vitol on a pre-payment basis for export thermal coal to be produced from an operation on Braakfontein.

Preliminary box-cut operations commenced during the latter part of 2008 at which point the international sub-prime crisis impacted heavily on seaborne coal prices. Operations ceased shortly after commencement leaving only a 80m x 80m x 3m excavation on surface.



Table 16: Braakfontein Project 31 March 2015 Coal Resource estimate

Coal Resource (MTIS) (AR)* Raw coal qualities (AD)

Average seam

thickness (m) Inferred Indicated Measured

TotalCoal

ResourceRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

Top seam – – 36.6 – 36.6 1.63 2.2 29.9 21.9 46.6 22.6 1.90 32.25Bottom seam – – 23.4 – 23.4 1.60 2.1 27.0 23.0 48.3 23.5 1.24 32.52

Total – – 60.1 – 60.1

* Opencastable resource cutoffs: Strip ratio <6BCM/t, thickness >0.5m, Ash <50%, DAFVOL >24%Underground resource cutoffs: Strip ratio >6BCM/t, thickness >1.4m, Ash <50%, DAFVOL >24%

0 1000m

RailwayPortion 1

Remainder ofMadadeni15961HT

Remainder ofBraakfontein

4278HT

Remainder ofDrycut

8198HT

Ne

wca

stle

10

km

O30 01'E O30 02'E O30 03'E O30 04'E

O27

46'S

O27

47'S

O27

48'S

BraakfonteinFigure 5: Braakfontein Project Coal Resource and tenure diagram

0 1000m

RailwayPortion 1



4278HT

Remainder ofDrycut

8198HT

Ne

wca

stle

10

km

O30 01'E O30 02'E O30 03'E O30 04'E

O27

46'S

O27

47'S

O27

48'S

Braakfontein

Project boundaryIndicated Coal ResourceBoreholeSecondary roadRail

Braakfontein Project


Previous Coal Resource estimates Several historic coal resource estimates have been

generated for the Braakfontein Project. Each of these is discussed briefly below:●● Anglo Coal (2001) – in the Information Memorandum mentioned previously, a 48.3Mt GTIS coal resource was quoted comprising 25.6Mt from the Top seam and 22.7Mt from the Bottom seam. Geological losses of 15% (Top seam) and 16.6% (Bottom seam) were applied to arrive at a total adjusted TTIS figure of 40.7Mt in the Measured Coal Resource category;

●● CCIC Coal (2012) – a 86.5Mt GTIS resource was estimated on behalf of Keaton Energy split 53.6Mt for the Top seam and 32.8Mt for the Bottom seam. A 20% geological loss was applied to both seams to arrive at TTIS coal resource estimates of 42.9MT and 26.3Mt respectively. The key difference centred on the surface area applied in the model, specifically that Anglo Coal excluded areas on the flanks of the deposit where the dips were greater than seven degrees meaning that no opencast resources were reported for these flanks by Anglo Coal. Anglo Coal further used slightly lower relative densities and Top Seam thicknesses than those modelled by CCIC Coal. Additional differences relate to the fact that Anglo Coal excluded the lower ply of the Top seam where the intra-seam parting was greater than 0.20m, whereas CCIC Coal applied 0.30m, and that CCIC Coal applied a 50% Ash, 24% DAFVOL and 0.5m and 1.4m cut-offs for opencast versus underground resources respectively (no cut-offs are stated for the Anglo Coal estimate).

All coal resource estimates from 31 March 2012 have been estimated by CCIC Coal and have not varied materially over that period.

FY15 exploration and development summary 33 Open percussion holes (2 671m) were drilled on the

property during October and November 2014. The programme comprised 33 flank structural boreholes spaced 50m apart on dip in three lines at 100m spacing along strike, designed to provide more detail on near-surface stratigraphy and its potential implication on underground access. Percussion drilling was preferred over core drilling for both time and cost reasons, but the prime objective of the programme was to quickly and easily define the near-outcrop geology on the western flank of the resource. Down-hole geophysics provided a reliable measure of coal seam depth in the relatively shallow and closely-spaced percussion holes. The seam intercepts for the additional 33 holes were therefore accurately measured and incorporated into the resource model update as discussed in the next section.

Drilling expenditure for the period totalled R2.05 million which included drilling, geophysical surveys and geological management services costs.

Coal Resource estimate (CCIC Coal) As with the majority of our portfolio, CCIC Coal has been

responsible for the Coal Resource estimation on Braakfontein since the project was acquired in 2011. The modelling and coal resource estimation methodologies and procedures are summarised in section 5.1. The resource model was updated during FY15 to reflect the structural and seam thickness output from the December 2014 33 hole percussion programme.

The Braakfontein MTIS Coal Resource reduced from 64.9Mt to 60.1Mt on the back of the remodel incorporating the results of the 33 decline holes. Furthermore, additional historic data for 35 boreholes was acquired during 2014 which included with structural and partial quality information which was incorporated into the remodel.


Coal Reserve estimate (Mindset) The ROM Coal Reserve of 24.9Mt previously declared by

Mindset as at 31 March 2014 has been withdrawn from the 31 March 2015 Group Coal Reserve inventory. The Braakfontein Project has historically been the subject of two independent feasibility studies, as well as a May 2013 independent Concept Study which essentially stood as an update of a 2009 Feasibility Study. The Coal Reserve previously declared for Braakfontein by Mindset therefore relied on their extensive previous experience in compiling the 2009 feasibility study as well as the output of the 2013 Concept Study.

The level of confidence ascribed to the 31 March 2014 Coal Reserve estimate was therefore considered by the CP to be sufficient to justify the declaration of that Coal Reserve estimate. In December 2014 Mindset was again commissioned to compile a new feasibility study on the project in order to understand the impact of the recent exploration drilling and prevailing coal market and economic circumstances.

Braakfontein has to date been designed primarily as an export colliery with a secondary thermal quality product for sale domestically. The continued decline in the price of international seaborne thermal coal has clearly changed the manner in which South African coal projects are viewed from a marketing point of view. Braakfontein is therefore currently being studied to determine the optimal product mix as a key determinant of the project’s feasibility.

On the basis that the most recent demonstration of the Braakfontein Project’s economics was a May 2013 concept Study, the 31 March 2014 Coal Reserve estimate has been withdrawn pending the finalisation of the Mindset 2015 Feasibility Study which is expected during the fourth quarter of the 2015 calendar year. The results of that study will clearly form the basis of an updated Coal Reserve estimate during FY16.

Future exploration No exploration has been planned for FY16. The results of

the Braakfontein Feasibility Study will inform a final phase of feasibility drilling which will focus on the opencast box-cut area and near-term underground Coal Reserve areas to provide more detailed geotechnical, structural and quality data to de-risk project construction phase.

Risks to Coal Resource and Coal Reserve estimates The independent Feasibility Study on the Braakfontein

Project is currently being compiled and is expected to be concluded during the last quarter of the 2015 calendar year. Although it is unlikely that the results of this study will have a material impact on the estimates presented in this report, it is worth noting that these estimates will be refined and reported upon in the next Integrated Annual Report. There are, however, no obvious risks to the estimates presented in this report.


9.2.2.2 Environmental permitting The Braakfontein Mining Right 143MR was awarded to

Leeuw Braakfontein Colliery (LBC) on 29 August 2007. As operations on Braakfontein have not recommenced since the first box-cut excavation of 2008, it has been necessary to amend all approvals for the project. In this first instance, in light of the current Feasibility Study being undertaken, an amendment will be necessary to the existing approved EMP. The EMP amendment process will run concurrently with the NEMA Environmental Impact Assessment (EIA), as well as the Integrated Water Use Application (IWULA) process.

Each of these applications will to a large extent require input from the Feasibility Study which will drive the submission date of the respective applications. The compilation of these applications commenced in September 2014. The specialist studies in support of these applications are currently in progress and are expected to be completed in July 2015. The integrated environmental authorisation application process was initiated with the DMR Regional Office in June 2015 and the relevant reports in support of these various authorisation processes will be submitted during the final quarter of 2015. Approvals are expected during the course of 2016, and only at that point can project development commence.

9.2.3 Koudelager As with the Braakfontein Project, Koudelager was acquired

as part of the LME KZN portfolio in December 2011. Both Anglo Coal and LME conducted historic phases of exploration on the project including sampling adits and core drilling which provided sufficient information on the anthracitic seams on the property to justify further investment on Koudelager as a potential reserve replacement project for Vaalkrantz. The property is easily accessible and would require ROM coal to be hauled a distance of approximately 35km via road to the Vaalkrantz Colliery processing plant.

The Koudelager Mining Right 210MR is held directly by LME and covers an area of 915.4ha over the remainder of portion 1 and portion 2 of the farm Koudelager 115HU located approximately 35km east of Vryheid, and approximately 15km east of Vaalkrantz Colliery. The right was executed on 11 April 2013 valid for a period of 28 years expiring on 10 April 2041.

Surface Rights over the 210MR properties are not held by LME. However, an access agreement with the Kewulane Community Trust is in place.

An additional Prospecting Right was granted to LME over the remaining extent of Koudelager 115HU, contiguous to the west of the 210MR properties. The right 10322PR was executed on 13 March 2015 valid for a period of three years


expiring on 12 March 2018. The respective properties are illustrated in Figure 6.

9.2.3.1 Geology, Coal Resource and Coal Reserve Geological setting Located 15km east of Vaalkrantz Colliery the Koudelager

Project area similarly consists of a dolerite capped mountain located at the eastern extremity of the Vryheid Coalfield. The surface geology on Koudelager is dominated by outcrops and sub-crops of Jurassic aged dolerite, as well as sedimentary rocks of the Vryheid and Pietermaritzburg Formations of the Ecca Group.

All the major seams of the Vryheid Coalfield are present on

Koudelager but only the Alfred, Gus and Dundas seams are considered to have potential for eventual economic extraction. All three of the Vryheid Coalfield seams intersected on Koudelager are anthracitic – the upper and lower Alfred, Gus, and upper and lower Dundas seams. All the seams present on Koudelager are narrow, ranging on average between 0.9m and 1.25m in thickness. Mining on Koudelager will therefore be exclusively underground using scoop assisted conventional drill and blast methods.

Adjacent projects/operations Koudelager is located very much within the same anthracite

belt as Vaalkrantz Colliery. The regional operational and exploration context is discussed in section 9.1.2.

Exploration history Seven core boreholes and seven prospecting adits were

drilled/excavated on the 210MR property by Anglo American Corporation between 1977 and 1979. Two confirmatory holes were drilled on the property by LME in September 2004 after the acquisition of Anglo Coal’s KZN assets in 2002. A further 13 core holes were drilled by LME between September and December of 2013 under the management of CCIC Coal on behalf of Keaton Energy.

An additional four boreholes were drilled on the 10322PR property by Aloe Minerals during 1975. Intercept and quality data for all historical drilling and sampling was available for modelling.

Historic resource estimates Only a single historic resource statement exists for the

Koudelager Project, which is presented in the Anglo Coal Information memorandum (2001). This work presents coal resources on the Alfred (upper and lower) and Dundas (upper and lower) seams. A total GTIS resource of 16.1Mt is stated, which with a 20% geological loss generating a TTIS figure of 12.9 million tonnes. This estimate pre-dated the first publication of the SAMREC code and is not SAMREC compliant.


Koudelager Project

0 1000m

618

Vryheid40km

Nongom

a

50km

O31 12'10"E O31 13'30"EO31 11'06"E

O27

47'4

2"S

O27

48'5

4"S

O27

46'3

0"S

Swart

Umfolozi

20km

Koudelager

Dundas SeamSub-outcrop

Portion 2:Koudelager

115HU(210MR)

Alfred SeamSub-outcrop

RE Portion 1:Koudelager

115HU(210MR)

RE Koudelager115HU

(10322PR)

Figure 6: Koudelager Project 31 March 2015 Coal Resource and tenure diagram

Table 17: Koudelager Project 31 March 2015 Coal Resource estimate


Inferred Indicated Measured

TotalCoal

ResourceRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

Upper Alfred seam – 2.4 – 2.4 1.65 3.2 24.0 4.5 65.5 24.1 2.14 6.4Lower Alfred seam – 1.1 – 1.1 1.60 2.1 16.6 4.5 76.7 27.4 3.54 5.6Gus seam 0.9 0.5 – 1.4 1.76 1.3 39.8 4.9 53.3 19.3 0.79 8.5Upper Dundas seam – 2.1 – 2.1 1.55 1.5 17.3 5.8 75.2 28.1 1.10 7.2Lower Dundas seam – 5.3 – 5.3 1.63 1.5 26.2 6.3 66.4 25.1 0.71 8.8

Total 0.9 11.4 – 12.3# Cutoff parameters: Thickness >0.9m, raw ash <50%, DAFVOL <16.5%

0 1000m

RailwayPortion 1



4278HT

Remainder ofDrycut

8198HT

Ne

wca

stle

10

km

O30 01'E O30 02'E O30 03'E O30 04'E

O27

46'S

O27

47'S

O27

48'S

Braakfontein

Project boundaryIndicated Coal ResourceBoreholeSecondary road


FY15 exploration and development summary No further exploration drilling nor feasibility studies were

conducted on the project during FY15. A substantial amount of modelling work was, however, conducted on the Koudelager resource to understand its structural setting. Dolerite intensity and structural faulting will guide how the resource will be developed.

Coal Resource estimate (CCIC Coal) There has been no change in the 12.3Mt MTIS Coal

Resource estimate reported for Koudelager as at 31 March 2014.


ROM Coal Reserve estimate No Coal Reserve has been estimated for Koudelager to

date.

Future exploration No further drilling is planned on the 210MR property for

FY16. Further drilling is being planned to integrate the new 10322PR property into the broader Koudelager footprint. The geological model will be broadened to include both rights during Q3 2015.


information not included that would have a material impact on either the geological model or the resultant Coal Resource estimate.

9.2.3.2 Environmental permitting Koudelager is a Mining Right property and therefore holds

an approved EMP in terms of the MPRDA. The feasibility of a satellite operation on Koudelager has yet to be established, meaning that the input parameters required for the respective NEMA Environmental Authorisation and DWS IWUL applications have not yet been determined. While further exploration can continue on Koudelager to inform further feasibility work, both the NEMA and IWUL approvals remain outstanding.

9.2.4 Sterkfontein Sterkfontein is a thermal coal exploration project 74% held

by Keaton Energy targeting the 4 seam of the Highveld Coalfield located immediately south-west of the town of Bethal in the Mpumalanga province. Anglo Coal’s New Denmark Colliery and Sasol Coal’s Twistdraai East Colliery lie in close proximity to the south and west of the Sterkfontein Project area respectively.

Keaton Energy holds a 74% interest in subsidiaries Keaton Mining and Labohlano Trading 46 Proprietary Limited (Labohlano Trading), each of which hold contributing Prospecting Rights as follows:

●● 443PR held by Keaton Mining Proprietary Limited over portion 1 of the farm Sterkfontein 299IS and portion 3 of the farm Palmietfontein 307IS covering 932.87ha. This right was renewed on 26 November 2014 for a three-year period expiring on 25 November 2017;

●● 444PR held by Keaton Mining over the remaining extent of portion 3 and the remaining extent of Kaffirs Kraal 148IS, remaining extent of Wildan 577IS, portions 20, 21, 25, 26, 34 and remaining extent of portion 4 of Sterkfontein 299IS, and portion 4 of the farm Goedehoop 301IS, covering 3 076ha. This right was renewed on 26 November 2014 for a three-year period expiring on 25 November 2017;

●● 1827PR held by Keaton Mining over portions 2 and 6 of the farm Dikkop Alias Verkorting 300IS, portion 1 of Sterkfontein 296IS and portions 2 and 3 of the farm Blesbokspruit 150IS, covering 575ha. This right was executed on 12 December 2012 for a period of five years expiring on 11 December 2017;

●● 2053PR held by Keaton Mining over remaining extent of Pieksdal 298JS and portion 1 of the farm Wildan 557IS, covering 498ha. This right was executed on 12 December 2012 for three years expiring on 11 December 2015; and

●● 1720PR held by Labohlano Trading over the farm Kaffirs Kraal (excluding portion 3 and remaining extent) and the farm Sterkfontein 299IS (excluding portions 4, 9, 20, 21, 23, 25, 26 and 34), covering 2 844ha. This right was renewed on 26 November 2014 for a three-year period expiring on 25 November 2017.

The combined area covered by the above Prospecting Rights totals 7 926ha which constitutes the Sterkfontein Project. Surface Rights over the contributing properties are not held by Keaton Mining or Labohlano Trading. Access agreements are, however, in place for exploration purposes.

9.2.4.1 Geology, Coal Resource and Coal Reserve Geological setting Sterkfontein targets the 4 seam located on the eastern

extremity of the Highveld Coalfield. The surface geology is dominated by outcrops and sub-crops of sedimentary rocks of the Vryheid Formation of the Ecca Group, with Jurassic-aged intrusives also present at the surface. The Sterkfontein Project area really only hosts the 5 and 4 seams of the Highveld Coalfield with the 2 seam represented only by a carbonaceous siltstone unit. The 5 seam is not considered economic due to its thin nature, usually being less than 0.5m thick.

From near surface to a depth of around 80m the geology of the project area is dominated by dolerites. Below this is a sandstone-dominated package until the 5 seam, which forms a good marker during drilling. The 5 seam is thin, mostly being less than 40cm over the property. It occurs in most of the holes drilled at a depth of between 130m and 175m.




Figure 7: Sterkfontein Project 31 March 2015 Coal Resource and tenure diagram

Table 18: Sterkfontein Project 31 March 2015 Coal Resource estimate

Coal resource (MTIS) (AD)# Raw coal qualities (AD)


TotalCoal

ResourceRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

4 upper 0.1 1.0 – 1.2 1.64 3.89 32.73 21.63 41.73 19.08 1.78 34.134 lower 40.5 49.2 – 89.7 1.60 3.59 31.31 25.71 39.49 19.86 1.32 39.68

Total 40.6 50.2 – 90.9# Cutoff parameters: Thickness >1.4m, raw ash <50%, DAFVOL >24%; in areas where the parting between the 4 upper and 4 lower seams exceeded 0.3m the 4

upper seam was excluded from the resource estimate.

0 2000m

Resource Block 3

Bethal

f

f

f

f

Morg

enzo

n

23km

O29 21'E O29 23'E O29 25'E O29 27'E O29 29'E

O26

30'S

O26

32'S

O26

34'S

O25

58'S

O26

36'S

Resource Block 2a

Tutu

ka P

ow

er

Sta

tion

12km

N17

R38

R35

N17

Davel18km

N

R

f f

Sterkfontein

Resource Block 2b

Sec

unda

7km

Resource Block 1

0 2000m

Resource Block 3

Bethal

f

f

f

f

Morg

enzo

n

23km

O29 21'E O29 23'E O29 25'E O29 27'E O29 29'E

O26

30'S

O26

32'S

O26

34'S

O25

58'S

O26

36'S

Resource Block 2a

Tutu

ka P

ow

er

Sta

tion

12km

N17

R38

R35

N17

Davel18km

N

R

f f

Sterkfontein

Resource Block 2b

Sec

unda

7km

Resource Block 1

Project boundaryInferred Coal ResourceIndicated Coal ResourceInterpreted faultBoreholeNatural routeArterial routeSecondary roadRail


The parting between the 5 seam and the 4 seam is formed by a sandstone to conglomeratic sandstone unit around 40m to 50m thick. The immediate roof to the 4 seam is formed by a medium to very coarse grained, well-cemented sandstone, which should form a good roof.

The 4 seam is a composite seam which is often split by a sandstone or siltstone parting creating a 4 upper and 4 lower seam. Typically the quality of the 4 lower seam is better than that of the 4 upper seam, and it is the main seam present on the project area. The 4 lower seam ranges in thickness from a minimum of 0.18m to a maximum of 4.50m with an average of 1.90m in areas where the parting between the 4 upper and 4 lower seams exceeds 0.3m, the 4 upper seam is deemed to be unmineable and is excluded from Coal Resource estimation. The immediate roof to the 4 lower seam occurs at depths from over 200m in the

south, to between 140m to 150m in the central part of the project area. Sterkfontein will therefore be an underground mine.

Adjacent projects/operations The Sterkfontein Prospecting Rights boundary is bordered

to the west by Sasol’s Twistdraai (and Syferfontein) collieries and to the south by Anglo Coal’s New Denmark Colliery. New Denmark supplies exclusively to Eskom’s Tutuka Power Station which lies approximately 25km south of the Sterkfontein site. Sasol’s Twistdraai Colliery supplies Sasol’s synfuels business, and also exports a good quality thermal fraction.

Raw 4 lower seam qualities are at the higher end of South African coals lending itself to potentially produce both export and domestic thermal saleable products.


Table 19: Sterkfontein Project HistoryDate Company Activity summary1969 Anglo American Corporation of SA Limited (AAC) Drilled four boreholes, all of which intersected coal. 2006 Keaton Mining Awarded Prospecting Rights 443PR and 444PR.2007 to 2008

Keaton Mining (Managed by CCIC Coal) Drilled 119 boreholes on the farms associated with the 443PR, 444PR, 1827PR and 2053PR.

2008 Labohlano Awarded Prospecting Rights 1720PR.Coffey Mining (South Africa) Proprietary Limited (Coffey Mining)

Prepared an Independent Competent Person’s report on the Sterkfontein and Delmas Coal Projects as part of JSE listing of KEHL.

2009 Labohlano (Managed by Beacon Rock Corporate Services Proprietary Limited, (Beacon Rock)

Drilled 25 boreholes on the farms associated with the 1720PR.

Keaton Mining Acquired Labohlano along with 1720PR on associated farms. Obtained 25 additional boreholes on these farms.

2009 to 2011

Keaton Mining (Managed by Coffey Mining) Drilled 86 boreholes on the farms associated with the 443PR, 444PR, 1827PR and 2053PR.

2010 Brown & McKinney Geocoal Services cc

Sterkfontein Project Exploration Report

Prepared an Independent Competent Person’s report on the Sterkfontein Coal Project

2012 Keaton Mining Awarded Prospecting Rights 1827PR and 2053PR.


No historical mining has taken place on any of the contributing properties.

Exploration history Four historical boreholes were drilled by Anglo American

Corporation of SA Limited (Anglo Coal) in 1969. Subsequent to Anglo relinquishing its rights, no further drilling was conducted prior to the Keaton Energy’s involvement. Keaton Energy drilled a further 253 holes on the contributing properties in two separate phases of exploration, the first between 2007 and 2008 and the second between 2009 and 2011. CCIC Coal managed the first phase.

With the acquisition of Labohlano Trading in 2009, KEH received data from an additional 25 boreholes on the contributing 1720PR properties.

The historical exploration and related activities on Sterkfontein are shown in Table 19.

Historic resource estimates A number of historic Coal Resource estimates for the

4 seam on Sterkfontein exist which are summarised as follows:●● Coffey Mining (2008): 39.8Mt (GTIS), 34.8Mt (TTIS). At this time the Sterkfontein Project covered a significantly smaller area than it does currently comprising only 199 boreholes;

●● GeoCoal (November 2010): 82Mt (GTIS); and●● CCIC Coal (March 2014): 103.6Mt (GTIS), 90.9Mt (TTIS). The total project area had nearly doubled between the Geocoal 2010 and CCIC Coal 2014 estimates with the inclusion of the Labohlano Trading (46) Prospecting Right 1720PR.

All of the listed resource estimates were compiled by independent CPs and were declared as SAMREC compliant.

FY15 exploration and development summary No further exploration drilling or feasibility studies were

conducted on the project during FY15.

Coal Resource estimate (CCIC Coal) A generalised Coal Resource estimation methodology

applied by CCIC Coal is presented in section 5.1 and is therefore not repeated here. A total of 228 boreholes were used by CCIC Coal in the generation of the 31 March 2015 geological model. The 31 March 2015 Coal Resource estimate is summarised in Table 18 and illustrated in Figure 7.

Coal Reserve Estimate The ROM Coal Reserve of 23.9Mt previously declared as at

31 March 2014 has been withdrawn from the 31 March 2015 group Coal Reserve inventory.

The 31 March 2014 Coal Reserve was estimated by Mr A Johnson of RSV Enco Consulting Proprietary Limited (RSV Enco) based upon the findings of a May 2013 Concept Study, the compilation of which had been managed by RSV Enco. At the time the CP felt that the underground life-of-mine production schedule and associated economic study compiled by a number of independent contributing consultants had been conducted in sufficient detail to support the declaration of a Coal Reserve for Sterkfontein. Notwithstanding the relative confidence in the project and its economics, sections 33 and 34 of the SAMREC Code are clear on the level of study required in order to demonstrate the economics of a coal project. In terms of this guideline, therefore, the 31 March 2014 Coal Reserve estimate has been withdrawn pending the completion of a pre-feasibility study on Sterkfontein.



Future exploration A preliminary drilling programme has been proposed in

order to upgrade the area to the south of a fault interpreted to separate resource blocks 1 and 2a to an Indicated Coal Resource classification. In order to achieve the required four boreholes per 100ha, an additional 41 boreholes would be required to an average depth of approximately 180m.

The estimated cost to conclude this programme is summarised in Table 20.

Table 20: Sterkfontein Project medium-term exploration cost estimate

Item Cost (Rm)

Drilling (~7.380m) 4.7Field services and geology 0.4Consumables 0.17Laboratory testwork 0.30Down-the-hole geophysics 0.05

Total 2.13

It is important to note here that this cost has not been included into the Keaton Energy FY16 exploration budget due to the weak state of the coal market at present. Decisions relating to future drilling and feasibility work will therefore be taken based on improvement in the international coal market.


information not included that would have a material impact on the geological model or the resultant Coal Resource estimate.

9.2.4.2 Environmental permitting All of the Prospecting Rights constituting the Sterkfontein

project are current, each with an approved prospecting EMP. No further environmental permits are required for exploration activities.

9.2.5 Roodepoort Xceed Resources, through its 100% held subsidiary Focus

Coal Investments Proprietary Limited, earned a 15% interest in the Roodepoort exploration project during 2011 and 2012 located approximately 7km north of the town of Kriel in the Mpumalanga province. The original Prospecting Right holder Hampfuna Mining and Exploration Proprietary Limited (Hampfuna Mining) holds the remaining 85%. Focus Coal holds a right to earn up to a maximum of 74% in the project through further exploration funding.

The Roodepoort Prospecting Right 3018PR covers 1 120.25ha over portions 6, 11, 12 and 17 of the farm Roodepoort 40 IS and portion 6 of the farm Diepspruit 41IS. The right was executed on 25 August 2009, valid for a period of four years which expired on 24 August 2013. A renewal application was submitted on 30 July 2013 which remained in process with the DMR at the date of this report.

Surface rights over the contributing properties are not held by Hampfuna Mining. Access agreements for exploration purposes are in place.

9.2.5.1 Geology, Coal Resource and Coal Reserve Geological setting The Roodepoort Project is located on the Witbank Coalfield.

While the 1 and 1A seams are present, the 2U and 2L seams are the most widely distributed over the area and average 2.5m and 1.4m in thickness respectively, with a parting of approximately 0.6m separating the two seams. The 1 seam is situated on average 9m below the S2L with an average thickness of 0.9m. The 1A seam is also present at an average of 3.5m below the 1 seam with an average thickness of 0.8m. The 2 upper and 2 lower seams are therefore the prime economic targets at Roodepoort. The deposit is relatively shallow with an average in situ strip ratio of 5.62BCM/t for the combined 2 upper, 2 lower and 1 seams. There is therefore good potential that Roodepoort could be mined using opencast methods.

Adjacent projects/operations The project is bordered to the north-east by Universal

Coal’s Roodekop Project and New Clydesdale Colliery (now jointly termed the NCC Project), to the south by Anglo Coal’s Kriel Colliery, to the north by BHP Energy Coal South Africa’s (BECSA) Douglas Colliery and to the west by BECSA’s Rietspruit resource. While Kriel Colliery produces exclusively Eskom product from both opencast and underground operations, all the surrounding operations produce export quality thermal coal from the 2 and 4 seams of the Witbank Coalfield. In addition to an export thermal product, the New Clydesdale operation has also historically produced a low phosphorous metallurgical coal from the 5 seam.

Exploration history Information for five historical boreholes was obtained from

the CGS. An additional four boreholes were drilled during November 2011 by Xceed Resources to confirm the historical findings. In February 2012 another 21 boreholes were drilled on the contributing properties by Xceed Resources.

Previous Resource estimates Gemecs published the maiden Coal Resource estimate on

behalf of Xceed Resources in July 2013. No further exploration has been conducted on the property since the initial 2013 estimate. The 31 March 2015 estimate therefore remains identical to that published in July 2013.

FY15 exploration and development summary No further exploration drilling was conducted during the

financial year under review.

Coal Resource estimate (Gemecs) The Coal Resource estimation methodology employed by

Gemecs for the Roodepoort Project is detailed in section 5.2 and therefore not repeated here.

The drilling on Roodepoort provided sufficient data density for Measured (minimum eight boreholes per 100ha, Indicated (minimum four core boreholes with quality data per 100ha) and Inferred Coal Resource (minimum one cored borehole with quality data per 100ha) consistent with


Roodepoort Project

Figure 8: Roodepoort Project 31 March 2015 Coal Resource and tenure diagram

Table 21: Roodepoort Project 31 March 2015 Coal Resource estimate



TotalCoal

ResourceRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

2 upper seam 2.2 7.2 5.6 15.0 1.54 1.8 25.9 29.3 43.0 23.8 0.91 40.52 lower seam 1.8 3.2 2.1 7.1 1.52 2.7 24.3 22.8 50.2 23.5 1.07 31.21 seam 0.6 1.1 0.9 2.6 1.83 2.4 48.5 17.5 31.6 13.2 0.50 35.61A seam 0.1 0.1 0.2 0.4 1.84 2.5 46.2 17.3 34.1 14.1 0.76 33.9

Total 4.7 11.6 8.9 25.1# Cutoff parameters: Thickness >0.5m, raw ash >50%, DAFVOL >28%

547

545

544K

riel 5

km

O26

09'S

O26

11'S

O26

13'S

0 2000mO29 11'E O29 13'E O29 15'E O29 17'E

Ogies

18km

Kriel2km

Roodepoort

555

Rietspruitdam

0New Clydesdale CollieryDiepspruit Section

Roodepoort 40ISPtns 6,12

Diepspruit 41ISPtn 6

Thubelihle

Roodepoort 40ISPtns 11,17

TavistockColliery

0

0Albion Collieries

0Phoenix Colliery

0Universal CoalRoodekop Project

Rietspruitdam

547

545

544

0New Clydesdale CollieryDiepspruit Section

Roodepoort 40IS

Diepspruit 41IS portion 6

Thubelihle

Krie

l 5km

O26

09'S

O26

11'S

O26

13'S

0 2000mO29 11'E O29 13'E O29 15'E O29 17'E

TavistockColliery

0

0Albion Collieries

0Phoenix Colliery

Ogies

18km

Kriel2km

Roodepoort

555

portion 6 Roodepoort 40ISportions 11 and 17

Project boundaryInferred Coal ResourceBoreholeMain roadSecondary roadRail



the borehole spacing/density listed in section 4 of this report. The resource model is constructed and Coal Resource estimated on data from 26 boreholes. The 31 March 2015 Coal Resource estimate is summarised in Table 21 and illustrated in Figure 8.

Although no additional drilling or updated geological modelling was conducted on the Roodepoort resource during FY15, the geological loss applied to the estimated Inferred Coal Resources for the 2 upper and 2 lower seams was corrected from 15%, which had been incorrectly applied, to 20%. The net effect of the correction is a 1.3Mt (4.9%) reduction in the total declared MTIS Coal Resource from 26.4Mt to 25.1Mt.

Prior to Xceed Resources’ involvement in Roodepoort, no previous coal resource estimates had been declared for any of the contributing properties.

Coal Reserve estimate No Coal Reserve has been estimated for Roodepoort to

date.

Future exploration No further exploration is planned for the Roodepoort Project

for FY16. A decision on whether to proceed with further exploration on the project will be taken during FY16 in order to earn up to 74% in the project.



9.2.5.2 Environmental permitting The Roodepoort Prospecting Right is current with an

approved prospecting EMP. No further environmental permits are required for exploration activities. There were no additional issues of an environmental nature identified in the EMP that would materially impact on Keaton Energy’s ability to develop an operation on the Roodepoort property.

9.2.6 Bankfontein The Bankfontein and Roodepoort project ownership

structures are identical in that Focus Coal funded exploration on both projects to earn a 15% interest in each, with the shares in the respective projects acquired from the same vendor Hampfuna Mining. Bankfontein is therefore similarly held 15% by Xceed Resources Limited subsidiary Focus Coal with the remaining 85% held by original Prospecting Right holder Hampfuna Mining. Focus Coal holds an identical right to earn up to a maximum of 74% in the project through further exploration funding.

Bankfontein is located approximately 30km north of the town of Ermelo, approximately 7km north-west of the town of Breyton in the Mpumalanga province. The Bankfontein

Prospecting Right 3041PR covers 913.12ha over portions 1, 10 and 13 of the farm Bankfontein 215IS. The right was executed on 25 August 2009, valid for a period of three years which expired on 24 August 2012. A renewal application was submitted on 31 May 2012 which remained in process at the date of this report.

Surface rights over the contributing properties are not held by Hampfuna Mining. Access agreements for exploration purposes are in place.

9.2.6.1. Geology, Coal Resource and Coal Reserve Geological setting The Bankfontein project lies to south-east of the Middelberg-

Hendrina sector of the Witbank Coalfield. The coal seams which are considered as having significant economic potential are the A lower, B lower, C lower and D seams which are typical of the Ermelo-Breyton region. The seams are relatively narrow with average thicknesses of 0.7m, 1.8m, 1.0m and 1.0m respectively. The combined package of seams would be investigated for potential opencast exploitation, but the thicker B lower horizon would be the primary economic target from an underground mining point of view.

Adjacent projects/operations The project is surrounded largely by Glencore coal assets

– bordered on the west by the undeveloped ConsBrey property, to the east by the Tselentis Block, and further to the south by the Spitzkop operation. The most prominent neighbour to Bankfontein is Continental Coal’s DeWittekrans-Greenfields project located approximately 15km west of Bankfontein. The fragmented nature of the Bankfontein Prospecting Right properties has resulted in the narrow portion 7 of the Bankfontein farm lying between the Keaton Energy contributing portions 1 and 13 as illustrated in Figure 9. A Prospecting Right over portion 7 is held by Roan Coal Proprietary Limited having acquired the property from Sentula Mining Limited during 2014.

Typical of the area the coal seams are relatively narrow but host relatively good quality seams.

Exploration history Data for 11 historic boreholes drilled in the area of interest

was sourced from the CGS. Three of these holes were drilled in 1952 by Consolidated Collieries Limited and the balance drilled in 1981 by ICODEV. The original borehole logs that were drilled in 1981 with the analysis were scanned into pdf and were available for verification and capture by Gemecs. Five of the historic boreholes were drilled on portions 1 and 10, and a further six holes on portion 13. During November 2011 five historic boreholes were twinned on portion 13 to validate the data from these boreholes. A further 17 core exploration boreholes were drilled during early 2012 including 15 boreholes on portion 13 and two boreholes on portions 1 and 10. All the


Bankfontein Project

0 2000m 542

Bankfontein 215IS portion 1


Extent of B Lower Coal Seam

Carolina18km

O26

14'S

O26

16'S

O26

18'S

Ermelo25km


Carolina30km

Hendrina26km

He

nd

rin

a2

0km

Bankfontein

R36

O29 54'E O29 56'E O29 58'E O30 00'E

555

R

Breyton

Figure 9: Bankfontein Project 31 March 2015 Coal Resource and tenure diagram

Table 22: Bankfontein Project 31 March 2015 Coal Resource estimate

Coal Resource (MTIS) (AD)* Raw coal qualities (AD)


TotalCoal

ResourceRD

(g/cc)IM(%)

ASH(%)

VM(%)

FC(%)

CV(MJ/kg)

TS(%)

DAFVOL(%)

A seam 0.5 – – 0.5 1.49 3.5 15.9 28.0 52.6 26.8 0.53 34.7B lower seam 5.6 3.9 – 9.5 1.63 3.0 27.4 22.7 46.8 22.2 0.74 32.7C lower seam 2.3 1.1 – 3.4 1.60 2.9 30.0 21.9 45.2 20.9 0.66 32.7D seam 2.6 0.1 – 2.7 1.62 3.1 31.0 20.5 45.4 21.0 0.99 31.3

Total 11.0 5.1 – 16.1

* Cutoff parameters: Thickness >0.5m, raw ash >50%, DAFVOL >28%

0 2000m 542



Extent of B Lower Coal Seam

Carolina18km

O26

14'S

O26

16'S

O26

18'S

Ermelo25km


Carolina30km

Hendrina26km

He

nd

rin

a2

0km

Bankfontein

R36

O29 54'E O29 56'E O29 58'E O30 00'E

555

R

Breyton

Project boundaryCoal Resource areaBoreholeArterial routeMain roadSecondary roadRailTown



0 1000m

Mooiklip

O27

35'S

O27

36'S

O27

37'S

O27

38'S

O31 15'E O31 16'EO31 14'EO31 13'EO31 12'EO31 11'E

Ithala Nature Reserve

R69

Project BoundaryBoreholeFY15 DrillingArterial RouteSecondary Road

R

Dundas seamoutcrop

Louwsburg3km

Vryheid

45km

Figure 10: Mooiklip Project locality and tenure diagram

Table 23: Mooiklip Phase 1 borehole sample analyses

RAW Analyses (AD)

Borehole and sample

Sample width

(m)RD

(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

MKP14-003

Upper Dundas 0.49 1.92 1.7 51.7 6.2 40.3 14.9

Sandstone parting 0.5 2.25 1.8 84.2 5.2 8.8 16.2

Lower Dundas 0.51 1.6 1.7 21.3 6.3 70.8 26.9MKP14-005 (Dundas) 1.2 1.7 1.3 32.8 5 61 22.4

MKP14-008 (Dundas) 1.5 1.8 1.5 40.1 5.5 52.8 19.0

0 1000m

Mooiklip

O27

35'S

O27

36'S

O27

37'S

O27

38'S

O31 15'E O31 16'EO31 14'EO31 13'EO31 12'EO31 11'E

Ithala Nature Reserve

R69

Project BoundaryBoreholeFY15 DrillingArterial RouteSecondary Road

R

Dundas seamoutcrop

Louwsburg3km

Vryheid

45km

Project boundaryBoreholeFY15 drillingArterial routeSecondary road

Mooiklip Project


the EMP that would materially impact on Keaton Energy’s ability to develop an access adit and underground operation on the Bankfontein property.

9.2.7 Mooiklip In October 2013, 74% held Keaton Energy subsidiary

Amalahle Exploration Proprietary Limited (Amalahle Exploration) entered into an Option and Acquisition Agreement with BSC Resources Proprietary Limited (BSC Resources), the holder of the Mooiklip Prospecting Right, to earn into the project by funding and initial exploration phase comprising three confirmatory boreholes. Subject to the results of that programme Amalahle Exploration has the option to acquire the project for a R250 000 cash payment and a R10 per saleable tonne royalty from the project once in production. The project is located approximately 40km north-east of Vryheid in KZN as illustrated in Figure 10.

The Mooiklip Prospecting Right 403PR covers an area of 2 343.95ha over portions 1, 2, 3, 4, 5 and remaining extent of the Mooiklip 235HU. The PR is held by BSC Resources, executed on 25 July 2014, valid for two years expiring on 24 July 2016. Surface rights to the contributing properties are not held by Amalahle Exploration but agreements are in place with surface owners, the Nhlangwini Communal Property Association and Nhlangwini Community Trust, enabling site access for drilling purposes.

9.2.7.1 Geology and exploration results Geological setting The Mooiklip property is located on the eastern edge of the

Vryheid Coalfield and is characterised by the dolerite-capped Nhlangwini mountain, the slopes of which are formed by rocks of the Vryheid Formation. All the major seams of the Vryheid Coalfield are present (the Fritz, Alfred, Gus, Dundas and Coking seams) but only the approximately 1.2m thick anthracitic Dundas seam presently has economic potential.

The locality and Prospecting Right polygon for the Mooiklip project are illustrated in Figure 10.

Adjacent projects/operations Mooiklip is located within the same anthracite belt as the

Vaalkrantz Colliery and Koudelager Project. The regional operational and exploration context is therefore very similar.

Exploration history Information for 11 historical boreholes drilled by Natal

Ammonium Collieries Limited during 1980 on the property was sourced from the CGS and included only collar elevations and Dundas seam intercepts. No quality data was available from this exploration programme. No further exploration work was undertaken on the property subsequent to the 1980 drilling programme. It is not known why no further development took place on the property.

boreholes were diamond drilled 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. All boreholes were geophysically logged to verify depths and thicknesses.

The current database and resultant Coal Resource estimate is based on 36 boreholes with quality data.

Previous Resource estimates Gemecs published the maiden Coal Resource estimate on

behalf of Xceed Resources in July 2013. No further exploration has been conducted on the property since the initial 2013 estimate. The 31 March 2015 estimate therefore remains identical to that published in July 2013.

FY15 exploration and development summary No further exploration drilling was conducted during the

financial year under review.

Coal Resource estimate (Gemecs) Both the Bankfontein and Roodepoort Prospecting Rights

are held by Hampfuna Mining and exploration on both projects was conducted concurrently during late 2011 and early 2012 under the supervision of Mr Kobus Dippenaar from Gemecs. The drilling, sampling, quality control, modelling and estimation methodologies employed are therefore identical for both projects as described in section 5.2.

There has been no change in the 16.1Mt Bankfontein Coal Resource estimate reported as at 31 March 2014. The 31 March 2015 Coal Resource estimate is summarised in Table 22 and illustrated in Figure 9.

Prior to Xceed Resources’ involvement in Bankfontein, no previous Coal Resource estimates have been declared for any of the contributing properties.

Future exploration No further exploration is currently planned for the

Roodepoort Project. A decision on whether to proceed with further exploration on the project will be taken during FY16 in order to earn up to 74% in the project.



9.2.6.2 Environmental permitting The Bankfontein Prospecting Right is current with an

approved prospecting EMP. No further environmental permits are required for exploration activities. There were no additional issues of an environmental nature identified in


Future exploration A further two confirmatory holes are planned to expand our

understanding of the sedimentology in the northern quadrant of the property as suggested by recent drilling. These holes will be drilled during the first quarter of FY16. The cost of this two-hole programme is expected to be approximately R0.26 million.

9.2.7.2 Environmental considerations The Mooiklip EMP was approved upon execution of the

Mooiklip Prospecting Right on 25 July 2014. The key environmental considerations contained in the EMP relate to the rehabilitation of access roads, drill sites and the boreholes themselves. All boreholes drilling sites, and in particular the lined water sumps and the surface disturbed due to vehicle activity, are rehabilitated as near as possible to original environmental state. The drilling contract entered into between Amalahle and contractor Discovery Drilling specifically caters for the rehabilitation of borehole sites with before and after photographs taken for record purposes. Each borehole site’s rehabilitation is formally recorded and signed by surface owner, driller and site manager. Rehabilitation of temporary access roads is similarly signed off by the surface owner.

Boreholes are sealed with a cement plug to avoid potential gas and/or water discharge, as well as to avoid potential injury to livestock.

There were no additional issues of an environmental nature identified in the EMP that would materially impact on Keaton Energy’s ability to develop an access adit and underground operation on the Mooiklip property.

10. Group FY15 exploration summary and FY16 budget

Our exploration drilling function is entirely outsourced and broadly includes site management, drilling services, geological services (logging, measurement and reporting, sampling), down-hole geophysics, laboratory analysis, collar surveys, geological modelling and reporting. In order to ensure consistent and reliable exploration results a common team of contractors has been deployed for the FY15 period in the respective disciplines, with the entire process managed by CCIC Coal. Quality assurance and quality control (QA/QC) is therefore achieved using independent professionals using leading industry practice in data acquisition, reputable certified laboratories and comprehensive analytical controls.

FY15 exploration and development summary An initial twin borehole and a further two in-fill core boreholes

were drilled on the property during October and November 2014 in order to verify the historical drilling data and to provide an early indication of Dundas seam structure and quality.

All drilling undertaken was diamond drilling using conventional equipment and TNW (60mm), core size. Core recoveries were >95% and the quality of the drilling was acceptable. Geological field services (drill site management, core logging, sampling) and consulting was provided by CCIC Coal under the supervision of Competent Person Dr Philip John Hancox. Drilling was conducted by Discovery Drilling, and laboratory analyses conducted by Vryheid Coal Laboratories.

Drilling and site access costs for the period totalled R0.41 million.

Exploration results The initial two boreholes drilled on the south-central portion

of the deposit, spaced approximately 630m apart, provided encouraging results from both structural and quality perspectives. A Dundas seam intersection in the north-eastern portion of the resource was, however, disappointing where a 0.8m sandstone parting was found to occur within the Dundas seam which would have a material impact on both the mineability of the seam using conventional methods, as well as contamination of the ROM product. This parting is clearly variable in thickness across the deposit, is absent in the central borehole VKZ14-005, and 0.1m thick in the southern borehole VKZ14-008. The impact that this in-seam parting on the raw ash content and resultant processing yield on Mooiklip will therefore be a key issue for further investigation. The volatile content range between 5.0% and 6.3% is typical of KZN anthracites.

Sample analysis results for the three boreholes drilled on Mooiklip are presented in Table 23.

Coal Resource estimate Insufficient exploration data is available upon which to

estimate a Coal Resource on Mooiklip. From historical seam intercepts and recent drilling results, including coal quality and washability data, an initial exploration target area of between 180ha and 220ha is estimated to contain an in situ exploration target within a range between 4.0Mt and 4.5Mt which forms the basis of our current effort on Mooiklip. It is important to note that the tonnage range quoted here is conceptual in nature and is not estimated with sufficient confidence to constitute a coal resource estimate.



The following service providers were used during the period under review.

Table 24: Geological service provider summary FY15Service provider

Geological services and site management

CCIC Coal

Diamond and open hole drilling Discovery Drilling Contractors

Laboratory services Vryheid Coal laboratories (KZN assets)

Noko Laboratory (Moabsvelden Project)

Inspectorate M&L (Vanggatfontein Colliery)

Down-hole geophysics Geoline Services Proprietary Limited

Collar surveys SRM Surveys

Exploration for the period ending 31 March 2015 centred largely on the KZN region (R4.86 million) where the structural complexity at Vaalkrantz required in-fill drilling within current and planned mining blocks. Greenfields drilling on the Braakfontein and Mooiklip Projects are included in the figure quoted above.

Total exploration metres drilled and expenditure for the 12-month period ending 31 March 2015 are summarised below.

Table 25: Group FY15 Exploration Expenditure SummaryFY15 FY16

Boreholes

drilled

Total exploration

expenditure (Rm)

Planned

boreholes

Budgeted

expenditure

(Rm)

Vanggatfontein Colliery 6 0.68 – –Vaalkrantz Colliery 16 2.40 14 1.45Moabsvelden Project 6 0.71 6 0.75Braakfontein Project 33 2.05 – –Mooiklip Project 3 0.41 2 0.19Balgray Project – – 22 2.95

Total 64 6.25 44 5.34

11. Legal proceedings or other material conditions Appendix 1 summarises the Keaton Energy Group mineral rights tenure, environmental permitting and rehabilitation provision

funding. Other than the items referred to in Appendix 1, no obvious legal proceedings or other material conditions exist that may impact on the Company’s ability to continue mining or continue with its exploration activities. No obvious environmental factors have been reported which have the potential to significantly affect any of our Prospecting or Mining Rights.

12. Lead CP consent This Coal Resource and Coal Reserve Statement was compiled from relevant data extracted from the respective contributing CP

reports by Mr Graham Stacey. Mr Stacey is the Lead Competent Person, registered with the South African Institute of Mining and Metallurgy (SAIMM, registration number 701319), holds a BSc Eng (Mining) (University of the Witwatersrand (WITS)) and an MBA (WITS) and a Mine Manager’s certificate (coal). He is a mining engineer with 20 years’ experience in mining operations and project development and is currently an independent consultant to Keaton Energy. Mr Stacey hereby provides written consent to the inclusion in this report of the SAMREC compliant Coal Resource and Coal Reserve estimates in the form and context in which they appear.

31 March 2015

GD Stacey Independent Technical Consultant PO Box 30057 Kyalami 1684



Appendix 1: Mining Rights tenure and environmental permittingMineral Rights Tenure Environmental permitting and guarantee funding

Right holderType of right Colliery/project Location

Department of Mineral Resources reference number Area (ha) Tenure Current status

Notes to material mineral rights impediments

Mineral and Petroleum Resources Development Act (MPRDA) Environmental Management Plan (EMP)

National Environmental Management Act (NEMA) environmental authorisation

Department of Water and Sanitation (DWS) Integrated Water Use Licence (IWUL)

Notes on permitting and potential impact on ongoing operations

Rehabilitation guarantee (ZAR) Funding mechanism

Keaton Mining (Pty) Ltd PR


Bethal, Mpumalanga MP30/5/1/1/2/443 PR 932.87 26/11/2014 – 25/11/2017

Right currently active None Approved EMP Not applicable Not applicable All permits in place R10 000 Cash

Keaton Mining (Pty) Ltd PR Bethal, Mpumalanga MP30/5/1/1/2/444 PR 3 076.00 26/11/2014 – 25/11/2017


Keaton Mining (Pty) Ltd PR Bethal, Mpumalanga MP30/5/1/1/2/1827 PR 575.00 12/12/2012 – 11/12/2017

Right currently active None Approved EMP Not applicable Not applicable All permits in place R154 471 Nedbank guarantee in favour of DMR


Right currently active None Approved EMP Not applicable Not applicable All permits in place R193 120 Nedbank and Investec guarantees in favour of DMR

Labohlano Trading 86 (Pty) Ltd

PR Bethal, Mpumalanga MP30/5/1/1/2/1720 PR 2 844.00 26/11/2014 – 25/11/2017

Right currently active None Approved EMP Not applicable Not applicable All permits in place R100 000 Investec guarantee in favour of DMR

Keaton Mining (Pty) Ltd MR Vanggatfontein Colliery

Delmas, Mpumalanga

MP30/5/1/2/2/309 MR 1 651.98 23/2/2010 – 22/2/2030 Right currently active – operational mine

None Approved EMP NEMA Record of Decision (ROD) awarded 25/9/2009

Valid IWUL awarded 11/1/2015

All permits in place R77 135 982 Lombard guarantee in favour of DMR

Keaton Mining (Pty) Ltd PR Vanggatfontein extension

Delmas, Mpumalanga

MP30/5/1/1/2/2078 PR 430.00 19/4/2013 – 18/4/2018 Right currently active – historical drilling being researched followed with in-fill drilling

None Approved EMP Not applicable Not applicable All permits in place R180 180 Lombard guarantee in favour of DMR

Keaton Mining (Pty) Ltd MP Klip Colliery Ogies, Mpumalanga MP30/5/1/3/2/519 MPMP30/5/1/3/2/595 MPMP30/5/1/3/2/596 MP

15.00 Closure rehabilitation in progress, mine closure application submitted and in process with DMR

None Approved EMP Not applicable Not applicable All permits in place R1 849 166 Nedbank and Investec guarantees in favour of the DMR

Neosho Trading 86 (Pty) Ltd

MR Moabsvelden Project Delmas, Mpumalanga

MP30/5/1/2/2/10025 MR 250.00 16/10/2013 – 15/10/2031

Right currently active – a condonation application in respect of delayed commencement has been submitted to the DMR detailing the revised mine development schedule and reasons for delayed commencement (IWUL and Eskom CSA)

Section 11 application due to unwinding of ASX listed Xceed Resources Limited structure submitted to DMR on 28/8/2015

Approved EMP NEMA Record of Decision (ROD) issued 3/9/2013

IWUL recommended for issuance

IWUL to be awarded before operations may commence

R19 959 823 Lombard guarantee in favour of DMR

Hampfuna Mining & Exploration (Pty) Ltd

PR Roodepoort Project Kriel, Mpumalanga MP30/5/1/1/2/3018 PR 1 120.25 25/8/2009 – 24/8/2013 Renewal application submitted timeously to the DMR and in process

None Approved EMP Not applicable Not applicable All permits in place R71 750 Cash


PR Bankfontein Project Breyten, Mpumalanga

MP30/5/1/1/2/3041 PR 913.12 25/8/2009 – 24/8/2012 Renewal application submitted timeously to the DMR and in process

None Approved EMP Not applicable Not applicable All permits in place

BSC Resources (Pty) Ltd PR Mooiklip Project Vryheid, KZN KZN30/5/1/1/2/403 PR 2 343.95 25/7/2014 – 24/7/2016 Right active None Approved EMP Not applicable Not applicable All permits in place R15 000 Lombard guarantee in favour of DMR

Leeuw Mining & Exploration (Pty) Ltd

MR Koudelager Project Vryheid, KZN KZN30/5/1/2/2/210 MR 915.40 11/4/2013 – 10/4/2041 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



PR Vryheid, KZN KZN30/5/1/2/2/10322 PR 915.40 13/3/2015 – 12/3/2018 Right active None Approved EMP Not applicable Not applicable All permits in place R90 301 Lombard guarantee in favour of DMR

Leeuw Braakfontein Colliery (Pty) Ltd

MR Braakfontein Project Newcastle, KZN KZN30/5/1/2/2/143 MR 1 951.66 29/8/2007 – 28/8/2027 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



MR Vaalkrantz Colliery Vryheid, KZN KZN30/5/1/2/2/225 MR 7 638.04 05/5/2009 – 04/5/2024 Right active – operational mine

None Approved EMP In progress In progress NEMA and IWUL applications in process



MR Vaalkrantz/Rustplaats Vryheid, KZN KZN30/5/1/2/2/211 MR 436.30 11/4/2013 – 10/4/2018 Right active None Approved EMP In progress In progress NEMA and IWUL applications in process

R800 000 Lombard guarantee in favour of DMR


MR Application

Balgray Project Utrecht, KZN KZN30/5/1/2/2/300 MR 5 056.94 Mining Right application in progress Mitigation measures presented relating to coexistence of mining and ecotourism and surface and groundwater impacts are being reviewed by the DMR

EMP submitted as part of Mining Right application

EIA application will be submitted on approval of MR

IWULA will be submitted on approval of MR

EMP approval required with MR approval; NEMA environmental authorisation and IWUL to be awarded before operations may commence

N/A – Mining Right application in progress


Appendix 1: Mining Rights tenure and environmental permittingMineral Rights Tenure Environmental permitting and guarantee funding

Right holderType of right Colliery/project Location

Department of Mineral Resources reference number Area (ha) Tenure Current status

Notes to material mineral rights impediments

Mineral and Petroleum Resources Development Act (MPRDA) Environmental Management Plan (EMP)

National Environmental Management Act (NEMA) environmental authorisation

Department of Water and Sanitation (DWS) Integrated Water Use Licence (IWUL)

Notes on permitting and potential impact on ongoing operations

Rehabilitation guarantee (ZAR) Funding mechanism

Keaton Mining (Pty) Ltd PR


Bethal, Mpumalanga MP30/5/1/1/2/443 PR 932.87 26/11/2014 – 25/11/2017


Keaton Mining (Pty) Ltd PR Bethal, Mpumalanga MP30/5/1/1/2/444 PR 3 076.00 26/11/2014 – 25/11/2017



Right currently active None Approved EMP Not applicable Not applicable All permits in place R154 471 Nedbank guarantee in favour of DMR


Right currently active None Approved EMP Not applicable Not applicable All permits in place R193 120 Nedbank and Investec guarantees in favour of DMR

Labohlano Trading 86 (Pty) Ltd

PR Bethal, Mpumalanga MP30/5/1/1/2/1720 PR 2 844.00 26/11/2014 – 25/11/2017

Right currently active None Approved EMP Not applicable Not applicable All permits in place R100 000 Investec guarantee in favour of DMR

Keaton Mining (Pty) Ltd MR Vanggatfontein Colliery

Delmas, Mpumalanga

MP30/5/1/2/2/309 MR 1 651.98 23/2/2010 – 22/2/2030 Right currently active – operational mine

None Approved EMP NEMA Record of Decision (ROD) awarded 25/9/2009

Valid IWUL awarded 11/1/2015

All permits in place R77 135 982 Lombard guarantee in favour of DMR

Keaton Mining (Pty) Ltd PR Vanggatfontein extension

Delmas, Mpumalanga

MP30/5/1/1/2/2078 PR 430.00 19/4/2013 – 18/4/2018 Right currently active – historical drilling being researched followed with in-fill drilling

None Approved EMP Not applicable Not applicable All permits in place R180 180 Lombard guarantee in favour of DMR

Keaton Mining (Pty) Ltd MP Klip Colliery Ogies, Mpumalanga MP30/5/1/3/2/519 MPMP30/5/1/3/2/595 MPMP30/5/1/3/2/596 MP

15.00 Closure rehabilitation in progress, mine closure application submitted and in process with DMR

None Approved EMP Not applicable Not applicable All permits in place R1 849 166 Nedbank and Investec guarantees in favour of the DMR

Neosho Trading 86 (Pty) Ltd

MR Moabsvelden Project Delmas, Mpumalanga

MP30/5/1/2/2/10025 MR 250.00 16/10/2013 – 15/10/2031

Right currently active – a condonation application in respect of delayed commencement has been submitted to the DMR detailing the revised mine development schedule and reasons for delayed commencement (IWUL and Eskom CSA)

Section 11 application due to unwinding of ASX listed Xceed Resources Limited structure submitted to DMR on 28/8/2015

Approved EMP NEMA Record of Decision (ROD) issued 3/9/2013

IWUL recommended for issuance

IWUL to be awarded before operations may commence



PR Roodepoort Project Kriel, Mpumalanga MP30/5/1/1/2/3018 PR 1 120.25 25/8/2009 – 24/8/2013 Renewal application submitted timeously to the DMR and in process

None Approved EMP Not applicable Not applicable All permits in place R71 750 Cash


PR Bankfontein Project Breyten, Mpumalanga

MP30/5/1/1/2/3041 PR 913.12 25/8/2009 – 24/8/2012 Renewal application submitted timeously to the DMR and in process

None Approved EMP Not applicable Not applicable All permits in place

BSC Resources (Pty) Ltd PR Mooiklip Project Vryheid, KZN KZN30/5/1/1/2/403 PR 2 343.95 25/7/2014 – 24/7/2016 Right active None Approved EMP Not applicable Not applicable All permits in place R15 000 Lombard guarantee in favour of DMR


MR Koudelager Project Vryheid, KZN KZN30/5/1/2/2/210 MR 915.40 11/4/2013 – 10/4/2041 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



PR Vryheid, KZN KZN30/5/1/2/2/10322 PR 915.40 13/3/2015 – 12/3/2018 Right active None Approved EMP Not applicable Not applicable All permits in place R90 301 Lombard guarantee in favour of DMR

Leeuw Braakfontein Colliery (Pty) Ltd

MR Braakfontein Project Newcastle, KZN KZN30/5/1/2/2/143 MR 1 951.66 29/8/2007 – 28/8/2027 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



MR Vaalkrantz Colliery Vryheid, KZN KZN30/5/1/2/2/225 MR 7 638.04 05/5/2009 – 04/5/2024 Right active – operational mine

None Approved EMP In progress In progress NEMA and IWUL applications in process



MR Vaalkrantz/Rustplaats Vryheid, KZN KZN30/5/1/2/2/211 MR 436.30 11/4/2013 – 10/4/2018 Right active None Approved EMP In progress In progress NEMA and IWUL applications in process

R800 000 Lombard guarantee in favour of DMR


MR Application

Balgray Project Utrecht, KZN KZN30/5/1/2/2/300 MR 5 056.94 Mining Right application in progress Mitigation measures presented relating to coexistence of mining and ecotourism and surface and groundwater impacts are being reviewed by the DMR

EMP submitted as part of Mining Right application

EIA application will be submitted on approval of MR

IWULA will be submitted on approval of MR

EMP approval required with MR approval; NEMA environmental authorisation and IWUL to be awarded before operations may commence

N/A – Mining Right application in progress


Abbreviations3D three dimensional

AD air dried

ADUC air dried, uncontaminated

Amalahle Exploration

Amalahle Exploration Proprietary Limited

AR as received

BCM bulk cubic metres

CP Competent Person

CPR Competent Person’s report

Cum cumulative

CV calorific value

DAFVOL dry ash free volatile content

DD diamond drill

DMR Department of Mineral Resources

EIA environmental impact assessment

EMP Environmental Management Plan

FC fixed carbon

GTIS gross tonnes in situ

ha hectare or 10 000 m2

IM inherent moisture

IWUL Integrated water use licence

IWULA Integrated water use licence application

JSE Johannesburg Securities Exchange Limited

Keaton Energy Keaton Energy Holdings Limited

Keaton Mining Keaton Mining Proprietary Limited

km kilometre

ktpa thousand tonnes per annum

Labohlano Labohlano Trading 46 Proprietary Limited

LBC Leeuw Braakfontein Colliery Proprietary Limited

LME Leeuw Mining & Exploration Proprietary Limited

LOM life of mine

m metres

Mamsl metres above mean sea level

MJ/kg megajoules per kilogram

mm millimetres

MR Mining Right

Mt million metric tonnes

MTIS mineable tonnes in situ

Mtpa million metric tonnes per annum

NEMA National Environmental Management Act

OGL original ground level

PR Prospecting Right

RD relative density

ROM run of mine

SAMREC South African Mineral Resource Committee

SAMVAL South African Mineral Asset Valuation

SANAS South African National Accreditation System

SANS South African National Standard

SR strip ratio

tonne/ton metric tonne

TP total phosphorus

tpa metric tonnes per annum

tph metric tonnes per hour

tpm metric tonnes per month

TS total sulphur

TTIS total tonnes in situ

VM volatile matter

Corporate Identity Brief

What is Corporate Identity (CI)?A companys CI is the look and feel that is associated with and attributedto that company. It is more than just the logo; rather, it is the way we, as a company,portray ourselves through a range of media to the outside world.

TYPE

Primary typeface

45 Helvetica LightABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Secondary typeface

66 Helvetica Medium ItalicABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Electronic typeface (to be used in DTP software)

The graphic typeface (Arial) is to be used on printapplications produced in DTP software.

The PANTONE Matching System (PMS) is preferred inprint for its colour accuracy. Where it is not possibleto use PANTONE colours, the CMYK process equivalentsmay be substituted.

The RGB (monitor colour) equivalents are only forelectronic use, for example in television, websites andaudio-visual presentations.

All colours must always be solid.

The logo and typeface may only be used in the primarycolour palette shown above or in white, reversed out ofthese colours.

The logo may not be used as a background element.

BLACK

C 0M 0Y 0K 100R 24G 21B 18

COLOURS

The positioning guide above and below showshow the elements of the logo work together,and how much clear space must be left aroundthe identity when using copy or other graphicelements. This space is a function of X whichis the height of the entire logo.

The identity may only be used in full colour,on a white or a black background.

Core logo colours


COLOUR USAGELOGO AND LOGOTYPE

1/2X 1/2X

1/2X

X

1/2X

www.kea

tone

nerg

y.co.

za

Questions relating to corporate identity

Please contactName SurnameKeaton Energy Holdings LimitedEmail: [email protected]

Keaton Energy Holdings LimitedTel: +27 (11) 317 1700 ¥ Fax: +27 (11) 463 4759Ground Floor, Eland House, The Braes, 3 Eaton RoadBryanston, Sandton

Primary colours

Secondary colours

P A N T O N EPMS 5473 CC 82M 0Y 28K 52R 0G 73B 80


www.keatonenergy.co.za

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