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GROUP COAL RESOURCE AND COAL RESERVE 2016

SUPPLEMENT TO THE INTEGRATED ANNUAL REPORTfor the year ended 31 March 2016

Welcome to the Keaton Energy Group Coal Resource and Coal Reserve Report 2016

Keaton Energy is a South African-based coal mining company with its ordinary shares listed for trading on the main board of the JSE under the share code KEH.Keaton Energy’s flagship colliery, Vanggatfontein, produces coal for supply to Eskom and metallurgical coal for supply to domestic industrial consumers. Vaalkrantz whose disposal is subject to section 11 Ministerial consent was placed on care and maintenance subsequent to year-end. Vaalkrantz produced anthracite for domestic and international customers.

We employ a forward thinking approach to ensure our sustainability, continually seeking new revenue streams, development projects and means to further increase LOM at our existing operations. We also look to capitalise on high-growth opportunities to continue diversifying and mitigating risk.

www.keatonenergy.co.za

1. Introduction

2. Compliance and reporting basis

3. Competent Persons

4. Definitions of Coal Resources and Coal Reserves

5. Coal Resource estimation methodology

5.1 CCIC coal 6

5.2 Gemecs 7

6. Laboratory quality assurance and quality control

7. Coal Reserve estimation methodology

8. Group Coal Resource and Reserve summary

8.1. Operations 9

8.2. Growth projects 9

9. Coal Resource and Coal Reserve estimates

Operations 12 – 14

Vanggatfontein Colliery 13 – 20

Vaalkrantz Colliery 21 – 26

Projects 27 – 29

Moabsvelden Project 30 – 35

Braakfontein Project 36 – 40

Koudelager Project 41 – 45

Mooiklip Project 46 – 48

Sterkfontein Project 49 – 53

Roodepoort Project 54 – 56

Bankfontein Project 57 – 60

10. Samrec 2016 amendment

11. FY16 exploration summary and FY17 budget

12. Legal proceedings or other material conditions

13. Lead CP consent

2

2 – 3

3

4 – 5

6 – 7

7 – 8

8 – 9

9

12 – 60

61

61

61

61

ContentsList of tables

Table 1: Keaton Energy Holdings Group Coal Resource and Coal Reserve summary as at 31 March 2016 (2015 values have been corrected to reflect exact numbers published as at 31 March 2015)

10 – 11

Table 2: Vanggatfontein Colliery 31 March 2016 Coal Resource estimate 16

Table 3: Vanggatfontein 31 March 2016 Mineable In Situ Coal Reserve estimate 18

Table 4: Vanggatfontein 31 March 2016 Run-of-Mine Coal Reserve estimate 19

Table 5: Vanggatfontein Colliery 31 March 2015 Saleable Coal Reserve estimate 19

Table 6: Vanggatfontein Colliery Medium-term Measured Coal Resource drilling cost estimate 20

Table 7: Vaalkrantz Colliery 31 March 2016 Coal Resource estimate 24

Table 8: Moabsvelden Project 31 March 2016 Coal Resource estimate 31

Table 9: Moabsvelden Project 31 March 2016 Mineable In Situ Coal Reserve estimate 33

Table 10: Moabsvelden Project 31 March 2016 Run-of-Mine Coal Reserve estimate 34

Table 11: Moabsvelden Project 31 March 2016 Saleable Coal Reserve estimate 34

Table 12: Braakfontein Project 31 March 2016 Coal Resource estimate 39

Table 13: Koudelager Project 31 March 2016 Coal Resource estimate 43

Table 14: Sterkfontein Project history 51

Table 15: Sterkfontein Project 31 March 2016 Coal Resource estimate 52

Table 16: Sterkfontein Project medium-term exploration cost estimate 53

Table 17: Roodepoort Project 31 March 2016 Coal Resource estimate 56

Table 18: Bankfontein Project 31 March 2016 Coal Resource estimate 60

Table 19: Geological service provider summary FY16 61

Table 20: Group FY16 exploration expenditure summary 61

List of figures

Figure 1: Keaton Energy locality map 2

Figure 2: Coal Resource and Coal Reserve classification 5

Figure 3: Vanggatfontein Colliery 5 seam Coal Resource 16



Figure 6: Vaalkrantz Colliery Alfred Coal Resource 25

Figure 7: Vaalkrantz Colliery Gus Coal Resource 25

Figure 8: Moabsvelden location relative to Vanggatfontein operation 28

Figure 9: Mpumalanga Projects 29

Figure 10: KwaZulu-Natal Projects and operation 29

Figure 11: Braakfontein Project Coal Resource 39

Figure 12: Koudelager Project Coal Resource 44

Figure 13: Mooiklip Project locality and tenure diagram 48

Figure 14: Sterkfontein Project Coal Resource 52

Figure 15: Roodepoort Project Coal Resource and tenure diagram 56

Figure 16: Bankfontein Project Coal Resource 60

List of appendices

Appendix 1: Mineral Rights tenure and environmental permitting matrix 62 – 63

Abbreviations 64

1Group Coal Resource and Coal Reserve Report 2016

Keaton Energy Group Coal Resource and Coal Reserve Report 2016

1. IntroductionOur coal portfolio consists of an operating asset and a number of exploration properties, grouped into two broad geographic regions. ●● The Witbank/Highveld region comprises the Vanggatfontein colliery and Moabsvelden project located approximately 16km east of the town of Delmas, and the Sterkfontein, Roodepoort and Bankfontein projects located near to the towns of Bethal, Kriel and Breyten in the Mpumalanga province respectively.

●● The KZN region comprises the Vaalkrantz anthracite operation and the Koudelager, Balgray and Mooiklip projects as well as the Braakfontein thermal exploration project.

The locality of our assets is illustrated in Figure 1.

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 internal standards through integrity, transparency and materiality in reporting, and to inform stakeholders of 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 with reserve replacement and growth projects considered. This report should be read in conjunction with the IAR, which provides additional information regarding the operations and their financial performance.

As at 31 March 2016 Keaton Energy holds a total managed Coal Resource of 384.2Mt (attributable 260.0Mt) and a corresponding total managed Coal Reserve of 84.3Mt (attributable 62.4Mt) net of 3.9Mt depletion for the period.

Important notes:●● Coal Resources and Coal Reserves are compliant with SAMREC 2009;

●● 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 AD basis, with Coal Reserve tonnages reported on an 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, permitting, changes in legislation, costs and other operating parameters.

For abbreviations please refer to page 64.

2. Compliance and reporting basisThis 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.

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda

National roadSecondary roadTownPower stationPortRail Richard’s Bay Coal line

Nongoma

Koudelager Project

Sterkfontein Project

Vaalkrantz CollieryBraakfontein Project

Delmas

Vanggatfontein Colliery

Mooiklip ProjectBalgray Project

Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid

Richards Bay Coal Terminal

Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project

Roodepoort Project N2

N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

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32OE30OE

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28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

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N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

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32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE26

OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

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N11

N2

N11

N12

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MOZAMBIQUE

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MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

SWAZILAND

MOZAMBIQUE

0 50kmScale

32OE30OE

26OS

28OS

Grootvlei

MatlaKriel

HendrinaDuvhaKusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda


Nongoma

Koudelager Project



Delmas



Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid


Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Moabsvelden Project

Bankfontein Project


N3

N4

N17

N11

N2

N11

N12

Figure 1: Keaton Energy locality map

Group Coal Resource and Coal Reserve Report 20162


Coal Resource and Coal Reserve Statement

The respective Coal Resource and Coal Reserve tables are compiled from comprehensive independent statements received from appointed 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. All CPs signed their respective estimates and consent to the inclusion of information into this report in the form and context in which they appear. Each CP is independent of the issuer and does not have a material interest capable of affecting their ability to give an unbiased opinion in the projects for which they take responsibility 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 Keaton Energy through the holding of 100 000 shares in the company.

The abridged Coal Resource and Coal Reserve Statement was compiled from relevant data extracted from the respective contributing CP reports by Mr Jaco Lotheringen. Mr Lotheringen is the Lead Competent Person, registered with the South African Institute of Mining and Metallurgy (SAIMM, PO Box 61127, Marshalltown, 2107), registration number 701237 and the Engineering Council of South Africa (ECSA, Private Bag X691, Bruma, 2026) registration number 20030022, holds a BEng Mining) (University of Pretoria) degree and a Mine Manager’s certificate of competency (fiery mines). He is a mining engineer with 18 years’ experience in mining project development. Mr Lotheringen is currently a director of Ukwazi Mining Solutions Proprietary Limited (Private Bag X159, Centurion, 0046).

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 PersonsThe 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 18 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 rewrite 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 25 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 (PO Box 40084, Reyno Ridge, 1049). Mr Raaths holds a BTech Mining degree, a BSc in Operations Research and an MBL from Unisa SBL. Mr Raaths is registered with the SAIMM (registration number 702015). Mr Raaths has 26 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.

Mr Raaths is currently responsible for all short, medium and long-term planning as well as data management and reconciliations for Keaton Mining’s Vanggatfontein Colliery. Mr Raaths is also a member of SACMA.



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

Competent Person

Operation/project* Holding company Coal Resource estimate Coal Reserve estimate

●● Vanggatfontein Colliery Keaton Mining Proprietary Limited Dr P J Hancox, CCIC Coal Mr L Raaths, Miptec

●● Moabsvelden Project Neosho Trading 86 Proprietary Limited Mr K Dippenaar, Gemecs Mr L Raaths, Miptec

●● Vaalkrantz Colliery Leeuw Mining and Exploration Proprietary Limited Dr P J Hancox, CCIC Coal N/A

●● Braakfontein Project Leeuw Braakfontein Colliery Proprietary Limited Dr P J Hancox, CCIC Coal N/A

●● Koudelager Project Leeuw Mining and Exploration Proprietary Limited Dr P J Hancox, CCIC Coal N/A

●● Sterkfontein Project Keaton Mining Proprietary Limited and Labohlano Trading 46 Proprietary Limited

Dr P J Hancox, CCIC Coal N/A

●● Mooiklip Project Amalahle Exploration Proprietary Limited N/A N/A

●● Roodepoort Project Richtrau 377 Proprietary Limited Mr K Dippenaar, Gemecs N/A

●● Bankfontein Project Richtrau 379 Proprietary 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 ReservesThe 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 CP, 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 CP, 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 CP, 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



Coal Resource and Coal Reserve Statement continued

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, rea l i s t i ca l l y 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

Figure 2: Coal Resource and Coal Reserve classification

Exploration results

INFERRED

INDICATED

MEASURED

PROBABLE

PROVED

Consideration of mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors

(the modifying factors)

Reported as In Situ mineralisation estimates

Reported as mineable production estimates

Incr

easi

ng le

vel o

f geo

scie

ntifi

c kn

owle

dge

and

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e

Exploration results

Coal Resources Coal Reserves

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 “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 Reserves has produced materials at specified qualities, moisture contents and size ranges.



5. Coal Resource estimation methodologyPr ior to the acqu is i t ion of Xceed Resources in February 2014, all of Keaton Energy’s Coal Resource est imates 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 borehole densities for the respective Coal Resource categories defined above.

5.1 CCIC CoalThe geological models and volume and tonnage estimations for the Vanggatfontein, Vaalkrantz, Braakfontein, Sterkfontein and Koudelager assets were generated using the 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.

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 drilling 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.

Quality grids for raw as well as washed coal qual i t ies and y ie lds are model led. A l l the reported coal qualities, ie 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.

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).

A minimum of 95% sampling coverage is applied to all seams to enable coal quality modelling.

In order to estimate the 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 burnt/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 TTIS or MTIS as the case may be, dependent upon whether any selective mining was planned for the resource. No modelling error is applied.

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

Geological lossesMeasured

(%)Indicated

(%)Inferred

(%)

Vanggatfontein 5 10 20Vaalkrantz – 20 –

Braakfontein – 20 –

Sterkfontein – 10 15

Koudelager – 15 25




5.2 GemecsGeological, 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. 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 Micromine, 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 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 qual i t ies and y ie lds are model led. A l l the reported coal qualities, ie 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 based on 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; 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 Coal Resources as per the SAMREC code. Coal Resource classification based on core borehole density (points of observation supported by analytical data) is as follows: Measured: 16 core boreholes per 100ha (250m x 250m grid), Indicated: four core boreholes per

100ha (500m x 500m grid spacing), Inferred: one core 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. Laboratory quality assurance and quality controlBoth on-site and independent commercial laboratories are used for sample analysis and rigorous QA/QC protocols are in place at these laboratories using leading industry practice, including external audits by independent consultants.

Analysis of coal samples was conducted by the following independent laboratories:●● Bureau Veritas Proprietary Limited (Bureau Veritas): Until 2013 all sampled drill core seam intersect ions f rom Vanggatfontein were analysed at the Commodity Services division of the Inspectorate M&L Proprietary Limited. Between 2007 and 2013 various inspections of the Inspectorate M&L’s laboratory in Middelburg were made by CCIC Coal and CP Dr PJ Hancox. During this time the Inspectorate M&L also ran the on-mine laboratory for production quality control purposes. In 2013 Inspectorate M&L became part of the global Bureau Veritas Group, a world leader in testing, inspection and certification services. Bureau Veritas is SANAS accredited and operates to the same high standards and continues to operate a laboratory on Vanggatfontein. Bureau Veritas



employs a stringent QA/QC protocol dealing with, among others, sample preparation, reference standards, reference materials, hidden duplicates and blanks, round robin proficiency testing programmes, ca l ibrat ions, analysis procedures and non-conformance measures.

No exploration drilling was conducted, at Vanggatfontein during this reporting period. No samples were generated during this reporting period for analysis at Bureau Veritas:

●● Noko Analytical Services Proprietary Limited (Noko Analytical): Noko Analytical is an independent SANAS accredited coal analysis laboratory which has been in operation since 2007. Noko Analytical similarly operates within a well-constrained QA/QC protocol dealing with the same battery of issues around QA and QC listed above.

No exploration drilling was conducted at Moabsvelden during this reporting period. No samples were generated during this reporting period for analysis at Noko Analytical Services.

●● Vryheid Coal Laboratory Proprietary Limited (Vryheid Coal Lab): Vryheid Coal Lab is not accredited in terms of SANAS, however through observation of the QA/QC protocols employed by the laboratory, CCIC Coal and Keaton Energy are satisfied that the results of the analyses are representative and repeatable. Vryheid Coal Lab is the only independent coal analytical laboratory in the town of Vryheid in the KZN province.

Vryheid Coal Lab follows prescribed local SABS and ISO procedures for coal sample preparation. Coal samples are weighed as received and again after preparation prior to actual analysis. This is aimed at

ensuring that the coal sampled is fully representative of the sample received. Ongoing monitoring and routine checks on scales and furnaces, including calibration of all analytical equipment and instrumentation, ensure rep resen ta t i ve and repeatable results. On-the-job monitoring and training of staff ensures that correct procedures and best practice methods are being continually employed. All laboratory equipment and instrumentation is routinely checked and calibrated in accordance with SABS and ISO requirements.

Samples sent to Vryheid Coal Lab are prepared (to ISO 13909/4) and analysed according to the following standards: Ash (ISO 1171); Inherent Moisture (SABS 925); Volatiles (ISO 562); Calorific Value (ISO1928); Total Sulphur (ASTM D4239); Phosphorous (ISO 622); Ash Fusion Temperature (ISO 540); Total Moisture (ISO 589). Keaton Energy and CCIC Coal is satisfied that the coal sampling methodologies and the use of Vryheid Coal Lab for analytical services by Keaton Energy for the Vaalkrantz and the neighbouring programmes is sufficient to allow for a high degree of confidence in the coal quality results of the Vaalkrantz Colliery. No bias was evident in comparison of the results from the Anglo Coal, LME and Keaton Energy analyses. Whilst production data has not been directly used in Coal Resource estimation, the mine has also been producing coal since 2003, and the raw qualities documented are in line with those recorded by Anglo Coal, LME and more recently Keaton. CCIC Coal is therefore satisfied that the coal sampling analysis methodologies for the Vaalkrantz Colliery are adequate, and may be used for quality purposes in the resource estimation.

No exploration drilling was conducted at Vaalkrantz nor any of our neighbouring KZN projects, during this reporting period. No samples were generated during this reporting period for analysis at Vryheid Coal Laboratory.

7. Coal Reserve estimation methodologyCoal Reserves are declared for the operating Vanggatfontein Colliery and the Moabsvelden development asset. Coal Reserve estimates for the opencast Delmas assets, Vanggatfontein and Moabsvelden, have been compiled by Mr Leon Raaths of Miptec. The Reserve estimation methodology is described below.

In the first instance it is important that the geological and mining modelling packages provide the primary order-of-magnitude cross-check of the In Situ volumes, relative densities and tonnages. Miptec utilises Runge Pincock Minarco (RPM) Global’s Open Cut Coal (XPac) package as the pit design and scheduling software which provides this first GTIS reconciliation 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 an appropriate and reasonable representation of the geological model.

A rigorous LOM schedule is then set up, with reserving modifying factors informed by experience in the current Vanggatfontein pits, from both pit planning and coal processing point of view. Modifying factors applied in the reserving process are listed in the respective sections of this report. In-pit seam losses and practical coal processing plant yield are 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 estimates of mine and plant output. Only Indicated and Measured Coal Resources are included for LOM scheduling purposes. In the event that an Indicated or Measured Coal Resource block is geographically isolated 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 Coal Resource categorisation before the isolated 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 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.

8. Group Coal Resource and Reserve summaryCoal Resources and Coal Reserves reported for the period ended 31 March 2016 are summarised and compared with the 31 March 2015 estimates in Table 1. In summary, total managed Coal Resources came off 1.5% from 390.1Mt to 384.2Mt, and total managed ROM Coal Reserve reduced 7.3% from 90.9Mt to 84.3Mt mainly due to the FY2016 mining depletion at Vanggatfontein and the revised Reserve estimation at Vaalkrantz.

The remaining Coal Reserve at Vaalkrantz Colliery could not sufficiently demonstrate potential for eventual economic extraction and was therefore withdrawn.

8.1 OperationsThe Coal Resource Estimate for Vanggatfontein Colliery was evaluated and the ROM depletion for the period amounted to 3.7Mt from the 5, 4 and 2 seams. The combined MTIS Coal Resource reduced 4.7% from 119.3Mt to 113.7Mt. Net of depletion, the Vanggatfontein ROM Coal Reserve reduced by a further 2.2% as a result of slightly lower recovery overall, with VG2 being quite significant. In the case of the VG3 pit near the wetland, fringe peripherals were not mined. On the VG4 pit side bordering the mined out VG1 pit and VG2 pit areas, pillars were left for safety reasons. The remaining LOM footprint excludes these pillars and remaining fringes.

The Vaalkrantz Coal Resource reduced by 1.7% from 11.5Mt to 11.3Mt as a result of mining depletion and the construction of a new geological model. The Alfred seam resource reduced by 2.4% from 8.2Mt to 8.0Mt, mainly due to depletion for mining as well as the newly constructed geological model by CCIC Coal. The Alfred seam depletion for the period totalled 0.05Mt. Similarly, a 2.1% reduction in the Gus seam resource from 3.35Mt to 3.28Mt was due to depletion for mining as well as the newly constructed geological model. Gus depletion for the period totalled 0.07Mt.

The Vaalkrantz operation was placed on care and maintenance in May 2016. Underground mining in KZN remains challenging in the current economic setting. Due to current pricing levels and operating costs at Vaalkrantz Colliery, a Coal Reserve was not estimated.

8.2 Growth projectsThe current Moabsvelden IWUL application is under review by the DWS, with a 150m wetland buffer. If the proposed wetland buffer is not approved, it will have a material effect on the Moabsvelden ROM Coal Reserves, as the mine design and planning was based on a 150m wetland buffer. The impact is estimated at between 18% and 25% of the total ROM Coal Reserve reported for the Moabsvelden project. The final impact will be determined once the wetland buffer has been confirmed in the approved IWUL. Keaton Energy is not aware of any additional data or information that would have a material impact on the geological model or the resultant Coal Resource and Coal Reserve estimates.

The Braakfontein Project MTIS Coal Resource also remained at 60.1Mt and no further exploration work was conducted. Keaton Energy has taken a strategic decision to suspend the feasibility study indefinitely as a result of current market conditions.

Sterkfontein Coal Resource estimation remains unchanged at 90.9Mt (MTIS) Coal Resource estimate declared at 31 March 2015.

There were no changes to the Koudelager, Bankfontein and Roodepoort Project Coal Resource estimates reported as at 31 March 2015.



Table 1: Keaton Energy Holdings Group Coal Resource and Coal Reserve summary as at 31 March 2016

At 31 March 2016 At 31 March 2015

Coal Resource estimate (MTIS) (AD)* ROM Coal Reserve estimate (MT) (AR)* Coal Resource estimate (MTIS) (AD)* ROM Coal Reserve estimate (MT) (AR)*

Mine/Project/SeamInferred

MtIndicated

MtMeasured

Mt

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 – 21.4 92.3 113.7 9.6 34.8 44.4 – 33.0 86.3 119.3 9.4 39.8 49.25 seam – 2.3 2.9 5.1 0.6 1.3 1.9 – 2.7 2.7 5.4 0.6 1.5 2.14 seam – 9.2 51.2 60.4 4.3 17.6 21.9 – 15.9 48.6 64.5 4.5 21.4 25.92 seam – 9.9 38.3 48.2 4.7 15.9 20.6 – 14.4 35.0 49.4 4.3 16.9 21.2

Vaalkrantz Colliery – 11.3 – 11.3 – – – – 11.5 – 11.5 2.0 – 2.0Alfred seam – 8.0 – 8.0 – – – – 8.2 – 8.2 1.6 – 1.6Gus seam – 3.3 – 3.3 – – – – 3.3 – 3.3 0.4 – 0.4

Moabsvelden Project – – 54.7 54.7 4.0 35.9 39.9 – – 54.7 54.7 3.9 35.9 39.85 seam – – 2.8 2.8 0.1 2.8 2.9 – – 2.8 2.8 0.1 2.7 2.94 seam – – 23.2 23.2 2.2 16.7 18.9 – – 23.2 23.2 2.2 16.7 18.92 seam – – 24.2 24.2 1.5 14.0 15.4 – – 24.2 24.2 1.4 14.0 15.41 seam – – 4.5 4.5 0.2 2.4 2.6 – – 4.5 4.5 0.2 2.4 2.6

Braakfontein Project – 60.1 – 60.1 – – – – 60.1 – 60.1 – – –Top seam – 36.6 – 36.6 – – – – 36.6 – 36.6 – – –Bottom seam – 23.4 – 23.4 – – – – 23.4 – 23.4 – – –

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

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

Roodepoort Project 4.7 11.6 8.9 25.1 – – – 4.7 11.6 8.9 25.1 – – –2 seam upper 2.2 7.2 5.6 15.0 – – – 2.2 7.2 5.6 15.0 – – –2 seam lower 1.8 3.2 2.1 7.1 – – – 1.8 3.2 2.1 7.1 – – –1 seam 0.6 1.1 0.9 2.6 – – – 0.6 1.1 0.9 2.6 – – –1A seam 0.1 0.1 0.2 0.4 – – – 0.1 0.0 0.2 0.4 – – –

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 seam 5.6 3.9 – 9.5 – – – 5.6 3.9 – 9.5 – – –C 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 – – –

Total 57.2 171.1 155.9 384.2 13.6 70.7 84.3 57.2 182.9 149.9 390.1 15.3 75.6 90.9

Keaton attributable* 33.0 116.7 110.1 260.0 10.0 52.3 62.4 33.0 125.5 105.7 264.3 11.3 56.0 67.3

Full project Coal Resources and Coal Reserves are stated, AD – air dried, AR – as received.* Bankfontein and Roodepoort projects 15% held by Keaton Energy, Moabsvelden project held 74% by Keaton Energy, and other collieries/projects held 100% 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.The Coal Resource and Coal Reserve supplement document includes full details of respective Coal Resource and Coal Reserve estimates and qualities.




Operations


12



13

9. Coal Resource and Coal Reserve estimates

9.1. Operations9.1.1 Vanggatfontein Colliery

Operations at Vanggatfontein commenced during 2010 with the construction of the 100 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 plant was commissioned thereafter in May 2011. The opencast 5, 4 and 2 seam operation generates in the order of 300ktpm ROM from a conventional truck and shovel operation. The operation is largely outsourced with mine management retained by Keaton Energy.

The Vanggatfontein Mining Right (309MR), held by Keaton Mining Proprietary Limited, covers the farm Vanggatfontein 251IR, an area of 1 651.98ha. The right is valid for 20 years from 23 February 2010 expiring on 22 February 2030. The Vanggatfontein Mining Right polygon is illustrated in Figure 4.

There are no legal proceedings relating to the surface rights which may have an influence on our ability to continue mining at Vanggatfontein.

Geological settingThe 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 unconformity of the order of 1.800 million years 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 ERB and WRB host the complete sequence of the Witbank Coalfield coal seams, namely 1, 2, 3, 4 and 5 seams, although 3 seam is not usually developed and 5 seam is eroded away in places. The stratigraphy of the ERB and WRB may be subdivided into three main sequences, these being a basal 2 seam sequence, overlain by 4 seam sequence, which in turn is overlain by 5 seam sequence.

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

Adjacent projects/operationsThe Vanggatfontein property is bordered by a number of active collieries, the most important and nearest neighbours is discussed: ●● Privately owned Canyon Coal holds the Phalandwa Colliery located approximately 7km north-northwest of Vanggatfontein.

●● 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 2 and 4 seams. Little more detailed information is publicly available.

●● Contiguous to the west of Vanggatfontein lies Sable Mining’s Rietkuil Property, an undeveloped coal project. 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 2 and 4 seams. 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 historyData from the CGS shows that between 1962 and 1963 a total of 40 boreholes were drilled on the property by Braakfontein Navigation Steam Collieries, with an additional hole drilled by the CGS itself (no date available). The 5, 4 and 2 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 Mining. 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 core boreholes drilled including seven twin, and five orientated geotechnical core boreholes. In 2011, an additional 12 core boreholes were drilled, mainly to increase level of understanding of the ERB geology.

All exploration resource drilling undertaken by Keaton Mining to date has been vertically oriented diamond drilling using conventional equipment and TNW (60mm), or NQ (47.6mm) core size. All core boreholes were logged and sampled by either CCIC, CCIC Coal or Keaton Mining 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 Middelburg (now part of the Bureau Veritas Group).

FY16 exploration and development summaryNo additional geological exploration or modelling was conducted during FY16.

No further feasibility studies were conducted during FY16.

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 Keaton Energy 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, during FY15, to avoid the application of the non-geological D2543 provincial road at the western boundary of the ERB. The geological database was therefore remodelled to estimate the global colliery Coal Resource including both ERB and WRB.

The 31 March 2016 estimation followed the same rationale. Pit face positions were supplied, in electronic format, by Keaton Energy. These face positions were applied to the geological model to reflect the reduction of Coal Resources from 119.3Mt to 113.7Mt on an MTIS basis. ROM depletion from the VG2, VG3 and VG4 pits for the period amounted to 3.7Mt.

The 31 March 2016 Coal Resource estimate is summarised in Table 2 and illustrated in Figures 3 to 5.



Figure 3: Vanggatfontein Colliery 5 seam Coal Resource

0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S

Vanggatfontein 5 seam

f f

Transnet Pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST

Project boundaryIndicated Coal ResourceMeasured Coal ResourceInterpreted faultBoreholeMined out areaWetlandPipelineSecondary road

Table 2: Vanggatfontein Colliery 31 March 2016 Coal Resource estimate

Coal Resource estimate (AD) Raw coal qualities (AD)

Classification Seam MTISRD

(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred 5 – – – – – – – – –4 – – – – – – – – –2 – – – – – – – – –

Total Inferred –Indicated 5 2.3 1.61 4.1 32.4 21.7 41.8 20.1 1.2 34.2

4 9.2 1.75 4.2 41.1 18.6 36.1 15.8 1.0 33.92 9.9 1.72 3.5 40.9 17.7 37.9 16.1 0.9 31.9

Total Indicated 21.4Measured 5 2.9 1.58 4.6 29.9 24.1 41.3 20.2 1.2 36.8

4 51.2 1.73 3.8 40.3 17.3 38.5 16.4 1.0 31.12 38.3 1.68 3.7 36.6 19.6 40.1 17.8 1.0 32.9

Total Measured 92.3Total Measured and Indicated – 5 seam 5.1 1.60 4.4 29.9 24.1 41.3 20.1 1.2 35.6Total Measured and Indicated – 4 and 2 seams 108.6 1.71 3.8 39.2 18.3 38.8 16.8 1.0 32.0Total Measured and Indicated Coal Resource 113.7

*Cutoff parameters: Thickness >0.5m, raw ash <50%, raw DAFVOL >24%.

0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S


f f

Transnet Pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST







0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S


f f

Transnet Pipeline

f

fWRBNORTH

ERBNORTH-WEST

ERBNORTH

VG1

ERBSOUTH

WRBSOUTH

WRBCENTRAL

0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S


f f

Transnet Pipeline

WRBNORTH

ERBNORTH-WEST

ERBNORTH

ERBNORTH-EAST

VG1

ERBSOUTH

WRBROAD

WRBCENTRAL

f

f

0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S


f f

Transnet Pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST


0 1000m

Delmas15km

Leandra25km

28O50'E 28O51'E 28O52'E 28O53'E

26O10

'S26

O11

'S26

O12

'S


f f

Transnet Pipeline

f

fWRBNORTH

ERBNORTH

VG1

WRBROAD

WRBCENTRAL

WRBWEST




Coal Reserve estimate (Miptec Proprietary Limited)During the period from April 2015 to March 2016, Vanggatfontein was an operating asset producing metallurgical and thermal products. No additional exploration or infill drilling was conducted at Vanggatfontein for the reporting period. Geological models remained unchanged, therefore the geological grids provided and checked for the 2015 Coal Reserve update are still valid and were utilised for the 2016 LOM and Coal Reserve updates.

The unconstrained Coal Resource grids were utilised by Miptec for pit design and coal reserve estimation using Xpac. Tonnages, qualities and product yield modelling variances compared favourably and the geological grid transfer was accepted as accurate.

The modifying factors utilised for the 31 March 2015 Coal Reserve estimate resulted in appropriate estimates in the resultant mining schedules for FY16. The correlation between the 2015 budget and actuals was above average on In Situ waste, ROM, Saleable Coal Reserve and associated qualities. The modifying factors for the 31 March 2015 Coal Reserve estimate were therefore accepted as appropriate and adjusted only on mining model variances in order to arrive at the 31 March 2016 estimates.

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 2016 Mineable In Situ Coal Reserve estimate

Mineable In Situ Coal Reserve estimate (AD) Raw coal qualities (AD)

Reserve category Seam MTISCV

(MJ/kg)ASH

(%)VM (%)

TS (%)

Probable 5 0.6 20.8 30.4 22.0 1.24 4.4 16.6 39.5 18.8 1.02 4.8 17.5 37.3 19.2 0.9

Total Probable 9.9

Proved 5 1.4 20.9 29.3 23.2 1.24 18.4 16.5 39.5 17.9 1.12 16.7 18.3 35.1 20.5 1.0

Total Proved 36.4

Total – 5 seam 2.0 20.8 29.7 22.8 1.2

Total – 4 and 2 seam 44.4 17.3 37.6 19.1 1.0

Total In Situ Coal Reserve 46.4

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%●● 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, as well as additional losses, resulted in a 79% recovery on 5 seam and 77% on 4 and 2 seams. The resultant average ROM stripping ratio for the LOM plan based on the above modifying factors is 3.05BCM/t.




The 31 March 2016 ROM Coal Reserve estimate is summarised in Table 4.

Table 4: Vanggatfontein 31 March 2016 Run-of-Mine Coal Reserve estimate

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

Reserve category SeamROM

(Mt)CV

(MJ/kg)ASH

(%)VM (%)

TS (%)

Probable 5 0.6 19.9 31.7 21.1 1.24 4.3 15.9 41.1 18.1 1.02 4.7 16.8 38.8 18.5 0.9

Total Probable 9.6

Proved 5 1.3 20.0 30.5 22.2 1.24 17.6 15.9 41.2 17.2 1.12 15.9 17.6 36.6 19.6 0.9

Total Proved 34.8

Total – 5 seam 1.9 20.0 30.9 21.9 1.2

Total – 4 and 2 seams 42.5 16.6 39.2 18.3 1.0

Total ROM Coal Reserve 44.4

The ROM Coal Reserve reported as at 31 March 2015 amounted to 49.2Mt. Opencast mining depleted 3.7 Mt as per the monthly surveys. Estimated Coal Reserves remaining as at 31 March 2016 is 45.5Mt. Additional losses were incurred over and above that estimated and represented by the mining modifying factors. The VG2 block is almost depleted with only one strip of 2 seam remaining. The additional coal lost in VG2, attributed to both geological and mining, was 0.29Mt. Fringes and pillars not mined around the wetland, between VG1 and VG4 as well as at the VG3/VG4 end cut were excluded based on practicality of recovery. The total additional losses for this reporting period amounted to 0.4Mt.

The 2016 remaining Coal Reserve, based on the recoveries used in the 2015 estimation, amounts to 45.1Mt. The remaining Coal Reserve in the mining model for LOM purposes was estimated at 44.4Mt. This estimation was based on locally adjusted mining modifying factors. As a result of this adjustment in modifying factors, a change in Coal Reserve estimate of 0.7Mt was applied with the final Coal Reserve for 31 March 2016 estimated at 44.4Mt.

After accounting for the 3.7Mt depletion for the period, the net ROM Coal Reserve reduction amounted to 4.8Mt for the reasons noted above.

The newly delineated WRB wetland had no effect on the Coal Reserve estimate. The 31 March 2016 Saleable Coal Reserve estimate is summarised in Table 5.

Table 5: Vanggatfontein Colliery 31 March 2015 Saleable Coal Reserve estimate

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

Reserve category SeamSaleable

(Mt)CV

(MJ/kg)ASH

(%)VM (%)

TS (%)

Probable 5 0.3 27.1 14.1 27.0 0.64 2.4 21.6 26.6 21.5 0.82 3.1 21.6 26.7 21.5 0.8

Total Probable 5.8

Proved 5 0.7 26.8 14.2 28.0 0.74 10.2 21.6 26.8 20.7 0.92 11.3 21.6 26.9 22.2 0.8

Total Proved 22.1

Total – 5 seam 1.0 26.9 14.1 27.7 0.7

Total – 4 and 2 seams 27.0 21.6 26.8 21.5 0.9

Total Saleable Coal Reserve 27.9

On the basis of current planning, the Vanggatfontein ERB ROM Coal Reserve will therefore be fully depleted in 2027, prior to the Mining Right expiry date of 22 February 2030.



It is important to note that this programme has not been formalised for FY17, the importance of a full Measured Coal Resource 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 FY17 will therefore be conducted on an ad hoc basis as localised geological circumstances dictate.

Operational risksVanggatfontein 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 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 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 estimatesAll coal reserves in the WRB are ranked in the probable category. From the resource classification a large area of northern portion of the WRB resources reside in the Indicated Coal Resource category

and additional exploration drilling in the north is required to move this portion of the Coal Reserve into the Proved category. Accessing these blocks will require, amongst other activities, the D2543 diversion of the provincial road. In line with the LOM plan the diversion is scheduled to occur in calendar year 2020. Work related to the road diversion is currently only at an initial stage and more detailed work related to regulatory approval, tender processes, etc must still be conducted. Subject to regulatory approval for the road diversion, the inclusion of a WRB Coal Reserve of 9.6Mt ROM may be subjected to review. The cost implication of the provincial road diversion, in order to facilitate the future extension of the VG3 and VG4 pits to the south-west, has however been incorporated into the Vanggatfontein financial model.

An additional coal processing facility is planned at the Vanggatfontein operation to process ROM coal from the Moabsvelden project. The Vanggatfontein tailings storage facility is currently not sufficient to handle discard from both the Vanggatfontein processing plant and the planned Moabsvelden plant. The required technical work has not progressed past conceptual stage nor have the required environmental approvals been granted.

Environmental permittingThe 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 IWUL awarded by the 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 1 000m3 of treated water in a reservoir;

●● Section 21 (c) – Impeding or diverting the flow of water in a watercourse. Keaton Energy 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;

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

●● Section 21 (j) – Removal of water found underground for the efficient continuation of an activity.

An Environmental Authorisation in terms of the 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.

Future explorationAs reported in the previous year, formal drilling to upgrade the entire Mining Right area to a Measured Coal Resource assuming an 8bh/100ha drilling density, would require an additional 12 core 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 Medium-term Measured Coal Resource drilling cost estimate

ItemCost (Rm)

Drilling (~1 020m) 1.8Field services and geology 0.2Consumables 0.0Laboratory test work 0.3Down-the-hole geophysics 0.1

Total 2.4





Vaalkrantz Colliery


21

9.1.2 Vaalkrantz CollieryUnderground operations at Vaalkrantz anthracite operation under the management of 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 2001 Anglo Coal disposed of its 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 2001, the feasibility of a new underground operation with CHPP was demonstrated in 2002 and operations commenced at the Enyati Adit during 2003.

The operation comprises two Mining Rights located approximately 25km east of the town of Vryheid in the KZN 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 Rights footprint is illustrated in Figures 6 and 7.

There are no legal proceedings relating to the mining and surface rights which may have an influence on our ability to continue mining at Vaalkrantz.

Geological settingVaalkrantz 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 mining right area currently have economic potential, both of which are mined using underground methods. 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 0.2m 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 1.0m in thickness, with a minimum thickness of 0.4m and maximum thickness of 1.5m. The depth to the roof of the Gus seam ranges from outcrop to about 200m.

The Alfred seam ranges in thickness from 0.2m in the extreme southwest of the resource area, to 4.6m in the northwest, averaging 2.4m. 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 1.6m in thickness, ranging from 1.0m to 2.3m 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 1.6m in the north, averaging 0.8m. 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 2.0m 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).

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 southwest to northeast across the resource area, dipping to the southwest, 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 that mined coal from the same coal seams. As many as 14 collieries operated in the Vryheid region during the 1980s, 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 historyA 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 Energy’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 Highveld/Witbank coals is the challenge posed by both mountainous topography and dense forestation. Drilling can only be conducted from accessible locations which render 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. Whilst the quality of some of the presented data required verification, most of the data was captured by qualified geologists. As such, CCIC Coal has 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.

FY16 exploration and development summaryNo additional core boreholes were drilled during FY16. Coal Resource estimates reported below for the Vaalkrantz Colliery were based on a newly constructed model generated by CCIC Coal. The model is based on the entire available dataset, including data pertaining to the additional Mining Right areas, and new data acquired through infill drilling carried out between 2013 and early 2015.

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.

For the Coal Resource tonnage estimate, a minimum seam thickness of 0.8m has been considered for the underground coal resources, the 0.8m thickness cutoff was considered allowable as LME historically mined at this seam height. A minimum cutoff of 50% Ash was also applied. Furthermore, the Coal Resource estimate differentiates between a dry Ash-free Volatile Matter content of less than 16.5% and of between 16.5% and 24%. The volumes and tonnages were rounded appropriately.

A 2.4% Alfred seam Coal Resource reduction from 8.2Mt to 8.0Mt was due to depletion for mining as well as the newly constructed geological model by CCIC Coal. The Alfred seam depletion for the period totalled 0.05Mt.

Similarly, a 2.1% reduction in the Gus seam Coal Resource from 3.35Mt to 3.28Mt was due to depletion for mining as well as the newly constructed geological model by CCIC Coal. Gus depletion for the period totalled 0.07Mt.



Table 7: Vaalkrantz Colliery 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred Alfred – – – – – – – – –Gus – – – – – – – – –

Total Inferred –

Indicated Alfred 8.0 1.65 2.6 29.3 5.6 61.2 21.8 0.9 8.3Gus 2.7 1.70 2.7 27.2 6.6 63.4 22.9 0.8 9.7Gus** 0.6 1.67 1.4 30.3 14.1 54.2 23.7 1.3 20.7

Total Indicated 11.3

Measured Alfred – – – – – – – – –Gus – – – – – – – – –

Total Measured –

Total Measured and Indicated Coal Resource* 10.7 1.66 2.6 28.8 5.9 61.8 22.1 0.9 8.6

Total Measured and Indicated Coal Resource** 0.6 1.67 1.4 30.3 14.1 54.2 23.7 1.3 20.7

*Cutoff parameters: Thickness >0.8m, raw ash <50%, raw DAFVOL <16.5%.**0.6Mt RPS2 Block cutoff parameters: Thickness >0.8m, raw ash <50%, 16.5%<, DAFVOL <24%.




Figure 6: Vaalkrantz Colliery Alfred Coal Resource

0 2000m

Vryheid 25km

Swart Umfolozi 20km

27O46

'S27

O47

'S27

O48

'S27

O49

'S27

O50

'S27

O51

'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

31O00'E 31O01'E 31O02'E 31O03'E 31O04'E 31O05'E30O59'E

Project boundaryIndicated Coal ResourceInterpreted faultBoreholeMined out areasSecondary road

Figure 7: Vaalkrantz Gus Coal Resource

0 2000m

f

Vryheid 25km

Swart Umfolozi 20km

f

fff

f

f

f

27O46

'S27

O47

'S27

O48

'S27

O49

'S27

O50

'S27

O51

'S

31O00'E 31O01'E 31O02'E 31O03'E 31O04'E 31O05'E30O59'E

f f

Vaalkrantz Gus

Block 2

RPS1

Block 3

Block 5

Block 1Rustplaats 165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

0 2000m

Vryheid 25km

Swart Umfolozi 20km

27O46

'S27

O47

'S27

O48

'S27

O49

'S27

O50

'S27

O51

'S f f

Vaalkrantz Alfred

f

f

ff

f

f

f

f

f

f

Block 2

Block 3

Block 4

Block 5


165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

31O00'E 31O01'E 31O02'E 31O03'E 31O04'E 31O05'E30O59'E


0 2000m

Vryheid 25km

Swart Umfolozi 20km

27O46

'S27

O47

'S27

O48

'S27

O49

'S27

O50

'S27

O51

'S f f

Vaalkrantz Alfred

f

f

ff

f

f

f

f

f

f

Block 2

Block 3

Block 4

Block 5


165HU Ptn3

Rustplaats165HU RE

RPS2

Enyati

31O00'E 31O01'E 31O02'E 31O03'E 31O04'E 31O05'E30O59'E




The 31 March 2016 Coal Resource estimate is summarised in Table 7 and illustrated in Figures 6 to 7.

ROM Coal Reserve estimateUnderground anthracite mining operations in KZN remain challenging in the current economic setting. Due to current pricing levels and operating costs at the Vaalkrantz Colliery a Coal Reserve was not estimated. The remaining Coal Reserve could not sufficiently demonstrate potential for eventual economic extraction based on current and forecasted revenue and cost of mining estimates. The mining operation was placed on care and maintenance in May 2016.

Future explorationThere are currently no further exploration activities planned at Vaalkrantz Colliery.

Risks to Coal Resource estimateResource estimation criteria in South Africa, specifically the recommended hole spacing/

drillhole density criteria for multiple seam deposit types, represent an unavoidable risk to Coal Resource categorisation in KZN. Due care has been exercised by the CP in the interpretation of geological data for the Vaalkrantz Coal Resource estimate 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 Resource are greater than the equivalent estimates in 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.

Environmental permittingWith 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 consolidated and amended EMP for the enlarged Mining Right was approved. An approved EMP are therefore in place for both Vaalkrantz Mining Rights 225MR and 211MR.

An IWULA was submitted in 2010 and had not been granted at the date of this report. Issues relating to site stormwater management are delaying the award of the IWUL at Vaalkrantz. A stormwater management plan has since been submitted and we await feedback from the department.




Projects


27

9.2 Exploration and development projects

9.2.1. IntroductionKeaton Energy’s project, depicted in Figure 8 near the town of Delmas in Mpumalanga is Moabsvelden.

In addition Keaton Energy has projects near the town of Bethal, Ermelo and Breyten in Mpumalanga province being Sterkfontein, Roodepoort and Bankfontein respectively as illustrated in Figure 9.

Figure 10 depicts our KZN province Braakfontein, Koudelager and Mooiklip projects near the towns of Newcastle and Vryheid respectively. Balgray project’s Mining Right application process is still currently under review at the DMR and the project is located outside the town of Utrecht.

Vanggatfontein and Moabsvelden

Project boundaryPower stationNational routeMain roadRailTown

N

Kusile

KendalKelvin

Johannesburg

Delmas

Pretoria

N1

N4

N12

N17

N14


Moabsvelden Project

Hawerklip Siding

R50R42

R51

0 10km

Figure 8: Moabsvelden location relative to Vanggatfontein operation

Vanggatfontein and Moabsvelden


N

Kusile

KendalKelvin

Johannesburg

Delmas

Pretoria

N1

N4

N12

N17

N14


Moabsvelden Project

Hawerklip Siding

R50R42

R51

0 10km




Figure 10: KwaZulu-Natal Projects and operation

N11

Braakfontein, Balgray, Vaalkrantz, Koudelager and Mooiklip

Dundee

Utrecht

Newcastle

Hattingspruit

DannhauserR33

R34R34

R68

ChelmsfordDam

0 10km

To Memel25km

To Volksrust30km

To Ladysmith50km

To Greytown90km

R69

R33

R34

R618

To RichardsBay 175km

To Nongoma37km

To Paulpietersburg19km

N

Louwsburg

Vryheid

Emondlo

Balgray Project

Braakfontein Project

Koudelager Project

Vaalkrantz Colliery

Mooiklip Project


N11

Braakfontein, Balgray, Vaalkrantz, Koudelager and Mooiklip

Dundee

Utrecht

Newcastle

Hattingspruit

DannhauserR33

R34R34

R68

ChelmsfordDam

0 10km

To Memel25km

To Volksrust30km

To Ladysmith50km

To Greytown90km

R69

R33

R34

R618

To RichardsBay 175km

To Nongoma37km

To Paulpietersburg19km

N

Louwsburg

Vryheid

Emondlo

Balgray Project


Koudelager Project

Vaalkrantz Colliery

Mooiklip Project


Roodepoort, Bankfontein and Sterkfontein

Duvha

KrielMatla

Emalahleni

0 10km

R545

R544

R575

N4


Roodepoort Project

Bankfontein Project

Secunda

Hendrina

Breyten

Ermelo

Pullen’s Hope

Hendrina

N11

N17Evander Bethal

Secunda

DavelProject boundaryPower stationNational routeMain roadRailTown

N

Figure 9: Mpumalanga Projects

Roodepoort, Bankfontein and Sterkfontein

Duvha

KrielMatla

Emalahleni

0 10km

R545

R544

R575

N4


Roodepoort Project

Bankfontein Project

Secunda

Hendrina

Breyten

Ermelo

Pullen’s Hope

Hendrina

N11

N17Evander Bethal

Secunda

DavelProject boundaryPower stationNational routeMain roadRailTown

N



Moabsvelden Project

30


9.2.1.1. Moabsvelden – Our flagshipThe Moabsvelden project is held by Neosho Trading 86 Proprietary Limited (Neosho). The property is located approximately 15km east of the town of Delmas, Mpumalanga. As a result of Keaton Energy’s acquisition of 100% of the issued shares in Australian Stock Exchange listed Xceed Resources Limited in February 2014, Neosho became an indirect 74% held Keaton Energy subsidiary. The remaining 26% 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 for the acquisition of the Surface Rights, by Neosho Trading, are ongoing and were at an advanced stage at the date of this report. Surface Right access has not been identified as a risk to the project. Due to its close proximity to the Vanggatfontein operation, Moabsvelden is envisaged to be operated as a satellite pit depicted in Figure 8.

Table 8: Moabsvelden Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred 5 – – – – – – – – –4 – – – – – – – – –2 – – – – – – – – –1 – – – – – – – – –

Total Inferred – – – – – – – – –

Indicated 5 – – – – – – – – –4 – – – – – – – – –2 – – – – – – – – –1 – – – – – – – – –

Total Indicated – – – – – – – – –

Measured 5 2.8 1.72 4.3 40.0 22.8 32.9 16.6 1.0 40.94 23.2 1.66 4.2 35.1 20.4 40.4 17.6 1.0 33.82 24.2 1.62 3.8 33.2 21.1 41.9 18.6 0.8 33.71 4.5 1.68 3.3 38.2 19.1 39.4 17.3 0.7 32.7

Total Measured 54.7 1.65 4.0 34.8 20.7 40.6 18.0 0.9 34.0

Total Measured and Indicated Coal Resource 54.7 1.65 4.0 34.8 20.7 40.6 18.0 0.9 34.0

*Cutoff parameters: Thickness 0.5m, ash 50%, DAFVOL >27%.



Geological settingMoabsvelden is located on the western edge of the Witbank Coalfield hosting the typical 5 to 1 coal seams, top to bottom sequence. The project area is characterised by an approximately 18m thick combination of the 4 upper, 4 mid and 4 lower, 2 upper and 2 lower and 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 the 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 been 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, 5 seam is interpreted to have been eroded away.

Adjacent projects/operations●● Moabsvelden portion 8 lies approximately 3km north-west of the Vanggatfontein operation.

Exploration historyAll exploration drilling on the Moabsvelden property has been conducted by Keaton Energy subsidiary Neosho Trading 86 Proprietary Limited. Ten core boreholes were drilled during 2010, and a further 32 core

boreholes drilled during 2011. A further six core boreholes 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 test work. The current geological database therefore consists of a total of 48 core boreholes with an average of 19 core boreholes with quality data per 100ha. No further exploration drilling was conducted during the period under review.

FY16 exploration and development summaryA PIR detailing the feasibility parameters for a 2.4Mtpa opencast operation on Moabsvelden was completed by RSV Enco Consulting Proprietary Limited in March 2016. The PIR represents a major overhaul of the bankable feasibility study previously compiled by Neosho Trading, in April 2012, prior to Keaton Energy’s acquisition of Xceed in February 2014. It will add value to review the PIR during FY17 to ensure that this report is aligned with market conditions and costs associated with operating a mine.

Previous Coal Resource estimate Gemecs has been involved in the Coal 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.

Coal Resource estimate (Gemecs)Since commencement of exploration at Moabsvelden, all exploration and Coal Resource estimation 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.

During the previous reporting period, the Moabsvelden geological model was updated to include the structural and quality results of the six additional core boreholes 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. No further geological work was conducted during this reporting period and the MTIS resource remains unchanged at 54.7Mt.

The 31 March 2016 Coal Resource estimate is summarised in Table 8 and illustrated in Figure 9.




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 area.

The limited surface area available for box-cut spoil deposition, plant infrastructure and coal discard deposition was an apparent shortcoming in the feasibility study

which needed to be addressed in a revised operational design.

Following Keaton Energy’s acquisition of the Moabsvelden Project, 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 should be conducted from the same mine planning principles and

basis. Miptec was commissioned to re-visit the Moabsvelden design and to develop a revised LOM schedule with associated Coal Reserve estimates.

The Miptec 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 9.

Table 9: Moabsvelden Project 31 March 2016 Mineable In Situ Coal Reserve estimate

Mineable In Situ Coal Reserve estimate (AD) Raw coal qualities (AD)

Reserve category Seam MTISCV

(MJ/kg)ASH

(%)VM (%)

TS (%)

Probable 5 0.1 11.1 53.4 19.1 0.74 2.3 15.0 41.8 15.7 0.82 1.5 20.1 29.0 21.6 0.71 0.2 16.6 40.7 17.7 0.7

Total Probable 4.1 16.8 37.5 18.1 0.8

Proved 5 2.9 15.9 42.3 21.8 1.14 17.5 16.8 36.9 20.2 1.02 14.6 17.5 36.1 20.8 0.71 2.5 17.9 36.3 19.6 0.8

Total Proved 37.5 17.1 37.0 20.5 0.9

Total In Situ Coal Reserve 41.6

The following modifying factors were applied to the MTIS Coal Reserve to derive the ROM and Saleable Coal Reserve estimates:

●● 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 LOM plan, based on the above modifying factors, is 2.88BCM/t.

No further mine planning and scheduling has been conducted during this reporting period. The ROM Coal Reserve remains unchanged at 39.9Mt for this reporting period. The 31 March 2016 ROM and Saleable Coal Reserve estimates are summarised in Table 10 and Table 11 respectively.



Table 10: Moabsvelden Project 31 March 2016 Run-of-Mine Coal Reserve estimate

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

Reserve category SeamROM

(Mt)CV

(MJ/kg)ASH

(%)VM (%)

TS(%)

Probable 5 0.1 10.8 55.0 18.6 0.74 2.2 14.6 43.1 15.2 0.82 1.5 19.5 29.9 21.0 0.71 0.2 16.1 42.0 17.2 0.7

Total Probable 4.0 16.3 38.6 17.5 0.7

Proved 5 2.8 15.5 43.6 21.2 1.14 16.7 16.3 38.0 19.6 0.92 14.0 17.0 37.2 20.2 0.71 2.4 17.4 37.4 19.0 0.8

Total Proved 35.9 16.6 38.1 19.9 0.8

Total ROM Coal Reserve 39.9

The Moabsvelden ROM Coal 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 11: Moabsvelden Project 31 March 2016 Saleable Coal Reserve estimate

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

Reserve category SeamSaleable

(Mt)CV

(MJ/kg)ASH

(%)VM (%)

TS (%)

Probable 5 0.0 19.5 32.2 26.4 0.84 1.1 20.2 29.4 18.4 0.82 1.3 20.5 28.2 21.7 0.71 0.1 19.5 32.9 19.7 0.6

Total Probable 2.6 20.3 29.1 20.3 0.7

Proved 5 1.9 19.5 33.1 24.5 0.94 10.4 20.7 27.7 21.9 1.12 10.1 20.4 28.9 22.1 0.71 1.9 19.7 31.6 20.7 0.7

Total Proved 24.3 20.4 28.9 22.1 0.9

Total Saleable Coal Reserve 26.9

Future explorationFour box-cut delineation core boreholes are planned during FY17 which will provide geotechnical, structural and quality confirmation within the revised box-cut footprint. The cost of this programme is estimated to be R0.86 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 risksThe future development of Moabsvelden now depends on:●● Finalisation of the surface right acquisition agreement with Phillem Beleggings

●● Conclusion and approval of the IWUL

●● Finalisation of the Eskom CSA and conclusion of the related HDSA/B-BBEE transactions in order to satisfy the 50% + 1 share requirements fo r new Eskom supp l y agreements.

There is a timing risk to the project, but the commercial terms upon which the CSA is concluded will determine project returns. Keaton Energy’s experience at Vanggatfontein, from an operational perspective, as well as being a key Eskom supplier positions Moabsvelden well from a risk point of view. Learnings from Vanggatfontein will be valuable for the operation going forward. Moabsvelden’s Mining Right expiry date of the 15 October 2031 is an operational risk to be noted and actioned in due course.




Risks to Coal Resource and Coal Reserve estimatesThe current Moabsvelden IWUL application is under review by the DWS, with a 150m wetland buffer. If the proposed wetland buffer is not approved, it will have a material effect on the Moabsvelden ROM Coal Reserves, as the mine design and planning was based on a 150m wetland buffer. The impact is estimated at between 18% and 25% of the total ROM Coal Reserve reported for the Moabsvelden project. The final impact will be determined once the wetland buffer has been confirmed. 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.

Environmental permittingThe 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 NEMA was 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 application was submitted in June 2012. The IWUL was recommended for issuance in March 2014 but with a 250m wetland protection buffer. Discussions and presentations to

DWS around this wetland protection resulted in the reduction of the buffer to 150m. A detailed presentation on the civil designs was conducted in November 2015 and this has been followed by a series of interactions up to and including the time of reporting. Timing for the conclusion of this process is difficult to predict.





36

9.2.2.1. BraakfonteinKeaton 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 2001, a significant body of work had been conducted on the asset. All the development work on the project culminated in the compilation of a 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 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 for 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.

Prepayment funding was obtained in 2008 and an exploratory box-cut was excavated in the first half of 2008. This was followed by the

market crash in the same year, 2008, resulting in severe contraction in coal prices.

Operations ceased shortly after commencement leaving only an 80m x 80m x 3m excavation on surface.

The LBC project remained suspended indefinitely.

Following Keaton Energy’s acquisition in 2011, development work commenced from 2013 to 2014 and included a 17 core borehole programme, an additional six core boreholes acquired from historical information and 33 percussion open holes. This work was followed by quality analyses, and structural and quality models completed in 2014. A feasibility study was commissioned in 2015 however Keaton Energy has since taken the decision to suspend the feasibility study indefinitely as a result of current market conditions.

Geological settingThe Braakfontein Project lies on the northern part of the Klip River Coalfield targeting the thermal quality Bottom (2B or Gus) and Top (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 majority being

underground. The surface geology is dominated by outcrops and subcrops 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●● Current operations include Shanduka Coal’s Springlake Colliery located north-west of Dundee approximately 25km south of Braakfontein.

●● Forbes Coal’s Magdalena and Aviemore collieries located immediately north of Dundee.

●● The exploration projects in the region include Ikwezi Coal’s Newcastle Project, Miranda Mineral Holdings Limited’s Yarl and Seshikhona projects. Of these, the most important in terms of comparison with the Braakfontein Project is Ikwezi Mining’s Ntendeka Project (Newcastle Project Phase 1), which is located contiguous to the south of the Braakfontein Mining Right boundary.

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

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



FY16 exploration and development summaryThirty-three 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.

No further exploration or geological modelling has been conducted during this reporting period.

Previous Coal Resource estimatesSeveral 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) – an 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 Coal Resources were reported for these flanks by Anglo Coal. Anglo Coal 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 cutoffs for opencast versus underground Coal Resources respectively (no

cutoffs 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.

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. Furthermore, additional historic data for 35 core boreholes was acquired during 2014, which included structural and partial quality information which was incorporated into the 2015 remodel.

As no further exploration or geological modelling has been conducted during this reporting period, the Braakfontein Coal Resource remains unchanged at 60.1Mt.

The 31 March 2016 Coal Resource estimate is summarised in Table 12 and illustrated in Figure 1.1.




Table 12: Braakfontein Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred Top – – – – – – – – –Bottom – – – – – – – – –

Total Inferred – – – – – – – – –

Indicated Top 36.6 1.63 2.2 29.9 21.9 46.6 22.6 1.9 32.3Bottom 23.4 1.60 2.1 27.0 23.0 48.3 23.5 1.2 32.5

Total Indicated 60.1 1.62 2.2 28.8 22.3 47.3 22.9 1.64 32.4

Measured Top – – – – – – – – –Bottom – – – – – – – – –

Total Measured – – – – – – – – –


*Opencast cutoff parameters: Strip ratio <6BCM/t, thickness > 0.5m, ash < 50%, DAFVOL > 24%.*Underground cutoff parameters: Strip ratio >6BCM/t, thickness > 1.4m, ash < 50%, DAFVOL > 24%.

0 1000m

New

cast

le10

km

30O01'E 30O02'E 30O03'E 30O04'E

27O46

'S27

O47

'S27

O48

'S

Braakfontein

RailwayPortion 1

Remainder ofMadadeni15961HT

Remainder ofBraakfontein

4278HT

Remainder ofDrycut

8198HT

Project boundaryIndicated Coal ResourceBoreholeSecondary roadRail

Figure 11: Braakfontein Project Coal Resource

0 1000m

New

cast

le10

km

30O01'E 30O02'E 30O03'E 30O04'E

27O46

'S27

O47

'S27

O48

'S

Braakfontein

RailwayPortion 1

Remainder ofMadadeni15961HT

Remainder ofBraakfontein

4278HT

Remainder ofDrycut

8198HT

Project boundaryIndicated Coal ResourceBoreholeSecondary roadRail



Coal Reserve estimate (Mindset)In 2015, Mindset was commissioned to conduct a feasibility study, for which results were initially expected during the fourth quarter of the 2015 calendar year. Keaton Energy has since taken the decision to suspend the feasibility study indefinitely subject to positive changes in market conditions. No Coal Reserve is currently stated.

Future explorationNo exploration has been planned for FY17. 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 the project construction phase.

Risks to Coal Resource estimateThe independent feasibility study on the Braakfontein Project has been suspended indefinitely. There are, however, no obvious risks to the estimates presented in this report.

Environmental permittingThe Braakfontein Mining Right 143MR was awarded to LBC on 29 August 2007. As operations on Braakfontein have not recommenced since the first box-cut excavation in 2008, it will be necessary to amend all approvals for the project. The EMP amendment process will run concurrently with the NEMA EIA, as well as the IWULA listed activities in terms of section 21 of the National Water Act (Act 36 of 1998).

Each of these applications will to a large extent require input from future technical work which will drive the commencement date of the respective applications. No further work was completed during 2016.




Koudelager Project


41

9.2.2.2. KoudelagerAs 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 the town of Vryheid, and approximately 15km east of the 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 12.

There are no legal proceedings relating to the mining and/or prospecting and surface rights which may have an influence on our ability to continue exploration activities at Koudelager.

Geological settingLocated 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, similar to the current Vaalkrantz operation.

Adjacent projects/operations●● Koudelager is located within the same anthracite belt as Vaalkrantz Colliery. An additional four core 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.

Exploration historySeven core boreholes and seven prospecting adits were drilled/excavated on the 210MR property by Anglo American Corporation between 1977 and 1979. Two confirmatory core boreholes 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 boreholes were drilled by LME between September and December of 2013 under the management of CCIC Coal.

Previous Resource estimatesOnly a single historic Coal Resource statement exists for the Koudelager Project, which was 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 was stated, which with a 20% geological loss generates a TTIS of 12.9 million tonnes. This estimate pre-dated the first publication of the SAMREC code and is not SAMREC compliant.

FY16 Exploration and development summaryNo further exploration drilling or feasibility studies were conducted on the project during FY16. A substantial amount of modelling and conceptual work was, however, conducted on the Koudelager resource to better 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 2015. The 31 March 2016 Coal Resource estimate is summarised in Table 13 and illustrated in Figure 13.




Table 13: Koudelager Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred Alfred upper – – – – – – – – –Alfred lower – – – – – – – – –

Gus 0.9 1.78 1.3 39.5 4.8 54.1 19.4 0.8 8.2Dundas upper – – – – – – – – –Dundas lower – – – – – – – – –

Total Inferred 0.9 1.78 1.3 39.5 4.8 54.1 19.4 0.8 8.2

Indicated Alfred upper 2.4 1.65 3.2 24.0 4.5 65.5 24.1 2.1 6.4Alfred lower 1.1 1.60 2.1 16.6 4.5 76.7 27.4 3.5 5.6

Gus 0.5 1.74 1.2 40.3 5.1 51.8 19.1 0.8 8.9Dundas upper 2.1 1.55 1.5 17.3 5.8 75.2 28.1 1.1 7.2Dundas lower 5.3 1.63 1.5 26.2 6.3 66.4 25.1 0.7 8.8

Total Indicated 11.4 1.62 1.9 23.8 5.6 68.2 25.4 1.4 7.7

Measured Alfred upper – – – – – – – – –Alfred lower – – – – – – – – –

Gus – – – – – – – – –Dundas upper – – – – – – – – –Dundas lower – – – – – – – – –



*Cutoff parameters: Thickness > 0.9m, raw ash < 50%, DAFVOL < 16.5%.



0 1000m

618

Alfred SeamSub-outcrop

RE Koudelager115HU

(10322PR)

Vryheid40km

Nongoma50km

31O12'10"E 31O13'30"E31O11'06"E

27O47

'42"

S27

O48

'54"

S27

O46

'30"

S

SwartUmfolozi20km

Koudelager

Portion 2:Koudelager

115HU(210MR)

Dundas SeamSub-outcrop

RE Portion 1:Koudelager

115HU(210MR)

Project boundaryIndicated Coal ResourceBoreholeSecondary road

Figure 12: Koudelager Project Coal Resource

0 1000m

618

Alfred SeamSub-outcrop

RE Koudelager115HU

(10322PR)

Vryheid40km

Nongoma50km

31O12'10"E 31O13'30"E31O11'06"E

27O47

'42"

S27

O48

'54"

S27

O46

'30"

S

SwartUmfolozi20km

Koudelager

Portion 2:Koudelager

115HU(210MR)

Dundas SeamSub-outcrop

RE Portion 1:Koudelager

115HU(210MR)

Project boundaryIndicated Coal ResourceBoreholeSecondary road




ROM Coal Reserve estimateNo Coal Reserve has been estimated for Koudelager to date.

Future explorationNo further drilling is planned on the Mining Right area for FY17. 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 mining and prospecting rights during FY2017.

Risks to Coal Resource estimateKeaton Energy is not aware of any additional data or information not included that would have a material impact on either the geological

model or the resultant Coal Resource estimate.

Environmental permittingKoudelager holds a Mining Right and therefore 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.



Mooiklip Project


46

9.2.2.3. MooiklipIn October 2013, Amalahle Exploration entered into an Option and Acquisition Agreement with BSC Resources Proprietary Limited, the holder of the Mooiklip Prospecting Right, to earn into the project by funding an initial exploration programme 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.

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 Prospecting Right is held by BSC Resources Proprietary Limited, executed on 25 July 2014, valid for two years expiring on 24 July 2016. Surface Rights 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.

There are no legal proceedings relating to the prospecting and Surface Rights which may have an influence on our ability to continue exploration activities at Mooiklip.

Geological settingThe 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 13.

Adjacent projects/operationsMooiklip 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 historyInformation 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.

FY15 exploration and development summaryAn initial twin core 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.

Exploration resultsThe initial two core 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 northeastern 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.

Coal Resource estimateNo Coal Resource estimate was declared.

Future explorationA further five confirmatory core boreholes 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 subject to the renewal approval of 403PR in FY16. The cost of this five-hole programme is expected to be approximately R0.5 million.

Environmental considerationsThe Mooiklip EMP was approved upon execution of the Mooiklip Prospecting Right on 25 July 2014.

No changes to last year’s report.



0 1000m

Mooiklip

27O35

'S27

O36

'S27

O37

'S27

O38

'S

31O15'E 31O16'E31O14'E31O13'E31O12'E31O11'E

Ithala Nature Reserve

R69 Project boundary

BoreholeArterial routeSecondary road

R

Dundas SeamOutcrop

Louwsburg3km

Vryheid

45km

Figure 13: Mooiklip Project locality and tenure diagram

0 1000m

Mooiklip

27O35

'S27

O36

'S27

O37

'S27

O38

'S

31O15'E 31O16'E31O14'E31O13'E31O12'E31O11'E

Ithala Nature Reserve

R69 Project boundary

BoreholeArterial routeSecondary road

R

Dundas SeamOutcrop

Louwsburg3km

Vryheid

45km






49

9.2.3.1 SterkfonteinSterkfontein 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 100% interest in subsidiaries Keaton Mining Proprietary Limited and Labohlano Trading 46 Proprietary Limited, 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 three years, expiring on 25 November 2017.

●● 444PR held by Keaton Mining Proprietary Limited over 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 3 076 ha. This right was renewed on 26 November 2014 for three years, expiring on 25 November 2017.

●● 1827PR held by Keaton Mining Proprietary Limited 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 five years, expiring on 11 December 2017.

●● 2053PR held by Keaton Mining Proprietary Limited over remaining extent of Pieksdal 298JS and portion 1 of the

farm Wildan 557 IS covering 498ha. This right was executed on 12 December 2012 for three years, expiring on 11 December 2015.

●● 1720PR held by Labohlano Trading 46 Proprietary Limited 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 three years, 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 with surface owners are, however, in place for exploration purposes. There are no legal proceedings relating to the prospecting and Surface Rights which may have an influence on our ability to continue exploration activities on the property.

Geological settingSterkfontein targets the 4 seam located on the eastern extremity of the Highveld Coalfield. The surface geology over the Sterkfontein Project area 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 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 to 5 seam, which forms a good

marker during drilling. The 5 seam is thin, mostly being less than 0.4m over the property. It occurs in most of the holes drilled at a depth of between 130m and 175m.

The parting between 5 seam and 4 seam is formed by a sandstone to conglomeratic sandstone unit around 40m to 50m thick. The immediate roof to 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 4 upper and 4 lower seams exceeds 0.3m, 4 upper seam is deemed to be unmineable and is excluded from Coal Resource estimation. The immediate roof to 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. Sasol’s Twistdraai Colliery supplies Sasol’s synfuels business, but also exports a good quality thermal fraction.

●● The Prospecting Right boundary is bordered to the south by Anglo Coal’s New Denmark Colliery which supplies exclusively to Eskom’s Tutuka Power Station which lies approximately 25km south of the Sterkfontein site.




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

Project historyThe historical ownership and associated activities on Sterkfontein are shown in Table 14.

Table 14: Sterkfontein Project history

Date Company Activity summary

1969 Anglo American Corporation of SA Limited (AAC)

Drilled four core boreholes, all of which intersected coal.

2006 Keaton Mining Awarded Prospecting Rights 443PR and 444PR.

2007 – 2008 Keaton Mining (Managed by CCIC Coal) Drilled 119 core 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)

Prepares an Independent Competent Persons Report on the Sterkfontein and Delmas Coal Projects as part of JSE listing of Keaton Energy.

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

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

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

2009 – 2011 Keaton Mining (Managed by Coffey Mining) Drilled 86 core boreholes on the farms associated with the 443PR, 444PR, 1827PR and 2053PR.

2010 Brown & McKinney Sterkfontein Project Exploration Report.

GeoCoal Services cc Prepares an Independent Competent Persons 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 historyFour historical core 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 Keaton Energy’s involvement. Keaton Energy drilled a further 253 core boreholes 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 core boreholes on the contributing 1720PR properties.

Previous Resource estimatesA number of historic Coal Resource estimates for 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 core boreholes.

●● GeoCoal (Nov 2010): 82Mt (GTIS).

●● 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 resource estimates.

FY16 exploration and development summaryNo further exploration drilling or feasibility studies were conducted on the project during FY16.

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 core boreholes were used by CCIC Coal in the generation of the March 2014 model.

As no further exploration or geological modelling has been conducted during this reporting period, the Sterkfontein Coal Resource remains unchanged at 90.9Mt. The 31 March 2016 Coal Resource estimate is summarised in Table 15 and illustrated in Figure 14.



0 2000m

Resource Block 3

Bethal

f

f

f

f

Morgenzon23km

29O21'E 29O23'E 29O25'E 29O27'E 29O29'E

26O30

'S26

O32

'S26

O34

'S25

O58

'S26

O36

'S

Resource Block 2a

Tutuka Power Station

12km

N17

R38

R35

N17

Davel18km

N

R

f f

Sterkfontein

Resource Block 2b

Secund

a7km

Resource Block 1

Project boundaryInferred Coal ResourceIndicated Coal ResourceInterpreted faultBoreholeNational routeArterial routeSecondary roadRail

0 2000m

Resource Block 3

Bethal

f

f

f

f

Morgenzon23km

29O21'E 29O23'E 29O25'E 29O27'E 29O29'E

26O30

'S26

O32

'S26

O34

'S25

O58

'S26

O36

'S

Resource Block 2a

Tutuka Power Station

12km

N17

R38

R35

N17

Davel18km

N

R

f f

Sterkfontein

Resource Block 2b

Secund

a7km

Resource Block 1

Project boundaryInferred Coal ResourceIndicated Coal ResourceInterpreted faultBoreholeNational routeArterial routeSecondary roadRail

Figure 14: Sterkfontein Project Coal Resource

Table 15: Sterkfontein Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred 4 upper 0.1 1.58 3.6 28.5 25.9 42.1 20.1 1.6 38.14 lower 40.5 1.62 3.6 33.7 25.1 37.6 18.8 1.2 40.2

Total Inferred 40.7 1.62 3.6 33.7 25.1 37.7 18.8 1.2 40.2

Indicated 4 upper 1.0 1.65 3.9 33.2 21.1 41.7 18.9 1.8 33.74 lower 49.3 1.58 3.6 29.2 26.2 41.1 20.8 1.4 39.2

Total Indicated 50.3 1.58 3.6 29.3 26.1 41.1 20.8 1.4 39.1

Measured 4 upper – – – – – – – – –4 lower – – – – – – – – –


Total Measured and Indicated Coal Resource 50.3 1.58 3.6 29.3 26.1 41.1 20.8 1.4 39.1*Cutoff parameters: Thickness > 1.4m, raw ash < 50%, DAFVOL > 24%; areas where the parting between the 4 upper and 4 lower exceeded 0.3m were excluded from the Resource estimate.




Coal Reserve estimateNo compliant Reserve estimate has been conducted on this project.

Future explorationA preliminary drilling programme has been proposed in order to upgrade the area to the south of a fault interpreted to as well as the central area in order to upgrade an Indicated Coal Resource classification. In order to achieve the required four core boreholes per 100ha, an additional 11 core boreholes would be required to an average depth of approximately 180m.

The estimated cost to conclude this programme is summarised in Table 16.

Table 16: Sterkfontein Project medium-term exploration cost estimate

Item Cost (Rm)

Drilling (~1 835m) 1.1Field services and geology 0.4Consumables 0.04Laboratory test work 0.1Down-the-hole geophysics 0.02

Total 1.7

It is important to note here that this cost has not been included in the Keaton Energy FY17 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 an improvement in the international coal market.

Risks to Coal Resource estimateKeaton 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 estimate.

Environmental permittingAll 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.



Roodepoort Project


54

9.2.3.2 RoodepoortXceed Resources, through its 100% held subsidiary Focus Coal Investments Proprietary Limited, earned a 15% interest in the Roodepoort Exploration Project 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 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 41 IS. 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.

There are no legal proceedings relating to the prospecting and surface rights which may have an influence on our ability to continue exploration activities on the property.

Geological settingThe Roodepoort Project is located on the Witbank Coalfield. While 1 and 1A seams are present, 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 S2L with an average thickness of 0.9m. The 1A seam is also present at an average of 3.5m below 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). In addition to an export thermal product, the New Clydesdale operation has also historically produced a low phosphorous metallurgical coal from the 5 seam.

●● To the south by Anglo Coal’s Kriel Colliery which produces exclusively Eskom product from both opencast and underground operations, all the surrounding operations produce export quality thermal coal from 2 and 4 seams of the Witbank Coalfield.

●● To the north by BHP Energy Coal South Africa’s (BECSA) Douglas Colliery.

●● To the west by BECSA’s Rietspruit resource.

Exploration historyInformation for five historical core boreholes was obtained from the CGS. An additional four core boreholes were drilled during November 2011 by Xceed Resources to confirm the historical findings. In February 2012 another 21 core boreholes were drilled on the contributing properties by Xceed Resources.

FY16 exploration and development summaryNo further exploration or geological modelling has been conducted during this reporting period.

Coal Resource estimate (Gemecs)Gemecs published the maiden Coal Resource estimate on behalf of Xceed Resources in July 2013. No further exploration or geological modelling has been conducted during this reporting period. The 31 March 2016 estimate therefore remains identical to that published for 31 March 2015.

The 31 March 2016 Coal Resource estimate is summarised in Table 17 and illustrated in Figure 15.

Coal Reserve estimateNo Coal Reserve has been estimated for Roodepoort to date.

Future explorationNo 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 FY 17 in order to earn up to 74% in the project.


Environmental permittingA prospecting renewal application was submitted on 30 July 2013 which remained in process with the DMR at the date of this report. 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.



Rietspruitdam

547

545

544

0New Clydesdale CollieryDiepspruit Section

Roodepoort 40ISPtns 6,12

Diepspruit 41ISPtn 6

Thubelihle

Kriel 5km

26O09

'S26

O11

'S26

O13

'S

0 2000m


29O11'E 29O13'E 29O15'E 29O17'E

TavistockColliery

0

0Albion Collieries

0 Phoenix Colliery

Ogies18km

Kriel2km

Roodepoort

555

0Universal CoalRoodekop Project

Project boundaryInferred Coal ResourceBoreholeMain roadSecondary roadRail

Figure 15: Roodepoort Project Coal Resource and tenure diagram

Table 17: Roodepoort Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred 2 upper 2.2 1.91 2.6 52.8 16.4 28.2 11.8 0.9 36.82 lower 1.8 1.87 2.4 49.1 17.3 31.2 13.5 0.7 35.6

1 0.6 1.55 2.9 25.9 22.9 48.3 22.8 0.9 31.91A 0.1 1.58 1.6 27.4 29.5 41.5 23.3 1.1 41.5

Total Inferred 4.7 1.84 2.5 47.4 17.9 32.2 14.1 0.80 35.8

Indicated 2 upper 7.2 1.83 2.6 49.1 17.4 31.0 12.6 0.7 36.12 lower 3.2 1.81 2.4 47.4 17.8 32.4 13.3 0.5 36.0

1 1.1 1.52 2.6 24.8 22.5 50.1 23.3 0.8 31.11A 0.1 1.52 1.9 25.9 28.3 43.9 23.6 0.7 39.1

Total Indicated 11.6 1.79 2.5 46.1 18.1 33.3 13.9 0.62 35.6

Measured 2 upper 5.6 1.81 2.6 49.2 17.2 31.0 12.6 0.6 36.32 lower 2.1 1.83 2.5 49.6 17.1 30.9 12.8 0.4 36.1

1 0.9 1.49 2.7 22.7 23.0 51.6 24.0 1.5 30.81A 0.2 1.51 2.0 24.8 29.2 44.0 24.1 0.8 39.8

Total Measured 8.8 1.78 2.5 46.0 18.1 33.4 14.1 0.6 35.8


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

Rietspruitdam

547

545

544

0New Clydesdale CollieryDiepspruit Section


Diepspruit 41ISPtn 6

Thubelihle

Kriel 5km

26O09

'S26

O11

'S26

O13

'S

0 2000m


29O11'E 29O13'E 29O15'E 29O17'E

TavistockColliery

0

0Albion Collieries

0 Phoenix Colliery

Ogies18km

Kriel2km

Roodepoort

555

0Universal CoalRoodekop Project

Project boundaryInferred Coal ResourceBoreholeMain roadSecondary roadRail




Bankfontein Project


57

9.2.3.3 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 and Exploration Proprietary Limited (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 exploration funding.

Bankfontein is located approximately 30km north of the town of Ermelo, and approximately 7km north-west of the town of Breyten in the Mpumalanga province. The Bankfontein Prospecting Right 3041PR covers 913.12ha over portions 1, 10 and 13 of the farm Bankfontein 215 IS. The right was executed on 25 August 2009, valid for a period of four years which expired on 24 August 2012. A renewal application was submitted on 31 May 2012. Recent communication with the DMR indicated that the renewal has been approved.

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

There are no legal proceedings relating to the Prospecting and Surface Rights which may have an influence on our ability to continue exploration activities on the property.

Geological settingThe Bankfontein Project lies to south-east of the Middelburg- 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-Breyten 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 and bordered on the west by the undeveloped ConsBrey property.

●● To the east by the Tselentis Block.

●● 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 17.

●● 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 historyData for 11 historic core 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 core boreholes were drilled on portions 1 and 10, and a further six holes on portion 13. During November 2011 five historic core 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 core boreholes on portion 13 and two core boreholes on portions 1 and 10.

All the 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 core boreholes with quality data.

FY16 exploration and development summaryNo further exploration or geological modelling has been conducted during this reporting period.

Previous Coal Resource estimatesGemecs 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 2016 estimate therefore remains identical to that published in July 2013.

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 2015. The 31 March 2016 Coal Resource estimate is summarised in Table 18 and illustrated in Figure 16. Prior to Xceed Resources’ involvement in Bankfontein, no previous Coal Resource estimates had been declared for any of the contributing properties.

Future explorationNo 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.


Environmental permittingNo 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 access adit and underground operation on the Bankfontein property.



0 2000m 542

Bankfontein 215IS Ptn 1


Extent of B Lower Coal Seam

Carolina18km

26O14

'S26

O16

'S26

O18

'S

Ermelo25km


Carolina30km

Hendrina26km

Hen

drin

a20

km

Bankfontein

R36

29O54'E 29O56'E 29O58'E 30O00'E

555

R

Breyton

Project boundaryInferred Coal ResourceBoreholeArterial routeMain roadSecondary roadRailTown

Figure 16: Bankfontein Project Coal Resource

Table 18: Bankfontein Project 31 March 2016 Coal Resource estimate



(g/cc)IM (%)

ASH (%)

VM (%)

FC (%)

CV (MJ/kg)

TS (%)

DAFVOL (%)

Inferred A 0.5 1.49 3.5 15.9 28.0 52.6 26.8 0.5 34.7B 5.6 1.61 3.3 30.7 22.5 43.6 21.0 0.2 34.0C 2.3 1.63 2.9 33.1 20.5 43.5 19.5 0.6 32.1D 2.6 1.62 3.1 31.3 20.4 45.2 20.9 1.0 31.3

Total Inferred 11.0 1.61 3.2 30.7 21.8 44.3 20.9 0.49 33.0

Indicated A – – – – – – – – –B 3.9 1.63 3.1 31.8 21.4 43.7 20.6 0.5 32.8C 1.1 1.53 2.9 23.7 24.8 48.6 23.7 0.8 33.8D 0.1 1.51 2.7 21.0 24.2 52.1 25.1 1.1 31.6

Total Indicated 5.1 1.61 3.0 29.8 22.2 44.9 21.4 0.60 33.0

Measured A – – – – – – – – –B – – – – – – – – –C – – – – – – – – –D – – – – – – – – –

Total Measured – – – – – – –

Total Measured and Indicated Coal Resource 5.1 1.61 3.0 29.8 22.2 44.9 21.4 0.60 33.0*Cutoff parameters: Thickness >0.5m, raw ash >50%, DAFVOL >28%.

0 2000m 542



Extent of B Lower Coal Seam

Carolina18km

26O14

'S26

O16

'S26

O18

'S

Ermelo25km


Carolina30km

Hendrina26km

Hen

drin

a20

km

Bankfontein

R36

29O54'E 29O56'E 29O58'E 30O00'E

555

R

Breyton

Project boundaryInferred Coal ResourceBoreholeArterial routeMain roadSecondary roadRailTown




10. SAMREC 2016 amendmentThe 2016 SAMREC amendment is scheduled for implementation at the start of 2017. The basis of the amendment could materially impact on the Coal Resource on the basis of potential for eventual economic extraction. Additional technical work is planned for 2016.

11. FY16 exploration summary and FY17 budgetOur 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 FY16 period in the respective disciplines, with the entire process managed by CCIC Coal. QA/QC is therefore achieved using independent professionals using leading industry practice in data acquisition, reputable certified laboratories and comprehensive analytical controls. The following service providers were used during the period under review.

Table 19: Geological service provider summary FY16

Service provider

Geological services and site management CCIC Coal

Diamond and open hole drilling Discovery Drilling Contractors

Laboratory services Vryheid Coal laboratories (KZN projects)Noko Laboratory (Moabsvelden Project)Inspectorate M&L (Vanggatfontein Project)

Down-hole geophysics Geoline Services Proprietary Limited

Collar surveys SRM Surveys CC

Total exploration metres drilled and expenditure for the 12-month period ending 31 March 2016 are summarised below.

Table 20: Group FY16 exploration expenditure summaryFY16 FY17

Boreholes drilled

Total exploration

expenditure (Rm)

Planned boreholes

Budgeted expenditure

(Rm)

Vanggatfontein Colliery – – 12 2. 4Vaalkrantz Colliery 14 1.5 – –Sterkfontein Project – – 11 1.7Moabsvelden Project (large diameter boreholes) 6 0.8 4 0.9Braakfontein Project – – – –Mooiklip Project 2 0.2 5 0.5

12. Legal proceedings or other material conditionAppendix 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.

13. Lead CP consent pageThe condensed Coal Resource and Coal Reserve Statement was compiled from relevant data extracted from the respective contributing CP reports by Mr Jaco Lotheringen. Mr Lotheringen is the Lead Competent Person, registered with the South African Institute of Mining and Metallurgy [(SAIMM, PO Box 61127, Marshalltown, 2107, registration number 701237)] and the Engineering Council of South Africa [(ECSA, Private Bag X691, Bruma, 2026, registration number 20030022)], holds a BEng (Mining) (University of Pretoria) degree and a Mine manager’s certificate of competency (fiery mines). He is a mining engineer with 18 years’ experience in mining project development. Mr Lotheringen is currently a director of Ukwazi Mining Solutions Proprietary Limited (Private Bag X159, Centurion, 0046). 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.

J LotheringenPrincipal Mining Engineer

30 August 2016

Ukwazi Mining Solutions Proprietary LimitedHazel Close, Unit 4B, 1st floor141 Witch-Hazel Street, Highveld, Centurion, 0046Private Bag X159, Centurion 0046, South Africa



Appendix 1: Mineral Rights tenure and environmental permitting matrix

Mineral 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 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 Proprietary Limited

PR


Bethal, Mpumalanga

MP30/5/1/1/2/443 PR 932.90 26/11/2014 – 25/11/2017 Right currently active None Approved EMP Not applicable Not applicable All permits in place R10 000 Cash


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 R10 000 Cash



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 the DMR



MP30/5/1/1/2/2053 PR 498.00 12/12/2012 – 11/12/2015 Renewal application submitted timeously to the DMR and in process

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

Labohlano Trading 86 Proprietary Limited


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 the DMR


MR Vanggatfontein Colliery

Delmas, Mpumalanga

MP30/5/1/2/2/309 MR 1 652.00 23/02/2010 – 22/02/2030 Right currently active – operational mine

None Approved EMP NEMA Record of Decision (ROD) awarded 25/09/2009

Valid IWUL awarded 11/01/2015

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


PR Vanggatfontein extension

Delmas, Mpumalanga

MP30/5/1/1/2/2078 PR 430.00 19/04/2013 – 18/04/2018 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

Neosho Trading 86 Proprietary Limited

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 has been granted

Approved EMP NEMA Record of Decision (ROD) issued 03/09/2013

IWUL recommended for issuance

IWUL to be awarded before operations may commence

R19 959 823 Lombard guarantee in favour of DMR

Hampfuna Mining and Exploration Proprietary Limited

PR Roodepoort Project

Kriel, Mpumalanga

MP30/5/1/1/2/3018 PR 1 120.30 25/08/2009 – 24/08/2013 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


None Approved EMP Not applicable Not applicable All permits in place

BSC Resources Proprietary Limited

PR Mooiklip Project

Vryheid, KZN KZN30/5/1/1/2/403 PR 2 344.00 25/7/2014 – 24/7/2016 Right expired and renewal submitted June 2016


Leeuw Mining and Exploration Proprietary Limited

MR Koudelager Project

Vryheid, KZN KZN30/5/1/2/2/210 MR 915.40 11/04/2013 – 10/04/2041 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



PR Koudelager Project

Vryheid, KZN KZN30/5/1/2/2/10322 PR 915.40 13/03/2015 – 12/03/2018 Right active None Approved EMP Not applicable Not applicable All permits in place R90 301 Lombard guarantee in favour of DMR

Leeuw Braakfontein Colliery Proprietary Limited

MR Braakfontein Project

Newcastle, KZN KZN30/5/1/2/2/143 MR 1 951.70 29/08/2007 – 28/08/2027 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 7 638.00 05/05/2009 – 04/05/2024 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 11/04/2013 – 10/04/2018 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: Mineral Rights tenure and environmental permitting matrix

Mineral 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 Water and Sanitation (DWS) Integrated Water Use Licence (IWUL)

Notes on permitting and potential impact on ongoing operations

Rehabilitation guarantee (ZAR)

Funding mechanism


PR


Bethal, Mpumalanga

MP30/5/1/1/2/443 PR 932.90 26/11/2014 – 25/11/2017 Right currently active None Approved EMP Not applicable Not applicable All permits in place R10 000 Cash



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 R10 000 Cash



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 the DMR




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

Labohlano Trading 86 Proprietary Limited


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 the DMR


MR Vanggatfontein Colliery

Delmas, Mpumalanga

MP30/5/1/2/2/309 MR 1 652.00 23/02/2010 – 22/02/2030 Right currently active – operational mine

None Approved EMP NEMA Record of Decision (ROD) awarded 25/09/2009

Valid IWUL awarded 11/01/2015

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


PR Vanggatfontein extension

Delmas, Mpumalanga

MP30/5/1/1/2/2078 PR 430.00 19/04/2013 – 18/04/2018 Right currently active. Historical drilling being researched followed with in-fill drilling


Neosho Trading 86 Proprietary Limited

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 has been granted

Approved EMP NEMA Record of Decision (ROD) issued 03/09/2013

IWUL recommended for issuance

IWUL to be awarded before operations may commence



PR Roodepoort Project

Kriel, Mpumalanga

MP30/5/1/1/2/3018 PR 1 120.30 25/08/2009 – 24/08/2013 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


None Approved EMP Not applicable Not applicable All permits in place

BSC Resources Proprietary Limited

PR Mooiklip Project

Vryheid, KZN KZN30/5/1/1/2/403 PR 2 344.00 25/7/2014 – 24/7/2016 Right expired and renewal submitted June 2016



MR Koudelager Project

Vryheid, KZN KZN30/5/1/2/2/210 MR 915.40 11/04/2013 – 10/04/2041 Right active None Approved EMP In progress In progress NEMA environmental authorisation, IWUL to be awarded before operations may commence



PR Koudelager Project

Vryheid, KZN KZN30/5/1/2/2/10322 PR 915.40 13/03/2015 – 12/03/2018 Right active None Approved EMP Not applicable Not applicable All permits in place R90 301 Lombard guarantee in favour of DMR

Leeuw Braakfontein Colliery Proprietary Limited

MR Braakfontein Project

Newcastle, KZN KZN30/5/1/2/2/143 MR 1 951.70 29/08/2007 – 28/08/2027 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 7 638.00 05/05/2009 – 04/05/2024 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 11/04/2013 – 10/04/2018 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



3D three dimensional

AD air dried

ADUC air dried, uncontaminated

Amalahle Exploration Amalahle Proprietary Limited

AR as received

BCM bulk cubic metres

CGS Council of Geoscience

CHPP Coal handling and Processing Plant

CP Competent Person

CPR Competent Person’s Report

CV calorific value

DAFVOL dry ash free volatiles

DMR Department of Mineral Resources

DWS Department of Water and Sanitation

EIA environmental impact assessment

EMP Environmental Management Plan

ERB East Resource Block

FC fixed carbon

GBIS Global Borehole Information System

GTIS gross tonnes In Situ

ha hectare

IAR Integrated Annual Report

IM inherent moisture

ISO International Organisation for Standardisation

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 kilometres

ktpm thousand tonnes per month

KZN KwaZulu-Natal

Labohlano Labohlano Trading 46 Proprietary Limited

LBC Leeuw Braakfontein Colliery Proprietary Limited

LME Leeuw Mining and Exploration Proprietary Limited

LOM life of mine

MJ/kg megajoules per kilogram

MPRDA Mineral and Petroleum Resources Development Act

Mt million metric tonnes

MTIS mineable tonnes In Situ

Mtpa million tonnes per annum

NEMA National Environmental Management Act

QA quality assurance

QC quality control

RD relative density

ROM run of mine

SABS South African Bureau of Standards

SACMA South African Colliery Managers’ Association

SAIMM South African Institute of Mining and Metallurgy

SAMREC South African Mineral Resource Committee

SANAS South African National Accreditation System

SANS South African National Standard

tph metric tonnes per hour

TP Total Phosphorous

TS total sulphur

TTIS total tonnes In Situ

VM volatile matter

WRB West Resource Block

Abbreviations

BASTION GRAPHICS



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