Wescoal Elandspruit Coal Resource Report · 2019. 10. 23. · Wescoal Elandspruit Coal Resource...

Wescoal Elandspruit Coal Resource Report

Report Prepared for:

Report Prepared by: Gemecs (Pty) Ltd

Visiomed Office Park Unit 16, Building 5

269 Beyers Naude Drive Blackheath, Randburg

Republic of South Africa

Tel: +27 11 431 2327 Fax: +27 11 388 5243

www.gemecs.co.za

Report Author:

CD van Niekerk Principal Consultant

M.Sc, MDP, Pr.Sci.Nat., FGSSA

Project Number: GMXP14057

11 May 2014

Wescoal Elandspruit Coal Resource Report 11 May 2014 Project No: GMXP14057

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Table of Contents

EXECUTIVE SUMMARY ...................................................................................................... 7

1. INTRODUCTION ........................................................................................................... 8

1.1 Background ............................................................................................... 8

1.2 Qualifications of Consultant ....................................................................... 8

1.3 Reliance on Other Experts ........................................................................ 9

1.4 Disclaimer .................................................................................................. 9

2. LOCALITY ................................................................................................................... 10

3. HISTORICAL BACKGROUND ..................................................................................... 11

4. OWNERSHIP AND TENURE (MINERAL HOLDINGS) ................................................ 12

5. DEPOSIT GEOLOGY .................................................................................................. 13

5.1 Introduction .............................................................................................. 13

1.2 Regional Geology .................................................................................... 13

5.1 Local Geology ......................................................................................... 19

6. EXPLORATION AND DATA ........................................................................................ 22

6.1 Surface Mapping ..................................................................................... 22

6.2 Aeromagnetic Survey .............................................................................. 22

6.3 Drilling ..................................................................................................... 22

6.4 Borehole Collar Surveys .......................................................................... 23

6.5 Borehole Core Recoveries ...................................................................... 24

6.6 Borehole Logging and Sampling ............................................................. 24

6.7 Analytical Laboratories ............................................................................ 25

6.8 Data Verification ...................................................................................... 26

6.8.1 Borehole Collar Positions and Elevations .................................... 26

7. GEOLOGICAL MODELLING ....................................................................................... 29


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7.1 Structural Modelling ................................................................................. 29

7.2 Coal Quality Modelling ............................................................................ 39

8. COAL RESOURCES ESTIMATION ............................................................................. 46

8.1 Introduction .............................................................................................. 46

8.2 Coal Resources Classification ................................................................. 46

9. COAL RESOURCES ................................................................................................... 51

9.1 Resource Estimation Assumptions .......................................................... 51

9.2 Coal Resource Statement ....................................................................... 51

9.3 Geological Discounts ............................................................................... 52

10. ADDITIONAL EXPLORATION ..................................................................................... 52


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List of Tables

Table 1: Elandspruit In Situ Coal Resources (TTIS) and Raw Qualities (air-dried) ................ 7

Table 2: Showing the Minimum, Maximum, Average, Mean and Standard Deviation of the

seam thickness of all the seams present in the area ........................................................... 20

Table 3: Boreholes with collars differing more than 1 metre from the LADAR Topographic

DTM .................................................................................................................................... 28

Table 4: Summary of the Raw air-dried qualities of the 5 coal seams present in the

Elandspruit area .................................................................................................................. 39

Table 5: SAMREC Resource Classification based on borehole density .............................. 48

Table 6: Elandspruit In Situ Coal Resources (TTIS) and Raw Qualities (air-dried) .............. 51

List of Figures

Figure 1: Locality map of the Elandspruit Project (from The Mineral Corporation) ............... 11

Figure 2: The Mineral Rights (“NOMR”) ownership of the Elandspruit Project ..................... 12

Figure 3: Locality of the Coalfields of South Africa - Witbank Coalfield indicated in yellow

(modified from Snyman, 1998) ............................................................................................ 14

Figure 4: The Witbank Coalfield (position of prospecting area indicated in purple) .............. 16

Figure 5: The effect of the palaeo-topography on coal seams ............................................. 16

Figure 6: Generalised stratigraphic column of the Witbank Coalfield (depicting the typical

occurrence and distribution of the more important coal seams) ........................................... 17

Figure 7: Diagram illustrating the coal seam splits that occur within the No. 1 and 2 Coal

Zone, in the Witbank Coalfield ............................................................................................ 18

Figure 8: Local geology of the Elandspruit Project Area ...................................................... 20

Figure 9: Borehole plan of Elandspruit ................................................................................ 23

Figure 10: Surface topography of Elandspruit based on a Ladar Survey ............................. 27

Figure 11: Surface Topography ........................................................................................... 30

Figure 12: Limit of weathering depth ................................................................................... 30

Figure 13: No 4 Lower Seam Thickness Isopach ................................................................ 32


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Figure 14: No 3 Seam Thickness Isopach ........................................................................... 32

Figure 15: No 2 Upper Seam Thickness Isopach ................................................................ 33

Figure 16: No 2 Lower Seam Thickness Isopach ................................................................ 33

Figure 17: No 1 Seam Thickness Isopach ........................................................................... 34

Figure 18: No 4 Lower Seam Floor Elevation Contours ....................................................... 34

Figure 19: No 3 Seam Floor Elevation Contours ................................................................. 35

Figure 20: No 2 Upper Seam Floor Elevation Contours ....................................................... 35

Figure 21: No 2 Lower Seam Floor Elevation Contours ....................................................... 36

Figure 22: No 1 Seam Floor Elevation Contours ................................................................. 36

Figure 23: No 3 Seam Interburden Thickness Contours ...................................................... 37

Figure 24: No 2 Upper Seam Interburden Thickness Contours ........................................... 37

Figure 25: No 2 Lower Seam Interburden Thickness Contours ........................................... 38

Figure 26: No 1 Seam Interburden Thickness Contours ...................................................... 38

Figure 27: No 4 Lower Seam Raw CV (MJ/kg) Distribution Contours .................................. 40

Figure 28: No 3 Seam Raw CV (MJ/kg) Distribution Contours ............................................ 41

Figure 29: No 2 Upper Seam Raw CV (MJ/kg) Distribution Contours .................................. 41

Figure 30: No 2 Lower Seam Raw CV (MJ/kg) Distribution Contours .................................. 42

Figure 31: No 1 Seam Raw CV (MJ/kg) Distribution Contours ............................................ 42

Figure 32: No 4 Lower Seam 26.5 MJ/kg CV Borehole Yield Contours ............................... 43

Figure 33: No 3 Seam 26.5 MJ/kg CV Borehole Yield Contours .......................................... 44

Figure 34: No 2 Upper Seam 26.5 MJ/kg CV Borehole Yield Contours ............................... 44

Figure 35: No 2 Lower Seam 26.5 MJ/kg CV Borehole Yield Contours ............................... 45

Figure 36: No 1 Seam 26.5 MJ/kg CV Borehole Yield Contours .......................................... 45

Figure 37: Geological confidence relating to Resource Classifications ................................ 47

Figure 38: Resource classification No 4 Lower Seam Resource Blocks Green=Measured;

Orange = Indicated ............................................................................................................. 48

Figure 39: Resource classification No 3 Seam Resource Blocks Green=Measured; Orange =


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Indicated ............................................................................................................................. 49

Figure 40: Resource classification No 2 Upper Seam Resource Blocks Green=Measured;





Indicated ............................................................................................................................. 50


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EXECUTIVE SUMMARY

Gemecs (Pty) Ltd (“Gemecs”) has been commissioned by Wescoal Holdings Limited

(“Wescoal”), to produce a Coal Resource Report on the coal resources of the Elandspruit

Project (prospecting permit) in Mpumalanga, South Africa.

This coal resource statement was prepared based on resource models created in Geovia

MinexTM from base principles by CD van Niekerk, a full-time geologist at Gemecs.

The report was prepared using the South African Code for Reporting of Mineral Resources

and Mineral Reserves (the SAMREC Code - 2008) as a guide, as well as the South African

guide to the systematic evaluation of coal resources and coal reserves (SANS10320:2004).

It comprises a resource statement covering the Elandspruit Project area derived from the

May 2014 geological resource model.

Both Gross Tons In Situ (GTIS) and Total Tons In Situ (TTIS) coal resources are reported for

the 4 Lower (S4L), 3 (S3), 2 Upper (S2U), 2 Lower (S2L) and 1 (S1). Coal seams tonnage

and raw coal qualities are summarised in the table below:

Table 1: Elandspruit In Situ Coal Resources (TTIS) and Raw Qualities (air-dried)


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1. INTRODUCTION

1.1 Background

Gemecs (Pty) Ltd (“Gemecs”) has been commissioned by Wescoal Holdings Limited

(“Wescoal”), to produce a Coal Resource Report on the Elandspruit Project coal resources

near Middelburg in Mpumalanga.

This coal resource statement was prepared based on resource models created in Geovia

MinexTM from base principles by CD van Niekerk, a full-time geologist at Gemecs.

The report was prepared using the South African Code for Reporting of Mineral Resources

and Mineral Reserves (the SAMREC Code - 2008) as a guide, as well as the South African

guide to the systematic evaluation of coal resources and coal reserves (SANS10320:2004).

It comprises a resource statement covering the Elandspruit Project area derived from the

March 2014 geological resource models.

The person responsible for estimating the coal resources is satisfied that, based on the

information made available, the estimates presented are reasonable and are appropriate for

the type of deposit, its location and the current and proposed methods of exploitation.

Gemecs places reliance on Wescoal that all legal information provided to Gemecs at the

time of writing is both valid and accurate for the purpose of compiling this report including

tenure and Mineral Right status.

1.2 Qualifications of Consultant

Gemecs’ independence is ensured by the fact that it holds no equity in any ongoing or

planned projects. This permits Gemecs to provide its clients with conflict-free and objective

recommendations on crucial judgement issues. Gemecs has a demonstrated track record in

undertaking independent assessments of resources and reserves, project evaluations and

audits, CPR’s and independent feasibility evaluations to bankable standards on behalf of

exploration and mining companies and financial institutions worldwide.

Neither Gemecs nor any of its employees and associates employed in the preparation of this

report has any beneficial interest in the assets of Wescoal Holdings Limited.

The competent person with overall responsibility for reporting of Mineral Resources is

Coenraad D van Niekerk, Pr.Sci.Nat (Reg No. 400066/98), M.Sc (Geology), MDP, FGSSA,


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who is a senior coal geologist at Gemecs. Mr van Niekerk is a mining geologist with over 38

years’ experience in the coal mining industry.

1.3 Reliance on Other Experts

During the investigation, data processing and modelling, Gemecs made use of the following

experts:

Johan Repsold is an experienced coal geologist with more than 35 years’ coal experience.

He obtained a B.Sc. Hons. from the University of the Witwatersrand and is registered as a

Professional Natural Scientist with the South African Council for Natural Scientific

Professions (Pr.Sci.Nat - Reg No 400049/04). He also worked for nearly 6 years on coal

projects in KZN and gained expert knowledge in borehole database development and coal

data preparation. Johan has worked as an associate with Gemecs since 2007 and was

responsible for the data processing for this project.

Dan Ferreira, a qualified and experienced surveyor and owner of Dan Ferreira Technical

Services. Mr Ferreira was responsible for the survey of borehole positions, obtaining the

Ladar surface survey data for Wescoal. He also checked the borehole coordinates and collar

elevations and assisted with the conversion of the coordinates from Cape Lo 29 to WGS84

Lo 29.

Gerhard Mulder, owner of Geotechnical Consultants CC. Mr Mulder is an experienced

geologist and he was responsible for the processing of historical borehole data and the

logging and sampling of the “ED” series boreholes drilled in 2013 by Wescoal.

1.4 Disclaimer

This report is a Geological Resource Report.

The guidelines of the SAMREC code (The South African Code For The Reporting Of

Exploration Results, Mineral Resources And Mineral Reserves -2007 Edition), as well as

The South African Guide To The Systematic Evaluation Of Coal Resources And Coal

Reserves (SANS10320:2004) have been used to compile this report.

Due to the reciprocity agreement that exists between SAMREC and JORC (Joint Ore

Reserve Committee-Australasian Code for Reporting of Exploration Results, Mineral

Resources and Ore Reserves), this report is JORC compliant.


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This report is for internal use by the client and may be used for public reporting purposes if

so required. The report is compiled and signed off by a Competent Person as defined by the

SAMREC code.

It is important to note that this is a Geological Resource Report compiled by a Competent

Person, but not a Competent Persons Report (“CPR”) as per the requirements specified by

the JSE (Johannesburg Stock Exchange); however, since it is SAMREC compliant, this

report can be used to populate the geological and resource section of a JSE-compliant CPR.

2. LOCALITY

The project is located 8 kilometres west of the town Middelburg in the Mpumalanga Province

of South Africa. The site is approximately 200 km from the city of Johannesburg. Given the

proximity to Middelburg, the local infrastructure and services are excellent (Figure 1).

The R55 national road runs east-west along the southern boundary of the property, while a

gravel road running north-south from the R555 transverses the property.

Graspan Colliery, owned and operated by Shanduka Coal Limited (“Shanduka”), adjoins the

property to the east while the open pit of the Middelburg Townlands Colliery, also owned and

operated by Shanduka, is located south of the property.


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Figure 1: Locality map of the Elandspruit Project (from The Mineral Corporation)

3. HISTORICAL BACKGROUND

Historical ownership details of the Elandspruit are not readily available. Only general

information regarding exploration campaigns by some mining companies is available, and is

presented below.

Exploration was first undertaken by Tselentis in 1981 and 1982 when a total of 45 boreholes

were completed. A second drilling programme was done by the same company between

March and November 1990. This time, a total of 71 boreholes were drilled.

Xstrata Coal undertook an exploration drilling programme after they obtained the prospecting

rights from Tselentis. The drilling was conducted in 2007 when 23 boreholes were drilled.

As at 6 September 2012, Xstrata Coal has had a 100% interest in the Elandspruit Project

and, after the deal with Wescoal, is now the new owner of the mineral rights of the

Elandspruit Project. Wescoal undertook a drilling programme during 2013 when a total of 10

boreholes were drilled. Most of these boreholes were twinned boreholes drilled next or close


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to old historical boreholes. Wescoal also plans to do additional drilling later during 2014. In

addition, they have started with a pre-feasibility study to be completed by the end of June

2014.

4. OWNERSHIP AND TENURE (MINERAL HOLDINGS)

The Elandspruit Project will be operated by Wescoal Mining Pty Ltd, a wholly-owned

subsidiary of Wescoal Holdings Limited (“Wescoal”). The new order Mining right (“NOMR”)

over the mineral Area 7 of Mineral Area situated on Portion 29, Mineral Area 8 of Mineral

Area 6 situated on Portion 32 and Portions 30, 33, 34, 36, and 40, all of the farm Elandspruit

291 JS, are either currently held by Wescoal or are in the process of being transferred to

Wescoal.

The Mineral Rights ownership of the Elandspruit Project is shown in Figure 2.

Figure 2: The Mineral Rights (“NOMR”) ownership of the Elandspruit Project


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5. DEPOSIT GEOLOGY

5.1 Introduction

This section gives an overview of the geology of Witbank Coalfield and Elandspruit Project in

more detail.

5.2 Regional Geology

The Elandspruit Project is located in the Witbank Coalfield (Figure 3). The Witbank Coalfield

forms part of the northern section of the Witbank-Belfast-Standerton, Coal Province.

The Witbank Coalfield stretches from Springs in the west to Belfast in the east over a

distance of around 180 km, and extends for roughly 40 km in a north-south direction. The

irregular northern boundary of the Witbank Coalfield is defined by the limit of the coal-

bearing strata. The southern margin of the Witbank Coalfield is distinctly defined over the

central portion of the coalfield by the so-called ‘Smithfield Ridge’ (which is represented by a

series of inliers of Rooiberg felsite). The Smithfield Ridge forms the boundary between the

Witbank and Highveld Coalfields. Arbitrary southern boundaries of the Witbank Coalfield

exist to the east and west of the central portion of the coalfield. The southern margin extends

from south of Delmas Colliery to a position somewhere just south of South Witbank Colliery,

in the eastern part of the coalfield.


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Figure 3: Locality of the Coalfields of South Africa - Witbank Coalfield indicated in yellow

(modified from Snyman, 1998)

The geology of the Witbank Coalfield is dominated by sedimentary rocks of the Dwyka and

Ecca Groups, which both form part of the Late Carboniferous to Middle Jurassic (320-180

Ma) aged Karoo Supergroup. The sediments of the coal-bearing Ecca Group present within

the Witbank Coalfield were deposited on an undulating pre-Karoo floor, which had a

significant influence on the nature, distribution and thickness of the coal seams (Smith and

Whittaker, 1986). After the deposition of the Karoo strata extensive portions of the


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stratigraphic column were removed by erosion, together with considerable amounts of coal

in certain areas. A maximum of approximately 180m of Karoo Sequence lithologies have

been preserved within the Witbank Coalfield.

The stratigraphic sequence typically comprises, from the base of the Karoo Sequence

upwards, a diamictite of glacial origin, pro-glacial varved siltstone and pebbly mudstone, and

para-glacial gravel and conglomerate, overlain by swamp, fluvio-deltaic, and near-shoreline

deposits. Up to four distinct, commonly coal-capped, depositional sequences may be

recognized in various parts of the coalfield, as well as in other coalfields around the northern

and north-eastern rim of the Greater Karoo depositional Basin (Cadle, 1982: Smith and

Whittaker, 1986).

The Dwyka Group lithologies are best developed and thickest in the deeper palaeo-valleys

and are not present over the most pronounced pre-Karoo topographic highs. Numerous

prominent glacial valleys can be discerned within the Witbank Coalfield.

As illustrated in Figure 4, these glacial valleys include (after Smith and Whittaker, 1986):

• the Grootvlei Valley extending from north of Nigel and trending in a southerly

direction towards the South Rand Coalfield;

• the Vischkuil Valley, north-east of Springs trending towards Devon;

• the Coronation Valley running from north of Coronation Kromdraai Colliery, north-

west of Witbank, southwards towards Springbok Colliery and then extending to the

south-east towards Hendrina;

• the Bank Valley extending southward from north-west of Middelburg to Bank Colliery

and subsequently linking to the Coronation Valley;

• the Arnot Valley trending from north of Arnot southwards to the East of Arnot Colliery.


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Figure 4: The Witbank Coalfield (position of prospecting area indicated in purple)

The distribution and thickness of the coal seams present in the Witbank Coalfield was

controlled primarily by pre-Karoo palaeo-topography and are therefore poorly developed

over distinct palaeo-topographic highs. The general effect that the pre-Karoo floor

topography has on the continuity and distribution of the coal seams present is illustrated in

Figure 5. Coal seams can be thinner or totally absent, over major palaeo-topographic highs.

Figure 5: The effect of the palaeo-topography on coal seams


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The main economically important coal seams identified in the Witbank Coalfield are the No.

5, 4 and 2 coal seams. The No. 1 Coal Seam also has economic potential in certain areas,

but to a lesser extent. The No. 3 Coal Seam is thin and only sporadically developed, but has

been locally exploited in conjunction with the overlying No. 4 Lower Coal Seam. In the

Witbank Coalfield the No. 2 Coal Seam has been the most extensively mined and remains

the most economically important coal seam (Smith and Whittaker, 1986).

Figure 6: Generalised stratigraphic column of the Witbank Coalfield (depicting the typical

occurrence and distribution of the more important coal seams)

Coal seam splits occur in some parts of the coalfield such that the No. 4-Upper and No. 4-

Lower plies may represent the No. 4 Coal Seam Zone. Similarly, the No. 2 Coal Seam is


Page 18 of 52

split into an upper and lower ply in some places or the No. 2 Coal Seam Zone may contain a

rider coal (generally referred to as the No. 2A Coal Seam, but locally as the 2 Upper Coal

Seam). The No. 2 and 1 coal seams are closely associated in certain areas and may form a

continuous coal thickness (Figure 7). In rare instances an additional coal seam is

encountered below the No.1 Coal Seam and has been referred to as the No.1A, No. 1 Lower

or No. 0 Coal Seam.

Figure 7: Diagram illustrating the coal seam splits that occur within the No. 1 and 2 Coal Zone,

in the Witbank Coalfield

The coal seams present in the Witbank Coalfield are mostly moderately flat-lying to gently

undulating, with a slight regional dip to the south. Steep dips (of as much as 1 in 8) are

encountered in regions where coal seams abut against pre-Karoo basement ridges (see

Figure 5). The No. 4 and 5 Coal Seams have a more regular distribution (being higher up in

the stratigraphy) and their occurrence is mainly controlled by present-day surface

topography. In the western part of the Witbank Coalfield (in the Springs-Delmas area), the

coal seams tend to be a lot more irregular in distribution (mainly due to irregularities in the

Transvaal Supergroup dolomite floor), than the coal seams present in the main Witbank

Coalfield.

The Karoo strata in the Witbank Coalfield are predominantly unfolded to gently flexured and

have not been subjected to significant fault displacements, except where they are

transgressed by dolerite bodies. Rare faults with throws of up to 1m are recorded in a few

places, and faults with throws larger than this are very infrequent. Where faulting does take

place in the coal seams it is normally associated either with steeper dips near the flanks of

pre-Karoo basement ridges or with depressions such as those that occur in regions where


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the basement is composed of dolomite.

Post-Karoo dolerites have extensively intruded the entire sedimentary sequence present in

the Witbank Coalfield. The secondary structures caused by the emplacement of these

dolerite intrusions are an important factor influencing the estimation of coal reserves and

coal mining activities.

Dolerite dykes and sills have destroyed and devolatilised coal seams over large areas within

the coalfield. The dolerite intrusions have burnt large portions of the coal seams making the

coal useless in terms of utilization. The substantial displacement of coal seams caused by

dolerite intrusions has an extremely adverse affect on mining in numerous areas.

The Witbank Coalfield remains one of the most important coalfields in South Africa,

consistently contributing to the coal production in the country. Numerous major power

stations and coal mining operations are present within the coalfield.

5.1 Local Geology

The surface material covering the Elandspruit Project area is primarily underlain by the coal-

bearing Vryheid Formation of the Ecca Group (see Figure 8).

The Witbank Coalfield is divided up into several sectors based on stratigraphy and

geological structure. The Elandspruit Project area is situated within the Middelburg sector of

the Witbank Coalfield, nearby the northern limit between the Witbank coalfield.

Five principal seams are developed, namely No 1, 2 Lower, 2 Upper, 3 and 4 Lower. The 5

seam is not developed in the area. All the seams are absent in the western half of the

property where they have been eroded, while the No 3 and 4 Lower Seams are only present

in the higher topographic areas in the east.

The depth of weathering (“LOW”) is highly variable, ranging from 1.06m to 23.97m below

surface


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Figure 8: Local geology of the Elandspruit Project Area

Table 2: Showing the Minimum, Maximum, Average, Mean and Standard Deviation of the seam

thickness of all the seams present in the area

SEAM Min Max Average Median Std.Dev

S4L 0.00 2.31 1.73 1.76 0.32

S3 0.00 0.66 0.45 0.46 0.06

S2U 0.00 4.23 1.89 1.72 0.73

S2L 0.00 4.73 2.57 2.77 0.87

S1 0.40 5.20 3.24 3.57 0.96

No 1 Seam – occurs just above the Dwyka Formation and increases in thickness from less

than 1 metre on the eastern boundary to over 4 metres in the western boundary (Figure 17).

The coal is mainly dull to lustrous with occasional bright bands. Shale bands are usually

limited to the upper parts of the seam. The average Raw qualities (air-dried) comfortably

satisfied typical Eskom minimum Calorific Value (“CV”) and Volatile Matter (“VM”)

specifications of 20MJ/kg (air-dried) and 20% (air-dried) respectively.


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No 2 Lower Seam – is usually separated from the underlying No 1 Seam by less than 1m of

sedimentary rocks but the interburden can increase to 11m in the south-eastern corner of

the project (Figure 25). The thickness of the seam varies between 2.50m and 4.75m (Figure

16).

In the south-east the seam is absent along a north-south trending zone approximately 400 to

500m wide. It is possible that this is caused by a sedimentary wash-out. The average Raw

qualities (air-dried) are compatible with the No 1 Seam and will satisfy Eskom’s minimum

requirements.

No 2 Upper Seam – The interburden between the 2 Upper and the underlying No 2 Lower

Seam ranges from a few centimetres in the north to over 11m in the south (Figure 24). The

seam thickness ranges between 0.50m and 4.23m (Figure 15).

Raw qualities (air-dried), particularly in the west, are often inferior due to shaley in-seam

partings. The quality can be improved by washing the coal.

No 3 Seam – the interburden between the No 2 Upper and No 3 seam is remarkably

constant across the property and ranges between 12.0 and 15.5 metres (Figure 23). The

seam thickness, which is also very constant, is thin and never exceeds 0.70m and is absent

in the lower topographical areas. The seam comprises mainly bright coal and the quality is

excellent.

No. 4 Lower Seam – like the No 3 seam, it is only present in the topographically high areas

of the property and lies on average 8m above the No 3 Seam As far as thickness is

concerned, it ranges between 0.50 and 2.30m. In-seam partings are rare and the raw

qualities are relatively high, with a Raw Ash content (air-dried) below 20%. Washing can

improve the coal quality so that it reaches an attractive yield.

Dolerite Intrusions

No dolerite sills are present in the area. Only one borehole recorded a dolerite intrusion and,

given the high borehole density, it is considered unlikely that more intrusions will be

encountered.


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6. EXPLORATION AND DATA

6.1 Surface Mapping

No detailed surface mapping was performed, but existing published geological maps of the

study area were evaluated.

6.2 Aeromagnetic Survey

No aeromagnetic work has been done over the property.

6.3 Drilling

Except for a few boreholes known to have been completed by Esterhuizen contractors, the

identity of the drillers used in the first ”ELA” programme is unknown. The equipment type

and core size is not documented.

Boreholes in the second EP exploration campaign were drilled by Robust Drilling and

Exploration, owned and operated by the brothers R N and R K Eales, who also undertook

the logging and sampling. The core size was TNW which has a nominal diameter of 60 mm.

The 2007, Xstrata drilled a series of boreholes denoted ”ESP”. The drill contractor was

referred to in the logs as ACS, but details of the equipment and core size are not known.

Wescoal undertook a drilling programme in 2013. The “ED” series of 10 boreholes were

mostly twin boreholes next or very close to historic boreholes The drilling was done by a

drilling contractor Geotechnical Consultants. The borehole logging and sampling was

performed by Gerhard Mulder, an experienced geologist, while the borehole positions were

surveyed by a qualified surveyor, Dan Ferreira of Dan Ferreira Technical Services.

A plan showing the borehole positions is reflected in Figure 9.


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Figure 9: Borehole plan of Elandspruit

6.4 Borehole Collar Surveys

It is not known whether the locations of boreholes drilled during the first exploration

programme were professionally surveyed. Indeed, the geological report compiled by the

Eales brothers mentions “questionable survey positions” with regard to the “ELA” Boreholes.

This suggests that some of the borehole coordinates may be unreliable.

The ”EP” series of boreholes drilled during the second programme were located at pre-

surveyed sites. Accepting that the boreholes were collared exactly on the surveyed sites, it

can be reasonably assumed that the coordinate’s locations are accurate for the most part.

The “ESP” series of boreholes drilled during Xstrata’s 2007 phase of exploration were

surveyed by Dragonfly Survey and Drafting (“Dragonfly”). It is not known whether the

surveyors employed by this company were registered with the South African Council for


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Professional and Technical Surveyors (“PLATO”).

The boreholes drilled by Wescoal in 2013 were surveyed by an experienced and qualified

surveyor, D Ferreira of Dan Ferreira Technical Services, based in Middelburg.

6.5 Borehole Core Recoveries

No records of core recoveries are available for any of the boreholes drilled in the three

exploration programmes. Therefore no comment can be made as to whether reasonable

recoveries were achieved, but based on discussions Gemecs had with M Smith (Xstrata)

and Gerhard Mulder (Geotechnical Consultants CC), the standard of 95% core recovery was

applied over coal seams intersected and boreholes with core recoveries of


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It is also not clear if Gerhard Mulder, who handled the latest drilling programme, is registered

with SACNASP.

Downhole geophysical wireline logging was conducted only on the 2007 “ESP” series of

boreholes. Information, however, is limited only to Long-Spaced Density traces. It is not

known whether other tools were employed.

Generally, the standard of logging from the second and third drill programmes is considered

sufficiently detailed to allow reasonable geological interpretation and, for the most part,

reliable seam correlation. With the exception of the six boreholes logged by D Thompson,

the standard of logging performed during the first drilling programme is considered to be

poor.

No details of sampling methodology are available for the first three drilling programmes. The

latest drilling programme done in 2013 was sampled according to the standard practice in

South Africa to sample whole coal core, and there is no reason to assume that this approach

was not practised during the historic drilling programmes.

6.7 Analytical Laboratories

Samples from the first Tselentis programme (“ELA” boreholes) were analysed at at least

three different laboratories including Tans-Tugela, Middelburg and North Natal. At that time

the South African National Accreditation System (‘SANAS’) did not exist. Samples from the

second Tselentis programme were submitted to Middelburg Laboratory and McLachlan &

Lazar (Pty) Limited (now known as Inspectorate M&L), which is currently SANAS accredited

(Facility Accreditation No. T0313 complying with ISO/IEC 17025:2005). It is not known which

laboratory analysed samples from the Xstrata drilling programme.

Exact details of the sample preparation techniques employed are not known. However,

examination of the various laboratory reports suggests that samples were usually first

crushed to -25mm and the -05mm material screened off. The +0.5 x -25mm coal was

subjected to float/sink analysis at wash densities which varied according to the programme.

A limited number of samples were also analysed at raw.

All -0.5mm material and the +0.5mm float/sink fraction were tested for calorific value, total

sulphur content and proximate analysis (inherent moisture, ash and volatile matter contents,

with fixed carbon determined by difference).


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No determinations of relative density (‘RD’) were performed on samples from the first

programme of exploration (“ELA” series boreholes). The RD of samples from the second and

third programmes was laboratory reported. The method used to determine RD is not known.

Most samples from the second Tselentis programme (“EP”) boreholes were tested for

phosphorus-in-coal content. Selected samples from the same programme were also

submitted for specialised test work including Total Ash Analysis, Ash Fusion Test (‘AFT’) and

Hardgrove Grindability Index (‘HGI’).

Approximately half of the original laboratory reports from the first Tselentis programme

(“ELA” boreholes) are available (in hardcopy). For the second Tselentis programme (“EP”

boreholes), most of the laboratory reports were supplied in hardcopy format. No original lab

reports have been seen for the 2007 Xstrata phase of work.

In the case of the ”ED” series, the samples were processed and analysed by Middelburg

Laboratory.

Coal samples were analysed for proximate analyses: Ash Content (AS), Inherent Moisture

(IM) and Volatile Matter (VM), as well as for Calorific Value (CV) and Total Sulphur (TS).

This was also done for wash densities at 1.50, 1.60, 1.65, 1.70 and sinks.

6.8 Data Verification

A new borehole database was created in Micromine GEOBANK and all the relevant

borehole information was imported. This included borehole collars, lithological descriptions

of some of the boreholes, unit interpretations, raw and fractional analyses.

6.8.1 Borehole Collar Positions and Elevations

The recorded elevations of the borehole collars were checked against the topographic DTM

(Ladar Survey) provided by Wescoal (see Figure 10).


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Figure 10: Surface topography of Elandspruit based on a Ladar Survey

In most cases the difference between the LADAR data and the collar elevations was less

than 1m. However, in 22 cases the difference was between 1 to 11m (Table 3).

No boreholes were omitted from the geological database on the basis of apparent

differences between recorded collar and surface topographic elevations as, in all cases, the

collar elevations were adjusted to be the same as the LADAR surface when there were no

corresponding anomalies in the seam elevations, which would be expected if there were

genuine discrepancies in borehole collar elevation.


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Table 3: Boreholes with collars differing more than 1 metre from the LADAR Topographic DTM

A number of analytical data verification routines were used to validate all the raw and

washability data as received from the laboratory. Anomalies were identified, queried and

corrected where possible, otherwise flagged and removed from the final modelling dataset.

All the coal samples with washability data were normalised in GEOBANK to produce

cumulative washability curves on a sample basis that was used in the modelling of the

different coal products.

Making use of different statistical methods, Gemecs could identify erroneous RD values.

These values were either excluded or edited using a different regression formula and then

the raw RD was modelled like the other raw qualities. The modelled RD was used for

resource estimations.


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Stringent analytical quality validation testing was conducted by Gemecs on all the other

qualities on all the borehole analyses as part of the borehole validation and verification

routines that are available in the GEOBANK borehole database and Geovia MinexTM

modelling software.

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

modelling.

7. GEOLOGICAL MODELLING

The data dumps from GEOBANK were imported into the Minex database as a direct upload

from MS Excel spread sheets (CSV format) and after uploading the Minex database was

checked for transfer errors.

7.1 Structural Modelling

Geological modelling was performed using Geovia MinexTM software. Minex provides the

best geology and mine planning tools for coal and other stratified deposits, ensuring

resources are evaluated accurately and mined efficiently.

Surface grids of the topography were created using surface DTM’s provided by the client

(see Figure 11).

In each borehole, the limit of weathering as recorded was used to model the weathering

surface (“LOW”) (see Figure 12).


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Figure 11: Surface Topography

Figure 12: Limit of weathering depth


Page 31 of 52

The stratigraphical seam sequence was validated in Minex before structural modelling

commenced. Missing seams (boreholes that did not intersect seams due to basement,

dolerite or weathering) were interpolated and thicknesses selectively set to zero, to ensure a

full stratigraphical sequence for modelling and also to ensure that the negative intersections

are honoured in the modelling process.

Each coal seam structure was modelled on a grid of 25mx25m. Roof and floor surfaces

were created in 3D for each layer, as well as a thickness grid for each seam. Coal

extrapolation was limited to 250m from the last borehole with data which is deemed to be

appropriate for this geological setting and data distribution.

The structural (physical) model grids were generated for the following parameters:

• All coal seam thicknesses (“ST”)

• All seam floors (“SF”) and seam roofs (“SR”)

• All seam interburden thicknesses (“IB”)

The final structural model was created, using the topographic surface and weathering limit

as cutting surfaces at the top to remove coal where it intersects these surfaces.

The seam thickness isopach of the different seams is shown in Figures 13 – 17.

The seam floor elevation contours are shown in Figure 18 – 22.

The dolerite sills could not be modelled due to the fact that only one borehole intersected a

thin dolerite dyke.

The partings (interburdens) are critical in the mining of the resource and are shown in

Figures 23 – 26.


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Figure 13: No 4 Lower Seam Thickness Isopach

Figure 14: No 3 Seam Thickness Isopach


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Figure 15: No 2 Upper Seam Thickness Isopach

Figure 16: No 2 Lower Seam Thickness Isopach


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Figure 17: No 1 Seam Thickness Isopach

Figure 18: No 4 Lower Seam Floor Elevation Contours


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Figure 19: No 3 Seam Floor Elevation Contours

Figure 20: No 2 Upper Seam Floor Elevation Contours


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Figure 21: No 2 Lower Seam Floor Elevation Contours

Figure 22: No 1 Seam Floor Elevation Contours


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Figure 23: No 3 Seam Interburden Thickness Contours

Figure 24: No 2 Upper Seam Interburden Thickness Contours


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Figure 25: No 2 Lower Seam Interburden Thickness Contours

Figure 26: No 1 Seam Interburden Thickness Contours


Page 39 of 52

7.2 Coal Quality Modelling

Raw coal qualities were modelled for each seam as mentioned above. Coal qualities

modelled are: Relative density (RD), Calorific Value (CV), Ash (AS), Inherent Moisture (IM),

Fixed Carbon (FC), Volatile Matter (VM) and Total Sulphur (TS). The Raw air-dried qualities

of the 5 coal seams present in the area are summarised in Table 4.

Table 4: Summary of the Raw air-dried qualities of the 5 coal seams present in the Elandspruit

area


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All coal qualities reported hereafter are on an air dried basis. Sample qualities were

composited in Minex, based on the coal seam selections. Modelled grids for each quality

variable were created on a 25mx25m grid.

Figures 27 to 31 show the different Raw Calorific Values (MJ/kg) distribution of all the coal

seams.

Figure 27: No 4 Lower Seam Raw CV (MJ/kg) Distribution Contours


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Figure 28: No 3 Seam Raw CV (MJ/kg) Distribution Contours

Figure 29: No 2 Upper Seam Raw CV (MJ/kg) Distribution Contours


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Figure 30: No 2 Lower Seam Raw CV (MJ/kg) Distribution Contours

Figure 31: No 1 Seam Raw CV (MJ/kg) Distribution Contours


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Coal product washability was modelled for two wash products, namely at 26.5MJ/kg CV and

22.5MJ/kg CV.

Figures 32-36 show the borehole yield of all the coal seams for a 26.5 MJ/kg CV (air dried)

product.

Figure 32: No 4 Lower Seam 26.5 MJ/kg CV Borehole Yield Contours


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Figure 33: No 3 Seam 26.5 MJ/kg CV Borehole Yield Contours

Figure 34: No 2 Upper Seam 26.5 MJ/kg CV Borehole Yield Contours


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Figure 35: No 2 Lower Seam 26.5 MJ/kg CV Borehole Yield Contours

Figure 36: No 1 Seam 26.5 MJ/kg CV Borehole Yield Contours


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The above is just an indication and it is recommended that more detailed work should be

conducted by Wescoal to determine what products should be beneficiated to optimise the

wash products for Elandspruit Project.

8. COAL RESOURCES ESTIMATION

8.1 Introduction

This section summarises the methods used to estimate and classify the Coal Resource for

the Elandspruit Project. All qualities are reported on an air-dry uncontaminated basis, unless

otherwise stated.

8.2 Coal Resources Classification

Gemecs’ estimates of Coal Resources use the terms and definitions as proposed by The

South African Code for reporting of Mineral Resources and Mineral Reserves (SAMREC

Code), as well as the South African National Standard (SANS 10320:2004) for coal

evaluation.

Within the cover of the SAMREC Code, particular reference is taken of Section 6,

Commodity Specific Reporting For Coal, as well as the guidelines laid out in

SANS 10320:2004 (South African Guide to the systematic evaluation of coal resources and

coal reserves). This standard provides a detailed framework for reporting on coal resources

and reserves for the purpose of the Securities Exchanges and defines common terminology

to be used in public reporting with the SAMREC Code.

Figure 37 is a diagram showing the relationship between the level of geological knowledge

and resource categories.


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Figure 37: Geological confidence relating to Resource Classifications

Principally, the main criteria for 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 samples taken from

the cores of the individual borehole intersections.

Classification was guided by the following:

• Borehole density;

• Geological and grade continuity;

• Geological structure and its influence on mining;

• Complexity of the geology.

The borehole density and spatial distribution of cored boreholes, sampled and analysed for

raw ash content, is sufficient to allow for confident extrapolation of physical and quality

parameters between boreholes and also allows for the coal resources to be adequately

categorised into Inferred, Indicated and Measured Resources as per the SAMREC Code. In

addition, Reconnaissance tonnages were reported in line with SANS10320:2004, where

borehole spacing allows such classification.

In the case of the Elandspruit Project coal resource, the classification based on borehole

density (points of observation) is as follows:


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Table 5: SAMREC Resource Classification based on borehole density

Figures 38 - 42 illustrate the resource classes for all the coal seams. The different resource

classes are indicated as follows: green = measured, orange = indicated and red = inferred

category.


Orange = Indicated


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Indicated

Figure 40: Resource classification No 2 Upper Seam Resource Blocks Green=Measured;

Orange = Indicated


Page 50 of 52


Orange = Indicated


Indicated


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It is the opinion of Gemecs that density, distribution and quality of data is sufficient at this

stage to allow for tonnage and grade estimates to be made.

9. COAL RESOURCES

9.1 Resource Estimation Assumptions

In situ coal resources were reported for each seam within the individual resource area

boundaries. A seam thickness of less than 0.50m was applied to the 4 Lower, 2 Upper, 2

Lower and 1 seams while in the case of No 3 Seam a thickness of less than 0.30m was

excluded for reporting resource tonnes. A Raw Volatile Matter cut-off was applied, excluding

coal with a Raw Volatile Matter content


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9.3 Geological Discounts

Provision has been made for a geological loss factor (discount). Losses may occur mainly

as a result of intersection of dolerite dykes, small-scaled faulting and other unforeseen

geological losses.

The geological discounts applied are:

• Measured resource - 10%

• Indicated - 15%

10. ADDITIONAL EXPLORATION

Gemecs would like to recommend that Wescoal undertakes additional drilling:

• This includes twinning at least 3 of the historical boreholes to confirm the presence of

economically viable coal deposits.

• Drilling in the indicated resource areas to convert the resources to measured

resources.

• Drilling in areas where mining will start (box-cut), as well as a few additional areas to

obtain additional analytical data.

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