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Vanggatfontein project (formerly known as the Delmas project)

The Vanggatfontein Project, located some 80km east of Johannesburg on the edge of the Central Witbank Coalfield in Mpumalanga, covers an area of 1 635 hectares. In May 2009 a SAMREC-compliant coal reserve of 25.9Mt and coal resource of 163Mt was declared, and in June 2009 the Department of Mineral Resources (DMR) awarded a 20-year mining right. The initial coal reserve, which will result in a 10-year mine life, contains 3.4Mt of high-quality metallurgical coal (No 5 Seam: 1.8Mt opencast; 1.6Mt underground) and 22.5Mt of power station coal (Nos 2 and 4 Seams).

Phase 1 of Vanggatfontein’s two-phase development programme will involve development of a No 5 Seam metallurgical coal mining and processing operation, timed to benefit from a strengthening in the domestic market for high-quality metallurgical coal.

In November 2009, the Keaton Energy board gave the go-ahead for Phase 1 of Vanggatfontein’s development at a cost of R158 million, before surface rights acquisitions. SNC Lavalin South Africa is the managing contractor on the project, with DRA Mineral Projects responsible for plant design and construction and Epoch Resources for residue facility design. Minopex is the preferred plant operator and Megacube Mining, a subsidiary of Sentula Mining, the preferred opencast mining contractor.

Plant fabrication began in January 2010; the mining right became effective in February 2010; and after the amicable settlement of a land access dispute in June 2010, earthworks were able to get underway. Steel erection began in August 2010. First coal is expected in October 2010, followed by a production ramp-up to 50ktpm (ROM).

Gross In-Situ Tonnage and Mineable In-Situ Tonnage (May 2009) (Air dried basis)

	Tonnage GTIS	Geological loss	Tonnage MTIS	Category
Resource area	(‘000 t)	(%)	(‘000 t)
Bituminous
No. 5 Seam – West	1 995	15	1 696	Measured
– Middle	5 413	15	4 601	Measured
– East	431	15	366	Measured
No. 5 Seam Bituminous	7 839	15	6 663	Measured
No. 4 Seam – Middle	45 292	10	40 763	Measured
– East	3 584	10	3 226	Measured
– West	31 295	10	28 165	Measured
No. 4 Seam Bituminous	80 171	10	72 154	Measured
No. 2 Seam – Middle	38 105	10	34 294	Measured
– East	2 545	10	2 290	Measured
– West	4 460	10	4 014	Measured
No. 2 Seam Bituminous	45 110	10	40 599	Measured
Subtotal Bitumious	133 120	10	119 416	Measured
Low Volatile
No. 4 Seam – Middle	5 441	15	4 625	Measured
– East	1 260	15	1 071	Measured
– West	19 460	15	16 541	Measured
No. 4 Seam Low Volatile	26 161	15	22 237	Measured
No. 2 Seam – Middle	8 633	15	7 338	Measured
– East	234	15	199	Measured
– West	16 758	15	14 244	Measured
No. 2 Seam Low Volatile	25 625	15	21 781	Measured
Subtotal Low Volatile	51 786	15	44 018	Measured
Total Delmas Project area	184 906		163 434

Note: Coal Resources are reported inclusive of the Coal Reserves

Coal Reserve Statement (May 2009)

Mining method	Coal type	Proved Coal Reserves Millions of tonnes(AR)	Probable Coal Reserves Millions of tonnes(AR)	Total Coal Reserves Millions of tonnes(AR)	Total Marke- table Coal Reserves Millions of tonnes(AR)	ASH (per- cent)	VM (per- cent)	S (per- cent)	CV (MJ/ kilogram)
Opencast	Power station	22.5		22.5	15.7	28.5	20.1	1.0	20.5
Opencast	Metallurgical	1.8		1.8	0.9	15.0	28.8	0.8	26.5
Underground	Metallurgical		1.6	1.6	0.7	15.0	27.5	0.8	26.6
Total		24.3	1.6	25.9	17.3

AR = As Received

AD = Air Dried