As noted in the Chairman’s statement, 2009 was another very good year for Bisichi. Black Wattle our direct mining subsidiary, continued to mine opencast. This together with our fixed price export contract, contributed strongly to Black Wattle’s profitability. Although 2010 has brought its challenges, with the strong South African Rand and lower market prices, we will continue to see the benefit of Black Wattle’s opencast and expanded washing plant operation, in our increased cost competitiveness.

Production
Production at Black Wattle continued strongly in 2009 with total run of mine production of 1.33 million metric tonnes for the year (2008: 1.31 million metric tonnes).

As noted in the Chairman’s statement, Black Wattle’s remaining open cast permissions were granted in February 2010. This represents an important landmark in the mine’s development and, going forward, gives Black Wattle the ability to mine strategically and more flexibly its remaining reserves.

During 2009, Black Wattle started buying in high quality coal from nearby reserves. These buy-in coal opportunities are increasing in number and give Black Wattle the opportunity to blend purchased coal with our own opencast coal thereby increasing overall production and extending the life of mine. Black Wattle will be looking at taking further advantage of these opportunities in 2010.

We are pleased to report that the expansion of the washing plant was completed in 2009. The benefits of this expansion include the following:

•  Increased washing plant capacity from 130,000 to 170,000 metric tonnes per month.
• An ability to wash a larger variety of products to the qualities required by the market.
• Improved Yields through washing each product size fraction at its ideal parameters.

Markets
2009 saw coal prices tumble after one of the most volatile periods in decades in the international coal market. At the peak, in August 2008, the average weekly price of Free on Board (FOB) Coal from Richards Bay Coal Terminal (API4) stood at over US$180.00 per metric tonne. By the beginning of 2009, the API4 price had fallen to US$75.00 per metric tonne and reached a low of just below US$60.00 per metric tonne by the end of the first half of 2009. At the same time, the South African Rand appreciated by over 21% against the US Dollar.

Fortunately, the bulk of our export volumes were protected from this collapse in coal price by our fixed price export contract, which came to an end in the last quarter 2009. In October 2009, we took advantage of the higher forward prices offered on the market and secured a new three year fixed price export contract for 300,000 metric tonnes per annum.

The downturn in international coal prices began to reflect in domestic prices in the second half of 2009 and resulted in a reduction in prices in all our domestic steam coal markets. Our ability to diversify further our product as a result of our expanded washing plant will give us the opportunity to look at new markets for our product. Throughout 2010 we will aim to sell to markets which give the highest return.

In 2009, we completed an upgrade to our siding by installing a third rail line. This additional capacity will be utilised to meet the increased production for both our export and domestic rail markets.

Health, Safety & Environment (HSE)
Black Wattle is committed to creating a safe and healthy working environment for its employees and the health and safety of our employees is of the utmost importance. In addition to the required personnel appointments and assignment of direct health and safety responsibilities on the mine, a system of Hazard Identification and Risk Assessments has been designed, implemented and maintained at Black Wattle.

Health and Safety training is conducted on an ongoing basis. Supervisors and about 85 percent of employees to date have received training in hazard identification and risk assessment in their work areas.

A medical surveillance system is also in place which provides management with information used in determining measures to eliminate, control and minimalise employee health risks and hazards and all Occupational Health hazards are monitored on an ongoing basis.

Various systems to enhance the current HSE strategy have been introduced as follows:

• In order to improve hazard identification before the commencing of tasks, mini risk assessment booklets have been distributed to all mine employees and long term contractors on the mine.
• In order to improve the current reporting practice of incidents on the mine, initial reporting of incidents booklets were handed out to all employees and contractors.
• In order to capture and record investigation findings from incidents, an incident recording sheet was introduced to line management and contractors.
• Hazard Identification and Risk Assessment training was given to all levels of employees, line management, Head of Departments, contractor representatives and contractor employees.
• A HSE ’contractor pack’ was introduced for all contractors working on Black Wattle.
• A weekly labour return form was introduced for all contractors.
• A Plan, Do, Review system for all Heads of Department was introduced to encourage managers to take ownership of HSE matters.
• In order to control jobs effectively over weekends that require additional risk assessments to safely perform tasks, a weekend work register was introduced on the mine.

HSE performance in 2009:

•  Black Wattle had a 70 percent reduction in the Lost Time Injury Frequency Rate compared to 2008.
• No new cases of Occupational Diseases Certified were recorded
• Zero cases for the Compensation for Occupational Diseases were submitted
• Zero machines operating at Black Wattle exceeded the regulatory level of 110dB.

Environment Management Programme
Under the terms of the mine’s Environmental Management Programme approved by the DMR, Black Wattle undertakes a host of environmental protection activities to ensure that the approved Environmental Management Plan is fully implemented. In addition to these routine activities, Black Wattle regularly carries out environmental monitoring activities on and around the mine, including evaluation of ground water quality, air quality, noise and lighting levels, ground vibrations, air blast monitoring, and assessment of visual impacts.

Black Wattle Colliery has improved its water management tremendously by erecting a new pollution control dam as well as upgrading existing dams in consultation with the Department of Water Affairs and Forestry.

An area of 26 hectares at the opencast was also rehabilitated.

Black Wattle Colliery Social and Labour Plan progress (SLP)
Black Wattle Colliery is committed to true transformation and empowerment within the company as well as poverty eradication within the surrounding and labour providing communities.

Black Wattle is committed to providing opportunities for the sustainable socio-economic development of the company’s stakeholders:

• Employees and their families, through Skills Development, Education Development, Human Resource Development, Empowerment and Progression Programmes.
• Surrounding and Labour sending communities, through Local Economic Development, Rural and Community Development, Housing and Living Condition, Enterprise Development and Procurement programmes.
• Empowerment partners, through Broad-Based Black Economic Empowerment (BBBEE) and Joint Ventures with Historically Disadvantaged South African (HDSA) new mining entrants and enterprises.
• The Company, through ongoing consultation with stakeholders to develop strong company-employee relationships, strong companycommunity relationships and strong company-HDSA enterprise relationships.

The key focus areas in terms of the detailed SLP programmes were updated as follows:

•  New implementation action plans, projects, targets and budgets were established through regular workshops with all stakeholders.
• A comprehensive desktop socio-economic assessment was undertaken on baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala District Municipality (NDM).
• The current Black Wattle Colliery Local Economic Development (LED) programmes were upgraded, and new LED projects were selected in consultation with the key stakeholders from the STLM.
• An appropriate forum was established on the mine and a process initiated for the consultation, empowerment and participation of the employee representatives in the Black Wattle Colliery SLP process.

Procurement
In compliance with the Mining Charter and the Mineral and Petroleum Resource Development Act, Black Wattle has implemented a BEEfocussed procurement policy which strongly encourages our suppliers to establish and maintain BEE credentials. At present, BEE companies provide approximately 68 percent of Black Wattle’s equipment and services. We closely monitor our monthly expenditure and welcome potential BEE suppliers to compete for equipment and service contracts at Black Wattle. Black Wattle also sells much of its coal products to empowered companies as evidenced by our long term sales agreement with a BEE company for the purchase of our discard product which is then sold to the national power utility Eskom.

Employment Equity
Black Wattle is committed to achieving the goals of the Employment Equity Act and is pleased to report the following:

•  Black Wattle Colliery has exceeded the 10 percent woman in management and core mining target.
•  Black Wattle Colliery has achieved 17.4 percent woman in middle to top management.
• Black Wattle Colliery has achieved 17.3 percent woman in core mining.
• 93 percent of the woman at Black Wattle Colliery are HDSA females.
• Black Wattle Colliery has achieved a 43.5 percent participation level of HDSA’s in overall management.

Prospects
With the timely expansion of our washing plant, the approval of all remaining opencast permissions and the commencement of buy-in coal, the group’s position to manage Black Wattle’s productivity and markets has never been stronger.

Developing mines can struggle because of lack of finance, rail capacity and markets whereas our profitability over the last two years is a direct result of having a fully operational mine with existing infrastructure and markets in place.

Going forward, I am confident that 2010 should be another successful year for our South African operations.

Andrew Heller
Managing Director