Mining review

As noted in the Chairman’s statement, higher production contributed significantly to Black Wattles’ profitability in 2012. In addition, the continued improved performance of Transnet, the State rail provider, ensured strong demand for our coal. This demand along with the weakening of the South African Rand against the US Dollar helped offset the impact of weaker international coal prices throughout 2012.

Production
Run of mine production from Black Wattle continued strongly in 2012 with total production for the year of 1.87million metric tonnes (2011: 1.45million metric tonnes). The majority of this production came in the second half of the year with overall monthly production increasing from 149,000 metric tonnes in the first half of 2012 to 165,000 metric tonnes in the second half.

At the end of last year we began to expand further into our existing opencast reserves by opening up additional opencast pits. The ability to source production from various opencast pits has allowed Black Wattle to maintain profitable levels of production.

Looking forward into 2013, Black Wattle will be mining into deeper reserves by opencast mining. We will do everything that we can to keep costs under control in these deeper reserves and to ensure that 2013 is another very good year.

Markets
Although domestic prices improved steadily in 2012, international coal prices continued to weaken. At the beginning of 2012, the average weekly price of Free on Board (FOB) Coal from Richards Bay Coal Terminal (API4) was over $100. By the end of the first half of the year the price had weakened to under $90 where it remained in a range of US$85 to US$90 for the rest of the year. However a depreciation in the South African Rand against the US Dollar helped offset this decline.

The performance of Transnet continues to have a positive effect on demand for our coal. In 2012, Transnet railed 68.5million tonnes to Richards Bay Coal Terminal compared to 65.7million tonnes in 2011 and 62.8million tonnes in 2010. In addition, strong demand in the domestic market, in particular from local power utilities, ensured stockpiles remained low.

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. We are pleased to report all 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 minimise 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.
  • A Job Safety Analysis form has been introduced to ensure effective identification of hazards in the workplace.
  • 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. • Black Wattle Colliery utilises ICAM (Incident cause analysis method).
  • Hazard Identification and Risk Assessment training was given to all levels of employees, line management, Heads of Departments, contractor representatives and contractor employees.
  • Ongoing training on conveyor belt operation is being conducted with all employees involved with this discipline.
  • 21 employees were trained in ABET (Accreditation Board for Engineering and Technology) level one and another 19 will be trained in 2013 on level one, two and three.

HSE performance in 2012:

  • No new cases of Occupational Diseases were recorded.
  • Zero claims for the Compensation for Occupational Diseases were submitted.
  • No machines operating at Black Wattle exceeded the regulatory noise level.
  • Black Wattle Colliery recorded one Lost time Injury during 2012

Environment Management Programme
Under the terms of the mine’s Environmental Management Programme approved by the Department of Mineral Resource (“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 substantially improved its water management by erecting a new pollution control dam as well as upgrading existing dams in consultation with the Department of Water Affairs and Forestry.

We are very pleased to report that Black Wattle received their approved water licence from the Department of Water Affairs and Forestry. An external audit was also conducted and completed on the approved water licence.

A performance assessment audit was conducted to verify compliance to our Environmental Management Programme, no significant deviations were found.

Black Wattle Colliery Social and Labour Plan (SLP) progress
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 socioeconomic 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 company-community 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.
  • Black Wattle Colliery has concluded extensive work on various Agricultural projects as well as the E-Bag Recycling projects.

Procurement
In compliance with the Mining Charter and the Mineral and Petroleum Resource Development Act, Black Wattle has implemented a BBBEEfocussed procurement policy which strongly encourages our suppliers to establish and maintain BBBEE credentials. At present, BBBEE companies provide approximately 80 percent of Black Wattle’s equipment and services. We closely monitor our monthly expenditure and welcome potential BBBEE suppliers to compete for equipment and service contracts at Black Wattle. Black Wattle also sells much of its coal products to empowered companies.

Black Wattle Colliery is proud to announce that we are now a level 5 BBBEE contributor.

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 women in management and core mining target.
  • Black Wattle Colliery has achieved 18.5 percent women in core mining.
  • 97 percent of the women at Black Wattle Colliery are HDSA females.

Prospects
Since permissions were granted in 2010 to mine opencast the reserves at Black Wattle, management have worked tirelessly to increase production from our opencast reserves in order to reach acceptable levels of profitability. Going forward into 2013, we wish to build on the success of the past year not only at Black Wattle but also, in partnership with our BEE partners, in growing our reserve base in South Africa.

As a result, I am confident that 2013 should be another successful year for our South African operations.

Andrew Heller Managing Director
18 April 2013