Full Disclosure 2016

Exxaro Resources Limited's disclosure of environmental non-compliances in annual reports

2016 update

2015 company reports

Exxaro’s 2015 Integrated Annual Report does not deal specifically with environmental issues. All environmental issues are contained within the separate “Supplementary Report”.

Exxaro’s 2015 Supplementary Report states as follows:

All our South African operations have environmental management programmes (EMPs) as required under the Mineral and Petroleum Resources Development Act (MPRDA) and National Environmental Management Act (NEMA).¹

Exxaro lists its 2015 environmental “highlights” as:

• Six integrated water use licences (IWULs) granted
• Five environmental authorisations granted
• Environmental management plan approved for Grootegeluk infrastructure projects.²

The company’s “lowlights” are listed as:

• Delays in obtaining environmental licences for new projects such as Glisa water treatment plant
• Delays in finalising appeals lodged against some projects such as Thabametsi and Belfast.³

In relation to the “delays in finalising appeals” against the Thabametsi and Belfast projects referred to above, Exxaro’s 2015 Integrated Annual Report provides the following summary of the status of its authorisations:

Thabametsi: The timing of certain future phases depends largely on progress with infrastructure (rail, water and roads) developments in the Waterberg. In the fourth quarter, we completed the bankable feasibility study of phase 1 to supply 3,9Mtpa of coal to the Thabametsi independent power producer (IPP), and the IWUL was approved in January 2016. An appeal was lodged and Exxaro is following due legal process. The mining right approval is imminent and first run-of-mine coal production to the Grootegeluk beneficiation complex could therefore be achieved by 2018. The subsequent rate of production ramp-up will depend on the IPP procurement programme for its coal baseload and Waterberg infrastructure development schedules.⁴

Thabametsi IPP: A bid was submitted by the Thabametsi IPP in the first bid window under the Department of Energy’s coal baseload IPP procurement programme on 2 November 2015 for a 630MW coal-fired power station. Marubeni Corporation is the lead developer and Korea Electric Power Corporation the co-developer on this project. Preferred bidders are expected to be announced in the first quarter of 2016. Based on this, we expect early construction works to begin in the second quarter of 2016.⁵

NBC Belfast open-cast mine: Following authorisation of the integrated water use licence in 2014, an appeal was lodged and the licence suspended. We expect the appeal case to be heard by the water tribunal in the second quarter of 2016. We also expect the tribunal hearing on the objection against the project’s rezoning application received in 2015 to be heard in the second quarter of 2016. Only 7% of the approved project start-up capital budget has been released to date, primarily for detail engineering designs [sic] and activities beginning in 2016, until we have more certainty on the regulatory process for this project.⁶

In relation to legal compliance and sanctions for non-compliance, Exxaro states in its Supplementary Report that:

In 2015, five environmental authorisations (under NEMA) were granted for FerroAlloys expansion, Thabametsi, Belfast Rietkuil siding, Matla mine new shaft and Leeuwpan block OI, and the environmental management plan (MPRDA) approved for Grootegeluk’s infrastructure projects.

Exxaro received no environmental stoppage directives during the review period. A fine was issued to ECC Tumelo Coal, which has been paid and an environmental authorisation is awaited from the authorities.⁷

In relation to water use licences, Exxaro states as follows:

Water use for most Exxaro operations is authorised under the old Water Act (1956). In recent years, after all operations submitted their integrated water use licence (IWUL) applications, we have steadily migrated these authorisations to the National Water Act (1998). By January 2016, 12 IWULs were approved (not shown here) and four pending.⁸

The Supplementary Report details the number of “environmental incidents” that have occurred through the year in a Key Performance Indicator (KPI) dashboard table, which details the KPIs under Exxaro’s material focus areas, and details the performance against these indicators in 2014 and 2015, and then labels the trend between the years as positive, negative or constant.⁹ The table further labels the “risk appetite threshold” of the company’s performance in the reporting year as either “Out of Appetite”, “Worst tolerable”, “Best realistic”, “Target” or “Possible waste/opportunity”.¹⁰

According to the 2015 Supplementary Report, the company reported 137 level one incidents, 18 level 2 incidents and no level 3 incidents in the reporting year.¹¹

The report discloses that the number of level 2 incidents showed a marked increase from the 2014 reporting year, in which only three level two incidents were recorded. This increase is flagged in the company’s Key Performance Indicator dashboard as “out of appetite”.¹²

The company records the nature of the level 2 incidents, their “receiving environment” and the response measures taken by the company in another table.

According to this table, the 18 level two incidents included incidents related to:¹³

• Bulk diesel spillage, with the receiving environment listed as “possible soil/groundwater pollution”. The company states that its response was to contain the diesel and initiate an emergency plan.
• Erosion along the river bank, with the receiving environment listed as “possible soil pollution”.
• Alien vegetation, with the receiving environment listed as “possible soil pollution”.
• Malfunctioning of sewage treatment works with the receiving environment listed as “surface water”.
• Potholing on portions of the shaft area route and surrounding surface area leading to water ponding, with the receiving environment listed as “possible soil/groundwater pollution.”
• Pollution control dam overflow, with the receiving environment listed as “possible soil/groundwater pollution.”
• Oil Spillage, with the receiving environment listed as “possible soil/groundwater pollution”.
• Pipe burst on truck carrying oil, with the receiving environment listed as “possible soil pollution”. The company reports that, in response, the “Area [was] cleaned and cleared of contaminated soil”.
• Explosion of surface transformer, causing oil to spill onto bare soil with the receiving environment listed as “possible soil/groundwater pollution”. The company reports that, in response, “Contaminated soil [was] cleared and area [was] cleaned.”

In addition, the KPI dashboard table also refers to the number of operating licences in place as well as Exxaro’s compliance with licencing conditions.  With reference to “Environmental authorisations (%) in place (validity) (integrated water use licence licence (IWUL), environmental impact assessment (EIA) and waste”, the table states that “<90%” were in place in 2014, and more “> 90%” are in place in 2015.¹⁴  Under the heading of “environmental authorisations (% compliance to conditions)” it states that there was “<90%” compliance in both 2014 and 2015.

The KPI dashboard table depicts that the number of stoppage directives (including section 54 directives under the MHSA, section 93 directives under the MPRDA and stoppage directives under the NWA and NEMA) declined from 7 in 2014 to 2 in 2015.¹⁵ This is inconsistent with the statement made by Exxaro under the heading of “legal compliance” quoted above, where it is stated that “Exxaro received no environmental stoppage directives during the review period”.¹⁶

The KPI dashboard table records that the percentage of environmental liability provisions in place in 2015 is 67%.¹⁷

In relation to biodiversity, Exxaro states:

According to the latest biodiversity assessment report (2011) shape files of national protected areas, none of Exxaro’s business units fall within these areas. Only Tshikondeni is next to a protected area (Kruger National Park), although several business units fall within protected vegetation types. Exxaro has evaluated and identified all protected vegetation units with important conservation targets and listed as protected by the national spatial biodiversity assessment report (2011).¹⁸

Full Disclosure 2015

Exxaro’s company reports contain some information on environmental non-compliances.

2009 company reports

During the 2009 reporting period, dust rates exceeded permitted standards 12 times.¹⁹ There were also 5 exceedances of the permitted particulate matter (PM) rate at KZN Sands and 1 exceedance of SO₂ at Zincor.²⁰ Exxaro has an incident reporting system which categorises incidents on a level of 1 to 3 depending on severity (3 being the most severe). The 2009 report reported 20 Level 2 incidents.²¹ These included:

• overflow of contaminated water into a clean area;
• stack exceedance of Atmospheric Pollution Prevention Act permit requirements;
• pollution dam spill into clean area;
• excessive smoke and particulate matter;
• soil pollution from coal spillage;
• water and soil pollution caused by flooding of sewage treatment plant;
• leaching of run-of-mine pipeline into neighbouring property;
• erosion of sensitive area following rainfall; and
• coal and hydrocarbon spillage.²²

There were also 1361 Level 1 incidents during the reporting period.²³

2010 company reports

Exceedance of the permitted dust rate was also reported in the 2010 Annual Report²⁴ as were 2 exceedances of PM at KZN Sands.²⁵ A directive was also issued by the Department of Water Affairs due to mining operations intruding onto a wetland area during the year.²⁶ During the reporting period, there were 931 Level 1 incidents and 30 Level 2 incidents.²⁷ The Level 2 incidents included:

• accidental diversion of reclaimed slimes dam water to an unlined slimes dam causing localised pollution;
• discovery of graves during mining;
• the breaking of a slit damwall resulting in slurry running into field;
• the failure of a slimes transfer pipeline;
• sediment washing into river due to breach in berm;
• discoloration of river;
• slimes spraying onto neighbouring property;
• surface runoff to neighbouring properties resulting in damage to crops;
• stack emission exceedance;
• sewage discharge;
• coal sediment and contaminated water spill into clean environment;
• pollution dam overflow; and
• evaporation dam overflow.²⁸

2011 company reports

In the 2011 Annual Report it was reported that there had been 28 Level 2 incidents and again exceedances of the dust limit.²⁹ In this report it was also noted that the company’s compliance with environmental and water use legislation at mines in Mpumalanga “was an issue raised by stakeholders”.³⁰

No further information on environmental non-compliances is provided, other than the statement by Exxaro that “no material incidents of non-compliance occurred in 2011″.³¹

2012 company reports

In 2012, exceedances of permitted dust limits were again reported.³² The following fines and directives were also reported to have been issued during the reporting period:

• at the North Block Complex, the above ground diesel tank was authorised following a fine for non-compliance;
• Grootegeluk was instructed to clean up its industrial waste;
• Leeuwpan received notices from Department of Water Affairs for mining activities close to a wetland area (dealt with below under ‘Community, media and NGO reports’);
• at the North Block Complex a directive was received from the Department of Water Affairs for not having a water use licence;
• a directive was also issued by the Mpumalanga Department of Mineral Resources requesting information on rehabilitation activities and water management; and
• Tshikondeni received a notice from the Department of Water Affairs Limpopo on water compliance gaps.³³

There were also 11 Level 2 incidents and 411 Level 1 incidents.³⁴ The Level 2 incidents included the following:

• overspray from mining activities;
• exceedances of stack emission limits and air quality standards;
• smelter spillages;
• overflow of subsurface drainage;
• oil spill;
• water overflow into Veld; and
• water flowing into mini-pits resulting in potential groundwater pollution.³⁵

2013 company reports

In the 2013 report it was reported that there had been 7 Level 2 incidents.³⁶ There had also been 175 Level 1 incidents.³⁷ The Level 2 incidents related to:

• the overflow of a dam;
• a slimes line spill resulting in ground pollution;
• major water overflow from a pollution control dam leading to ground and surface water pollution;
• exceedance of dust threshold; and
• dam overflows leading to potential ground water and surface water pollution.³⁸

Exxaro’s dust fallout rate had also exceeded the industrial limit for three months.³⁹ In the 2013 report it was also stated that no material fines or penalties had been received for non-compliance during the reporting period.⁴⁰

2014 company reports

In 2014 it was reported that there had been 152 Level 1 incidents and 3 Level 2 incidents. The three Level 2 incidents related to dam and reticulation system overflows, and in two of the incidents there was “possible soil/groundwater pollution”.⁴¹ Two operations also exceeded the non-residential limit for dust fallout during the reporting period.⁴²