ALAN GOLDING ANALYTIKA HOLDINGS (PTY) LTD. Exploration Management, BOTSWANA

ALAN GOLDING ANALYTIKA OLDINGS (PTY) LTD Exploration Management, BOTSWANA

World Coal July 2014

The challenges in the development of Botswana s coal resources.

Where is Botswana? Gabon Congo Dem Rep of the Congo Brazzaville Kinshasa Rwanda Burundi Kenya Nairobi Tanzania Dar es Salaam Luanda Angola Malawi Windhoek T Namibia Zambia Botswana Lusaka T Gaborone Pretoria Johannesburg South Africa T ET P Lesotho arare Zimbabwe ET ET ET ET ET ET ET ET ET ET Lilongwe ET T Maputo Mbabane Swaziland T Mozambique ydro station P Pumped storage scheme T Thermal Station ET Eskom thermal station Cape Town N P

Botswana has an estimated 212Bt of coal resources in-situ (Figures published in 1998) Current production is essentially for internal consumption with some exports and the sole mine, Morupule has a capacity of approximately 3.5mt pa. Exploration over the last 7 years has confirmed significant tonnages are available in the known areas and has located other resources in areas which were previously considered speculative. Published figures by exploration companies indicate JORC compliant resources (GTIS) in the order of 60Bt The large scale conversion of these resources to reserves has yet to be determined.

Coal Resources of Botswana in mt From DGS, Chatupa 1998 (Reviewed by Barlow Jonker) Total (All categories) 212,868mt Coalfield Pandamatenga Tonnes (Mt) (1986) Not declared Tonnes (Mt) (1998) Not declared Dukwe Foley Serule Bobonong Morupule Moijabana (SW) Mmamabula Mmamantswe Letlhakeng Dutlwe Ncojane Not declared 1,604 Not declared 6,860 Not declared 9,685 Not declared 179 7,910 18,072 1,300 3,539 5,175 23,213 Not declared 2,898 3,530 70,353 2,000 71,740 Not declared 4,725 Total 19,915 212,868* 23% (48,576) Resources * 77% ypothetical-speculative level

Coal Resources of Botswana 212,868mt From DGS, Chatupa 1998 (Reviewed by Barlow Jonker)# Coalfield Tonnes (Mt) (1998)# Defined Published Resource Figures (Mt) M/Ind/Inf Dukwe 1,604 +1,269 +700 +1,500 Exploration Target Foley 6,860 2,517+860 3-6,000 Exploration Target Serule 9,685 915 +3,900 Exploration Target Location Sowa/Dukwe Sese & Mabesekwa) Lechana & Tshimoyapula Bobonong 179 None declared Poorly explored Morupule 18,072 190 7,234 2,400 Moijabana 3,539 1,460 +5,000 Exploration Target Mmamabula 23,213 2,925+442+2,512+ 3,144+2,493 MCL Kgaswe Morupule South Moijabana Kweneng MME/MMNC/MMS/MMW Mmamantswe 2,898 1,300 Mmamantswe Letlhakeng 70,353 4,230+2,654 Takotakwane remainder poorly explored Dutlwe 71,740 None declared Poorly explored Ncojane 4,725 None declared Poorly explored Total 212,868 60,021 (28%)

Distribution of Coal Resources of Botswana by Coalfield Dukwe Foley Coalfield Tonnes (Mt) (1986) Tonnes (Mt) (1998) Serule Pandamatenga Not declared Not declared Dukwe Not declared 1,604 Bobonong Foley Serule Not declared Not declared 6,860 9,685 Morupule Moijabana Bobonong Not declared 179 Morupule 7,910 18,072 Moijabana 1,300 3,539 Ncojane Mmamabula (East/NC/West) Mmamantswe Mmamabula 5,175 23,213 Letlhakeng Mmamantswe Not declared 2,898 Dutlwe Letlhakeng 3,530 70,353 Dutlwe 2,000 71,740 Ncojane Not declared 4,725 Total 19,915 212,868* Marine sediments

Related studies There was going to be a re-assessment of the coal resources of Botswana which was tendered, reached the Financials and then never awarded. There is an ongoing study on CCS potential of Botswana

Morupule Power station 600Mw capacity designed to take approximately 3mt pa but has not operated at full capacity since commissioning and is not we believe currently working. Current electricity consumption (approximately 550Mw is from imports and diesel generation 90+20Mw. Morupule Coal Mine (owned by Debswana and GoB) has a take or pay contract with BPC. MCM has coal export contracts with Turkey but we understand that transport logistics are proving difficult. It has also a contract to supply coal to cement plants in the Lichtenberg area. It has in the recent past also exported to Zimbabwe and Namibia.

The Coal Road Map In 2011 the Government of Botswana decided to place a temporary moratorium of new applications coal prospecting licences for coal and commissioned a study to determine the most suitable long term plan (Coal Road Map) for the development of the resources. The key outcomes of the Coal Road Map were discussed at a meeting in February 2012 and can be summarised briefly as follows: Large scale coal exports (60Mt/a) through a suitable port. Applications for coal prospecting licences within a core area of the known resources would be restricted to completive tender whilst those effectively in the deeper areas outside the core resource area would be accepted. Management of the prospecting licence application, review and management to be moved from the Department of Geological Survey to Department of Mines. (There was a further delay of approximately six months while the co-ordinates of the core area were defined and published.) A high level unit think tank was proposed to further review the above to maximise the use of this resource for the benefit of Botswana.

The Coal Road Map - progress Large scale coal exports (60Mt/a) through a suitable port. An (Australian) consultant has been appointed to undertake a Feasibility study for the construction of the proposed railway line to Walvis Bay.

The Coal Road Map - progress A consultant has been appointed to undertake a Feasibility study for the construction of the proposed railway line to Walvis Bay. Applications for coal prospecting licences within a core area of the known resources would be restricted to completive tender whilst those effectively in the deeper areas outside the core resource area would be accepted. Since the implementation of the Coal Road Map only two completive tenders for prospecting licences have been issued (one of these was in place before the coal road map). The second tender was not in a highly prospective area.

The Coal Road Map - progress A consultant has been appointed to undertake a Feasibility study for the construction of the proposed railway line to Walvis Bay. Applications for coal prospecting licences within a core area of the known resources would be restricted to completive tender whilst those effectively in the deeper areas outside the core resource area would be accepted. Management of the prospecting licence application, review and management to be moved from the Department of Geological Survey to Department of Mines. Management of the prospecting licence application, review and management under the Department of Mines has deteriorated and applications are taking over two years. i. Applications for licences outside the core area have only been considered up to the end of 2012.

The Coal Road Map - progress A consultant has been appointed to undertake a Feasibility study for the construction of the proposed railway line to Walvis Bay. Since the implementation of the Coal Road Map only two completive tenders for prospecting licences have been issued (one of these was in place before the coal road map). The second tender was not in a highly prospective area. Management of the prospecting licence application, review and management to be moved from the Department of Geological Survey to Department of Mines. Management of the prospecting licence application, review and management under the Department of Mines has deteriorated and applications are taking over two years. i. Applications for licences outside the core area have only been considered up to the end of 2012. ii. The Prospecting licence process is no longer transparent as the prospecting licence map, issued monthly, is not current and apparently open areas may already be under application.

The Coal Road Map - progress A consultant has been appointed to undertake a Feasibility study for the construction of the proposed railway line to Walvis Bay. Since the implementation of the Coal Road Map only two completive tenders for prospecting licences have been issued (one of these was in place before the coal road map). The second tender was not in a highly prospective area. Management of the prospecting licence application, review and management to be moved from the Department of Geological Survey to Department of Mines. Management of the prospecting licence application, review and management under the Department of Mines has deteriorated and applications are taking over two years. i. Applications for licences outside the core area have only been considered up to the end of 2012. ii. iii. The Prospecting licence process is no longer transparent as the prospecting licence map, issued monthly, is not current and apparently open areas may already be under application. The current prospecting licences are largely time expired (past their sell by date!!!!) and between 5-7 years old. Their further renewal is at the discretion of the Minister and existing legislation for retention will not allow them to be retained long enough until the railway line is completed.

Basic economics!!! If a product has no market it cannot be sold. If it cannot reach a market at an economic price then it has no market.

Basic economics!!! If a product has no market it cannot be sold. If it cannot reach a market at an economic price then it has no market. Markets?? International if Botswana can meet quality specifications and the price is right. South Africa has a developing shortage (50mt by 2015) of coal for power generation if the price is right.

Export routes from Botswana Gabon Congo Dem Rep of the Congo Brazzaville Kinshasa Rwanda Burundi Kenya Nairobi Tanzania Dar es Salaam Luanda Angola Malawi Walvis Bay Approx. 1500kms Cost US$22B? Capacity 50Mt T Cape Town Namibia N P Zambia Botswana Lusaka T Gaborone Pretoria Johannesburg South Africa T ET P Lesotho arare Zimbabwe ET ET ET ET ET ET ET ET ET ET Lilongwe ET T Maputo Mbabane Swaziland T Mozambique Technobane ydro station P Pumped Approx. storage 900kms scheme T Thermal Station ET Eskom Cost thermal US$21B station Capacity 50-120Mt Maputo Coal Terminal Approx. 1000kms Cost US$0-? Capacity 2Mt but can be increased to 4Mt

Status A trial run of 1600t successfully reached Maputo All three railways in talks to agree a tariff. Botswana Railways has quoted US$5c/tonne/km Botswana Railways have invested in 200 coal wagons. Morupule Colliery in Botswana has a aggressive exporting marketing drive which has seen tonnage increase 70% and even now exports to RSA! Tenders for Brown field and Greenfield sites are yet to be awarded.

Basic economics II Distance Cost per tonne km + US25 tonne mining costs 3 4 5 6 7 FOB 1700 76 93 110 127 144 65 1600 73 89 105 121 137 65 1500 70 85 100 115 130 65 1400 67 81 95 109 123 65 1300 64 77 90 103 116 65 1200 61 73 85 97 109 65 1100 58 69 80 91 102 65 1000 55 65 75 85 95 65 900 52 61 70 79 88 65 800 49 57 65 73 81 65 160 140 120 100 80 60 40 20 0 65 65 65 65 65 65 65 65 65 65 1700 1600 1500 1400 1300 1200 1100 1000 900 800 3 4 5 6 7 FOB

Depressed??

Quo Vadis (II)! 1. We need to set up the think tank now. 2. We do need to re-evaluate the coal resources of Botswana to appreciate the true scope of the resource. 3. We need to stimulate coal mining to create the knowledge and human resources for the long term development of the resource.

Botswana has.. Abundant coal resources Of medium low grade quality A long way to the sea A power shortage A need to diversify its economy A need to become more self sufficient in strategic items A shortage of water

Thinking out the box!!! 1. What could you do with US$10 (or 20) billion if you invested this money into projects that would stimulate coal mining and consume the coal.

Thinking out the box!!! 1. What could you do with US$10 (or 20) billion if you invested this money into projects that would stimulate coal mining and consume the coal. 2. Instead of continually developing Morupule Colliery (effectively a parastatal) why not allow other producers a 0.5m tpa contract to the power station(s) to allow them to start their mines (something to take to the bank) and then develop their own markets. 3. Why not try out a small scale UCG project to generate 60Mw, which can be on line in two years at a cost of say US$50m?

Engineering News 31 Jan 2015

Thinking out the box!!! Why not. The Think Tank is urgently needed to achieve: 1.Avoid arbitary decision making 2. Broader economic beneficiation

The definition of insanity is doing the same thing over and over and expecting different results. (Railway studies in early 1900 s, 1982, 2015)

Alan Golding ANALYTIKA OLDINGS (PTY) LTD P.0. Box 401898 Gaborone BOTSWANA Tel: +267 391 8323 Fax: +267 391 8378 Cell: +267 724 17 627 Email: alang@analytika.co.bw