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Coal

Strategy and growth

Anglo Coal’s strategy is focused on serving the power generation and steel making sectors from large, low cost, and predominantly export oriented coal basins. Anglo Coal delivers this strategy through its diverse, high quality asset portfolio in South Africa, Australia and the Americas, and also aims to be a long term, reliable supplier to its customers. It also aims to be a leader in the industry in the pursuit of cleaner coal solutions to the world’s energy needs. Anglo Coal’s strategy is based on the three pillars of operational excellence, growth and securing the future.

Anglo Coal is focused on expanding from its existing strong position in the export metallurgical and export thermal coal markets, while maintaining its leading position in the South African domestic thermal market (where it is a key supplier to Eskom). This strategy will be delivered through its extensive portfolio of greenfield and brownfield expansion projects, supported by targeted acquisitions.

An example of this strategy in action was the acquisition in December 2007 of 70% of the Foxleigh coal mine joint venture in Queensland, Australia. This adds to Anglo Coal’s existing coal mining operations in the Bowen Basin, one of the world’s premier coking coal supply regions. Foxleigh currently produces in total 2.5 Mtpa of PCI coal for the steelmaking industry (with production capacity for 3.3 Mtpa), and adjoins Anglo Coal’s Capcoal (German Creek) operations and the associated Lake Lindsay mine development. The mine and surrounding tenements will be the subject of ongoing exploration and feasibility studies. In addition, Anglo Coal has substantially completed a major programme of investment which includes the expansions at Cerrejón, Lake Lindsay and Dawson and ongoing projects at Mafube and Zondagsfontein.

Anglo Coal continues to pursue business development opportunities in several major coal producing regions. This includes interests in a range of projects that offer potential exposure to the broader energy markets, while building on the business’ core capability in coal, namely coal bed methane (CBM) exploration in South Africa and Botswana, stranded coal reserves at the Monash project in Australia, the Xiwan coal-to-chemicals project in China, and the FutureGen Industrial Alliance in the US. While these projects remain at an early stage with demanding economics, they do ensure that Anglo Coal is equipped with a diverse resource base to meet changing market demands over the long term.

The impact of climate change is an area of focus for the sector and Anglo Coal’s strategy is to participate to help address the issue as demand for energy continues to grow. Anglo Coal is a leading member of numerous industry bodies, such as the World Coal Institute (WCI) and the Coal Industry Advisory Board (CIAB), and is a founding member of the Global Carbon Capture and Storage Institute (GCCSI), launched in November 2008. Anglo Coal continues to take steps at its own operations to reduce its carbon footprint, including the capture of methane from underground mining operations that is converted into electricity at on-site or neighbouring power stations.

While Anglo Coal continues to grow and expand its operations in its existing geographies, it is also continually evaluating potential opportunities in new regions. In 2008, the company spent $35 million on exploration and new business development activities, investigating thermal and coking coal and CBM reserves and resources, mainly in southern Africa, China, Australia and Canada. It has conducted an advanced resource evaluation of the Xiwan project in China and is examining additional projects in South Africa, Canada and Australia. Anglo Coal commenced a CBM exploration programme in Botswana in late 2008.

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