Venmyn Deloitte is finding considerable inconsistency in the reporting of coal resources in the minerals industry, and particularly amongst South Africans and Australians.
Some companies use Gross Tonnes in Situ (GTIS), some use Total Tonnes in Situ (TTIS) and still others Mineable Tonnes in Situ (MTIS), with some reporting on all of these values in the interest of clarity.
In South Africa, all coal resources and coal reserves are classified according to the SAMREC Code and SANS10320:2004 which outline the standard method of reporting of coal resources and coal reserves through the application of the various technical parameters, and specifically note how to determine GTIS, TTIS and MTIS.
However, Venmyn Deloitte has observed that some countries, and particularly Australia, quote GTIS figures only for all projects, with washability tests sometimes, although not always, included in their reporting.
The JORC Code and the Australian Guideline for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves tend to not be as prescriptive although the Guideline states, “…Coal resources should be estimated and reported for individual seams or seam groupings within a deposit. They should also be subdivided and reported on the basis of key variables, such as thickness, depth range, strip ratio, coal quality parameters, geographic constraints and geological or technical considerations. The key variables and assumptions for each deposit should be clearly stated in order to ensure clarity and transparency of the report.”
For Venmyn Deloitte’s valuation curve, the tendency has been to use GTIS rather than TTIS or MTIS, to compare the values of coal companies based on the resources that they have and to include Australian as well as other non-South African companies.
However, in a South African scenario, the use of different reporting standards for coal resources is particularly problematic. This is because GTIS and TTIS values can differ considerably, particularly in the Waterberg where coal is interlaminated with mudstones, and can result in a 25% value difference between GTIS and TTIS values.
Venmyn Deloitte Executive Lead Catherine Telfer notes that it is imperative that only the coal resource tonnages be quoted in the resource statements for the Waterberg Coalfield, as quoting zone tonnages, including interlaminated mudstones, may be misleading since:-
sampling of these zones typically does not separate out the coal from the interlaminated shale portions;
these zones are modelled and the tonnages calculated;
resource statements have quoted the tonnages pertaining to the whole zone, rather than only the coal portion;
washability results on these coals are often as poor as 20% due to the large percentage of contained rock; and
these tonnages are often used in the derivation of project values using non-DCF methods.
Venmyn Deloitte understands that the coal industry in South Africa is attempting to further standardise one method of how coal resources are reported in order to solve this problem. This is being carried out through the re-writing of the SANS code, which is currently under way.