Independent Environmental Compliance Audit - Drayton Coal - Project .

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 report to take into account any events or emergent circumstances or facts occurring or becoming apparent after the date of the report. This Report is issued with the understanding that it is the responsibility of the Auditee to ensure that the information contained herein is brought to the attention of the appropriate regulatory agencies, where required by law. Additionally, it is the sole responsibility of the Auditee to properly rectify any findings from the audit that indicate that relevant laws or regulations have been or may be breached. Neither the Auditor nor any member associate or employee of the Auditor undertakes any responsibility for any injury, loss or damage claimed by the Auditee arising out of a claim by any third party against the Auditee in connection with this Report. Page vi 2172813A/PR 0665 PARSONS BRINCKERHOFF

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 Glossary and acronyms AEMR Annual Environmental Management Report ACHP Aboriginal Cultural Heritage Plan Antiene EIS Antiene Joint User Rail Facility Environmental Impact Statement (Umwelt, 2000) Approval Project Approval 06 0202 ARL Action response level ARTC Australian Rail and Track Corporation AQMP Air Quality Management Plan BMP Blast Management and Monitoring Plan C Compliant CCC Community Consultative Committee Consent Development Application 106-04-00 CSIRO Commonwealth Scientific and Industrial Research Organisation DA Development Application DECCW NSW Department of Environment, Climate Change and Water DPI NSW Department of Planning & Infrastructure Drayton Coal Anglo American (Drayton Management) Pty Ltd DTIRIS NSW Department of Trade & Investment, Regional Infrastructure and Services EA Environmental Assessment EMS Environmental Management Strategy EPA New South Wales Environment Protection Authority EPL Environment Protection Licence ESCP Erosion and Sediment Control Plan FVMP Final Void Management Plan GEEP Greenhouse and Energy Efficiency Plan GMP Groundwater Monitoring Plan HVAS High volume air samplers LGA Local Government Area LMP Landscape Management Plan MCP Mine Closure Plan MDG Mining Design Guideline MIA Mining Infrastructure Area ML Megalitre MOP Mining Operations Plan MSC Muswellbrook Shire Council Mtpa Million tonnes per annum N/A Not Applicable N/C Non-compliant NMP Noise Management Plan NOW NSW Officer of Water OCE Open Cut Examiner OEH NSW Office of Environment and Heritage PA Project Approval PARSONS BRINCKERHOFF 2172813A/PR 0665 Page vii

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 CHPP Coal Handling and Preparation Plant RMS Roads and Maritime Services ROM Run of mine ROMP Rehabilitation and Offset Management Plan SCMP Spontaneous Combustion Management Plan SGWRP Surface and Ground Water Response Plan SHE Safety, Health and Environment SMP Spontaneous Management Plan SOC Statement of Commitments SWMMP Surface Water Management and Monitoring Plan TEOM Tapered Element Oscillating Microbalance TSP Total suspended particles TSS Total suspended solids WMP Water Management Plan Page viii 2172813A/PR 0665 PARSONS BRINCKERHOFF

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 1. Introduction Anglo American (Drayton Management) Pty Ltd (Drayton Coal) commissioned Parsons Brinckerhoff Australia Pty Ltd to conduct an independent environmental compliance audit of the Drayton Mine and Antiene Rail Spur. The audit was conducted under the direction of the NSW Department of Planning and Infrastructure (DPI) in accordance with the current project approval for the Drayton Mine (PA 06 0202, the approval) and the development application for the Drayton Rail Loop and Antiene Rail Spur (DA 106-04-00, the consent). 1.1 Drayton Mine Drayton Coal mine (the Project) is an open cut mine located between Muswellbrook and Singleton in the Hunter Valley, New South Wales. Drayton Coal is wholly owned by Anglo American and joint venture partners NCE Australia, Mitsui Coal Holdings, Daesung Australia and Hyundai Australia. The mine is managed by Anglo American. Drayton Coal mine, operating since 1983, currently produces approximately five million tonnes of thermal coal annually. 1.1.1 Project Approval 06 0202 Condition 6, Schedule 5 of the approval requires an independent environmental audit of the Drayton Mine to be undertaken within two years of the approval (February 2010) and every three years thereafter (or as otherwise directed by DPI). Specifically, Condition 6, Schedule 5 requires the audit to: a) be conducted by a suitably qualified, experienced, and independent team of experts whose appointment has been endorsed by the Director-General; b) assess the environmental performance of the project, and its effects on the surrounding environment; c) assess whether the project is complying with the relevant standards, performance measures, and statutory requirements; d) review the adequacy of any strategy/plan/program required under this approval; and, if necessary, e) recommend measures or actions to improve the environmental performance of the project, and/or any strategy/plan/program required under this approval. DPI was consulted by Drayton Coal prior to the audit and the following additional requirements were specified by the Department: The audit team should include a spontaneous combustion specialist who can review Drayton Coal’s Spontaneous Combustion Management Plan and recommend improvements in Drayton Coal’s spontaneous combustion management. PARSONS BRINCKERHOFF 2172813A/PR 0665 Page 1

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 The audit team should include a rehabilitation specialist who can review Drayton Coal’s Rehabilitation and Offset Management Plan and recommend improvements in Drayton Coal’s rehabilitation management. The audit team should include an air quality specialist who can review Drayton Coal’s Air Quality Management Plan and recommend improvements in Drayton Coal’s dust management. DPI also supplied a required audit methodology which is addressed in Section 2.1. Drayton Coal also contacted other relevant agencies prior to the audit. Agencies included: NSW Office of Environment and Heritage (OEH). NSW Department of Trade and Investment, Regional Infrastructure and Services (DTIRIS). NSW Office of Water (NOW). Muswellbrook Shire Council (MSC). Of the abovementioned groups, only DTIRIS and NOW provided responses: NOW requested that the audit assess the nature and metering of the licensable taking of water in the mining operation. DTIRIS requested that the audit address: Management and performance in accordance with the required Spontaneous Combustion Management Plan. Management and rehabilitation performance of Drayton's biodiversity offset areas. DTIRIS’ additional requirements are consistent with DPI’s requirements. 1.2 Drayton Rail Loop and Antiene Rail Spur Drayton Coal Pty Ltd and Mt Arthur Coal developed the Antiene Joint User Rail Facility, located on the northern boundary of the Drayton Mine. The facility incorporates the existing Antiene Rail Spur, Drayton Rail Loading Facility and a Rail Loading Facility for Mt Arthur Coal. The facility is used to transport coal from the Drayton and Mt Arthur mines. The Drayton Rail Loading Facility and Antiene Rail Spur are wholly owned by Drayton Coal. The Antiene Joint User Rail Facility provides Drayton Coal with the capacity to transport up to 7 megatonnes per annum (Mtpa) of coal from the loop, and use the Antiene Rail Spur up to a limit of 20 Mtpa (although Mt Arthur Coal’s equivalent consent regarding use of the spur has since been suspended). Page 2 2172813A/PR 0665 PARSONS BRINCKERHOFF

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 1.2.1 Development Application 106-04-00 Development Application 106-04-00 (the Drayton Rail Loop and Antiene Rail Spur approval) applies to the operation of rail loading and transport operations at the Antiene and Drayton rail lines. Condition 7.1, Schedule 2 of the consent requires an independent environmental audit of the Drayton Rail loop operation and Antiene rail spur to be undertaken every three years thereafter (or as otherwise directed by DPI). Specifically, Condition 7.1, Schedule 2 requires the audit to: 1.3 a) assess compliance with the requirements of the consent, licences and approvals b) assess the development against the predictions made in the EIS c) review the effectiveness of the environmental management of the coal transportation operations, including any mitigation works; d) be carried out at the Applicant’s expense e) be conducted by a duly qualified independent person or team approved by the Director-General in consultation with Muswellbrook Shire Council (MSC). Structure of this audit report This report contains the following sections: Section 1: Introduction – An overview of the Drayton Mine and the background to this audit. Section 2: Audit process – A detailed description of the audit process and scope. Section 3: Agency consultation – An overview of the outcomes from consultation with relevant agencies during the audit. Section 4: Audit findings – An overview of the findings of the audit for PA 06 0202, including detailed descriptions of any non-compliance identified. Section 5: Audit findings – An overview of the findings of the audit for DA 106-04-00, including detailed descriptions of any non-compliance identified. Section 6: Evaluation of management plans – A critical review of the environmental management plans required under the approval. Section 7: Environmental performance – A discussion of observations made during the audit and site inspections relating to the environmental performance of Drayton Coal. This includes a review of the environmental protection licences, statement of commitments, predictions made in the relevant environmental assessments, mining leases and the annual environmental management reports. Section 8: Summary of audit findings – A summary of all non-compliances and opportunities for improvement with their associated recommendations for improvement. PARSONS BRINCKERHOFF 2172813A/PR 0665 Page 3

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 Section 9: References – A list of applicable literature referenced during the review of the environmental management plans. Appendix 1: PA 06 0202 checklist – A detailed checklist of PA 06 0202 which reviews each compliance condition applicable to the project. Appendix 2: DA 106-04-00 checklist – A detailed checklist of DA 106-04-00 which reviews each compliance condition applicable to the project. Appendix 3: Audit documents – A list of the documents obtained from Drayton Coal for the purposes of this audit. Appendix 4: Site photographs – Photographs of key site features referred to in this report. Appendix 5: Agency consultation log – A register of agency consultation undertaken as part of the audit. Appendix 6: Audit team curriculum vitae – Provision of relevant skills and experience of the audit team (refer to Section 2.2). Page 4 2172813A/PR 0665 PARSONS BRINCKERHOFF

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 2. Audit process 2.1 Audit scope and methodology The audit was undertaken according to AS/NZS ISO 19011:2003 – Guidelines for Quality and/or Environmental Management Systems Auditing in order to meet the requirements outlined in Condition 8, Schedule 5 of the approval (refer to Section 1.1.1 and 1.2.1) and the additional requirements provided by DPI and other agencies. The audit was conducted in accordance with the required methodology as provided to Drayton Coal on 2 October 2012. Table 2.1 provides a summary of the required methodology and references to the section of the report where each component is addressed. Table 2.1 Required audit methodology Required assessment How it was assessed Reference “All conditions of consent are to be audited” All conditions from PA 06 0202 and DA 106-04-00 were addressed in the audit interview Refer Appendices 1 and 2 for responses to all requirements. Refer to Sections 4 and 5 for a summary of non-compliant findings. Refer to Section 8 for a summary of all audit findings. “The condition numbers must be included in the report” All conditions are numbered. Refer Appendices 1 and 2 for responses to all requirements. Refer to Sections 4 and 5 for a summary of non-compliant findings. Refer to Section 8 for a summary of all audit findings. “The audit must be sequential (.e.g. all development consent requirements, then EPL, then Mining Lease)” Sections 4 and 5 address approval and consent conditions. Section 6 addresses environmental management plans. Section 7 addresses environmental performance (site inspection, performance against environmental assessments, EPL, AMER, statement of commitments, mining lease). Section 8 provides a summary of findings. Refer to Sections 4-8. Section 6 addresses environmental management plans. Refer to Section 6. Conditions of consent Management plans “The commitments in management plans have been implemented” PARSONS BRINCKERHOFF 2172813A/PR 0665 Page 5

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 Required assessment How it was assessed Reference Requirements of other relevant environmental legislation (where specified by consent) “Environmental Protection Licence conditions” Section 7 addresses environmental performance (site inspection, performance against environmental assessments, EPL, AEMR, statement of commitments, mining lease). Refer to Section 7. “Environmental aspects of the Mining Lease” Section 7 addresses environmental performance (site inspection, performance against environmental assessments, EPL, AEMR, statement of commitments, mining lease). Refer to Section 7. EA/EIS or SEE predictions and commitments “This will include but not be limited to items such as mining phase, dump heights, landform, noise attenuation etc.” Section 7 addresses environmental performance (site inspection, performance against environmental assessments, EPL, AEMR, statement of commitments, mining lease). Refer to Section 7. Section 7 addresses environmental performance (site inspection, performance against environmental assessments, EPL, AEMR, statement of commitments, mining lease). Refer to Section 7. It was determined that the approval and consent limits match environmental assessment predictions; therefore these were addressed in the assessment of the conditions. Refer Appendices 1 and 2 for responses to all requirements. Refer to Sections 4 and 5 for a summary of non-compliant findings. Refer to Section 8 for a summary of all audit findings. “Community complaints should be reviewed for any trends” Review of complaints was undertaken as part of the assessment for the annual reporting. Refer to Section 7. “Identifying the source of an established trend” See above. See above. “Is additional monitoring required for identified trends” See above. See above. Statement/s of commitments “The commitments made have been implemented/complied with” Monitoring results and trends “Including against regulatory limits and EA/EIS/SEE predictions” Community complaints Page 6 2172813A/PR 0665 PARSONS BRINCKERHOFF

Independent Environmental Compliance Audit - Drayton Coal - Project Approval 06 0202 and Development Application 106-04-00 Required assessment How it was assessed Reference “Including any letters, penalty notice prosecutions etc.” It was determined that this is a requirement under the project approval; therefore this was addressed in the assessment of the conditions. Refer Appendices 1 and 2 for responses to all requirements. Refer to Sections 4 and 5 for a summary of non-compliant findings. Refer to Section 8 for a summary of all audit findings. “What was the outcome of the action?” See above. See above. “What was committed to following the regulatory action? Was it completed?” See above. See above. “Are recommendations required to prevent recurrence?” See above. See above. “Annual reviews are to be reviewed to provide the author with information as a basis for recommendation regarding ongoing environmental improvement.” Annual reviews are assessed as part of the assessment of approval conditions. Refer Appendices 1 and 2 for responses to all requirements. “As far as possible the audit should verify the validity of the annual review” See above. See above. Regulatory action Annual reviews Any other specific matter raised by relevant agencies or the Department “Ensure that all specific matters raised by relevant agencies or the Department are addressed.” Specific requirements raised by the DPI and other relevant agencies were addressed in this report. Refer to Sections 1.1.1 and 3. “Including opportunities to improve the environmental performance of the mine” Recommendations accompany all noncomplia

Environmental Compliance Audit - Drayton Coal - Project Approval 06_0202 and Development Application 106-04-00' Audit Report, 4 January 2013 (the Report) from certain information provided by Anglo American (Drayton Management) Pty Ltd (the Auditee) at the request of and exclusively for the use and benefit of the Auditee.