Water Stewardship

Approach

Kestrel understands the importance of a clean and reliable water supply within the Fitzroy River Basin. Our water stewardship approach acknowledges the shared needs and demands on water resources and the significance of responsibly managing water and collaborating with other users in the catchment. As a scarce and variable resource, we must provide for strong and transparent water governance, effective and efficient management of water at our operations. Managing water across the mine site in line with the rainfall conditions at the time requires Kestrel to delicately balance water recovery, use and storage.

2022 Outcomes

Kestrel’s total site water reduced to 3,268.26ML in 2022 with reductions across raw water, supplementary bore and dewatering usages. In 2022, Kestrel did not require any water from supplementary bores and reduced our raw water usage by 220ML, with usage being supplemented by output (permeate) from the reverse osmosis (RO) plants. Optimisation issues associated with the

RO plants was identified as one of the factors attributing Kestrel’s 175ML raw water increase in 2021 from 2020. To improve the metering and recording of mine water movements, Kestrel began work to install additional hardware to gain a better understanding of raw water use onsite as well as underground water make. Additionally, the RO feedwater was completely changed to goaf water, as it is more closely matched to the RO design specification. This resulted in an increased uptime in 2022 due to switching feed water source that more closely matched the RO Plant’s design specifications, with throughput rates remaining the same.

Kestrel’s raw water usage continued to decline in 2022 compared to same period in 2021 and 2020. A total of 657ML of raw water was used in 2022 at a rate of 116L per tonne of coal product. The 2022 result achieved a reduction of 45ML raw water used compared to 2020 (702ML) and 220ML less raw water usage to 2021 (877ML), equivalent to 25% reduction for the previous year.

The volume of water released in 2021 was minimal, but highlighted an

2022 Water Source Breakdown

opportunity to improve our release procedures. Kestrel worked with the regulator to agree on improved water release conditions, and in 2022 we streamlined our operational processes to allow the optimal volume of water to be released back into the environment, as and when natural flow conditions allow. Returning water of suitable quality back into the river system helps to maintain natural river flow, and prevent an excess of water being stored onsite.

During the 12-month period controlled water releases were utilised under optimal release conditions resulting in a total of 1,202ML of water released back into the natural environment. Throughout 2022 our monitoring and reporting standards were maintained in accordance with the requirements set out by the regulator, the Department of Environment and Science.

In 2022, Kestrel also commenced dredging the Rejects Return Water Dam. These works to reinstate the design storage capacity will continue into 2023.

The Year Ahead

In 2023, Kestrel propose to:

„ Continue investigating improvements to metering and recording of mine water movements.

3,268ML Total site water

8.9ML/D Average daily extraction

„ Assess optimisation of current reverse osmosis plant against new or additional infrastructure.

„ Finish de-silting the Rejects Return Water Dam and complete bathymetry survey to identify volume de-silted.

„ Pursuing options to further reduce raw water intake from Selma Weir.

„ Continue to optimise performance of the dry tailings disposal process.

Climate Change and Carbon Management

Approach

Kestrel recognises the challenges that climate change presents across human and natural systems. We are committed to supporting Australia’s carbon emission reduction targets, that align with the Paris Agreement, to limit the increase in global average temperatures to 2°C and transition to carbon neutrality by 2050.

We are in active dialogue with our customers to gain greater understanding of their own future ESG needs. This ensures Kestrel performs a valuable role in their ESG requirements by adapting to the changing landscape accordingly.

Kestrel reports under the National Greenhouse and Energy Reporting Scheme (NGERS) and Safeguard Mechanism legislation and has a good understanding of our current emissions. Through this understanding we recognise that climate change and the resulting need for carbon footprint reduction is one of our critical corporate risks. Climate Change Resilience is also identified as one of Kestrel’s 9 Material Topics in our ESG Strategy.

As an underground coal mine, the highest proportion of our carbon emissions (88%) are generated directly from the coal resource, while only 12% of emissions are attributable to diesel and electricity usage. This means that even major reductions in diesel or electricity consumption will have only a minor impact on our total carbon footprint.

Any major reduction in carbon footprint at Kestrel will need to occur through initiatives in reducing, re-using or mitigating our coal related gas emissions. Coal related gas at Kestrel includes:

1. Pre-drainage gas extraction: to reduce gas content in the seam ahead of mining, minimising risk of gas outburst or ignition. All predrainage gas is flared to convert methane to CO 2

2. Post-drainage gas extraction: to remove gas from overlying seams during longwall retreat. As much post-drainage gas as possible is flared to convert methane to CO 2

3. Vented-air methane (VAM): is gas extraction at very low concentrations from the mine working environment via the primary ventilation systems. VAM is our largest footprint as it is vented as methane and there is no viable technology currently available in Queensland to convert these low concentrations of methane to CO 2

Flaring methane and converting it to CO 2 significantly reduces carbon emissions as methane is 28 times more potent a greenhouse gas than CO 2. Kestrel has been undertaking pre-drainage and postdrainage flaring for some years, and is already achieving these reductions. At Kestrel, there is also an unavoidable factor of geology affecting the composition of our carbon footprint.

We are currently mining at depths of up to 450m below the surface as longwall operations proceed through the 400 panels and into the 500 panels. As the coal seam deepens, the total amount of gas increases and the composition of coal seam gas changes to a higher concentration of methane relative to CO 2. As a result of the unavoidable deepening of the coal seam, Kestrel’s carbon footprint will remain high for the next 5-7 years, before significantly reducing as mining progresses back into shallower sections of the coal seam where there is less gas and lower methane content.

To mitigate increasing gas levels as the mine progresses deeper, Kestrel commenced its first Underground In Seam (UIS) pre-drainage activities of the overlying Corvus coal seam to remove, capture and flare as much methane as possible to prevent it being lost directly to the environment in the ventilation air system. In addition, Kestrel has increased the intensity of gas drainage from previously mined areas to reduce inflow into existing mining areas.

Kestrel is focused on assessing opportunities to reduce our coal mine waste gas emissions. Our specific focus is to identify technology to allow conversion of VAM to CO 2, or to a usable methane concentration, that would provide the biggest single reduction in our carbon emissions.

While no obvious solution for VAM is currently available, Kestrel acknowledges it is our responsibility to work with national and international carbon reduction leaders, our local, state and commonwealth governments and our communities, to manage these emissions and realise a low-carbon economy for the well-being of future generations.

2022 Outcomes

In 2022, Kestrel explored a diverse range of innovative technology options to reduce our carbon footprint across all emission sources to act against climate change.

A high-level concept definition study was undertaken by an internationally recognised environmental engineering company for a range of coal mine waste gas carbon mitigation options. The purpose of this study was to assist Kestrel determine where to focus our more specific carbon reduction projects. The study assessed a range of criteria and assigned a stop-light ranking on each of eight (8) assessed options. These options are summarised in the table (below).

While the high-level concept study was underway, Kestrel continued to progress a number of other emission reduction options including:

„ A 3.2MW Absorption Chiller feasibility assessment at one of our coal mine waste gas drainage vents (VSA3).

„ Commenced discussions to partner with a Carbon Farming initiative across some or all of Kestrel’s agricultural land to generate Australian Carbon Credit Units (ACCUs).

„ Commenced assessing options with two separate providers around waste gas power supply stations (sizing between 5MW – 30MW).

„ Initiated discussions around the opportunity for a large renewable installation on Kestrel land – solar and wind.

„ Commenced discussions with Australian and international research and development organisations around VAM gas management options (either methane destruction, or methane concentration to useable limits).

By the end of 2022, Kestrel had determined to progress to feasibility stage the option for a coal mine waste gas power station, commencing with a trial 5MW facility, and progressing up to 25-30MW if the initial project is successful.

Further assessment of the Carbon Farming and VAM management initiatives will continue into 2023.

The Year Ahead

In 2023, Kestrel propose to:

„ Finalise feasibility, seek approvals and commence installation of an initial 5MW coal mine waste gas power station, with potential to upgrade to 25-30MW in future.

„ As a high priority, continue to actively seek opportunities and develop partnerships with relevant research and development organisations, to reduce VAM carbon emissions.

„ Evaluate opportunity to replace grid powered ventilaton and cooling systems with gas generation systems utilising coal mine waste gas.

„ Confirm opportunity for Carbon Farming, and develop implementation plan if viable.

„ Develop a Decarbonisation Plan as part of our ESG Strategy, that provides a Life of Mine vision and options implementation plan, for ongoing decarbonisation to meet both legislation and expectation.