6 SBA Britmindo Report 201012 SBA Project

PT SUMBER BARA ABADI
SEBULU COAL PROJECT
EAST KALIMANTAN
INSITU RESOURCES AND RESERVES REPORT

FINAL REPORT

DECEMBER 2010

PT Britmindo
Jl. Kemang Timur 60 A, Jakarta, Indonesia
www.britmindo.com
42/RP/XII/2010
PT Sumber Bara Abadi
Insitu Resources and Reserves Report

EXECUTIVE SUMMARY
PT Britmindo (Britmindo) has been commissioned by PT Sumber Bara Abadi (SBA) to
complete an independent estimate of the Coal Resources and Reserves within the mining
concessions of the coal deposit situated in Sebulu, East Kalimantan, Indonesia.
As part of the services, Britmindo has prepared this Report which encompasses the
following key areas:

Geology
The SBA project area can be considered as two separate blocks in accordance with the
geological formation. Both of blocks areas can be characterized by a high degree of
structural complexity, large numbers of coal seams on southern block‐01 (Pamaluan
Formation), Block‐2 characterized by Pulaubalang formation, generally thin coal seams, and
low dip degree.
Exploration was concentrated in the Southern block of the concession.

Coal Quality
The coal both in Southern Block‐1 and Block‐2 areas is known to be bituminous coal,
moderate to low ash, with medium to high energy content. Although in Block‐2 there is a
high sulphur content (2,2% – 3%), because of the high CV, the coal is very attractive as a
blending coal.

Geological Model
A review and validation of the existing exploration data was undertaken. This data was then
used as base information for geological model generation.
A geological model was generated using Mincom’s MineScape software and was used as a
basis for Resources and Reserves Estimation.

Resources
Total Resources from Blocks 1 and 2, which have been estimated to maximum depth of
200m, are 9,555,000 tonnes Measured and 2,717,000 tonnes Indicated which equates to
total Measured and Indicated Resource of 12,273,000 tonnes. An additional resource of
2,223,000 tonnes has also been estimated and classified as Inferred.

Final Pit Design
There are no geotechnical recommendations available and overall slopes of 45 degrees
were applied in all designs.
Access ramps will be constructed on the low wall through the basal seam floor with the
location based on the locations of the out of pit waste dump and coal haul road.

42/RP/XII/2010 Page 2 of 23

Reserves
Total Reserves of 2,810,000 tonnes from Block 1 and 2 were estimated at an average strip
ratio of 20.1 bcm/tonne, and total reserves of 3,655,000 tonnes at an average strip ratio of
25:1 bcm/tonne.

Mine Planning
The deposit will be exploited using open cut mining methods. Initial mining will develop a
“box cut’ with the overburden placed in out of pit dumps. Overburden from the progressive
mining will then be backfilled into the following void once coal mining is completed.
The detail mine development strategies are contained in Section 7 of this study.

Capital and Operating Cost
The estimated capital cost to develop this concession is US$14,625,000.
The estimated operating costs are US$63.00 per tonne FOBT Vessel using a strip ratio 20:1,
and US$73.50 per tonne FOBT Vessel using a strip ratio 25:1. These estimates exclude
private royalties and 10% Indonesian VAT.

Recommendations
Key findings and recommendations are contained in Section 8 of this study.

Disclaimer
This report has been prepared by Britmindo for the sole use of SBA. The assessments and
assumptions stated in this report have been prepared in a professional manner and comply
with accepted geological and engineering evaluations of coal deposits. The assumptions are
made solely on the data supplied and no verification of the data has been undertaken. It is
therefore acknowledged that, at best, this is an estimation of resources at the various
locations and as such this report should not be used as the basis for any commercial
arrangements without further verification of coal potential, using acceptable and verifiable
methods of determination.

The contents of the report are confidential and are to be used only by SBA, its officers and
staff. Use of any sections of this report or any data contained therein by any third party is
prohibited unless authorized directly by SBA, its nominated representatives or the authors.
Britmindo accepts no liability for any unauthorized use of all or any sections of this report by
third parties.


LIST OF CONTENTS

1 INTRODUCTION ..................................................................................................................... 5
1.1 Project Location .................................................................................................................................... 5
1.2 Land Use Status ..................................................................................................................................... 6
2 GEOLOGY ............................................................................................................................... 7
2.1 Regional Geology .................................................................................................................................. 7
2.2 Tectonic and Structures ........................................................................................................................ 8
2.3 Coal Occurence ..................................................................................................................................... 8
2.4 Exploration ............................................................................................................................................ 8
2.5 Geological Model Source Data .............................................................................................................. 8
2.6 Geological Modeling ............................................................................................................................. 9
2.7 Coal Seams .......................................................................................................................................... 10
2.8 Seam Structure ................................................................................................................................... 12
3 COAL QUALITY ...................................................................................................................... 13
4 COAL RESOURCES ................................................................................................................. 15
4.1 Resources Estimation .......................................................................................................................... 16
5 CAPITAL AND OPERATING COST ............................................................................................ 18
5.1 Capital Cost ......................................................................................................................................... 18
5.2 Operating Cost .................................................................................................................................... 18
6 MINE DESIGN AND RESERVES ................................................................................................ 19
6.1 Final Pit Design .................................................................................................................................... 19
6.2 Reserves Estimation ............................................................................................................................ 19
7 MINE PLANNING ................................................................................................................... 21
8 FINDINGS AND RECOMMENDATIONS ................................................................................... 22
9 APPENDIX ‐ PLANS OF SBA COAL PROJECT ............................................................................ 23

LIST OF TABLES

Table 2‐1 List of Data .......................................................................................................................................... 9
Table 2‐2 Seam Thickness Statistic Block‐01 ..................................................................................................... 11
Table 2‐3 Seam Thickness Statistic Block‐02 ..................................................................................................... 11
Table 3‐1 Coal Analysis Results Block‐01 ........................................................................................................... 13
Table 4‐1 Resources Estimate Summary Block 1 ............................................................................................... 16
Table 4‐2 Resources Estimate Summary Block 2 ............................................................................................... 17
Table 6‐1 Reserves Summary Block 1 ................................................................................................................ 20
Table 6‐2 Reserves Summary Block 2 ................................................................................................................ 20

LIST OF FIGURES

Figure 1‐1 Concession Location ........................................................................................................................... 6
Figure 2‐1 Regional Geology of SBA Concession Area .......................................................................................... 7


1 INTRODUCTION
PT Britmindo (Britmindo) has been commissioned by PT Sumber Bara Abadi (SBA) to
complete an independent estimate of the Coal Resources and Reserves within the mining
concessions of the coal deposit situated in Sebulu, East Kalimantan, Indonesia.

As part of the services, Britmindo has prepared this Report which encompasses the
following key areas:

1. Coal Geology
2. Coal Quality
3. Resources Estimation
4. Capital & Operating Cost Evaluation
5. Mine Design & Reserves Assessment
6. Mine Planning Strategy

As part of the Services, Britmindo undertook a site visit in August 2010 to verify coal
occurrences in the area.

1.1 PROJECT LOCATION
The SBA concession is situated approximately 130 km drive from Balikpapan and is located
in the Kecamatan of Sebulu, District of Kutai Kartanegara, East Kalimantan.

The SBA area can be accessed by scheduled flights from Jakarta to Balikpapan and
thereafter to the concession area by light vehicle with a travel time to the concession area,
through Tenggarong, of approximately 5 hours.

The concession location map is shown as Figure 1.1 below.


Project Concession

Figure 1‐1 Concession Location

1.2 LAND USE STATUS
The geomorphology of the concession area is relatively hilly, which is influenced by the
lithology from Pamaluan and Pulaubalang Formation and comprises quartz sandstone,
siltstone and coal deposits.

The concession area is farmed through locally owned community developments with mostly
rice cultivation and bamboo plantation.

2 GEOLOGY
2.1 REGIONAL GEOLOGY
Based on the Regional Geology information, published by the Directorate General of
Geology and Mineral Resources, the Concession area is included in the Samarinda Sheet
Regional Geology Map.

Based on the regional geological map, the concession covers 3 sedimentary formations,
where the identified coal resources occur in the Pamaluan Formation and Pulaubalang
Formation. These are predominantly quartz sandstone intercalation with claystone, shale,
limestone, and siltstone. Pulaubalang Formation is formed in middle to late Miocene,
Pamaluan formation is formed in Early Miocene and its upper part interfingers with the
Bebuluh Formation. The Regional Geology is shown in Figure 2‐1 below.

Figure 2‐1 Regional Geology of SBA Concession Area


2.2 TECTONIC AND STRUCTURES
The main structural element in the concession is part of the anticline fold and fault system
of Samarinda, with fold axes generally trending northeast‐ southwest, showing steeper dips
at their southeastern flanks. They are within the older sedimentary units such us Pamaluan
and Bebuluh formations are strongly folded with dips of about 40‐75o. There are generally
three types of faults: trust, normal, and strike slip faults which are activated in Late Miocene
Time and normal fault occurred during Pliocene Time.

2.3 COAL OCCURENCE
From drilling results, at least twenty eight (28) coal seams including 1 seam split were
identified in Block‐1 and three (3) coal seams in Block‐2. Coal thicknesses in Block ‐1 range
from 0.30m to 2.1 m, whilst in Block‐2 seam thickness range from 0.30m – 0.55 m.

From field mapping results twenty three (23) coal outcrops were identified and observed in
Block 1 and three (3) identified in Block 2. It appears that the areas contain different
stratigraphic sequences where coal in Block 1 is part of the Pemaluan Formation and coal in
Block 2 is part of the Pulaubalang Formation.

2.4 EXPLORATION
SBA commenced initial coal exploration in the concession area between July 2009 and
September 2010. SBA exploration activities included coal outcrop mapping, detailed drilling,
down‐hole geophysical logging, coal quality analysis and topographic surveying. The open
and cored boreholes were drilled to depths ranging from 30m to 150m.

Boreholes were drilled by rotary touch coring and open holes methods and then
geophysically logged to prove seam depths, thicknesses and as a check on core recoveries.

2.5 GEOLOGICAL MODEL SOURCE DATA
All data utilized in the study has been provided by SBA. The data was derived as the result of
exploration work.

The source data was reviewed and prepared for further processing and geological modeling
as described below.

• The basic drill holes information is manually inputted to an Excel spreadsheet, which is
currently used as the geological database. For each hole, this records the collar details
and lithology.
• Lithology intersections were recorded for coal interval only.
• Base of lithology weathering was recorded in drill holes data based on drill log or
interpreted as 2 m depth below collar.

• Initial seam correlation was undertaken with the aid of the geophysical logs.
• The quality information was manually inputted to an Excel spreadsheet. For each
sample, this records the interval details and laboratory analysis result.
• Topography is based on ground survey data that just covers Block‐2 of the SBA
concession area.

Following the review of the data, Britmindo did not find any fatal error in the database. The
drill hole data is generally consistent with the geophysical log data. Minor changes were
made in the database for correlation purposes. The data covers the following:

Table 2‐1 List of Data
No Type of Data Remarks

1 Touch Core Hole 206 holes
2 Out crop 29 data
3 Drill hole Geophysical Log Not available in several drill holes
4 Coal Quality 80 Holes
5 Topography Surveyed by Total Station Instrument

A total of 206 holes were drilled in the southern blocks of the concession, including
boreholes on Block‐01 and Block‐2. Of these holes a small percentage were barren. This is
due to delays in obtaining field data and the structural complexity of the area. In the order
of 95% of all holes have been logged using down‐hole geophysics. Logging data
comprised gamma, density and calliper. The drill holes were approximately 100m to 200 m
spacing, resulting in reasonably well established seam continuation and correlation along
strike and down‐dip.

2.6 GEOLOGICAL MODELING
A geological model was generated for Resources and Reserves estimation. The Mincom
mine planning software was used for generating the computerized geological model, and
the stages undertaken are summarized below:

1. A first pass geological modeling exercise and further validation of the drill holes data was
undertaken, covering the following.
a. Topography has been modeled as a three dimensional terrain surface.
b. Schematic rule on modeling geology has been distinguished on Block‐1 and Block‐2
in accordance with geological formation.
c. Base of lithology weathering has been modeled as a surface below the topographical
surface. All coal seams are cut off against this base of weathering.
d. Coal seams were modeled as a single conformable sequence underlying the
weathering zone.
e. Quality analysis from core holes was modeled based on core sample results.

f. Further seam correlation was undertaken with the aid of cross sections that were
generated from the “First Pass” model.
2. As a follow up to the valid seam correlation, a final model was then generated to be
used as a base model in Resources and Reserves estimation.

Model Parameters
The parameters used to build the geological model are summarized below.

No Parameter Remarks
1 Topography Model Cell Size 25m
2 Geology Model Cell Size 25m
3 Modeling Option All
4 Interpolator Search Radius 10000m
5 Model Extrapolation Distance 3000m
6 Interpolator ‐ Thickness Planar
7 Interpolator – Surface FEM
8 Interpolator ‐ Trend Planar
9 Trend Surface Yes (using grid surface)
10 Partings No
11 Faults Yes (1 trust fault)
12 Limit Polygons None
13 Survey Data None

2.7 COAL SEAMS
The exploration programme demonstrated the presence of twenty eight (28) coal seams
including one seam split in Block‐01, and three (3) coal seams in Block‐02.

There are two different stratigraphic sequences occuring within the SBA area which are
Pemaluan Formation in Block 1 and Pulau Balng Formation in Block 2. The seam
nomenclature has been established such that seams in the Block‐1 area have been given a
“PMA” prefix and seams in the Block‐2 area have a “PB” prefix.

The seams thicknesses summaries are shown in Table 2‐2 below.

42/RP/XII/2010 Page 10 of 23

Table 2‐2 Seam Thickness Statistic Block‐01
No. Of Thickness (m)
Seam
Data Avg. Min. Max.
PMA11 3 0.47 0.40 0.55
PMA10 1 0.30 0.30 0.30
PMA9 2 1.80 1.00 2.60
PMA8 1 2.30 2.30 2.30
PMA7 6 0.48 0.25 0.80
PMA6 7 0.43 0.10 1.10
PMA5 7 0.51 0.30 0.80
PMA4 12 1.09 0.30 2.15
PMA3 14 0.80 0.10 1.20
PMA2 16 0.69 0.16 1.30
PMA1 16 0.71 0.07 1.30
PMA 14 0.74 0.23 1.46
PMB 9 0.58 0.09 1.70
PMC 16 0.87 0.10 1.85
PMD 19 0.66 0.05 1.60
PME 17 0.41 0.09 1.25
PMF 19 0.33 0.10 0.60
PMG 17 0.44 0.10 0.98
PMH 23 2.04 0.25 2.80
PMH01 1 0.50 0.50 0.50
PMIU 5 0.38 0.35 0.40
PMI 9 0.30 0.13 0.45
PMIL 5 0.30 0.19 0.40
PMJ 12 0.41 0.25 0.60
PMK 8 0.45 0.20 0.70
PML 3 0.31 0.25 0.40
PMM 5 0.45 0.35 0.50
PMN 5 0.36 0.27 0.45
PMO 1 0.45 0.45 0.45

Table 2‐3 Seam Thickness Statistic Block‐02
No. Of Thickness (m)
Seam
Data Avg. Min. Max.
PBA 25 0.54 0.30 1.00
PBB 14 0.33 0.15 0.50
PBC 47 0.52 0.40 0.85

42/RP/XII/2010 Page 11 of 23

2.8 SEAM STRUCTURE
SBA project area exhibits considerable structural complexity especially in Block‐1. Faulting
with a southwest‐northeast trend and conjugate sets are present in the area. In general,
the steepness of dip decreases eastward. The geology of this coal‐bearing formation is
strongly influenced by intense local tectonic deformations in the form of faulting and
folding. Large scale faulting (up to 50m throw) has been inferred by current drilling
activities. It is expected that there are more faults in the deposit areas as current
interpretation has only picked up large scale faults or faults which have intersected holes
where the sequence is readily identifiable and spurious interburdens or missing seams were
noted. Accurate modeling of these faults will only be possible with closer spaced drilling
and stratigraphic analysis to determine fault throw, extents and styles

The deposit in Block‐1 has relatively southwest‐northeast trend strike line with moderate to
high dipping, being 35o‐70o.
Block‐2 is characterized by a low dipping structure being 15 o ‐ 25o.

The typical structure of the seams is shown in Plan A‐1 in Appendix A.
A typical cross section of the deposit is shown in Plan A‐2 in Appendix A.

42/RP/XII/2010 Page 12 of 23

3 COAL QUALITY
Based on the analyses results, coal quality in SBA concession is considered as medium rank
coal with CV ranging from 5800kcal/kg to 7700 kcal/kg (adb basis).

A total of 123 core samples of coal from Block‐1 and Block‐2 have been sent and analyzed at
an independent laboratory, PT Geoservices in Balikpapan meeting ASTM standards.

The test work was undertaken included Total Moisture (TM), Proximate Analysis (Air Dried
Moisture, Ash, Volatile Matter and Fixed Carbon), Total Sulphur (TS), Calorific Value (CV), Relative
Density and Hard Grindability Index (HGI). The average existing quality for the same is shown
in Table 3‐1below.

Table 3‐1 Coal Analysis Results Block‐01
CV
TM IM ASH VM FC TS kcal/kg
SEAM RD HGI
% ar % adb % adb % adb % adb % adb adb
PMA7 6.74 4.26 2.79 49.77 43.18 0.44 7649 1.26 43
PMA6 9.60 5.56 3.10 39.91 51.43 0.51 7269 1.32
PMA5 7.10 4.15 5.11 48.30 42.44 0.52 7371 1.28
PMA4 11.89 4.85 5.49 43.10 46.55 0.69 7145 1.35
PMA3 10.15 4.54 6.24 43.51 45.71 0.37 7206 1.38
PMA2 10.26 4.41 7.72 42.44 45.43 1.77 7024 1.33 51
PMA1 7.88 4.28 7.03 41.79 46.90 0.31 7100 1.32
PMA 12.53 4.50 8.30 42.02 45.18 0.38 7030 1.36 50
PMC 8.01 4.16 4.35 43.15 48.34 0.41 7448 1.29
PMD 9.33 3.90 6.05 43.34 46.71 0.32 7328 1.31 46
PME 5.90 3.66 5.03 44.32 46.99 0.26 7494 1.29 43
PMF 8.34 3.50 4.94 44.63 46.93 0.24 7563 1.28
PMG 8.76 3.15 15.39 40.41 41.05 2.22 6615 1.38 46
PMH 7.81 3.74 4.88 42.58 48.80 0.87 7284 1.30 51
PMH01 9.31 2.68 8.36 47.83 41.13 3.53 7382 1.31
PMIU 7.53 2.97 10.73 42.81 43.48 0.36 7092 1.32
PMIL 9.21 2.99 6.15 43.49 47.37 0.41 7435 1.31
PMJ 10.63 3.09 8.55 42.56 45.80 2.10 7172 1.33
PMK 9.94 3.27 13.73 38.49 44.51 0.50 6676 1.37
PML 10.88 3.52 24.09 33.79 38.60 2.52 5831 1.50
PMM 11.63 2.86 12.83 42.43 41.88 1.63 6967 1.36
PMN 9.70 2.91 14.03 39.28 43.78 2.67 6726 1.38
PMO 6.39 3.30 4.53 42.96 49.21 1.55 7587 1.29

42/RP/XII/2010 Page 13 of 23

Table 3‐2 Coal Analysis Results Block‐02
CV
TM IM ASH VM FC TS kcal/kg
SEAM RD HGI
% ar % adb % adb % adb % adb % adb adb
PBA 5.51 3.34 9.26 44.45 42.95 3.26 7101 1.30 46
PBB 7.19 3.64 5.82 43.56 46.98 2.22 7257 1.32 48
PBC 6.38 3.63 4.66 42.04 45.67 2.76 7065 1.34 49

42/RP/XII/2010 Page 14 of 23

4 COAL RESOURCES
Britmindo has undertaken a resource estimation of the SBA deposit based on three levels of
confidence as described below:

Measured Coal Resource is that part of the total Coal Resources for which the quantity and
quality can be estimated with a high level of confidence, based on information gathered
from Points of Observation.
Indicated Coal Resource is that part of the total Coal Resources for which the quantity and
quality can be estimated with a reasonable level of confidence, based on information
gathered from Points of Observation.

Inferred Coal Resource is that part of the total Coal Resources for which the quantity and
quality can only be estimated with a low level of confidence, based on information gathered
from Points of Observation.
The Resources in the concession area have been evaluated using information gathered from
the Points of Observation.

The Points of Observation used to define the Coal Resources at SBA deposit are those open
drill holes and in which the coal seam has been cored. The distance radius of influence from
Points of Observations that are used in estimating the Resources are as follows:

• Measured ‐ 0m – 500m spacing (radius of influence 250m)
• Indicated ‐ 500m – 1,000m spacing (radius of influence 500m)
• Inferred ‐ 1,000m – 2,000m spacing (radius of influence 1,000m)
In determining the coal tonnages in each of the Resource categories, the following
parameters were used to estimate the Resources:

• No minimum thickness cut‐off for resource estimation.
• Coal relative density of 1.30 has been used to generate the tonnage.
• No quality cut‐offs have been used.
• Seam depth restriction is 200m.
42/RP/XII/2010 Page 15 of 23

4.1 RESOURCES ESTIMATION
Total Resources from Blocks 1 and 2 are estimated to a maximum depth of 200m as
9,555,000 tonnes Measured and 2,717,000 tonnes Indicated which equates to total
Measured and Indicated Resource of 12,273,000 tonnes. An additional resource of
2,223,000 tonnes has also been estimated and classified as Inferred. The Resources
estimate summaries are shown in Table 4‐1 below.

Table 4‐1 Resources Estimate Summary Block 1
COAL
DEPTH SEAM COAL (‘000t) Total (‘000t)
BLOCK 1 Measured Indicated Incr. Inferred
0 – 200m PMA11 168 130 297 216
PMA10 29 28 56 55
PMA9 51 50 100 159
PMA8 99 120 219 151
PMA7 23 ‐ 23 ‐
PMA6 44 2 46 17
PMA5 70 25 95 27
PMA4 84 ‐ 84 ‐
PMA3 186 1 187 ‐
PMA2 244 30 274 13
PMA1 297 1 298 ‐
PMA 399 300 699 18
PMB 221 27 247 ‐
PMC 282 8 289 ‐
PMD 376 15 391 ‐
PME 171 6 177 ‐
PMF 150 ‐ 150 ‐
PMG 210 1 211 ‐
PMH 1,221 20 1,242 ‐
PMI 307 17 324 ‐
PMJ 269 59 328 ‐
PMK 276 34 310 ‐
PML 74 12 86 ‐
PMM 182 31 213 7
PMN 170 36 206 9
PMO 17 5 22 ‐
Total 0 – 200m 5,620 956 6,576 672

42/RP/XII/2010 Page 16 of 23

Table 4‐2 Resources Estimate Summary Block 2
COAL
DEPTH SEAM COAL (‘000t) Total (‘000t)
BLOCK 2 Measured Indicated Incr. Inferred
0 – 200m PBA 1,391 633 2,024 479
PBB 366 240 606 132
PBC 2,178 889 3,067 939
Total 0 – 200m 3,936 1,761 5,697 1,551

The Resources of the SBA concession are considered as in‐situ tonnage as yet not compliant
to any acceptable standard. No adjustment has been made for moisture content.
42/RP/XII/2010 Page 17 of 23

5 CAPITAL AND OPERATING COST
5.1 CAPITAL COST
The estimated capital costs are showing below:

ITEM ESTIMATED COST (US$)
Contractor mobilization 1,500,000
Mine infrastructure
- offices 500,000
- camp 1,000,000
Coal Process Plant and stockpiles 2,500,000
Road construction
Re‐alignment 12.5km @US$250,000 per km 3,125,000
Re‐grading & widening 12.5km @US$ 50,000 per km 2,000,000
Allowance for 4 x river crossings included above

Port site earthworks, and product stockpiles 1,000,000
Barge loader, jetty and dolphins 2,000,000
Port administration offices and laboratory 1,000,000
TOTAL US$14,625,000

5.2 OPERATING COST
Below are the estimated operating costs for coal sale price US$90 and strip ratio 20:1.

ACTIVITY PARAMETER UNIT RATES US$ TOTAL COST US$
Overburden excavation SR 20:1 2.00 / bcm 40.00
Coal mining 2.50 / t 2.50
Coal processing
‐ ROM Stockpile and feed to plant 1.50 / t 1.50
‐ product coal and truck load out 0.50 / t 0.50
Coal hauling to port 25km 0.15 / t / km 3.75
Port stockpile and barge loading 1.50 / t 1.50
Barging to trans‐shipment point Avg. 200 km 0.02 / t / km 4.00
Ship loading (using ship grabs) 1.75 / t 1.75
Port charges 0.25 / t 0.25
Quality Control 0.20 / t 0.20
Site overheads 2.00 / t 2.00
Marketing overheads 0.25 / t 0.25
Reclamation 0.30 / t 0.30
Royalties 5% of selling price $90 4.50
TOTAL FOBT Vessel US$63.00

The estimated operating costs for coal sale price US$100 and strip ratio 25:1 is US$73.50 per
tonne FOBT Vessel. These estimates exclude private royalties and 10% Indonesian VAT.
42/RP/XII/2010 Page 18 of 23

6 MINE DESIGN AND RESERVES
Mine designs and reserves were generated based on the geological model and restricted to
average strip ratios of 20:1 and 25:1 based on analysis of pit optimizations.

6.1 FINAL PIT DESIGN
There is no geotechnical recommendation that can be applied to the designs and an overall
slope of 45 degrees was assumed.

Access ramps will be constructed on the low wall through the basal seam floor with the
location based on the locations of the out of pit waste dump and coal haul road.

The final pit dump design layouts are shown in Item B‐1 to B‐4 in Appendix B.

6.2 RESERVES ESTIMATION
Based on the generated pit designs, Reserves were calculated within each pit using the
following assumptions:

• Seams included in the Reserves in Block 1 are PMC, PMD, PME, PMF, PMG, PMH, PMM
and PMN.
• Seams included in the Reserves in Block 2 are PBA, PBB and PBC.
• A coal thickness of 0.20m has been used as the minimum cut‐off for reserves estimation.
• Partings less than 0.10m were included as coal interval.
• Mining losses of 0.05m from the top and 0.05m from the bottom of each seam have
been allowed.
• Mining dilution of 0.025m from the roof and 0.025m from the floor of each seam has
been allowed.
• Coal relative density of 1.30 has been used to generate the tonnage.

Total Reserves of 2,810,000 tonnes from Blocks 1 and 2 were identified at average strip
ratio of 20.1 bcm/tonne, and total Reserves of 3,655,000 tonnes were identified at average
strip ratio of 25:1 bcm/tonne. The Reserves summary is shown in Table 5‐1 below. It should
be noted that these Reserve figures is considered as Potential In‐situ Reserves.

42/RP/XII/2010 Page 19 of 23

Table 6‐1 Reserves Summary Block 1
Seam Coal Waste Strip

Option 1 (‘000 tonne) (‘000 bcm) Ratio
PMC 3 50 16.7
PMD 17 870 51.2
PME 25 780 31.2
PMF 52 2,765 53.2
PMG 43 2,015 46.9
PMH 660 9,720 14.7
PMM 10 300 30.0
PMN 15 205 13.7
Total 825 16,705 20.2
Option 2 (‘000 tonne) (‘000 bcm) Ratio
PMC 25 760 30.4
PMD 50 3,050 61.0
PME 40 1,960 49.0
PMF 75 4,760 63.5
PMG 67 3,265 48.7
PMH 758 11,720 15.5
PMM 12 495 41.3
PMN 18 255 14.2
Total 1,045 26,265 25.1

Table 6‐2 Reserves Summary Block 2

Option 1 (‘000 tonne) (‘000 Bcm) Ratio
PBA 1,470 30,075 20.5
PBB 410 7,575 18.5
PBC 105 2,185 20.8
Total 1,985 39,835 20.1
Option 2 (‘000 tonne) (‘000 Bcm) Ratio
PBA 2,035 53,185 26.1
PBB 445 8,465 19.0
PBC 130 3,340 25.7
Total 2,610 64,990 24.9

The above Reserve figures are considered as in‐situ tonnage. No moisture adjustment was
undertaken for product quantity (marketable tonnage) determination.
42/RP/XII/2010 Page 20 of 23

7 MINE PLANNING
The deposit will be exploited using open cut mining methods. Typically in Indonesia, mining
contractors are employed for the overburden and coal extraction with coal delivered to a
nominated stockpile. From there coal is processed by the mine owner who also manages the
transportation and sales. This operation is unlikely to be any different.

Initial mining will develop a “box cut’ with the overburden placed in out of pit dumps.
Overburden from the progressive mining will then be backfilled into the following void once
coal mining is completed. Haul distances for overburden are anticipated to be in the order
of 1 km. Typically, mines in this area are blasting up to approximately 80% of the
overburden which comprises sandstone, mudstone and shale.

By commencing in the southern area of the concession coal hauling from the pit will
transport the coal to a run of mine (ROM) stockpile close to the concession boundary where
the coal process plant will be located. A typical coal crushing plant comprising 2 stage rolls
crushers and radial stackers will provide a ‐50mm coal product which will be feed coal to a
product stockpile. No other beneficiation will be required. Total ROM and product stockpile
capacity should be capable of holding at least 2 weeks coal production.

The barge loading port is to be located on the Mahakam River approximately 25kms
kilometers to the south. An existing logging road will be used although realignment and
upgrading of approximately 50% will be required to reduce the distance, reduce grades and
provide a 10m wide running surface suitable for the 30 tonne rigid trucks used for coal
hauling. If the reserves can support the capital investment future consideration should be
given to the construction of an overland conveyor as this will reduce the operating cost of
transportation considerably.

Coal would be unloaded into a receiving hopper and stockpiled adjacent to the barge loader
for blending prior to barge loading. A reclaim facility will load 8000 tonne capacity coal
barges at a rate of minimum 1000 tonne per hour.

Besides a port office a laboratory will be built so that controls will be in place for quality
analysis and the management of spontaneous combustion.

The barges will transport the coal to the ship loading locations at Muara Jawa or Muara
Berau at the estuary of the Mahakam River a distance of 160kms or 250kms respectively. An
option may exist to use the Balikpapan Coal terminal but this is considered expensive due to
additional barging and high tariffs. Initially Handymax size vessels (up to 45,000 tonnes) with
ships gear would be loaded but a floating crane would be introduced with increased
tonnages.
42/RP/XII/2010 Page 21 of 23

8 FINDINGS AND RECOMMENDATIONS

The following recommendations are provided from the findings of the Report :

- there are positive indications from the coal seam contours that the Resources and
Reserves will increase with further exploration. This is because of the continuity of
coal seams outside of the exploration area.
- Additional topographical survey which prevents the conversion of Resources into
Reserves.
- The current reserve base will support the commencement of a mining operation of
up to 1 Mtpa whilst further exploration is undertaken to expand the Resource and
Reserve base,
- The upgrading of the haul road can commence concurrently with the opening of a
box cut at the mine. This will reduce the lead time for coal production and also
provide fill material if this is required for haul road construction.
- Upgrading of the coal process plant and barge loading port can be undertaken at this
time.
- It is estimated that coal production could be achieved within 4 months which
coincides with the dryer weather.
- This high calorific value coal is easily marketable and the excellent heating value will
off set the occasional occurrence of high Total Sulphur.
- There are no apparent impediments to an efficient mining and coal transportation
operation
42/RP/XII/2010 Page 22 of 23

9 APPENDIX ‐ PLANS OF SBA COAL PROJECT

PLAN DESCRIPTION
A ‐ 1 Borehole Position
A ‐ 2 Typical Geological Cross Section Block‐01
A ‐ 3 Typical Geological Cross Section Block‐02
A ‐ 4 Typical Seam Structure Block 1 (Seam PMH)
A ‐ 5 Typical Contour Floor Block 2 (Seam PBC)
A ‐ 6 Resources Area Map of Seam PMM
A ‐ 7 Resources Area Map of Seam PMC
A ‐ 8 Resources Area Map of Seam PMD
A ‐ 9 Resources Area Map of Seam PME
A ‐ 10 Resources Area Map of Seam PMF
A ‐ 11 Resources Area Map of Seam PMG
A ‐ 12 Resources Area Map of Seam PMH
A ‐ 13 Resources Area Map of Seam PBA
A ‐ 14 Resources Area Map of Seam PBB
A ‐ 15 Resources Area Map of Seam PBC
A ‐ 16 Pit Design Layout Block 1 Strip Ratio 20:1
A ‐ 20 Historical Indonesia Coal Price

42/RP/XII/2010 Page 23 of 23

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