appendix 6a bib independent qualified person s...

APPENDIX 6A – BIB INDEPENDENT QUALIFIED PERSON’S REPORTAND VALUATION

United Fiber System Ltd

PT Borneo Indobara Concession

Independent Qualified Persons Report

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HDR Salva HDR International, Inc.

www.hdrinc.com www.salvaresources.com

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United Fiber System Ltd PT Borneo Indobara Concession

Independent Qualified Persons Report Salva Resources Pty Ltd Level 11, 82 Eagle Street, Brisbane, QLD 4000, Australia PO Box 10791, Adelaide Street, Brisbane, QLD 4000, Australia Email: [email protected] Website: www.hdrinc.com

www.hdrsalva.com Phone: +61 (0) 7 3211 9911 Fax: +61 (0) 7 3221 5725

Effective Date: 31 July 2014

Independent Expert Person:

Manish Garg BEng (Hons), Master of Applied Finance MAusIMM, MAICD Director- Consulting / Partner, HDR Salva

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Table of Contents Executive Summary ............................................................................................. 12

1 Introduction ................................................................................................. 19

1.1 Scope ..................................................................................................................19

1.2 Data Sources ......................................................................................................19

1.2.1 Site Visit....................................................................................................19

1.3 Disclaimer and Warranty ....................................................................................20

1.4 Independent Competent Person and Expert Statement.....................................21

1.4.1 Statement of Independence .....................................................................21

2 Project Description ..................................................................................... 22

2.1 Property Description and Access .......................................................................22

2.2 Ownership and Concession ................................................................................24

2.3 Tenure ..........................................................................................................24

2.3.1 Tenure Status ...........................................................................................24

2.3.2 Forestry Status ........................................................................................25

3 Coal Resources & Reserves....................................................................... 27

3.1 Coal Resource ....................................................................................................27

3.1.1 Resource Classification ............................................................................27

3.2 Coal Resource Statement ..................................................................................28

3.3 Coal Reserves ....................................................................................................28

3.3.1 Estimation Methodology ...........................................................................28

3.4 Modifying Factors ...............................................................................................29

3.5 Reserves Classification ......................................................................................30

3.6 Statement of Coal Reserves ...............................................................................31

4 Mining Schedule ......................................................................................... 32

4.1 Mine Schedule...................................................................................................35

4.2 Mining Operations ............................................................................................35

4.2.1 Top Soil Removal .....................................................................................36

4.2.2 Drilling and Blasting ..................................................................................36

4.2.3 Waste Excavation .....................................................................................36

4.2.4 Coal Mining ..............................................................................................37

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4.2.5 Dewatering ...............................................................................................38

5 Coal Handling and Coal Logistics ............................................................. 39

5.1 Eastern Logistic Leg (SS, SN and KG Blocks) ..............................................40

5.1.1 KG Block...................................................................................................40

5.1.2 SS and SN Blocks ....................................................................................43

5.2 Western Logistic Leg (BS and PP Blocks) .....................................................44

5.2.1 BS Block ...................................................................................................44

5.2.2 PP Block ...................................................................................................44

6 Environment and Community Relations ................................................... 46

6.1 Environmental Aspects .......................................................................................46

6.1.1 Water Run-off from site ............................................................................46

6.1.2 Noise and Dust .........................................................................................46

6.1.3 Rehabilitation ............................................................................................46

6.1.4 Hydrocarbon Management .......................................................................47

6.2 Social Aspects ..................................................................................................47

6.2.1 Economy...................................................................................................48

6.2.2 Education .................................................................................................48

6.2.3 Health .......................................................................................................48

6.3 AMDAL ...............................................................................................................48

7 Valuation ..................................................................................................... 49

7.1 Valuation Approaches ........................................................................................49

7.2 Valuation Approach for Assessing the BIB Mine ................................................49

8 Economic Parameters ................................................................................ 50

8.1 Royalty and Local Government Fees .................................................................50

8.2 Inflation Outlook ..................................................................................................51

8.3 Corporate Income Tax ........................................................................................51

8.4 Depreciation and Amortisation ...........................................................................52

8.5 Working Capital ..................................................................................................52

8.6 Carried Forward Tax Losses ..............................................................................52

8.7 Value Added Tax ................................................................................................52

8.8 Weightage Average Cost of Capital (WACC) .....................................................53

9 Market Analysis and Coal Prices ............................................................... 54

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9.1 Global Outlook ....................................................................................................54

9.2 Thermal Coal Demand .......................................................................................54

9.3 Thermal Coal Supply ..........................................................................................56

9.4 Thermal Coal Benchmark Price Forecast ..........................................................57

9.5 Coal Price Used for Project Assessment ...........................................................58

9.5.1 High Rank Coal Price Forecast ................................................................58

9.5.2 Low Rank Coal Price Forecast .................................................................59

10 Capital Cost ................................................................................................. 61

10.1 Basis of Estimation .............................................................................................62

10.1.1 Pricing.......................................................................................................62

10.1.2 Project Currency and Foreign Exchange .................................................62

10.1.3 Duties and Taxes .....................................................................................62

10.2 Land Acquisition .................................................................................................62

10.3 Diversion of Channel ..........................................................................................63

10.4 ROM Handling Facilities .....................................................................................63

10.5 Haul Road Construction .....................................................................................63

10.6 Overland Conveyor .............................................................................................63

10.7 Coal Fired Power Station ....................................................................................63

10.8 Port Stockpile and Jetty ......................................................................................64

10.9 Other Cost Items.................................................................................................64

10.10 Mine Reclamation ...............................................................................................64

10.11 Exclusions ...........................................................................................................64

10.12 Capital Phasing...................................................................................................64

11 Operating Cost ............................................................................................ 66

11.1 Method of Estimation ..........................................................................................66

11.2 Items included in the Operating Cost Estimates ................................................66

11.3 Contractor Costs .................................................................................................67

11.4 Owner Costs .......................................................................................................68

11.5 VAT .....................................................................................................................68

11.6 Royalties and Government Costs .......................................................................68

11.7 Overall Operating Cost .......................................................................................69

12 Financial Analysis & Project Valuation ..................................................... 70

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12.1 Modelling Methodology & Considerations ..........................................................70

12.2 Base or Preferred Case ......................................................................................70

12.2.1 Preferred Case Results ............................................................................72

12.2.2 Sensitivity Analysis ...................................................................................73

12.3 Valuation Range .................................................................................................74

13 Valuation Summary .................................................................................... 75

13.1 Previous Valuation ..............................................................................................75

14 Risk Factors & Opportunities ..................................................................... 76

14.1 Project Risks .......................................................................................................76

14.1.1 Resources and Reserves .........................................................................76

14.1.2 Geotechnical Risk ....................................................................................76

14.1.3 Coal Price Risk .........................................................................................76

14.1.4 Impact on Weather on Production ............................................................77

14.1.5 Expansion and Infrastructure Associated Risk.........................................77

14.1.6 Mining Approvals, Tenure and Permits ....................................................77

14.1.7 Land Acquisition .......................................................................................78

14.1.8 Environmental and Social Risks ...............................................................78

14.1.9 Operational and Mine Safety ....................................................................78

14.1.10 Operating and Capital Costs Estimates ..............................................78

14.1.11 Human Resources ...............................................................................79

14.1.12 Political and Regulatory Risk ...............................................................79

14.2 Key Opportunities ...............................................................................................80

References ........................................................................................................... 81

Appendix A – CVs ................................................................................................ 82

Appendix B: SGX Mainboard Appendix 7.5........................................................ 83

Appendix C – Resource & Reserve Report ........................................................ 84

List of Figures Figure 2:1 General Location Plan ........................................................................... 22

Figure 2:2 CCoW Boundary and Location of Individual Coal Blocks ...................... 23

Figure 3:1 General relationships between Mineral Resources & Ore Reserves ..... 30

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Figure 4:1 Inferred Resources within optimized pit shell. Seam E1L1 ....................... 33

Figure 4:2 Life of Mine Schedule ............................................................................ 35

Figure 4:3 LOM Waste Excavation ......................................................................... 37

Figure 4:4 Coal Mining Operations at KG Block ..................................................... 37

Figure 4:5 Coal Mining at BS Block ........................................................................ 38

Figure 5:1 BIB Coal Logistics ................................................................................. 39

Figure 5:2 Road from the KG Block to Bunati Port (under construction) ................. 40

Figure 5:3 Barge loading conveyors at the BIB’ Bunati Port ................................... 41

Figure 5:4 Logistic Flow - KG Block ....................................................................... 42

Figure 5:5 Logistic Flow -SS and SN Block ............................................................ 43

Figure 5:6 Barging of BIB Coal from Abidin Port through Satui River ..................... 44

Figure 5:7 Logistic Flow - BS and PP Block ........................................................... 45

Figure 6:1 Rehabilitation of the Mined Out Area in BS Block .................................. 47

Figure 6:2 Health, Safety and Community Relationship ......................................... 47

Figure 9:1 Thermal Coal Major Demand Centres ................................................... 55

Figure 9:2 Major Thermal Coal Suppliers ............................................................... 56

Figure 9:3 Project Coal Prices (US $/t, Real Terms) .............................................. 60

Figure 12:1 Cash Streams – Preferred Case ........................................................ 72

Figure 12:2 Discounted Cash Flow Profile ............................................................. 73

Figure 12:3 Key Project Sensitivities ...................................................................... 73

List of Tables Table 2:1 BIB Concession Details .......................................................................... 24

Table 3:1 Coal Resources, BIB Mine, 31 July 2014 ............................................... 28

Table 3:2 Modifying & Mine Optimisation Factors .................................................. 29

Table 3:3 Coal Reserves, BIB Mine, 31 July 2014 ................................................ 31

Table 3:4 Coal Reserves – Quality Estimates ........................................................ 31

Table 4:1 LOM Schedule, Inferred Resources within optimized pit shell ................... 34

Table 7:1 Typical Valuation Methods ..................................................................... 49

Table 8:1 Indonesian Coal Royalty Rates .............................................................. 50

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Table 8:2 Corporate Tax Rates .............................................................................. 52

Table 8:3 WACC (After Tax) .................................................................................. 53

Table 8:4 WACC for Indonesian Coal Mining Companies ...................................... 53

Table 9:1 Major Thermal Coal Importers (Mt) ......................................................... 55

Table 9:2 Major Thermal Coal Exporters (Mt) ........................................................ 57

Table 9:3 Thermal Coal (Newcastle Coal Index) Price Outlook in Nominal USD .... 58

Table 9:4 Coal Price Forecast, US $/t .................................................................... 60

Table 10:1 Capital Cost (Real Terms) .................................................................... 61

Table 10:2 Capital Cost Phasing (US $M, Real Terms) .......................................... 65

Table 11:1 Contractor Unit Rates (Real Terms) ..................................................... 67

Table 11:2 Variable Owner Unit Costs (Real Terms) .............................................. 68

Table 11:3 Average Unit Operating Cost (Real Terms) over Life of Mine ............... 69

Table 12:1 Preferred Case – Key Input Parameters ............................................... 70

Table 12:2 Preferred Case – Financial Model ........................................................ 71

Table 12:3 Preferred Case – Financial Outputs & Valuation................................... 72

Table 12:4 Project Sensitivity ................................................................................. 74

Table 12:5 Valuation Range - Input Parameters..................................................... 74

Table 12:6 Valuation Range ................................................................................... 74

Table 13:1 Valuation Summary .............................................................................. 75

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Key abbreviations 0 Degrees $ or USD United States Dollar adb Air dried basis, a basis on which coal quality is measured AMSL Above Mean Sea Level AMDAL Analisis Mengenai Dampak Lingkungan Hidup- Environmental Impact

Assessment (EIA), which contains three sections, the ANDAL, the RKL and the RPL

ANDAL Analisis Dampak Lingkungan Hidup, component of the AMDAL that reports the significant environmental impacts of the proposed mining activity

ar As received basis ASR Average stripping ratio AusIMM Australasian Institute of Mining and Metallurgy Batter Slope of Advancing Mine Strip bcm bank cubic meter BD bulk density CCoW Coal Contract of Work CHPP Coal Handling and Processing Plant CV Calorific value Capex Capital Expenditure Mineral Resource

A ‘Mineral Resource’ is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.

Coal Reserve A ‘Coal Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.

DCF Discounted cash flow DGMC Directorate General of Minerals and Coal within the Ministry of Energy and

Mineral Resources FC Fixed Carbon gar gross as received, a basis on which coal quality is measured GCV Gross Calorific Value, “The Gross Calorific Value of coal is the amount of

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heat produced by its complete combustion of its unit quantity.” It is usually expressed in kcal/kg unit.

GEMS PT Golden Energy Mines Tbk ha Hectare(s) HDR Salva Salva Resources Pty Ltd HGI Hardgrove Grindability Index IM Inherent Moisture IPPKH ‘Izin Pinjam Pakai Kawasan Hutan’ which translates to a borrow to use

permit in a production forest IRR Internal Rate of Return IUP ‘Izin Usaha Pertambangan’ which translates to ‘Mining Business License’ JORC 2012 Edition of the Australasian Code for Reporting of Exploration Results,

Mineral Resources and Ore Reserves, Australian Institute of Geoscientists and Mineral Council of Australia

K thousand kcal/kg Unit of energy (kilocalorie) per kilogram kg kilogram km Kilometers(s) km2 Square kilometre(s)

kV kilovolt kV kilovolt M Meter lcm loose cubic metre LOM Life of Mine M Million Mbcm Million bank cubic metres Mbcmpa Million bank cubic metres per annum MEMR Ministry of Energy and Mineral Resources within the central government m RL metres reduced level m3 cubic metre Mt Millions of tonnes Mtpa Millions of tonnes per annum MW Megawatt NAR Net as received NPV Net present value NTA Net tangible assets Opex Operating expenditure PKP2B ‘Perjanjian Kerjasama Pengusahaan Pertambangan Batubara’ – same as

CCoW RD Relative density RKL ‘Rencana Pengelolaan Lingkungan’ - environmental management plan ROM Run of Mine RKL Relative Level - survey reference for height of landforms above a datum

level

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RPL ‘Rencana Pemantauan Lingkungan’ - environmental monitoring plan SE Specific Energy SR Strip ratio (of waste to ROM coal) expressed as bcm per tonne t Tonne tkm Tonne kilometer tph Tonnes per hour tpa Tonnes per annum TM Total Moisture (%) TS Total Sulphur (%) United Fiber United Fiber System Limited VALMIN 2005 Edition of the Code for the Technical Assessment and Valuation of

Mineral and Petroleum Assets and Securities for Independent Expert Reports

VM Volatile Matter (%) WACC Weighted Average Cost of Capital

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Executive Summary Introduction

United Fiber System Limited (“United Fiber” or “Client”) has engaged Salva Resources Pty Ltd (“HDR Salva”) to prepare a mineral asset valuation and an Independent Qualified Persons Report (“Report”) of the Borneo Indobara coal concession (“BIB Mine” or “BIB”) located in the Tanah Bumbu Regency of the South Kalimantan Province, Indonesia.

United Fiber has signed a conditional sale and purchase agreement to acquire PT Golden Energy Mines Tbk (“GEMS”). The Qualified Persons Report to be presented to United Fiber shareholders is intended to comply with Section 5 of SGX-ST Listing Rules Practice Note 6.3. The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code).

The BIB concession is beneficially owned and controlled by GEMS. The BIB concession is a second generation PKP2B coal concession (“CCoW”) covering a total area of 24,100 ha. The BIB concession consists of following 5 coal blocks:

• Kusan Girimulya Block (“KG Block”); • Sebamban North Block ( “SN Block”); • Sebamban South Block (“SS Block”); • Batulaki Block (“BS Block”) and • Pasopati Block (“PP Block”).

Conventional open-pit coal mining operations was commenced in the SS and BS blocks in 2005 and in the KG block in 2011.

Coal Resources

An independent estimate of Coal Resources within the BIB Concession was prepared by HDR Salva. Coal Resources have been estimated, classified and reported according to the JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July 2014. The Coal Resources are detailed in Tables below.

Coal Resources, BIB Mine, 31 July 2014

Resources (Mt)

Area Measured Ash% (adb)

CV adb

Kcal/kg Indicated Ash%

(adb)

CV adb

Kcal/kg Inferred Ash%

adb

CV adb

Kcal/kg Total

KG 356 5.01 5,361 564 5.47 5,324 535 6.34 5,261 1,453 BS 22 4.71 5,567 27 5.61 5,560 155 5.94 5,563 204 SS 18 6.22 5,510 10 6.29 5,559 15 5.59 5,570 42 SN 9 4.71 5,395 12 6.24 5,281 25 8.4 5,248 46 PP 10 7.48 6,146 10 8.87 6,275 10 9.72 6,460 31

Total 414 623 740 1,777 Mineral Resources are reported inclusive of the Mineral Reserves

(Note: individual totals may differ due to rounding)

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Coal Reserves

An independent estimate of the Reserves within the BIB concession was prepared by HDR Salva. Coal Resources have been estimated, classified and reported according to the JORC Code (2012). HDR Salva prepared the Coal Reserve estimate as at 31 July 2014 on the basis for the Coal Resource estimate as at that date after application of appropriate modifying factors.

Coal Reserves, BIB Mine, 31 July 2014

Coal Blocks Coal Reserves (Mt)

Proved Probable Total KG 221.1 336.7 557.8 BS 13.5 6.1 19.6 SS 11.7 4.1 15.8 SN 3.2 4.5 7.7 PP 2.4 0.9 3.3

Total BIB 251.9 352.3 604.2 (Note: individual totals may differ due to rounding)

Coal Reserves – Quality Estimates

Block

Total Moisture

(%) (arb)

Inherent Moisture

(%) (adb)

Ash (%)

(adb)

Total Sulphur (%)

(adb)

Calorific Value

(Kcal/Kg) (gar)

KG 35.4 15.5 4.8 0.2 4,105

BS 33.3 13.4 6.4 0.2 4,213

SS 38.3 12.6 6.0 0.2 3,875

SN 38.4 16.4 4.8 0.2 3,944

PP 12.5 5.9 9.1 1.4 6,663

Life of Mine Schedule

The BIB Mine has been operating since 2005 (Kusan-Girimulya Pit started from 2011). It has produced 4.1 Mt in 2013 and expected to produce 4.6 Mt in 2014.

Prefeasibility studies were completed prior to commencement of mining operations. These studies were accepted as part of the approval process by the Director General of Minerals and Coal, Ministry of Energy and Minerals, Republic of Indonesia prior to being given mining operations approval (CCoW).

Where an entity has an operating mine for an Ore Reserve, its Life of Mine Plan would generally be expected to contain information at better than Pre-Feasibility or Feasibility level for the whole range of inputs normally required for a Pre-Feasibility or Feasibility study and this would meet the requirement in Clause 29 for the Ore Reserve to continue that classification. HDR Salva has used actual modifying factors based on current operations at the BIB Mine which were independently verified by the HDR’s subject specialist during the site visit. In HDR Salva’s opinion, the Modifying Factors at the BIB Mine are better defined based on actual mining practices compared to a Greenfield project at Pre-Feasibility stage.

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As per HDR Salva’s preliminary production schedule, the LOM minable tonnes over life of mine are expected to be 604.1 Mt and the corresponding waste mining would be 2,561 Mbcm. The LOM Stripping ratio is expected to be at 4.24 bcm/t of coal mined. The schedule targeted production of 2.1 Mt for the remaining period of the year 1, increasing to 23 Mt by year 5 with peak production of 40 Mt from year 10 onwards. Coal mining from both SS and SN block is expected to commence 2015 while the coal from the Pasopati block, which is higher energy, scheduled from 2016 onwards.

Life of Mine Schedule

* Aug-Dec 2014.

It is proposed mining at BIB Mine to be conducted by contract operators. The company will deploy management persons for critical areas, manage site infrastructure and coal evacuation logistics only.

Logistics

Coal handling and processing infrastructure are already in place at the BIB Mine. The infrastructure includes a Run of Mine (ROM) stockpile, a crushing and screening plant at ROM stockpile, a stockpile and another crushing circuit at Bunati Port and a jetty & barge loading conveyor at the Bunati Port. PT Golden Energy Mines Tbk (GEMS) is presently using a third party road to haul coal from the KG Block to this port.

A substantial upgrade to coal handling infrastructure is required to achieve the planned production targets from the KG Block. This includes building its own dedicated haulage road from the KG Block to the Bunati Port, capable of handling up to 60 tonne trucks. The construction for Stage I connecting the Kusan Block to the Bunati Port is well advanced and near completion. Stage II connecting the Kusan Sub block to the Girimulya Sub block is also scheduled for completed by mid 2015.

In addition, GEMS is proposing to build an overland conveyor belt system from the KG block to the Port to handle production of up to 40 Mtpa. The conveyor system is planned to be

0

1

2

3

4

5

6

0

5

10

15

20

25

30

35

40

45

Strip

ping

Rat

io (b

cm/t

)

Coal

Min

ed (M

t)

KG Block BS Block

SS Block SN Block

PP Block Overall Stripping Ratio (bcm/t), RHS

18.1

30

40 40 40 40 40 40 40 40 40 39.8

35.0

31.0

27.0

23.0

18.0

13.0

7.0

2.1

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commissioned in 2019. At an estimated capital cost of US $98M, the conveyor will reduce the KG Block operating cost by ~$3.10/t of coal produced.

Capital and Operating Cost

The overall estimated capital cost for the project (including land compensation for life of mine and contingency) is as follows:

Capital Cost (Real Terms)

Particulars Direct Cost ($M)

Contingency ($M)

Total Cost ($M)

Land Compensation 78.4 11.8 90.2 Land Compensation 78.4 11.8 90.2 Diversion Channel 6.0 0.9 6.9 Road From Pit to ROM Stockpile 1.0 0.2 1.2 Workshop, Office and Laboratory 2.5 0.4 2.9 Backup Power Generation 1.5 0.2 1.7 Explosive Magazine and Site Preparation 1.0 0.2 1.2 Miscellaneous Roads 0.8 0.1 0.9 Coal Power Station and Distribution 45.0 6.8 51.8 Coal Handling Equipment 8.0 1.2 9.2 ROM - Crushing and Screening 30.0 4.5 34.5 Contractor Mobilisation 10.0 1.5 11.5 Accommodation Camp 6.0 0.9 6.9 Fuel Storage 3.0 0.5 3.5 Water supply and Sewage System 1.0 0.2 1.2 Communications 0.5 0.1 0.6 Mine Infrastructure 116.3 17.4 133.7 Haul Road Construction 11.0 1.7 12.7 Overland Conveyor 85.0 12.8 97.8 Hauling to Jetty 96.0 14.4 110.4 Port Stockpile and Jetty 60.0 9.0 69.0 Port Facilities 60.0 9.0 69.0 Additional Studies 4.0 0.6 4.6 Other Capital Expenses 4.0 0.6 4.6 Total Project Capital 354.7 53.2 407.9

HDR Salva estimated total operating costs for mining and other activities including coal hauling, barging and port handling charges. At this level of study these estimates are considered reasonable. The cost components are given in Table below.

Average Unit Operating Cost (Real Terms) over Life of Mine

Cost Item $/t Land Clearing $0.01 Topsoil Removal $0.05

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Waste Mining $10.17 Waste Overhaul $1.21 Coal Mining $1.40 Haul to ROM stockpile $0.30 ROM Coal Handling $0.50 Haul to Port Stockpile $1.36 Port Stockpile and Barge loading $1.00 Barging $1.28 Transhipment $2.10 Mine Closure $0.05 Environmental and Rehabilitation $0.15 Miscellaneous Operations $0.15 Dewatering and Water Treatment $0.05 Salary and Wages $0.30 Camp and Accommodation $0.05 Medical & Community Development $0.15 Land Use Payment $0.15 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $1.69 Contingency $1.16 Operating Cost Excl. Royalty $24.28 Royalty $5.13 Operating Cost incl. Royalty $29.41

The unit operating costs are reasonable when compared to industry standards by HDR Salva.

Price Outlook

The thermal coal market has grown at a compound average growth rate (CAGR) of 6.53% in the last five years, representing a significant increase from 567 Mt in 2008 to 778 Mt in 2013. Strong demand in Asia, predominantly China and India, have driven this market growth.

Indonesian supply has grown considerably, from 104 Mt in 2002 to 404 Mt in 2013, growing at a staggering 16.2%. Indonesia is now the world’s largest exporter of thermal coal with exports more than double that of the second biggest exporter, Australia. Going forward, Indonesia is expected to remain the world’s largest exporter of thermal coal as Indonesian coal mines are historically sitting at the lower end of global production costs.

To estimate the long term price for the BIB Mine, HDR Salva has adopted the latest brokers and analyst forecast for thermal coal prices ex Newcastle ($/t, FOB) as a benchmark thermal coal price. The data which was collected by Consensus Economics Inc. in June 2014, included forecasts of future prices for coal of CV 6,322 kcal/kg (gar). HDR Salva has adopted an average of forecast prices as a reasonable benchmark price.

Although the coal from Pasopati Block has higher CV than the Newcastle benchmark, HDR Salva have used benchmark price forecast as the price for coal from Pasopati block (HRC Coal). HDR Salva have applied the historical price differential to estimate price to low rank sub bituminous

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(higher moisture, lower CV coal from other blocks (LRC Coal). The projected price for the BIB Mine coal is shown in Table below.

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Coal Price Forecast, US $/t (Real Terms)

2014E 2015F 2016F 2017F 2018F 2019F

Newcastle Coal Index 78.4 79.7 81.9 84.7 85.1 88.4 LRC Coal 36.8 37.4 38.4 39.7 39.9 41.4

HRC Coal 78.4 79.7 81.9 84.7 85.1 88.4

HDR Salva has assumed coal prices to remain constant in real terms after 2019.

Other Economic factors

HDR Salva applied appropriate economic and other factors, including VAT, corporate tax, depreciation etc. Discount rate used for determination of discounted cash flow and valuation was assessed as 11.5% WACC (after tax).

Project Valuation and Range

In HDR Salva’s opinion, the discounted cash flow (DCF) method is appropriate to value the BIB Mine which is an operating mine undergoing expansion. The valuation model for the BIB Mine was developed in Microsoft Excel. Valuation has been derived from analysis of cash flows calculated for the project over the life of mine. The valuation was designed so that input parameters could be varied to investigate different scenarios to determine an estimated valuation range.

A base case or preferred valuation, along with low and high case was developed using the assumptions discussed in this report. HDR Salva’s opinion of the technical value and the corresponding project value (on 100% basis), as at 31 July 2014, is shown in Table below. The valuation accounts for high and low cases and the sensitivity.

Valuation Summary

Item Market Value (US $M)

Lower Preferred Upper

Net Present Value , 100% of Project Basis 1,476 2,112 2,748

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1 Introduction United Fiber System Limited (“United Fiber” or “Client”) has engaged Salva Resources Pty Ltd (“HDR Salva”) to prepare a mineral asset valuation and an Independent Qualified Persons Report (“Report”) of the Borneo Indobara coal concession (“BIB Mine” or “BIB”) located in the Tanah Bumbu Regency of the South Kalimantan Province, Indonesia.

United Fiber has signed a conditional sale and purchase agreement to acquire PT Golden Energy Mines Tbk (“GEMS”). The Qualified Persons Report to be presented to United Fiber shareholders is intended to comply with Section 5 of SGX-ST Listing Rules Practice Note 6.3. The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code).

The BIB concession is beneficially owned and controlled by GEMS. The effective date of valuation is the 31 July 2014, the date on which the Resource and Reserves that support this valuation were estimated.

1.1 Scope

United Fiber has requested that HDR Salva prepare a mineral asset valuation and an Independent Qualified Persons Report (“Report”) for the BIB coal concession (“BIB Mine” or “BIB”) located in the Tanah Bumbu Regency of the South Kalimantan Province, Indonesia. This report covers the mineral asset valuation the BIB coal concession only and not for the entire company which holds the assets.

1.2 Data Sources

This review is based on the information provided by United Fiber and GEMS, the technical reports of previous consultants and current owners, PT Golden Energy Mines Tbk (“GEMS”), as well as other published and unpublished data relevant to the project area.

HDR Salva has carried out its own independent assessment of the quality of the geological and mining data. HDR Salva relied on an Independent legal firm “LasutLay and Pane Advocates”, a technical specialist that has carried out independent enquiry regarding the status of agreements, royalties or concession standing pertaining to the assets..

In developing our assumptions for this Statement, HDR Salva has relied upon information provided by the company and information available in the public domain. Key sources are outlined in this Report and all data included in the preparation of this Report has been detailed in the references section of this report. HDR Salva has accepted all information supplied to it in good faith.

1.2.1 Site Visit

Mr. Sunil Kumar, Principal Consultant – Mining conducted the site visit to the BIB Mine from 24 July to 25 July 2014. Mr. Manish Garg, Director – Consulting / Partner conducted the visit to GEMS offices in Jakarta from 4 Aug 2014 to 7 Aug 2014 to review technical studies and commercial information.

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1.3 Disclaimer and Warranty

This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva’s schedule of rates. HDR Salva’s fee is not contingent on the outcome of its valuation or the success or failure for the transaction for which the report was prepared. None of HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report.

HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS its directors, substantial shareholders, advisers and their associates.

A draft version of this report was provided to the directors of United Fiber and GEMS for comment in respect of omissions and factual accuracy. As recommended in Section 39 of the VALMIN Code, United Fiber and GEMS has provided HDR Salva with an indemnity under which HDR Salva is to be compensated for any liability and/or any additional work or expenditure, which:

Results from HDR Salva’s reliance on information provided by United Fiber and/or GEMS and/or their Independent consultants that is materially inaccurate or incomplete, or

Relates to any consequential extension of workload through queries, questions or public hearings arising from this report.

This report may contain or refer to forward-looking information based on current expectations, including, but not limited to timing of mineral Resource estimates, future exploration or project development programs and the impact of these events on the United Fiber.

Forward-looking information is subject to significant risks and uncertainties, as actual results may differ materially from forecasted results. Forward-looking information is provided as of the date hereof and HDR Salva assumes no responsibility to update or revise them to reflect new events or circumstances.

The conclusions expressed in this report are as on the 31 July 2014, the date on which the Resource and Reserves that support this valuation were estimated. The valuation is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results. All monetary values outlined in this report are expressed in US dollars ($) unless otherwise stated. HDR Salva services exclude any commentary on the fairness or reasonableness of any consideration in relation to this acquisition.

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1.4 Independent Competent Person and Expert Statement

The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code). This Mineral asset techno-commercial assessment and valuation in this report was prepared by, or under the supervision of Manish Garg (B.Eng. (Minerals Engineering), MAppFinance, MAusIMM, MAICD).

Mr. Garg, Director – Consulting / Partner and a full time employee of HDR Salva has sufficient assessment and valuation experience, which is relevant to the activity he is undertaking to qualify as an Expert as defined in the 2005 Edition of the “Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports” (VALMIN Code).

This report was prepared on behalf of HDR Salva by the signatory to this report, assisted by the subject specialists’ competent persons whose qualifications and experience are set out in Appendix A of this report.

Mr. Manish Garg Director – Consulting / Partner HDR Salva

1.4.1 Statement of Independence

This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva’s schedule of rates. HDR Salva’s fee is not contingent on the outcome of its valuation or the success or failure for the transaction for which the report was prepared. The above mentioned person(s) have no interest whatsoever in the mining assets reviewed and will gain no reward for the provision of this techno-commercial assessment.

HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates.

None of HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report.

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2 Project Description

2.1 Property Description and Access

The BIB Mine is located in the Tanah Bumbu Regency of the South Kalimantan Province of Indonesia. The BIB concession is a second generation PKP2B coal concession (“CCoW”) covering a total area of 24,100 ha. The BIB concession is located within the coal mining hub of South Kalimantan province and consists of following 5 coal blocks:

• Kusan Girimulya Block (“KG Block”); • Sebamban North Block ( “SN Block”) • Sebamban South Block (“SS Block”) • Batulaki Block (“BS Block”); and • Pasopati Block (“PP Block”).

Conventional open-pit coal mining operations was commenced in the SS and BS blocks in 2005 and in the KG block in 2011. At the time of writing of this report, the mining operations are continuing at the BIB Mine. Various mining blocks are located between 6 km to 30 km to the South Kalimantan coastline (Figure 2:1).

Figure 2:1 General Location Plan

Kalimantan, Indonesia Sulawesi, Indonesia

Java Sea

Celebes Sea

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Locations of individual coal blocks and CCOW boundary is shown in Figure 2:2 below.

Figure 2:2 CCoW Boundary and Location of Individual Coal Blocks

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2.2 Ownership and Concession

PT Golden Energy Mines Tbk (GEMS) holds the mining rights to the BIB concession through its subsidiary PT Roundhill Capital Indonesia.

Tenure at the BIB concession is held under the second generation Perjanjian Kerjasama Pengusahaan Pertambangan Batubara (“PKP2B”). The PKP2B was originally executed on 15 August 1994 between PT Borneo Indobara (“PT BIB”) and PT Tambang Batubara Bukit Asam (“PTBA”), a government owned company for an area of 93,164 ha. Approval to commence production was granted on 17 February 2006 for a period of 30 years for an area of 24,100 ha. The detail of the coal concession is given in Table 2:1.

Table 2:1 BIB Concession Details

Concession Number

Concession Type Area (ha)

Status Granted Expiry GEMS Net Holding

10.K/40.00/ DJB/2006

Perjanjian Kerjasama Pengusahaan

Pertambangan Batubara (CCoW)

24,100 ha

Granted 17-Feb-

2006 17-Feb-

2036 98.0951%

2.3 Tenure

Clause 67 of the VALMIN Code states that status of tenement is Material and requires disclosure. Determination of the status of Tenements is necessary and must be based on a recent independent inquiry, either by the Expert or a Specialist.

LasutLay & Pane (“LLP”), a Jakarta based legal firm, was commissioned to prepare a report in respect of the legal aspects of the mining activities within the BIB concession, solely from the perspective of Indonesian laws. LLP’s scope was to confirm that

BIB has good title to its mining concessions; and

BIB has complied with material, applicable provisions of the Mining Law 2009 and its implementing regulations, environmental law, forestry law and other relevant laws (as applicable).

The LLP report was made available to HDR Salva for reference in preparing this Report.

2.3.1 Tenure Status

BIB is party to the Coal Contract of Work (CCoW), between PT Borneo Indobara and the Government of Republic Indonesia, dated 15 August 1994 in conjunction with Amendment dated 27 June 1997. The current production operation at BIB concession is supported by subsequent ministerial and directorate decisions as given below:

No. 007/PK/PTBA-BI/1994 tentang Perjanjian Kerjasama Pengusahaan Pertambangan Batubara tertanggal 15 Agustus 1994, Jo. Amandemen tertanggal 27 Juni 1997 /“concerning Cooperation Agreement of Coal Mining Concessions dated 15 August 1994 in conjunction with Amendment dated 27 June 1997 between PT Borneo Indobara and the Government of Republic Indonesia and valid from 15 August 1994 until 30 years

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following the initial production phase, covering an area of 112,107 hectares, located at Kotabaru Regency, South Kalimantan Province; in conjunction with

Keputusan Menteri Pertambangan dan Energi No.074.K/29/M.PE/1998 tentang Penciutan Ke-I Wilayah Perjanjian Kerjasama Pengusahaan Pertambangan Batubara dan Permulaan Tahap Kegiatan Eksplorasi PT Borneo Indobara / concerning First Reduction of Cooperation Agreement Area of Coal Mining and Initial Exploration Activity Phase of PT Borneo Indobara. Issued by Minister of Mining and Energy (presently known as Minister of Energy and Mineral Resources) and valid through the period of CCOW, covering an area of 84,080 hectares, located at Kotabaru Regency, South Kalimantan Province;

Keputusan Direktur Jenderal Pertambangan Umum No. 58.K/20.01/DJP/2000 tentang Penciutan Ke-II Wilayah Perjanjian Kerjasama Pengusahaan Pertambangan Batubara dan Permulaan Tahap Kegiatan Studi Kelayakan PT Borneo Indobara/ concerning Secondary Reduction of Cooperation Agreement Area of Coal Mining and Initial Feasibility Study Phase of PT Borneo Indobara. Issued by the Director General of Mining and valid through the period of CCOW, covering an area of 24,100 hectares, located at Kotabaru Regency, South Kalimantan Province; and

Keputusan Menteri Energi dan Sumber Daya Mineral No.10.K/40.00/ DJB/2006 tentang Permulaan Tahap Kegiatan Produksi PKP2B PT Borneo Indobara / concerning CCOW Initial Production Phase, Issued by the Minister of Energy and Mineral Resources and valid from 17 February 2006 until 17 February 2036, covering an area of 24.100 hectares, located at Kotabaru Regency, South Kalimantan Province.

LLP reports that BIB granted Production phase of CCOW are in good standing with permanent rent requirements met.

2.3.2 Forestry Status

LLP further reviewed the Forestry Area Borrow and Use Permits (“IPPKH”). LLP identified the following Forestry Area Borrow and Use Permit which is of relevance to this project:

64/Menhut-II/2008 tentang Izin Pinjam Pakai Kawasan Hutan Pada Kawasan Hutan Produksi Tetap Dan Hutan Produksi Yang Dapat Dikonversi Atas Nama PT Borneo Indobara untuk eksploitasi bahan galian batubara dan sarana penunjangnya seluas 881,59 Ha / concerning Borrowing and Use of Forest Area Permit in the Fix Production Forest Area and Convertible Production Forest on behalf of PT Borneo Indobara for Coal Exploitation and its infrastructure covering an area of 881.59 Ha Tanah Bumbu Regency, South Kalimantan Province valid from 17 December 2008 until 17 December 2017 in conjunction with SK.743/Menhut-II/2013 tanggal 31 Oktober 2013 tentang Perubahan Atas Keputusan Menteri Kehutanan Nomor 464/Menhut-II/2008 / concerning Amendment of Decision of Minister of Forestry Number 464/Menhut-II/2008 dated 31 October 2013 issued by the Minister of Forestry.

SK.288/Menhut-II/2010 tentang Izin Pinjam Pakai Kawasan Hutan untuk Eksploitasi Batubara dan Sarana Penunjangnya pada Kawasan Hutan Produksi Terbatas, Hutan Produksi Tetap dan Hutan Produksi yang Dapat Dikonversi Atas Nama PT Borneo Indobara Seluas 2.936,54 Ha / concerning Borrowing and Use of Forest Area Permit for Coal Exploitation and Its Infrastructure In The Limited Production Forest Area, Fixed Production Forest And Production Forest Which Can Be Converted On Behalf Of PT Borneo Indobara with an area of 2,936.54 Ha in Tanah Bumbu Regency, South Kalimantan Province valid from 27 April 2010 until 27 April 2028 in conjunction with SK.744/Menhut-II/2013 tanggal 31 Oktober 2013 tentang Perubahan Atas Keputusan

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Menteri Kehutanan Nomor SK.288/Menhut-II/2010 / concerning Amendment of Decision of Minister of Forestry Number SK.288/Menhut-II/2010 dated 31 October 2013, issued by the Minister of Forestry.

HDR Salva understands that mining activities can only be carried out within this IPPKH permit however the Permit area can be progressively adjusted as mining activity progresses.

LLP report confirms that BIB’s granted Forestry Area Borrow and Use Permits (“IPPKH”) are in good standing. Based on the report by LLP, HDR Salva considers the tenement tenure and permits to be in good standing.

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3 Coal Resources & Reserves Resources and Reserves Estimates are presented in the format prescribed in “Appendix 7.5 to the SGX listing rules” in Appendix B.

3.1 Coal Resource

An independent estimate of Coal Resources within the BIB Concession was prepared by HDR Salva and is current as of 31 July 2014. The Coal Resource estimates were prepared in accordance to the 2012 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves” (JORC Code, 2012).

3.1.1 Resource Classification

The coal resources present in the BIB concession have been classified in accordance with the JORC Code, 2012. The JORC Code identifies three levels of confidence in the reporting of Resource categories. These categories are briefly explained below.

Measured – “...That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors to support detailed mine planning and financial evaluation”;

Indicated – “…That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors in sufficient detail to support mine planning and evaluation”; and

Inferred – “…That part of a Mineral Resources for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling.”

For the purpose of coal resource classification according to JORC Code (2012) guidelines, HDR Salva has considered a drill-hole with a coal quality sample intersection and core recovery above 90% over the sampled interval as a valid point of observation.

In terms of Coal Resource classification, HDR Salva is also guided by the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) (The Coal Guidelines) specifically referred to under clause 37 of the JORC Code (2012). According to the Coal Guidelines, maximum spacing’s between points of observation for both structural and coal quality points of observation for Measured, Indicated and Inferred resources are 500 m, 1000 m and 4000 m respectively.

Based on due consideration of the continuity of the coal seams as observed in the geological models for each of the five resource areas, the relative lack of evidence for significant faulting and the population statistics of the coal quality composites per seam, HDR Salva has sub-divided Coal Resources within the BIB concession into resource classification categories based on the following sample point spacing (expressed as a radius of influence around points of observation which is half of the spacing between points of observation):

Measured 250 m radius of influence; Indicated 500 m radius of influence; and Inferred 2000 m radius of influence.

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It is a requirement of the JORC Code (2012) that the likelihood of eventual economic extraction be considered prior to the classification of coal resources. Therefore, given the average coal quality attributes of the coal seams considered, which makes it amenable to be marketed as a thermal coal for power generation purposes, HDR Salva considers that it is reasonable to define all coal seams within the classification distances discussed above, to a depth of 250 m below the topographic surface, as potential open cut coal resources or to a maximum vertical stripping ratio of 15:1 in the case of the more steeply dipping PP Block (where a depth of 250 m below surface would result in overall stripping ratios that are unlikely to be economic due to the steep dips).

3.2 Coal Resource Statement

Coal Resources which have been estimated, classified and reported according to the guidelines outlined in the JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July 2014 are detailed in Table 3:1 below.

Table 3:1 Coal Resources, BIB Mine, 31 July 2014

Resources (Mt)


CV adb


(adb)

CV adb


adb

CV adb

Kcal/kg Total

KG Block 356 5.01 5,361 564 5.47 5,324 535 6.34 5,261 1,453 BS Block 22 4.71 5,567 27 5.61 5,560 155 5.94 5,563 204 SS Block 18 6.22 5,510 10 6.29 5,559 15 5.59 5,570 42 SN Block 9 4.71 5,395 12 6.24 5,281 25 8.4 5,248 46 PP Block 10 7.48 6,146 10 8.87 6,275 10 9.72 6,460 31

Total 414 623 740 1,777

Mineral Resources are reported inclusive of the Mineral Reserves


More detailed discussion of the Resource estimate including the following aspects in included in the Resource and Reserve Report (Appendix C):

Description of regional and local geology; Exploration undertaken to date including the number of boreholes, borehole locations and

spacing, drilling and sampling techniques; The number of core samples taken and core recovery percentages; Criteria used to define points of observation; Ore body modelling techniques and procedures; Coal quality results, relative density of coal, laboratory used and analytical standards; Classification of Resources; and Ore body geometry and dimensions.

3.3 Coal Reserves

The Coal Reserves estimates were prepared in accordance to the 2012 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves” (JORC Code, 2012).

3.3.1 Estimation Methodology

An independent estimate of the Reserves within the BIB concession was prepared by HDR Salva as of 31 July 2014. HDR Salva prepared the Coal Reserve estimate on the basis for the Coal

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Reserve estimate as at that date. The Coal reserves estimates presented in this report are based on the outcome of pit optimisation results and the techno-economics study carried out by HDR Salva.

The subject specialist for Reserves considers the proposed mine plan and mining schedule is techno-economically viable and achievable. This has been done by reviewing all the modifying factors, estimating reserves in the pit shell and doing a strategic production schedule and economic model which confirms a positive cash margin using the cost and revenue factors as described below in this report.

3.4 Modifying Factors

The BIB mine has been operating since 2005 (Kusan-Girimulya Pit started from 2011). It has produced 4.1 Mt in 2013 and expected to produce 4.6Mt in 2014.

Prefeasibility studies were completed prior to commencement of mining operations. These studies were accepted as part of the approval process by the Director General of Minerals and Coal, Ministry of Energy and Minerals, Republic of Indonesia prior to being given mining operations approval (CCoW).

Where an entity has an operating mine for an Ore Reserve, its Life of Mine Plan would generally be expected to contain information at better than Pre-Feasibility or Feasibility level for the whole range of inputs normally required for a Pre-Feasibility or Feasibility study and this would meet the requirement in Clause 29 for the Ore Reserve to continue that classification. Where, however, its Life of Mine Plan does not contain information at Pre-Feasibility or Feasibility level, it will have to upgrade its Life of Mine Plan to Pre-Feasibility or Feasibility level before 1 December 2014 or else downgrade the Ore Reserve to a Mineral Resource”.

HDR Salva has used actual modifying factors based on current operations at the BIB Mine which were independently verified by the HDR’s subject specialist during the site visit. In HDR Salva’s opinion, the Modifying Factors at BIB Mine are better defined based on actual mining practices compared to a greenfield project at Pre-Feasibility stage. The following Table 3:2 outlines the factors used to run the mine optimisation and estimate the Coal Reserve tonnage.

Table 3:2 Modifying & Mine Optimisation Factors

Factor Chosen Criteria

Seam roof & floor coal loss of 0.05 m each 0.10m Seam roof & floor dilution 0.02 m each 0.04m Geological & mining loss including loss in transportation and handling 5% Minimum mining thickness minable coal seam 0.3m Dilution default density 2.2bcm/t Dilution default calorific value 500Kcal/kg Dilution default ash 75% Overall High-wall and End-wall slope (varies in different blocks) 20 deg to 42 deg Maximum pit depth 200m max. Minimum mining width at pit bottom 50m Exclusion of Mining lease (CCOW) and offset from pit crest 50m Offset from the creek/ river edge 100-300m Mining , coal handling and transport cost – validated by HDR Salva

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Coal selling price for break-even stripping ratio calculation US$ 41.4/t (excl. Pasopati), Pasopati- US$ 88.4/t

Government approvals All in place, operating mine Environment report All in place, operating mine Geotechnical report Available & Used Hydrogeology report Available & Used

3.5 Reserves Classification

Under the JORC Code as shown below only Measured and Indicated Coal Resources can be considered for conversion to Coal Reserves after consideration of the “Modifying Factors” including mining, processing, economic, environmental, and social and government factors.

To convert Resources to Reserves it must be demonstrated that extraction could be justified after applying reasonable economic assumptions. Proved Reserves is derived from the highest level geological confidence of established Measured Resources while Probable Reserves is derived from a moderate geological confidence level established Indicated Resources. A level of uncertainty in any one or more of the Modifying Factors may result in Measured Resources converting to Probable Reserves depending on materiality. A high level of uncertainty in any one or more of the Modifying Factors may preclude the conversion of the affected Resources to Reserves (Figure 3:1).

Figure 3:1 General relationships between Mineral Resources & Ore Reserves

Source: JORC Code 2012

This classification is also consistent with the level of detail in the mine planning completed for BIB Coal concession deposits. In the opinion of HDR Salva, the uncertainties in most of these are not sufficiently material to prevent the classifications of areas deemed Measured Resources to be areas of Proved Reserves and areas deemed Indicated Resources to be the areas of Probable Reserves.

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3.6 Statement of Coal Reserves

The Statement of Coal Reserves has been prepared in accordance with the 2012 Edition of the JORC Code. The total ROM coal Reserves and Coal Quality are summarised in Table 3:3 and Table 3:4, respectively. Total ROM coal Reserves are same as total marketable coal Reserves.

Table 3:3 Coal Reserves, BIB Mine, and 31 July 2014

Coal Blocks Coal Reserves (Mt)

Proved Probable Total KG 221.1 336.7 557.8 BS 13.5 6.1 19.6 SS 11.7 4.1 15.8 SN 3.2 4.5 7.7 PP 2.4 0.9 3.3

Total BIB 251.9 352.3 604.2 (Note: individual totals may differ due to rounding)

Table 3:4 Coal Reserves – Quality Estimates

Block

Total Moisture

(%) (arb)

Inherent Moisture

(%) (adb)

Ash (%)

(adb)

Total Sulphur (%)

(adb)

Calorific Value

(Kcal/Kg) (gar)

KG Block 35.4 15.5 4.8 0.2 4,105

BS Block 33.3 13.4 6.4 0.2 4,213

SS Block 38.3 12.6 6.0 0.2 3,875

SN Block 38.4 16.4 4.8 0.2 3,944

PP Block 12.5 5.9 9.1 1.4 6,663 More detailed discussion of the Reserve estimate including the following aspects in included in the Resource and Reserve Report (Appendix C):

Reserve estimation methodology; Discussion on Modifying Factors; Current Mining Operations; Pit Optimisation; Pit design considerations; Cut off parameters and pit limits; Audits and reviews; and Reserve Classification and Reserves statements.

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4 Mining Schedule A life of mine (LOM) plan was prepared based on the final pit design. This was done to ensure that the proposed mining method would be practical and achievable and that the proposed dumping strategy would be able to contain the waste mined in the final pit design. This provides a check on the reasonableness of the assumed waste mining costs and estimates the average waste haul per mining period.

Inferred Resources Within Optimized Pit Shell were used to estimate Coal Reserves for the BIB concession. It contains a significant proportion of Coal Resources that are classified as Inferred Resources. Under the JORC Code, these Resources cannot be converted to Reserves because of insufficient boreholes present within reasonable proximity, where core samples were collected and analysed. Hence, these coal resources have been classified as Inferred Resources within optimized pit shell.

These estimated “Inferred Resources within optimized pit shell” are generally from open hole intersections, where geophysics data at sufficiently close spacing reasonable confirms the continuity and thickness of coal seams and partings.

In the process of Reserve Estimation, HDR Salva has followed the process which aimed to minimize the quantity of Inferred Resources within optimized pit shell. included in the final pit designs. However, under certain circumstances, it was considered necessary to include this coal as exclusion of it would result in an impractical pit design. Typical situations where inclusions of Inferred Resources within optimized pit shell. within the pit design were:

Inferred Resources within optimized pit shell. located at the sub-crop but with Measured and Indicated coal located down dip;

Small areas of Inferred Resources within optimized pit shell located close to the high-wall where exclusion would result in unrealistic high-wall shapes; and

Thin seams in the stratigraphy where it is difficult to achieve sufficient core recovery or sufficient core for analysis to classify the coal as Measured or Indicated, but which are underlain or overlain by thicker seams with Measured and Indicated Resources.

A schematic diagram for KG block showing other minable tonnes for the main seam E1L1 within the designed Pit shell has been shown in Figure 4:1 below.

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Figure 4:1 Inferred Resources within optimized pit shell. Seam E1L1

Inferred Resources within optimized pit shell

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HDR Salva notes that care must be taken with the inclusion of Inferred Resources within optimized pit shell in life of mine schedules to avoid cases where confidence in the thickness, continuity and quality of the coal is so low that resulting pit designs and schedules would be unrealistic. During the Reserve estimation process, the subject specialist inspected these seams and determined an appropriate limit for the final pit shell taking these considerations into account. The quantity of Inferred Resources within optimized pit shell inside the pit designs with Reserves and the scheduled tonnes are shown in Table 4:1.

Table 4:1 LOM Schedule, Inferred Resources within optimized pit shell

Mining Block Coal Reserves

Inferred Resources within

optimized pit shell

HDR Salva Scheduled LOM

KG Block 557.8 127.0 557.8 BS Block 19.6 20.4 19.6 SS Block 15.8 3.2 15.8 SN Block 7.7 2.3 7.7 PP Block 3.3 2.7 3.3

Total, BIB 604.2 155.6 604.2

To mitigate the risk associated with the inclusion of Inferred Resources within optimized pit shell tonnes and to be on conservative side, HDR Salva has opted to kept total minable tonnes over LOM to be equal to the quantity of proved and probable reserves only for the purpose of this valuation report. In HDR Salva’s opinion, significant upside potential exists to mine these additional “Inferred Resources within optimized pit shell.”.

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4.1 Mine Schedule

As per HDR Salva’s preliminary production schedule, the minable tonnes over life of mine are expected to be 604.3 Mt, requiring waste mining of 2,561 Mbcm. The LOM stripping ratio is expected to be at 4.24 bcm/t of coal mined. The schedule targeted production of 2.1 Mt for the rest of the year 1, increasing to 23 Mt by year 5 with peak production of 40 Mt forecast by year 10 onwards (see Figure 4:2). Coal mining from both SS and SN block is expected to commence 2015 while the coal from the Pasopati block, which is higher energy, scheduled from 2016 onwards

Figure 4:2 Life of Mine Schedule

* Aug-Dec 2014.

HDR Salva recommends converting LOM Mine plan into detailed mining schedule reflecting up to 40 Mtpa target production rate. This document will address all the necessary detailed aspects related to the mining and associated activities for this project. Completion of this document will assist in reducing contingency which is factored in the current LOM plan.

4.2 Mining Operations

Currently mining operations for all pits within the BIB concession is carried out by conventional open pit mining method using truck and excavator combination. Mining of both coal and waste are outsourced to third party contractor, which are a common practice in Indonesia.

Mining operation commenced in 2005 at both Sebamban south (SS Block) and Batulaki (BS Block). Mining at Sebamban south pit ceased in January 2014 due to land acquisition issues. Currently the mine is under care and maintenance. At the time of writing of this report, the negotiation with land owners to gain access to SS block was at an advanced stage. In HDR Salva’s opinion, the mining operations at SS Block can recommence quickly once the required land is acquired.

0

1

2

3

4

5

6

0

5

10

15

20

25

30

35

40

45

Strip

ping

Rat

io (b

cm/t

)

Coal

Min

ed (M

t)

KG Block BS Block

SS Block SN Block

PP Block Overall Stripping Ratio (bcm/t), RHS

18.1

30

40 40 40 40 40 40 40 40 40 39.8

35.0

31.0

27.0

23.0

18.0

13.0

7.0

2.1

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Mining at the Kusan pit (KG) commenced in 2011. The mining method at KG block can be described as a multi seam, moderate dip, open cut coal mine using truck and shovel equipment in a combination of strip and haulback operations.

4.2.1 Top Soil Removal

It is necessary to clear land and removes topsoil to advance any open pit mining operations. At BIB concession, land clearing and topsoil removal is undertaken by contractors. Natural Vegetation is cleared by using dozers. The vegetation is pushed into piles and moved to a suitable location. All necessary care is taken to minimize soil profile disturbances and same process will be followed during the life of mine operations. Once land is cleared, a fleet of small trucks and excavators removes topsoil which is either preserved for final reclamation or directly dumped into final landform area (where coal is already mined out) for rehabilitation.

4.2.2 Drilling and Blasting

Most of the coal mining operations in Indonesia do not require drilling and blasting of overburden material to expose coal. The overburden is free digging which is not typical in countries outside Indonesia. . It is generally possible to mine waste up to 100 m by either free digging with excavator or ripping with dozers. However, in some large operations it is more efficient to drill and blast waste overburden or inter-burden before handling by excavator as blasting significantly improves excavator productivity.

At the time of writing of report, drill and blast was not required in all blocks of BIB concession, however, in the later years of operation, drill and blast is likely to be required to achieve long term production target. Drilling will likely to be undertaken using standard down hole drill rig with hole diameters up to 165 mm. Drill hole depth is limited to 11m (including 1 m of subgrade drilling) for a bench size of 10 m. Explosives will be stored in magazines on the site and mixed and loaded into blast holes by mobile mixing units.

In line with the standard practice in Indonesia, drilling and blasting will be part of the mining contractor’s responsibilities.

4.2.3 Waste Excavation

Waste material is mined using hydraulic excavators and loaded into standard (up to100 tonne capacity) rear tipping off-highway trucks for haulage to rock waste dumps which are either in close proximity to the pits or in-pit where possible. Diesel powered hydraulic excavators in backhoe configuration are currently being used at BS and KG block, and it is assumed for the purpose of this study that this type of equipment will continue to be used over the life of mine. The new bench will be opened as 5 meter height which will be subsequently converted into a 10 m bench.

Waste will be dumped in lifts with a typical height of 10 m with dozers pushing waste and ensuring the dump area is clean and that safety berms are maintained. A swell factor of 1.2 was assumed for all waste dumping and handling calculations. The current operations employ 120 tonne excavators (Komatsu PC1250) and 50 tonne capacity trucks (Komatsu HD465) for waste excavation and hauling on site.

However, future increases in mining rate will require upsizing of the mining fleet. The waste to be mined over life of mine has been shown in Figure 4:3 below.

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Figure 4:3 LOM Waste Excavations

4.2.4 Coal Mining

Currently, the coal mining activities in Kusan area are concentrated over Seam D group (Figure 4:4). In the last quarter of 2014, it is proposed to open up the Seam B group which has a lower strip ratio. Girimulya Pit will be opened in the first quarter of 2015 to target Seam B group. Contractors are currently using a mining fleet with truck 200 t excavator with 100 t trucks & 110 t excavator with 60t trucks for waste removal whereas coal mining has been carried out by smaller size excavators (PC200-PC400 Komatsu excavators) with 30-40 t trucks.

Figure 4:4 Coal Mining Operations at KG Block

Source: HDR Salva

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Similarly, coal mining is being carried out at the Batulaki Pit by another contractor deploying similar size equipment (Figure 4:5). Waste removal is being carried out by higher size hydraulic excavators (200 t excavators) and 100 t trucks.

Figure 4:5 Coal Mining at BS Block

Source: HDR Salva

4.2.5 Dewatering

For any efficient mining operations, dewatering of pit and pit water management is of critical importance. During the site visit at BIB concession, the subject specialist inspected pit sumps and found that the water management systems were of high standard. The pit drainage system, which is designed to prevent external water from entering into pit was also inspected and found effective and fit for purpose.

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5 Coal Handling and Coal Logistics The BIB Mine is an operating mine with established logistics infrastructure to support sales to the overseas market (predominately India and China). The project is supported by ROM stockpiles, crushing and screening plants, road transportation, port with barge loading facilities and trans-shipment points for anchorage of ocean going ships (Figure 5:1).

Figure 5:1 BIB Coal Logistics

Bunati Anchorage A

Bunati Anchorage D

Bunati Anchorage C

Bunati Anchorage B

Bunati Port

Satui Anchorage

Abidin Port

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5.1 Eastern Logistic Leg (SS, SN and KG Blocks)

5.1.1 KG Block

There is coal handling and processing infrastructure already in place for the KG Block. This infrastructure includes a Run of Mine (ROM) stockpile, crushing and screening plant at the ROM stockpile, a stockpile and another crushing circuit at the BIB owned Bunati Port along with jetty & barge loading conveyor at the Bunati Port. GEMS are presently using a third party road to haul coal from the KG Block to this port.

A substantial upgrade to the coal handling infrastructure is underway, or planned, to achieve the planned production targets from the KG Block. This includes building a dedicated haulage road from the KG Block to the Bunati Port. This road is designed to be capable of handling up to 60 tonne trucks (Figure 5:2). The construction for Stage I connecting the Kusan Block to the Bunati Port is well advanced and near completion. Stage II connecting the Kusan Sub block to the Girimulya Sub block is also scheduled for completion by mid 2015.

Figure 5:2 Road from the KG Block to Bunati Port (under construction)

Source: HDR Salva

Coal at the port stockpile will be retrieved by a standard mechanical reclaim and barge-loading system. Coal will be barged for less than 25 km from the Bunati Port for transshipment to larger

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vessels using floating cranes. The capacity at the Bunati Port has recently been upgraded to 12 Mtpa of coal handling (Figure 5:3).

Figure 5:3 Barge loading conveyors at the BIB’ Bunati Port

Source: HDR Salva

To accommodate 40 Mtpa of coal product, a substantial upgrade of coal handling infrastructure is planned. This includes additional modular crushing & screening plants and additional barge loading facilities.

The proposed system comprises haulage of up to a distance of 2 km to the ROM stockpile using rigid coal trucks. From there, coal will either be dumped into coal receiving hoppers or the ROM stockpile for the purpose of re-handling and coal blending at site. The coal will be crushed at the mine site itself in two crushing circuits, two each at the Kusan and Girimuyla sites (2x 2,000 tph at Kusan and 2 x 2,500 tph at Girimulya). Crushed coal stockpile of 60,000 t capacity will be constructed both at the Kusan and the Girimulya pits.

GEMS is also proposing to build an overland conveyor belt system from the KG block to the Port to handle production of up to 40 Mtpa. The conveyor system is planned to be commissioned in 2019. The capital cost from the conveyor is estimated at US $98M. This will reduce operating cost by ~$3.10/t of coal produced from the KG Block.

Coal at the port stockpile will be retrieved by a standard mechanical reclaim and barge-loading system. Coal will be barged less than 25 km for transshipment to larger vessels using floating cranes. HDR Salva notes that the proposed infrastructure plan is conceptual in nature and likely to be re-investigated during the Detailed Engineering phase. However, construction and use of most of these types of coal handling system is very common in Indonesia which constitutes the proposed infrastructure plan. The proposed logistic flow for the KG block is shown in Figure 5:4.

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5.1.2 SS and SN Blocks

The SS Block is an existing mine with established infrastructure. At present the mining operation in the SS block is suspended on account of issues with land acquisition. HDR Salva has been advised that discussions on land acquisition are well advanced and BIB plans to commence production from the SS Block in 2015 Mining is planned to commence in the SN Block from 2015 onwards.

Coal from the SS and SN Block is planned to be hauled by 20-30t rigid trucks to the ROM stockpile. Coal will be re-handled using mobile equipment into rigid body coal haul trucks and hauled ( ~6 km for SS Block and ~10 km for SN Block) to the the BIB Bunati Port where it will be blended with the coal from the KG Block. The proposed logistic flow for the SS and SN block is shown is Figure 5:5.

~2 km hauling

Capacity ~800kt

3000 tph capacity

500 tph 500 tph

Crushing and

Screening

~2 km hauling

SN Block

Rehandle with Mobile Equipment

Hauling to Bunati Port ~ 9 km

Hauling to Bunati Port ~6 km


Coal Mining Coal Mining

ROM Stockpile ROM Stockpile

Crushing and

Screening

Product Stockpile

Barging loading Transhipment

SS Block

25 km barging to Anchorage

Figure 5:5 Logistic Flows -SS and SN Block

Bunati Port

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5.2 Western Logistic Leg (BS and PP Blocks)

5.2.1 BS Block

Coal from the BS Block is hauled by 20-30 t rigid trucks to the ROM stockpile located up to a distance of 4km from the pit. Coal is then re-handled using mobile equipment into rigid body coal haul trucks and hauled approximately 11 km to the Abidin Port. Abidin Port is a third party owned port where infrastructures for crushing, stockpiles and coal loading are already in place.

Coal is loaded from the stockpile onto barges using a barge-loading system and barged through the Satui River to anchorage points up to 40 km away (Figure 5:6).

Figure 5:6 Barging of BIB Coal from Abidin Port through Satui River

Source: HDR Salva

The existing infrastructure will be maintained and used for coal handing and transportation until coal inventory present in these pits will be depleted.

5.2.2 PP Block

Coal from the PP Block will be hauled to BS stockpile using the existing common shared Jayanti Road. This road will require some repair and upgrading before mining operations can commence at the PP Block. The coal logistics plan for PP is similar to BS and will share the same haul road and use the same port stockpile and barge loading infrastructure at the Abidin Port (Figure 5:7).

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Figure 5:7 Logistic Flow - BS and PP Block

Abidin Port

500 tph

~2 km hauling

PP Block


Hauling to Abidin Port ~40 km via Jayanti Road

Hauling to Abidin Port ~11 km


Coal Mining Coal Mining

ROM Stockpile ROM Stockpile

Crushing and Screening

Product Stockpile

Barging loading

Transhipment

BS Block

Barging up to 40 km to Anchorage at Satui or Bunati

~2 km hauling

Capacity ~200kt

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6 Environment and Community Relations A preliminary assessment of potential issues pertaining to environment and community relations which may impact the Project valuation was carried out by HDR Salva. These include the following activities:

Site visit and inspection of environmental management infrastructure;

Review of environment management procedure at site;

Review of the environment impact assessment and management plans (AMDAL); and

Review of Corporate Social Responsibility Reports.

HDR Salva’s preliminary assessment doesn’t reveal any issues related to environment and community relations that will adversely impact project valuation. However, it should be noted that HDR Salva’s assessment was only preliminary in nature and HDR Salva cannot provide any guarantee or warranty that significant environmental or community issues will affect the operation.

As a part of its site inspection, HDR Salva has inspected key components of environmental management at the pit, roads and stockpiles during the site visits, including: sediment ponds, hydrocarbon storage, water discharge points and topsoil stockpiles. Key environmental and community relations issues are discussed below.

6.1 Environmental Aspects

Key issues which can potentially impact on project valuations are: Water Run-off, noise and dust, rehabilitation and protection of aquifers.

6.1.1 Water Run-off from site

If sediment loads are high or if water is acidic Run-off from dumps, stockpiles, roads and water pumped from pits has the potential to pollute local rivers, creeks and vegetation. This is managed through the use of bunds, drains and sediment ponds of sufficient size to allow small particles to settle out of the water. Regular monitoring of water discharge points is required under government regulations.

6.1.2 Noise and Dust

Noise and Dust originating from mine operations haulage and coal handling have the potential to impact the local environment, particularly if villages and local communities are located within close proximity to mining and coal handling operations. Dust is generally managed by using water trucks on haul roads and by spraying water or dust suppressant chemicals to minimise dust being airborne and suppressing it.

6.1.3 Rehabilitation

A large area of land will be cleared as part of the BIB mining operation, although much of this area is secondary growth forest or plantations. The disturbed area is generally rehabilitated and revegetated by mining and handling topsoil separately, and then restoring topsoil to rehabilitated sites and replanting suitable vegetation. A large portion of the mined out area in the BS Block has already been rehabilitated (Figure 6:1).

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Figure 6:1 Rehabilitation of the Mined Out Area in BS Block

Source: HDR Salva

6.1.4 Hydrocarbon Management

There are significant stores of fuel and oils at the BIB site and discharge of these to the environment could result in significant damage. Hydrocarbons are managed with bunds around the storage areas, oil traps at water discharge points from workshop areas and with response and clean-up plans for any spills.

6.2 Social Aspects

Maintaining a good relationship with local communities is a key requirement for the success of the BIB operation. Efforts must be implemented to develop community programs in coordination with the local government. HDR Salva reviewed BIB’s Corporate Social Responsibility programs which include the following aspects: Economy, education and health.

Figure 6:2 Health, Safety and Community Relationship

Source: GEMS

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6.2.1 Economy

Economic development of the local community is set to include activities to assist with the economic development of the community by providing employment and business opportunities once mining operations have finished.

Current programs include training in sewing skills and establishing aquaculture infrastructure. BIB carried out improvement of the assessment of teachers' performance which includes teachers from Kindergarten, Elementary School, Junior High School and Senior High School. Through these activities, it is expected that the performance standard and the quality of teachers will impact on the quality of education for the students.

6.2.2 Education

The education plan includes programs to improve education of children and adults in the local communities with current activities including: Teacher training and development, reading programs and scholarships for elementary, junior high and senior high school students.

6.2.3 Health

Health Plan includes programs to improve health in the local communities and to increase people’s knowledge through education in health issues.

6.3 AMDAL

HDR Salva notes that the current approved AMDAL for the BIB concession does not address all the issues associated with the medium to long term plans to expand production beyond 13 Mtpa from the concession. The revision and approval of an updated AMDAL for the site is needed to achieve the designed mine plan. GEMS advises that AMDAL approval for expanded throughput is likely to be received as soon as dedicated haulage road under construction is completed.

Mine closure plans for the updated mine plan have yet to be completed; however HDR Salva does not foresee any significant issues with this aspect of the operation. A reasonable allowance has been made in for environmental management, rehabilitation and mine closure.

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7 Valuation

7.1 Valuation Approaches

There are a number of methods used in valuing mineral assets. The applicability of these methods depends on project specific factors including the level of maturity of the mineral assets.

In determining the appropriate method(s) to be used for valuation of these assets, HDR Salva has taken into consideration the classification of these assets as defined in the VALMIN Code and the different methodologies that are generally accepted as industry practice for each classification. Generally there are three broad methods of valuation that are used for valuing mineral assets. These are the cost approach, income approach and market approach. The asset classifications that may be applied to a project are set out in Table 7:1 below.

Table 7:1 Typical Valuation Methods Classification General Description Key Valuation Methods

Exploration Areas Properties where mineralisation may or may not have been identified, but a Resource has not been identified.

Rule of Thumb, Geo-scientific method, Comparable Transactions.

Advanced Exploration Areas

Properties where considerable exploration has been undertaken and specific targets identified. Resource estimation may or may not have been made. Good understanding of mineralisation present.

Geo-scientific method, Appraised Value Method, Comparable Transactions.

Pre- development Projects

Properties where mineral Reserve have been identified but decision to proceed with development have not been made.

The above methods and DCF/NPV valuation.

Operating Mines Properties where mining activities are already commenced.

DCF/NPV valuation.

7.2 Valuation Approach for Assessing the BIB Mine

The BIB Mine is an operating mine where production has already commenced in 3 major coal blocks out of 5 blocks. Coal Resource and Reserve has been determined in all 5 blocks. Although mining activity at the SN & PP blocks is yet to commence but the Coal Resource and Reserve has already been delineated at these blocks and a decision to commence mining has already been made. Therefore in HDR Salva’s opinion, it is appropriate to use DCF method to determine Net Present Value (NPV) of the whole project.

Therefore for the purpose of valuation, HDR Salva has opted to value the Coal Reserves present within the BIB concession on DCF based method. The cash flow model constructed by HDR Salva was based on the production schedules, costs and prices developed for this project. No separate value is ascribed to the exploration potential of the areas outside the blocks contained in the mine study with Coal Reserves. HDR Salva has opted to value the project on the basis of Coal Reserves only using the DCF method.

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8 Economic Parameters

8.1 Royalty and Local Government Fees

Royalty is generally levied as a percentage of sale proceeds to be applied for the different types of coal depending on its Gross Calorific Value (“GCV” and method of mining. However different royalty rates have been adopted for different types of ownership structure including: Contract of Work holders (CoWs), Coal Contract of Work holders (CCoW), Izin Usaha Pertambangan holders (IUP), and Izin Usaha Pertambangan Khusus holders (IUPK).

At present, a range of percentage of sales proceeds is applicable for different type of coal mining arrangements as detailed in Table 8:1. However holders of IUPKs are required to pay an additional royalty of 10% of their net profit. 40% of this incremental royalty is paid to Central Government and remaining is shared between province and respective regency.

Table 8:1 Indonesian Coal Royalty Rates Concession Type Royalty Current Rates (2014)

CCoW and CoW 13.5% Royalty on HBA price for the coal type

IUP and IUPK 3% - 7%

(Open Pit) 2% - 6%

(Underground)

The royalty rate depends on air dried calorific value of the coal produced:

3% of HBA price for coal <5,100 kcal/kg

5% of HBA price for coal for <5,100 kcal/kg - 6,100 kcal/kg

7% of HBA price for coal for >6,100 kcal/kg

The BIB concession is a CCoW concession, amenable to be exploited by open-pit mining method. A royalty of 13.5% of revenue excluding barging and transshipping associated cost is applicable to coal sales from the BIB concession. This amount is defined in the PKP2B and subsequent agreements between BIB and the Indonesian Government Regulation No. 17 of 2010 issued by the Minister of Energy and Mineral Resources (MEMR) also requires that all coal sales be made at a minimum (or benchmark) price that is defined by the Indonesian government on a monthly basis. The methodology for calculation of the minimum price is described in Regulation No. 515.K/32/DJB/2011 and Regulation No. 644.K/30/DJB/2013 issued by the Directorate General of Minerals and Coal (DGMC).

HDR Salva assumed that future benchmark prices for Royalty calculations will be equal to or lower than the forecast prices used in this study and thus the forecast coal price has been used for the calculating royalty payments.

The agreement between BIB and the Indonesian Government appears to allow for the Government royalty to be calculated based on the coal sales price (or the benchmark coal price if it is higher) adjusted for the costs incurred past BIB’s last loading facility. This effectively means that revenue can be calculated on the FOB, barge loading basis for the purpose of royalty calculation. Regulation No. 644.K/30/DJB/2013 defines the maximum costs that can be deducted

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from the sales price for the purpose of the royalty calculation. The current maximum claimable costs are:

US $0.0221 per tonne nautical mile (US $0.0119 per tonne km) plus US $3.7406 for barging;

US $4.00 for transshipment;

US $0.25 for survey; and

0.8% per shipment for insurance.

HDR Salva has used the lower of actual cost and maximum allowable allowance for barging and transshipped activity related costs in determination of Royalty payable.

8.2 Inflation Outlook

HDR Salva has developed a nominal cash flow model for calculation of the NPV and assessment of mineral asset value. HDR Salva has assumed cost in US $ in real terms and converted it into US $ nominal terms based on the long term US inflation factor of 2.4%.

HDR Salva considers this to be an appropriate technique while valuing projects in high inflation, declining foreign exchange rate countries including Indonesia. This is a common approach used in most mineral asset valuation.

8.3 Corporate Income Tax

Corporate income tax is applicable to all Indonesian registered corporations. In 2009, the tax payable was reduced from 30% to 28% of gross income less allowable deductions. From 2010 onwards, the corporate income tax rate was reduced further to 25% of net taxable profit.

COW and CCoW holders operate under a specific corporate tax rate, which is set out under their contract. Corporate income tax rate is generally stipulated in their contracts and it is different for different generations CCoW holders. For most of the large producers (holders of 1st generation CCoW permit), the initial corporate tax rate is 35% and is applicable for the first 10 years of production. After this, the corporate tax rate reverts to 45% for the remaining life of the mine. The corporate income tax rate for second generation CCoW holders is 25% and for others it is between 30-45%.The higher tax rates for the CCoW holders is compensated for by a lex specialis status, which protects them from the introduction of any additional taxes that are not specified in their initial agreement. The tax rates for different concession types have been shown in Table 8:2.

The BIB concession is a second generation CCoW concession and applicable tax rates will be governed by its contract clause which stipulates that the company is subject to prevailing laws and regulations on taxation. Therefore, in line with the prevailing corporate income tax regulation an income tax rate of 25% is applied to the revenues from the concession.

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Table 8:2 Corporate Tax Rates

Concession Type Corporate Tax Reversion Rate

CCoW (First generations) 35% 45%

CCoW (Second generations) 25% N/A

CCoW (others) 30-45% N/A

IUP 25% N/A

8.4 Depreciation and Amortisation

Application of straight line depreciation at 12.5% (for all building and non-building assets) is permitted for first generation CCoW holders. For all other type of coal concession holder’s including second generation CCoW concessions like the BIB concession, different rate of depreciation is applicable for different type of assets (Minister of Finance Decree 138/KMK.03/2002 and Amendment 520/KMK.04/2002).

Fixed assets are categorised into four different types depending on nature of assets and its expected useful life. Assets are generally depreciated over 4, 8, 16 or 20 years and the company may opt to either apply a diminishing balance or straight line approach for each category of asset.

HDR Salva has opted to apply straight line depreciation rates depending on type of asset and their useful life.

8.5 Working Capital

Working capital has been included in the financial model has been estimated using the following assumptions:

Accounts Receivable Days 35; Inventory Days 15; and Accounts Payable Days 45.

HDR Salva has assessed these assumptions and found them to be inline with the current operating practices.

8.6 Carried Forward Tax Losses

As per existing law, the tax losses can be carried forward up to 5 years however tax losses cannot be carried back. For the purpose of this mineral asset valuation, HDR Salva hasn’t considered any prior carried forward losses as at 31 July 2014.

8.7 Value Added Tax

The prevailing VAT law stipulates that supplies of coal and other natural resources taken directly from the source are not subjected to VAT. This means that there will not be any output VAT applicable to coal produced from the BIB Concession. As per prevailing VAT law, a variable component of contractor cost attracts a 10% VAT. HDR Salva notes that there are uncertainties

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in current regulations and in the conditions of IUP/CCoWs regarding application of VAT to contractor cost. Erring on the side of conservatism, HDR Salva has opted to be conservative and applied VAT to all variable contractor cost and therefore a VAT rate of 10% is applied on all contractor cost.

8.8 Weightage Average Cost of Capital (WACC)

Weightage Average Cost of Capital (WACC) is generally used as a discount rate for the valuation of advanced mining projects with Reserves. HDR Salva has derived the WACC on the basis of Capital Asset Pricing Model (CAPM). Following is the assumptions used in calculation of WACC (Table 8:3).

Table 8:3 WACC (After Tax)

S.No. Items Value Source

1 Risk Free Rate of Return 8.05%

10 year Indonesia government bond yield (Source: AsianBondsonline.adb.org)

2 Equity Risk Premium 7.35% Indonesia Country Premium (Source: Bloomberg)

3 Relevant Beta 1.01 Unlevered beta of comparable companies, re-levered to average capital structure of comparable companies

4 Company & Project Risk 0.75% Additional company & project risk

5 Cost of Equity 16.22% Equal to (1) + (2) x (3) + (4)

6 Debt to Enterprise Ratio 40% Anticipated proportion of debt for the purpose of

WACC calculation

7 Cost of debt (after Tax) 4.39%

Indonesian interbank rate (JIBOR) adjusted for corporate tax (source: Bank Indonesia, www.bi.go.id)

8 WACC (after Tax) 11.49%

Furthermore, HDR Salva has crosschecked the calculated WACC for the project with WACC of the various comparable listed mining companies of Indonesia. Table 8:4 summarises WACC of the various mining companies in Indonesia.

Table 8:4 WACC for Indonesian Coal Mining Companies

Company Value Adaro Energy 9.1% Bayan Resources 8.3% Barau Coal 10.0% Average 9.1%

Source: Bloomberg

HDR Salva concludes that the calculated WACC for the project appears to be reasonable when compared with other listed mining companies in Indonesia.

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9 Market Analysis and Coal Prices

9.1 Global Outlook

The center of gravity for imported thermal coal has shifted to Asia in the past 10 years with China and India growing more rapidly than other traditionally large importers. This has been driven by a number of factors including the rapid industrialisation of China and India, strong economic growth in the general Asian region, a lack of sufficient domestic coal supply in these countries, a strong supply response from seaborne suppliers such as Indonesia and Australia and, until mid 2012, and a buoyant pricing environment.

As a response to this, Asian trade in the thermal coal market has increased significantly in the last five years, growing from 567 Mt in 2008 to 778 Mt in 2013 at a compound average growth rate (CAGR) of 6.53%. This growth has been driven by strong demand in Asia, predominantly China and India who have increased their combined market share of seaborne thermal coal imports from 9% (49 Mt) in 2008 to 32.8% (268 Mt) in 2013, accounting for over 90% of demand growth over the period. This rapid uptake in imported coal is a result of the ongoing electrification and urbanisation of these two countries which has been primarily met by coal-fired power plants.

Going forward, electrification and industrialisation will continue in Asia which is generally unaffected by concerns about carbon emissions. Instead the developing countries are more focused on ensuring lowest cost for power generation in which thermal coal remains the cheapest fuel source by far throughout the region. Coal suppliers in the Pacific basins will benefit immediately from this high demand and ramp up production in response. Over time, current marginal supply will be required to meet growing demand. New supply basins like Indonesia’s Central Kalimantan, Australia’s Surat and Galilee basins, Mozambique, Mongolia, Russia’s Far East, and the western USA will become marketable – complementing expansions in the existing low-cost basins of Indonesia and Australia.

9.2 Thermal Coal Demand

Industrial production is likely to grow significantly in China (over 7.0% per year through 2015) and strongly in India (above 6.0% per year through 2015). The share of electricity generation attributable to coal in developing countries will remain high, reflecting its abundance, comparative safety, portability of the fuel and low cost.

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Figure 9:1 Thermal Coal Major Demand Centres

Source: HDR Salva

As shown in Figure 9:1 and Table 9:1, China is the largest thermal coal importer in the world and has imported an estimated 152 Mt of thermal coal in 2013, followed by Japan (137 Mt) and India (116 Mt). By end of 2014, India is expected to surpass Japan and its import levels will be at second only to China.

Looking forward, HDR Salva expects high volumes of coal-fired power plant construction to drive demand for thermal coal on the seaborne market. China is forecast to continue addition of coal-fired generation capacity, currently adding almost 1 GW a week, which will increase import demand at a CAGR of 1.3% to 230 Mt by 2020. Indian coal-fired power plant development is also expected to drive import demand growth at a CAGR of 8%, to increase imports from 136 Mt in 2013 to 233 Mt in 2020.

Table 9:1 Major Thermal Coal Importers (Mt)

Year China India Japan South Korea Taiwan

2013 212 136 138 97 67 2014 Estimated 250 155 137 98 69 2015 forecast 222 192 137 105 69 2020 forecast 230 233 138 136 88 CAGR Growth 2013 to 2020 1.4% 8.0% 0.0% 5.0% 4.0%

Source: HDR Salva

China

India

Japan JSouth Korea

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9.3 Thermal Coal Supply

In 2013, Indonesia, Mozambique, Colombia along with Australia, South Africa and the USA were the major thermal coal suppliers globally with Indonesia growing the most (Figure 9:2).

Figure 9:2 Major Thermal Coal Suppliers

Source: HDR Salva

Indonesian seaborne supply has grown considerably, from 104 Mt in 2002 to 404 Mt in 2013, growing at 16.2% CAGR and accounting for around 80% of the growth in thermal coal export supply. Indonesian exports are now over double the second largest exporter, Australia, whose exports increased from 107 Mt in 2004 to 188 Mt in 2013, growing at a 6.5% CAGR. Colombia (74 Mt) and South Africa (73 Mt) continue to be significant exporters in the global market.

Going forward, Indonesia is expected to remain the world’s largest exporter of thermal coal. Export of coal from Indonesia is forecast to continue growing at a 3.5% CAGR reaching over 510 Mt in 2020 (Table 9:2).

Australian thermal coal exports are forecast to remain strong, despite the current infrastructure doubts surrounding exports from the Surat and Galilee Basins. Exports are forecast to reach 244 Mt by 2020, growing at a 3.5% CAGR (Table 9:2).

Russia

Australia

Indonesia

South Africa

USA

Colombia

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Table 9:2 Major Thermal Coal Exporters (Mt)

Indonesia Australia Colombia South Africa

2013 404 188 74 73 2014 Estimated 416 193 77 74 2015 forecast 454 208 79 79 2020 forecast 510 244 90 86 CAGR Growth 2013 to 2020 3.5% 3.5% 3.0% 2.3%

Source: HDR Salva

Despite the recent drop in coal prices, Indonesian coal production is set to increase significantly, as Indonesian coal mines are historically sitting at the lower end of the global production cost curve.

9.4 Thermal Coal Benchmark Price Forecast

Since late 2012, the thermal coal market has remained oversupplied due to a number of factors. Surplus thermal coal from the USA was exported, due to availability of low priced shale gas which resulted in a significant drop in thermal coal domestic demand and therefore price. Excess domestic USA thermal coal production was therefore exported if possible. High rates of production growth from Indonesia and Australia also has seen oversupply in the market, which has therefore seen the international coal price drop lower. This has impacted coal producers globally, with large numbers of coal projects especially in high cost jurisdictions like Australia and Canada being either cancelled or postponed.

Current low international prices, along with the price of shale gas increasing domestically in recent times, has resulted in a decrease of the thermal coal exports from the USA. Going forward, in HDR Salva’s opinion, as a result of cancellation and postponement of thermal coal projects, the growth in seaborne supply should subside which may provide support for the coal price. The majority of industry experts and brokers are of the opinion that thermal coal prices are likely to improve from the current levels as demand for thermal coal is expected to remain strong from developing countries such as India and China. Table 9:3 summarises price outlook for the Newcastle Coal Index (GCV 6,322 kcal/kg gar) provided by various industry experts and brokers. This data was collected by Consensus Economics Inc. in June 2014.

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Table 9:3 Thermal Coal (Newcastle Coal Index) Price Outlook in Nominal USD

Analyst 2014E 2015F 2016F 2017F 2018F 2019F

Commonwealth Bank 79.6 88.6 87.0 86.8 88.1 94.2

Liberum Capital 78.3 85.0 NA NA NA NA

Investec 84.0 84.2 88.3 93.8 95.0 95.0 ANZ 81.8 84.2 88.8 93.8 100.0 NA

RBC Capital Markets 81.8 84.2 88.8 90.0 90.0 99.4

UBS 81.8 84.2 87.3 89.5 90.0 97.6

Euromonitor International 78.7 82.6 86.3 91.9 96.7 NA

Wilson HTM 79.3 84.3 88.5 92.0 95.5 103.4

Credit Suisse 80.0 82.5 90.0 95.0 95.7 NA

Deutsche Bank 80.0 82.3 88.1 91.2 94.4 NA Societe Generale 78.7 80.6 86.7 91.2 92.6 93.9

Morgan Stanley 76.5 85.0 98.7 94.0 98.7 112.8 Macquarie Bank 75.6 79.1 87.8 92.5 94.5 NA

BREE 74.3 73.8 76.0 80.0 85.0 NA

Capital Economics 72.3 63.8 60.0 NA NA NA

Average 78.9 81.6 85.9 90.9 93.6 99.5

Note: Coal Price forecast are in nominal terms and all in USD

Source: Consensus Economics Inc., June 2014

HDR Salva has opted to use averages of the banks and various analysts as the forecast prices for the benchmark coal prices for the purpose of this report.

9.5 Coal Price Used for Project Assessment

The BIB Mine contains two different types of coals. Coal from the PP Block will be sold as high CV coal product, High Rank Coal (“HRC”). Coal from other blocks will be blended to produce one single low CV coal product, Low Rank Coal (“LRC”).

Therefore, HDR Salva has opted to forecast the price for HRC coal and LRC coal separately.

9.5.1 High Rank Coal Price Forecast

The coal product from the PP Block is a high quality bituminous coal. It has been assumed for the purpose of this study that this coal will be marketed separately, although opportunities exist to increase the total value by blending this with the lower rank coal.

In HDR Salva’s opinion, the forecasted price of the PP Block coal should be at prices similar to the Newcastle Coal Index. HDR Salva notes that the PP Block coal has a higher GCV than typical Newcastle coal (on average, 5.8% higher than Newcastle benchmark). However, compared to Newcastle coal, it contains higher sulphur at 1.36%. Therefore, in HDR Salva’s opinion, the HRC coal from the PP Block should sell at prices similar to the Newcastle benchmark. Higher sulphur content is assumed to be offset by the higher CV content in PP Block coal and freight advantage which customers enjoy over Newcastle coal.

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9.5.2 Low Rank Coal Price Forecast

The coal from KG, BS, SN and SS blocks will be blended to produce one single product, Low Rank Coal (LRC). The average predicated product coal quality based on Reserves and life of mine plan for KG, BS, SN and SS block is TM (ar) 35.4%, Ash (ar) 4.8%, CV (gar) 4,100 Kcal/Kg.

The lower energy coal sells at a discount to the Newcastle benchmark price. This includes a pro-rata energy discount and further discount to account for higher freight and, lower boiler efficiencies, and higher ash disposal associated with lower quality coal.

The quality of the LRC coal is expected to be similar to that marketed by PT Adaro Energy, Tbk (“Adaro”) as Ecocoal, albeit a slightly bit lower CV (2.4% lower than Ecocoal). Therefore in HDR Salva’s opinion, LRC coal should trade at a slight discount to price of Adaro’s Ecocoal mainly because of a slightly lower CV. To determine long term price outlook for the LRC coal, HDR Salva has first determined the long term price outlook for the Adaro’s Ecocoal and the price of LRC coal, which was determined from Adaro’s Ecocoal price on the basis of pro-rata energy differentials.

At the time of writing of this report, the coal produced from the BIB Mine was sold at price of $38-$39/t. The mined out coal was sold to various end users mainly located in China, India and South Korea.

To estimate the long term price for the Adaro’s Ecocoal, HDR Salva has adopted the latest brokers and analyst forecasts for thermal coal prices ex Newcastle (US$/t, FOB) as a benchmark thermal coal price. The data which was collected by Consensus Economics Inc. in June 2014 and included forecasts of future prices for coal of CV 6,322 kcal/kg (gar) by various analysts and Industry experts. HDR Salva has adopted an average of these is forecast prices and taken as a reasonable benchmark price.

Utilizing the historical price differential for this type of Indonesian coal over the Newcastle benchmark price, HDR Salva has discounted the long term benchmark prices to estimate the price for the low rank sub bituminous (higher moisture, lower CV) coal.

HDR Salva notes that the historical price of Adaro’s Ecocoal is trading in the range of 47% to 53% of the Newcastle Index over in the past three years. HDR Salva notes that the price differential between the Newcastle coal index and Indonesian LRC has decreased in recent times, due to low bulk sea fright rates at present and more and more power plants being designed to operate at these coal blends. At the time of writing this report at end of July 2014, Ecocoal was selling at 53.3% of the benchmark price. In HDR Salva’s opinion, over the under short to medium term, the price ratio (ratio of Ecocoal’s price over Newcastle coal Index) is likely to remain above 50%. However, to be on the conservative side, HDR Salva has chosen a ratio of 48% of the Newcastle Index to estimate the price of Ecocoal.

Furthermore, to estimate the price of the LRC coal, HDR Salva has opted to apply a further discount of 2.3% on the Adaro’s Ecocoal’s forecasted price. The price discount of 2.3% has been taken on the basis of pro-rata energy differentials.

The projected price for the BIB Mine coal has been shown in Table 9:4 and Figure 9:3.

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Table 9:4 Coal Price Forecast, US $/t 2014E 2015F 2016F 2017F 2018F 2019F

Nominal Terms Newcastle Coal Index 78.9 81.6 85.9 90.9 93.6 99.5 Adaro’s Eco Coal 37.9 39.2 41.2 43.6 44.9 47.8

LRC- BIB Coal 37.0 38.3 40.3 42.6 43.9 46.7 HRC- BIB Coal 78.9 81.6 85.9 90.9 93.6 99.5

Real Terms Newcastle Coal Index 78.4 79.7 81.9 84.7 85.1 88.4

Adaro’s Eco Coal 37.6 38.3 39.3 40.6 40.9 42.4

LRC- BIB Coal 36.8 37.4 38.4 39.7 39.9 41.4 HRC- BIB Coal 78.4 79.7 81.9 84.7 85.1 88.4

HDR Salva has assumed coal prices to remain constant in real term after 2019.

Figure 9:3 Project Coal Prices (US $/t, Real Terms)

Source: Consensus Economics, HDR Salva

Price quoted in consensus Economics Outlook is quoted in Nominal Terms. They were converted to Real Terms.

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 LT

LRC Coal HRC Coal Newcastle Coal Index Adaro's Eco Coal

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10 Capital Cost HDR Salva has assumed mining operations to be commenced using contractor’s mining equipment. The capital cost and charges for this equipment have been factored in the contractor charges as operating cost. This is an industry standard practice in Indonesia and Australia.

The total capital cost estimate for the initial development and ramp-up of the facilities at the BIB Mine including mining, logistics and associated infrastructure is estimated to be US $407.9M which includes a contingency of US $53.2M. A contingency of 15% has been applied to the capital cost estimate. These estimated are considered to have an accuracy of ± 15%.

In addition to the expansion capital of US $407.9M, HDR Salva has factored 3% of the invested capital apart from land purchase cost as sustaining capital per annum for asset maintenance over the life of mine.

While preparing these estimates, HDR Salva has relied on industry benchmarks, its internal database and expertise, internal studies on the BIB concessions and the previous estimates. Estimates of major infrastructure capital cost elements are based on pre-feasibility studies containing only preliminary engineering designs and can be considered preliminary estimates. However, cost associated with infrastructure facilities is relatively well established as construction and use of these types of infrastructure is quite common in Indonesia.

In line with the standard industry practice, mine closure cost has been taken as annual expense under operating cost estimates rather than as capital cost. The Capital Cost estimates and the basis of its estimation are shown in Table 10:1. The cost estimate was prepared in Q3 2014 in US dollars ($).

Table 10:1 Capital Cost (Real Terms)

Sr. No. Particulars Direct Cost

($M) Contingency

($M) Total Cost

($M)

1.1 Land Compensation 78.4 11.8 90.2 1 Land Compensation 78.4 11.8 90.2

2.1 Diversion Channel 6.0 0.9 6.9 2.2 Road From Pit to ROM Stockpile 1.0 0.2 1.2 2.3 Workshop, Office and Laboratory 2.5 0.4 2.9 2.4 Backup Power Generation 1.5 0.2 1.7 2.5 Explosive Magazine and Site Preparation 1.0 0.2 1.2 2.6 Miscellaneous Roads 0.8 0.1 0.9 2.7 Coal Power Station and Distribution 45.0 6.8 51.8 2.8 Coal Handling Equipment 8.0 1.2 9.2 2.9 ROM - Crushing and Screening 30.0 4.5 34.5 2.1 Contractor Mobilisation 10.0 1.5 11.5

2.11 Accommodation Camp 6.0 0.9 6.9 2.12 Fuel Storage 3.0 0.5 3.5 2.13 Water supply and Sewage System 1.0 0.2 1.2 2.14 Communications 0.5 0.1 0.6

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2 Mine Infrastructure 116.3 17.4 133.7 3.1 Haul Road Construction 11.0 1.7 12.7 3.2 Overland Conveyor 85.0 12.8 97.8 3 Hauling to Jetty 96.0 14.4 110.4

4.1 Port Stockpile and Jetty 60.0 9.0 69.0 4 Port Facilities 60.0 9.0 69.0

5.1 Additional Studies 4.0 0.6 4.6 5 Other Capital Expenses 4.0 0.6 4.6 Total Project Capital 354.7 53.2 407.9

10.1 Basis of Estimation

Basis of estimation for the major cost elements have been given below.

10.1.1 Pricing

The pricing of commodities and the design / supply of equipment are not based on binding contracts. Budget quotations have been used for all major equipment items and capital items which have been obtained from either new quotes from a supplier or HDR Salva’s internal database. Budget quotations denote indicative pricing provided for specified equipment and material where no commitment is made to provide the equipment or materials at the particular price at a future date. Minor equipment costs have been based on recent quotes on file for similar equipment.

10.1.2 Project Currency and Foreign Exchange

The project capital costs are expressed in United States dollars ($) with the following provisions:

Costs are based on current market conditions as in Q3, 2014; Costs submitted in other currencies have been converted to US $. Foreign currency

exchange rates applied to the capital cost estimate relative to the US $ are set out as US $1.00 = IDR 11,500; and

No provision has been made for variations in the currency exchange rates.

10.1.3 Duties and Taxes

Duties and taxes including VAT for the capital items are included in the estimate unless otherwise noted.

10.2 Land Acquisition

The land covering part of Girimulya and Pasopati blocks fall within the area of United Fiber and/or its subsidiaries while the remaining land is held by other parties and is used mainly for palm oil plantation. BIB has to pay certain fees on a per tonne basis to operate in this area.

A total of approximately 6,452 ha of land requirement have been estimated over the life of mine for mine pit and waste dumps. An extra 235 ha of land has been considered to accommodate building office, infrastructure and site roads resulting in total land requirement of 6,687 ha over the life of mine.

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Approximately 2,075 ha of this total land requirement is owed by United Fiber. Remaining 4,612 ha of land will be required to be acquired over the life of mine from other third parties. Land acquisition costs have been estimated on the basis of US $17,000 per ha for the total requirement for the project (calculated from mine plan). The estimates of US $17,000 per ha can be considered as a conservative estimate for this area and allows a cover for palm oil trees.

10.3 Diversion of Channel

A small watercourse flows through the concession area. This stream may require to be diverted in the process of mining. Total cost associated with the diversion of water stream has been estimated as US $6.9M. This cost estimate is based on Preliminary designs of diversion channels estimated costs for the volume of material required to be moved.

10.4 ROM Handling Facilities

Total Cost associated with the construction of ROM coal handling facilities are estimated at US $43.7M, including a contingency of US $5.7M. The capital cost associated with installation of crushing and screening equipment is estimated as US $34.5M while coal handling equipment is estimated at US $9.2M. The estimated cost is based on the preliminary layout and costing for supply and construction (including ground support and earthworks) for an individual unit of 10 to 12 Mtpa. Four of these units would be required to cater for the peak production capacity at the project.

10.5 Haul Road Construction

Haul Road construction was well advanced and most of the road was already constructed at the time of site visit in July, 2014.

The estimated cost of construction for the rest of the haul road is estimated as US $12.7 M, including a contingency of US $1.7 M. This is considered appropriate for a road suitable for trucks of up to 60 tonne capacity. Haul Road construction was well advanced and most of the road to the Kusan Block was already constructed at the time of site visit in July, 2014.

10.6 Overland Conveyor

Total Cost associated with the construction of ROM coal handling facilities are estimated at US $98M. The cost of overland conveyor is based on a cost of US $3.8M per kilometer. The overland conveyor will be used for both the Kusan and Girimulya block.

HDR Salva notes that use of an overland conveyor is not very widespread in Indonesia. However HDR Salva has reviewed operations of numerous overland conveyors working globally including the operation of PT Kaltim Prima Coal’s 13 km overland conveyor, currently under operation in East Kalimantan region and a proposed 43 km long overland conveyor by PT Barau Coal. The capital and operating costs for overland conveyor systems are relatively well understood. HDR Salva has opted to take a conservative approach in estimating these costs.

10.7 Coal Fired Power Station

The power requirement of overland conveyor was estimated at 23 MW. A normative estimate for the construction of Power plant cost of US $2M per MW capacity was used including power

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distribution and reticulation. This does not include allowance for electrification of other equipment in the project. Capital costs for the construction of power plant have been taken as US $52M, which includes a contingency of US $7M.

10.8 Port Stockpile and Jetty

Three additional units of stockpiles and Jetty each of 10 to 12 Mtpa capacity have been envisaged to be constructed. A cost estimate of US $20M for each of this unit was made on the basis of the preliminary layout and costing for supply and construction (including ground support and earthworks). Overall the total estimated cost for port stockpile and Jetty facility including contingency has been taken as US $69M, which includes a US $9M provision for contingency.

10.9 Other Cost Items

Costs for other minor items are based on HDR Salva’s in-house database and typical industry benchmark costs adjusted for the site conditions.

10.10 Mine Reclamation

In line with the standard industry practice, mine closure costs have been taken under operating cost estimates.

10.11 Exclusions

The following items are excluded from the capital cost estimate:

Refundable taxes and duties; Currency fluctuations; Lost time due to severe weather conditions; Lost time due to force majeure; Additional costs for accelerated or decelerated deliveries of equipment, materials and

services resultant from a change in project schedule; Any project sunk costs including this study; Community relations; and Owner’s risk and exposure.

10.12 Capital Phasing

Based on the requirement of the project, capital expenditure for the major items has been distributed over the ramp-up period. The capital expenditure over the life of mine is shown in Table 10:2 below.

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Table 10:2 Capital Cost Phasing (US $M, Real Terms)

Capital Item 2014 2015 2016 2017 2018 2019 Total

Land Compensation 9.0 22.5 22.5 18.0 9.0 9.0 90.2 Overland Conveyor 0.0 19.6 19.6 29.3 29.3 0.0 97.8 Port Stockpile and Jetty 0.0 0.0 17.3 17.3 17.3 17.3 69.0 Coal Power Station and Distribution 0.0 0.0 5.2 15.5 15.5 15.5 51.8 Crushing and Screening 0.0 6.9 6.9 6.9 6.9 6.9 34.5 Haul Road Construction 7.6 5.1 0.0 0.0 0.0 0.0 12.7 Contractor Mobilisation 1.2 1.7 1.7 2.3 2.3 2.3 11.5 Coal Handling Equipment 0.0 0.0 4.6 0.0 2.3 2.3 9.2 Diversion Channel 0.0 0.0 0.0 1.7 1.7 3.5 6.9 Accommodation Camp 0.0 0.0 3.5 0.0 3.5 0.0 6.9 Additional Studies 0.0 2.3 1.4 0.9 0.0 0.0 4.6 Fuel Storage 0.0 1.7 0.0 1.7 0.0 0.0 3.5 Workshop, Office and Laboratory 0.0 1.4 0.0 1.4 0.0 0.0 2.9 Backup Power Generation 0.0 0.0 0.4 0.9 0.4 0.0 1.7 Road From Pit to ROM Stockpile 0.0 0.3 0.0 0.3 0.3 0.3 1.2 Explosive Magazine and Site Preparation 0.0 0.6 0.3 0.3 0.0 0.0 1.2 Water Supply and Sewage System 0.0 0.0 0.6 0.0 0.6 0.0 1.2 Miscellaneous Roads 0.0 0.4 0.0 0.4 0.0 0.0 0.9 Communications 0.0 0.3 0.0 0.0 0.3 0.0 0.6 Total 17.8 62.8 83.9 97.0 89.4 57.0 407.9

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11 Operating Cost

11.1 Method of Estimation

Overall operating costs are a combination of mining costs, crushing & handling costs, product transportation and general and administrative (G&A) costs.

These costs are based upon information obtained from the following sources:

Existing contracts;

Pre-feasibility studies;

Budgetary quotations;

HDR Salva projects database; and

Experience of HDR Salva staff with other similar operations in the region.

Where specific data does not exist, cost allowances have been based upon consumption and operating requirements from other similar properties for which reliable data exists. The operating costs have been estimated and presented with an added contingency allowance of 5%. All costs are presented in real terms (Q3, 2014 dollars). Costs are exclusive of taxes unless otherwise noted. For the purpose of estimation, fuel price delivered to the site and exchanged rate assumed for the purpose of estimation is as followed:

Fuel Price US $1.10 / litre; and

Exchange Rate IDR 11,500 / US $.

In HDR Salva’s opinion, all operating cost estimates are reasonable at this stage of project assessment given the size and stage of the project.

11.2 Items included in the Operating Cost Estimates

Coal is mined at the BIB Mine by conventional open-pit mining method using truck and excavator combination. It is envisaged to continue the use of mining contractors to exploit coal and overburden. Following cost elements were considered by HDR Salva:

Land Clearing and Top Soil Removal: Clearing of land and removal of top soil in the process of mining, generally taken on the basis of $/ha of the area;

Mining – Waste / Overburden: Cost per bcm of waste removed; Mining – Coal: Cost per tonne of extracting coal; Crushing/ROM: Cost per tonne for coal crushing and handling; Power cost: Power cost per tonne of coal; Labour cost: Cost per tonne towards salary and wages to the company staffs; Trucking (Haul to Stockpile): Cost per tonne km to haul to port stockpile using specialist

coal haulage trucks; Overland Conveyor: Cost per tonne km to haul to port stockpile using overland conveyor; Port Stockpile and Barge loading: Cost per tonne to store and load barges; Barging: Cost per tonne per kilometre to transfer barges; and coal using; and Transhipment: Cost per tonne per kilometre for transfer from barge to mother vessel

using transhipment facility.

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Additional variable operational costs have also been assumed by HDR Salva which includes:

Environment and Mine Closure: Cost per tonne for all associated expenditure related to environmental approval and reclamation;

Payment of agreed fees on a per tonne basis in the area owned by United Fiber; Government Royalties: Cost per tonne for royalty (13.5% of FOB “Barge”); Local Government Tax; and Corporate Overheads.

Costs have been categorised into four different cost types

Contractor Cost;

Owner Cost;

VAT; and

Local Government cost and Royalties.

11.3 Contractor Costs

HDR Salva has assumed all contractor cost to be variable in nature. Variable contractor cost is the type of cost which typically varies with the changes in minable quantities and strip ratio. The variable contractor cost is generally based on unit contract rates where a rate is specified for a number of physical quantities which are physically measured on a periodic basis including area cleared, waste mined etc. These types of contracts are generally in practice across entire coal mining Industry. HDR Salva has assumed a contract mining operation in all the pits. HDR Salva’s estimates are based on current contracts already in place at the mine, firm quotes, pre-feasibility studies and budget quotes.

HDR Salva notes that there is a significant downward revision in contract mining quotes and new rates are more competitive. HDR Salva has assumed unit rates that are considered to be sustainable for both contractors and mine owners in the long term. HDR Salva has compared these against the industry benchmarks and estimated these to be reasonable. Table 11:1 below shows the contractor unit rates.

Table 11:1 Contractor Unit Rates (Real Terms)

Cost Item Unit Rate Land Clearing $/ha 1,700 Topsoil Removal $/bcm 2.40 Waste Mining $/bcm 2.40 Waste Haulage $/bcm/km 0.30 Coal Mining $/t 1.40 Haul to ROM Stockpile $/t km 0.15 Haul to Port Stockpile – Road $/t km 0.13 Barging $/t km 0.05 Transhipment $/t 2.10

Note: All quoted cost in local currency is adjusted for fuel price and exchange rate

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11.4 Owner Costs

HDR Salva has assumed all owner cost to be variable in nature. Variable owner costs vary with the changes in physical quantities in the mine plan and are incurred by the company directly.

HDR Salva’s estimates are based on current costs at the mine and pre-feasibility studies. The cost was compared with actual costs from other operations and then adjusted for the conditions and processes on the site. HDR Salva has determined these to be comparable against the industry benchmarks and estimated these to be reasonable. Table 11:2 below shows the owners unit rates.

Table 11:2 Variable Owner Unit Costs (Real Terms)

Cost Item Unit Rate ROM Coal Handling $/t 0.50 Haul to Port Stockpile - Conveyor $/t km 0.05 Port Stockpile and Barge Loading $/bcm 1.00 Mine Closure $/ha 8,500 Environmental and Rehabilitation $/t 0.15 Miscellaneous Operations $/t 0.15 Water Treatment $/t 0.05 Salary and Wages $/t 0.30 Camp and Accommodation $/t 0.05 Medical & Community Development $/t 0.15 Land Use Payment $/t 0.25 Corporate Overheads $/t 0.50 Contingency $/t 1.12

11.5 VAT

VAT is attributable on the variable component of contractor cost only. However, HDR Salva has taken a conservative approach and assigned a 10% VAT on all contractor costs rather than variable component only.

11.6 Royalties and Government Costs

The royalty is generally levied as percentages of sale proceeds to be applied for the different types of coal depending on its GCV and method of mining. However, different royalty rates have been adopted for different types of ownership structure which include: Contract of Work holders (CoWs) Coal Contract of Work holders (CCoW) Izin Usaha Pertambangan holders (IUP) and Izin Usaha Pertambangan Khusus holders (IUPK).

A royalty of 13.5% of revenue is applicable to coal sales from the BIB concession. This amount is defined in the PKP2B and subsequent agreements between BIB and the Indonesian government. Regulation No. 17 of 2010 issued by the Minister of Energy and Mineral Resources (MEMR) also requires that all coal sales be made at a minimum (or benchmark) price that is defined by the Indonesian government on a monthly basis. The methodology for calculation of the minimum

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price is described in Regulation No. 515.K/32/DJB/2011 and Regulation No. 644.K/30/DJB/2013 issued by the Directorate General of Minerals and Coal (DGMC).

HDR Salva assumed that future benchmark prices will be equal to or lower than the forecast prices used in this study and thus the forecast coal price has been used for the calculating royalty payments. In additional to the royalty rate of 13.5% HDR Salva has also applied a provision of $0.50/t towards local government costs.

11.7 Overall Operating Cost

Total operating costs per tonne of coal product including royalty for the BIB Mine has been estimated as $29.41/t over the life of the mine. VAT has been indicated under separate heading. The cost components for the different heads have been given in Table 11:3 below.

Table 11:3 Average Unit Operating Cost (Real Terms) over Life of Mine

Cost Item $/t Land Clearing $0.01 Topsoil Removal $0.05 Waste Mining $10.17 Waste Overhaul $1.21 Coal Mining $1.40 Haul to ROM stockpile $0.30 ROM Coal Handling $0.50 Haul to Port Stockpile $1.36 Port Stockpile and Barge loading $1.00 Barging $1.28 Transhipment $2.10 Mine Closure $0.05 Environmental and Rehabilitation $0.15 Miscellaneous Operations $0.15 Dewatering and Water Treatment $0.05 Salary and Wages $0.30 Camp and Accommodation $0.05 Medical & Community Development $0.15 Land Use Payment $0.15 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $1.69 Contingency $1.16 Operating Cost Excl. Royalty $24.28 Royalty $5.13 Operating Cost incl. Royalty $29.41

HDR Salva has compared these against the industry benchmarks and estimated these to be reasonable.

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12 Financial Analysis & Project Valuation The BIB Mine as an operating mine undergoing expansion as such, in HDR Salva’s opinion, it is appropriate to use the discounted cash flow (DCF) method to determine the technical value of the project. In the forming over opinion of valuation, HDR Salva has not applied any premium or discount to the technical value to determine the market value on the basis of strategic, market related or any other special factors.

12.1 Modelling Methodology & Considerations

The valuation model for the BIB Mine was developed in Microsoft Excel. Valuation has been derived from analysis of cash flows calculated for the project over the life of mine. The valuation was designed so that input parameters could be varied to investigate different scenarios to determine an estimated valuation range. HDR Salva has adopted the following considerations in its financial model:

The model is developed in nominal terms. All cost and prices were considered in real terms and then converted to nominal terms;

The model assumes continuous cash in and outflows, which are reflected in mid-point discounting during a period;

Cash flows was developed on stand-alone project basis; Sunk cost (including acquisition costs) is excluded; and All future cash flows were discounted using WACC.

12.2 Base or Preferred Case

A base case valuation was developed using the assumptions discussed in various section of this report. Key inputs are summarised in Table 12.1 below.

Table 12:1 Preferred Case – Key Input Parameters

Key Parameters Description Unit Value Peak Production capacity Maximum annual production capacity Mtpa 40 Life of Mine Considered Years of coal production years 20 Discount Rate Discount rate (nominal terms) % 11.5% Corporate Tax Rate Indonesian corporate tax rates % 25.0% LRC Coal Price Aver. price for LRC Coal (real terms) $/t 41.17 HRC Coal Price Aver. price for HRC Coal (real terms) $/t 85.26 Capital - Project Total project capital expenditure (real terms) $M 408 Capital - Sustaining Total ongoing replacement capital (real terms) $M 152 Coal Mined Coal mined over life of mine Mt 604 Stripping Ratio Aver. ratio of waste: coal bcm:t 4.24x Waste Mined Waste mined over life of mine Mbcm 2,561 Operating Cost Excl. Royalty Aver. operating cost (real terms) $/t 24.28 Royalty Aver. royalty (real terms) $/t 5.13

Operating Cost incl. Royalty Aver. operating cost including royalty (real terms) $/t 29.41

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15

15

Tota

l Cap

ital

$M

638

18

65

89

108

105

73

11

11

12

12

12

12

13

13

13

14

14

14

15

15

Ope

ratin

g Co

st

$M

19,3

91

50

142

269

392

548

644

717

883

1,08

6 1,

128

1,17

5 1,

222

1,28

3 1,

377

1,40

8 1,

528

1,67

6 1,

716

1,32

0 82

7

Roya

lty

$M

4,04

9 10

33

67

10

1 13

1 16

1 18

3 21

2 24

7 25

4 26

0 26

7 27

3 28

0 28

6 29

3 30

0 30

8 23

6 14

6

EBIT

DA

$M

9,21

4 19

93

20

9 32

2 37

9 49

6 57

9 61

6 66

1 66

8 66

4 66

1 64

5 59

8 61

4 54

2 44

5 45

5 34

7 20

3

Cash

Mar

gin

15

9

13

16

18

16

18

19

18

17

17

17

17

16

15

15

14

11

11

12

11

Depr

ecia

tion

$M

543

0 2

6 11

17

21

22

23

24

25

26

28

29

31

33

36

39

44

51

73

Taxa

ble

Inco

me

$M

8,67

2 19

91

20

3 31

1 36

2 47

5 55

7 59

3 63

7 64

3 63

8 63

3 61

6 56

7 58

0 50

6 40

5 41

1 29

6 13

0

Corp

orat

e Ta

x $M

2,

168

5 23

51

78

91

11

9 13

9 14

8 15

9 16

1 15

9 15

8 15

4 14

2 14

5 12

7 10

1 10

3 74

33

EARN

ING

AFT

ER T

AX

$M

6,50

4 14

68

15

2 23

3 27

2 35

6 41

8 44

4 47

8 48

2 47

8 47

5 46

2 42

5 43

5 38

0 30

4 30

8 22

2 98

Depr

ecia

tion

$M

543

0 2

6 11

17

21

22

23

24

25

26

28

29

31

33

36

39

44

51

73

Wor

king

Cap

ital A

dj.

$M

0 -4

-1

2 -1

8 -1

7 -1

2 -1

8 -1

5 -1

1 -1

3 -3

-1

-2

0

2 -3

3

6 -3

28

92

Capi

tal E

xpen

ditu

re

$M

638

18

65

89

108

105

73

11

11

12

12

12

12

13

13

13

14

14

14

15

15

Unl

ever

ed C

ash

Flow

$M

6,

409

-8

-6

51

119

172

285

414

445

477

493

491

488

478

445

453

405

335

335

287

248

Disc

ount

ed C

ash

Flow

$M

2,

112

-8

-6

41

86

111

166

216

208

200

185

166

148

130

108

99

79

59

53

40

31

Cum

ulat

ive

DCF

$M

-8

-13

28

114

226

391

607

815

1,01

5 1,

200

1,36

5 1,

513

1,64

2 1,

751

1,84

9 1,

929

1,98

8 2,

040

2,08

1 2,

112

NPV

$M

2,

112

662




12.2.1 Preferred Case Results

Financial Model for the preferred case is shown in Table 12:2. The results of the preferred case valuation scenario are shown in Table 12:3 below.

Table 12:3 Preferred Case – Financial Outputs & Valuation

Financial Summary (Nominal Terms) $ M Revenue $32,654 Operating Cost $19,391 Royalties Payment $4,049 Corporate Tax Expenses $2,168 Total Capital (including Sustaining Capital) $638 Cumulative Free Cash Flows $6,409 Net Present Value (NPV) $2,112

Under the preferred case of using a nominal discount rate after tax of 11.49%, the Project NPV is determined as US $2,112M. The Project cash streams are shown in Figure 12:1 while discounted and cumulated discounted cash flows is indicated in Figure 12:2.

Figure 12:1 Cash Streams – Preferred Case

-3000

-2000

-1000

0

1000

2000

3000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

US

$M

Revenue Capital Cost Operating Cost Taxes and Royalties Free Cash Flow

663




Figure 12:2 Discounted Cash Flow Profile

12.2.2 Sensitivity Analysis Sensitivity of the project was assessed for key parameters like sales price, discount rate, operating cost and capital cost. Figure 12:3 exhibits the project sensitivities.

Figure 12:3 Key Project Sensitivities

Table 12:4 outlines the impact of project NPV for change in the input parameters.

-500

0

500

1000

1500

2000

2500

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

US

$ M

illio

n

Cumulative Discounted Cash Flows Discounted Cash Flows

0

500

1000

1500

2000

2500

3000

3500

4000

80% 90% 100% 110% 120%

US

$ M

Change in Input Parameter

Coal Sales Price Discount Rate Capital Cost Operating Cost

$2,112 M

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Table 12:4 Project Sensitivity

Key Input Variables Change in Input Parameter (%)

80% 90% 100% 110% 120% Coal Sales Price 534 1,323 2,112 2,901 3,691 Discount Rate 2,572 2,327 2,112 1,922 1,754 Operating Cost 3,014 2,563 2,112 1,661 1,210 Project Capital Cost 2,177 2,144 2,112 2,080 2,048

As seen in the Table 12:4, the BIB Mine is most sensitive to coal sales price followed by change in operating cost.

12.3 Valuation Range

In order to determine the range of valuation estimates (low and high scenarios), a range of key inputs in the financial model were selected to reflect upper and lower values that are considered reasonable by HDR Salva for key input assumptions. To determine low case valuation, coal price was decreased by 5% along with 5% increase in capital and operating cost. In case of high case, price was increased by 5% along with 5% reduction in capital and operating cost. The input parameters assumptions for the low and high range are shown in Table 12:5.

Table 12:5 Valuation Range - Input Parameters

Case Key Input Parameters Unit Valuation Input

Low Aver. Price – LRC $/t 39.10 Operating Cost (Real Terms) $/t 30.89 Project Capital Cost (Real Terms) $M 428.2

Preferred Aver. Price – LRC $/t 41.17 Operating Cost (Real Terms) $/t 29.41 Project Capital Cost (Real Terms) $M 407.9

High Aver. Price – LRC $/t 43.23 Operating Cost (Real Terms) $/t 27.94 Project Capital Cost (Real Terms) $M 387.5

The results of the analysis for the low and high cases are shown in Table 12.6 below.

Table 12:6 Valuation Range

Key Outcomes Unit Valuation Range (US $M) Low High

Net Present Value (after Tax) $M 1,476 2,748

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13 Valuation Summary HDR Salva has estimated the valuation of the BIB concession using the assumptions and inputs detailed in this report. HDR Salva’s opinion of the technical value and thus the project value (on 100% basis) as at 31 July 2014 is shown in Table 13:1 below, which takes into account the high and low cases and the sensitivity of the project.

Table 13:1 Valuation Summary

Item Market Value (US $M)

Lower Preferred Upper

Net Present Value, 100% of Project Basis 1,476 2,112 2,748

13.1 Previous Valuation HDR Salva is not aware of any valuations being publically released for the BIB concession in the past.

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14 Risk Factors & Opportunities HDR Salva has identified a range of risk elements or risk factor which may affect the future operations and financial performance of the BIB Mine. Some of the risk factors are completely external, which is beyond the control of management. However the project specific risk can be mitigated by taking proper measure in advance. Key Project risks that have been identified are discussed below.

14.1 Project Risks

14.1.1 Resources and Reserves

Although the majority of coal included in the Life of Mine Plan contains Proved and Probable Reserves which was modelled from Measured and Indicated Resources respectively, a total of 15.2% of the coal in the pit shell is classified under “ Inferred Resources within optimized pit shell due to the lack of core samples and quality analysis.

Therefore, to mitigate the risk associated with the inclusion of Inferred Resources within optimized pit shell and to be on conservative side, HDR Salva has scheduled total minable tonnes to be equal to the quantity of Proved and Probable Reserves only. In HDR Salva’s schedule, the cumulative tonnes to be mined over the life of mine do not exceed the total Coal Reserves.

However, it is still considered possible that further exploration and technical studies may result in a reduction or an increase of Reserves which would have some impact on the value of the concession.

14.1.2 Geotechnical Risk

Although the design of pit slop angles have been based on Geotechnical studies that undertaken for the Kusan block in the BIB concession, but these studies are considered to be preliminary in nature. These studies were used to assess the general relationship between pit depth and overall slope angles for pit high walls.

Although HDR Salva has taken an appropriate factor of safety by maintaining a large offset in the pit design, further detailed geotechnical analysis is recommended for the final pit designs to ensure that there is an adequate factor of safety for the actual pit designs.

14.1.3 Coal Price Risk

Coal prices and the demand for coal are cyclical in nature and subject to significant fluctuations, and any significant decline in the prices of coal or demand for coal could materially and adversely affect the Company’s business and financial condition results of operations and prospects. Coal markets are highly competitive and are affected by factors beyond the Company’s control which include but not limited to:

Economic conditions in Indonesia and globally;

Government actions; and

667




Fluctuations in industries with high coal demand such as Power Sector and other industries using thermal coal.

Although sufficient analysis and studies have been conducted to ascertain future long term forecasts, if there is a fall in long term prices there would be a substantial reduction in the value of the project. While it is unlikely that the project will become uneconomic as it is considered to be a relatively low cost producer, the reduction in long term price will adversely effect the coal reserves estimates and may cause reduction in production target and pit design.

14.1.4 Impact on Weather on Production

South Kalimantan has tropical climate with a high rainfall. During rain season, weather is expected to impact on the mining production due to the project being an open-pit mining operation. However, this has been factored into account for potential weather related impacts by having a provision of sufficient coal stockpiles.

14.1.5 Expansion and Infrastructure Associated Risk

Ramping up production to 40 Mtpa requires mobilisation of large amounts of mobile equipment and construction of coal handling facilities. The ability to achieve the target production expansion has significant impact on the valuation of the project.

While a reasonable timeframe has been allowed for obtaining approvals and design and construction of this infrastructure, the construction of new facilities and expansion of production may exceed the currently envisaged timeframe cost for a variety of reasons both within and outside the control of the Project’s management. These may include delays in obtaining approvals, construction of mine infrastructure, delivery of new equipment, site establishment, recruitment of the workforce and many others.

14.1.6 Mining Approvals, Tenure and Permits

A number of government permits and approvals are required to facilitate expansions of the BIB Mines and the associated infrastructure facilities. Any delays in obtaining the required approvals may affect the production expansion and the mine plan. This may likely to cause the project to overrun which may significantly affect project capital and operating costs.

The risk associated with the tenure of concession is considered to be significantly lower than many other nearby mines, as the tenure is held under a 2nd generation PKP2B that is valid for close to the entire planned mine life. The company must be studious in complying with all conditions of the contract to ensure that they maintain tenure and a good relationship with regulatory organisations.

668




14.1.7 Land Acquisition

Most mining operations in Indonesia are facing issues in acquiring land for their projects. Acquiring land and compensating land owners is considered to be a significant issue, especially in areas which are densely populated.

In order to achieve the value estimated in this study, BIB will need to identify key land owners in advance so that an appropriate settlement can be reached and no interruptions to the development of the project will occur. Land compensation will be required for mining areas, dumping areas and infrastructure construction. HDR Salva is not aware of any specific land compensation issues with the BIB concession at the current time that may affect this valuation. However, it is considered possible that delays to land compensation and associated interruptions to the project may occur in the future and that this may have a material impact on the value of the concession.

14.1.8 Environmental and Social Risks

While environmental and social risks have been identified and management plans are in place, it is possible that failure to comply with the environment criteria or failure to maintain good relationships with the local community will have an impact on project value. These risks are not considered to be greater for the BIB Mine than for other operating coal mines operating in Indonesia.

14.1.9 Operational and Mine Safety

Mining operations at BIB concession operates in accordance with applicable laws and currently acceptable industrial practices. In addition, it conducts its operations in a responsible manner with regard to occupational and mine safety.

The project is subject to Indonesian laws and regulations regarding occupational and mine safety, which means that there are potential liability risks. Coal producers who fail to comply with safety regulations will be subject to penalties, including fines and suspension of the mining permit for the mine.

The proposed coal mining operations will be subject to several operational risks such as contractor performance, poor mining practice which may increase strip ratio, equipment failure, accidents etc. These unforeseen events have the potential to result in being unable to meet production targets and it can potentially increase cost of production.

14.1.10 Operating and Capital Costs Estimates

Some of the operating cost items considered for economic assessment is not based on the quotes from the actual contractor and these may change. However, in HDR Salva’s opinion the upward escalation of these rates are unlikely in current circumstances. Since 2012, many contracts have been renegotiated at much lower rates and new contracts are more competitive. While HDR Salva has assumed unit rates that are considered to be sustainable for both contractors and mine owners in the long term, any occurrence of operating costs higher than the forecast costs would have a significant impact on the value of the BIB Mine. To mitigate the risk

669




associated with future price escalation, HDR Salva has allowed a suitable contingency in preparing the estimates.

Capital expenditure estimates are considered to be preliminary estimates based and is not based on detailed engineering design. These estimates depend on many factors and can be affected by a wide range of changing circumstances. These can vary from the worldwide demand for specific materials and components like steel, rubber, parts manufactured predominantly in certain parts of the world.

While the estimates are considered to be conservative, HDR Salva has factored a contingency of 15% to its capital estimate. Any increase in actual capital costs will have a significant impact on project value.

14.1.11 Human Resources

The BIB Mine is planned to expand rapidly over the next 8 years, and as such there will be a need to attract and retain key personnel critical to achieving the planned production. The demand or mining and construction personnel are usually cyclical in nature and depending on the phase of the cycle it may be difficult to attract sufficient numbers of professionals to fulfil the demand. The failure to recruit sufficiently qualified staff could affect many aspects of future performance including operations, finance, community and government relations marketing and planning. If the company cannot attract, train and retain qualified managers, the company may be unable to successfully manage its growth or otherwise compete effectively in the coal industry.

A shortage of skilled labour in the Indonesian mining industry could result in the company having insufficient employees or contractors to operate its business efficiently. Similarly, industrial action by the employees of either the company or mining contractors could negatively impact planned production and consequently financial performance.

14.1.12 Political and Regulatory Risk

Since 2009, Indonesian mining has been governed by the Central Government’s “New Mining Law”, enacted to provide greater opportunity for the industry to expand to meet growing Asian demand. The Mining Law aimed to reflect the Government of Indonesia’s ("GoI") desire to recognise the financial benefits of its own natural resources, by ensuring that the GoI had greater input into resource extraction. The major developments from the 2009 Mining Law have been the Domestic Market Obligation (DMO) and Export Benchmark Pricing (HBA).

Some future regulations may include a coal export tax or ban on certain qualities, stricter coal road transportation rules and alignment of IUP and CCOW royalty rates. The actual implementation of these new aspects of the law is still unclear and many contract holders are currently in negotiation with the Indonesian government regarding this issue. Issues likes DMO, Coal upgrading requirements, Export taxes, Minimum Pricing Regulations and Foreign Ownership Restriction of the new law may affect the valuation of the BIB concession.

In our view, the likelihood of these being implemented is minimal. The value-adding requirement for mineral exports in Indonesia, enacted on 1 January 2014, which has had broad implications for the metals sector, is not applicable to the coal sector and so has had no apparent effect on coal industry.

670




14.2 Key Opportunities There are a number of options that the BIB Mine may consider to reduce operating costs at their concession. These have not been incorporated into this study as there is insufficient engineering design and confidence in the suitability, operating and capital costs for such options. Further investigation and technical work on these options is currently underway and may allow for their inclusion in future valuations. Potential opportunities for improvement include:

Potential to mine additional “Inferred Resources within optimized pit shell” or upgrade the Inferred Resources to Indicated or Measured Resources and convert these to Ore Reserves by a study at Pre-Feasibility level and subsequently mine these additional reserves.

Deployment of large size excavator with matching trucks; In pit crushing and conveying for waste mining and hauling; Use of large Electric shovels and trolley assist trucks; and Minimising stockpile and rehandling by maximising direct ship loading.

671




References Bloomberg Bond Yield, June 2014, [viewed 15 July 2014], <http://www.bloomberg.com/news/2014-01-07/indonesia-markets-dollar-bonds-at-yields-above-existing-notes.html>.

Indonesia Interbank Call Rate, June 2014, [viewed 15 July 2014], <http://www.tradingeconomics.com/indonesia/interbank-rate>.

PT SMG Consultants, “JORC Resource Statement, PT Borneo Indobara, Prepared for United Fiber System Limited”, 21October 2013 PT SMG Consultants, “JORC Reserve Statement, PT Borneo Indobara, Prepared for United Fiber System Limited”, 21October 2013

VALMIN, 2005. Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code) Available from: https://www.ausimm.com.au/content/docs/valmin_2005.pdf [Accessed: 15 May 2014].

JORC, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves – The JORC Code – 2012 Edition [online], The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia. Available from: http://www.jorc.org/docs/jorc_code2012.pdf [Accessed: 15 May 2014].

LasutLay & Pane Advocates, Report On GEMS Group Mining Rights For BIB Coal Concessions dated 18th September 2014.

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Appendix A – CVs Person Role

Manish Garg (Director - Consulting) / Partner

Qualification B. Engg (Hons), MAppFin

Prof. Membership MAusIMM; MAICD

Contribution Overall Supervision, Valuation (VALMIN 2005)

Experience

Manish has more than 25 years’ experience in mining Industry. Manish have worked for mining majors including Vedanta, Pasminco, WMC Resources, Oceanagold, BHP Billiton - Illawarra Coal and Rio Tinto Coal. Manish has been in consulting roles for past 5 years predominately focusing on due diligence, valuations and M&A area. A trusted advisor, Manish has qualifications and wide experience in delivering due diligences, feasibility studies and project valuations for banks, financial investors and mining companies on global projects, some of these deals are valued at over US$5 billion.

Craig Williams (Principal Consultant - Geology)

Qualification B. Sc. (Hons), M.Sc. (Geology) Prof. Membership MAusIMM Contribution Geology, Resource (JORC 2012) Experience Craig is a geologist with 19 years’ experience in the mining industry. He has

worked at De Beers, Anglo Coal and Vale along with significant consulting experience. Craig’s experience covers mineral exploration, underground coal mine production, technical management, and resource estimation, together with due diligence, mineral audits and review, coal quality and exploration. To date, Craig has worked on over 30 coal projects around the world, inclusive of both thermal and coking coal, in the Bowen, Hunter, Surat, Galilee and Collie Basins of Australia, as well as in Africa, Madagascar, Mongolia and Indonesia.

Sunil Kumar (Principal Consultant - Mining)

Qualification B. Engg. (Mining) Prof. Membership MAusIMM Contribution Mine Scheduling, Reserve (JORC 2012) Experience Sunil is a mining engineer with 25 years’ experience in the mining industry

across operations and consulting. His career spans 4 years in working in mining operations and about 21 years as a mining consultant primarily in the mine planning & design role which included estimation of coal reserves, DFS/FS, due diligence studies, techno-commercial evaluations and technical inputs for mining contracts. Prior to joining HDR Salva, Sunil was working as Principal Mining Engineer at Xstrata Coal. To date Sunil has worked on over 25 coal projects around the world, inclusive of thermal and coking coal projects in Australia, as well as in major coalfields in India, Indonesia, Mongolia and Mozambique.

673




Appendix B: SGX Mainboard Appendix 7.5 Cross-referenced from Rules 705(7), 1207(21) and Practice Note 6.3

Summary of Mineral Reserves and Resources

Name of Asset / Country: Borneo Indobara / Indonesia

Category Mineral Type

Gross (100% Project) Net Attributable to GEMS Remarks Tonnes

(millions) Grade Tonnes (millions) Grade

Reserves

Proved Coal 252 Bituminous A /

Subbituminous B 247

Bituminous A / Subbituminous B

Probable Coal 352 Bituminous A /

Subbituminous B 345


Total Coal 604 Bituminous A /

Subbituminous B 592


Resources*

Measured Coal 415 Bituminous A /

Subbituminous B 407


Indicated Coal 623 Bituminous A /

Subbituminous B 611


Inferred Coal 738 Bituminous A /

Subbituminous B 724


Total Coal 1,776 Bituminous A /

Subbituminous B 1,742


* Mineral Resources are reported inclusive of the Mineral Reserves.

674




Appendix C – Resource & Reserve Report

675




Independent Resource & Reserve Report

676




Page ii



Independent Resource & Reserve Report Salva Resources Pty Ltd Level 11, 82 Eagle Street, Brisbane, QLD 4000, Australia PO Box 10791, Adelaide Street, Brisbane, QLD 4000, Australia Email: [email protected] Website: www.hdrinc.com

www.hdrsalva.com Phone: +61 (0) 7 3211 9911 Fax: +61 (0) 7 3221 5725

Effective Reporting Date: 31 July 2014

Independent Expert Person:

Manish Garg Director - Consulting / Partner HDR Salva

Subject Specialists:

Craig Williams Sunil Kumar Principal Consultant – Geology Principal Consultant – Mining HDR Salva- Brisbane Office HDR Salva- Brisbane Office

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Page iii

Table of Contents Executive Summary ............................................................................................. 10

1 Introduction ................................................................................................. 14

1.1 Approach ............................................................................................................14

1.2 Data sources .......................................................................................................15

1.3 Limitations ...........................................................................................................15

1.4 Disclaimer and warranty .....................................................................................16

2 Independent Competent Persons and Experts Statement ....................... 17

2.1 Statement of Independence ...............................................................................17

3 Project Description ..................................................................................... 18

3.1 Property Description and Access .......................................................................18

3.2 Ownership ...........................................................................................................19

4 Geology ....................................................................................................... 20

4.1 Regional Geology ...............................................................................................20

4.2 Local Geology .....................................................................................................23

4.3 Coal Seams ........................................................................................................24

Kusan Girimulya (KG Block) ....................................................................24 4.3.1

Batulaki South (BS Block) ........................................................................25 4.3.2

Sebamban South (SS Block)....................................................................25 4.3.3

Sebamban North (SN Block) ....................................................................25 4.3.4

Pasopati (PP Block) .................................................................................25 4.3.5

5 Exploration .................................................................................................. 30

5.1 Exploration History..............................................................................................30

5.2 Other prospective areas .....................................................................................30

6 Geological Data and QAQC ........................................................................ 31

6.1 Data Supplied .....................................................................................................31

6.2 Lithological Data .................................................................................................31

6.3 Topographic Survey and base of weathering (BOW) .........................................37

6.4 Data Quality Assurance and Quality Control (QAQC) Measures .......................37

Core Sampling ..........................................................................................37 6.4.1

Down-hole Geophysics and Seam Picks .................................................38 6.4.2

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Page iv

Coal Quality ..............................................................................................39 6.4.3

Data validation by HDR Salva prior to geological model construction .....39 6.4.4

6.5 Coal Density .......................................................................................................40

6.6 Coal Quality Data................................................................................................40

7 Resource Model Construction ................................................................... 55

7.1 Structural Model..................................................................................................55

Structural Model Validation ......................................................................55 7.1.1

7.2 Coal Quality Model .............................................................................................56

7.3 Quality Model Validation .....................................................................................56

8 Coal Resources ........................................................................................... 57

8.1 Prospects for Eventual Economic Extraction and Resource Classification........57

8.2 Coal Resource Statement ..................................................................................58

8.3 Comparison with Previous Estimates .................................................................58

9 Reserves Estimation ................................................................................... 60

9.1 Estimation Methodology .....................................................................................60

9.2 Modifying Factors ...............................................................................................60

9.3 Notes on Modifying Factors ................................................................................61

Mining Factors ..........................................................................................61 9.3.1

Optimisation Result ..................................................................................63 9.3.2

Selection of Pit Shell ................................................................................63 9.3.3

Geotechnical Factors ...............................................................................64 9.3.4

Surface Water Management ....................................................................65 9.3.5

Mining Method & Operations ....................................................................65 9.3.6

Processing Factors ...................................................................................66 9.3.7

Mine Logistics Factors ..............................................................................66 9.3.8

Permits and Approvals .............................................................................68 9.3.9

Cost and Revenue Factors.......................................................................68 9.3.10

Marketing Factors .....................................................................................71 9.3.11

Product Quality .........................................................................................71 9.3.12

Other Relevant Factors ............................................................................72 9.3.13

9.4 Final Pit Design...................................................................................................73

Cut-off Parameters and Pit Limit ..............................................................73 9.4.1

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Page v

Pit Designs ...............................................................................................74 9.4.2

Mining Schedule .......................................................................................77 9.4.3

9.5 Audits and Reviews ............................................................................................84

9.6 Discussion of Relative Accuracy and Confidence ..............................................84

9.7 Reserves Classification ......................................................................................84

10 Statement of Coal Reserves ....................................................................... 86

10.1 Seam by Seam Coal Reserve ............................................................................86

11 JORC Table 1 .............................................................................................. 90

References ........................................................................................................... 91

Appendix A: CVs .................................................................................................. 92

Appendix B: JORC Table 1 .................................................................................. 93

Appendix C: Raw coal quality histograms per seam ....................................... 103

Appendix D: Cross-Sections ............................................................................. 117

List of Figures Figure 3:1 General Location Plan ........................................................................... 18

Figure 3:2 CCoW Boundary and Location of Individual Coal Blocks ....................... 19

Figure 4:1 Generalized Stratigraphy of South-east Kalimantan .............................. 20

Figure 4:2 Regional Geological Setting .................................................................. 21

Figure 4:3 Cross-Section A-B showing Barito and Asem Asem sedimentary basins22

Figure 4:4 Local geological map of the BIB concession area ................................. 23

Figure 9:1 BIB Coal Logistics ................................................................................. 67

Figure 9:2 New Haul Road under construction ....................................................... 68

Figure 9:3 Pit shell selection & Final Pit Design – KG Block ................................... 74

Figure 9:4 Pit shell selection & Final Pit Design – BS Block ................................... 75

Figure 9:5 Pit shell selection & Final Pit Design – SS Block ................................... 75

Figure 9:6 Pit shell selection & Final Pit Design – SN Block ................................... 76

Figure 9:7 Pit shell selection & Final Pit Design – PP Block ................................... 76

Figure 9:8 Final Pit Design – Kusan Girimulya Pits ................................................ 78

Figure 9:9 Representative Cross Section 2 – Girimulya Pit .................................... 79

Figure 9:10 Final Pit Design – Batulaki Pit (BS Pit) ................................................ 80

Figure 9:11 Representative Cross Section – Batulaki Pit ....................................... 80

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Page vi

Figure 9:12 Final Pit Design – Sebamban South (SS Pits) ..................................... 81

Figure 9:13 Representative Cross Section – Sebamban South Pit ......................... 81

Figure 9:14 Final Pit Design – Sebamban North (SN Pit) ....................................... 82

Figure 9:15 Representative Cross Section – Sebamban North Pit ......................... 82

Figure 9:16 Final Pit Design – Pasopati Pits (PP Pits) ............................................ 83

Figure 9:17 Representative Cross Section (Upper Pit) – Pasopati Pit .................... 83

Figure 9:18 Representative Cross Section (Lower Pit) – Pasopati Pit .................... 83

List of Tables Table 3.1 BIB Concession Details .......................................................................... 19

Table 4:1 KG Block Seam Splitting Relationships .................................................. 25

Table 4:2 BS Block Seam Splitting Relationships ................................................... 27

Table 4:3 SS Block Seam Splitting Relationships ................................................... 28

Table 4:4 SN Block Seam Splitting Relationships .................................................. 28

Table 4:5 PP Block Seam Splitting Relationships ................................................... 29

Table 6:1 KG Block Drill hole Coal Seam Intercept Statistics ................................. 32

Table 6:2 BS Block Drill hole Coal Seam Intercept Statistics .................................. 33

Table 6:3 SS Block Drill hole Coal Seam Intercept Statistics .................................. 35

Table 6:4 SN Block Drill hole Coal Seam Intercept Statistics ................................. 35

Table 6:5 PP Block Drill hole Coal Seam Intercept Statistics .................................. 36

Table 6:6 KG Block Summary of Drill hole raw coal quality by seam ...................... 40

Table 6:7 BS Block Summary of Drill hole raw coal quality by seam ...................... 46

Table 6:8 SS Block Summary of Drill hole raw coal quality by seam ...................... 48

Table 6:9 SN Block Summary of Drill hole raw coal quality by seam ...................... 50

Table 6:10 PP Block Summary of Drill hole raw coal quality by seam .................... 53

Table 7:1 Model Schema Settings and Parameters ............................................... 55

Table 7:2 Quality Model Parameters ...................................................................... 56

Table 8:1 Coal Resource Estimate as at 31 July 2014 ........................................... 58

Table 9:1 Modifying & Mine Optimisation Factors .................................................. 60

Table 9:2 Contractor Unit Rates (Real Terms) ....................................................... 62

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Table 9:3 Variable Owner Unit Cost (Real Terms) ................................................. 62

Table 9:4 Block wise Optimiser Base Pit limits ....................................................... 63

Table 9:5 Break-even Stripping Ratio (BESR) ........................................................ 64

Table 9:6 Average Unit Operating Cost (Real Terms) over Life of Mine ................. 69

Table 9:7 Capital Cost (Real Terms) ...................................................................... 70

Table 9:8 Long Term Price Estimate ...................................................................... 71

Table 9:9 Product Coal Quality .............................................................................. 72

Table 9:10 Pit Design Parameters for BIB blocks ................................................... 73

Table 9:11 Historical Production – BIB Mine (Mt, Coal) .......................................... 77

Table 9:12 Production Reconciliation ..................................................................... 84

Table 9:13 General relationships between Mineral Resources & Ore Reserves ..... 85

Table 10:1 Coal Reserves for BIB Coal Concession as at 31 July 2014 ................. 86

Table 10:2 Coal Reserves for Kusan – Girimulya (KG) as at 31 July 2014 ............. 86

Table 10:3 Coal Reserves for Batulaki (BS) as at 31 July 2014 ............................. 87

Table 10:4 Coal Reserves for Sebamban South (SS) as at 31 July 2014 ............... 88

Table 10:5 Coal Reserves for Sebamban North (SN) Block as at 31 July 2014...... 89

Table 10:6 Coal Reserves for Pasopati (PP) as at 31 July 2014 ............................ 89

Key abbreviations $ or USD United States Dollar Adb Air dried basis, a basis on which coal quality is measured AMSL Above Mean Sea Level AMDAL Analisis Mengenai Dampak Lingkungan Hidup- Environmental Impact

Assessment (EIA), which contains three sections, the ANDAL, the RKL and the RPL

ANDAL Analisis Dampak Lingkungan Hidup, component of the AMDAL that reports the significant environmental impacts of the proposed mining activity

Ar As received basis AS Australian Standards ASR Average stripping ratio AusIMM Australasian Institute of Mining and Metallurgy Batter Slope of Advancing Mine Strip bcm bank cubic meter BD Bulk density CCoW Coal Contract of Work

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CHPP Coal Handling and Processing Plant CV Calorific value Capex Capital Expenditure Coal Resource

A ‘Coal Resource’ is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, quality, and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, quality, continuity and other geological characteristics of a Coal Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Coal Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.

Coal Reserve A ‘Coal Reserve’ is the economically mineable part of a Measured and/or Indicated Coal Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the Coal is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.

DGMC Directorate General of Minerals and Coal within the Ministry of Energy and Mineral Resources

FC Fixed Carbon gar gross as received, a basis on which coal quality is measured GEMS PT Golden Energy Mines Tbk gm Gram h Hour ha Hectare(s) HDR Salva Salva Resources Pty Ltd IM Inherent Moisture IPPKH ‘Izin Pinjam Pakai Kawasan Hutan’ which translates to a borrow to use

permit in a production forest IUP ‘Izin Usaha Pertambangan’ which translates to ‘Mining Business Licence’ JORC 2012 Edition of the Australasian Code for Reporting of Exploration Results,

Mineral Resources and Ore Reserves, Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia

k Thousand kcal/kg Unit of energy (kilocalorie) per kilogram kg kilogram km Kilometers(s) km2 Square kilometre(s)

kt kilo tonne (one thousand tonne) L Litre m Meter

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lcm loose cubic metre LOM Life of Mine lcm lcm loose cubic metre M Million Mbcm Million bank cubic metres Mbcmpa Million bank cubic metres per annum MEMR Ministry of Energy and Mineral Resources within the central government m RL metres reduced level m3 cubic metre m/s metres per second Mt Millions of tonnes Mtpa Millions of tonnes per annum MW Megawatt NAR Net as received Opex operating expenditure PKP2B ‘Perjanjian Kerjasama Pengusahaan Pertambangan Batubara’ – same as

CCoW RD Relative density RKL ‘Rencana Pengelolaan Lingkungan’ - environmental management plan ROM Run of Mine RKL Relative Level - survey reference for height of landforms above a datum

level RPL ‘Rencana Pemantauan Lingkungan’ - environmental monitoring plan SE Specific Energy SMGC PT SMGC Consultants SR Strip ratio (of waste to ROM coal) expressed as bcm per tonne t Tonne tkm Tonne kilometer tpa Tonnes per annum TM Total Moisture (%) TS Total Sulphur (%) United Fiber United Fiber System Limited VALMIN 2005 Edition of the Code for the Technical Assessment and Valuation of

Mineral and Petroleum Assets and Securities for Independent Expert Reports

VM VM Volatile Matter (%)

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Executive Summary United Fiber Systems Limited (“United Fiber” or “”Client”) commissioned HDR Salva to prepare an independent estimate of Open Cut Coal Reserves for the BIB (PT Borneo Indobara) coal concession area. HDR Salva understands that this report will be relied on as part of the proposed acquisition of PT Golden Energy Mines Tbk by United Fiber. The estimate of Coal Resources and Reserves as at the 31 July 2014 contained within this Report has been reported in compliance with the requirements of the reporting guidelines of the 2012 Editon of the Australasian Code for the Reporting of exploration results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (“The JORC Code”).

BIB (PT Borneo Indobara) Projects in Indonesia

The BIB Project covers an area of 24,100 ha and is located in the Tanah Bumbu district of South Kalimantan Province, Indonesia. The concession tenure is held under a PKP2B, granted on 17th February 2006 and is valid for 30 years. The current concession area has been divided into six mining blocks namely – Kusan Girimulya (KG), Batulaki South (BS), Batulaki North (BN), Sebamban South (SS), Sebamban North (SN) and Pasopati (PP). Mining has been carried out in three blocks – Kusan (KG), Batulaki (BS) and Sebamban South (SS). Currently mining in SS block is under care and maintenance since January 2014 due to land compensation agreement which is under progress. United Fiber is proposing to open up the SS Pit again in early 2015 along with new open cut mine over the SN Block during the first quarter of 2015. Mining activity in PP block is proposed to commence in 2016. The current estimate does not include any reserve from Batulaki North (BN) as this block is not well explored and only localised correlation has been established. BN block should be considered as a potential for future Resource and Reserve upside.

Geology

The BIB coal concession area has a general inverted U shape which follows both limbs of a synclinal structure with an approximate north-northeast trending synclinal axis. The coal seams generally display shallow dips of around 10-20 degrees towards this synclinal axis but dips can increase locally up to around 60 degrees. The entire Pasopati resource area, which is adjacent to obducted basement volcanics and ophiolites, exhibits dips of around 60 degrees. The increased dip in the Pasopati resource area is associated with increased coal rank, as seen from the fact that coals in the Pasopati area have in general higher calorific values compared to coals in the rest of the concession.

There have been a number of phases of exploration completed in the BIB coal concession area over the past 10 years by PT Golden Energy Mines Tbk (GEMS). The first phase involved generally shallow drilling and field mapping. In-fill drilling and deeper stratigraphic drilling to depths of up to 200 m followed in phase two, in order to allow for more accurate definition of the structural geology and coal quality characteristics of the deposit.

A total of 2,099 drill holes were used by HDR Salva to construct five geological models in the BIB coal concession area comprising KG Block - 994 drill holes, BS Block - 552 drill holes, SS Block – 212 drill holes, SN Block - 168 drill holes and PP Block - 173 drill holes.

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Coal Resource

HDR Salva have estimated total Coal Resources of 1,777 million tonnes (Mt) on an in situ air dried moisture basis, to a maximum depth of 250 m. The total tonnes are comprised of 414 Mt of Measured, 623 Mt of Indicated and 740Mt of Inferred category Resources.

Coal Resources Estimate as at 31 July 2014

Resources (Mt)


CV adb


(adb)

CV adb


adb

CV adb

Kcal/kg Total

KG 356 5.01 5,361 564 5.47 5,324 535 6.34 5,261 1,453 BS 22 4.71 5,567 27 5.61 5,560 155 5.94 5,563 204 SS 18 6.22 5,510 10 6.29 5,559 15 5.59 5,570 42 SN 9 4.71 5,395 12 6.24 5,281 25 8.4 5,248 46 PP 10 7.48 6,146 10 8.87 6,275 10 9.72 6,460 31

Total 414 623 740 1,777 Mineral Resources are reported inclusive of the Mineral Reserves

(Note: individual totals may differ due to rounding, final Inferred Resource rounded to nearest 5 Mt)

Mining Operations

Mining operation commenced in 2005 in the SS and BS Blocks. The SS pit was mined till January 2014 and is currently under care and maintenance. The Kusan pit (KG) was started in 2011. The mining operation at BIB uses standard truck and excavator methods which are a common practice in Indonesia. Waste material is mined using hydraulic excavators and loaded into standard rear tipping off-highway trucks and hauled to dumps in close proximity to the pits or to in-pit dumps where possible. For the purpose of this Reserve Statement, it is proposed that contractors will continue to be used for mining and haulage operations over the life of mine, and the unit costs used for the Reserve estimate reflect this style of mining.

Mining Modification factors – Resource to Reserve

This Coal Reserve estimate uses the most recent geological model and the Coal Resources estimate prepared by HDR Salva as of 31 July 2014.

Potential open cut reserves inside different blocks of the Project area were identified with pit optimisation software utilising the Lerchs Grossman algorithm. The optimiser was run across a wide range of coal prices using a set of site specific costs (waste removal, land compensation, coal removal, haulage costs, etc.). These costs were adjusted to suit the conditions for this project.

An economic model was prepared for the mining operation from each of the BIB coal concessions to determine the project breakeven or incremental stripping ratio. The pit optimisation results were examined and pit shells selected where the incremental stripping ratios were less than or equal to break even strip ratio determined at a point where the costs for mining and handling the coal equalled the revenue generated by the coal.

A life of mine plan was plan was completed based on the final pit design. This was done to ensure that the proposed mining method would be practical and achievable and that the

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proposed dumping strategy would be able to contain the waste mined in the final pit design. The mining schedule targeted production of 2.4Mt in year 1 (2014), 13Mt by year 3 (2016), 23Mt by year 5 and ramping up to an average 40 Mt from year 9 (2022) onwards. The study identified that a large amount of palm oil plantation area currently outside of the acquired IPPKH boundary will be required for implementation of this mine plan.

The coal price estimate was based on HDR Salva’s view on the outlook for global thermal coal fundamentals and including the demand and supply outlook for the sector. Capital and operating costs were derived by HDR Salva for the BIB project based on a combination of existing contracts and HDR Salva in house knowledge database about Indonesian operations. These are considered to be reasonable and suitable for the purpose of this study. There is a significant amount of capital requirement for the Infrastructural up-gradation of this project.


Pre-feasibility studies were completed prior to commencement of mining operations. These studies were accepted as part of the AMDAL approval process from the Govt. of Indonesia prior to being given mining operations approval (CCoW).

Where an entity has an operating mine for an Ore Reserve, its Life of Mine Plan would generally be expected to contain information at better than Pre-Feasibility or Feasibility level for the whole range of inputs normally required for a Pre-Feasibility or Feasibility study and this would meet the requirement in Clause 29 for the Ore Reserve to continue that classification. HDR Salva has used actual modifying factors based on current operations at the BIB Mine which were independently verified by the HDR’s subject specialist during the site visit. In HDR Salva’s opinion, the Modifying Factors at BIB Mine are better defined based on actual mining practices compared to a greenfield project at Pre-Feasibility stage.

Coal Reserves

Coal Reserves were estimated by applying appropriate modifying factors and exclusion criteria to the Coal Resources. Surface water management, infrastructure and the location of the IUP boundary were considered when determining the surface constraints for the mining operation. Coal Reserves were estimated by applying appropriate density adjustment and mining loss and dilution parameters to the Measured and Indicated Coal Resources inside the final pit design. All the final pits used for the Reserve estimate were designed following the existing geotechnical recommendations and operating practices.

Coal Reserves have been reported in Proved and Probable categories to reflect the reliability of the estimate. No Inferred Coal Resources are included in the reported Coal Reserves. The final coal Reserve for PT Borneo Indobara coal deposit (“BIB”) as of 31 July 2014 is 604.2 Mt comprising of 251.9 Mt Proved and 352.1 Mt Probable categories. No beneficiation of coal product is planned other than crushing to a nominal top size (50mm). ROM Coal Reserves for BIB coal concession along with the estimated quality are presented in Table below.

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Coal Reserves Estimate as at 31 July 2014

Block Reserve (Mt) RD TM arb

IM adb %

Ash adb %

CV TS adb

% Proved Probable Total adb t/m3 % arb

Kcal/kg KG 221.1 336.7 557.8 1.39 35.4 15.5 4.8 4,105 0.21 BS 13.5 6.1 19.6 1.37 33.3 13.4 6.4 4,213 0.16 SS 11.7 4.1 15.8 1.47 38.3 12.6 6 3,875 0.17 SN 3.2 4.5 7.7 1.38 38.4 16.4 4.8 3,944 0.16 PP 2.4 0.9 3.3 1.33 12.5 5.9 9.1 6,663 1.36

Total 251.9 352.2 604.2 1.39 35.2 15.3 4.9 4,114 0.21

*This table must be presented with the entire JORC Reserve Statement of PT Borneo Indobara

The coal will be sold as a run of mine (ROM) product; hence Marketable Reserves will equal ROM Coal Reserves.

There are a number of planning & operational issues which may impact on the stated mining reserves. These include:

detailed geotechnical studies to confirm the overall slope angles and other parameters in deeper pit area;

detailed hydrogeological studies to know the water flow gradient and dewatering arrangement;

more quality data as well as detailed drilling and updates to the geological model; land compensation issues; and changes in life of mine schedule, infrastructure constraints, coal transportation issues and

due to changes in marketing and costing during the mining operation.

These issues may cause the pit shell and mining quantities to change in future JORC statements. Changes to the Optimised Pit Shell limits and subsequent changes in the Coal quantities within the Optimised Pit Shells and Coal Reserves are sensitive to minor changes in the economics.

This report may only be presented in its entirety. Parties wishing to publish or edit selected parts of the text, or use the Statement for public reporting, must obtain prior written approval from Salva and the signatories of this report.

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1 Introduction United Fiber System Limited (“United Fiber” or “Client”) commissioned Salva Resources Pty Ltd (“HDR Salva”) to prepare an independent estimate (“Statement”) of the Open Cut Coal Resources and Reserves for the PT Borneo Indobara coal deposit (“BIB”) located in South Kalimantan, Indonesia. HDR Salva understands that this report will be relied on as part of the proposed acquisition of PT Golden Energy Mines Tbk by United Fiber. The purpose of this report is to provide an assessment of the Coal Resources and Reserves and report these in accordance with the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”, (the “JORC Code”) December 2012, prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy (“AusIMM”), the Australasian Institute of Geoscientists (“AIG”) and Minerals Council of Australia.

1.1 Approach

The principal data used in the preparation of this report included:

A JORC Resource Report titled “JORC Resource Statement, PT Borneo Indobara, 21st October 2013, Prepared for: United Fiber System Limited” by PT SMG Consultants;

PT Ground Risk management (GRM), “Engineering Report for Geo-technical and Surface Water Study on Kusan Coal Mine”; 11 July 2011;

Capex and Opex data supplied by GEMS (PT Golden Energy Mines Tbk) and also derived from HDR Salva’s cost database of typical Indonesian operations; and

A Life of Mine Plan Report titled “Life of Mine Plan, PT Borneo Indobara, 21st October 2013, Prepared for: United Fiber System Limited”.

The following approach was undertaken by HDR Salva to estimate Coal Reserves:

HDR Salva has reviewed the geological data set provided by United Fiber for the coal block covered under scope of report;

Using the existing bore hole information provided to HDR Salva by United Fiber, a geological model was created using Minescape stratigraphic modelling software. While creating the model, a thickness cut off limit of 0.1m was applied and is termed as an “in situ” model;

This model and the underlying raw data such as Drill hole logs, coal quality reports and geophysical logs were reviewed by HDR Salva’s team of geologists headed by Mr Williams;

On the basis of confidence limits (as described in the Resource Classification Section), the in-situ geological model was then categorised into Measured, Indicated and Inferred categories according to the JORC Code (2012). Once these categories were ascertained, coal volume, tonnage and qualities were estimated;

Cross sections, plans and deposit characteristics such as structure, number and thickness of seams were examined in conjunction with the proposed equipment and mining method to decide on minimum mining thickness, coal losses and dilution factors. These factors were then used to convert the in situ geological model to a ROM model;

Physical surface constraints were studied and consideration was made for surface water runoff and management, as well as the location of significant infrastructure and communities inside the potential mining area. Appropriate mining limits were then determined based on this data;

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Indicative cost and revenue factors were reviewed with United Fiber and checked for reasonableness by HDR Salva. Optimiser software was used to incorporate other criteria such as depth constraints, geotechnical criteria and minimum mining thickness. In this way a series of different pit shells were derived for varying cost and revenue inputs;

Optimised pit shells selected where the incremental stripping ratios were less than or equal to break even strip ratio determined at a point where the costs for mining and handling the coal equalled the revenue generated by the coal and then practical pit design were made (Mineable Pit Shell). This pit shell formed the basis of the subsequent reserves estimate;

The Measured and Indicated confidence limits were overlaid on the main pit shell and any Inferred tonnes were excluded from the estimate;

The overall economic viability of the results was tested by creating an economic model which included provision for capital and operating cost;

Based on Resource confidence and present mine planning detail, the reserves were categorised into Proved and Probable categories;

All of the modifying factors and checks adopted to ascertain the estimate have been provided in the respective section of this report.

1.2 Data sources

This review is based on the information provided by GEMS, the technical reports of consultants and previous explorers, as well as other published and unpublished data relevant to the area. HDR Salva has carried out, to a limited extent, its own independent assessment of the quality of the geological data. The status of agreements, royalties or concession standing pertaining to the assets was investigated by an independent solicitor Lasutlay& Pane Advocates as a legal specialist.

In developing our assumptions for this Statement, HDR Salva has relied upon information provided by the company and information available in the public domain. Key sources are outlined in this Report and all data included in the preparation of this Report has been detailed in the references section of this report. HDR Salva has accepted all information supplied to it in good faith as being true, accurate and complete, after having made due enquiry as of July 2014.

1.3 Limitations

After due enquiry in accordance with the scope of work and subject to the limitations of the Report hereunder, HDR Salva confirms that:

The input, handling, computation and output of the geological data and Coal Resource and Reserve information has been conducted in a professional and accurate manner, to the high standards commonly expected within the mining professions;

The interpretation, estimation and reporting of the Coal Reserve Statement has been conducted in a professional and competent manner, to the high standards commonly expected within the Geosciences and mining professions, and in accordance with the principles and definitions of the JORC Code (2012);

In conducting this assessment, HDR Salva has addressed and assessed all activities and technical matters that might reasonably be considered relevant and material to such an assessment conducted to internationally accepted standards. Based on observations

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and a review of available documentation, HDR Salva has, after reasonable enquiry, been satisfied that there are no other relevant material issues outstanding;

The conclusions presented in this report are professional opinions based solely upon HDR Salva’s interpretations of the documentation received and other available information, as referenced in this Report. These conclusions are intended exclusively for the purposes stated herein;

For these reasons, prospective investors must make their own assumptions and their own assessments of the subject matter of this Report.

Opinions presented in this report apply to the conditions and features as noted in the documentation, and those reasonably foreseeable. These opinions cannot necessarily apply to conditions and features that may arise after the date of this report, about which HDR Salva have had no prior knowledge nor had the opportunity to evaluate.

1.4 Disclaimer and warranty

This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva’s schedule of rates. HDR Salva’s fee is not contingent on the outcome of its Statement or the success or failure for the purpose for which the report was prepared. Neither Mr. Craig Williams, Mr. Sunil Kumar nor any of the HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report.

Mr. Craig Williams, Mr. Sunil Kumar, HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates.

A draft version of this Statement was provided to the directors of United Fiber for comment in respect of omissions and factual accuracy. As recommended in Section 39 of the VALMIN Code, United Fiber has provided HDR Salva with an indemnity under which HDR Salva is to be compensated for any liability and/or any additional work or expenditure, which:

Results from HDR Salva’s reliance on information provided by United Fiber and/or Independent consultants that is materially inaccurate or incomplete, or

Relates to any consequential extension of workload through queries, questions or public hearings arising from this report.

The conclusions expressed in this Statement are appropriate as at 31 July 2014. The report is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results. All monetary values outlined in this report are expressed in United States dollars ($) unless otherwise stated. HDR Salva services exclude any commentary on the fairness or reasonableness of any consideration in relation to this acquisition.

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2 Independent Competent Persons and Experts Statement This Resource and Reserve report has been written following the guidelines contained within the 2005 Edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Experts Reports (“the VALMIN Code”) and the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“the JORC Code”). It has been prepared under the supervision of Mr Manish Garg (Director – Consulting / Partner, HDR Salva) who takes overall responsibility for the report and is an Independent Expert as defined by the VALMIN Code.

Sections of the report which pertain to Coal Resources have been prepared by Mr. Craig Williams (Principal Consultant, HDR Salva) who is a subject specialist and a Competent Person as defined by the JORC Code. Sections of the report which pertain to Coal Reserves have been prepared by Mr. Sunil Kumar (Principal Consultant, HDR Salva) who is a subject specialist and a Competent Person as defined by the JORC Code.

This report was prepared on behalf of HDR Salva by the signatory to this report, assisted by the subject specialists’ competent persons whose qualifications and experience are set out in Appendix A of this report.

Mr. Manish Garg Director – Consulting / Partner HDR Salva

2.1 Statement of Independence

This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva’s schedule of rates. HDR Salva’s fee is not contingent on the outcome of this report. The above mentioned person(s) have no interest whatsoever in the mining assets reviewed and will gain no reward for the provision of this report.

Mr. Craig Williams, Mr. Sunil Kumar, HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates.

Neither Mr. Craig Williams, Mr. Sunil Kumar nor any of the HDR Salva’s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report.

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3 Project Description 3.1 Property Description and Access

The BIB Project is located in the Tanah Bumbu Regency of the South Kalimantan Province of Indonesia. The BIB concession is a second generation PKP2B coal concession (“CCoW”) covering a total area of 24,100 ha. The BIB concession is located within the coal mining hub of South Kalimantan province and consists of following 5 coal blocks:

• Kusan Girimulya Block (“KG Block”); • Sebamban North Block ( “SN Block”); • Sebamban South Block (“SS Block”); • Batulaki Block (“BS Block”); and • Pasopati Block (“PP Block”).

Conventional open-pit coal mining operations was commenced in the SS and BS blocks in 2005 and in the KG block in 2011. At the time of writing of this report, the mining operations are continuing at the BIB project. Various mining blocks are located between 6 km to 30 km to the South Kalimantan coastline (Figure 3:1 ).

Figure 3:1 General Location Plan

Locations of individual coal blocks and CCOW boundary is shown below in Figure 3:2.

www.hdrinc.comwww.salvaresour

Celebes Sea

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Figure 3:2 CCoW Boundary and Location of Individual Coal Blocks

3.2 Ownership

LasutLay& Pane Advocates (“LLP”) has advised HDR Salva that PT Golden Energy Mines Tbk (GEMS) holds the mining rights to the BIB concession through its subsidiary PT Roundhill Capital Indonesia (Net 98.0951%). Tenure at the BIB concession is held under the second generation Perjanjian Kerjasama Pengusahaan Pertambangan Batubara (“PKP2B”). The PKP2B was originally executed on 15 August 1994 between PT Borneo Indobara (“PT BIB”) and PT Tambang Batubara Bukit Asam (“PTBA”), a government owned company for an area of 93,164 ha. Approval to commence production was granted on 17 February 2006 for a period of 30 years for a reduced area of 24,100 ha. The detail of the coal concession is given in Table 3.1.

Table 3.1 BIB Concession Details

No. Concession Type Area (ha) Status Granted Expiry

10.K/40.00/ DJB/2006 (CCoW) 24,100 ha Granted 17-Feb-2006 17-Feb-2036

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4 Geology 4.1 Regional Geology

The coal deposits found within the BIB coal concession area are located within the Asem Asem Basin of South-eastern Kalimantan. The Asem Asem Basin has been previously termed the Pasir or Asem Asem sub-basin to the larger Barito Basin, found to the north of the Meratus Range Mountains, which form a general north-easterly trending divide between the two basins. Sediments within both the Barito and Asem Asem Basins have been deposited from Eocene times (Figure 4:1) and represent an initial transgressive sedimentation sequence from Eocene fluvio-deltaic sediments at the base up through Oligocene to mid-Miocene deltaic to shallow marine sediments. The Meratus orogenic uplift commenced in the mid-Miocene which resulted in a subsequent mid-Miocene to Quaternary regressive sequence of deltaic to fluvio-deltaic sediments at the top of the sedimentary package.

Orogenic uplift of the Meratus Range resulted in obduction of Ophiolite Complex slabs mainly within the Meratus Range area (Figure 4:1). These Cretaceous age ophiolites and other metamorphic, volcanic and sedimentary rocks form the basement rocks, separated by an unconformable contact, to the coal bearing sediments of the Barito and Asem Asem Basins. As can be seen from Figure 4:3 This unconformable contact is often marked by thrust faulting, which has allowed to older Cretaceous age rocks to be uplifted adjacent to the younger Eocene to Quaternary age sediments .

Figure 4:1 Generalized Stratigraphy of South-east Kalimantan

From Panggabean (1991)

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ins

From

Pan

ggab

ean

(199

1)

Oph

iolit

e

Barit

o As

em A

sem

Thru

st fa

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Figure 4:4 Local geological map of the BIB concession area

4.2 Local Geology

The BIB coal concession area has a general inverted U shape which follows both limbs of a synclinal structure with an approximate north-northeast trending synclinal axis (Figure 4:4). The seams generally display shallow dips of around 20 degrees but dips can increase locally up to around 60 degrees. The entire Pasopati resource area, which is adjacent to obducted basement volcanics and ophiolites (labelled Source Rock in Figure 4:4), exhibits dips of around 60 degrees. The increased dip in the Pasopati resource area is associated with increased coal rank, as seen

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from the fact that coals in the Pasopati area have in general higher calorific values compared to coals in the rest of the concession.

Structure within the area is relatively benign, with most of the significant faults in the area consisting of the north-east trending thrust faults that follow the general trend of the fold axes. Normal and block faulting is seen mainly in the basement (Pre-Tertiary) rocks (Panggabean, 1991). However, localised increase in seam dips have been observed in the coal models constructed for resource estimation purposes and this may be due to as yet un-mapped faults.

In general the stratigraphic sequence within the BIB concession, from the youngest to oldest is as follows:

Alluvium

The Alluvium is comprised of gravels, sand, silt, clay and mud, found as alluvial, swamp and coastal deposits.

Dahor Formation

This unit consists of friable quartzitic sandstones, locally interbedded with clays, lignites and basalt gravels.

Warukin Formation

This formation is a mainly deltaic sequence comprised of alternating quartzitic sandstones and claystone, intercalated with shales, coal seams, limestones and carbonaceous claystone. This formation contains the majority of the coal resources in the BIB concession area.

Berai Formation

The Berai Formation is shallow marine derived sediment which is comprised of limestones alternating locally with marl and sandstone.

Tanjung Formation

This is a fluvio-deltaic sequence found at the base of the coal bearing sedimentary basin sequence, deposited on an unconformable contact with underlying basement rocks. The formation consists of alternating conglomerate, sandstone and claystone, intercalated with shale, coal and limestone. The lower part consists of conglomerate and sandstone, with claystone, shale and coal, whereas the upper part consists of sandstone and claystone intercalated with limestone. The coals within the Pasopati resource area form part of this formation.

4.3 Coal Seams

Kusan Girimulya (KG Block) 4.3.1

The deposit at KG Block contains approximately 52 modelled coal seams (Table 4:1) of which 20 have been split into upper and lower plies. Some seams are less continuous than others and have been modelled to pinch out where not present in a particular drill hole. In particular the D1 seam has a limited extent through the deposit due to the fact that has not been correlated in the majority of holes drilled. In contrast, the BL2U seam is one of the most continuous seams and is present throughout the deposit. This resource area covers the eastern outcrop of the Warukin

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formation coals and seams dip shallowly to the west. The coal quality is low rank with high inherent moisture and low ash and sulphur contents. This area is currently being mined.

Batulaki South (BS Block) 4.3.2

This resource area is situated on the western flank of the syncline and seams consequently dip to the east. Seams in this area also form part of the Warukin Formation with coal quality characteristics that are very similar to KG, SS Block and SN Block areas. There are 40 named and correlated seams in this area. No correlation between the Warukin coals across the western and eastern limbs of the syncline has been undertaken. This area is currently being mined.

Sebamban South (SS Block) 4.3.3

Warukin Formation coal seams occur in this resource area, dipping shallowly to the west. There are 20 named and correlated seams including splits that have been identified in this area. The coal quality is similar to the KG, BS Block and SN Block areas but no correlation of seams between these areas has been made to date. This area has been mined in the past but is currently on care and maintenance.

Sebamban North (SN Block) 4.3.4

This resource area is found immediately north of the SS Block and has many characteristics in common with SS Block coals. Warukin Formation coal seams dip shallowly to the west and 22 seams have been named and correlated across the area. The coal quality is similar to the KG, BS Block and SS Block areas. This area has not been mined to date but is scheduled for mining in 2015.

Pasopati (PP Block) 4.3.5

The coal seams in this resource area belong to the Tanjung Formation and are therefore older than the Warukin Formation coals found in the rest of the concession. The coal is steeply dipping (60 degrees) to the east and exhibits higher rank and resultant higher energy. There are 13 named and correlated seams in this area. The area has not been officially mined to date but has been extensively worked by artisanal miners in the past due to the prized high quality of the coal in this area.

Table 4:1 KG Block Seam Splitting Relationships Master Seam

1st Phase Splitting

2nd Phase Splitting

3rd Phase Splitting

H H2 H1

G G2

G2U G2L

G1

F F2 F1

FL FL2 FL1

E E2 E2U E2L E2L2

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Master Seam

1st Phase Splitting

2nd Phase Splitting

3rd Phase Splitting

E2L1

E1 E1U

E1U2 E1U1

E1L E1L2 E1L1

EL EL2

EL2U EL2L

EL1 EL1U EL1L

D

D1 D1U

D1U2 D1U1

D1L D1L2 D1L1

DU DU2

DU2U DU2L

DU1 DU1U DU1L

DL DL2

DL2U DL2L

DL1 DL1U DL1L

CR CR2

CR2U CR2L

CR1 CR1U CR1L

CU CU2

CU1

CL CL2

CL2U CL2L

CL1 CL1U CL1L

B

BU BU2

BU2U BU2L

BU1 BU1U BU1L

BL BL2

BL2U BL2L

BL1 BL1U BL1L

A AU AL AL2

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Table 4:2 BS Block Seam Splitting Relationships Master Seam

1st Phase Splitting

2nd Phase Splitting

D

C CU CL

B BU

BL BL2 BL1

A5

A4U A4U2

A4U2B A4U2A

A4U1

A4L

A3U A3U2 A3U1

A3L

A2U A2U2 A2U1

A2L

A1U A1U2 A1U1

A1L A1L2 A1L1

AL2 AL1 S1

S2 S2U S2L

S3

S4 S4U S4L

S5 S6

S7U S7L S8U S8L S9

S10 S10U S10L

S11 S12

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Table 4:3 SS Block Seam Splitting Relationships Master Seam

1st Phase Splitting

2nd Phase Splitting

3rd Phase Splitting

F F2 F1

E E2

E2U E2L

E1 E1U E1L

D1 D1U D1L

D

DU DU2 DU1

DL DL2

DL2U DL2L

DL1 C

B1

B BU

BU2 BU1

BL BL2 BL1

A2

Table 4:4 SN Block Seam Splitting Relationships Master Seam

1st Phase Splitting

2nd Phase Splitting

G

F F2 F1

FL

E E2

E2U E2L

E1 D3

D2 D2U D2L

D1

D DU

DL DL2 DL1

C CU CL

BU

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Master Seam

1st Phase Splitting

2nd Phase Splitting

BL BL2 BL1

A A2 A1

AL

Table 4:5 PP Block Seam Splitting Relationships Master Seam

1st Phase Splitting

SU1 SU1U SU1L

SU2 SM1

SM2 SM2U SM2L

SL1 SL1U SL1L

SL2 SL2U SL2L

SL3 SL3U SL3L

SB

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5 Exploration 5.1 Exploration History

There have been a number of phases of exploration completed in the BIB coal concession area over the past 10 years by PT Golden Energy Mines Tbk (GEMS) staff. The first phase involved generally shallow drilling and field mapping. In-fill drilling and deeper stratigraphic drilling to depths of up to 200 m followed in phase two, in order to allow for more accurate definition of the structural geology and coal quality characteristics of the deposit.

Successive phases of exploration drilling in the BIB concession have involved the following:

In fill pre-production drilling Dump and infrastructure sterilization drilling Resource upgrade drilling Deep stratigraphic drilling Resource expansion drilling

The results of the various phases of drilling have been assessed and geological models have been updated on a regular basis by GEMS staff and by PT SMG Consultants. The last phase of exploration drilling was completed in early 2013 and PT SMG Consultants produced updated geological models and an updated coal resource statement as at 28 July 2013, which details a total coal resource of 1.8 Bt, considered by PT SMG Consultants to have been reported in accordance with JORC Code (2004).

5.2 Other prospective areas

The only exploration area within the concession boundary that has no current coal resources is Batulaki North (found between the BS and PP Blocks resource areas (Figure 3:1). This area contains Warukin Formation coals that dip eastward. The area is not well explored and only localised correlation of intersected seams has been established to date. As such, seam continuity has not yet been established from the data available and further drilling will be required to allow for resource estimation within this area.

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6 Geological Data and QAQC 6.1 Data Supplied

The geological data provided by GEMS for the BIB concession was independently reviewed by HDR Salva’s geologists and is considered appropriate and reasonable for the purpose of estimating Coal Resources.

This data, used by HDR Salva for the purpose of resource estimation, includes but is not limited to:

Drill hole collar information inclusive of total depth drilled per hole;

Drill hole lithological data inclusive of seam picks identified and correlated on the basis of down-hole geophysics;

Coal sample table and associated raw coal qualities per sample;

Drill hole completion reports for most of the holes drilled containing details of core recoveries achieved;

Scanned copies of original laboratory analysis reports of coal quality for samples analysed;

Down-hole geophysical data in the form of both LAS files and Minex drill hole databases;

Minex geological models for the KB Block, BS Block, PP Block and SS Block areas constructed by PT SMG Consultants in mid - 2013, which contains a complete drill hole database as well has grids of seam roofs, floors, the topographic surface and the base of the weathered horizon surface;

A Minescape geological model of the SN Block resource area constructed by GEMS geologists in 2014 which contains a complete drill hole database as well has grids of seam roofs, floors, the topographic surface and the base of the weathered horizon surface.

6.2 Lithological Data

A total of 2,099 drill holes were used to construct five geological models in the BIB coal concession area comprising:

KG Block - 994 drill holes;

BS Block - 552 drill holes;

SS Block - 212 drill holes;

SN Block - 168 drill holes; and

PP Block - 173 drill holes

Of these holes, a small percentage are barren, i.e. no coal intersected; this is due to drill-rig limitations (maximum 60 m depth in earlier campaigns). Barren holes are never the less useful for geological modelling purposes as they prevent coal from being modelled where it is not present. In other cases no seam picks were supplied for a number of holes. In these instances the hole is

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marked as ‘not logged’ and the model is allowed to project seams though these holes if warranted by surrounding holes.

Approximately 98% of the holes have been logged using down-hole geophysics. Down-hole geophysical data acquired by GEMS is predominantly comprised of gamma, density and calliper logs and has allowed for accurate identification of coal seams in each hole (seam picks) and the correlation of coal seams between holes.

Drill hole locations for the five resource areas can be seen in Appendix D and coal intercept statistics for the five resource areas can be seen in Table 6:1 to Table 6:5.

Table 6:1 KG Block Drill hole Coal Seam Intercept Statistics

Seam Intersections Hole No. Min Thickness Hole No. Max

Thickness Mean

Thickness S.D.

H2 12 CPSMG_097A 0.03 CSMGC068 1.16 0.526 0.394 H1 12 DHKS09078 0.08 CPSMG_094 7.70 1.720 2.819 G2U 98 CSMGC063 0.08 CPSMG_056 2.60 0.342 0.358 G2L 100 KS_INF09145CR 0.16 CPSMG_106R 2.45 0.662 0.574 G1 103 CSMGC063 0.06 CPSMG_097A 6.75 0.533 1.159 F2 226 CPSMG_014 0.07 CPSMG_107 5.30 1.045 0.688 F1 225 CPSMG_014 0.05 CPSMG_106R 4.00 0.474 0.380 FL2 101 GM06014 0.10 CPSMG_095 4.30 0.764 0.819 FL1 98 CSMGC044 0.06 CPSMG_106R 3.00 0.548 0.617 E2U 406 CSMGC044 0.02 CPSMG_092 5.96 0.760 0.731 E2L2 407 CSMGC044 0.01 GM09405A 9.34 0.583 0.782 E2L1 407 DHKS09077 0.01 GM09405A 3.56 0.233 0.304 E1U2 432 CSMGC044 0.02 CPSMG_065 12.86 1.621 1.978 E1U1 432 CSMGC044 0.04 CSMGC075 10.64 1.220 1.010 E1L2 440 CSMGC044 0.04 CPSMG_034 11.45 1.541 1.291 E1L1 440 CPSMG_112 0.03 CSMGC074 10.51 1.906 1.478 EL2U 325 CPSMG_032 0.09 CSMGC064 5.86 1.115 0.944 EL2L 325 CPSMG_012 0.07 CSMGC068 4.75 0.900 0.769 EL1U 249 CSMGC051 0.10 CSMGC056 6.13 1.210 1.173 EL1L 249 CSMGC051 0.01 GM06045R 2.00 0.139 0.236 D1U2 141 KS_0843 0.02 GM09411 1.92 0.299 0.256 D1U1 140 KS_0843 0.03 GM09411 1.66 0.405 0.313 D1L2 149 KS_08258 0.01 CPSMG_041 2.50 0.421 0.470 D1L1 144 KS_08258 0.01 GM06042 1.90 0.419 0.390 DU2U 369 KS_08258 0.01 CPSMG_065 6.66 0.668 0.753 DU2L 369 KS_08258 0.01 CPSMG_044 10.40 0.599 0.729 DU1U 356 KS_08258 0.02 CPSMG_043 6.46 0.646 0.807 DU1L 357 KS_08258 0.01 CPSMG_043 6.14 0.763 0.794 DL2U 368 CPSMG_097A 0.05 DHKS09045 5.35 1.800 1.325 DL2L 367 CPSMG_097A 0.05 CSMGC036 5.30 1.508 1.112

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Seam Intersections Hole No. Min Thickness Hole No. Max

Thickness Mean

Thickness S.D.

DL1U 361 KS_08290 0.04 CPSMG_038 8.65 1.327 1.179 DL1L 361 KS_08290 0.02 CPSMG_037 5.25 0.645 0.673 CR2U 120 DHKS09120 0.08 GM06008R 3.19 0.486 0.469 CR2L 120 DHKS09120 0.04 GM06008R 1.96 0.292 0.287 CR1U 118 GM09003 0.09 GM10034 1.70 0.426 0.335 CR1L 118 DHKS09120 0.04 GM10034 0.85 0.215 0.167 CU2 172 DHKS09054 0.12 DHKS09004 4.65 0.537 0.550 CU1 170 DHKS09029 0.13 CSMGC003 2.70 0.518 0.408 CL2U 189 DHKS09052C 0.08 GM10028 6.52 1.018 1.184 CL2L 188 DHKS09052C 0.02 CPSMG_016 2.40 0.292 0.332 CL1U 188 CSMGC004 0.05 CPSMG_037 1.92 0.277 0.251 CL1L 189 CSMGC004 0.05 CPSMG_037 2.28 0.332 0.302 BU2U 172 DHKS09025 0.04 DHKS09104 2.46 0.565 0.412 BU2L 167 DHKS09025 0.03 DHKS09104 1.88 0.420 0.304 BU1U 173 DHKS09025 0.06 DHKS09116 4.08 0.760 0.619 BU1L 174 DHKS09025 0.04 DHKS09116 2.67 0.492 0.405 BL2U 209 DHKS09025 0.06 CPSMG_034 10.27 2.359 2.421 BL2L 210 DHKS09025 0.04 CPSMG_034 8.13 1.873 1.913 BL1U 192 DHKS09025 0.04 CPSMG_063 1.80 0.599 0.342 BL1L 192 DHKS09025 0.05 GM09029 2.75 0.726 0.421 B1 30 KS_08195 0.30 KS_08161 1.70 0.745 0.330 AU 80 DHKS09123 0.30 DHKS09034 0.95 0.553 0.150 AL2 49 DHKS09084 0.25 DHKS09024 1.00 0.623 0.167

Table 6:2 BS Block Drill hole Coal Seam Intercept Statistics

Seam Intersections Hole no. Min Thickness Hole no. Max

Thickness Mean

Thickness S.D.

D 6 BL_F709 0.35 B_09020A 1.15 0.64 0.315 CU 22 BL_F858 0.20 BL_0611 0.63 0.40 0.129 CL 27 BL_0631 0.20 BL_0678 0.96 0.50 0.203 BU 39 BL_0675 0.22 BL_F701 3.85 1.63 1.037 B 185 B_F9007 0.80 BL_F842 17.1 9.35 4.495 BL2 28 BL_0613C 0.18 BL_0682 4.47 1.61 1.265 BL1 24 BL_0613C 0.16 BL_F864 2.90 1.08 0.880 A5 22 BL_0607 0.20 B_F9020C 1.10 0.44 0.206 A4U2B 4 BL_F836 0.30 BL_F716 0.50 0.41 0.095 A4U2A 4 BL_F716 0.95 BL_0622C 2.45 1.78 0.724 A4U1 54 BL_F840C 0.34 BL_F859C 2.30 1.20 0.444 A4L 61 BL_0601A 0.21 BLK13033 1.95 0.71 0.318

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Thickness Mean

Thickness S.D.

A3U2 18 BLK_11026 0.30 BL_0608 2.08 0.79 0.444 A3U1 16 BL_F714C 0.75 B_10028 4.92 3.49 1.400 A3L 79 BLK_11019 0.20 B_09012 1.25 0.43 0.137 A2U2 21 BLK_11059 0.35 B_10032 2.18 1.38 0.626 A2U1 20 BL_0625 0.28 BLK_12009 4.70 1.05 1.022 A2L 73 B_09023 0.35 B_F9031 2.33 1.04 0.361 A1U2 17 B_F9055 0.20 B_10032 4.76 2.56 1.788 A1U1 17 B_09028 0.10 BLK_12012 0.95 0.45 0.228 A1L2 8 BL_0625 0.32 BLK_12009 1.20 0.70 0.274 A1L1 8 BL_0625 0.28 BLK_12009 3.30 0.81 1.012 AL2 22 B_09145 0.10 BS_13027 1.65 0.68 0.405 AL1 12 B_09144 0.20 B_F9032 1.50 0.80 0.357 S1 5 B_F9032 0.25 B_F9043 0.60 0.41 0.156 S2U 5 B_F9050 0.45 B_F9044 0.90 0.67 0.168 S2L 5 B_09017 0.30 B_09036 0.80 0.44 0.203 S3 26 B_09032 0.15 B_F9029 1.20 0.50 0.228 S4U 10 BLK_11045E 0.40 B_F9044 1.90 0.97 0.562 S4L 10 BLK_11045E 0.35 B_09017 0.85 0.57 0.193 S5 15 B_F9063 0.15 B_10035 0.67 0.28 0.135 S6 24 BLK_12006B 0.15 B_F9045 1.90 0.52 0.514 S7U 32 BLK_12005 0.25 B_F9062 5.45 0.94 1.028 S7L 32 BLK_12004B 1.95 B_09016 6.25 3.90 1.373 S8U 25 B_F9063 1.65 BLK_12007 3.90 2.98 0.576 S8L 16 B_09140 0.20 BLK_11045D 0.70 0.43 0.158 S9 14 B_F9059 0.20 B_09141 1.10 0.57 0.293 S10U 5 B_09021 0.25 B_09026 0.40 0.33 0.057 S10L 5 B_09016 0.32 B_09026 0.50 0.39 0.077 S11 10 B_09016 0.25 B_F9068 4.30 2.52 1.637 S12 9 B_F9047 2.30 B_F9061 6.10 4.99 1.060 C 90 BL_F879C 0.10 B_F9XX09 2.25 0.84 0.345 BL 76 B_09033 0.25 BL_F811 3.10 0.66 0.484 A4U2 49 BL_0611 0.32 B_10016 4.90 1.97 1.058 A4U 37 B_F9074 0.30 B_09002A 7.35 2.46 1.717 A3U 83 B_F9XX07 0.50 BL_F719 5.85 3.64 1.128 A2U 57 B_F9015A 0.20 B_F9XX07 4.45 2.42 1.000 A1U 45 BLK_12018 0.20 BL_F702C 5.00 1.84 1.503 A1L 42 BLK_12025 0.15 B_F9071 1.10 0.57 0.247 S2 6 B_F9064 0.25 B_F9071 1.30 0.52 0.390 S4 22 BLK_11056 0.30 BLK_12006 3.25 1.89 1.256

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Thickness Mean

Thickness S.D.

S10 3 B_F9047 0.35 B_F9069 0.75 0.58 0.208

Table 6:3 SS Block Drill hole Coal Seam Intercept Statistics


Thickness Mean

Thickness S.D.

F2 56 SB-INF813C 0.85 SB-INF815 2.78 1.92 0.503 F1 56 SBM0806 0.42 SB-INF803C 1.45 0.91 0.237 E2U 86 DUMMY2 1.10 SB-INF807C 5.64 2.74 0.844 E2L 87 SB-0630 0.50 SB-INF807C 5.22 2.53 0.812 E1U 70 SB-0616 0.15 SB-INF810 3.59 0.77 0.544 E1L 70 SB-0616 0.15 SB-INF810 3.66 0.78 0.555 EL 49 SB-INF837 0.25 SB-INF805 4.00 2.10 0.863 D1U 57 SB-0642 0.22 DHSB9057 1.60 0.84 0.405 D1L 56 SB-0642 0.12 CHKSB907TC 1.00 0.45 0.205 DU2 82 DHSB9001C 0.25 DHSB9005C 5.99 2.19 0.979 DU1 78 SB-INF812 0.12 DHSB9005C 2.06 0.76 0.373 DL2U 2 SB-0650 0.36 SB-0659 0.43 0.40 0.049 DL2L 2 SB-0650 0.44 SB-0659 0.80 0.62 0.255 DL2 72 SB-INF808 0.20 SB-0643 3.54 1.58 0.820 DL1 78 SB-INF808 0.30 DCSB814 4.01 2.40 1.103 C 42 SB-0605C 0.30 DHSB9003C 1.25 0.67 0.196 B1 9 CHKSB914 0.40 DHSB9081C 1.20 0.66 0.274 BU2 29 CHKSB915A 0.14 DHSB9003C 0.98 0.43 0.238 BU1 28 CHKSB915A 0.16 DHSB9003C 1.13 0.49 0.276 BL2 33 DCSB809 0.40 DHSB9003C 2.99 1.31 0.637 BL1 34 DCSB809 0.31 DHSB9003C 2.30 0.99 0.491 A2 5 SB-0636 0.70 DCSB813 0.80 0.77 0.045

Table 6:4 SN Block Drill hole Coal Seam Intercept Statistics


Thickness Mean

Thickness S.D.

G 4 SBA_13016 0.3 SBA_13037 0.5 0.413 0.085 F2 13 SBA_13064 0.2 DH_SB09029 0.9 0.546 0.257 F1 13 SBA_14073 0.25 DH_SB09027 0.6 0.367 0.096 FL 6 DH_SB09011 0.25 SBA_13026 0.5 0.433 0.108 E2U 1 DH_SB09026 1.29 DH_SB09026 1.29 1.29 -

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Thickness Mean

Thickness S.D.

E2L 1 DH_SB09026 3.45 DH_SB09026 3.45 3.45 - E1 21 DH_SB09021C 0.2 SBA_14086 3.65 0.931 0.949 D3 4 DH_SB09021C 0.35 SBA_13006 0.8 0.637 0.214 D2U 10 DH_SB09024 0.35 SBA_13023 4.2 1.815 1.209 D2L 9 GT_SBA_06 0.2 SBA_13016 0.7 0.328 0.152 D1 13 SBA_13005 0.2 SBA_13008 0.8 0.392 0.205 DU 22 DH_SB09005 0.25 SBA_13011 2.3 0.725 0.462 DL2 7 SBA_13049 0.8 SBA_13020 6.6 2.95 2.109 DL1 6 SBA_13021 0.2 SBA_14016 1.1 0.483 0.331 CU 10 SBA_13003 0.3 GT_SBA_04 1.04 0.679 0.227 CL 9 GT_SBA_04 0.1 SBA_13068 0.8 0.444 0.23 BU 18 GT_SBA_06 0.3 SBA_13053 2 0.739 0.406 BL2 6 SBA_13055C 0.33 SBA_13055 0.7 0.505 0.147 BL1 7 SBA_14096 1.2 SBA_13056 3.7 2.343 0.945 A2 23 SBA_13062 0.2 SBA_13036 1.3 0.606 0.306 A1 13 SBA_13036C 0.1 SBA_13055C 0.6 0.398 0.14 AL 8 SBA_13049 0.22 GT_SBA_09 0.8 0.47 0.279 F 8 GT_SBA_01 0.222 SBA_13029C 2.6 0.64 0.796 E2 17 SBA_14086 0.45 SBA_13016 5.6 2.741 1.705 E 52 SBA_13066 0.2 SBA_13006 6.5 4.198 1.657 D2 48 DH_SB09006 0.25 GT_SBA_08 2.8 1.095 0.598 DL 37 SBA_14023 0.1 GT_SBA_06 6.2 3.52 1.499 D 34 SBA_14023A 1.8 SBA_13058 8.3 6.643 1.534 C 34 SBA_13004 0.2 SBA_13062 1.6 0.754 0.317 BL 21 SBA_13022 0.222 SBA_13049 4.9 2.54 1.476

Table 6:5 PP Block Drill hole Coal Seam Intercept Statistics


Thickness Mean

Thickness S.D.

SU1U 1 CPS11029E 1.95 CPS11029E 1.95 1.95 -

SU1L 1 CPS11029E 3.45 CPS11029E 3.45 3.45 - SU2 10 CPS11025 0.5 CPS11042F 6.15 4.01 2.392 SM1 23 PS11042E 0.9 CPS11043A 4 1.916 0.748 SM2U 3 CPS11095B 1.1 CPS11094B 1.25 1.2 0.087 SM2L 3 CPS11095B 0.9 CPS11094B 0.95 0.933 0.029 SL1U 3 CPS11091B 0.85 CPS11026C 2.2 1.683 0.729 SL1L 3 CPS11026C 1 CPS11092B 1.9 1.583 0.506

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Thickness Mean

Thickness S.D.

SL2U 3 CPS11029F 1.1 CPS11006H 8.15 3.75 3.837 SL2L 4 PS11038B 1 CPS11006C 12 4.65 5.152 SL3U 2 PS11033 0.9 CPS11032B 5 2.95 2.899 SL3L 2 PS11033 1.2 CPS11032B 2.1 1.65 0.636 SB 33 CPS11034 0.35 CPS11006D 3.8 1.088 0.665 SU1 6 CPS11025 0.4 CPS11041 3 2.233 1.203 SM2 36 CPS11011B 0.8 CPS11034X 5.35 2.371 1.508 SL1 40 CPS11096B 0.9 CPS11012 6 2.871 1.425 SL2 50 CPS11026D 0.55 CPS11012 9 3.257 1.749 SL3 54 CPS11036C 1.25 PS11006B 12.7 4.437 2.51

6.3 Topographic Survey and base of weathering (BOW)

Topography data used in the five BIB geological models has been derived from Light Detecting and Ranging (LIDAR) remote sensing surveys conducted by PT Surtech Utama in 2012. During this survey GPS ground control points were combined with flight trajectories and LIDAR scanning equipment to produce an accurate dataset of XYZ topographic coordinate points for the entire concession area.

The topography within the mining area is surveyed on a daily basis by the mine site surveyors and “as mined” and “as dumped” surfaces are updated regularly.

A ‘non-conformable’ base of weathering (BOW) surface was generated for the geological models by translating the topographic surface down by 3 m in the Z direction. This is based on the observation that the average weathered horizon thickness, where it has been logged, is approximately 3 m.

6.4 Data Quality Assurance and Quality Control (QAQC) Measures

Core Sampling 6.4.1

At the completion of each run, core lengths were checked in the splits for recovery to ensure coal seams have been recovered as required. A target core recovery of 90% has been applied throughout all drilling phases. If core recovery was found to be less than 90% within the coal seam, the hole was re-drilled to collect a sample with 90% recovery. The core was also photographed routinely and logged in the splits by a geologist before being sampled. For open holes, chip samples were collected at 1 m intervals for lithological logging purposes.

All the drill rigs used during each phase of exploration were operated by experienced personnel and drilling was supervised by fully qualified geologists working in shifts.

Sampling of the coal seams was conducted by the rig geologist on duty and was conducted in accordance with the following sampling procedure supplied to rig geologists;

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• Open core barrel inner split tube and remove sample from the barrel;

• Transfer the core to the PVC split or core box;

• Determine the core depth (“From” and “To”) from the drill depth; and

• Reconstruct the core in the split to allow for any gaps;

• Determine the core recovery;

• Wash down using water and a cloth and/or brush prior to logging if covered by mud or oil;

• Complete geological logging and photograph structure or any abnormal features. The photograph should show information of drill hole number and from and to depths;

• The division of samples follows the simple scheme of sample all coal, sample separately any contained bands (plies) and take 10 cm roof and floor non-coal samples;

• Place samples into plastic bags which should be doubled to minimise moisture loss. Insert one bag inside another so that they are doubled;

• Label the sample by ID card, the label should give information about the sample number, hole number, from/to depth, and Project Code. Place the label ID card inside the small re-sealable plastic bag before putting it into the sample bag;

• Seal the sample bag with tape and write the sample number on the plastic bag;

• Dispatch sample to an accredited laboratory

The coal quality sampling technique detailed above is considered by HDR Salva to adequately address the QAQC requirements of coal sampling. As a further coal quality validation step prior to importing coal quality sample results for coal quality modelling purposes, HDR Salva constructed spreadsheets which compare the sampled intervals against the logged seam intervals in order to ensure that sampled intervals match the seam pick intervals.

Down-hole Geophysics and Seam Picks 6.4.2

Down-hole geophysical logs were completed during each drilling program by PT Surtech International and by PT Recsalog. Geophysical logging was conducted following the completion of a drill hole. After drilling is complete the logging unit deploys down-hole geophysical sondes, including gamma ray, calliper and density tools to assist with characterising the down-hole formation and its geological properties. Stratigraphic information, intercepted along the entire length of the drill hole (collar to total depth), is recorded and plotted in acrobat pdf format. A digital copy of the data is stored in LAS file format.

Logging was performed on the majority of drill holes (including cored and open holes) and approximately 98% of all holes have geophysical data. Seam picks and lithologies have all been corrected for geophysics.

Geophysical logging provides information on the coal seams intersected and aids in the definition of horizon boundaries and marker horizons, used to correlate the subsurface geology. The presence or absence of geophysical logging is one of the criteria used in the determination of points of observation for resource classification purposes. Under normal conditions coal-bearing sections of each drill hole were geophysically logged at the completion of drilling. In some instances, poor ground conditions restricted the ability to geophysically log the entire hole upon completion. In these cases, collapsed portions of holes were re-drilled in order to allow for density

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and gamma logging to be accomplished by lowering the geophysical probe through the drill string.

Coal Quality 6.4.3

Coal quality sampling was undertaken by GEMS and contract geologists, with the analysis testing being completed by PT Geoservices Coal Laboratories in Asam Asam or Banjarbaru. PT Geoservices laboratories are accredited to ISO 17025 standards and quality control is maintained by daily analysis of standard samples and by participation in regular "round robin" testing programs.

International Standards Organisation (ISO) methods have been used for Moisture Holding Capacity tests; Australian Standards (AS) have been used for Relative Density and American Society for Testing and Materials (ASTM) methods have been used for all other quality variables.

The following tests were undertaken as standard on all coal samples:

• Inherent Moisture (IM)

• Ash Content (Ash)

• Volatile Matter (VM)

• Fixed Carbon (FC)

• Total Sulphur (TS)

• Calorific Value-air dried basis (CV adb) – selected samples only

• Relative Density (RD)

Data validation by HDR Salva prior to geological model construction 6.4.4

Prior to using the lithological (seam pick) and coal quality data for geological model construction purposes, HDR Salva performed the following data validation and verification checks on the data;

• Checking of seam picks against the down-hole geophysics in selected instances in order to validate seam pinch outs or correlations during structural model construction.

• Validation of coal quality sample intervals against seam pick intervals

• Scatter plots of raw coal quality data pairs were constructed in order to determine outliers. In a few cases spurious data values were identified and removed from the quality data set prior to importing the data into Minescape.

• In cases were RD (adb) data was not determined for a sample, linear regression equations determined from the RD-ash scatter plot constructed from the rest of the raw coal quality data set were used to determine the RD value for the sample concerned from the ash value for that sample.

• Core recovery percentages per core run were compiled and merged with the coal quality sample data set in order to determine if any samples in the coal quality data set are from coal seam intersections with less than 90% core recovery over the seam width. No instances of this were identified as core recovery was observed to be generally good within the sampled seams (coal samples with less than 90% core recovery had previously been removed from the data by GEMS staff prior to being forwarded to HDR Salva)

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• During the importation of coal quality samples and associated raw coal quality data into the geological modelling software, a few instances of overlapping samples were identified and these were corrected and the samples re-imported

• After compositing the coal quality samples over the seam width on a seam by seam basis, histograms were constructed of the composited raw coal quality for each seam, in each of the five resource areas (Appendix C). Analysis of these histograms shows that in a few instances, raw ash% outliers are present as a result of excessive overlap of the coal quality sample into the seam roof or floor. In the majority of such instances, the proportion of outlier composite samples is very small compared to the total number of samples per seam and hence the presence of these outliers has no material impact on the modelled raw coal quality for affected seams. In very few instances, in the case of some minor seams with small total numbers of coal quality composites per seam, one or two overlapping samples do result in a material change to the raw coal quality of that seam. However in all such cases (F1, D1L1, D1L2, D1U1, D1U2 at KG Block, A3U at BS Block and SL1L at PP Block) the total tonnage represented by theses seams is less than 1% of the total tonnage of the block concerned and hence there is no material impact on the coal quality of the resource area as a whole.

6.5 Coal Density

No information on in situ moisture was obtained from the laboratory, resulting in the fact that the Preston and Sanders equation could not be applied to obtain in situ relative densities. As a result all resource tonnages are quoted on an in situ air dried density basis, as volumes are calculated on an in situ basis and density on an air dried basis. However the density of in situ coal is in reality not at an air dried basis but at a higher moisture in situ moisture basis. The estimate of resources on an air dried basis will therefore result in a higher tonnage as compared to the equivalent in situ moisture basis calculation. This effect has been accounted for to a large extent in the reserving process, where the total moisture as been used as proxy for the in-situ moisture and a Preston Sanders calculation has been made on this basis. However, given the unknown accuracy of this approximation, this calculation was not done at the resource stage, preferring rather to use the more accurately known air dried density and state the moisture basis used in the resource.

6.6 Coal Quality Data

Within the BIB concession, Warukin Formation coals are classified as a low energy sub-bituminous class B coal (ASTM – Guidebook of Thermal Coal page 35). The Tanjung Formation coals in the PP Block are classified as Bituminous class A coal.

Raw coal quality composite sample statistics for all seams in each resource area are given from Table 6:6 to Table 6:10.

Table 6:6 KG Block Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

H2

Number of Values 1 1 1 1 1 1 1 1 Min Value 1.68 5590.14 41.38 15.48 1.36 37.5 0.13 41.46 Max Value 1.68 5590.14 41.38 15.48 1.36 37.5 0.13 41.46

Mean 1.68 5590.14 41.38 15.48 1.36 37.5 0.13 41.46

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SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

H1


Mean 11.73 4933.85 36.48 14.73 1.43 36.58 0.13 37.57

G2U

Number of Values 3 3 3 3 3 3 3 3 Min Value 4.84 4180 29.56 12.92 1.37 32.78 0.14 33.68 Max Value 22.39 5433 39.38 14.47 1.5 38 0.2 41.31

Mean 12.78 4898 34.75 13.92 1.44 35.69 0.17 38.55

G2L

Number of Values 3 3 3 3 3 3 3 3 Min Value 5.14 4180 29.56 12.92 1.37 32.78 0.14 33.68 Max Value 22.39 5425.25 39.36 14.37 1.5 38 0.2 41.18

Mean 12.88 4895.42 34.74 13.87 1.44 35.68 0.17 38.5

G1

Number of Values 5 5 5 5 5 5 5 5 Min Value 5.01 4180 29.56 13.38 1.34 32.78 0.14 33.68 Max Value 22.39 5548 39.22 15.94 1.5 38.12 0.29 43.74

Mean 9.7 5042.8 36.31 14.71 1.42 35.39 0.19 39.27

F2


Mean 4.56 5452.71 39.03 14.92 1.37 36.26 0.23 41.49

F1

Number of Values 21 21 21 21 21 21 21 21 Min Value 2.82 2172.3 16.02 7.53 1.33 25.24 0.11 19.38 Max Value 58.21 5757 41.18 20.01 1.9 41.16 0.54 45.24

Mean 10.34 5111.43 36.05 14.49 1.42 35.4 0.23 39.24

FL2


Mean 5.28 5245.29 38.48 15.11 1.4 36.67 0.17 41.13

FL1


Mean 5.9 5282.78 37.74 14.74 1.4 36.34 0.18 41.63

E2U


Mean 5.18 5373.72 38.76 15.24 1.38 35.54 0.17 40.82

E2L2


Mean 5.4 5354.8 38.76 15.22 1.38 35.52 0.17 40.63

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E2L1


Mean 6.08 5303.38 38.43 15.24 1.39 35.41 0.16 40.24

E1U2


Mean 4.8 5364.58 39.09 15.32 1.38 35.45 0.14 40.8

E1U1


Mean 4.69 5374.15 39.21 15.25 1.38 35.6 0.14 40.85

E1L2


Mean 4.49 5411.64 39.21 15.14 1.38 35.57 0.14 41.17

E1L1


Mean 5.24 5370.08 38.73 15.24 1.38 35.42 0.15 40.82

EL2U

Number of Values 72 72 72 72 72 72 72 72 Min Value 1.84 4142 22.73 10.96 1.31 25.97 0.09 34.72 Max Value 25.57 5975.29 41.48 20.13 1.56 38.23 0.94 46.7

Mean 6.31 5308.71 37.76 15.08 1.39 35.15 0.18 40.86

EL2L


Mean 6.2 5321.18 37.61 15.24 1.39 35.08 0.18 40.96

EL1U

Number of Values 55 55 55 55 55 55 55 55 Min Value 2.6 4181 24 10.54 1.31 26.75 0.09 33.55 Max Value 27.26 5827.39 41.48 21.56 1.58 38.32 0.44 45.12

Mean 6.65 5331.61 37.27 15.15 1.39 34.56 0.17 40.94

EL1L


Mean 12.71 5006.43 34.92 14.44 1.43 33.67 0.18 38.62

EL2U


Mean 6.31 5308.71 37.76 15.08 1.39 35.15 0.18 40.86

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EL2L


Mean 6.2 5321.18 37.61 15.24 1.39 35.08 0.18 40.96

EL1U

Number of Values 55 55 55 55 55 55 55 55 Min Value 2.6 4181 24 10.54 1.31 26.75 0.09 33.55 Max Value 27.26 5827.39 41.48 21.56 1.58 38.32 0.44 45.12

Mean 6.65 5331.61 37.27 15.15 1.39 34.56 0.17 40.94

EL1L


Mean 12.71 5006.43 34.92 14.44 1.43 33.67 0.18 38.62

D1U2


Mean 10.98 5023 35.88 14.26 1.43 35.07 0.22 38.87

D1U1


Mean 10.62 5045.08 36.24 14.13 1.43 35.08 0.22 39.02

D1L2


Mean 8.7 5167.85 36.82 14.52 1.41 35.12 0.23 39.96

D1L1


Mean 9.09 5163.07 36.58 14.38 1.41 34.89 0.22 39.96

DU2U

Number of Values 61 61 61 61 61 61 61 61 Min Value 2.24 1871 13.32 6.85 1.35 22.75 0.09 18.11 Max Value 61.72 5677 41.29 19 1.99 39.42 1.07 44.96

Mean 7.55 5207.75 37.39 15.13 1.41 35.39 0.22 39.93

DU2L


Mean 7.32 5230.56 37.55 15.03 1.41 35.46 0.22 40.1

DU1U


Mean 6.43 5274.54 38.11 15.26 1.4 35.71 0.22 40.2

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DU1L


Mean 6.6 5264.73 38.04 15.25 1.4 35.71 0.22 40.11

DL2U


Mean 5.51 5312.74 38.65 15.33 1.39 35.81 0.2 40.52

DL2L


Mean 5.85 5292.15 38.43 15.38 1.39 35.63 0.18 40.34

DL1U


Mean 6.71 5256.42 38.11 15.21 1.4 35.34 0.19 39.97

DL1L


Mean 7.5 5212.7 37.67 15.13 1.41 35.13 0.21 39.71

CR2U


Mean 7.99 5337.82 36.42 14.56 1.4 34.46 0.28 40.9

CR2L


Mean 8.2 5324.08 36.31 14.53 1.4 34.42 0.27 40.83

CR1U


Mean 7.35 5411.89 36.64 14.4 1.4 34.9 0.26 41.48

CR1L


Mean 7.65 5390.68 36.31 14.38 1.4 34.87 0.25 41.53

CU2


Mean 10.21 5127.53 36.14 14.42 1.42 34.67 0.67 39.24

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CU1


Mean 11.23 5109.16 35.59 13.94 1.44 34.73 0.97 39.28

CL2U


Mean 6.54 5315.97 37.8 15.12 1.4 36.14 0.52 40.55

CL2L


Mean 6.59 5318.15 37.83 15.1 1.4 35.71 0.52 40.48

CL1U


Mean 8.71 5199.86 36.46 14.88 1.41 35.26 0.53 39.94

CL1L


Mean 7.82 5259.18 36.94 15.06 1.4 35.49 0.55 40.17

BU2U


Mean 7.48 5255.23 38.27 14.52 1.41 36.13 0.55 39.73

BU2L


Mean 7.99 5215.9 38.09 14.47 1.42 36 0.57 39.45

BU1U


Mean 6.56 5307.69 38.27 14.79 1.4 36.19 0.53 40.38

BU1L


Mean 7.26 5260.35 38.18 14.71 1.41 35.96 0.51 39.84

BL2U

Number of Values 68 68 68 68 68 68 68 68 Min Value 2.76 4752 35.35 11.72 1.35 31.76 0.14 35 Max Value 15.1 5695 42.11 19.29 1.48 41.49 3.98 43.59

Mean 4.81 5357.38 39.56 15.29 1.39 36.35 0.49 40.34

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BL2L

Number of Values 69 69 69 69 69 69 69 69 Min Value 2.89 4613 34.41 11.72 1.34 31.76 0.14 35 Max Value 16.75 5695 42.32 19.29 1.5 41.49 3.98 44.2

Mean 4.97 5348.73 39.49 15.33 1.4 36.54 0.49 40.21

BL1U


Mean 7.1 5271.78 38.28 14.83 1.41 36.29 0.69 39.79

BL1L


Mean 6.89 5289 38.44 14.88 1.41 36.36 0.72 39.79

B1


Mean 8.19 5361.71 37.54 13.78 1.41 36.16 2.03 40.42

AU


Mean 35.4 3554 22.81 11.25 1.64 29.47 0.36 30.54

AL2


Mean 13.43 5173.62 36.11 12.15 1.46 36.9 2.2 38.32

Table 6:7 BS Block Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

CU


Mean 8.8 5403 37.4 13.77 1.38 33.54 0.36 40.03

C


Mean 11.32 5239.64 35.18 13.6 1.41 32.27 0.23 39.89

CL


Mean 11.61 5314.6 37.48 11.74 1.42 34.76 0.17 39.17 BU Number of Values 6 6 6 6 6 6 6 6

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Min Value 4.16 4295.21 31.21 10.05 1.34 29.92 0.13 33.05 Max Value 24.37 5515 40.28 16.57 1.55 38.5 0.28 41.15

Mean 12.95 4957.24 36.43 13.42 1.44 33.38 0.17 37.2

B


Mean 3.93 5605.16 39.97 14.03 1.37 33.19 0.16 42.07

BL2


Mean 6.03 5787.57 38.88 11.33 1.38 31.66 0.17 43.76

BL


Mean 7.48 5460.79 38.34 13.76 1.39 32.87 0.27 40.4

BL1


Mean 8.81 5673.38 37.47 10.39 1.39 29.28 0.19 43.33

A5


Mean 17.11 4746.77 33.73 12.69 1.43 31.89 0.36 36.47

A4U2


Mean 4.36 5707.17 38.22 13.83 1.35 34.17 0.22 43.6

A4U2A


Mean 3.3 6064 40.14 10.38 1.34 33.59 0.14 46.18

A4U


Mean 4.34 5777.98 40 12.46 1.37 31.5 0.19 43.2

A4U1


Mean 4.99 5698.94 37.71 13.93 1.35 32.09 0.17 43.38 A4L Number of Values 5 5 5 5 5 5 5 5

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Min Value 5.7 3695 25.86 8.22 1.32 27.95 0.13 28.7 Max Value 34.51 5963 38.43 14.75 1.63 33.53 0.23 45.98

Mean 14.41 5131.54 33.91 12.34 1.43 30.88 0.17 39.34

A3U


Mean 9.37 5387.99 37.49 11.79 1.39 32.15 0.2 41.35

A2U2

Number of Values 2 2 2 2 2 2 2 2 Min Value 8.7 4847.88 35.11 13.8 1.26 30 0.15 35.96 Max Value 11.24 5324 36.4 17.69 1.39 31.1 0.17 41.1

Mean 9.97 5085.94 35.75 15.74 1.33 30.55 0.16 38.53

A2U


Mean 7.58 5526.18 40.04 11.03 1.44 34.12 0.15 41.34

A2U1

Number of Values 3 3 3 3 3 3 3 3 Min Value 6.68 5265.94 36.4 13.8 1.26 30 0.17 37.23 Max Value 8.84 5365 39.96 16.63 1.41 34.33 0.2 41.1

Mean 8.07 5318.31 37.87 14.8 1.33 32.05 0.19 39.26

A2L


Mean 16.49 4989.11 33.99 10.97 1.46 31.57 0.19 38.54

A1U2

Number of Values 1 1 1 1 1 1 1 1 Min Value 4.04 5628.61 43.22 12 1.4 34.42 0.13 40.74 Max Value 4.04 5628.61 43.22 12 1.4 34.42 0.13 40.74

Mean 4.04 5628.61 43.22 12 1.4 34.42 0.13 40.74

Table 6:8 SS Block Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

F2


Mean 6.85 5274.17 38.88 13.99 1.44 38.18 0.14 40.29

F1


Mean 13.05 4993.76 36.42 12.19 1.49 36.33 0.13 38.34

E2U Number of Values 15 15 15 15 15 15 15 15

Min Value 3.5 4567.25 30.12 8.96 1.36 32.29 0.09 37.3

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Max Value 18.89 5915.96 41.93 17.14 1.79 39.25 0.24 44.94 Mean 5.97 5507.13 39 13.03 1.46 37.29 0.14 41.99

E2L

Number of Values 16 16 16 16 16 16 16 16 Min Value 3 4370.66 29.87 8.7 1.32 32.83 0.09 35.27 Max Value 19.5 5891.58 42.35 16.45 1.81 40.86 0.17 45.91

Mean 6.63 5415.52 38.34 13.47 1.46 37.58 0.12 41.56

E1U

Number of Values 8 8 8 8 8 8 8 8 Min Value 2.92 4846.2 31.99 8.78 1.34 34.72 0.07 39.52 Max Value 15 5867 42.34 18.34 1.8 38.59 0.31 44.7

Mean 6.17 5535.85 38.31 12.89 1.46 37.44 0.15 42.66

E1L


Mean 10.33 5283.72 36.82 12.54 1.55 36.9 0.13 40.31

EL


Mean 7.82 5496.97 38.5 12.22 1.5 36.84 0.21 41.45

D1U


Mean 2.79 6054.79 40.82 10.18 1.37 38.36 0.27 46.21

D1L


Mean 3 5960.67 42.1 10.25 1.51 38.45 0.23 44.65

DU2


Mean 4.94 5637.29 41.21 11.5 1.45 39.51 0.18 42.35

DU1


Mean 3.33 5678.77 42.83 11.41 1.47 39.97 0.14 42.07

DL2


Mean 4.48 5646.03 41.48 11.39 1.53 39.49 0.16 42.51

DL1 Number of Values 7 7 7 7 7 7 7 7

Min Value 4.53 5437 38.91 8.3 1.38 38.68 0.15 40.13

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Max Value 6.19 5859.34 43.07 13.98 1.82 40.58 0.32 44.59 Mean 5.34 5665.56 40.85 11.39 1.48 39.5 0.19 42.43

C


Mean 15.84 5047.14 34.23 11.3 1.48 36.57 2.14 38.63

BU2

Number of Values 1 1 1 1 1 0 1 1 Min Value 7.39 5426 38.7 13.71 1.4 - 1.21 40.2 Max Value 7.39 5426 38.7 13.71 1.4 - 1.21 40.2

Mean 7.39 5426 38.7 13.71 1.4 - 1.21 40.2

BU1

Number of Values 1 1 1 1 1 0 1 1 Min Value 7.39 5426 38.7 13.71 1.4 - 1.21 40.2 Max Value 7.39 5426 38.7 13.71 1.4 - 1.21 40.2

Mean 7.39 5426 38.7 13.71 1.4 - 1.21 40.2

BL2


Mean 4.89 5616.96 41.52 12.05 1.52 40.32 0.47 41.54

BL1


Mean 5.3 5550.81 41.79 12.68 1.52 40.65 0.4 40.25

Table 6:9 SN Block Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

F2


Mean 8.12 5117 36.71 16.43 1.4 37.8 0.26 38.74

F


Mean 7.04 5496 37.22 13.2 1.36 39.4 0.21 42.54

FL


Mean 17.54 4774 32.39 12.7 1.43 38.95 0.3 37.37

E2

Number of Values 1 1 1 1 1 1 1 1 Min Value 3.64 5479.94 39.78 15.59 1.39 36.99 0.14 41 Max Value 3.64 5479.94 39.78 15.59 1.39 36.99 0.14 41

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Mean 3.64 5479.94 39.78 15.59 1.39 36.99 0.14 41

E


Mean 4.17 5401.86 38.64 16.09 1.37 39.61 0.17 41.09

E1


Mean 4.46 5372 38.62 16.35 1.36 38.18 0.24 40.57

D3


Mean 7.29 5420 39.37 13.32 1.39 39.18 0.27 40.02

D2U


Mean 5.11 5376 36.99 16.46 1.39 39.99 0.2 41.44

D2


Mean 5.49 5428.11 37.29 16.05 1.37 38.1 0.23 41.17

DU


Mean 10.98 5065 33.43 17.27 1.39 36.09 0.18 38.33

DL2


Mean 4.56 5532 39.27 14.12 1.39 38.3 0.12 42.05

D


Mean 3.75 5421.37 39.62 16.23 1.37 38.09 0.11 40.4

DL


Mean 5 5283.6 38.23 16.81 1.37 38.85 0.13 39.97

CU


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Mean 7.74 5335 36.74 15.83 1.38 39.35 2.1 39.68

C


Mean 11.84 5133.8 35.03 14.32 1.42 37.87 2.2 38.81

CL


Mean 22.3 4415 31.3 12.64 1.5 39.63 0.9 33.76

BU


Mean 9.39 5236.5 34.48 16.01 1.38 37.75 1.14 40.12

BL


Mean 6.07 5403 38.56 14.75 1.39 38.57 0.98 40.63

BL1


Mean 7.8 5118 35.36 18.5 1.38 38.45 1.32 38.34

A2


Mean 10.56 5320.5 35.91 13.87 1.4 38.83 1.09 39.67

A1


Mean 14.66 4975.5 33.87 13.71 1.44 37.97 3.2 37.76

AL


Mean 9.22 5230 34.43 17.22 1.37 36.71 2.19 39.12

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Table 6:10 PP Block Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb

SU1U


Mean 12.9 6316 40.88 5.6 1.37 11.28 2.02 40.63

SU1


Mean 10.1 6497.66 43.23 7.12 1.31 9.27 0.66 43.49

SU1L


Mean 15.46 6135 39.17 4.9 1.38 10.79 1.07 40.47

SU2


Mean 7.8 6756.21 43.57 6.39 1.33 13.48 1.2 42.92

SM1


Mean 12.63 6359.38 41.34 5.55 1.34 13.08 1.38 41.18

SM2U

Number of Values 2 2 2 2 2 2 2 2 Min Value 9.35 6500 39.89 6 1.33 13.22 1.32 41.67 Max Value 9.48 6552 42.21 6.6 1.38 19.07 2.76 44.75

Mean 9.41 6526 41.05 6.3 1.36 16.14 2.04 43.21

SM2


Mean 11.45 6406.5 41.09 6.06 1.37 11.73 1.16 41.39

SM2L


Mean 10.14 6538 40.88 5.7 1.33 15.58 1.96 43.26

SL1U


Mean 9.87 6497 42.99 6.33 1.33 12.34 0.97 40.81

SL1


Mean 6.68 6828 43.99 6.26 1.32 12.54 0.79 43.07

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SL1L

Number of Values 2 2 2 2 2 2 2 2 Min Value 12.54 6396 31.38 3.6 1.38 8.88 3.34 36.56 Max Value 28.42 6500 40.15 4.9 1.48 12 3.82 42.38

Mean 20.48 6448 35.77 4.25 1.43 10.44 3.58 39.47

SL2U


Mean 7.08 7007 43.7 5.35 1.31 14.25 0.76 43.88

SL2


Mean 6.62 6875.31 43.37 5.98 1.31 12.22 1.17 44.03

SL2L


Mean 12.8 6601.5 39.7 4.3 1.36 11.01 1.68 43.17

SL3


Mean 8.59 6698.33 42.95 5.65 1.33 12.78 1.52 42.8

SB


Mean 11.97 6386 41.07 5.98 1.34 13.27 0.98 40.99

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7 Resource Model Construction 7.1 Structural Model

After completion of the previously detailed QA/QC processes, the available valid lithological and coal quality data was then imported into the MineScape software (Version 5.7.85.0) to generate both a structural model and a coal quality models for each of the five resource areas.

The topographic model for the each deposit was constructed by importing the Minex topography grid models for each area used previously by PT SMG Consultants. These topography models describe both virgin topography and mined voids within the concession as at 28th July 2013.

The lithological data was then modelled to create structural grids. The schema, stored within the Stratmodel module of the MineScape software controls the modelling of seam elements and their structural relationships, grid model cell size, interpolators and other parameters. The details of these parameters stored in the applied schemas used in the structural modelling process are listed in Table 7:1.

Within the modelling schema, all of the stratigraphic intervals were modelled with pinched continuity. This is applied in areas where intervals are missing in a drill hole. In this situation, the modelling algorithm stops the interpolation of the missing interval halfway between the two drill holes between which it ceases to be present.

Structural Model Validation 7.1.1

Structural and thickness contours were generated and inspected to identify any irregularities, bulls-eyes, unexpected discontinuities etc. Cross-sections were also generated to identify any further structures such as faulting and any areas where seams were modelled as being discontinuous due to short drilling. Selected cross-sections from each resource area are shown in Appendix D.

Table 7:1 Model Schema Settings and Parameters Model Component Details Modelling Software Ventyx MineScape - Stratmodel module Schema kg2014,pp2014,km16,sbs14,sbnorth Topography Model Topotmo_1212 (KG), Tops (PP, SS, SN) Topography Model Cell Size 25 m Structural Model Cell Size 25 m Interpolator (thickness)/order Finite Element Method (FEM)/0 Interpolator (surface)/order Finite Element Method (FEM)/1 Interpolator (trend)/order Finite Element Method (FEM)/0 Extrapolation Distance 5500 m (PP), 4000 m (KG), 2500 m (BS, SS, SN) Parting Modelled No Minimum Ply Thickness 10 cm Minimum Coal Parting 30 cm (PP) otherwise not defined Conformable Sequences Weathered, Fresh

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Upper Limit for Seams Base of Weathering (BOW) Control Points Yes Constraint File No Penetration File Yes Model Faults No Maximum Strip Ratio 1:15 (PP) Maximum Resource Depth 250 m Tonnage Calculations Based on volumes using relative density on an air dried basis

7.2 Coal Quality Model

Coal quality data has been composited on a seam basis. The Inverse distance interpolator was selected for modelling coal quality as it has been shown to perform adequately for most coal quality attributes and it is also less likely to introduce spurious trends into the data. Testing indicated that a power value of two and a search radius of 2500 metres are the most suitable inverse distance interpolation parameters for modelling of the BIB coal deposits. Parameters used for quality modelling are summarized in Table 7:2.

Table 7:2 Quality Model Parameters Model Component Details Coal Quality Data Type Raw Model Type MineScape Table Interpolator Inverse distance Power 2 Search Radius 2500 metres

7.3 Quality Model Validation

After the completion of quality model gridding, selected qualities for selected seams were contoured and contours inspected to ensure that quality models had been gridded correctly. As a second validation measure, average qualities reported during resource reporting for all seams were compared against the average qualities of the input data to ensure consistency between input and output data sets.

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8 Coal Resources 8.1 Prospects for Eventual Economic Extraction and Resource

Classification

Coal Resources present in the BIB concession have been reported in accordance with the JORC Code, 2012. The JORC Code identifies three levels of confidence in the reporting of resource categories. These categories are briefly explained below.

Measured – “..That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors to support detailed mine planning and financial evaluation”;

Indicated – “…That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors in sufficient detail to support mine planning and evaluation”; and

Inferred – “…That part of a Mineral Resources for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling.”.

For the purpose of coal resource classification according to JORC Code (2012) Code, HDR Salva has considered a drill hole with a coal quality sample intersection and core recovery above 90% over the sampled interval as a valid point of observation.

In terms of Coal Resource classification, HDR Salva is also guided by the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) (The Coal Guidelines) specifically referred to under clause 37 of the JORC Code (2012). According to the Coal Guidelines, maximum spacing’s between points of observation for both structural and coal quality points of observation for Measured, Indicated and Inferred resources are 500 m, 1000 m and 4000 m respectively.

Based on due consideration of the continuity of the coal seams as observed in the geological models for each of the five resource areas, the relative lack of evidence for significant faulting and the population statistics of the coal quality composites per seam, HDR Salva has sub-divided Coal Resources within the BIB concession into resource classification categories based on the following spacing’s (expressed as a radius of influence around points of observation which is half of the spacing between points of observation):

Measured 250 m radius of influence;

Indicated 500 m radius of influence; and

Inferred 2000 m radius of influence.

Resource polygons for the main seams from each resource area are shown in Appendix E.

It is furthermore a requirement of the JORC Code (2012) that the likelihood of eventual economic extraction be considered prior to the classification of coal resources. Therefore, given the average coal quality attributes of the coal seams considered, which makes it amenable to be marketed as a thermal coal for power generation purposes, HDR Salva considers that it is reasonable to

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define all coal seams within the classification distances discussed above, to a depth of 250 m below the topographic surface, as potential open cut coal resources or to a maximum vertical stripping ratio of 15:1 in the case of the more steeply dipping PP Block (where a depth of 250 m below surface would result in overall stripping ratios that are unlikely to be economic due to the steep dips).

8.2 Coal Resource Statement

The Coal Resources which have been estimated, have been classified and reported according to the JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July 2014 are detailed in Table 8:1 below.

Topographic surfaces valid as at 28 July 2013 were used in all resource models. As no more current mined void information was available at the time of model construction, adjustments for mining between 28 July 2013 and the date of this resource statement (31 July 2014) have been made.

Table 8:1 Coal Resource Estimate as at 31 July 2014

Resources (Mt)

Area Measured Ash% CV

Indicated Ash% CV

Inferred Ash% CV

Total (adb) adb

Kcal/kg (adb) adb Kcal/kg adb adb

Kcal/kg

KG 356 5.01 5,361 564 5.47 5,324 535 6.34 5,261 1,453 BS 22 4.71 5,567 27 5.61 5,560 155 5.94 5,563 204 SS 18 6.22 5,510 10 6.29 5,559 15 5.59 5,570 42 SN 9 4.71 5,395 12 6.24 5,281 25 8.4 5,248 46 PP 10 7.48 6,146 10 8.87 6,275 10 9.72 6,460 31

Total 414 623 740 1,777

Mineral Resources are reported inclusive of the Mineral Reserves (Note: individual totals may differ due to rounding)

Final Inferred Resource rounded to nearest 5 Mt.

8.3 Comparison with Previous Estimates

A previous JORC 2004 compliant resource report exists for Coal Resources in the BIB concession. In October 2013 PT SMG Consultants estimated a total resource of 1.84 Bt..

This latest (July 2014) resource estimate of 1.78 Bt represents a 3.3% drop in total tonnage for a number of reasons, namely;

A 22% drop in Measured and Indicated tonnes in this latest estimate resulting from modelling of seams as pinched (not present) if not logged in the hole. Previously seams were taken through the hole even if not logged as present.

A 44% increase in Inferred tonnes due to an increase in the classification distance for Inferred from 2000 m to 4000 m between holes.

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Table 8:2 below shows a breakdown of the difference in resource tonnes for the entire BIB concession between this and the previous estimate.

Table 8:2 Coal Resource - Comparison with Previous Estimate

Resource Category HDR Salva 2014 (Mt)

PT SMGC 2013 (Mt)

Measured 414 583 Indicated 623 742 Total M&I 1,038 1,324 Inferred 740 512

Total 1,777 1,836

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9 Reserves Estimation

9.1 Estimation Methodology HDR Salva prepared the Coal Resource estimate for BIB Concession coal deposit as at 31 July 2014 which is used as a basis for the Coal Reserve estimate.

The Coal Reserves estimates presented in this report are based on the outcome of pit optimisation results and the Techno-economics study carried out by HDR Salva. The mining schedule for the BIB concession blocks includes 3 existing open cut mines, Kusan Girimulya (KG), Batulaki South (BS) and Sebamban South (SS) and 2 proposed open cut mines Sebamban North (SN) and Pasopati (PP) which targets total coal requirement of 40 Mtpa from all the pits from the year 2022 onwards.

The subject specialist for Coal Reserves considers the proposed mine plan and mining schedule is techno-economically viable and achievable. This has been done by reviewing all the modifying factors, estimating reserves in the pit shell and doing a strategic production schedule and economic model which confirms a positive cash margin using the cost and revenue factors as described below in this report.

9.2 Modifying Factors


Pre-feasibility studies were completed prior to commencement of mining operations. These studies were accepted as part of the AMDAL approval process from the Govt. of Indonesia prior to being given mining operations approval (CCoW).

Where an entity has an operating mine for an Ore Reserve, its Life of Mine Plan would generally be expected to contain information at better than Pre-Feasibility or Feasibility level for the whole range of inputs normally required for a Pre-Feasibility or Feasibility study and this would meet the requirement in Clause 29 for the Ore Reserve to continue that classification. HDR Salva has used actual modifying factors based on current operations at the BIB Mine which were independently verified by the HDR’s subject specialist during the site visit. In HDR Salva’s opinion, the Modifying Factors at BIB Mine are better defined based on actual mining practices compared to a greenfield project at Pre-Feasibility stage.

The following table (Table 9:1) outlines the factors used to run the mine optimisation and estimate the Coal Reserve Tonnage.

Table 9:1 Modifying & Mine Optimisation Factors Factor Chosen Criteria

Seam roof & floor coal loss of 0.05 m each 0.10m

Seam roof & floor dilution 0.02 m each 0.04m

Geological & Mining loss including loss in transportation and handling at port

5%

Minimum mining thickness minable coal seam 0.3m

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Factor Chosen Criteria

Dilution default density 2.2bcm/t

Dilution default calorific value 500Kcal/kg

Dilution default ash 75%

Overall Highwall and Endwall slope (varies in different blocks) 20 deg to 42 deg

Maximum Pit depth Varies (200m max.)

Minimum Mining width at Pit bottom 50m

Exclusion of Mining lease (CCOW) and offset from Pit crest 50m

Offset from the river edge 300m

Mining , Coal handling and Transport Cost Available and Used

Coal Selling Price for Break-even Stripping Ratio calculation US$ 41.4/t (except Pasopati), Pasopati- US$ 88.4/t

Government Documents / approvals Available and Used

Environment Report Available and Used

Geotechnical Report Available and Used

Hydrogeology Report Available & Used

9.3 Notes on Modifying Factors

Mining Factors 9.3.1

General

The mining limits are determined by considering physical limitations, mining parameters, economic factors and general modifying factors as above (See Table 9:1). The mining factors applied to the Coal Resource model for deriving mining quantities were selected based on the use of suitably sized excavators and trucks. The assumptions are that due to the shallow to moderate and steep dip of the coal mining will need to occur in strips and benches.

The mining factors (such as recovery and dilution) were defined based on the proposed open cut mining method and the coal seam characteristics. The exclusion criteria included the lease boundary, Kusan River (for Girimulya Pit & Pasopati pit) and a minimum working section thickness.

Determination of Open Cut Limits

The geological models that were used as the basis for the estimation of the Reserves are the MineScape geological models prepared by HDR Salva to compute the Resources.

Potential open cut reserves inside different blocks of the Project Area were identified with pit optimisation software utilising the Lerchs Grossman algorithm. By generating the financial value (positive or negative) for each mining block within a deposit and then applying the physical relationship between the blocks, the optimal economic pit can be determined.

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This method is widely accepted in the mining industry and is a suitable method for determining economic mining limits in this type of deposit. The optimiser was run across a wide range of coal prices using a standard set of costs that was developed by HDR Salva and based on typical industry costs in similar operations. These costs were adjusted to suit the conditions for this project.

Unit Costs

The Contractor and Owner unit costs used in the Lerchs Grossman optimiser for various blocks are detailed in Table 9:2 and Table 9:3. These costs were used to create a series of waste and coal cost grids which were used to generate the optimiser nested pit shells.

Table 9:2 Contractor Unit Rates (Real Terms)

Cost Item Unit Rate Land Clearing $/ha 1,700 Topsoil Removal $/bcm 2.40 Waste Mining $/bcm 2.40 Waste Haulage $/bcm/km 0.30 Coal Mining $/t 1.40 Haul to ROM Stockpile $/t km 0.15 Haul to Port Stockpile – Road $/t km 0.13 Barging $/t km 0.05 Transhipment $/t 2.10

Note: All quoted cost in local currency is adjusted for fuel price and exchange rate

Table 9:3 Variable Owner Unit Costs (Real Terms)

Cost Item Unit Rate ROM Coal Handling $/t 0.50 Haul to Port Stockpile – Conveyor $/t km 0.05 Port Stockpile and Barge Loading $/bcm 1.00 Mine Closure $/ha 8,500 Environmental and Rehabilitation $/t 0.15 Miscellaneous Operations $/t 0.15 Water Treatment $/t 0.05 Salary and Wages $/t 0.30 Camp and Accommodation $/t 0.05 Medical & Community Development $/t 0.15 Land Use Payment $/t 0.25 Corporate Overheads $/t 0.50 Contingency $/t 1.12

Royalty was estimated 13.5% based on the respective sale prices of the coal for each block. A 10% VAT and 15% operating contingency was also considered.

Apart from the unit costs described in the above section, land compensation cost per Ha was also considered during optimisation. These land compensation costs were obtained from the GEMS

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technical team and verified by HDR Salva. Finally this was converted to an equivalent unit cost per square meter of land for use in the optimiser.

Base Pit for Optimiser

In addition to the mining and economic constraints, the optimisers were mostly limited by a 3 dimensional shell which was built for each block following either a surface constraint or geological model extent. These constraints are detailed in Table 9:4. This pit shell effectively represented the maximum pit possible in the deposit that was reasonable for the estimation of Coal Reserves.

Table 9:4 Block wise Optimiser Base Pit limits Block Name North South East West Kusan Girimulya IUP and River Geomodel Sub-Crop IUP and Geomodel Batulaki Geomodel Geomodel Geomodel IUP and River Sebamban South IUP IUP Sub-Crop IUP Sebamban North IUP IUP Sub-Crop IUP Pasopati Geomodel Geomodel Geomodel Geomodel

In Pasopati the base pit was divided into two separate pits – North and South – as a river runs almost through middle of the block. A 300 m offset was taken from the river in both sides.

Artisanal Mining in Pasopati

Artisanal mining was prevalent in the Pasopati block before the LIDAR topography was surveyed in 2009. No accurate survey was available for the current mined out situation in this block. A polygon delineating the extent of this mining in both north and south was surveyed. HDR Salva has performed a tentative estimation on the maximum depth of this artisanal mining and generated a mined out surface. This surface was used in optimisation for this block to exclude any possible mined out tonnage from the current reserve estimate.

Optimisation Result 9.3.2

The optimiser produced a series of nested pit shells using same cost parameters with varying sale price of coal. The method starts with a very low discounted sale price following a high discount factor and moves toward higher sale prices by decreasing the discount on sale price. It estimates the net margin by subtracting the total cost from the revenue within a particular shell at a particular discount factor using the cost-revenue parameters and the physical quantities within the pit shell. As the method progresses, the incremental margin per tonne of coal slowly drops down to zero at “zero” discount factor and then goes negative as the pit shells go deeper following higher sale prices. As a result the cumulative margin slowly rises up to a maximum level at “zero” discount factor and then starts dropping off. Thus the pit shell (OPT000) which represents the “zero” discount factor is called the optimum pit shell as any smaller or bigger shell will have a lower cumulative margin (“value”). The goal in this process is intended to have economic pit sensitivity.

Selection of Pit Shell 9.3.3

United Fiber is proposing to mine 40 Mtpa of coal from BIB coal concession blocks from 2022 onwards and as such would need 750-800 Mt of mineable ROM coal to achieve this target. An economic model was prepared for the mining operation from each of the BIB coal concessions to

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determine the project breakeven or incremental stripping ratio. The pit optimisation results were examined and pit shells selected where the incremental stripping ratios were less than or equal to break even strip ratio determined at a point where the costs for mining and handling the coal equalled the revenue generated by the coal.

Break Even Stripping Ratio

Table 9:5 summarises the calculation of the Break Even Stripping Ratio for BIB Blocks. The methodology adopted involves taking the cost to mine a tonne of coal and adding all the costs associated with getting the coal to the point of sale.

Table 9:5 Break-even Stripping Ratio (BESR)

Estimation of Break Even Stripping Ratio KG/BS/SS & SN Blocks PP Block

Coal Price, US$/t FOB Basis $41.40 $88.40 Total of Road haulage, Port, Barging & Royalty, US$/t $16.57 $24.00 Price at Mine Head, US$/t $24.83 $64.40 Other mine related cost, US$/t $5.90 $8.00 Price ex mine, US$/t $18.93 $56.40 Cost of coal mining incl. haulage, US$/t $1.70 $1.70 Cost of waste mining incl. top soil & haulage, US$/bcm $2.70 $2.70 Break-even stripping ratio, bcm/t 6.4 20.3 For the purpose of reserve estimation, total moisture was considered to be equal to in-situ moisture for determination of in-situ relative density as in-situ moisture values were not available. The in-situ density of the coal has been estimated using the Preston-Sanders method to account for the difference between air-dried density and in-situ density. The formula and inputs were as follows:

RD2 = RD1 x (100 – M1) / (100 + RD1 x (M2 – M1) – M2)

Where

• RD2 = In-situ Relative Density (arb) • RD1 = Relative density (adb) • M1 = Inherent Moisture (adb) • M2 = Total Moisture (arb)

It should be noted that while the total moisture from laboratory measurements may not necessarily equal the in-situ moisture, this is considered to be a best estimate given the limited amount of data. HDR Salva has assumed that no moisture reduction takes place for the determination of product quality.

Geotechnical Factors 9.3.4

All pits except for Pasopati block have been designed such that low walls commenced at the subcrops and followed the coal floors. In Pasopati block, low-wall does not follow the seam floor due to block’s steeply dipping stratigraphy. Hence a geo-technically stable batter angle was selected for this block and used for the pit design. As a consequence, the low wall batter has to lie

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below the seam floor of the bottommost seam. It is important to understand that any undercut of bedding on the low wall (or up dip mining) creates a high risk of failure.

The current geotechnical studies deals with KG block and have recommended the slope parameters up-to 200m depth. Geotechnical parameters used in this report were based on either actual operations or previous geotechnical studies.

Surface Water Management 9.3.5

Pit water management is of critical importance to the effective operation of the mine. Dewatering operations observed during the site visit were considered to be of a high standard with well constructed pit sumps and efficient drainage from operating areas into the sump. The overall strategy for water management over the life of mine will be to:

1. Minimise surface water entering the pit by:

a. Building dams and drains to divert water from external catchments away from pits; and

b. Profiling dumps so that water is diverted away from the pits.

2. Removing water from excavations by:

a. Constructing a main sump at the deepest point of each pit and draining all in pit water to that sump; and

b. Installing sufficient pumps and pipes of suitable size to pump water from the pit. Two stage pumping will be required in deeper areas in the later years of the mine life.

Mining Method & Operations 9.3.6

Mining operation commenced in 2005 in Sebamban south (SB) and Batulaki South (BS) Blocks. Sebamban south pit was mined till January 2014 and is currently under care and maintenance. The Kusan pit (KG) was started in 2011. The mining operation in BIB is an open pit mine using standard truck and excavator methods which are a common practice in Indonesia. Waste material is mined using hydraulic excavators and loaded into standard rear tipping off-highway trucks and hauled to dumps in close proximity to the pits or to in-pit dumps where possible. For the purpose of this Reserve Statement it is proposed that contractors will continue to be used for mining and haulage operations over the life of mine, and the unit costs used for the Reserve estimate reflect this style of mining.

Currently, the mining activities in Kusan pit are concentrated over Seam D group. In the last quarter of 2014, it is proposed to open up the seam B group in the lower ratio zones in Kusan pit. Girimulya pit will be opened in the first quarter of 2015 to target seam B group. Contractors are currently using truck and excavator combinations of 200t excavator with 100T trucks & 110t excavator with 60T trucks for waste removal whereas coal mining is being carried out by smaller size excavators (PC200-PC400 Komatsu excavators) with 30-40 T trucks. Coal from Kusan Pit is being hauled (about 20 km) to Port Bunati (Sea port owned by GEMS) for export to customers. The mining method can be described as a multi seam, moderate dip, open cut coal mine using truck and shovel equipment in a combination of strip and haulback operations.

Coal mining operations at Batulaki pit (BS Pit) are being carried out by another contractor deploying similar size equipment. Waste removal is being carried out by higher size hydraulic excavators (200t excavators) and 100 T trucks. Coal is being hauled to the Port Abidin to about

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16 km. Port Abidin is a river based port where all the coal handling arrangements are being rented including loading onto the barges (7500-8000t barges).

Processing Factors 9.3.7

The coal is to be sold unwashed so no processing factors have been applied. Other than crushing to a 50 mm top size no other beneficiation will be applied.

Mine Logistics Factors 9.3.8

HDR Salva has carried out a high level assessment of logistic options to assess the project economics. A number of options were identified and techno-economic assessment of each option was carried out. Based on assessment of available information and data gathered from site visit, two logistic chains for coal blocks comprising BIB projects exist and need to be strengthened.

Presently at KG block, coal handling and infrastructure is already in place as coal mining activities is currently underway since 2011. The existing infrastructure at KG includes a run of mine (ROM) stockpile, a primary crushing and screening plant at the mine site and a weigh bridge, port stockpile, secondary crushing circuit at the Bunati port. Bunati Port also has jetty and barge loading conveyor (recently expanded to 12mtpa capacity). Offices, camps, workshops and other associated facilities are currently in place both at mine site and at the port.

At present, current operations use both the coal crushing plants located at ROM stockpile and at the port. Coal mined from the BIB block is currently hauled by using a third party haul road. At the time of writing of this report, BIB is constructing two dedicated haul roads of higher capacity. Once the road is constructed, BIB will use its own haul road for the purpose of coal hauling. This haul road is being constructed in two phases, phase 1 of 16-18 Mtpa capacity is almost complete and coal hauling will start from the beginning of 2015 while works on phase 2 is 60% completed to target haul up to 25 Mtpa of coal from KG Block area. Sebamban North and Sebamban South pits will also use the newly built haul road (phase-I initially) to transport coal from the pit head to the Bunati port as they are being proposed to be opened up from 2015.

For handling 40Mtpa annual output from BIB concession blocks, a major upgrade is required for coal handling circuits including crushing, coal conveying and stockpiles (Both at ROM & Bunati Port). During the site visit, it was acknowledged and the preparation is on for such upgrades. The proposed coal handling and logistics infrastructure for the Kusan and Girimulya Blocks require construction of the following components:

Run of Mine Coal handling facilities, crushing circuits and stockpiles at both Kusan and Girimulya mine sites for receiving coal from the mine, stockpiling and loading onto trucks and/or overland conveyor for transport to the port;

A new haul road joining Kusan and Girimulya to the port including an underpass of the main highway (which is under construction) to replace the 3rd party owned haul road currently in use;

Overland conveyors from Kusan and Girimulya directly to the port, anticipated to be in operation from 2019 onwards; and

Port stockpile coal handling, blending, stockpiling and barge-loading facilities with a total capacity in excess of 40 Mtpa.

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Similar coal handling arrangement exists for the coal mined from Batulaki pit which is hauled to the Abidin port located at Satui River. Abidin Port is a third party owned port where infrastructures required for crushing and coal loading are being rented for coal export. Pasopati coal is also proposed to utilize the services of Port Abidin when the mining activities will start in 2016. BIB existing coal logistics, proposed infrastructure and new haul roads are shown in Figure 9:1 and Figure 9:2.

Figure 9:1 BIB Coal Logistics

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Figure 9:2 New Haul Road under construction

Permits and Approvals 9.3.9

From discussions with United Fiber and GEMS, HDR Salva understands that the majority of permits and approvals with regard to further mining activities in BIB Coal Concession deposits have been obtained.

Cost and Revenue Factors 9.3.10

General

GEMS provided a “data sheet” of indicative unit costs and revenues relevant for this project which was subject to review and agreement with GEMS. HDR Salva did an independent coal marketing study to review the coal prices forecast for reasonableness. HDR Salva also reviewed the costs for reasonableness against known current mining costs for similar mining conditions within Indonesia. An in-house NPV based economic model was developed to show that the project and reserves are “economic". These unit rates were then used to estimate the cost to deliver coal to a ship (FOB vessel). This allowed a break even strip ratio to be estimated and the rates were also used to calibrate the Optimiser software.

The following points summarise the cost and revenue factors used for the estimate:

All costs are in US dollars; Long term coal price of US$44 per tonne (all except Pasopati), Pasopati - US$88; Royalties of 13.5% of revenue less marketing, costs have been allowed along with VAT of

10% and Contingency of 15%;

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Allowances were made for hauling, crushing, quality control, stockpiling, barge loading, barging and ship loading which totalled approximately $17 (all except Pasopati) to $24 (Pasopati) per tonne;

Coal mining rate is considered as US$1.40 per tonne; and Waste mining rate considered as US$2.40 per bank cubic metre.

Operating Cost

GEMS provided the operating costs for mining and other activities including coal hauling, barging and port handling charges, which Salva checked for reasonableness. Total operating costs per tonne of coal product including royalty for the BIB Project has been estimated as US $29.41 per tonne over the life of the mine. The updated operating cost for the BIB projects has been summarised below in Table 9:6.

Table 9:6 Average Unit Operating Cost (Real Terms) over Life of Mine

Cost Item $/t Land Clearing $0.01 Topsoil Removal $0.05 Waste Mining $10.17 Waste Overhaul $1.21 Coal Mining $1.40 Haul to ROM stockpile $0.30 ROM Coal Handling $0.50 Haul to Port Stockpile $1.36 Port Stockpile and Barge loading $1.00 Barging $1.28 Transhipment $2.10 Mine Closure $0.05 Environmental and Rehabilitation $0.15 Miscellaneous Operations $0.15 Dewatering and Water Treatment $0.05 Salary and Wages $0.30 Camp and Accommodation $0.05 Medical & Community Development $0.15 Land Use Payment $0.15 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $1.69 Contingency $1.16 Operating Cost Excl. Royalty $24.28 Royalty $5.13 Operating Cost incl. Royalty $29.41

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Capital Cost

As GEMS is engaging contractors for mining operations at BIB concession blocks, it is envisaged that no major capital expenditure shall be incurred towards the mining equipment. But major capital will be required for infrastructure upgrades for initial development and ramp-up facilities at the BIB projects including mining and logistics infrastructure both at mine site and at the port.

HDR Salva estimates total capital expenditure of US$ 408M which includes a contingency of US$ 53M. A contingency of 15% has been applied to the capital cost estimate. These estimated are considered to have an accuracy of ± 15%.

In addition to the expansion capital of US$ 408M, HDR Salva has factored 3% of the invested capital as sustaining capital per annum for asset maintenance over the life of mine. While preparing these estimates, HDR Salva has relied on industry benchmarks, its internal database and expertise and internal studies on the BIB concessions.

HDR Salva notes that use of an overland conveyor is not very widespread in Indonesia. However HDR Salva has reviewed operations of numerous overland conveyors working globally including the operation of PT. Kaltim Prima Coal’s 13 km overland conveyor, currently under operation in East Kalimantan region and a proposed 43 km long overland conveyor by Barau Coal. The capital and operating costs for these systems are thus also considered to be relatively well understood using existing operations as a basis, although a conservative approach to estimating these costs has been taken.

The Capital Cost estimates and the basis of its estimation are shown in Table 9:7. The cost estimate was prepared in Q3 2014 in US dollars ($).

Table 9:7 Capital Cost (Real Terms)

Sr. No. Particulars Direct Cost ($M)

Contingency ($M)

Total Cost ($M)

1.1 Land Compensation 78.4 11.8 90.2 1 Land Compensation 78.4 11.8 90.2

2.1 Diversion Channel 6.0 0.9 6.9 2.2 Road From Pit to ROM Stockpile 1.0 0.2 1.2 2.3 Workshop, Office and Laboratory 2.5 0.4 2.9 2.4 Backup Power Generation 1.5 0.2 1.7 2.5 Explosive Magazine and Site Preparation 1.0 0.2 1.2 2.6 Miscellaneous Roads 0.8 0.1 0.9 2.7 Coal Power Station and Distribution 45.0 6.8 51.8 2.8 Coal Handling Equipment 8.0 1.2 9.2 2.9 ROM - Crushing and Screening 30.0 4.5 34.5 2.1 Contractor Mobilisation 10.0 1.5 11.5

2.11 Accommodation Camp 6.0 0.9 6.9 2.12 Fuel Storage 3.0 0.5 3.5 2.13 Water supply and Sewage System 1.0 0.2 1.2 2.14 Communications 0.5 0.1 0.6

2 Mine Infrastructure 116.3 17.4 133.7

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Sr. No. Particulars Direct Cost ($M)

Contingency ($M)

Total Cost ($M)

3.1 Haul Road Construction 11.0 1.7 12.7 3.2 Overland Conveyor 85.0 12.8 97.8 3 Hauling to Jetty 96.0 14.4 110.4

4.1 Port Stockpile and Jetty 60.0 9.0 69.0 4 Port Facilities 60.0 9.0 69.0

5.1 Additional Studies 4.0 0.6 4.6 5 Other Capital Expenses 4.0 0.6 4.6 Total Project Capital 354.7 53.2 407.9

HDR Salva has compared these against the industry benchmarks and estimated these to be reasonable.

Marketing Factors 9.3.11

To estimate the long term price for different types of project coals, HDR Salva has adopted the latest Consensus brokers forecast for thermal coal prices ex Australia (USD/t, FOB) as a benchmark price. These data which was collected by Consensus Economics in June 2014 included forecasts of future prices for coal over a 10 year horizon from each expert. HDR Salva has adopted average of this forecast prices as a reasonable benchmark price. Utilising the historical price differential for this type of Indonesian coal over benchmark price, HDR Salva has discounted long term benchmark price to accommodate low rank sub bituminous (higher moisture) coal based on the historical discount. HDR Salva has checked the actual price realised for the BIB coal product. The BIB Mine is currently achieving US$38-39/t of coal which is in line with the forecast used for 2014. This was verified by cross checking actual invoices during the visit to the BIB offices.

The following Table 9:8 summarises long term price forecast taken to estimate reserves.

Table 9:8 Long Term Price Estimate

Mining Blocks GCV, kcal/kg (gar) Long term Price FOB (US $/t)

KG, BS, SS and SN 4100 41.4

PP 6663 88.4

Product Quality 9.3.12

As previously stated, HDR Salva have assumed no moisture change in the product coal chain. Therefore it is assumed that the final product will have the same quality of ROM coal which is summarised in the Table 9:9 below.

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Table 9:9 Product Coal Quality Block RD adb t/m3 TM arb % IM adb % Ash adb % CV arb Kcal/Kg TS adb %

KG 1.39 35.31 15.45 4.78 4,105 0.21

BS 1.37 33.31 13.37 6.36 4,213 0.16

SS 1.47 38.32 12.58 6.04 3,875 0.17 SN 1.38 38.40 16.40 4.80 3,944 0.16 PP 1.33 12.47 5.90 9.06 6,663 1.36 Total 1.39 35.24 15.27 4.89 4,114 0.21

Other Relevant Factors 9.3.13

Limitations to Drilling

Approximately 2,000 boreholes are located within the BIB Project Area. 98% of boreholes have been logged using down-hole geophysics. Geophysical data is predominantly comprised of gamma, density and calliper logs and has allowed for accurate seam definition. The Resource is limited to 250 m depth below topography in all the BIB concession coal blocks except Pasopati block where it is limited to cut off stripping ratio of 15:1.

Surface Constraints

Mining operations are constrained physically by the concession boundary and seam out crops. Other constraints that were used to define the project were limits of exploration drilling, constraints due to river and variable land compensation rates. No significant surface features exist that would further constrains mining activities.

There are a number of planning & operational issues which may impact on the stated mining reserves. These include:

detailed geotechnical studies to confirm the overall slope angles and other parameters in deeper pit area;

detailed hydrogeological studies to know the water flow gradient and dewatering arrangement;

more quality data as well as detailed drilling and updates to the geological model; land compensation issues; and changes in life of mine schedule, infrastructure constraints, coal transportation issues and

due to changes in marketing and costing during the mining operation.

These issues may cause the pit shell and mining quantities to change in future JORC code compliant Reserve Statements.

HDR Salva is not aware of any other environmental, legal, marketing, social or government factors which may hinder the economic extraction of the Coal Reserves other than those disclosed in this report.

In the opinion of HDR Salva the uncertainties in areas discussed in the report are not sufficiently material to prevent the classification of areas deemed Measured Resources to be areas of Proved Reserves for the purpose of this report. HDR Salva also believes that the uncertainties in

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each of these areas also not sufficiently material to prevent the classification of areas deemed Indicated Resources to be areas of Probable Reserve.

Key project risk for the BIB Project emanates from the following factors in order of importance.

• Lower long term coal prices or domestic coal demand; • Higher life of mine operating costs and logistics issues; • Higher levels of capital costs.

Any downside to these factors will likely have a significant impact on the economic feasibility of this project. However the projected cash flows in the financial analysis currently show a healthy margin.

9.4 Final Pit Design

For the purposes of this report, HDR Salva has limited the pit depth to the limit of exploration drilling within the limit applied to the Resource estimates. Other factors considered in the final optimum pit designs included:

The location and proximity of coal to exploration data; Proximity to the concession boundary; Out of pit dumping room; Geotechnical parameters; and Surface water management considerations.

The final pit designs closely followed the selected pit shell in most locations (Figure 9:3 to Figure 9:7).

Cut-off Parameters and Pit Limit 9.4.1

Overall low-wall slopes as per the basal seam dip, endwall slopes and highwall slopes for the final pit design were considered as per table given below. The slope parameters are based on the geotechnical study carried out for Kusan block.

Table 9:10 Pit Design Parameters for BIB blocks Pit Design

Parameters Kusan Girimulya

(KG) Batulaki (BS) Sebamban South (SS)

Sebamban North (SN)

Pasopati (PP)

Overall Highwall Slope

30 deg up to 100m depth, 18 deg for depth up-to 200m

depth

35 deg up to 100m depth, 20 deg up to 200 m

depth

35 deg up to 100m depth, 20 deg up to 200 m

depth

35 deg up to 100m depth, 20 deg up to 200 m depth

42 deg up to 100m depth

Bench Slope 45 deg 45 deg 45 deg 45 deg 60 deg

Bench Height 10 m 10 m 10 m 10 m 10 m

Highwall berm 10 m 5 m 5 m 5 m 5 m

Low wall slope 3-4 deg (Kusan), 5-7 deg (Girimulya)

12-14 deg

8-10 deg

8-10 deg

-

Ramp Width 30 m 30 m 30 m 30 m 30 m

Maximum Ramp Grade

8% 8% 8% 8% 8%

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Pit Designs 9.4.2

The coal seam distribution within the BIB Concession deposits resulted in the Optimiser identifying several pits with the different basal seams. The pits were subjected to adjustments to form a practical pit design, which lead to the exclusion of the minor narrow pit shells and the resultant formation of Mineable Pit Shells, which formed the basis of the subsequent reserves estimate (Figure 9:3 to Figure 9:7).

Pits for various blocks have been designed within the limits as defined by the pit optimisation analysis. These limits are rationalised to ensure access between floor benches and walls were straightened to generate mineable pits.

Figure 9:3 Pit shell selection & Final Pit Design – KG Block

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Figure 9:4 Pit shell selection & Final Pit Design – BS Block

Figure 9:5 Pit shell selection & Final Pit Design – SS Block

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Figure 9:6 Pit shell selection & Final Pit Design – SN Block

Figure 9:7 Pit shell selection & Final Pit Design – PP Block

All pits except for Pasopati block have been designed such that low walls commenced at the subcrops and followed the coal floors. The overall highwall batter angle approximately varies from 20 to 35 degrees as the ultimate pit depth ranges from a little more than 80 m to 200 m. This was done in accordance with the geotechnical study done on Kusan block.

In Pasopati, it was not possible to follow any seam floor at the lowwall side because of the block’s steeply dipping stratigraphy. Hence a geotechnically stable batter angle was selected for this block and used for the pit design. As a consequence this pit includes a significant amount of underburden material below the bottommost seam.

The ROM coal quantities within the Mineable Pit Shells were then tested so that only Measured and Indicated Coal Resources were classified as Coal Reserves. Coal Reserves within the seams having Measured Resources are reported as Proved Reserves whereas seams having Indicated Resources are reported as Probable Reserves. The final pit designs and associated

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cross sections for estimating Coal Reserves for BIB Coal concession deposits are shown on Figure 9:8 to Figure 9:18 as below.

Mining Schedule 9.4.3

A life of mine plan was plan was completed based on the final pit design. This was done to ensure that the proposed mining method would be practical and achievable and that the proposed dumping strategy would be able to contain the waste mined in the final pit design. This provides a check on the reasonableness of the assumed waste mining costs and estimates the average waste haul per period. The schedule targets production of 2.4Mt in year 1 (half year of 2014), 13Mt by year 3 (2016), 23Mt by year 5 and ramping up to an average 40 Mt from year 9 (2022) onwards.

Currently BIB coal mining blocks (KG and Batulaki) are scheduled to produce 4.6Mt for full year in 2014. Historical production from BIB mines have shown below in Table 9.11.

The study identified that a large amount of palm plantation area currently outside of the acquired IPPKH boundary will be required for implementation of this mine plan.

Table 9:11 Historical Production – BIB Mine (Mt, Coal) Mines 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Kusan Girimulya

-

-

-

-

-

-

0.6

2.1

2.2

3.1

Batulaki 0.1

0.2

0.5

0.8

0.9

0.8

0.9

1.2

1.1

1.1

Sebamban 0.1

0.3

0.8

0.4

0.3

0.3

1.2

0.5

0.7

0.4

BIB Mines (Total)

0.2

0.5

1.3

1.3

1.2

1.1

2.8

3.8

4.1

4.6

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Figure 9:8 Final Pit Design – Kusan Girimulya Pits

Section -2

Section -1

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Figure 9:10 Final Pit Design – Batulaki Pit (BS Pit)

Figure 9:11 Representative Cross Section – Batulaki Pit

Section

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Figure 9:12 Final Pit Design – Sebamban South (SS Pits)

Figure 9:13 Representative Cross Section – Sebamban South Pit

Section

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Figure 9:14 Final Pit Design – Sebamban North (SN Pit)

Figure 9:15 Representative Cross Section – Sebamban North Pit

Section

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Figure 9:16 Final Pit Design – Pasopati Pits (PP Pits)

Figure 9:17 Representative Cross Section (Upper Pit) – Pasopati Pit

Figure 9:18 Representative Cross Section (Lower Pit) – Pasopati Pit

Section-2

Section-1

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9.5 Audits and Reviews

Checks were done to validate the Minex Coal Resources to Coal Reserves estimation by repeating it manually in an Excel spread sheet. Other validation work included estimating the total volume of coal and waste in the pit shells using the separate industry standard computer programs MineScape. As MineScape structure and quality grids were imported into Minex for optimisation work, volume and area checks were also carried out in Minex within the pit shells.

The difference between the Proved and Probable Reserves with respect to Measured and Indicated Resources respectively is explained by the following:

The Measured and Indicated Resource polygons extend beyond the Mineable Pit Shells; There are some Inferred tonnes in the pit shell which cannot be counted as Coal

Reserves; and There are geological and mining losses and dilution gains in the coal reserve estimation.

9.6 Discussion of Relative Accuracy and Confidence

A comparison between the actual coal mined and geo model predicted coal tonnages have been done in the Kusan block since commencement of mining to end of Q2, 2014 and it shows an overall 85% recovery for the said period as shown in Table 9:12. The Ply-by-Ply in-situ Geo Model was used for generating the model predicted number.

Table 9:12 Production Reconciliation

Actual Coal Tonnes, Mt Geo-Model Coal Tonnes (Mt) Difference in Percentage (%)

6.25 7.35 85

9.7 Reserves Classification

Under the JORC Code as shown below only Measured and Indicated Coal Resources can be considered for conversion to Coal Reserves after consideration of the “Modifying Factors” including mining, processing, economic, environmental, and social and government factors.

To convert Resources to Reserves it must be demonstrated that extraction could be justified after applying reasonable investment assumptions. The highest confidence level establishes Proved Reserves from Measured Resources and a lesser confidence level establishes Probable Reserves from Indicated Resources. A level of uncertainty in any one or more of the Modifying Factors may result in Measured Resources converting to Probable Reserves depending on materiality. A high level of uncertainty in any one or more of the Modifying Factors may preclude the conversion of the affected Resources to Reserves.

This classification is also consistent with the level of detail in the mine planning completed for BIB Coal concession deposits. Inferred Coal Resources in the mineable pit shell have been excluded from the Reserve Statement.

In the opinion of HDR Salva, the uncertainties in most of these are not sufficiently material to prevent the classifications of areas deemed Measured Resources to be areas of Proved Reserves and areas deemed Indicated Resources to be the areas of Probable Reserves.

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Table 9:13 General relationships between Mineral Resources & Ore Reserves

Source: JORC Code 2012

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10 Statement of Coal Reserves The Statement of Coal Reserves has been prepared in accordance with the 2012 Edition of the JORC Code. Total ROM coal Reserves for PT Borneo Indobara coal deposit (“BIB”) are summarised in Table 10:1 as of 31 July 2014. Total ROM coal reserves are same as total marketable coal reserves.

Table 10:1 Coal Reserves for BIB Coal Concession as at 31 July 2014

Block Reserve (Mt) RD TM arb

IM adb %

Ash adb %

CV TS adb

% Proved Probable Total adb t/m3 % arb

Kcal/kg KG 221.1 336.7 557.8 1.39 35.4 15.5 4.8 4,105 0.21 BS 13.5 6.1 19.6 1.37 33.3 13.4 6.4 4,213 0.16 SS 11.7 4.1 15.8 1.47 38.3 12.6 6 3,875 0.17 SN 3.2 4.5 7.7 1.38 38.4 16.4 4.8 3,944 0.16 PP 2.4 0.9 3.3 1.33 12.5 5.9 9.1 6,663 1.36

Total 251.9 352.2 604.2 1.39 35.2 15.3 4.9 4,114 0.21 (Note: individual totals may differ due to rounding)

10.1 Seam by Seam Coal Reserve

Total ROM Coal Reserves for each of BIB coal concessions are reported by seam and are presented in Table 10:2 to Table 10:6.

Table 10:2 Coal Reserves for Kusan – Girimulya (KG) as at 31 July 2014

Seams Proved

Reserves, Mt

Probable Reserves,

Mt

Total Reserves,

Mt

RD, adb

ASH, % IM, % TM, %

CV (Gar),

Kcal/kg TS, %

G1 - 0.4 0.4 1.41 6.01 15.4 37.27 3837 0.16 F2 1.4 1.5 2.9 1.37 4.49 14.81 36.15 4094 0.21 F1 0.4 0.5 0.9 1.44 12.53 14.17 34.84 3775 0.2 FL2 - 2.1 2.1 1.41 5.61 15.25 35.94 3902 0.17 FL1 - 1.7 1.7 1.41 5.97 14.87 35.8 3933 0.18 E2U 6.3 8.5 14.9 1.38 4.44 15.28 35.11 4145 0.14 E2L2 4.5 6.8 11.3 1.38 4.05 15.66 34.91 4194 0.14 E2L1 1 1.6 2.7 1.38 4.26 15.66 34.75 4198 0.13 E1U2 16.3 30.3 46.6 1.38 3.84 15.5 35.07 4177 0.12 E1U1 15.3 18.3 33.6 1.38 3.64 15.45 35.16 4181 0.12 E1L2 16.3 23.9 40.2 1.37 3.82 15.27 35.15 4182 0.12 E1L1 22.4 25.8 48.2 1.38 4.45 15.39 34.96 4178 0.14 EL2U 8.7 18 26.7 1.37 4.1 16.22 34.66 4222 0.13 EL2L 7.2 15 22.2 1.37 5.38 15.6 34.64 4191 0.2 EL1U 7.7 14 21.7 1.39 7.28 14.88 34.05 4124 0.16 EL1L 0.2 0.6 0.8 1.38 4.32 14.86 34.06 4257 0.12 D1U2 0 0.2 0.2 1.4 5.6 14.04 36.25 4015 0.21 D1U1 0 0.2 0.2 1.4 5.85 14.09 36.03 4020 0.21

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D1L2 0 0.1 0.1 1.4 6.64 13.95 36.53 3937 0.19 D1L1 0 0.1 0.1 1.39 4.92 13.72 37.07 3995 0.17 DU2U 3.1 8.3 11.4 1.39 4.99 15.6 33.85 4127 0.22 DU2L 3 8.2 11.2 1.39 4.76 15.57 34.06 4121 0.26 DU1U 2.0 9.1 11.1 1.39 5.05 14.76 36.37 4028 0.17 DU1L 2.4 9.5 11.9 1.39 5.18 14.77 36.34 4025 0.17 DL2U 14.2 15.9 30.2 1.39 4.65 15.48 35.96 4057 0.2 DL2L 10.3 11 21.2 1.39 4.69 15.22 36.28 4042 0.16 DL1U 11.2 17.2 28.4 1.4 5.96 15.92 34.4 4052 0.2 DL1L 5.8 8.7 14.5 1.4 6.32 15.91 34.16 4045 0.25 CR2U 0.6 1.1 1.7 1.39 6.06 14.69 35.57 4165 0.17 CR2L 0.3 0.5 0.8 1.39 6.12 14.59 35.51 4170 0.17 CR1U 0.3 0.6 0.9 1.39 6.67 14.74 35.4 4182 0.18 CR1L 0 0 0 1.4 7.37 14.5 35.7 4115 0.18 CU2 0.1 0.6 0.7 1.41 10.04 15.59 33.51 3994 0.32 CU1 0.2 0.6 0.8 1.41 8.57 15.25 34.23 4047 0.43 CL2U 8.3 12.8 21 1.4 6.03 15.12 36.14 4007 0.34 CL2L 1.8 2.7 4.5 1.4 6.45 15.15 35.15 4049 0.38 CL1U 0.5 2.2 2.7 1.41 8.05 15.51 34.45 3998 0.31 CL1L 0.6 2.4 3 1.39 6.62 15.76 34.78 4061 0.29

BU2U 1.1 1.8 2.8 1.4 5.04 14.47 37.43 3956 0.53 BU2L 0.6 1 1.7 1.4 4.6 14.43 37.29 3981 0.48 BU1U 1.5 2.3 3.8 1.39 4.43 14.71 36.72 4028 0.41 BU1L 0.8 1.4 2.2 1.39 4.22 14.81 36.64 4039 0.36 BL2U 23.7 25.7 49.4 1.39 4.15 15.69 36.43 4033 0.31 BL2L 17.7 17.6 35.3 1.4 4.52 15.83 36.62 4007 0.32 BL1U 1.6 2.7 4.3 1.4 5.89 14.48 36.56 3976 0.58 BL1L 1.8 3.2 5 1.4 5.73 14.46 36.77 3979 0.52 B1 - 0.1 0.1 1.39 6.26 14.36 36.3 4083 2.11

Total (KG) 221.1 336.7 557.8 1.39 4.78 15.45 35.37 4105 0.21 (Note: individual totals may differ due to rounding)

Table 10:3 Coal Reserves for Batulaki (BS) as at 31 July 2014

Seams Proved

Reserves, Mt

Probable Reserves,

Mt

Total Reserves,

Mt

RD, adb

ASH, % IM, % TM,

%

CV (Gar),

Kcal/kg

TS, %

CU 0.2 0.0 0.2 1.39 - - - - - CL 0.1 0.1 0.2 1.42 11.91 11.55 34.65 4103 0.17 BU 0.1 0.0 0.1 1.39 9.68 15.61 32.82 4204 0.15 B 9.7 0.4 10.2 1.37 3.54 13.90 33.75 4342 0.15

BL2 0.0 0.6 0.6 1.38 3.25 7.99 35.33 4346 0.20 BL1 0.0 0.3 0.3 1.40 4.03 7.37 36.93 4619 0.20

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A4U2B 0.3 0.1 0.4 1.39 - 13.00 33.00 - - A4U2A 0.5 0.2 0.8 1.39 - 13.00 33.00 - - A4U1 0.5 0.2 0.7 1.35 5.15 13.97 32.08 4499 0.17 A4L 0.1 0.1 0.2 1.41 12.22 11.74 31.37 4230 0.18

A3U2 0.4 1.3 1.8 1.39 - - - - - A3U1 0.9 1.7 2.7 1.39 - - - - - A2U2 0.3 0.2 0.4 1.34 10.26 16.19 30.68 4045 0.16 A2U1 0.2 0.4 0.6 1.34 8.08 14.79 32.11 4172 0.19 A2L 0.2 0.3 0.5 1.45 15.30 11.15 31.71 3836 0.19

Total (BS) 13.5 6.1 19.6 1.39 6.36 13.37 33.31 4213 0.16 (Note: individual totals may differ due to rounding)

Table 10:4 Coal Reserves for Sebamban South (SS) as at 31 July 2014

Seams Proved

Reserves, Mt

Probable Reserves,

Mt

Total Reserves,

Mt

RD, adb

ASH, % IM, % TM, % CV (Gar),

Kcal/kg TS, %

F2 0.3 0.5 0.8 1.43 6.38 13.94 38.10 3815 0.14 F1 0.4 - 0.4 1.49 14.62 12.06 35.91 3526 0.14

E2U 1.9 0.2 2.1 1.45 5.31 13.35 37.47 3987 0.14 E2L 1.9 0.1 1.9 1.44 6.47 13.67 37.47 3910 0.12 E1U 0.5 0.1 0.5 1.49 5.35 13.48 37.68 3985 0.15 E1L 0.4 0.1 0.5 1.55 9.89 13.01 37.03 3767 0.13 EL 1.1 0.2 1.4 1.52 8.84 12.99 37.25 3829 0.18

D1U 0.3 0.0 0.3 1.37 2.94 10.76 38.16 4150 0.27 D1L 0.1 0.0 0.1 1.57 3.38 10.80 38.12 4057 0.22 DU2 1.5 0.9 2.5 1.46 4.67 11.53 39.27 3863 0.18 DU1 0.5 0.3 0.8 1.47 3.24 11.62 39.93 3847 0.14 DL2 0.9 0.4 1.3 1.51 4.29 11.72 39.54 3853 0.15 DL1 1.5 0.6 2.1 1.46 5.34 11.59 39.50 3858 0.20

C 0.0 0.1 0.1 1.50 17.21 11.06 36.69 3526 2.41 BL2 0.3 0.3 0.6 1.56 4.89 11.65 40.78 3792 0.48 BL1 0.2 0.2 0.4 1.56 5.43 12.58 41.26 3729 0.40

Total (SS) 11.7 4.1 15.8 1.48 6.04 12.58 38.32 3875 0.17 (Note: individual totals may differ due to rounding)

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Table 10:5 Coal Reserves for Sebamban North (SN) Block as at 31 July 2014

Seams Proved

Reserves, Mt

Probable Reserves,

Mt

Total Reserves,

Mt

RD, adb

ASH, %

IM, % TM, % CV (Gar),

Kcal/kg TS, %

E 0.6 0.0 0.6 1.38 3.61 15.29 40.87 3,839 0.17 D2U - 0.4 0.4 1.38 5.15 16.10 39.41 3,908 0.20 D2 0.1 0.5 0.5 1.38 4.62 15.66 39.42 3,950 0.21 D 1.7 - 1.7 1.37 3.37 17.64 37.30 4,082 0.08 DL 0.9 3.7 4.6 1.38 5.19 16.27 38.53 3,898 0.14 CU - 0.0 0.0 1.38 7.29 14.52 40.49 3,801 2.16 C - 0.0 0.0 1.41 11.86 14.58 39.92 3,593 1.99

A2 0.0 - 0.0 1.36 8.05 14.04 38.11 4,052 0.26 Total (SN) 3.2 4.5 7.7 1.38 4.80 16.40 38.40 3,944 0.16


Table 10:6 Coal Reserves for Pasopati (PP) as at 31 July 2014

Seams Proved

Reserves Mt

Probable Reserves

Mt

Total Reserves

Mt

RD adb

ASH % IM % TM

%

CV (Gar)

cal/kg

TS %

SU1 0.0 0.0 0.0 1.30 6.2 15.4 SU2 0.0 0.0 0.0 7.06 5.9 17.2 6,864 1.51 SM1 0.0 0.0 0.0 1.35 7.53 6.2 12.4 6,748 0.74

SM2U 0.0 0.0 0.0 1.31 9.35 6.0 19.0 6,552 2.75 SM2 0.3 0.2 0.4 1.33 13.23 5.8 11.3 6,275 1.19 SM2L 0.0 0.0 0.0 1.39 10.80 4.8 17.9 6,575 2.6 SL1U 0.1 0.0 0.1 1.29 9.21 6.3 12.5 6,558 1.13 SL1 0.4 0.1 0.5 1.33 5.00 6.7 12.3 6,881 1.02 SL1L 0.1 0.0 0.1 1.31 18.84 4.4 10.1 6,437 3.63 SL2U 0.2 0.0 0.2 1.42 7.10 5.4 14.3 7,005 0.76 SL2 0.1 0.3 0.4 1.32 5.44 7.2 11.9 6,822 1.41 SL2L 0.2 0.0 0.2 1.29 12.77 4.3 11.0 6,603 1.68 SL3U 0.1 0.0 0.1 1.35 11.7 40.8 SL3 0.8 0.1 0.9 1.30 7.27 5.5 10.7 6,849 1.51 SL3L 0.1 0.0 0.1 1.31 6.2 15.4 SB 0.2 0.1 0.3 1.30 9.09 6.7 14.0 6,531 1.01

Total (PP) 2.4 0.9 3.3 1.33 9.06 5.9 12.5 6,663 1.36 (Note: individual totals may differ due to rounding)

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11 JORC Table 1 This Coal Reserve Report has been carried out in recognition of The 2012 JORC Code published by the Joint Ore Reserves Committee (“JORC”) of the Australasian Institute of Mining and Metallurgy, the AIG and the Minerals Council of Australia in 2012. Under the report guidelines all geological and other relevant factors for this deposit are considered in sufficient detail to serve as a guide to on-going development and mining.

In the context of complying with the Principles of the Code, Table 1 of the JORC code (Appendix B) has been used as a checklist by HDR Salva in the preparation of this report and any comments made on the relevant sections of Table 1 have been provided on an ‘if not, why not’ basis. This has been done to ensure that it is clear to an investor whether items have been considered and deemed of low consequence or have yet to be addressed or resolved.

The order and grouping of criteria in Table 1 reflects the normal systematic approach to exploration and evaluation. Relevance and Materiality are the overriding principles which determine what information should be publicly reported and HDR Salva has attempted to provide sufficient comment on all matters that might materially affect a reader’s understanding or interpretation of the results or estimates being reported. It is important to note that the relative importance of the criteria will vary with the particular project and the legal and economic conditions pertaining at the time of determination.

In some cases it may be appropriate for a Public Report to exclude some commercially sensitive information. A decision to exclude commercially sensitive information would be a decision for the company issuing the Public Report, and such a decision should be made in accordance with any relevant corporation regulations in that jurisdiction.

In cases where commercially sensitive information is excluded from a Public Report, the report should provide summary information (for example the methodology used to determine economic assumptions where the numerical value of those assumptions is commercially sensitive) and context for the purpose of informing investors or potential investors and their advisers.

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References ASIC, 2011. Regulatory Guide 112: Independence of Experts. Australian Securities & Investments Commission [online]. Available from: <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg112-30032011.pdf/$file/rg112-30032011.pdf> [Accessed 22 August 2012].

Bishop, M.G, 2001, South Sumatra Basin Province, Indonesia: The Lahat/Talang Akar- Cenozoic Total Petroleum System, USGS Open-File Report 99-50-S.

JORC, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves – The JORC Code – 2012 Edition [online], The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia.

PT SMG Consultants – JORC Resource Statement BIB Project 21st October 2013.

Panggabean, Hermes, (1991) Tertiary source rocks, coals and reservoir potential in the Asem Asem and Barito Basins, South-eastern Kalimantan, Indonesia, Doctor of Philosophy thesis, Department of Geology – Faculty of Science, University of Wollongong, http://ro.uow.edu.au/theses/2113.

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Appendix A: CVs Person Role

Manish Garg (Director - Consulting) Qualification B. Eng. (Hons), MAppFin

Prof. Membership MAusIMM; MAICD

Contribution Overall Supervision, Economic Assessment (VALMIN 2005)

Experience

Manish has more than 25 years’ experience in mining Industry. Manish have worked for mining majors including Vedanta, Pasminco, WMC Resources, Oceanagold, BHP Billiton - Illawarra Coal and Rio Tinto Coal. Manish has been in consulting roles for past 5 years predominately focusing on due diligence, valuations and M&A area. A trusted advisor, Manish has qualifications and wide experience in delivering due diligences, feasibility studies and project valuations for banks, financial investors and mining companies on global projects, some of these deals are valued at over US$5 billion.

Craig Williams (Principal Consultant - Geology) Qualification B. Sc. (Hons), M.Sc. (Geology) Prof. Membership MAusIMM Contribution Geology, Resource (JORC 2012) Experience Craig is a geologist with 19 years’ experience in the mining industry. He

has worked at De Beers, Anglo Coal and Vale along with significant consulting experience. Craig’s experience covers mineral exploration, underground coal mine production, technical management, and resource estimation, together with due diligence, mineral audits and review, coal quality and exploration. To date, Sunil has worked on over 30 coal projects around the world, inclusive of both thermal and coking coal, in the Bowen, Hunter, Surat, Galilee and Collie Basins of Australia, as well as in Africa, Madagascar, Mongolia and Indonesia.

Sunil Kumar (Principal Consultant - Mining) Qualification B. Engg. (Mining) Prof. Membership MAusIMM Contribution Mine Scheduling, Reserve (JORC 2012) Experience Sunil is a mining engineer with 25 years’ experience in the mining

industry across operations and consulting. His career spans 4 years in working in mining operations and about 21 years as a mining consultant primarily in the mine planning & design role which included estimation of coal reserves, DFS/FS, due diligence studies, techno-commercial evaluations and technical inputs for mining contracts. Prior to joining HDR Salva, Sunil was working as Principal Mining Engineer at Xstrata Coal. To date Sunil has worked on over 25 coal projects around the world, inclusive of thermal and coking coal projects in Australia, as well as in major coalfields in India, Indonesia, Mongolia and Mozambique.

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Appendix B: JORC Table 1 Criteria Explanation Comment

Sampling techniques

Nature and quality of sampling (e.g. cut channels, random chips etc.) and measures taken to ensure sample representivity.

Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.

Aspects of the determination of mineralisation that are Material to the Public Report.

In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to obtain 1m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.

Chip samples were collected at every 1m for lithology logging. Sampled all cored coal, sampled separately any bands and taken 10cm of roof and floor for non coal samples.

Drilling techniques

Drill type (e.g.. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka etc.) and details (e.g.. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.).

Drilled pilot hole to ascertain coal seams and then drilled a cored drill hole.

Drill sample recovery

Whether core and chip sample recoveries have been properly recorded and results assessed.

Measures taken to maximise sample recovery and ensure representative nature of the samples.

Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

After the completion of each core run, core loss is determined by the on site geologist and recorded in the drill hole completion sheet. If recovery is found to be less than 90% within a coal seam intersection, the hole is re-drilled in order to re-sample this seam with greater than 90% core recovery. All samples with less than 90% core recovery over the width of the seam intersection were excluded from the coal quality database.

Followed drilling SOP's for loose and carbonaceous formations to achieve full sample recovery.

Logging

Whether core and chip samples have been logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.

Whether logging is qualitative or quantitative in nature. Core (or costean, channel etc.) photography.

The total length and percentage of the relevant intersections logged.

Detailed logging of chips and core. Core photographs were taken.

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Criteria Explanation Comment

Sub-sampling techniques and sample preparation

If core, whether cut or sawn and whether quarter, half or all core taken. If non-core, whether riffled, tube sampled, rotary split etc. and whether sampled wet or dry. For all sample types, the nature, quality and appropriateness of the sample preparation technique.

Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.

Measures taken to ensure that the sampling is representative of the in situ material collected.

Whether sample sizes are appropriate to the grainsize of the material being sampled.

No sub-sampling of the core

Quality of assay data and laboratory tests

The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.

For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc. Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established.

PT Geoservices laboratories are accredited to ISO 17025 standards. Coal quality laboratory adheres to internal QAQC and inter-laboratory QAQC checks. ISO methods have been used for MHC tests. Australian Standards have been used for RD and American Society for testing and materials (ASTM) methods have been used for all other quality variables.

Geophysical traces were observed to be generally of good quality.

Verification of sampling and assaying

The verification of significant intersections by either independent or alternative company personnel.

The use of twinned holes.

Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.

Discuss any adjustment to assay data.

Coal quality sampling undertaken by GEMS. Visual inspection on site.

Twinned holes checked for agreement of seam intersection depths and in almost all cases there was good agreement

Location of data points

Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.

Specification of the grid system used.

Quality and adequacy of topographic control.

Borehole collars have been surveyed using standard total station techniques employed by the survey contractors.

Surveys have been validated by GEMS survey staff. The surveyed borehole locations for BIB match well with topographic data. The topography was generated by PT Surtech Utama across BIB project area using LIDAR remote sensing data.

Data spacing and

Distribution

Data spacing for reporting of Exploration Results.

Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.

Whether sample compositing has been applied.

Data spacing sufficient to establish continuity in both thickness and coal quality. Data sets include topography and base of weathering as well as seam structure and coal quality. Ply sampling methodology use.

Sample compositing has been applied.

Orientation of data in relation to geological

Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.

Ply by Ply sampling used therefore orientation of sampling not seen to introduce bias as all drilling is vertical.

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structure If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

Sample Security The measures taken to ensure sample security. Proper measures for sample security was taken .

Audits or reviews The results of any audits or reviews of sampling techniques and data.

PTSMGC conducted a review of the drill hole database in 2013. Standard database checks also performed by HDR Salva as outlined on Section 6.4.4 prior to resource modelling.

Mineral tenement and land tenure status

Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

All tenure are secured and currently available.

.

Exploration done by other parties

Acknowledgment and appraisal of exploration by other parties. No exploration by other parties.

Geology Deposit type, geological setting and style of mineralisation.

See Section 4 of the Resource and Reserve Report.

Drill hole

A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:

easting and northing of the drill hole collar elevation or RL (Reduced Level – elevation above

sea level in metres) of the drill hole collar dip and azimuth of the hole down hole length and interception depth hole length.

If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.

This report pertains to resource estimation not exploration results. As such the details of the drill holes used in the estimate are too numerous to list in this Table.

Data aggregation methods

In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations and cut-off grades are usually material and should be stated.

Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.

The assumptions used for any reporting of metal equivalent values should be clearly stated.

All samples have been composited over full seam thickness and reported using Minescape modelling software.

No metal equivalents used.

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Relationship between mineralisation widths and intercept lengths

These relationships are particularly important in the reporting of Exploration Results.

If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported.

If it is not known and only the down-hole lengths are reported, there should be a clear statement to this effect (e.g. ‘downhole length, true width not known’).

Ply sampling methodology prevents samples from crossing ply boundaries. Therefore orientation of sampling not seen to introduce bias as all drilling is vertical and seams mostly gently dipping except in the case of the PP deposit

Diagrams

Where possible, maps and sections (with scales) and tabulations of intercepts should be included for any material discovery being reported if such diagrams significantly clarify the report.

See figures in the Report and Appendices.

Balanced reporting

Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practised to avoid misleading reporting of Exploration Results.

No reporting of exploration results.

Other substantive exploration data

Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.

Geophysical survey results available for 98% of the holes..

Further work The nature and scale of planned further work (e.g.. tests for lateral extensions or depth extensions or large-scale step-out drilling).

Further work will be necessary to improve the confidence levels of the deposits and understanding of the full seam stratigraphy. No proposed exploration plan has been proposed in this report.

Database integrity

Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.

Data validation procedures used.

The database for all blocks is considered of an acceptable standard to report a Coal Resource. Drill hole data used to construct Minescape model. Checks against original down hole geophysics (las) files used to verify data during modelling.

Site Visits

Site Visits undertaken by the Competent Person and the outcome of these visits. If no site visits have been undertaken, indicate why this is the case

Site visit by Mining Engineer (CP for Reserving).

Geological site visit not conducted due to the fact that the geology had been well documented by previous workers.

Geological interpretation

Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.

Nature of the data used and of any assumptions made.

The effect, if any, of alternative interpretations on Mineral Resource estimation.

The use of geology in guiding and controlling Mineral Resource estimation.

The factors affecting continuity both of grade and geology.

High degree of confidence in seam picks made using down hole geophysical data.

The BIB geological models created by HDR Salva are considered to accurately represent the deposits. No major faults have been reported within the tenements concerned although major faulting exists outside the tenements.

HDR Salva has employed a more conservative approach to the structural modelling of coal seams which involves

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pinching seams out if they are not logged as present in a particular hole. This has resulted in an overall 22% reduction in tonnes as compared to the previous model constructed by PTSMGC who did not pinch seams out.

Dimensions

The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.

See figures in the Report and Appendices.

Estimation and modelling techniques

The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points.

The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.

The assumptions made regarding recovery of by-products.

Estimation of deleterious elements or other non-grade variables of economic significance (eg sulphur for acid mine drainage characterisation).

In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.

Any assumptions behind modelling of selective mining units.

Any assumptions about correlation between variables.

Description of how the geological interpretation was used to control the resource estimates.

Discussion of basis for using or not using grade cutting or capping.

The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available.

FEM interpolator used for surface elevation, thickness and trend. Inverse distance squared used for coal quality throughout.

Based on experienced gained in the modelling of over 40 coal deposits around the world, the FEM interpolator is considered to be the most appropriate for structure and inverse distance the most appropriate for coal quality.

Grid cell size of 25 m for the topographic model, 25 m for the structural model.

Table 7:1 contains additional model construction parameters. Visual validation of all model grids performed.

Sulphur is below 1% on average for most seams (apart from the C and BU seams in some instances) for all deposits except for the PP deposit where Sulphur is on average mainly above 1%.

Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.

All tonnages estimated on air dried basis.

Cut-off parameters

The basis of the adopted cut-off grade(s) or quality parameters applied.

The coal resources contained in this report are confined within the concession boundary. The resources were limited to 250m below topography except in the case of PP Block where a 15:1 strip ratio limit was used. A minimum ply thickness of 10cm and maximum thickness of 30cm was used for coal partings.

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Mining factors or assumptions

Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It may not always be possible to make assumptions regarding mining methods and parameters when estimating Mineral Resources. Where no assumptions have been made, this should be reported.

The KG and BS blocks are currently being mined as open pit excavations by truck and shovel method. SS block has been mined till Jan 2014 and is now under care and maintenance.

Metallurgical factors or assumptions

The basis for assumptions or predictions regarding metallurgical amenability. It may not always be possible to make assumptions regarding metallurgical treatment processes and parameters when reporting Mineral Resources. Where no assumptions have been made, this should be reported.

N/A in situ air dried tonnes quoted

Environmental

Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfield project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

N/A

Bulk density

Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.

See discussion on density with regard to moisture basis.

Classification

The basis for the classification of the Mineral Resources into varying confidence categories.

Whether appropriate account has been taken of all relevant factors i.e. relative confidence in tonnage/grade computations, confidence in continuity of geology and metal values, quality, quantity and distribution of the data.

Whether the result appropriately reflects the Competent Person(s)’ view of the deposit.

Classification distances based on an assessment of the variability of critical variables through statistical analysis and by an assessment of the degree of geological complexity. Classification radii for the three resource categories are:

Measured: 250m

Indicated: 500m

Inferred: 2000m

Audits or reviews

The results of any audits or reviews of Mineral Resource estimates.

Reconciliation exercises between planned and actual mining is occurring on an ongoing basis.

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Discussion of relative accuracy/confidence

Where appropriate a statement of the relative accuracy and/or confidence in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate.

The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages or volumes, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.

These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

Spacing ranges for the three resource categories are considered to adequately reflect the degree of confidence in the underlying estimate on a global basis. Significant local variation to estimated values may arise which should be addressed by adequate grade control procedures.

Mineral Resource Estimate for conversion to Ore Reserves

Description of the Mineral Resource estimate used as a basis for the conversion to an Ore Reserve.

Clear statement as to whether the Mineral Resources are reported additional to, or inclusive of, the Ore Reserves.

Basis of the estimates is “BIB JORC Resource Statement as at 31 July 2014. Coal resources is inclusive of Coal reserves

Site Visits

Comment on any site visits undertaken by the Competent Person and the outcome of those visits.

If no site visits have been undertaken indicate why this is the case.

Mr Sunil Kumar, Mining Engineer, CP, made the site visit and held discussions during July 2014.

Study Status

The type and level of study undertaken to enable Mineral Resources to be converted to Ore Reserves.

The Code requires that a study to at least Pre-Feasibility Study level has been undertaken to convert Mineral Resources to Ore Reserves. Such studies will have been carried out and will have determined a mine plan that is technically achievable and economically viable, and that material Modifying Factors have been considered.

Two pits (KG & BTi) within BIB Coal concession blocks are being currently mined. It is proposed to one up two more blocks (SS & SN) in 2015.

Cut-off parameters

The basis of the cut-off grade(s) or quality parameters applied

Refer Table 9:5, Break even Stripping Ratio analysis

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Mining factors or assumptions

The method and assumptions used as reported in the Pre-Feasibility or Feasibility Study to convert the Mineral Resource to an Ore Reserve (i.e. either by application of appropriate factors by optimisation or by preliminary or detailed design).

The choice, nature and appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre-strip, access, etc.

The assumptions made regarding geotechnical parameters (eg pit slopes, stope sizes, etc.), grade control and pre-production drilling.

The major assumptions made and Mineral Resource model used for pit and stope optimisation (if appropriate).

The mining dilution factors used.

The mining recovery factors used.

Any minimum mining widths used.

The manner in which Inferred Mineral Resources are utilised in mining studies and the sensitivity of the outcome to their inclusion.

The infrastructure requirements of the selected mining methods.

Refer Table 9:1 Modifying Factors and Pit Optimisation Parameters and Section 9:3 on Notes on Modifying Factors.


Pre-feasibility studies were completed prior to commencement of mining operations. These studies were accepted as part of the AMDAL approval process from the Govt. of Indonesia prior to being given mining operations approval (CCoW). Where an entity has an operating mine for an Ore Reserve, its Life of Mine Plan would generally be expected to contain information at better than Pre-Feasibility or Feasibility level for the whole range of inputs normally required for a Pre-Feasibility or Feasibility study and this would meet the requirement in Clause 29 for the Ore Reserve to continue that classification.

HDR Salva has used actual modifying factors based on current operations at the BIB Mine which were independently verified by the HDR’s subject specialist during the site visit. In HDR Salva’s opinion, the Modifying Factors at BIB Mine are better defined based on actual mining practices compared to a greenfield project at Pre-Feasibility stage.

Metallurgical Factors or assumptions

The metallurgical process proposed and the appropriateness of that process to the style of mineralisation.

Whether the metallurgical process is well-tested technology or novel in nature.

The nature, amount and representativeness of metallurgical test work undertaken, the nature of the metallurgical domaining applied and the corresponding metallurgical recovery factors applied.

Any assumptions or allowances made for deleterious elements.

The existence of any bulk sample or pilot scale test work and the degree to which such samples are considered representative of the ore body as a whole.

For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications.

The coal is to be sold unwashed so no processing factors have been applied. Other than crushing to a 50 mm top size no other beneficiation will be applied.

Environmental

The status of studies of potential environmental impacts of the mining and processing operation. Details of waste rock characterisation and the consideration of potential sites, status of design options considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported.

Refer Section 9.3.9, Permits and approvals

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Infrastructure

The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed.

Discussed in Section 9.3.8 Mine Logistic Factors

Costs

The derivation of, or assumptions made, regarding projected capital costs in the study.

The methodology used to estimate operating costs. Allowances made for the content of deleterious elements.

The derivation of assumptions made of metal or commodity price(s), for the principal minerals and co- products.

The source of exchange rates used in the study.

Derivation of transportation charges.

The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.

The allowances made for royalties payable, both Government and private.

Discussed in Section 9.3.10 Cost and Revenue factors.

Revenue Factors

The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc.

The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products

Discussed in Section 9.3.10 Cost and Revenue factors

Market Assessment

The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future.

A customer and competitor analysis along with the identification of likely market windows for the product.

Price and volume forecasts and the basis for these forecasts.

For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.

Discussed in Section 9.3.11Marketing Factors

Economic

The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc.

NPV ranges and sensitivity to variations in the significant assumptions and inputs

Economic analysis (NPV) done based on long term price outlook and the cost estimates (Contractor mining operation)

Social The status of agreements with key stakeholders and matters leading to social licence to operate Refer Section 9.3.9, Permits and approvals

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Other

To the extent relevant, the impact of the following on the project and/or on the estimation and classification of the Ore Reserves:

Any identified material naturally occurring risks.

The status of material legal agreements and marketing arrangements.

The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingency.

Discussed under Section 9.3.13, Other Factors

Classification

The basis for the classification of the Ore Reserves into varying confidence categories.

Whether the result appropriately reflects the Competent Person’s view of the deposit.

The proportion of Probable Ore Reserves that have been derived from Measured Mineral Resources (if any).

Discussed under Section 9.7, Reserve Classification

Audit & Reviews The results of any audits or reviews of Ore Reserve estimates.

Discussed under Section 9.5, Audits & Reviews.

Discussion of Relative accuracy/confidence

Where appropriate a statement of the relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the reserve within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate.

The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.

Accuracy and confidence discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage.

It is recognised that this may not be possible or appropriate in all circumstances. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

Discussed under Section 9.6, Relative Accuracy and confidence.

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Appendix C: Raw coal quality histograms per seam KG Block

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Page 105

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BS Block

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PP Block

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SN Block

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SS Block

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Appendix D: Cross-Sections

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793


794


795


796


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Appendix E: Resource Polygons for selected seams

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799


800


801


802


803


804


805


806


807


808


809


810


811


812


813


814


815


816


817


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Appendix F: Drill Hole Location Plans

819


820


821


822


823


824


825