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Development Potential of the

Wara Coal Deposit to meet

Indonesia’s Future PowerRequirements

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COAL RESOURCE

• Indonesia has large resources of lower heating value sub-bituminous coal

• the resources are largely in South and East Kalimantan and South Sumatera

• the resource base is many billions of tonnes

• these resources have not been developed to date because production growth from existing deposits has been sufficient to meet domestic and export demand

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COAL RESOURCES

• the coal resources in South and East Kalimantan are:– close to the surface– suitable for low cost open pit mining– close to the sea

or– close to rivers that give deep water access to the sea

• the Kalimantan coal resources in some locations are:– low in ash– low in sulphur– give low NOx emissions– have suitable trace element content

• however some of the coals are:– relatively high in moisture– relatively low in heat value– relatively soft which will mean handling considerations

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COAL RESOURCES

• a number of the deposits of the lower heating sub-bituminous coal are in areas currently being mined

• have had some exploration and development work

• are close to existing mine infrastructure

• in some cases the mines are already opened

• could be developed or expanded quickly with first or increased production in a matter of months

• need long term markets to justify full development

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WARA COAL DEPOSIT

• once such lower heating value sub-bituminous coal resource is the Wara deposit in PT Adaro Indonesia’s Coal Cooperation Agreement area in South Kalimantan

• the Wara resource base is estimated at over 1 billion tonnesof surface minable coal with a low strip ratio

• the Wara deposit lies 5 kilometers west of Adaro’s existing mining operations at Tutupan

• the Wara area is already connected to the road infrastructure of the Tutupan operations

• the coal resources of Wara are the second largest in Adaro’s area after the Tutupan resources

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PT ADARO INDONESIA

• Adaro commenced mining in its resource area in 1991

• its production has climbed steadily from less than 1 million tonnes in its first year of production to a planned 34 million tonnes this year

• the area contains sub-bituminous coal resources in exceess of 3 billion tonnes in three deposits known as Paringin, Tutupan and Wara

• all the coal in these deposits is typified by medium to low calorific value, medium to high moisture and low sulphur and ash

Adaro's Production Since 1992

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5

10

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25

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35

40

1992

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1996

1998

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2006

Mill

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Tonn

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PT ADARO INDONESIA

• the Adaro deposits are characterized by thick seams of surface mineable coal with low stripping ratios and favourablemining conditions

• the development of the coal resource was based on the construction of a 75 km coal haul road from the deposits to a crushing, stockpiling and barge loading site built at Kelanis on the Barito river

• the Barito river provides deep water access to the sea

• at Kelanis, coal is loaded on to barges for transport either direct to domestic customers or for transshipment into bulk carriers

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PT ADARO INDONESIA

• Adaro is a major exporter with sales to 17 countries in Asia, Europe and North America

• Adaro is the largest supplier to the domestic market with approximately 35% of its output being supplied to PLN and private power producers, the cement industry and general industries such as paper and pulp

• a 36 million tonnes per year output from Tutupan, which will be achieved in 2007, is considered optimum for this deposit

• any additional production output above this level will come from the Wara deposit

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WARA COAL DEPOSIT

• the Wara deposit has been drilled and a large resource base has been delineated

• mining operations were carried out in 1995 and 1996 as a European customer was using a blend of Wara and Tutupan coal in a power station that had been previously using high sulphur lignite

• the Wara blend, with its ultra low sulphur and ash, was used to allow the station to keep generating and meet EU emission standards without installation of flue gas desulphurisation equipment

• however it was found that the station could accept the Tutupan coal which was already under large scale mining and the mining at Warawas subsequently stopped

• since then there has been no mining at Wara as Adaro has sufficient reserves in its Tutupan deposit to meet its current domestic and export markets

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WARA COAL GEOLOGY

• exploration work carried out at Wara includes geological and coal outcrop mapping, trenching, drilling, geophysical downhole logging and coal sampling and analysis

• A geotechnical analysis and aerial photogrammetric topographic mapping has also been undertaken

• exploration work identified two separate deposits, named Wara 1 and Wara2, each with multiple seams

• the Wara 1 deposit has three major coal seams with some splits in the seams

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WARA COAL GEOLOGY

• the Wara 1 coal strikes in a general north-east / south-west direction, and the coal seams dip to the south east at approximately 45 degrees

• the average coal thickness for the seams is 12 meters, with a range of between 4 to 30 meters

• the Wara 2 deposit, northwest of Wara 1 deposit, does not outcrop and was discovered by drilling

• the Wara 2 coal appears to be shallow, flat lying and may be of a highermoisture than Wara 1

• only limited work has been done on Wara 2

Map of the cross sections

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WARA COAL QUALITY

• a total of 25 quality holes have been drilled in Wara 1, intersecting the three major seams

• the total moisture of the Wara 1 coal is relatively high and varies from 39% to 41%

• Inherent moisture is 26% to 31%. Run of mine moisture percentage will depend on the mining method and coal handling

• ash is low at 2% and sulphur is low at 0.15%

• the average calorific value of Wara1 is 4,850 kcal/kg (adb basis)

• the coal quality of the Wara 2 deposit has not been defined. The ash and sulphur contents appear to be similar to Wara 1

Proximate Analysis Total Moisture (a.r) 40% Inh Moisture (a.d.b.) 27

Ash (a.d.b.) 2Volatile Matter (a.d.b.) 37Fixed Carbon (a.d.b.) 34Calorific Value (a.d.b.) 4850Calorific Value (g.a.r.) 4000Total Sulphur (a.a) 0.15H.G.I. 60

Ultimate Analysis (Dry Ash Free Basis)% Carbon 69

Hydrogen 5Nitrogen 1.4Oxygen 23Sulphur 0.1

Ash Fusion (Reducing Atmosphere)

Temperature Initial Deformation 1300o C Spherical 1370

Hemispherical 1450Flow 1490

TYPICAL SPECIFICATIONS

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WARA COAL RESOURCES

• the Wara coal deposit is classified in the measured, indicated or inferred resource categories

• the total insitu coal resources have been calculated at 1,086 million tonnesof which 850 million tonnes is in the Wara 1 deposit

Deposit

Measured Indicated Inferred Total

Wara I 254 280 316 850

Wara II 59 73 104 236

Total 313 353 420 1086

WARA I & II RESOURCES

Resources

( million mt )

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WARA COAL COMBUSTION TESTING

• a 5 tonne sample of Wara 1 coal was tested at the Energy Technology Laboratory (UPT-LSDE, BPPT) Puspiptek, Serpong, Tangerang

• the report, including all the results of the tests, showed the suitability of the use of the coal in existing power plants in Indonesia

• the results were similar to that obtained from the combustion testing of Adaro’s Tutupan coal, a coal now widely used in power plants around the world

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WARA MINING and TRANSPORT

• the mining method will be by conventional truck and shovel mining similar to Adaro’s current operation

• this system best suits the proposed multi bench pit layout, and gives maximum scheduling flexibility

• equipment size will be as large as possible to lower the unit production cost. However the philosophy of larger size equipment will be balanced with what equipment size can be maintained under Kalimantan conditions

• at the Barito river a new coal crushing, stockpiling and barge loading facility would be constructed at Kelanis beside the one currently in use

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WARA HANDLING AND SHIPPING

• the Kelanis system would receive the coal delivered by haul trucks. After crushing, the system would convey the coal to a stockpile area or convey directly to barges

• the facility at Kelanis for Wara coal would have a planned capacity of 20 million tonnes per year and would take 9 to 12 months to design and construct

• before that time up to 2 million tonnes a year of Wara coal could go through the current system

• transportation from Kelanis to power plants on Java would be by direct barging in barges up to 14,000 tonnecapacity

• this transport method is commonly used in domestic supply of coal and is well able to expand to meet increased demand

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MARKETING STRATEGY

• the first stage will be to identify the markets for the Wara coal

• the best markets would be new power plants designed for the coal quality with:

– facilities of a size to handle the tonnage

– mills of a suitable type (beater mills?)

– large fan capacity – boilers designed for such coal

• markets could be in:– Indonesia – new power plants – China – coastal power plants– India –planned new power

plants– South-East Asia

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MARKETING STRATEGY

• the optimum market for the Wara coal is the one with the shortest transport distance given the low heat value of the coal

• optimum markets in order of priority are:– on-site power plants– new power plants in Kalimantan– new power plants in Indonesia

• target markets are the 10,000 MW of new power plants to be built under the Indonesian Government program of which 5,000 MW will be on Java

• the Java plants will require 20 million tonnes a year:

– Adaro can deliver in barges up to 14,000 tonnes direct from barge

– loading at Kelanis– 4 to 5 days delivery time– can provide competitive delivered price

per unit of heat value

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MARKETING PROGRAM

• the marketing program will be to provide Wara coal information to possible power plant developers

• provide trial samples as needed from 5 kg up to 500 tonnes from the present trial mine

• make test burn results available

• have Adaro’s coal combustion consultant available to provide technical advice

• arrange inspection visits to operating power plants using similar coals

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GOVERNMENT POLICIES

• adjustments to some Government policies would assist in the development of the large energy resource of lower heat value sub-bituminous coals in Indonesia

• Government promotion of the use of this type of coal in new power plants would bring it to the planned developers consideration

• reduction of the royalty in Coal Cooperation Agreements and CoalContracts of Work from the current 13.5% would allow more of this type of coal to become economically viable

• new power plants require long term coal supply contracts if the plant is built to use particular types of coal. Many of the current Coal Cooperation Agreement’s come up for renewal from 2020. Early renewal of these Agreements would promote long term planning and development of this national energy resource

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WARA COAL CONCLUSIONS

• the Wara deposit is a large resource of lower heat value sub-bituminous coal in South Kalimantan

• part of the deposit has been drilled and the coal quality and the resource base defined

• the coal resource outlined to date is over 1 billion tonnes

• the coal is close to the surface and amendable to low cost open pit mining. It is also close to a large scale mining operation with which it can share infrastructure

• a new mining operation at Wara would only require construction of a crushing, stockpiling and barge loading system at Kelanis on the Barito river, a project that could be completed in less than a year

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WARA COAL CONCLUSIONS

• coal combustion testing has established that the Wara coal will perform similar to other sub-bituminous coals of its type in commercial power plants

• the Wara deposit has not been developed to date because production growth from existing deposits has been sufficient to meet domestic and export demand

• the Wara coal is environmentally friendly and is a deposit whose characteristics make it suitable for use in the growing domesticpower plant market.

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Terimakasih, Maturnuwun.