Risk from limited services and coal transportation routes Risk of declining coal quality

10. Risk of coal oversupply

Growth in world coal markets and increased global demand for coal has attracted new players in the industry and encourage the development of new mines and expansion of existing mines in various countries which resulted in increase in global coal production capacity. Increasing rate of development and the excess of global coal supply in the future may reduce the global coal price and the coal sales price.

11. Risk of failure or delay in the implementation of the Company’s strategy

The Company through its subsidiaries produces 2.0 million tons of coal in 2010 and plans to increase the amount of production to 6 million tons in 2011. The ability of the Company and its subsidiaries to increase their coal production, including their ability to meet coal sales contractual commitments during year 2014 and in the years ahead, has some risks, including:  The inability of the Company and its subsidiaries to renew contracts with existing contractors or achieve agreements with new contractors, with profitable terms and conditions.  The inability of the Company and its subsidiaries andor the contractors in providing equipments and machineries required in coal production chain.  Under the terms of contract agreements between the subsidiaries and the contractors, the contractors are responsible for most capital expenditure requirements and manpower to run their activities. The contractors’ capital expenditure requirements and operational plans have risks, which some of the risks are beyond their control, such as increasing price of equipments, delay in the delivery of required equipments and materials including the ability to obtain permits required, the procurement of qualified manpower and the ability to obtain funding by acceptable provisions, which may affect the ability of contractors to meet their contractual obligations to related subsidiaries.  The Company and its subsidiaries or its contractors may find difficulties in the procurement of machineries, equipments and spare parts, especially the coal trucks, digging machinery and tires for those equipments required to increase coal production, which may be caused by the supply constraints in steel and rubber market and high demand for such materials in the global market.  The Company and its subsidiaries must obtain various permits from the authorities to implement and continue their expansion plan. Failure to obtain required permits within a specified time period may inhibit or obstruct the expansion plan.