7,660 PT. Bayan Resources Tbk - Prospectus

4.3 Geological Database and Modelling

Geological Database Key elements of the geological database to the end of March 2008 were reviewed by MMC and the following noted: ‰ total of 239 holes have been drilled at Keham and 390 holes at Cilong, ‰ drillholes are typically less than 60 m in depth, ‰ no geophysical logging has been done, ‰ a large number of drillholes have been “touch” cored for coal quality analysis, and ‰ all drillhole locations have been surveyed. The proposed initial pit areas at both Keham and Cilong have been subject to detailed drilling at 50-200m spacing while the remainder of the potential open pit area has been largely subject to semi-detailed drilling approximately 300 m spacing. Geophysical logging which provides a high degree of certainty of data accuracy has not been conducted at GBP Block 1. It is recommended that any future drilling include geophysical logging. The typical suite of geophysical logs for coal exploration includes natural gamma, in situ rock density and calliper borehole diameter. The data that can be obtained includes seam depth and thickness, seam partings, indicative seam quality ash, seam correlations and in the identification of faults. Drillhole depths are typically shallow up to 60m depth and have been drilled “open hole” i.e. noncored with “touch” coring of intersected coal seams. This methodology is widely used in the Indonesian coal industry and is generally acceptable in terms of providing reliable seam data when coal core recoveries are typically greater than 90 based on geologists drill logs. However some coal roof losses do occur through “touch” coring and this can be considered a material issue in the interpretation of thin seams Note: MMC has considered this in resource categorisation, see Section 4.5. Survey Detailed topographic survey has been conducted over the study area and all drillholes have been surveyed by Total Station. Geological Modelling All data including drill logs, coal quality and drillhole survey data have been input into an electronic database. Using Mincom “Stratmodel” mining computer software, Bayan geologists have created a 3-D “surface” model of the deposit. A surface model is built up from individual layers including topographic surface, weathering surface, seam roofs and floors. Mincom software is capable of modelling seam splits and faults. Model Conversion and Resource Estimation The Mincom model was provided to MMC in “gridded” model format and was converted to Minex computer software format. The Minex model was validated against the original Mincom models by comparing total volume of waste and coal and found to have a high degree of accuracy. MMC Coal Resource estimates were derived from the Minex model output. Coal Density MMC used Relative Density RD obtained by applying the Preston-Sanders formula to convert the modelled air dried RD from analyses of coal cores to in situ RD.

4.4 Data Validation

MMC undertook extensive validation of the GBP Block 1 database in order to validate the geological model and to determine the resource categories on which Coal Resource estimates were based, including review of the following: ‰ a significant number of original drill logs in order to validate the coal seam intercepts recorded in the computer database, ‰ drillhole plans for each seam, A-22 ‰ output from the Mincom geological model was reviewed for accuracy in relation to the available drilling data, ‰ typical cross-sections across the pits, and ‰ coal quality database plans and tabulations. In summary, the database is of an adequate standard and the work has been undertaken by competent professionals. A copy of the model was provided to MMC and MMC is of the opinion that the geological model is of sufficient accuracy to be used for Coal Resource estimation. There are no fatal flaws identified, however the following observations are made in relation to the level of confidence of the database and model: ‰ thin seam interpretation is of lower confidence than for thicker seams due to the use of “touch” coring and the absence of geophysical logging, and ‰ the lack of supporting geophysical logging data lowers the overall level of confidence in the database and model such that the Coal Resource estimates can only be of maximum Indicated status.

4.5 Geological Confidence And Resource Categories

Open-cut Geological Resources are defined as that part of the identified in-situ coal “with reasonable prospects for eventual economic extraction” JORC Code, 2004. The JORC Code identifies three levels of confidence in the reporting of resource categories as follow: ‰ Measured—“that part of a Mineral Resource for which the tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence ”. Note: bolding added by MMC. ‰ Indicated—“...estimated with a reasonable level of confidence”. ‰ Inferred—“…estimated with a low level of confidence”. Determination of “level of confidence” by MMC was based on the categorising the following seam characteristics as “simple”, “moderate” or “complex” based on the following criteria: ‰ variability of seam thickness including seam splitting, ‰ variability in coal quality parameters, and ‰ structural complexity. The categorisation of resources at GBP Block 1 under this system is summarised in Table 4.5 below: Table 4.5—Resource Categorisation Parameters Simple Moderate Complex Sedimentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X Coal Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X Drill Spacing — Measured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500m 250m 100m — Indicated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500-1,000m 250-500m 100-200m — Inferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000-1,500m 500-1,000m 200-400m Based on the level of complexity of the GBP Block 1 deposit, MMC sub-divided resources into categories based on the following drill spacing: ‰ Measured 0-250m radius of influence 125 m. ‰ Indicated 250-500m radius of influence 250 m. ‰ Inferred 500-1,000m radius of influence 500 m. While the proposed open cut mine area has close drill spacing 50-200 m spacing, the lack of geophysical logging and the use of “touch” coring for relatively thin seams has resulted in the resources being classified as of Indicated status in this area. A-23