Mt PT. Bayan Resources Tbk - Prospectus

5.2 Study Status

The mine has been operating since 1998 and is a mature mine with established infrastructure and position in the market place. The Competent Person for Coal Reserves considers the current mine operation is be technically achievable and commercially viable. He has visited the site and is aware of the status of the operations and issues associated with the mine. It is a complex site as there are a series of mined out pits and rehabilitated areas to consider in the long term mine plan. With recent higher coal prices the previous pit limits have been extended. Underground options are being considered but are not included in this statement.

5.3 Cut-off Parameters and Pit Limits

A “breakeven strip ratio” was calculated using actual data from the mine. This estimated the breakeven strip ratio to be 22.4 bcm tonne. The average stripping ratio was 19.4 bcm tonne. Minex optimiser software was used to generate a series of incremental pit shells. This is a three dimensional approach which provides a series of incremental pit shells where each increment is more expensive due to a combination of factors such as depth, strip ratio and coal quality. At this stage, the optimiser was not constrained by confidence limits. Results were examined and compared to a series of pit shells generated manually by Bayan. A total of over 40 pit shells were evaluated which extended over 10 of the 14 seams. These were cross checked for tonnes, quality, strip ratio and confidence limits Coal Resource categories and a number of pit shells excluded due to the Inferred level of confidence. Any potential pit areas which had Inferred Coal Resources were excluded from the estimate. This process started with 35 Mt ROM tonnes and after eliminating 9 Mt of lower confidence coal this gave a total of 26 Mt of Proved and Probable Open Cut Coal Reserves. The pit shells included in the Coal Reserve estimates are as shown on Figure 6.

5.4 Mining Factors

The highwall slope applied is 45 degrees. Adjustments have been made to the coal quantity and quality based on historical practices. This includes: ‰ coal losses of nominally 50mm for the roof and floor based on historical practices, ‰ ash increased by 1.5; and ‰ calorific value decreased by 150 kcal from the in situ model.

5.5 Metallurgical Factors

The majority of coal is sold unwashed and has no metallurgical factors applied. A small amount of cleanup coal containing excess dilution is sent to a process plant to produce a clean washed product. The average yield for this coal is 50. The process and maintenance costs for the wash plant are high compared to the low throughput. The notional margins on this otherwise wasted coal are also high and offset the high production cost. This quantity has been excluded in the Coal Reserve estimate and can be considered as an upside.

5.6 Cost and Revenue Factors

Bayan provided a “data sheet” of unit costs relevant to GBP Block 2. MMC checked these for reasonableness and also used an in-house NPV based economic model to show the project and reserves are “economic”. These unit rates were then used to calculate the cost to deliver coal to a ship. This allowed a break even strip ratio to be calculated and was 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. ‰ A benchmark coal price of US65 per tonne for coal of CV 6,322 kcalkg gar moisture was used for the estimates. ‰ Royalties of 13.5 of revenue less marketing, barge and shipping costs have been allowed. ‰ VAT of 10. ‰ A fuel price of 68 cents per litre was used for mining costs. ‰ A coal haulage cost of 11 cents per tonne kilometre. ‰ Allowances were made for crushing, stockpiling, barge loading and ship loading which totalled approximately 11.40 per tonne. A-50