Mt 3.9 Mt Geological Confidence And Resource Categories

5. COAL RESERVE ESTIMATE

The following sections describe the process used in converting the Coal Resources into Coal Reserves. The order generally follows “Table 1—Check List of Assessment and Reporting Criteria” in The JORC Code. This process includes defining viable pit limits and applying various mining recovery, metallurgical, cost, revenue and similar factors to the Coal Resources to estimate Coal Reserves.

5.1 Coal Resource Estimate

The Coal Resource estimate that is used as a basis for the Coal Reserve estimate is documented in this report see Section 4. The Competent person who did the Coal Resource estimate is Mr William Park. Coal Reserves quoted in this report are inclusive of Coal Resources.

5.2 Study Status

The mine is not yet producing. The Competent Person for Coal Reserves considers the proposed mine plan to be technically achievable and viable. This has been done by reviewing all the modifying factors and reviewing costs from Bayan’s operating mines. A pit optimization has been completed and pit design undertaken. A “Life of Mine” plan has yet to be completed.

5.3 Cut-off Parameters and Pit Limits

The depth limit was set to the same as the resource model. The Minex Optimiser software was used to generate a series of incremental pit shells based on a range of coal sales prices. This is a three dimensional approach which provides a series of incremental pit shells where each increment reflects different economic scenarios such as changes to depth, mining cost or coal price. At this stage, the Optimiser was not constrained by confidence limits. An economic model was prepared of the mining operation to determine the project breakeven or incremental stripping ratio. The pit optimisation results were examined and pit shells selected which corresponded to an incremental stripping ratios of 23.7 bank cubic metrestonne bcmt for Keham and 29.5 bcmt for Cilong. Higher strip ratios than this would mean the mining cost is greater than revenue for the next incremental pit expansion. Through the application of mining factors Section 5.4 below, the Mineable In Situ coal within these pit shells was converted to ROM coal quantities which were then tested so that only Indicated Coal Resources were classified as Coal Reserves. The selected pit shells are shown on Figure 7 and Figure 8.

5.4 Mining Factors

The selected mining method is a “shallow open cut, multi seam, shallow dip, truck and shovel mining method where dumping is initially ex-pit and subsequently in-pit using a haulback methodology”. The low-wall slope was assumed to follow the seam floor and the highwall slope 45 degrees. The mining factors applied to the Coal Resource model for deriving mining quantities were selected based on the use of excavators and trucks. The assumption is that clean accurate mining practices similar to that achieved at the other Bayan mines will be adopted. Loss and dilution factors guidelines are as follows: ‰ Roof and Floor Loss: It is assumed that an average of 50mm of coal will be lost in both the roof and floor of all coal seams i.e. total loss 100mm. ‰ Global Loss: It is assumed that 4 of all coal mined will be lost. This global allowance covers both geological and mining losses including losses which will occur along edges; including subcrops, faults, wedges and ramps. ‰ Roof and Floor Dilution: It is assumed that an average of 10mm of waste materials will be mined with the roof and floor of all coal seams. This assumes small equipment, close supervision and good mining practices. ‰ Minimum Mining Thickness: Coal less than 0.4 m was excluded from the estimate. ‰ Minimum Parting Thickness: Partings less than 0.1m were assumed to be mined with the coal. ‰ Defaults: Dilution was assumed to be RD 2.1 bcmt and CV of 2,000 kcalkg gar. A-25