APPENDIX 6B KIM INDEPENDENT QUALIFIED PERSON S REPORT AND VALUATION

Transcription

1 United Fiber System Ltd PT Kuansing Inti Makmur Concession Independent Qualified Persons Report 826

2 United Fiber System Ltd PT Kuansing Inti Makmur Concession Independent Qualified Persons Report Salva Resources Pty Ltd Level 11, 82 Eagle Street, Brisbane, QLD 4000, Australia PO Box 10791, Adelaide Street, Brisbane, QLD 4000, Australia Website: Phone: +61 (0) Fax: +61 (0) Effective Date: 31 July 2014 Independent Expert Person: Manish Garg BEng (Hons), Master of Applied Finance MAusIMM, MAICD Director Consulting / Partner, Page ii 827

3 Table of Contents Executive Summary Introduction Scope Data Sources Site Visit Disclaimer and Warranty Independent Competent Person and Expert Statement Statement of Independence Project Description Property Description and Access Tenure Tenure Status Geology and Resources Coal Resource Resource Classification Statement of Coal Resources Coal Reserves Estimation Methodology Modifying Factors Reserves Classification Statement of Coal Reserves Life of Mine Scheduling Other Mineable Coal Inside Pit Design Mine Schedule Mining Operations Top Soil Removal Drilling and Blasting Waste Excavation Coal Mining Dewatering...36 Page iii 828

4 5 Coal Handling and Coal Logistics Coal Logistics Haulage on Public Roads Environment and Community Relations Environmental Aspects Water Run-off from site Noise and Dust Rehabilitation Social Aspects Economy Health Valuation Valuation Approaches Valuation Approach for Assessing the KIM Project Economic Parameters Royalty and Local Government Fees Inflation Outlook Corporate Income Tax Depreciation and Amortisation Working Capital Carried Forward Tax Losses Value Added Tax Weightage Average Cost of Capital (WACC) Market Analysis and Coal Prices Global Outlook Domestic Coal Demand Indonesian Coal Supply Coal Price Used for Project Assessment Capital Cost Basis of Estimation Project Currency and Foreign Exchange Duties and Taxes...53 Page iv 829

5 10.2 Land Acquisition Haul Road Construction Site Infrastructure Mine Reclamation Exclusions Capital Phasing Operating Cost Method of Estimation Items included in the Operating Cost Estimates Contractor Costs Owner Costs VAT Royalties and Government Costs Overall Operating Cost Financial Analysis & Project Valuation Modelling Methodology & Considerations Base or Preferred Case Preferred Case Results Sensitivity Analysis Valuation Range Valuation Summary Previous Valuation Risk Factors & Opportunities Risk Factors Resources And Reserves Geotechnical Risk Coal Price Risk Impact on Weather on Production Mining Approvals, Tenure and Permits Land Acquisition Environmental and Social Risks Operational and Mine Safety...66 Page v 830

6 Operating and Capital Costs Estimates Political and Regulatory Risk Coal Haulage on Public Road Opportunities...67 References Appendix A CVs Appendix B: SGX Mainboard Appendix Appendix C: Resource & Reserve Report List of Figures Figure 2:1 IUP Boundary and Location of Individual Coal Blocks Figure 3:1 Relationships between Mineral Resources & Ore Reserves Figure 4:1 Inferred Coal Resources inside Pit Shell- KIM East Seam S300L Figure 4:2 Inferred Coal Resources inside Pit Shell- KIM West Seam S300L Figure 4:3 LOM Production Schedule Figure 4:4 Waste Excavations over Life of Mine Figure 4:5 Coal Mining at KIM East Block Figure 4:6 Waste Mining at KIM East Pit Figure 5:1 Coal Stockpile Figure 5:2 Coal Logistics Current & Additional Options Figure 5:3 Current and Proposed Coal Logistics Figure 9:1 Indonesian Domestic Coal Demand (Mt) Figure 9:2 Indonesia Coal Supply Figure 9:3 Indonesian Coal Consumption Growth Rate by Sector Figure 9:4 Domestic Sales Prices (in nominal terms) Figure 12:1 Cash Streams Base Case Figure 12:2 Discounted Cash Flow Profile Base Case Figure 12:3 Key Project Sensitivities List of Tables Table 2:1 KIM Concession Details Page vi 831

7 Table 3:1 Coal Resources, KIM Project, and 31 July Table 3:2 Coal Resources Quality Estimates Table 3:3 Modifying & Mine Optimisation Factors Table 3:4 Coal Reserves, KIM Project, and 31 July Table 3:5 Coal Reserves Quality Estimates Table 4:1 LOM Schedule, Inferred Resource Tonnes in Pit Shell Table 7:1 Typical Valuation Methods Table 8:1 Indonesian Coal Royalty Rates Table 8:2 Corporate Tax Rates Table 8:3 WACC (After Tax) Table 8:4 WACC for Indonesian Coal Mining Companies Table 9:1 Contracted Price - KIM Coal Table 9:2 Contracted Price in US$ Table 10:1 Capital Cost (Real Terms) Table 10:2 Capital Cost Phasing (US $M, Real Terms) Table 11:1 Contractor Unit Rates (Real Terms) Table 11:2 Owner Unit Costs (Real Terms) Table 11:3 Average Unit Operating Cost (Real Terms) over Life of Mine Table 12:1 Base Case Key Input Parameters Table 12:2 Base Case Financial Model Table 12:3 Base Case Financial Outputs & Valuation Table 12:4 Project NPV Sensitivity Table 12:5 Valuation Range Table 12:6 Valuation Summary Page vii 832

8 Key abbreviations C degrees Celsius $ or USD United States Dollar adb AMSL AMDAL ANDAL Anticline ar AS ASR AusIMM Batter bcm cc BD CCoW CHPP CV Capex Mineral Resource Air dried basis, a basis on which coal quality is measured Above Mean Sea Level Analisis Mengenai Dampak Lingkungan Hidup- Environmental Impact Assessment (EIA), which contains three sections, the ANDAL, the RKL and the RPL Analisis Dampak Lingkungan Hidup, component of the AMDAL that reports the significant environmental impacts of the proposed mining activity An anticline is a fold that is convex, with older layers closer to the centre or core As received basis Australian Standards Average stripping ratio Australian Institute of Mining and Metallurgy Slope of Advancing Mine Strip bank cubic meter Cubic Centimeter bulk density Coal Contract of Work Coal Handling and Processing Plant Calorific value Capital Expenditure A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth s crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. Coal Reserve A Coal Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the Coal is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. Page viii 833

9 DCF DGMC FC gar GCV GEMS gm h ha HGI IM IPPKH IRR IUP JORC k kcal/kg kg km km2 kt kv kilovolt L m mm lcm LOM lcm M Mbcm Mbcmpa MEMR m RL m 3 m/s Mt Discounted cash flow Directorate General of Minerals and Coal within the Ministry of Energy and Mineral Resources Fixed Carbon gross as received, a basis on which coal quality is measured Gross Heating Value - The amount of heat produced by its complete combustion of its unit quantity. It is usually expressed in kcal/kg unit. PT Golden Energy Mines Tbk Gram hour Hectare(s) Salva Resources Pty Ltd Hardgrove Grindability Index, an index on which grindability of coal is measured Inherent Moisture Izin Pinjam Pakai Kawasan Hutan which translates to a borrow to use permit in a production forest Internal Rate of Return Izin Usaha Pertambangan which translates to Mining Business Licence 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, Australian Institute of Geoscientists and Mineral Council of Australia thousand Unit of energy (kilocalorie) per kilogram kilogram Kilometers(s) Square kilometre(s) kilo tonne (one thousand tonne) kv kilovolt Litre Meter millimetre(s) loose cubic metre Life of Mine lcm loose cubic metre Million Million bank cubic metres Million bank cubic metres per annum Ministry of Energy and Mineral Resources within the central government metres reduced level cubic metre metres per second Millions of tonnes Page ix 834

10 Mtpa Millions of tonnes per annum MW Megawatt NAR Net as received NPV Net present value NTA Net tangible assets Opex operating expenditure PKP2B Perjanjian Kerjasama Pengusahaan Pertambangan Batubara same as CCoW RD Relative density RKL Rencana Pengelolaan Lingkungan - environmental management plan ROM Run of Mine RKL Relative Level - survey reference for height of landforms above a datum level RPL Rencana Pemantauan Lingkungan - environmental monitoring plan SE Specific Energy SMGC PT SMGC Consultants SR Strip ratio (of waste to ROM coal) expressed as bcm per tonne t Tonne tkm Tonne kilometer tph Tonnes per hour tpa Tonnes per annum TM Total Moisture (%) TS Total Sulphur (%) United Fiber United Fiber System Limited VALMIN 2005 Edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports VM VM Volatile Matter (%) WACC Weighted Average Cost of Capital Page x 835

11 Executive Summary United Fiber System Limited ( United Fiber or Client ) has engaged Salva Resources Pty Ltd ( ) to prepare a mineral asset valuation and an Independent Qualified Persons Report ( Report ) of the Kuansing Inti Makmur concession ( KIM Project or KIM ) located in the Bungo Regency of Jambi Province, Indonesia. United Fiber has signed a conditional sale and purchase agreement to acquire PT Golden Energy Mines Tbk ( GEMS ). The Qualified Persons Report to be presented to United Fiber shareholders is intended to comply with Section 5 of SGX-ST Listing Rules Practice Note 6.3. The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code). The KIM concession is beneficially owned and controlled by GEMS. The tenure for the KIM Project is covered by 8 Izin Usaha Pertambangan Produksi ( IUP Production ) and covers a 2,610 ha area of coal concession. The KIM project consists of following 2 coal Pits: KIM East Pit ( KIM East Pit or KIM East ); and KIM West Pit ( KIM West Pit or KIM West ). Conventional open-pit coal mining operations was commenced in the KIM East in 2007 and the KIM West in Coal Resources An independent estimate of Coal Resources within the KIM Concession was prepared by HDR Salva. Coal Resources have been estimated, classified and reported according to the JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July The Coal Resources are detailed in Tables below. Coal Resources, KIM Project, 31 July 2014 Coal Resources (Mt) Block Measured Indicated Inferred Total KIM East KIM West Total Mineral Resources are reported inclusive of the Mineral Reserves (Note: individual totals may differ due to rounding) Block Measured Ash% adb Coal Resources Quality Estimates CV (Kcal/kg) adb Coal Resources (Mt) Indicated Ash% adb CV (Kcal/kg) adb Inferred Ash% adb CV (Kcal/kg) adb KIM East KIM West Total Total Page

12 Coal Reserves An independent estimate of the Reserves within the KIM concession was prepared by HDR Salva. These Reserves have been estimated, classified and reported according to the JORC Code (2012). prepared the Coal Reserve estimate as at 31 July 2014 on the basis for the Coal Reserve estimate as at that date after application of appropriate modifying factors determined during the mine optimisation studies. Coal Reserves, KIM Project, 31 July 2014 Coal Blocks Coal Reserves (Mt) Proved Probable Total KIM East KIM West Total KIM Block Total Moisture (%) (arb) Coal Reserves Quality Estimates Inherent Moisture (%) (adb) Ash (%) (adb) (Note: individual totals may differ due to rounding) Total Sulphur (%) (adb) Calorific Value (Kcal/Kg) (gar) KIM East ,967 KIM West ,995 Life of Mine Schedule The KIM Mine is an operating mine since 2007 (KIM East pit commenced production in 2007 while the KIM West pit started in 2010). The KIM Mine is operated as single mining operation; even though the production from the KIM West pit has been temporarily suspended while the KIM East pit is operating as part of normal operation control. It is planned to resume production from the KIM West pit by Q1, The Modifying Factors used are based on actual operations at the KIM Mine which were independently verified by the s subject specialist during the site visit. Therefore it is considered valid to use Modifying Factors from the operating KIM Mine to satisfy clause 29 of the JORC Code. While JORC 2012 is not explicit with reference to operating mines, the guidance given in ASX FAQ no. 9 is considered relevant in this regard. Further, has carried out independent life of Mine (LOM) Study to develop the mining schedule and its economic evaluation of the Mine. As per s preliminary production schedule, the LOM minable tonnes over life of mine are expected to be 35.5 Mt and the corresponding waste mining would be Mbcm. The LOM stripping ratio is expected to be 6.8 bcm/t of coal mined. During initial years of operations, the production from the KIM pits will be restricted to 0.8 Mtpa, with peak production of 3 Mtpa forecast by year 5 onwards once the dedicated haulage road is completed. Page

13 LOM Production Schedule-KIM East and KIM West Mt KIM East KIM West Overall Stripping Ratio (BCM/t), RHS 9.0x 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x Stripping Ratio (BCM/t) Logistics The coal from the KIM Mine is currently being sold to domestic customers. The mine to end user supply chain involves hauling of coal to the ROM stockpile, followed by transportation using public roads to the domestic customers. The Jambi provincial government in conjunction with regency governments from Jambi s major coal producing regions has agreed on a suspension of coal trucks using public roads, starting from 31 December 2012 (Jambi Province Regulation No 13 Year 2012). However, the Jambi Province Regulation No 13 Year 2012 does stipulate some conditions on which the hauling of coal through public roads may be permitted. This is further clarified in Governor Jambi Regulation No 18 Year 2013 (Implementation Rules to the Jambi Province Regulation No 13 Year 2012), where under Article 3, paragraph 1 and 2, laid out conditions on which the Governor may allow limited utilisation of special public roads for coal hauling purposes and. The Article 6, paragraph 1 and 2 of the Jambi Province Regulation number 13, year 2012, stipulates that in the event Special Road (dedicated haul road) is yet to develop or still unavailable to be utilised then hauling may be allowed through specific public road. Presently, GEMS have developed plans to build a new haul road which will connect the KIM Mine to an existing special road. This new haul road will connect the KIM Mine to Port Nilau (owned by GEMS) via the Lontar Papyras Pulp and Paper Plant ( LPPP ). This 65 km dedicated connecting road is expected to be completed in 36 months. This will enable coal to be hauled on a special road to LPPP, a power plant at Ombilin and potential exports via the Nilau Port. Although the interpretation of this regulation is somewhat ambiguous, is in opinion that the government is likely to allow hauling by public road where a coal company is developing its own dedicated haul road. Page

14 Capital and Operating Cost The overall estimated capital cost for the project (including land compensation for life of mine and contingency) is shown below. Capital Cost (Real Terms) Particulars Direct Cost ($M) Contingency ($M) Total Cost ($M) Land Compensation Land Compensation Site Infrastructure Mine Infrastructure Haul Road Construction Hauling to Customers Total Project Capital estimated total operating costs for mining and other activities including coal hauling, barging and port handling charges. At this level of study these estimates are considered reasonable. The cost components are given in Table below. Average Unit Operating Cost (Real Terms) over Life of Mine Cost Item $/t Land Clearing $0.02 Topsoil Removal $0.05 Waste Mining $12.25 Waste Overhaul $1.00 Coal Mining $1.10 Haul to ROM Stockpile $0.45 ROM Coal Handling $0.30 Haul to Customer $26.20 Mine Closure $0.07 Environmental and Rehabilitation $0.06 Salary and Wages $0.25 Medical & Community Development $0.05 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $4.11 Contingency $2.35 Operating Cost Excl. Royalty $49.25 Royalty $2.83 Operating Cost incl. Royalty $52.08 The unit operating costs are reasonable when compared to industry standards by. Page

15 Price Outlook Domestic demand for thermal coal in Indonesia has grown rapidly since 2008, at a CAGR of 18%, primarily driven by strong demand from the power sector was a strong year for domestic coal consumption in Indonesia, with 86 Mt consumed. The domestic demand for thermal coal is largely driven by government energy policy which laid out plans to boost domestic coal consumption by coal fired power station in country. Subsequently, Government owned power producer PT PLN ( PLN ) laid out its road map to build 20 GW of power generation capacity by Indonesian supply has grown considerably, from 104 Mt in 2002 to 404 Mt in 2013, growing at a staggering compound annual growth rate (CAGR) of 13.13%. The sales price assumptions used in this study are based on domestic coal prices received for the KIM Mine in the current market. has reviewed the actual purchase orders and sales contracts for coal sales for the past two years. The sales contracts and purchase orders specified a coal at a range of prices from 600,000 IDR to 650,000 IDR per tonne at a base CV of 4,900 kcal/kg on a gross as received basis. These sales contracts are linked with the fuel index in Indonesia (which is a proxy for petrol and diesel prices in Indonesia). While the current contracts are linked with the Fuel Index in Indonesia, has adopted a conservative approach for assessing domestic coal prices outlook for this project. The domestic coal price forecast has been assumed to stay flat in real terms (US $56.5/t) over the life of mine. Other Economic factors has applied appropriate economic and other factors including VAT, corporate tax, depreciation etc. Discount rate used for determination of discounted cash flow and valuation was assesses as 11.5% WACC (after tax). Project Valuation and Range In s opinion, it is appropriate to use the discounted cash flow (DCF) method to determine the value of the project as the KIM Project as an operating mine undergoing expansion. The valuation model for the KIM Project was developed in Microsoft Excel. Valuation has been derived from analysis of cash flows calculated for the project over the life of mine. The valuation was designed so that input parameters could be varied to investigate different scenarios to determine an estimated valuation range. A base case valuation along with low and high case was developed using the assumptions discussed in this report. Following assumptions were applied for development of low and high scenario: Low Case: While the KIM Mine complies with the logistics regulations. Mine could be shut if permission to haul coal haulage on public road is not allowed along with management decision not to construct special road. High Case: Price increases by 5% while operating cost decreases by 3%. s opinion of the technical value and the corresponding project value (on 100% basis) as at 31 July 2014 is shown in Table below. The valuation range accounts for high and low cases and the sensitivity. Page

16 Valuation Summary Market Value (US $M) Item Lower Preferred Upper Net Present Value, 100% of Project Basis Page

17 1 Introduction United Fiber System Limited ( United Fiber or Client ) has engaged Salva Resources Pty Ltd ( ) to prepare a mineral asset valuation and an Independent Qualified Persons Report ( Report ) of the Kuansing Inti Makmur concession ( KIM Project or KIM ) located in the Bungo Regency of Jambi Province, Indonesia. PT Golden Energy Mines Tbk ( GEMS ) has the rights to explore and mine the KIM Project through its subsidiary company, PT Kuansing Inti Makmur ( PT KIM ). understands that this report will be relied on as part of the proposed transaction to be presented to United Fiber shareholders. The Qualified Persons Report is intended to comply with Section 5 of SGX-ST Listing Rules Practice Note 6.3. The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code). The KIM concession is beneficially owned and controlled by PT Golden Energy Mines Tbk (GEMS). The effective date of valuation is as on the 31 July 2014, the date on which the Resource and Reserves that support this valuation were estimated. 1.1 Scope United Fiber has requested that prepare a mineral asset valuation and an Independent Qualified Persons Report ( Report ) for the KIM coal concession ( KIM Project or KIM ) located in the Bungo Regency of Jambi Province, Indonesia. This report covers the mineral asset valuation of the KIM coal concession only and is not a valuation of the entire holding company. 1.2 Data Sources This review is based on the information provided by United Fiber and GEMS, the technical reports of previous consultants and current owners, Pt Golden Energy Mines Tbk ( GEMS ), as well as other published and unpublished data relevant to the project area. has carried out, to a limited extent, its own independent assessment of the quality of the geological and mining data. relied on an Independent legal firm LasutLay and Pane Advocates, a technical specialist that has carried out independent enquiry regarding the status of agreements, royalties or concession standing pertaining to the assets.. In developing our assumptions for this Statement, has relied upon information provided by the company and information available in the public domain. Key sources are outlined in this Report and all data included in the preparation of this Report has been detailed in the references section of this report. has accepted all information supplied to it in good faith Site Visit Mr. Sunil Kumar, Principal Consultant Mining conducted the site visit to the KIM project from 22 July to 23 July Mr. Manish Garg, Director Consulting conducted the visit to GEMS offices in Jakarta from 4 Aug 2014 to 7 Aug 2014 to review technical studies and commercial information. Page

18 1.3 Disclaimer and Warranty This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva s schedule of rates. s fee is not contingent on the outcome of its valuation or the success or failure for the transaction for which the report was prepared. None of s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report. s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS its directors, substantial shareholders, advisers and their associates. A draft version of this report was provided to the directors of United Fiber and GEMS for comment in respect of omissions and factual accuracy. As recommended in Section 39 of the VALMIN Code, United Fiber and GEMS has provided with an indemnity under which HDR Salva is to be compensated for any liability and/or any additional work or expenditure, which: Results from s reliance on information provided by United Fiber and/or GEMS and/or their Independent consultants that is materially inaccurate or incomplete, or Relates to any consequential extension of workload through queries, questions or public hearings arising from this report. This report may contain or refer to forward-looking information based on current expectations, including, but not limited to timing of mineral Resource estimates, future exploration or project development programs and the impact of these events on the United Fiber. Forward-looking information is subject to significant risks and uncertainties, as actual results may differ materially from forecasted results. Forward-looking information is provided as of the date hereof and assumes no responsibility to update or revise them to reflect new events or circumstances. The conclusions expressed in this report are as on the 31 July 2014, the date on which the Resource and Reserves that support this valuation were estimated. The valuation is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results. All monetary values outlined in this report are expressed in US dollars ($) unless otherwise stated. services exclude any commentary on the fairness or reasonableness of any consideration in relation to this acquisition. Page

19 1.4 Independent Competent Person and Expert Statement The independent valuation has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code). This Mineral asset techno-commercial assessment and valuation in this report was prepared by, or under the supervision of Manish Garg (B.Eng. (Minerals Engineering), MAppFinance, MAusIMM, MAICD). Mr. Garg, Director Consulting / Partner and a full time employee of has sufficient assessment and valuation experience, which is relevant to the activity that he is undertaking to qualify as an Expert as defined in the 2005 Edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code). This report was prepared on behalf of by the signatory to this report, assisted by the subject specialists competent persons whose qualifications and experience are set out in Appendix A of this report. Mr. Manish Garg Director Consulting / Partner Statement of Independence This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva s schedule of rates. s fee is not contingent on the outcome of its valuation or the success or failure for the transaction for which the report was prepared. The above mentioned person(s) have no interest whatsoever in the mining assets reviewed and will gain no reward for the provision of this techno-commercial assessment. s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates. None of s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report. Page

20 2 Project Description 2.1 Property Description and Access The KIM Project is located in the Bungo Regency of Jambi Province on Sumatra Island, Indonesia.. The KIM Project is located ~300 km to the South East of the Padang Port in West Sumatra. Access to the site is via a 2 hour plane flight from Jakarta to Padang followed by a either an 6 hour car journey or via a 1.5 hour plane flight from Jakarta to Jambi followed by a 7 hour car trip. The tenure for the KIM Project is covered by 8 Izin Usaha Pertambangan Produksi ( IUP Production ) and covers a 2,610 ha area of coal concession. The KIM project consists of following 2 coal blocks: KIM East Block ( KIM East Block ); and KIM West Block ( KIM West Block ). The IUP boundaries, existing workings and exploration borehole locations are shown in Figure 2:1. Conventional open-pit coal mining operations was commenced in the KIM East pit in 2007, which was followed by opening of the KIM West pit in Approximately 8 Mt of coal has already been mined from these pits until 31 July Figure 2:1 IUP Boundary and Location of Individual Coal Blocks Page

21 2.2 Tenure Clause 67 of the VALMIN Code states that status of tenement is Material and requires disclosure. Determination of the status of Tenements is necessary and must be based on a recent independent inquiry, either by the Expert or a Specialist. LasutLay & Pane ( LLP ), a Jakarta based legal firm, was commissioned to prepare a report in respect of the legal aspects of the mining activities within the KIM concession, solely from the perspective of Indonesian laws. LLP s scope was to confirm that: KIM has good title to its mining concessions; and KIM has complied with material, applicable provisions of the Mining Law 2009 and its implementing regulations, environmental law, forestry law and other relevant laws (as applicable). LLP report was made available to for reference in preparing this Report Tenure Status Eight (8) of the IUPs with a total area of 2,610 ha are owned directly and in-directly by subsidiaries of GEMS. Tenure at the KIM concession is held under the Izin Usaha Pertambangan which translates to Mining Business License (IUP) system of ownership. The ownership details of these IUPs are given in Table 2:1 below. Table 2:1 KIM Concession Details Company IUP Number Area (ha) Granted Expiry GEM Ownership PT Bungo Bara Utama PT Bungo Bara Utama PT Bara Harmonis Batang Asam 341/DESDMTAHUN /DESDM TAHUN /DESDM TAHUN ,301 9-Jul years % Apr-10 8 years % Apr-10 6 years % PT Karya Cemerlang Persada PT Tanjung Belit Bara Utama PT Kuansing Inti Makmur PT Kuansing Inti Makmur PT Berkat Nusantara Permai 350/DESDM TAHUN /DESDM TAHUN /DESDM TAHUN /DESDM TAHUN /DESDM TAHUN Jul years % Apr-10 8 years % Apr-10 8 years % Apr years % Dec years % Total Area (ha) 2,610 GEMS Ownership % All IUP s have a provision for 2 x 10 years extensions. A possible issue with tenure for the project is a number of gaps between the IUPs that cover the project area. The gaps are for a Page

22 maximum of 150 m in width (Figure 2:2). has been informed by Independent legal firm Lasutlay and Pane Advocates (LLP) that no other party holds tenure over the land in these gaps and that application is currently underway to change the coordinates of the current IUPs to ensure that there is no gap between them. This type of issue is not uncommon in Indonesia and there is no known reason why it could not be resolved. HDR Salva is not aware of any disruptions to operations at the KIM project that have occurred due to this issue. All of the land inside the KIM project area is designated Area Pengunaan Lain (Other Purpose) by the Forestry Department, and thus no borrow to use permit (Izin Pinjam Pakai Kawasan Hutan) is required for mining operations in this area. The current production operation permits held by KIM or its subsidiary has been detailed below. KIM Directly Owned Production Operation IUP KIM is the direct holder of the following Production Operation IUP 251/DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi Batubara dan Revisi Titik Koordinat / concerning Approval of Mining Production Permit and the Revision of The Coordinate Points. Issued by Bungo Regent, Jambi Province and valid from 23 April 2010 until 23 April 2020, covering an area of 199 hectares, located at Bungo Regency, Jambi Province, in conjunction with 166/DESDM Tahun 2012 tentang Perubahan Atas Lampiran Keputusan Bupati Bungo No. 251/DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi dan Revisi Titik Koordinat PT Kuansing Inti Makmur / concerning the Amendment of Bungo Regent Decision No. 251/DESDM Tahun 2010 concerning Approval of Mining Production Permit and the Revision of The Coordinate Points. Issued by Bungo Regent, jambi Province on 5 April /DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi Batubara / concerning Approval of Mining Production Permit. Issued by Bungo Regent, Jambi Province and valid from 23 April 2010 unti 23 April 2018, covering an area of 199 hectares, located at Bungo Regency, Jambi Province. KIM Indirectly Owned Production Operation IUP Following Production Operation IUP are owned by KIM s subsidiaries: PT Berkat Nusantara Permai ( BNP ) BNP is the holder of Production Operation IUP 545/DESDM Tahun 2010 tentang Persetujuan Pengalihan Kepemilikan Izin Usaha Pertambangan Operasi Produksi Batubara Kepada PT Berkat Nusantara Permai (Dari PT Lively Duaji Energy Pemegang IUP No. 492/DESDM Tahun 2009) / concerning Approval of the Transfer of Production Operation Minging Permit to PT Berkat Nusantara Permai (From PT Lively Duaji Energy, Holder of IUP No. 492/DESDM year 2009).Issued by Bungo Regent, Jambi Province and valid from 15 December 2010 until 30 December 2019, covering an area of 199 hectares, located at Bungo Regency, Jambi Province. Page

23 PT Bungo Bara Utama ( BBU ) 341/DESDM Tahun 2009 tentang Pemberian Izin Usaha Pertambangan Operasi Produksi Batubara / concerning Approval of Production Operation Mining Permit. Issued by Bungo Regent, Jambi Province and valid from 9 July 2009 until 9 July 2029, covering an area of 1,301 hectares, located at Bungo Regency, Jambi Province. 250/DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi Batubara / concerning Approval of Production Operation Mining Permit. Issued by Bungo Regent, Jambi Province and valid from 23 April 2010 until 23 April 2018, covering an area of 199 hectares, located at Bungo Regency, Jambi Province. PT Bara Harmonis Batang Asam (BHBA) BHBA is the holder of Production Operation IUP 247/DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi PT Bara Harmonis Batang Asam / concerning Approval of Production Operation Mining Permit. Issued by Bungo Regent, Jambi Province and valid from 23 April 2010 until 23 April 2016, covering an area of 172 hectares, located at Bungo Regency, Jambi Province. PT Karya Cemerlang Persada ( KCP ) KCP is the holder of Production Operation IUP 350/DESDM tahun 2009 tentang Persetujuan Peningkatan Izin Usaha Pertambangan Eksplorasi menjadi Izin Usaha Pertambangan Operasi Produksi / concerning Approval of Escalation of Exploration Mining License to Production Operation Mining Permit. Issued by Bungo Regent and valid from 22 July 2009 until 21 July 2019, covering an area of 143 hectares located at Bungo Regent, Jambi Province. PT Tanjung Belit Bara Utama ( TBBU ) TBBU is the holder of Production Operation IUP 249/DESDM Tahun 2010 tentang Izin Usaha Pertambangan Operasi Produksi / concerning Approval of Production Operation Mining Permit. Issued by Bungo Regent, Jambi Province and valid from 23 April 2010 until 23 April 2018, covering an area of 198 hectares located at Bungo Regency, Jambi Province. LLP reports that Production and Operation IUPs comprising KIM Project granted are in good standing, with permanent rent requirements met. KIM has complied with all applicable environmental regulations, Forestry laws and there are no pending investigations by government agencies on environmental.issues. All IUPs were granted Clean and Clear status by the General Director of Mineral and Coal on 28 th February Based on the report by LLP, considers the tenement tenure and permits to be in good standing. Page

24 3 Geology and Resources Resources and Reserves Estimates are presented in the format prescribed in Appendix 7.5 to the SGX listing rules in Appendix B. 3.1 Coal Resource An independent estimate of Coal Resources within the KIM Concession was prepared by HDR Salva and is current as of 31 July The Coal Resource estimates were prepared by Mr. Craig Williams, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr. Williams, Principal Consultant - Geology is a full time employee of and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code, 2012) Resource Classification The coal resources present in the KIM concession have been classified in accordance with the JORC Code, The JORC Code identifies three levels of confidence in the reporting of Resource categories. These categories are briefly explained below. Measured...That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors to support detailed mine planning and financial evaluation ; Indicated That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors in sufficient detail to support mine planning and evaluation ; and Inferred That part of a Mineral Resources for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. For the purpose of coal resource classification according to JORC Code (2012) guidelines, HDR Salva has only considered drillholes with core recovery above 90% as a valid point of coal quality observation. In terms of Coal Resource classification, is also guided by the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) (The Coal Guidelines) specifically referred to under clause 37 of the JORC Code (2012). According to the Coal Guidelines, maximum spacing s between points of observation for both structural and coal quality points of observation for Measured, Indicated and Inferred resources are 500 m, 1000 m and 4000 m respectively. Based on due consideration of the continuity of the coal seams as observed in the geological models for each of the five resource areas, the relative lack of evidence for significant faulting and the population statistics of the coal quality composites per seam, has sub-divided Coal Resources within the KIM concession into resource classification categories based on the following sample point spacing (expressed as a radius of influence around points of observation which is half of the spacing between points of observation): Page

25 Measured 250 m radius of influence; Indicated 500 m radius of influence; and Inferred 2000 m radius of influence. It is a requirement of the JORC Code (2012) that the likelihood of eventual economic extraction be considered prior to the classification of coal resources. Therefore, given the average coal quality attributes of the coal seams considered, which makes it amenable to be marketed as a thermal coal for power generation purposes, considers that it is reasonable to define all coal seams within the classification distances discussed above, to a depth of 250 m below the topographic surface, as potential open cut coal resources. 3.2 Statement of Coal Resources Coal Resources which have been estimated, classified and reported according to the guidelines outlined in JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July 2014 are detailed in Table 3:1 and Table 3:2 below. Table 3:1 Coal Resources, KIM Project, and 31 July 2014 Coal Resources (Mt) Block Measured Indicated Inferred Total KIM East KIM West Total Mineral Resources are reported inclusive of the Mineral Reserves (Note: individual totals may differ due to rounding) Block Measured Table 3:2 Coal Resources Quality Estimates Coal Resources (Mt) Ash% adb CV (Kcal/kg) adb Indicated Ash% adb CV (Kcal/kg) adb Inferred Ash% adb CV (Kcal/kg) adb KIM East KIM West Total More detailed discussion of the Resource estimate including the following aspects in included in the Resource and Reserve Report (Appendix C): Description of regional and local geology; Exploration undertaken to date including the number of boreholes, borehole locations and spacing, drilling and sampling techniques; The number of core samples taken and core recovery percentages; Criteria used to define points of observation; Ore body modelling techniques and procedures; Coal quality results, relative density of coal, laboratory used and analytical standards; Classification of Resources; and Ore body geometry and dimensions. Total Page

26 3.3 Coal Reserves The Coal Reserves estimates were prepared by Mr. Sunil Kumar who is a Member of the Australasian Institute of Mining and Metallurgy. Mr. Kumar, Principal Consultant - Mining is a full time employee of and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code, 2012) Estimation Methodology An independent estimate of the Reserves within the KIM concession was prepared by as of 31 July prepared the Coal Reserve estimate on the basis for the Coal Reserve estimate as at that date. The Coal reserves estimates presented in this report are based on the outcome of pit optimisation results and the techno-economics study carried out by HDR Salva. The subject specialist for Reserves considers the proposed mine plan and mining schedule is techno-economically viable and achievable. This has been done by reviewing all the modifying factors, estimating reserves in the pit shell and doing a strategic production schedule and economic model which confirms a positive cash margin using the cost and revenue factors as described below in this report. 3.4 Modifying Factors The KIM Mine is an operating mine since 2007 (KIM East pit commenced production in 2007 while the KIM West pit started in 2010). The KIM Mine is operated as single mining operation; even though the production from the Kim West pit has been temporarily suspended while the KIM East pit is operating as part of normal operation control. It is planned to resume production from the KIM West pit by Q1, considers the Modifying Factors to be valid for both pits. The Modifying Factors used are based on actual operations at the KIM Mine which were independently verified by the HDR Salva s subject specialist during the site visit. Therefore it is considered valid to use Modifying Factors from the operating KIM mine to satisfy clause 29 of the JORC Code. While JORC 2012 is not explicit with reference to operating mines, the guidance given in ASX FAQ no. 9 is considered relevant in this regard. Further, has carried out independent life of Mine (LOM) Study to develop the mining schedule and its economic evaluation of the Mine. The following Table 3:3 outlines the factors used to run the mine optimisation and estimate the Coal Reserve tonnage. Table 3:3 Modifying & Mine Optimisation Factors Factor Chosen Criteria Seam roof & floor coal loss of 0.05 m each 0.10m Seam roof & floor dilution 0.02 m each 0.04m Geological & mining loss including loss in transportation and handling 5% Minimum mining thickness minable coal seam 0.3m Dilution default density 2.2bcm/t Page

27 Dilution default calorific value 500Kcal/kg Dilution default ash 75% Overall High-wall and End-wall slope (varies in different blocks) 20 deg to 42 deg Maximum pit depth 200m max. Minimum mining width at pit bottom 50m Exclusion of Mining lease (CCOW) and offset from pit crest 50m Offset from the creek/ river edge m Mining, coal handling and transport cost validated by Coal selling price for break-even stripping ratio calculation Government approvals Environment report Geotechnical report Hydrogeology report US$ 56.5/t 3.5 Reserves Classification Under the JORC Code as shown below only Measured and Indicated Coal Resources can be considered for conversion to Coal Reserves after consideration of the Modifying Factors including mining, processing, economic, environmental, and social and government factors. To convert Resources to Reserves it must be demonstrated that extraction could be justified after applying reasonable economic assumptions. Proved Reserves is derived from the highest level geological confidence of established Measured Resources while Probable Reserves is derived from a moderate level geological confidence of established Indicated Resources. A level of uncertainty in any one or more of the Modifying Factors may result in Measured Resources converting to Probable Reserves depending on materiality. A high level of uncertainty in any one or more of the Modifying Factors may preclude the conversion of the affected Resources to Reserves (Figure 3:1). Figure 3:1 Relationships between Mineral Resources & Ore Reserves Source: JORC Code 2012 Page

28 This classification is also consistent with the level of detail in the mine planning completed for KIM Coal concession deposits. In the opinion of, the uncertainties in most of these are not sufficiently material to prevent the classifications of areas deemed Measured Resources to be areas of Proved Reserves and areas deemed Indicated Resources to be the areas of Probable Reserves. 3.6 Statement of Coal Reserves The Statement of Coal Reserves has been prepared in accordance with the 2012 Edition of the JORC Code. The total ROM coal Reserves are summarised in Table 3:4 and Table 3:5 below. Total ROM coal reserves are same as total marketable coal reserves. Block Table 3:4 Coal Reserves, KIM Project, and 31 July 2014 Coal Blocks Coal Reserves (Mt) Proved Probable Total KIM East KIM West Total KIM (Note: individual totals may differ due to rounding) Table 3:5 Coal Reserves Quality Estimates Total Inherent Total Ash Moisture Moisture Sulphur (%) (%) (%) (%) (adb) (arb) (adb) (adb) Calorific Value (Kcal/Kg) (gar) KIM East ,967 KIM West ,995 More detailed discussion of the Reserve estimate including the following aspects in included in the Resource and Reserve Report (Appendix C): Reserve estimation methodology; Discussion on Modifying Factors; Current Mining Operations; Pit Optimisation; Pit design considerations; Cut off parameters and pit limits; Audits and reviews; and Reserve Classification and Reserves statements. Page

29 4 Life of Mine Scheduling A life of mine (LOM) plan was prepared based on the final pit design. This was done to ensure that the proposed mining method would be practical and achievable and that the proposed dumping strategy would be able to contain the waste mined in the final pit design. This provides a check on the reasonableness of the assumed waste mining costs and estimates the average waste haul per production period. 4.1 Other Mineable Coal Inside Pit Design The optimised pit designs and ultimate pit shells were used to estimate Coal Reserves for the KIM Mine. It contains a significant proportion of Inferred Coal Resources. Under the JORC Code, these Inferred Coal Resources cannot be converted to Reserves because of insufficient confidence in the estimate is not sufficient to allow the results of the application of technical and economic parameters to be used for detailed planning. Hence, the results of the technical assessments of this Inferred Coal Resources should.be treated with caution. Generally the Inferred Coal Resources included in the optimised pit shell are from open hole intersections, where geophysical data at sufficiently close spacing reasonable confirms the continuity and thickness of coal seams and partings. In the process of Reserve Estimation, has followed the process which aimed to minimize the quantity of Inferred Coal Resources included in the final pit designs. However, under certain circumstances, it was considered necessary to include this coal as exclusion of it would result in an impractical pit design. Typical situations where inclusions of Inferred Coal Resources within the pit design were: Inferred Coal Resources located at the sub-crop but with Measured and Indicated coal located down dip; Small areas of Inferred Coal Resources located close to the high-wall where exclusion would result in unrealistic high-wall shapes; and Thin seams in the stratigraphy where it is difficult to achieve sufficient core recovery or sufficient core for analysis to classify the coal as Measured or Indicated, but which are underlain or overlain by thicker seams with Measured and Indicated Resources. A schematic diagram for the KIM East and the KIM West blocks showing other the Inferred Coal Resources within the designed Pit shell is shown in Figure 4:1 and Figure 4:2. Page

30 Figure 4:1 Inferred Coal Resources inside Pit Shell- KIM East Seam S300L Inferred Resources within optimised pit shell Page

31 Figure 4:2 Inferred Coal Resources inside Pit Shell- KIM West Seam S300L Inferred Resources within optimised Pit Shell Inferred Resources within optimised Pit Shell Page

32 notes that care must be taken with the inclusion of Other Mineable Coal in life of mine schedules to avoid cases where confidence in the thickness, continuity and quality of the coal is so low that resulting pit designs and schedules would be unrealistic. During the Reserve estimation process, the subject specialist inspected these seams and determined an appropriate limit for the final pit shell taking these considerations into account. The quantity of Inferred Resources inside the pit designs with Reserves and the scheduled tonnes are shown in Table 4:1. Table 4:1 LOM Schedule, Inferred Resource Tonnes in Pit Shell Coal Reserves Inferred Resource within Optimised Pit Shell Scheduled LOM KIM East KIM West Total, KIM To mitigate the risk associated with the inclusion of Inferred Resources within Optimised Pit Shell and to be on conservative side, has opted to kept total minable tonnes over LOM to be equal to the quantity of proved and probable reserves only for the purpose of this valuation report. 4.2 Mine Schedule At the time of writing of this report, mining operation was carried out in the KIM East pit, whereas the coal production at the KIM West pit was suspended as the margins are more attractive from the KIM East pit. Currently KIM West pit is under care and maintenance. The production from KIM West pit is likely to recommence from 2017 onwards when the dedicated haul road expected to become operational. The Coal Reserves in the KIM East pit are expected to be depleted by 2020 and the mine will be closed. As per s preliminary production schedule, the minable tonnes over life of mine are expected to be 35.6 Mt requiring waste mining of Mbcm. The LOM stripping ratio is expected to be 6.8 bcm/t of coal mined. During initial years of operations, the production from KIM pits will be restricted to 0.8 Mtpa, with peak production of 3 Mtpa from year 5 onwards (Figure 4:3) once the dedicated haulage road is completed. Page

33 Figure 4:3 LOM Production Schedule Mt KIM East KIM West Overall Stripping Ratio (BCM/t), RHS 9.0x 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x Stripping Ratio (BCM/t) recommends converting LOM Mine plan into detailed mining schedule reflecting up to 3 Mtpa target production rate. This document will address all the necessary detailed aspects related to the mining and associated activities for this project. Completion of this document will assist in reducing contingency which is factored in the current LOM plan. 4.3 Mining Operations Currently, the mining method for all pits within the KIM concession can be described as a multi seam, moderate dip, open cut coal mine using truck and shovel equipment in a combination of strip and haul back operations. The mining operations in KIM concession is carried out by conventional open pit mining method using truck and excavator combination. Mining of both coal and waste are outsourced to third party contractor, which are a common practice in Indonesia. Mining operation at KIM East block was commenced in This was followed by development and commencement of mining in the KIM west Block in So far, approximately 9 Mt of coal have been produced from both the pits combined together Top Soil Removal It is necessary to clear land and removes topsoil to advance any open pit mining operations. At KIM concession, land clearing and topsoil removal is undertaken by contractors. Natural Vegetation is cleared by using dozers. The vegetation is pushed into piles and moved to a suitable location. All necessary care is taken to minimize soil profile disturbances and same process will be followed during the life of mine operations. Once land is cleared, a fleet of small trucks and excavators removes topsoil which is either preserved for final reclamation or directly dumped into final landform area (where coal is already mined out) for rehabilitation. Page

34 4.3.2 Drilling and Blasting Most of the coal mining operations in Indonesia do not require drilling and blasting of overburden material to expose coal. The overburden is free digging which is not typical in countries outside Indonesia. It is generally possible to mine waste up to 100 m by either free digging with excavator or ripping with dozers. However, in some large operations it is more efficient to drill and blast waste overburden or inter-burden before handling by excavator as blasting significantly improves excavator productivity. At the time of writing of report, drill and blast was not required in the KIM East block. However, some drilling and blasting was carried out in the ignimbrite (a type of rock derived from volcanic ash fall) layers of KIM West block. In the later year of operation, some drilling and blasting at KIM West is likely to be required. Drilling will likely to be undertaken using standard down hole drill rig with hole diameters up to 165 mm. Drill hole depth is limited to 11m (including 1 m of subgrade drilling) for a bench size of 10 m. Explosives will be stored in magazines on the site and mixed and loaded into blast holes by mobile mixing units. In line with the standard practice in Indonesia, drilling and blasting will be part of the mining contractor s responsibilities Waste Excavation Waste material is mined using hydraulic excavators and loaded into standard rear tipping offhighway trucks for haulage to waste dumps which are either in close proximity to the pits or in pit where possible. Diesel powered hydraulic excavators in backhoe configuration are currently being used at KIM East Block and it is assumed for the purpose of this study that this type of equipment will continue to be used over the life of mine. The new bench will be opened of 5 meter height which will be subsequently converted into a 10 m bench. Waste will be dumped in lifts with a typical height of 5 m; with dozers pushing waste and ensuring the dump area is clean and that safety berms are maintained. A swell factor of 1.2 was assumed for all waste dumping and handling calculations. The waste to be mined over life of mine has been shown in Figure 4:4 below. Figure 4:4 Waste Excavations over Life of Mine M bcm KIM East KIM West Page

35 4.3.4 Coal Mining Coal at KIM East Block is mined using 40 to 60 tonne excavators backhoe excavator which typically sits on top of the coal and load trucks directly. Coal is then hauled and dumped to the ROM stockpile using smaller rigid axle coal haulage trucks of up to 30 tonne capacity (Figure 4:5 & Figure 4:6). Figure 4:5 Coal Mining at KIM East Block Source: Figure 4:6 Waste Mining at KIM East Pit Source: Page

36 4.3.5 Dewatering For any efficient mining operations, dewatering of pit and pit water management is of critical importance. During the site visit at KIM concession, the subject specialist inspected pit sumps and found that the water management systems were of high standard. The pit drainage system, which is designed to prevent external water from entering into pit was also inspected and found effective and fit of purpose. Page

37 5 Coal Handling and Coal Logistics has carried out a high level review of logistic options to access the KIM Project economics. A number of options were validated and techno-economic assessment of each option was carried out. Based on the assessment of available information, data gathered during the site visit and while visiting GEM office in Jakarta, the following logistics chain for the coal blocks comprising the KIM project is considered appropriate. 5.1 Coal Logistics The coal from the KIM project is currently being sold to domestic customers. The mine to end user supply chain involves hauling of coal to the ROM stockpile, followed by transportation using public roads to the domestic customers. Until recently, the coal from the KIM project had been sold to export customers as well; however at the time of writing this report, is of the opinion that it is more appropriate to sell coal domestically as the margins are significantly better as compared to exporting the product. Therefore, for the purpose of this valuation report, coal from the KIM Project is assumed to be sold to domestic customers only for the life of the mine. However, an option to export coal to overseas customers still exists if margins improve in the future. At the KIM Mine, the mined coal is hauled to the ROM stockpile, located at an approximate distance of 2 km from the KIM pits, using rigid body coal haulage trucks (Figure 5:1). Although facility for crushing and screening exist at the ROM stockpile area, crushing is not required for sales to most domestic customers which reduce operating cost. Figure 5:1 Coal Stockpile Source: Coal is loaded from the ROM stockpile into rigid-body coal haul trucks and hauled along public roads to customers. It is anticipated that most of the coal will be sold to the Lontar Papyrus pulp Page

38 and paper plant in the near term. However, in medium term, some of the coal produced from the KIM Project may go into to nearby power plants which are currently under construction including one at Jambi and one at Teluk Sirih. The coal flow logistics is outlined in Figure 5:2. Figure 5:2 Coal Logistics Current & Additional Options Port Nilau (Owned by GEMS) KIM East ~2km PLTU Ombilin ROM Stockpile ~262 km Lontar Papyrus, Pulp and Paper KIM West ~5 km Other Power Plants in Jambi Port Teluk Bayur (Padang) 5.2 Haulage on Public Roads The Jambi provincial government in conjunction with regency governments from Jambi s major coal producing regions has agreed on a suspension of coal trucks using public roads, starting from 31 December 2012 (Jambi Province Regulation No 13 Year 2012). The provincial government is planning to construct an alternative route for coal trucks, in order to avoid resistance from coal producers in the area. The validity of this regulation has been questioned by the Association of the Coal Mines, Asosiasi Pengusaha Batubara Indonesia (APBI), Jambi Region and is under juridical review by the Supreme Court of Indonesia. Jambi Province Regulation No 13 Year 2012 does however stipulate some conditions on which the hauling of coal through public roads may be permitted. This was further clarified in Governor Jambi Regulation No 18 Year 2013 (Implementation Rules to the Jambi Province Regulation No 13 Year 2012), where under Article 3, paragraph 1 and 2, laid out conditions on which the Governor may allow limited utilisation of special public roads for coal hauling purposes, regulation. The Article 6, paragraph 1 and 2 of the Jambi Province Regulation number 13, year 2012, stipulates that in the event Special Road (dedicated haul road) is yet to develop or still unavailable to be utilised then hauling may be allowed through specific public road. Presently, GEMS have developed plans to build a new haul road which will connect the KIM Mine to an existing special road. This new haul road will connect the KIM Mine to Port Nilau (owned by GEMS) via the Lontar Papyras Pulp and Paper Plant. This 65 km dedicated connecting road is Page

39 expected to be completed in 36 months. This will enable coal to be hauled on a special road to LPPP, a power plant at Ombilin and potential exports via the Nilau Port. Although the interpretation of this regulation is a little ambiguous in nature, is in opinion that the government is likely to allow hauling by public road where a coal company is developing its own dedicated haul road. While hauling coal on public roads may be allowed at the current time, in s opinion this is an issue that is likely to impact future operations. As per the plans provided to, the dedicated haul road is expected to be completed by mid has considered the use of the dedicated special road from 2017 onwards for base or preferred case valuation. HDR Salva has opted to assume that no haulage on public roads will be allowed immediately, while developing low case valuation. The current and proposed logistics map for the KIM project is shown in Figure 5:3 below. Figure 5:3 Current and Proposed Coal Logistics Page

40 6 Environment and Community Relations A preliminary assessment of potential issues pertaining to environment and community relations that may impact the Project valuation was carried out by. These included following activities: Review of environment management procedure at site; Visit to GEMS Jakarta office and inspection of environmental management plans; Review of the Analisis Mengenai Dampak Lingkungan Hidup (AMDAL) - environment impact assessment and management plans; and Review of Corporate Social Responsibility Reports. s preliminary assessment did not reveal any issues related to environment and community relations that will adversely impact project valuation. However, it should be noted that s assessment was only preliminary in nature and cannot provide any guarantee or warranty that significant environmental or community issues will not affect the operation. Key environmental and community relations issues are discussed below. 6.1 Environmental Aspects Key issues which can have potential impact on project valuations are: Water Run-off, noise and dust and rehabilitation Water Run-off from site If sediment loads are high or if water is acidic, water run-off from dumps, stockpiles, roads and water pumped from pits has the potential to pollute local rivers, creeks and vegetation. This is managed through the use of bunds, drains and sediment ponds of sufficient size to allow small particles to settle out of the water. Regular monitoring of water discharge points is required under government regulations Noise and Dust Noise and Dust originating from mine operations haulage and coal handling have the potential to impact the local environment, particularly if villages and local communities are located within close proximity to mining and coal handling operations. Dust is generally managed by using water trucks on haul roads, and by spraying water or dust suppressant chemicals to minimise dust being airborne and suppressing it Rehabilitation A large area of land will be cleared as part of the KIM mining operation, although much of this area is not covered by any forest land. The disturbed area is generally rehabilitated by removing the topsoil prior to mining, storing the topsoil onsite during mining and covering the final landform with topsoil at the completion of mining. The area to be rehabilitated is then panted with suitable vegetation. Management at the KIM Project have established procedures and a nursery in place to prepare for revegetation to take place. To prevent the dust hazard, the company is currently using dust Page

41 suppressant and water sprinkling system. notes that the current approved AMDAL for the KIM concessions allows the company to mine in excess of the proposed throughput. Mine closure plans for the updated mine plan have yet to be completed; however does not foresee any significant issues with this aspect of the operation. A reasonable allowance has been made in for environmental management, rehabilitation and mine closure. 6.1 Social Aspects Maintaining a good relationship with local communities is a key requirement for the success of the KIM operation. Efforts must be continued in the ongoing community development programs in coordination with the local government. reviewed KIM s Corporate Social Responsibility programs which include the following aspects: Economy and health Economy Economic development of the local community is set to include activities to assist with the economic development of the community by providing employment and business opportunities once mining operations have finished. Current programs include training in sewing skills and establishing aquaculture infrastructure Health It includes programs to improve health in the local communities and to increase people s knowledge through education in health issues. Page

42 7 Valuation 7.1 Valuation Approaches There are a number of methods used in valuing mineral assets. The applicability of these methods depends on project specific factors including the level of maturity of the mineral assets. In determining the appropriate method(s) to be used for valuation of these assets, has taken into consideration the classification of these assets as defined in the VALMIN Code and the different methodologies that are generally accepted as industry practice for each classification. Generally there are three broad methods of valuation that are used for valuing mineral assets. These are the cost approach, income approach and market approach. The asset classifications that may be applied to a project are set out in Table 7:1 below. Table 7:1 Typical Valuation Methods Classification General Description Key Valuation Methods Exploration Areas Advanced Exploration Areas Pre- development Projects Operating Mines Properties where mineralisation may or may not have been identified, but a Resource has not been identified. Properties where considerable exploration has been undertaken and specific targets identified. Resource estimation may or may not have been made. Good understanding of mineralisation present. Properties where mineral Reserve has been identified but decision to proceed with development have not been made. Properties where mining activities are already commenced. Rule of Thumb, Geo-scientific method, Comparable Transactions. Geo-scientific method, Appraised Value Method, Comparable Transactions. The above methods and DCF/NPV valuation. DCF/NPV valuation. 7.2 Valuation Approach for Assessing the KIM Project The KIM Project is an operating mine where production has already commenced in both coal blocks. Coal Resource and Reserve has been determined in all 2 blocks. Since mining activity has commenced, therefore in s opinion, it is appropriate to as DCF method to determine Net Present Value (NPV) of the whole project. Therefore for the purpose of valuation, has opted to value the Coal Reserves present within the KIM concession on DCF based method. The cash flow model constructed by HDR Salva was based on the production schedules, costs and prices developed for this project. No separate value is ascribed to the exploration potential of the areas outside the blocks contained in the mine study with Coal Reserves. has opted to value the project on the basis of Coal Reserves only using the DCF method. Page

43 8 Economic Parameters 8.1 Royalty and Local Government Fees The royalty is generally levied as percentages of sale proceeds to be applied for the different types of coal depending on its Gross Calorific Value GCV and method of mining. However, different royalty rates have been adopted for different type of ownership structure including: Contract of Work holders (CoWs), Coal Contract of Work holders (CCoW), Izin Usaha Pertambangan holders (IUP), and Izin Usaha Pertambangan Khusus holders (IUPK). At present, a range of percentage of sales proceeds is applicable for different type of coal mining arrangements as detailed in Table 8:1. Table 8:1 Indonesian Coal Royalty Rates Concession Type Royalty Current Rates (2014) CCoW and CoW 13.5% Royalty on HBA price for the coal type The royalty rate depends on air dried calorific value of the coal produced: IUP and IUPK 3% - 7% (Open Pit) 3% of HBA price for coal <5,100 kcal/kg 2% - 6% 5% of HBA price for coal for <5,100 kcal/kg - (Underground) 6,100 kcal/kg 7% of HBA price for coal for >6,100 kcal/kg The KIM project is held under a number of IUP concessions, amenable to be exploited by open pit mining method. The royalty rate is expected to be 5% as the air dried energy of the coal product is greater than 5,100 kcal/kg and less than 6,100 kcal/kg. The revenue excluding barging and transshipping associated cost is applicable to coal sales from the KIM concession. This Government Regulation requires that all coal sales be made at a minimum (or benchmark) price that is defined by the Indonesian government on a monthly basis. The methodology for calculation of the minimum price is described in Regulation No. 515.K/32/DJB/2011 and Regulation No. 644.K/30/DJB/2013 issued by the Directorate General of Minerals and Coal (DGMC). assumed that future benchmark prices for Royalty calculations will be equal to or lower than the forecast prices used in this study and thus the forecast coal price has been used for the calculating royalty payments. 8.2 Inflation Outlook has developed a nominal cash flow model for calculation of NPV and assessment of mineral asset value. has assumed cost in US $ in real terms and converted it into US $ nominal terms based on the long term US inflation factor of 2.4%. considers this to be an appropriate technique while valuing projects in high inflation, declining foreign exchange rate countries including Indonesia. This is a common approach used in most mineral asset valuation. Page

44 8.3 Corporate Income Tax Corporate income tax is applicable to all Indonesian registered corporations. In 2009, the tax payable was reduced from 30% to 28% of gross income less allowable deductions. From 2010 onwards, the corporate income tax rate was reduced further to 25% of net taxable profit. The tax rates for different concession types have been shown in Table 8:2. The KIM project is held under a number of IUP concessions. Therefore, in line with the prevailing corporate income tax regulation an income tax rate of 25% is applied to the revenues from the concession. Table 8:2 Corporate Tax Rates Concession Type Corporate Tax Reversion Rate CCoW (First Generations) 35% 45% CCoW (Second Generations) 25% N/A CCoW (others) 30-45% N/A IUP 25% N/A 8.4 Depreciation and Amortisation The different rate of depreciation is applicable for different type of assets for IUP concessions like the KIM concession (Minister of Finance Decree 138/KMK.03/2002 and Amendment 520/KMK.04/2002). Fixed assets are categorised into four different types, depending on nature of assets and its expected useful life. Assets are generally depreciated over 4, 8, 16 or 20 years and the company may opt to either apply a diminishing balance or straight line approach for each category of asset. has applied different depreciation rate depending on type of asset and their useful life. has opted to applied straight line method to estimate depreciation. 8.5 Working Capital Working capital has been included in the financial model has been estimated using the following assumptions: Accounts Receivable Days 35; Inventory Days 15; and Accounts Payable Days 45. has assessed these assumptions and found them to be inline with the current operating practices. 8.6 Carried Forward Tax Losses As per existing law, the tax losses can be carried forward up to 5 years. Tax losses cannot be carried back. For the purpose of this mineral asset valuation, hasn t considered any prior carried forward losses as at 31 July Value Added Tax The prevailing VAT law stipulates that supplies of coal and other natural resources taken directly from the source are not subjected to VAT. This means that there will not be any output VAT Page

45 applicable to coal produced from the KIM Concession. As per prevailing VAT law, variable component of contractor cost attracts a 10% VAT. notes that there are uncertainties in current regulations and in the conditions of IUP/CCoWs regarding application of VAT to contractor cost. Erring on the side of conservatism, has opted to be conservative and applied VAT to all variable contractor cost and therefore a VAT rate of 10% is applied on all contractor cost. 8.8 Weightage Average Cost of Capital (WACC) Weightage Average Cost of Capital (WACC) is generally used as a discount rate for the valuation of advanced mining projects with Reserves. has derived the WACC (after tax basis) on the basis of Capital Asset Pricing Model (CAPM). Following is the assumptions used in calculation of WACC (Table 8:3). Table 8:3 WACC (After Tax) S.No. Items Value Source 1 Risk Free Rate of 10 year Indonesia government bond yield 8.05% Return (Source: AsianBondsonline.adb.org) 2 Equity Risk Premium 7.35% Indonesia Country Premium (Source: Bloomberg) 3 Relevant Beta 1.01 Unlevered beta of comparable companies, re-levered to average capital structure of comparable companies 4 Company & Project Risk 0.75% Additional company & project risk 5 Cost of Equity 16.22% Equal to (1) + (2) x (3) + (4) 6 Debt to Enterprise Ratio 40% 7 Cost of debt (after Tax) 4.39% 8 WACC (after Tax) 11.49% Anticipated proportion of debt for the purpose of WACC calculation Indonesian interbank rate (JIBOR) adjusted for corporate tax (source: Bank Indonesia, Furthermore, has cross-checked the calculated WACC for the project with WACC of the various comparable listed mining companies of Indonesia. Table 8:4 summarises WACC of the various mining companies in Indonesia. Table 8:4 WACC for Indonesian Coal Mining Companies Company Value Adaro Energy 9.1% Bayan Resources 8.3% Barau Coal 10.0% Average 9.1% Source: Bloomberg concludes that the calculated WACC for the project appears to be reasonable when compared with other listed mining companies in Indonesia. Page

46 9 Market Analysis and Coal Prices 9.1 Global Outlook The center of gravity for imported thermal coal has shifted to Asia in the past 10 years with China and India growing more rapidly than other traditionally large importers. This has been driven by a number of factors including the rapid industrialisation of China and India, strong economic growth in the general Asian region, a lack of sufficient domestic coal supply in these countries, a strong supply response from seaborne suppliers such as Indonesia and Australia and, until mid 2012, and a buoyant pricing environment. As a response to this, trade in the thermal coal market has increased significantly in the last five years, growing from 567 Mt in 2008 to 778 Mt in 2013 at a compound average growth rate (CAGR) of 6.53%. This growth has been driven by strong demand in Asia, predominantly China and India who have increased their combined market share of seaborne thermal coal imports from 9% (49 Mt) in 2008 to 45% (348 Mt) in 2013, accounting for over 90% of demand growth over the period. This rapid uptake in imported coal is a result of the ongoing electrification and urbanisation of these two countries which has been primarily met by coal-fired power plants. Going forward, electrification and industrialisation will continue in Asia which is unaffected by concerns about carbon emissions and instead, is based more on lowest cost supply for power generation in which thermal coal remains the cheapest fuel source by far throughout the time horizon. Coal suppliers in the Pacific basins will benefit immediately from this high demand and ramp up production in response. Over time, current marginal supply will be required to meet growing demand. New supply basins like Indonesia s Central Kalimantan, Jambi and South Sumatra, Australia s Surat and Galilee basins, Mozambique, Mongolia and Russia s Far East will become marketable complementing expansions in the existing low-cost basins of Indonesia. 9.1 Domestic Coal Demand Domestic demand for thermal coal in Indonesia has grown rapidly since 2008, at a CAGR of 18%, primarily driven by strong demand from the power sector was a strong year for domestic coal consumption in Indonesia, with 86 Mt consumed as a result of continued strong demand from the growing power sector (Figure 9:1) Figure 9:1 Indonesian Domestic Coal Demand (Mt) Mt Power Cement Pulp & Paper and Others Source: Page

47 The domestic demand for thermal coal is largely driven by government energy policy which laid out plans to boost domestic power generation by coal fired power stations in country. Subsequently, Indonesian government owned power producer PT Perusahaan Listrik Negara ( PLN ) laid out its road map to build 20 GW of power generation capacity by 2016 in two phases, each of 10 GW with the majority of them being coal based. At the time of writing of this report an estimated 6,800 MW of capacity covered under the Fast Track-1 project has been completed and another 940 MW station will become operational by the end of Although PLN is optimistic about the completion of Fast Track-1 programme by 2014, in our opinion PLN s fast track program will be delayed by around one year considering the fact that around 20% of the capacity is still in the construction and PLN s projects are known to regularly miss their completion target dates. Along with PLN, several Independent Power Producers (IPPs), such as Java Power at Paiton, are currently constructing coal fired power plants. These power producers have signed offtake agreements with PLN to supply electricity at a contracted price. The projects are mainly developed by consortiums of Chinese, Japanese and South Korean companies with a local operator. As a result of this, domestic demand for thermal coal in Indonesia has risen at a quickening pace due in large part to the growing number of coal-fired thermal power plants now coming on-line. In addition to the power sector, industries like Cement (PT Semen Gresik (PTSG), PT Indocement Tunggal Prakasa and PT Holcim Indonesia tbk), Pulp and Paper (Asia Pulp and Paper and Asia Pacific Resources International Holdings Limited), Metallurgy (steel-making, foundry cast iron) are the major consumers of domestic coal and their consumption is expected to increase in the future as well. 9.2 Indonesian Coal Supply Indonesia began exporting thermal coal in 1990, and impressive growth saw it become the world s largest thermal coal exporter by The coal industry s strong performance is one of the key factors driving economic growth in Indonesia. Three major factors have contributed to the strong growth of the Indonesian coal sector: Growing domestic and international demand for lower calorific value (CV) coals; Proximity to high growth markets of India and China; and Low capital and operating cost structure by international standards. Recent years have seen Indonesian production grow to record highs, assisted by the 2009 Mining Law, with more transparent licencing regulations propelling new mine development. Since 2008, Indonesian production has risen at an annual average growth rate of 16% from 237 Mt to 486 Mt in As shown in Figure 9:2 domestic consumption and exports have increased significantly, with 200 Mtpa of additional exports over this period. Page

48 600 Figure 9:2 Indonesia Coal Supply Exports Domestic While Indonesia is a major force in the seaborne coal trade, 2013 indicated a weakening of the Indonesian coal production growth. 486 Mt was produced in 2013, with y-o-y growth of 7.3% (33.1 Mt), the lowest increment of growth in the last 5 years (Figure 9:3) but still better than any other major coal producing country in the world. 30% Figure 9:3 Indonesian Coal Consumption Growth Rate by Sector. 25% 20% 15% 10% 5% 0% Export Growth Domestic Growth Production Growth Page

49 Indonesian supply grew just 5.0% in 2013, compared to 8.9% in 2012 and 18.2% in Despite continued strong demand from India and China, slowing exports is primarily a result of lower export coal prices in an oversupplied market, putting pressure on margins. Domestic demand continues its high growth mainly led by growth in the power sector. In HDR Salva s opinion, the domestic demand in Indonesia is likely to remain strong with a majority of the Industry s experts and brokers being in the opinion that thermal coal prices are likely to improve from the current levels as demand for thermal coal are expected to remain strong from developing countries such as India and China. 9.3 Coal Price Used for Project Assessment The KIM Project produces coal which is sold in the domestic market. The sales price assumptions used in this study are based on domestic coal prices received for coal sold from the KIM project in the current market. has reviewed the actual purchase orders and sales contracts for coal sales for the past two years. These sales documents covered a sales volume of approximately 1.5 Mt. The sales contracts and purchase orders specified a coal at a range of prices from 600,000 IDR to 650,000 IDR per tonne at a base CV of 4,900 kcal/kg on a gross as received basis. These sales contracts are linked with the fuel index in Indonesia (which is a proxy for petrol and diesel prices in Indonesia). After weighting by contract volumes, adjusting for actual CV produced and adjustment for the prevailing exchange rates, the historical contract rates and volume, the following base rates for sales prices of the KIM coal was determined as per Table 9:1. Table 9:1 Contracted Price - KIM Coal Year Price (IDR) , , ,000 does not see any reason why there will be any difficulties marketing the coal from the KIM project as a domestic thermal coal. At present, the primary markets for this coal are paper and pulp mills located in Sumatra. The users of the KIM coal in the recent past have been: PT Lontar Papyrus Pulp and Paper Industry mill located in Jambi (LPPPI); and PT Indah Kiat Pulp and Paper mill located in Perawang, Riau (IKPP). However, moving forward, some of the coal produced from the KIM Project may also go into nearby power plants which are currently operating or under construction. These include: PLTU, Ombilin (100 MW); PLTU, Jambi (2 x 400 MW); PLTU, Teluk Sirih & Pesisir, West Sumatra (224 MW); PLTU, Baturaja (20 MW) and PLTU, Muko-Muko (8 MW). Page

50 also reviewed the economics for export sales from the concession. It was found that with the assumed mining costs for the operation, the margins for export sales were lower than domestic sales for current and forecast coal prices. Coal exporting was considered to be less attractive at current coal prices, although this situation may change in the future as export prices increases. Moving forward, the exports of coal from the KIM project is expected to commence only if margins for export sales are more than margins for domestic coal. In such circumstances, the price of export coal will be more than domestic coal. The KIM project is predominately a domestic coal supply project where the price is linked with the Indonesian fuel Index (proxy for diesel prices). Price forecast is based on the actual contracts which are being realized by the company at present. Although the Indonesian domestic coal price has increased recently, when expressed in Indonesian Rupiah (IDR) but in reality it has fallen in USD term mainly because of higher depreciation of the IDR compared to the US Dollar (USD). We have actually taken coal price towards the lower end of the recent USD prices. Below is the recent coal price when converted into USD. Table 9:2 Contracted Price in US$ Year Average Exchange Rate (IDR: US$) Contracted Price (IDR) Coal Price (US $) 2014E 11, , , , , , Average exchange rate is calculated using United Nations Treasury Operational Rates of Exchange To determine the long term price forecast for the KIM Mine, has used the most recent contract price which is considered to be the most appropriate estimate of coal price. Therefore, in s opinion, for the purpose of valuation it is appropriate to use current actual contracts as the basis of coal pricing. While the current contracts are linked with the Fuel Index in Indonesia, has adopted a conservative approach for assessing a domestic coal price outlook for this project. The domestic coal price forecast has been assumed to stay flat in real terms (US $56.5/t) or increase at an annual rate of 2.4% over the life of mine in nominal terms. The projected price for the KIM coal has been shown in Figure 9:4 below. Page

51 Figure 9:4 Domestic Sales Prices (in nominal terms) US $/t Page

52 10 Capital Cost The KIM project is an operating mine with most of the mine infrastructure already established and in-place. has assumed mining operations to be continued using contractor s mining equipment. The capital cost and charges for these equipment have been factored in the contractor charges as operating cost. This is an industry standard practice in Indonesia and Australia. The major capital required for the continuation of the project is linked with the land acquisition for the development of the mine over its life and the cost associated with the construction of dedicated road to link the Kim Project with the existing Jalan WKS special road. The total capital cost estimate for KIM Project including road logistics is estimated to be US $58.4M which includes a contingency of US $7.6M. A contingency of 15% has been included in the capital cost estimate. These estimated are considered to have an accuracy of ± 15%. In addition to the expansion capital of US $58.4M, has factored 3% of the invested capital apart from land purchase cost as sustaining capital per annum for asset maintenance over the life of mine. While preparing these estimates, has relied on industry benchmarks, internal database, internal studies and expertise on the KIM concessions. The capital costs for road construction is considered to be relatively well understood, although a conservative approach to estimating these costs has been taken. In line with the standard industry practice, mine closure costs have been taken as annual expense under operating cost estimates rather than as capital cost. The Capital Cost estimates and the basis of its estimation are shown in Table 10:1. The cost estimate was prepared in Q in US dollars ($). Sr. No. Particulars Table 10:1 Capital Cost (Real Terms) Direct Cost ($M) Contingency ($M) Total Cost ($M) 1.1 Land Compensation Land Compensation Site Infrastructure Mine Infrastructure Haul Road Construction Hauling to Customers Total Project Capital Page

53 10.1 Basis of Estimation Basis of estimation for the major cost elements have been given below Project Currency and Foreign Exchange The project capital costs are expressed in United States dollars ($) with the following provisions: Costs are based on current market conditions as in Q3, 2014; Costs submitted in other currencies have been converted to US $. Foreign currency exchange rates applied to the capital cost estimate relative to the US $ are set out as US $1.00 = IDR 11,500; and No provision has been made for variations in the currency exchange rates Duties and Taxes Duties and taxes including VAT for the capital items are included in the estimate unless otherwise noted Land Acquisition has been advised that most of the land over the mining area over the KIM concession is already owned by the company. Some additional land will be required to be acquired for the life of mine production. Land acquisition cost have been estimated on the basis of US $30,000 per ha for the total requirement for the project (calculated from the mine plan). The estimates of US $30,000 per ha can be considered as a conservative estimate for this area and allows a cover for rubber and palm oil plantations. A total of approximately 600 ha of land requirement have been estimated over the life of mine Reserves covering land required for pit and dumps Haul Road Construction Total Cost associated with the construction of the dedicated special road for connecting the KIM Project with the existing Jalan WKS special road is estimated at US $31.9M, including a contingency of US $4.2M. Design and construction time is estimated at 3 years. The road construction cost was estimated at US $350,000 per km with an additional allowance of US $5M for bridges. An additional contingency of 15% has been factored in the estimate of capital expenditure. This is considered appropriate for a road suitable for trucks of up to 30 tonne capacity Site Infrastructure has factored in US $5M (+15% contingency) for upgrade to ROM stockpile and associated mine infrastructure to handle higher tonnage in the future. Page

54 10.5 Mine Reclamation In line with the standard industry practice, mine closure costs have been taken under operating cost estimates Exclusions The following items are excluded from the capital cost estimate: Refundable taxes and duties; Currency fluctuations; Lost time due to severe weather conditions; Lost time due to force majeure; Additional costs for accelerated or decelerated deliveries of equipment, materials and services resultant from a change in project schedule; Any project sunk costs including this study; Community relations; and Owner s risk and exposure Capital Phasing Based on the requirement of the project, capital expenditure for the major items has been distributed over the ramp-up period. The capital expenditure over the life of mine is shown in Table 10:2 below. Table 10:2 Capital Cost Phasing (US $M, Real Terms) Capital Item Total Land Compensation Site Infrastructure Haul Road Construction Total Page

55 11 Operating Cost 11.1 Method of Estimation Overall operating costs are a combination of mining costs, crushing & handling costs, product transportation and general and administrative (G&A) costs. These costs are based upon information obtained from the following sources: Existing contracts; Pre-feasibility studies; Budgetary quotations; projects database; and Experience of staff with other similar operations in the region. Where specific data does not exist, cost allowances have been based upon consumption and operating requirements from other similar properties for which reliable data exists. The operating costs have been estimated and presented with an added contingency allowance of 5%. All costs are presented in real terms (Q3, 2014 dollars). Costs are exclusive of taxes unless otherwise noted. For the purpose of estimation, Fuel price delivered to the site and exchanged rate assumed for the purpose of estimation is as followed: Fuel Price US $1.20 / litre; and Exchange Rate IDR 11,500 / US $. In s opinion, all operating cost estimates are reasonable at this stage of project assessment given the size and stage of the project Items included in the Operating Cost Estimates Coal is mined at the KIM Project by conventional open pit mining method using truck and excavator combination. It is envisaged to continue the use of mining contractors to exploit coal and overburden. Following cost elements were considered by : Land Clearing and Top Soil Removal: Clearing of land and removal of top soil in the process of mining, generally taken on the basis of $/ha of the area. Mining Waste / Overburden: Cost per BCM of waste removed; Mining Coal: Cost per tonne of extracting coal; Labour cost: Cost per tonne towards salary and wages to the company staffs; Trucking (Haul to Stockpile): Cost per tonne km to haul to port stockpile using specialist coal haulage trucks; Trucking (Haul to End User): Cost per tonne km to haul to end user using coal haulage trucks; Additional variable operational costs have also been assumed by which includes: Environment and Mine Closure: Cost per tonne for all associated expenditure related to environmental approval and reclamation; Page

56 Royalties: Cost per tonne for royalty (5% of the sales price Local Government Tax; and Corporate Overheads. Costs have been categorised into four different cost types Contractor Cost; Owner Cost; VAT; and Local Government cost and Royalties Contractor Costs has assumed all contractor cost to be variable in nature. Variable contractor cost is the type of cost which typically varies with the changes in minable quantities and strip ratio. The variable contractor cost is generally based on unit contract rates where a rate is specified for a number of physical quantities which are physically measured on a periodic basis including area cleared, waste mined etc. These types of contracts are generally in practice across entire coal mining Industry. has assumed a contract mining operation in all the pits. s estimates are based on current contracts already in place at the mine, firm quotes, pre-feasibility studies and budget quotes. notes that, there is a significant downward revision in contract mining quotes and new rates are more competitive. has assumed unit rates that are considered to be sustainable for both contractors and mine owners in the long term. has compared these against the industry benchmarks and estimated these to be reasonable. Table 11:1 below shows the contractor unit rates. Table 11:1 Contractor Unit Rates (Real Terms) Cost Item Unit Rate Land Clearing $/ha 1,400 Topsoil Removal $/bcm 1.80 Waste Mining $/bcm 1.80 Waste Overhaul $/bcm/km 0.25 Coal Mining $/t 1.10 Haul to ROM Stockpile $/t km 0.10 Haul to Customer $/t km 0.10 Note: All quoted cost in local currency is adjusted for fuel price and exchange rate. Page

57 11.4 Owner Costs has assumed all owner cost to be variable in nature. Variable owner costs vary with the changes in physical quantities in the mine plan and are incurred by the company directly. s estimates are based on current costs at the mine and pre-feasibility studies. The cost was compared with actual costs from other operations and then adjusted for the conditions and processes on the site. has determined these to be comparable against the industry benchmarks and estimated these to be reasonable. Table 11:2 shows the owners unit rates. Table 11:2 Owner Unit Costs (Real Terms) Cost Item Unit Rate ROM Coal Handling $/t 0.30 Mine Closure $/ha 4,200 Environmental and Rehabilitation $/t 0.06 Salary and Wages $/t 0.25 Medical & Community Development $/t 0.05 Corporate Overheads $/t 0.50 Contingency $/t VAT VAT is attributable on the variable component of contractor cost only. However, has taken a conservative approach and assigned a 10% VAT on all contractor costs rather than variable component only Royalties and Government Costs The royalty is generally levied as percentages of sale proceeds to be applied for the different types of coal depending on its GCV and method of mining. However, different royalty rates have been adopted for different types of ownership structure which include: Contract of Work holders (CoWs) Coal Contract of Work holders (CCoW) Izin Usaha Pertambangan holders (IUP) and Izin Usaha Pertambangan Khusus holders (IUPK). Tenure for the KIM project is held under a number of IUPs which have a royalty rate that is dependent on the air dried energy of the coal as sold. In the case of this coal, the Royalty Rate is expected to be 5% of the total revenue for the average coal produced as the air dried energy is greater than 5,100 kcal/kg and less than 6,100 kcal/kg. In addition to this has allowed an amount of US $ 0.50 per tonne to cover local government fees and charges. assumed that future benchmark prices will be equal to or lower than the forecast prices used in this study and thus the forecast coal price has been used for the calculating royalty payments. Page

58 11.7 Overall Operating Cost Total operating costs per tonne of coal product including royalty for the KIM Project has been estimated as US $52.08 per tonne over the life of the mine. The cost components for the different heads have been given in Table 11:3 below. Table 11:3 Average Unit Operating Cost (Real Terms) over Life of Mine Cost Item $/t Land Clearing $0.02 Topsoil Removal $0.05 Waste Mining $12.25 Waste Overhaul $1.00 Coal Mining $1.10 Haul to ROM Stockpile $0.45 ROM Coal Handling $0.30 Haul to Customer $26.20 Mine Closure $0.07 Environmental and Rehabilitation $0.06 Salary and Wages $0.25 Medical & Community Development $0.05 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $4.11 Contingency $2.35 Operating Cost Excl. Royalty $49.25 Royalty $2.83 Operating Cost incl. Royalty $52.08 has compared these against the industry benchmarks and estimated these to be reasonable. Page

59 12 Financial Analysis & Project Valuation The KIM Project as an advance stage mining project and in s opinion, it is appropriate to use the discounted cash flow (DCF) method as the primary method to determine the technical value of the project. In the forming over opinion of valuation, has not applied any premium or discount to the technical value to determine the market value on the basis of strategic, market related or any other special factors Modelling Methodology & Considerations The valuation model for the KIM Project was developed in Microsoft Excel. Valuation has been derived from analysis of cash flows calculated for the project over the life of mine. The valuation was designed so that input parameters could be varied to investigate different scenarios to determine an estimated valuation range. has adopted the following considerations in its financial model: The model is developed in nominal terms. All cost and prices were considered in real terms and then converted to nominal terms; The model assumes continuous cash in and outflows, which are reflected in mid-point discounting during a period; Cash flows was developed on stand-alone project basis; Sunk cost (including acquisition costs) is excluded; and All future cash flows were discounted using WACC Base or Preferred Case A base case valuation was developed using the assumptions discussed in various section of this report. Key inputs are summarised in Table 12:1 while the summery of the financial model for the base case has been presented in Table 12:2 below. Table 12:1 Base Case Key Input Parameters Key Parameters Description Unit Value Peak Production capacity Maximum annual production capacity Mtpa 3 Life of Mine Considered Years of coal production years 15 Discount Rate Discount rate (nominal terms) % 11.5% Corporate Tax Rate Indonesian corporate tax rates % 25.0% Project Coal Price Aver. price for LRC Coal (real terms) $/t $56.52 Capital - Project Total project capital expenditure (real terms) $M $58.36 Capital - Sustaining Total ongoing replacement capital (real terms) $M $6.33 Coal Mined Coal mined over life of mine Mt 35.7 Stripping Ratio Aver. ratio of waste: coal bcm:t 6.8x Waste Mined Waste mined over life of mine Mbcm Operating Cost Excl. Royalty Aver. operating cost (real terms) $/t $49.25 Royalty Aver. royalty (real terms) $/t $2.83 Operating Cost incl. Royalty Aver. operating cost including royalty (real terms) $/t $52.08 Page

60 Table 12:2 Base Case Financial Model Units LOM Coal Mined Mt Waste Mined Mbcm Stripping Ratio bcm:t Product Mt Revenue $M 2, Capital - Project $M Capital - Sustaining $M Total Capital $M Operating Cost $M 2, Royalty $M EBITDA $M Cash Margin $/t Depreciation $M Taxable Income $M Corporate Tax $M EARNING AFTER TAX $M Depreciation $M Working Capital Adj. $M Capital Expenditure $M Unlevered Cash Flow $M Discounted Cash Flow $M Cumulative DCF $M NPV $M 24.7 Page

61 Preferred Case Results The results of the base case valuation scenario are shown in Table 12:3 below. Financial Summary (Nominal Terms) Table 12:3 Base Case Financial Outputs & Valuation Revenue $2,444 Operating Cost $2,143 Royalties Payment $122 Corporate Tax Expenses $32.9 Total Capital (including Sustaining Capital) $69.4 Cumulative Free Cash Flows $76.6 Net Present Value (NPV) $24.7 Internal Rate of Return 29% Under preferred case, using a nominal discount rate after tax of 11.5%, the Project NPV is determined as US $24.7 M. The Internal Rate of Return (IRR) for the project has been determined as 29%. The Project cash streams are shown in Figure 12:1 while discounted and cumulated discounted cash flows is indicated in Figure 12:2. Figure 12:1 Cash Streams Base Case $ M US $M Revenue Capital Cost Operating Cost Taxes and Royalties Free Cash Flow Page

62 30.0 Figure 12:2 Discounted Cash Flow Profile Base Case 20.0 US $ Million Cumulative Discounted Cash Flows Discounted Cash Flows Sensitivity Analysis Sensitivity of the project was assessed for key parameters like sales price, discount rate, operating cost and capital cost. Figure 12:3 exhibits the project sensitivity under base case. 200 Figure 12:3 Key Project Sensitivities US $ M $24.7M 80% 90% 100% 110% 120% Change in Input Parameter Coal Sales Price Discount Rate Capital Cost Operating Cost Table 12:4 outlines the impact of project NPV for change in the input parameters. Page

63 Table 12:4 Project NPV Sensitivity Key Input Variables Change in Input Parameter (%) 80% 90% 100% 110% 120% Coal Sales Price Discount Rate Operating Cost Project Capital Cost As seen in the Table above, the KIM project is most sensitive to coal sales price, followed by any change in operating cost and then capital cost and discount rate Valuation Range In order to determine the range of valuation estimates (low and high scenarios), a range of key inputs to the financial model were selected to reflect upper and lower values that are considered reasonable by for key input assumptions. Following assumptions were applied for development of low and high scenario: Low Case: While the KIM Mine complies with the logistics regulations. Mine can be shut if permission to haul coal on public road is not allowed along with management decision not to constructs special dedicated road. High Case: Price increases by 5% while operating cost decreases by 3%. The results of the analysis for the low and high cases are shown in Table 12.5 below. Table 12:5 Valuation Range Valuation Range (US $M) Key Outcomes Unit Low High Net Present Value (after Tax) $M Valuation Summary has estimated the valuation of the KIM concession using the assumptions and inputs detailed in this report. s opinion of the project value as at 31 July 2014 is shown in Table 12:6 below, which takes into account the high and low cases and the sensitivity of the project. Table 12:6 Valuation Summary Valuation Range (US $M) Key Outcomes Unit Low Preferred High Net Present Value (after Tax) $M Previous Valuation is not aware of any valuations being publically released for the KIM concession in the past. Page

64 13 Risk Factors & Opportunities has identified a range of risk elements or risk factor which may affect the future operations and financial performance of the KIM Project. Some of the risk factors are completely external, which is beyond the control of management. However the project specific risk can be mitigated by taking proper measure in advance. Key Project risks that have been identified are discussed below Risk Factors Resources And Reserves Although the majority of coal included in the Life of Mine Plan contains Proved and Probable Reserves which was modelled from Measured and Indicated Resources respectively, a total of 32.5% of the coal in the pit shell is classified as Inferred Resources due to the lack of core samples and quality analysis. Therefore, to mitigate the risk associated with the inclusion of the Inferred Resources and to be on conservative side, has scheduled total minable tonnes to be equal to the quantity of Proved and Probable Reserves only. In s schedule, the cumulative tonnes to be mined over the life of mine do not exceed the total Coal Reserves. However, it is still considered possible that further exploration and technical studies may result in a reduction or an increase of Reserves which would have some impact on the value of the concession Geotechnical Risk Although the design of pit slop angles have been based on Geotechnical studies that undertaken for the blocks in the KIM concession, but these studies are considered to be preliminary in nature. These studies were used to assess the general relationship between pit depth and overall slope angles for pit high walls. Although has taken an appropriate factor of safety by maintaining large offset in the pit design, but further detailed geotechnical analysis is recommended for the final pit designs to ensure that there is an adequate factor of safety for the actual pit designs Coal Price Risk Coal prices and the demand for coal are cyclical in nature and subject to significant fluctuations, and any significant decline in the prices of coal or demand for coal could materially and adversely affect the Company s business and financial condition results of operations and prospects. Coal markets are highly competitive and are affected by factors beyond the Company s control which include but not limited to: Economic conditions in Indonesia and globally; Government actions; and Fluctuations in industries with high coal demand such as Power Sector and other industries using thermal coal. Page

65 Although sufficient analysis and studies have conducted to ascertain future long term forecast, however, if there is a fall in long term prices, there would be a substantial reduction in the value of the project Impact on Weather on Production Jambi has tropical climate with a high rainfall. During rain season, weather is expected to impact on the mining production due to the project being an open pit mining operation. The Company has mitigated this by allowing sufficient weather related non production days in mine schedule and by having sufficiently large coal stockpiles Mining Approvals, Tenure and Permits A number of government permits and approvals are required to facilitate expansions of the KIM Mines and the associated infrastructure facilities. Any delays in obtaining the required approvals may affect the production expansion and the mine plan. This may likely to cause the project to overrun which may significantly affect project capital and operating costs. The risk associated with the tenure of concession is considered to be significantly lower than many other nearby mines, as the tenure is held under a 2nd generation PKP2B that is valid for close to the entire planned mine life. The company must be studious in complying with all conditions of the contract to ensure that they maintain tenure and a good relationship with regulatory organisations Land Acquisition Most mining operations in Indonesia are facing issues in acquiring land for their projects. Acquiring land and compensating land owners is considered to be a significant issue, especially in areas which are densely populated. In order to achieve the value estimated in this study, KIM will need to identify key land owners in advance so that an appropriate settlement can be reached and no interruptions to the development of the project will occur. Land compensation will be required for mining areas, dumping areas and infrastructure construction. is not aware of any specific land compensation issues with the KIM concession at the current time that may affect this valuation. However, it is considered possible that delays to land compensation and associated interruptions to the project may occur in the future and that this may have a material impact on the value of the concession Environmental and Social Risks While environmental and social risks have been identified and management plans are in place, it is possible that failure to comply with the environment criteria or failure to maintain good relationships with the local community will have an impact on project value. These risks are not considered to be greater for the KIM Project than for other operating coal mines operating in Indonesia. Page

66 Operational and Mine Safety The Company reportedly operates in accordance with applicable laws and currently acceptable industrial practices. In addition, it conducts its operations in a responsible manner with regard to occupational and mine safety. The project is subject to Indonesian laws and regulations regarding occupational and mine safety, which means that there are potential liability risks. Coal producers who fail to comply with safety regulations will be subject to penalties, including fines and suspension of the mining permit for the mine. The proposed coal mining operations will be subject to several operational risks such as contractor performance, poor mining practice which may increase strip ratio, equipment failure, accidents etc. These unforeseen events have the potential to result in being unable to meet production targets and it can potentially increase cost of production Operating and Capital Costs Estimates Some of the operating cost items considered for economic assessment is not based on the quotes from the actual contractor and these may change. However, in s opinion the upward escalation of these rates are unlikely in current circumstances. Since 2012, many contracts have been renegotiated at much lower rates and new contracts are more competitive. While has assumed unit rates that are considered to be sustainable for both contractors and mine owners in the long term, any occurrence of operating costs higher than the forecast costs would have a significant impact on the value of the KIM Project. To mitigate the risk associated with future price escalation, has allowed a suitable contingency in preparing the estimates. Capital expenditure estimates are considered to be preliminary estimates based and is not based on detailed engineering design. These estimates depend on many factors and can be affected by a wide range of changing circumstances. These can vary from the worldwide demand for specific materials and components like steel, rubber, parts manufactured predominantly in certain parts of the world. While the estimates are considered to be conservative, has factored a contingency of 15% to its capital estimate. Any increase in actual capital costs will have a significant impact on project value Political and Regulatory Risk Since 2009, Indonesian mining has been governed by the Central Government s New Mining Law, enacted to provide greater opportunity for the industry to expand to meet growing Asian demand. The Mining Law aimed to reflect the Government of Indonesia s (GoI) desire to recognise the financial benefits of its own natural resources, by ensuring that the GoI had greater input into resource extraction. The major developments from the 2009 Mining Law have been the Domestic Market Obligation (DMO) and Export Benchmark Pricing (HBA). Some future regulations may include a coal export tax or ban on certain qualities, stricter coal road transportation rules and alignment of IUP and CCOW royalty rates. The actual implementation of these new aspects of the law is still unclear and many holders of these contracts are currently in negotiation with the Indonesian government regarding this issue. Issues Page

67 likes DMO, Coal upgrading requirements, Export taxes, Minimum Pricing Regulations and Foreign Ownership Restriction of the new law may affect the valuation of the KIM concession. In our view, the likelihood of these being implemented is minimal. The value-adding requirement for mineral exports in Indonesia, enacted on 1 January 2014, which has had broad implications for the metals sector, is not applicable to the coal sector and so has had no apparent effect on coal industry Coal Haulage on Public Road The Jambi provincial government in conjunction with regency governments from Jambi s major coal producing regions has agreed on a suspension of coal trucks using public roads, starting from 31 December 2012 (Jambi Province Regulation No 13 Year 2012). The provincial government is planning to construct an alternative route for coal trucks, in order to avoid resistance from coal producers in the area. The Article 6, paragraph 1 and 2 of the Jambi Province Regulation number 13, year 2012, stipulates that in the event Special Road (dedicated haul road) is yet to develop or still unavailable to be utilised then hauling may be allowed through specific public road. Although the interpretation of this regulation is little ambiguous in nature, the government is likely to continue allowing hauling by public road where a coal company is developing an own dedicated haul road. If haulage is not allowed while the dedicated road is being developed, then this will have significant impact on the project and the project may have to be put on care & maintenance (Valuation low case) Opportunities There are a number of options that the KIM Project may consider to reduce expenses and improve overall cost economics. These have not been incorporated into this study as there is insufficient engineering design and confidence in the suitability, operational and capital costs for such options. Further investigation and technical work on these options is currently underway and may allow for their inclusion in future valuations. Potential opportunities for improvement include: Additional uses of dozer push to dispose waste within the mined area itself. This could reduce excavation and haulage cost significantly; Deployment of large sized excavators and trucks with matching size to improve productivity; Dedicated trucks when dedicated haul road is commissioned; Investigation for the construction of mine mouth power plants; Detail Study to use Port Nilau to cater for export market; and Use of selective mining techniques. Page

68 References Bloomberg Bond Yield, June 2014, [viewed 15 July 2014], < Indonesia Interbank Call Rate, June 2014, [viewed 15 July 2014], < PT SMG Consultants, JORC Resource Statement, KIM Project, Prepared for United Fiber System Limited, 21October 2013 PT SMG Consultants, JORC Reserve Statement, KIM Project, Prepared for United Fiber System Limited, 21October 2013 VALMIN, Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (VALMIN Code) Available from: [Accessed: 15 May 2014]. JORC, Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves The JORC Code 2012 Edition [online], The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia. Available from: [Accessed: 15 May 2014]. Page

69 Appendix A CVs Person Qualification Prof. Membership Role Manish Garg (Director - Consulting) / Partner B. Eng. (Hons), MAppFin MAusIMM; MAICD Contribution Overall Supervision, Valuation (VALMIN 2005) Manish has more than 25 years experience in mining Industry. Manish have worked for mining majors including Vedanta, Pasminco, WMC Resources, Oceanagold, BHP Billiton - Illawarra Coal and Rio Tinto Coal. Manish has been in consulting roles for past 5 years predominately focusing Experience on due diligence, valuations and M&A area. A trusted advisor, Manish has qualifications and wide experience in delivering due diligences, feasibility studies and project valuations for banks, financial investors and mining companies on global projects, some of these deals are valued at over US$5 billion. Qualification Prof. Membership Craig Williams (Principal Consultant - Geology) B. Sc. (Hons), M.Sc. (Geology) MAusIMM Contribution Resource (JORC 2012) Experience Craig is a geologist with 19 years experience in the mining industry. He has worked at De Beers, Anglo Coal and Vale along with significant consulting experience. Craig s experience covers mineral exploration, underground coal mine production, technical management, and resource estimation, together with due diligence, mineral audits and review, coal quality and exploration. To date, Craig has worked on over 30 coal projects around the world, inclusive of both thermal and coking coal, in the Bowen, Hunter, Surat, Galilee and Collie Basins of Australia, as well as in Africa, Madagascar, Mongolia and Indonesia. Qualification Prof. Membership Sunil Kumar (Principal Consultant - Mining) B. Eng. (Mining) MAusIMM Contribution Reserve (JORC 2012) Experience Sunil is a mining engineer with 25 years experience in the mining industry across operations and consulting. His career spans 4 years in working in mining operations and about 21 years as a mining consultant primarily in the mine planning & design role which included estimation of coal reserves, DFS/FS, due diligence studies, techno-commercial evaluations and technical inputs for mining contracts. Prior to joining, Sunil was working as Principal Mining Engineer at Xstrata Coal. To date Sunil has worked on over 25 coal projects around the world, inclusive of thermal and coking coal projects in Australia, as well as in major coalfields in India, Indonesia, Mongolia and Mozambique. Page

70 Appendix B: SGX Mainboard Appendix 7.5 Cross-referenced from Rules 705(7), 1207(21) and Practice Note 6.3 Summary of Mineral Reserves and Resources Name of Asset / Country: Kuansing Inti Makmur / Indonesia Category Mineral Type Gross (100% Project) Tonnes (millions) Grade Reserves Net Attributable to GEMS Tonnes (millions) Grade Remarks Proved Coal 28 Subbituminous B 28 Subbituminous B Probable Coal 8 Subbituminous B 8 Subbituminous B Total Coal 36 Subbituminous B 36 Subbituminous B Resources* Measured Coal 115 Subbituminous B 115 Subbituminous B Indicated Coal 60 Subbituminous B 60 Subbituminous B Inferred Coal 85 Subbituminous B 85 Subbituminous B Total Coal 260 Subbituminous B 260 Subbituminous B * Mineral Resources are reported inclusive of the Mineral Reserves. Page

71 Appendix C: Resource & Reserve Report Page

72 United Fiber System Ltd PT Kuansing Inti Makmur Concession Appendix C to the Independent Qualified Persons Report Independent Resource & Reserve Report 897

73 United Fiber System Ltd PT Kuansing Inti Makmur Concession Independent Resource & Reserve Report Salva Resources Pty Ltd Level 11, 82 Eagle Street, Brisbane, QLD 4000, Australia PO Box 10791, Adelaide Street, Brisbane, QLD 4000, Australia Website: Phone: +61 (0) Fax: +61 (0) Effective Date: 31 July 2014 Independent Expert Person: Manish Garg Director - Consulting / Partner Subject Specialists: Craig Williams Principal Consultant Geology - Brisbane Office Sunil Kumar Principal Consultant Mining - Brisbane Office Page ii 898

74 Table of Contents Executive Summary Introduction Approach Data sources Limitations Disclaimer and warranty Independent Competent Persons and Experts Statement Statement of Independence Project Description Property Description and Access Ownership and Concession Geology Regional Geology Local Geology Coal Seams Exploration Exploration History Geological Data and QAQC Data Supplied Lithological Data Topographic Survey and base of weathering (BOW) Data Quality Assurance and Quality Control (QAQC) Measures Core Sampling...26 Down-hole Geophysics and Seam Picks...27 Coal Quality...28 Data validation by prior to geological model construction Coal Density Coal Quality Data Resource Model Construction Structural Model...32 Page iii 899

75 6.1.2 Structural Model Validation Coal Quality Model Quality Model Validation Coal Resources Prospects for Eventual Economic Extraction and Resource Classification Coal Resource Statement Comparison with Previous Estimates Reserve Estimation Estimation Methodology Modifying Factors Notes on Modifying Factors Mining Factors...37 Optimisation Result...38 Selection of Pit Shell...39 Geotechnical Factors...40 Surface Water Management...41 Mining Method & Operations...41 Processing Factors & Product Quality...41 Mine Logistics Factors...42 Permits and Approvals Environment and Community Relations Social Aspects Cost and Revenue Factors Marketing Factors Product Quality Other Factors Final Pit Design Cut-off Parameters and Pit Limit...49 Pit Design...49 Mining Schedule Audits and Reviews Discussion of Relative Accuracy and Confidence...54 Page iv 900

76 8.7 Reserves Classification Statement of Coal Reserves JORC Table References Appendix A: CVs Appendix B: JORC Table Appendix C: Raw Coal Quality Histograms per Seam Appendix D: Cross-Sections List of Figures Figure 3:1 General Location Plan Figure 3:2 General Location Plan Satellite Image Figure 3:3 IUP Boundary and Location of Individual Coal Blocks Figure 4:1 Generalised Stratigraphy of the South Sumatra Basin Figure 4:2 Regional Geological Setting Figure 4:3 Local geological map of the KIM concession area Figure 8:1 Soil & Rock lithology KIM Project Figure 8:2 Geotech Recommendations Figure 8:3 Current and Proposed Coal Logistics, KIM Project Figure 8:4 Selected Optimiser Pit shell & Final Pit Design - KIM West Figure 8:5 Selected Optimiser Pit shell & Final Pit Design- KIM East Figure 8:6 Final Pit Design - KIM West Figure 8:7 Representative Cross Section- KIM West Figure 8:8 Representative Cross Section - KIM East Figure 8:10 KIM West Pit Figure 8:11 KIM East Pit Figure 8:12 Relationships between Mineral Resources & Ore Reserves List of Tables Table 4:1 KIM East - Seam Splitting Relationships Page v 901

77 Table 4:2 KIM West - Seam Splitting Relationships Table 5:1 KIM East - Drill hole Coal Seam Intercept Statistics Table 5:2 KIM West - Drill hole Coal Seam Intercept Statistics Table 5:3 KIM East - Summary of Drill Hole Raw Coal Quality by Seam Table 5:4 KIM West - Summary of Drill hole raw coal quality by seam Table 6:1 Model Schema Settings and Parameters Table 6:2 Quality Model Parameters Table 7:1 Coal Resource Estimate for KIM Coal concession as at 31 July Table 7:2 Coal Resources - Comparison with Previous Estimate Table 8:1 Modifying & Mine Optimisation Factors Table 8:2 Contractor Unit Rates (Real Terms) Table 8:3 Owner Unit Costs (Real Terms) Table 8:4 Block wise Optimiser Base Pit limits Table 8:5 Break-even Stripping Ratio (BESR) Table 8:6 Average Unit Operating Cost (Real Terms) over Life of Mine Table 8:7 Capital Cost (Real Terms) Table 8:8 Product Coal Quality Table 8:9 Pit Design Parameters for KIM Project Table 8:10 Historical Production from KIM Mines Table 8:11 Production Reconciliation Table 9:1 ROM Coal Reserves for KIM Coal Concession as at 31 July Table 9:2 ROM Coal Reserves for KIM West as at 31 July Table 9:3 ROM Coal Reserves for KIM East as at 31 July Key abbreviations $ or USD United States Dollar Adb AMSL AMDAL ANDAL Air dried basis, a basis on which coal quality is measured Above Mean Sea Level Analisis Mengenai Dampak Lingkungan Hidup- Environmental Impact Assessment (EIA), which contains three sections, the ANDAL, the RKL and the RPL Analisis Dampak Lingkungan Hidup, component of the AMDAL that reports the significant environmental impacts of the proposed mining activity Page vi 902

78 Ar ASR AusIMM Batter bcm Cc BD CCoW CHPP CV Capex Coal Resource Coal Reserve As received basis Average stripping ratio Australasian Institute of Mining and Metallurgy Slope of Advancing Mine Strip bank cubic meter Cubic Centimeter bulk density Coal Contract of Work Coal Handling and Processing Plant Calorific value Capital Expenditure A Coal Resource is a concentration or occurrence of solid material of economic interest in or on the Earth s crust in such form, quality, and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, quality, continuity and other geological characteristics of a Coal Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Coal Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. A Coal Reserve is the economically mineable part of a Measured and/or Indicated Coal Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the Coal is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. DGMC FC gar GEMS gm ha IM IPPKH IUP JORC k kcal/kg Directorate General of Minerals and Coal Fixed Carbon gross as received, a basis on which coal quality is measured PT Golden Energy Mines Tbk Gram Hectare(s) Salva Resources Pty Ltd Inherent Moisture Izin Pinjam Pakai Kawasan Hutan which translates to a borrow to use permit in a production forest Izin Usaha Pertambangan which translates to Mining Business Licence 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia thousand Unit of energy (kilocalorie) per kilogram Page vii 903

79 kg km km2 kilogram Kilometers(s) Square kilometre(s) kt kilo tonne (one thousand tonne) L Litre m Meter lcm loose cubic metre LOM Life of Mine lcm lcm loose cubic metre M Million Mbcm Million bank cubic metres Mbcmpa Million bank cubic metres per annum MEMR Ministry of Energy and Mineral Resources within the central government m RL metres reduced level m 3 cubic metre m/s metres per second Mt Millions of tonnes Mtpa Millions of tonnes per annum NAR Net as received Opex operating expenditure PKP2B Perjanjian Kerjasama Pengusahaan Pertambangan Batubara same as CCoW RD Relative density RKL Rencana Pengelolaan Lingkungan - environmental management plan ROM Run of Mine RKL Relative Level - survey reference for height of landforms above a datum level RPL Rencana Pemantauan Lingkungan - environmental monitoring plan SE Specific Energy SMGC PT SMGC Consultants SR Strip ratio (of waste to ROM coal) expressed as bcm per tonne t Tonne tkm Tonne kilometer tpa Tonnes per annum TM Total Moisture (%) TS Total Sulphur (%) United Fiber United Fiber System Limited VALMIN 2005 Edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports VM VM Volatile Matter (%) Page viii 904

80 Executive Summary United Fiber Systems Limited ( United Fiber or Client ) commissioned to prepare an independent estimate of Open Cut Coal Resources and Reserves for the PT Kuansing Inti Makmur coal deposits ( KIM ). understands that this report will be relied on by United Fiber as part of the proposed acquisition of PT Golden Energy Mines Tbk. The estimate of Coal Resources and Reserves as at the 31 July 2014 contained within this Report has been reported in compliance with the requirements of the reporting guidelines of the 2012 Editon of the Australasian Code for the Reporting of exploration results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia ( The JORC Code ). KIM (PT Kuansing Inti Makmur) Projects in Indonesia The KIM Project is located in the Bungo Regency of Jambi Province on Sumatra Island, Indonesia. The KIM Project is located ~300 km to the South East of the Padang Port in West Sumatra. The KIM Project consists of 2 coal pits namely, KIM East Pit ( KIM East ) and KIM West Pit ( KIM West ). Conventional open-pit coal mining operations was commenced in the KIM East pit in 2007, which was followed by opening of the KIM West pit in Approximately 9 Mt of coal has already been mined from these pits until 31 July Geology The KIM concession area is found on the northern edge of the South Sumatra Basin. This basin was formed by back-arc extension and is filled with Eocene to Pliocene aged terrestrial and marine sediments. Two phases of coal seam accumulation are found within this sequence, the first is an older Oligocene phase related to fluvio-deltaic sedimentation (Talang Akar Formation) during initial rifting and deposition of a transgressive sedimentary sequence. After the mid- Miocene plate collision and commencement of subduction off the west Sumatra coast, a regressive sedimentary sequence commenced from mid-miocene to Pliocene times. This resulted in a return to a fluvio-deltaic environment, from the previously dominant deep marine sedimentation. This gave rise to the Muara Enim Formation, the dominant coal bearing unit within the South Sumatra Basin. Coals found within the KIM concession are however of Oligocene age and hence form part of the older phase of coal accumulation within the South Sumatra Basin. Seams within the concession are generally shallow to moderate dipping (less than 10 degrees in most of the area) to the northnortheast. The Oligocene coal bearing unit is unconformably overlain by ignimbrites of Miocene age, related to vulcanism within the basin, associated with to the onset of subduction. Page 9 905

81 Resource have estimated total Coal Resources of 260 million tonnes (Mt) on an in situ air dried moisture basis, to a maximum depth of 250 m. The total tonnes are comprised of 115 Mt of Measured, 60 Mt of Indicated and 85 Mt of Inferred category Resources. Coal Resource Estimate for KIM Coal concession as at 31 July 2014 Pit Measured Ash% adb CV adb kcal/kg Coal Resources (Mt) Indicated Ash% adb CV adb kcal/kg Inferred Ash% adb CV adb kcal/kg KIM East , , , KIM West , , , Total Mining Method Total Mineral Resources are reported inclusive of the Mineral Reserves Final Inferred Resource rounded to nearest 5 Mt (Note; individual totals may differ due to rounding) Mining operation commenced in 2007 in KIM East and in 2010 in KIM West Pit. The mining operation in KIM Pits is an open pit mine using standard truck and excavator methods which are a common practice in Indonesia. Waste material is mined using hydraulic excavators and loaded into standard rear tipping off-highway trucks and hauled to dumps in close proximity to the pits or to in-pit dumps where possible. For the purpose of this Reserve Statement, it is proposed that contractors will continue to be used for mining and haulage operations over the life of mine, and the unit costs used for the Reserve estimate reflect this style of mining. The mining method can be described as a multi seam, moderate dip, open cut coal mine using truck and shovel equipment in a combination of strip and haul back operations. Mining Modification factors Resource to Reserve This Coal Reserve estimate uses the most recent geological model and Coal Resources estimate prepared by as of 31 July Potential open cut reserves inside different blocks of the Project Area were identified with pit optimisation software utilising the Lerchs Grossman algorithm. By generating the financial value (positive or negative) for each mining block within a deposit and then applying the physical relationship between the blocks, the optimal economic pit can be determined. The optimiser was run across a wide range of coal prices using a set of site specific costs (waste removal, land compensation, coal removal, haulage costs, etc.). These costs were adjusted to suit the conditions for this project. An economic model was prepared for the mining operation from each of the KIM coal concessions to determine the project breakeven or incremental stripping ratio. The pit optimisation results were examined and pit shells selected where the incremental stripping ratios were less than or equal to break even strip ratio determined at a point where the costs for mining and handling the coal equalled the revenue generated by the coal. Page

82 An independent life of mine plan was prepared based on the final pit design. This was developed to ensure that the proposed mining method would be practical and achievable and that the proposed dumping strategy would be able to contain the waste mined in the final pit design. The mining schedule targets production of 0.4 Mt in year 1 (2014), 2 Mt by year 4 (2017) and ramping up to 3 Mt from year 5 (2018) onwards. The coal price estimate was based on s view on the outlook for global thermal coal fundamentals and including the demand and supply outlook for the sector. Capital and operating costs were estimated by for the KIM project based on the existing contracts and HDR Salva in house knowledge database about Indonesian operations. These are considered to be reasonable and suitable for the purpose of this study. Capital requirement have been identified for the 90km dedicated haul road and land development for this project. The KIM Mine is an operating mine since 2007 (KIM East pit commenced production in 2007 while the KIM West pit started in 2010). The KIM Mine is operated as single mining operation; even though the production from the Kim West pit has been temporarily suspended as part of normal operation control. It is planned to resume production from the KIM West pit by Q1, considers the Modifying Factors to be valid for both pits. The Modifying Factors used are based on actual operations at the KIM Mine which were independently verified by the HDR Salva s subject specialist during the site visit. Therefore, it is considered valid to use Modifying Factors from the operating KIM mine to satisfy clause 29 of the JORC Code. While JORC 2012 in not explicit with reference to operating mines, the guidance given in ASX FAQ no. 9 is considered relevant in this regard. Further, has carried out independent life of Mine (LOM) Study to develop the mining schedule and its economic evaluation of the Mine. Coal Reserves Coal Reserves were calculated by applying appropriate modifying factors and exclusion criteria to the Coal Resources. Surface water management, infrastructure and the location of the IUP boundary were considered when determining the surface constraints for the mining operation. Coal Reserves were calculated by applying appropriate density adjustment and mining loss and dilution parameters to the Measured and Indicated Coal Resources inside the final pit design. All the final pits used for the Reserve estimate were designed following the existing geotechnical recommendations for the KIM Expansion area. In opinion of, the current geotechnical study for KIM Pits adequately covers for the type of lithology and hydrogeological issues. Coal Reserves have been reported in Proved and Probable categories to reflect the reliability of the estimate. No Inferred Coal Resources are included in the reported Coal Reserves. The final coal Reserve for PT Kuansing Inti Makmur coal deposit ( KIM ) as of 31 July 2014 is 35.6 Mt comprising of 27.5 Mt Proved and 8.0 Mt Probable categories. No beneficiation of coal product is planned other than crushing to a nominal top size (50mm). ROM Coal Reserves for KIM coal deposit is presented along with the estimated quality in Table below. Page

83 Pit Coal Reserves Estimate for KIM Coal concession as at 31 July 2014 Reserve (Mt) Proved Probable Total RD adb t/m3 TM arb % IM adb % Ash adb % CV arb Kcal/kg TS adb % KIM West , KIM East , Total , *This table must be presented with the entire JORC Reserve Statement of PT Kuansing Inti Makmur Coal Resources are reported inclusive of Coal Reserves (that is, Coal Reserves are not additional to Coal Resources). The coal will be sold as a run of mine (ROM) product; hence Marketable Reserves will be equal to Coal Reserves. There are a number of planning & operational issues which may impact on the stated mining reserves. These include: detailed geotechnical studies to confirm the overall slope angles and other parameters in deeper pit area; detailed hydrogeological studies to know the water flow gradient and dewatering arrangement; more quality data as well as detailed drilling and updates to the geological model; land compensation issues; and changes in life of mine schedule, infrastructure constraints, coal transportation issues and due to changes in marketing and costing during the mining operation. These issues may cause the pit shell and mining quantities to change in future JORC code compliant Reserve Statements. is not aware of any other environmental, legal, marketing, social or government factors which may hinder the economic extraction of the Coal Reserves other than those disclosed in this report. This report may only be presented in its entirety. Parties wishing to publish or edit selected parts of the text, or use the Statement for public reporting, must obtain prior written approval from Salva and the signatories of this report. Page

84 1 Introduction United Fiber System Limited ( United Fiber ) commissioned Salva Resources Pty Ltd ( HDR Salva ) to prepare an independent estimate ( Statement ) of the Coal Resources and Reserves for the Kuansing Inti Makmur coal deposit ( KIM ) located in the Bungo Regency of Jambi Province, Indonesia. understands that this report will be relied on within the United Fiber Independent Expert s Report as part of the proposed acquisition of PT Golden Energy Mines Tbk by United Fiber. The purpose of this report is to provide an assessment of the Coal Resources and Reserves and report these in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, (the JORC Code ) December 2012, prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy ( AusIMM ), the Australasian Institute of Geoscientists ( AIG ) and Minerals Council of Australia. 1.1 Approach The principal data used in the preparation of this report included: A JORC Resource Report titled JORC Resource Statement, KIM Project, 21st October 2013, Prepared for: United Fiber System Limited by PT SMG Consultants; PT Ground Risk management (GRM), Engineering Report for KIM Mine Geo-technical Work East and West Expansion areas, Sumatera, Indonesia ; 28 February 2011; Capex and Opex data supplied by GEMS (PT Golden Energy Mines Tbk) and also derived from s cost database of typical Indonesian operations; Resource Management International Pty Ltd (RMI), Independent Coal Price Forecast Report for, 10 September 2013; Coal price outlook by s in-house study ( Salva Report) on Indonesian thermal coal; The following approach was undertaken by to estimate Coal Reserves: has reviewed the geological data set provided by United Fiber for the coal block covered under scope of report; Using the existing bore hole information provided to by United Fiber, a geological model was created using Minescape stratigraphic modelling software. While creating the model, a thickness cut off limit of 0.1m was applied and is termed as an in situ model; This model and the underlying raw data such as Drill hole logs, coal quality reports and geophysical logs were reviewed by s team of geologists headed by Mr Williams; On the basis of confidence limits (as described in the Resource Classification Section), the in-situ geological model was then categorised into Measured, Indicated and Inferred categories according to the guidelines provided by the JORC Code (2012). Once these categories were ascertained, coal volume, tonnage and qualities were estimated; Cross sections, plans and deposit characteristics such as structure, number and thickness of seams were examined in conjunction with the proposed equipment and mining method to decide on minimum mining thickness, coal losses and dilution factors. These factors were then used to convert the in situ geological model to a ROM model; Page

85 Physical surface constraints were studied and consideration was made for surface water runoff and management, as well as the location of significant infrastructure and communities inside the potential mining area. Appropriate mining limits were then determined based on this data; Indicative cost and revenue factors were reviewed with United Fiber and checked for reasonableness by. Optimiser software was used to incorporate other criteria such as depth constraints, geotechnical criteria and minimum mining thickness. In this way a series of different pit shells were derived for varying cost and revenue inputs; Optimised Pit Shell selected where the incremental stripping ratio were less than or equal to break even strip ratio and minor adjustments made (as necessary) to form a practical pit design (Mineable Pit Shell). This pit shell formed the basis of the subsequent reserves estimate; The Measured and Indicated confidence limits were overlaid on the main pit shell and any Inferred tonnes were excluded from the estimate; Based on Resource confidence and present mine planning detail, the reserves were categorised into Proved and Probable categories; All of the modifying factors and checks adopted to ascertain the estimate have been provided in the respective section of this report. 1.2 Data sources This review is based on the information provided by GEMS, the technical reports of consultants and previous explorers, as well as other published and unpublished data relevant to the area. has carried out, to a limited extent, its own independent assessment of the quality of the geological data. The status of agreements, royalties or concession standing pertaining to the assets was investigated by an independent solicitor Lasutlay& Pane Advocates and has relied on the independent enquiry conducted by them. In developing our assumptions for this Statement, has relied upon information provided by the company and information available in the public domain. Key sources are outlined in this Report and all data included in the preparation of this Report has been detailed in the references section of this report. has accepted all information supplied to it in good faith as being true, accurate and complete, after having made due enquiry as of July Limitations After due enquiry in accordance with the scope of work and subject to the limitations of the Report hereunder, confirms that: The input, handling, computation and output of the geological data and Coal Resource and Reserve information has been conducted in a professional and accurate manner, to the high standards commonly expected within the mining professions; The interpretation, estimation and reporting of the Coal Reserve Statement has been conducted in a professional and competent manner, to the high standards commonly expected within the Geosciences and mining professions, and in accordance with the principles and definitions of the JORC Code (2012); In conducting this assessment, has addressed and assessed all activities and technical matters that might reasonably be considered relevant and material to such an assessment conducted to internationally accepted standards. Based on observations Page

86 and a review of available documentation, has, after reasonable enquiry, been satisfied that there are no other relevant material issues outstanding; The conclusions presented in this report are professional opinions based solely upon s interpretations of the documentation received and other available information, as referenced in this Report. These conclusions are intended exclusively for the purposes stated herein; For these reasons, prospective investors must make their own assumptions and their own assessments of the subject matter of this Report. Opinions presented in this report apply to the conditions and features as noted in the documentation, and those reasonably foreseeable. These opinions cannot necessarily apply to conditions and features that may arise after the date of this report, about which have had no prior knowledge nor had the opportunity to evaluate. 1.4 Disclaimer and warranty This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva s schedule of rates. s fee is not contingent on the outcome of its Statement or the success or failure for the purpose for which the report was prepared. Neither Mr. Craig Williams, Mr. Sunil Kumar nor any of the s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report. Mr. Craig Williams, Mr. Sunil Kumar, s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates. A draft version of this Statement was provided to the directors of United Fiber for comment in respect of omissions and factual accuracy. As recommended in Section 39 of the VALMIN Code, United Fiber has provided with an indemnity under which is to be compensated for any liability and/or any additional work or expenditure, which: Results from s reliance on information provided by United Fiber and/or Independent consultants that is materially inaccurate or incomplete, or Relates to any consequential extension of workload through queries, questions or public hearings arising from this report. The conclusions expressed in this Statement are appropriate as at July The report is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results. All monetary values outlined in this report are expressed in United States dollars ($) unless otherwise stated. services exclude any commentary on the fairness or reasonableness of any consideration in relation to this acquisition. Page

87 2 Independent Competent Persons and Experts Statement This Resource and Reserve report has been written following the guidelines contained within the 2005 Edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Experts Reports ( the VALMIN Code ) and the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ( the JORC Code ). It has been prepared under the supervision of Mr Manish Garg (Director Consulting / Partner, ) who takes overall responsibility for the report and is an Independent Expert as defined by the VALMIN Code. Sections of the report which pertain to Coal Resources have been prepared by Mr Craig Williams (Principal Consultant, ) who is a subject specialist and a Competent Person as defined by the JORC Code. Sections of the report which pertain to Coal Reserves have been prepared by Mr Sunil Kumar (Principal Consultant, ) who is a subject specialist and a Competent Person as defined by the JORC Code. This report was prepared on behalf of by the signatory to this report, assisted by the subject specialists competent persons whose qualifications and experience are set out in Appendix A of this report. Mr. Manish Garg Director Consulting / Partner 2.1 Statement of Independence This Report was commissioned by United Fiber on a fee-for-service basis according to HDR Salva s schedule of rates. s fee is not contingent on the outcome of this report. The above mentioned person(s) have no interest whatsoever in the mining assets reviewed and will gain no reward for the provision of this report. Mr. Craig Williams, Mr. Sunil Kumar, s partners (including Mr. Garg), directors, substantial shareholders and their associates are independent of United Fiber, GEMS, its directors, substantial shareholders, advisers and their associates. Neither Mr. Craig Williams, Mr. Sunil Kumar nor any of the s partners (including Mr. Garg), directors, substantial shareholders and their associates have (or had) a pecuniary or beneficial interest in/or association with any of the United Fiber, GEMS or their directors, substantial shareholders, subsidiaries, associated companies, advisors and their associates prior to or during the preparation of this report. Page

88 3 Project Description 3.1 Property Description and Access The KIM Project is located in the Bungo Regency of Jambi Province on Sumatra Island, Indonesia (Figure 3:1 and Figure 3:2). The KIM Project is located ~300 km to the South East of the Padang Port in West Sumatra. Access to the site is via a 2 hour plane flight from Jakarta to Padang followed by a either an 6 hour car journey or via a 1.5 hour plane flight from Jakarta to Jambi followed by a 7 hour car trip. The tenure for the KIM Project is covered by 8 Izin Usaha Pertambangan Produksi ( IUP Production ) and covers a 2,610 ha area of coal concession. The KIM project consists of following 2 coal Pits: KIM East Pit ( KIM East Pit or KIM East Block ); KIM West Pit ( KIM West Pit or KIM West Blcok ). Conventional open-pit coal mining operations was commenced in the KIM East pit in 2007, which was followed by opening of the KIM West pit in Approximately 9 Mt of coal has already been mined from these pits until 31 July Figure 3:1 General Location Plan KIM Project Page

89 Figure 3:2 General Location Plan Satellite Image Figure 3:3 IUP Boundary and Location of Individual Coal Blocks Page

90 3.2 Ownership and Concession Eight (8) of the IUPs with a total area of 2,610 ha are owned directly and in-directly by subsidiaries of GEMS. Tenure at the KIM concession is held under the Izin Usaha Pertambangan which translates to Mining Business License (IUP) system of ownership. The ownership details of these IUPs are given in Table 3:1 below. Table 3:1 KIM Concession Details Area IUP Number (ha) Company Granted Expiry PT Bungo Bara Utama 341/DESDMTAHUN ,301 9-Jul years PT Bungo Bara Utama 250/DESDM TAHUN Apr-10 8 years PT Bara Barmonis Batang Asam 247/DESDM TAHUN Apr-10 6 years PT Karya Cemerlang Persada 350/DESDM TAHUN Jul years PT Tanjung Belit Bara Utama 249/DESDM TAHUN Apr-10 8 years PT Kuansing Inti Makmur 252/DESDM TAHUN Apr-10 8 years PT Kuansing Inti Makmur 166/DESDM TAHUN Apr years PT Berkat usantara Permai 545/DESDM TAHUN Dec years All IUP s have a provision for 2 x 10 years extensions. A possible issue with tenure for the project is that there are a number of gaps between the IUPs that cover the project area. The gaps are for a maximum of 150 m in width (Figure 3:3). HDR Salva has been informed that no other party holds tenure over the land in these gaps and that application is currently underway to change the coordinates of the current IUPs to ensure that there is no gap between them. This type of issue is not uncommon in Indonesia and there is no known reason why it could not be resolved. is not aware of any disruptions to operations at the KIM project that have occurred due to this issue. All of the land inside the KIM project area is designated Area Pengunaan Lain (Other Purpose) by the Forestry Department, and thus no borrow to use permit (Izin Pinjam Pakai Kawasan Hutan) is required for mining operations in this area. GEMS informed that permits are in place for the current operation. These permits will need to be maintained in order to continue mining operations within the KIM project. is not aware of any reason why it will not be possible to maintain these permits. makes no warranty or representation to United Fiber or third parties (express or implied) in regard to the validity of the IUP and documentation and this Reserve Statement does not constitute a legal due diligence of the concession. has relied on its independent verification by LasutLay and Pane Advocates in Indonesia ( LLP ). Page

91 4 Geology 4.1 Regional Geology The KIM concession area is found on the northern edge of the South Sumatra Basin (Figure 4:2). The South Sumatra Basin was formed due to back-arc extension which began in the late Paleocene. This extension resulted in an approximately north trending graben structure which is filled with an Eocene to mid-miocene age transgressive sedimentary sequence culminating in the deep water sediments of the Gumai Shales in the mid-miocene. This was followed by the mid- Miocene orogenic event, resulting from the collision of the Sunda Shelf plate with the Indo- Australian plate, which resulted in a subduction zone forming off the west coast of Sumatra and gave raise to the orogenic uplift of older pre-tertiary rocks to form the Barisan Mountains during late Miocene time. This mid-miocene plate collision marked the transition form extension tectonics and a transgressive sedimentary sequence to compression tectonics and a transition back to shallow water terrestrial sedimentation (regressive sequence). The onset of the regressive phase of sedimentation is marked by the Air Benekat Formation (Figure 4:1) The following is a general description of the main Eocene to Pliocene age sedimentary units recognised across the South Sumatra basin, from oldest to youngest; The Lahat Formation is comprised of brown to grey shales interbedded with tuffaceous shales and siltstones. These sediments rest unconformably on the pre-tertiary basement. The thickness of this formation is strongly controlled by the basement topography and this formation is not developed around some pre-tertiary basement highs. The Oligocene age Talang Akar Formation is comprised of thickly bedded sandstones alternating with thin shale bands and coal seams in places. This sedimentary unit is of terrestrial fluviatile origin, grading into a deltaic environment. The Baturaja Formation is only locally developed and consists of a lower bedded unit and an upper massive unit. The bedded unit consists of lime mudstones and lime wackstones, intercalated with marls, whilst the massive unit consists of mudstones, wackstones/packstones and boundstones. The Gumai Formation is one of the most widely occurring units seen in the basin and is comprised of deep water marine shales with minor interbeds of limestone and sandstone. The transition from deep water marine sedimentation to a regressive sequence is marked by the Air Benekat Formation which consists of shales and glauconitic sandstones. The middle to late Miocene aged Muara Enim Formation conformably overlies the Gumai Formation, the transition marked by the top of the last marine shale layer. The Muara Enim Formation consists of interbedded sandstones, claystones and coal seams. The majority of the coal mined from the South Sumatra Basin is derived from this unit; however these coals are younger than the Oligocene aged coal seams seen within the KIM concession area. The Kasai Formation conformably overlies the Muara Enim Formation and consists of bedded tuffaceous sands and gravels, occasionally interbedded with minor coal seams. Page

92 Figure 4:1 Generalised Stratigraphy of the South Sumatra Basin After Tamtomo (1997) Page

93 Figure 4:2 Regional Geological Setting KIM Concession 4.2 Local Geology (After Bishop, 2001) The local geology of the area is comprised of a Miocene aged ignimbrite unit (Tmr) which unconformably overlies the Oligocene aged coal bearing sediments belonging to the Sinamar Formation (Tos) Figure 4:3. The Sinamar Formation is of equivalent age and sedimentary setting to the Oligocene Talang Akar Formation, seen elsewhere in the basin. The ignimbrite unit varies in thickness between 50 m and 60 m and appears to have been deposited on an erosive paleosurface which has been incised into the coal bearing sediments of the Sinamar Formation Page

94 Figure 4:3 Local geological map of the KIM concession area Coal Seams The coal bearing sediments dip gently (less than 10 degrees) to the north-northeast. The area appears to be structurally relatively benign, with no evidence of significant displacement of the coal seams in the area. The splitting relationships for the coal seams identified within the concession are shown below in Table 4:1 and Table 4:2. The S100U and S100L seams are present throughout and the parent seam (S100) has not been logged in any of the drill holes in the KIM concession. The interburden between these seams ranges from 0.1 m to 0.9 m and averages 0.5 m. The S100U seam ranges from 0.03 to 2.9 m and S100L seam ranges from 0.20 m to 2.0 m in thickness. The S200U and S200L seams exist at 1.4 m to 17.4 m (mean interburden 5.6 m) below the overlying S100L seam. The S200U seam ranges from 0.09 m to 2.35 m and the S200L seam ranges from 0.2 to 2.9 m in thickness. The parent seam (S200) is present in places, where it ranges in thickness from 0.38 m to 4.6m in thickness. The S300 seam exists approximately 14 m below the S200L seam. The S300 parent seam has not been modelled in the KIM concession, only it s two recognised plies the S300U and the S300L seams, however there are areas where the interburden between these two plies is zero, which effectively means that this is the parent seam in such instances. The interburden between the two S300 plies ranges from 0.0 m to 6.9 m with an average interburden of 0.9 m at KIM East and 1.3 m at KIM East. Page

95 The S300 plies mean thickness varies between the KIM East and KIM West concession areas. In KIM East S300U has a mean thickness of 5.0 m and 9.0 m in the KIM West concession. The S300L has a mean thickness of 1.1 m at KIM East and 2.1 m at KIM West. Table 4:1 KIM East - Seam Splitting Relationships Master Seam 1st phase Splitting S100 S100U S100L S200 S200U S200L S300 S300U S300L Table 4:2 KIM West - Seam Splitting Relationships Master Seam S100 S200 S300 1st phase Splitting S100U S100L S200U S200L S300U S300L 4.3 Exploration Exploration History The geology of South Sumatra has been studied by various authors, particularly deep stratigraphic profiles in the search for oil reservoirs. In the local area there are no documented records of previous exploration for coal. There are previous unpublished reports that have been viewed. This area was reviewed by PT SMG Consultants in October, 2010 and in October 2012 to determine what Resources may be contained in the area and what additional drilling was necessary to raise the Resource confidence. Page

96 5 Geological Data and QAQC 5.1 Data Supplied The geological data provided by GEMS for the KIM concession area was independently reviewed by s geologists and is considered appropriate and reasonable for the purpose of estimating Coal Resources. This data, used by for the purpose of resource estimation, includes but is not limited to: Drill hole collar information inclusive of total depth drilled per hole; Drill hole lithological data inclusive of seam picks identified and correlated on the basis of down-hole geophysics; Coal sample table and associated raw coal qualities per sample; Drill hole completion reports for most of the holes drilled containing details of core recoveries achieved; Scanned copies of original laboratory analysis reports of coal quality for samples analysed; Down-hole geophysical data in the form of both LAS files and Minex drill hole databases; Minex geological models for the KIM EAST, and KIM WEST areas constructed by PT SMG Consultants in mid , which contains a complete drill hole database as well has grids of seam roofs, floors, the topographic surface and the base of the weathered horizon surface. 5.2 Lithological Data A total of 428 drill holes were used to construct five geological models in the KIM East and KIM West coal concession area comprising: KIM East drill holes; KIM West - 95 drill holes. Of these holes, a small percentage are barren, i.e. no coal intersected; this is due to drill-rig limitations (maximum 60 m depth). Barren holes are never the less useful for geological modelling purposes as they prevent coal from being modelled where it is not present. In other cases no seam picks were supplied for a number of holes. In these instances the hole is marked as not logged and the model is allowed to project seams through these holes if warranted by surrounding holes. Approximately 77% of the drillholes used in the structural model have been logged using downhole geophysics. Down-hole geophysical data acquired by GEMS is predominantly comprised of gamma, density and calliper logs and has allowed for accurate identification of coal seams in each hole (seam picks) and the correlation of coal seams between holes. Drill hole locations for the two resource areas can be seen in Appendix E and coal intercept statistics for the two resource areas can be seen in Table 5:1 and Table 5:2. Page

97 Table 5:1 KIM East - Drill hole Coal Seam Intercept Statistics Interval Number Minimum Maximum Mean S.D. Hole no. Thickness Hole no. Thickness Thickness S100U 88 KEN_ CW_A S100L 85 GAD_ BBU_ S200U 68 KEN_ KECS_ S200L 70 CW_08R 0.2 CW_E03R S300U 187 KEN_68R 0.42 KEN_ S300L 155 CW_06R 0.4 CW_K01R S KEN_ CW_A Table 5:2 KIM West - Drill hole Coal Seam Intercept Statistics Interval Number Minimum Maximum Mean S.D. Hole no. Thickness Hole no. Thickness Thickness S100U 46 KWN_ KWN_ S100L 47 KWN_ KWN_ S200U 24 KWN_50R 0.19 CTBBU_21RR S200L 25 CTB_ KWN_ S300U 77 CTB_ GT_ S300L 78 CTB_ RTB_ S CTBBU_ CTBBU_20R Topographic Survey and base of weathering (BOW) Topography data used in the two KIM geological models has been derived from Light Detecting and Ranging (LIDAR) remote sensing surveys conducted. During this survey GPS ground control points were combined with flight trajectories and LIDAR scanning equipment to produce an accurate dataset of XYZ topographic coordinate points for the KIM East and KIM West area. A non-conformable base of weathering (BOW) surface was generated for the geological models by translating the topographic surface down by 4 m in the Z direction. This is based on the observation that the average weathered horizon thickness, where it has been logged, is approximately 4 m. 5.4 Data Quality Assurance and Quality Control (QAQC) Measures Core Sampling At the completion of each run, core lengths were checked in the splits for recovery to ensure coal seams have been recovered as required. A target core recovery of 90% has been applied throughout all drilling phases. If core recovery was found to be less than 90% within the coal seam, the hole was re-drilled to collect a sample with 90% recovery. The core was also photographed routinely and logged in the splits by a geologist before being sampled. For open holes, chip samples were collected at 1 m intervals for lithological logging purposes. Sampling of the coal seams was conducted by the rig geologist on duty and was conducted in accordance with the following sampling procedure supplied to rig geologists: Open core barrel inner split tube and remove sample from the barrel; Page

98 Transfer the core to the PVC split or core box; Determine the core depth ( From and To ) from the drill depth; Reconstruct the core in the split to allow for any gaps; Determine the core recovery; Wash down using water and a cloth and/or brush prior to logging if covered by mud or oil; Complete geological logging and photograph structure or any abnormal features. The photograph should show information of drill hole number and from and to depths; The division of samples follows the simple scheme of sample all coal, sample separately any contained bands (plies) and take 10 cm roof and floor non-coal samples; Place samples into plastic bags which should be doubled to minimise moisture loss. Insert one bag inside another so that they are doubled; Label the sample by ID card, the label should give information about the sample number, hole number, from/to depth, and Project Code. Place the label ID card inside the small re-sealable plastic bag before putting it into the sample bag; Seal the sample bag with tape and write the sample number on the plastic bag; and Dispatch sample to an accredited laboratory. The coal quality sampling technique detailed above is considered by to adequately address the QAQC requirements of coal sampling. As a further coal quality validation step prior to importing coal quality sample results for coal quality modelling purposes, constructed spreadsheets which compare the sampled intervals against the logged seam intervals in order to ensure that sampled intervals match the seam pick intervals Down-hole Geophysics and Seam Picks Down-hole geophysical logs were completed during each drilling program by PT Surtech Indonesia. Geophysical logging was conducted following the completion of a drill hole. After drilling is complete the logging unit deploys down-hole geophysical sondes, including gamma ray, calliper and density tools to assist with characterising the down-hole formation and its geological properties. Stratigraphic information, intercepted along the entire length of the drill hole (collar to total depth), is recorded and plotted in acrobat pdf format. A digital copy of the data is stored in LAS file format. Logging was performed on the majority of drill holes (including cored and open holes) and all these holes have geophysical data. Seam picks and lithologies have all been corrected for geophysics. Geophysical logging provides information on the coal seams intersected and aids in the definition of horizon boundaries and marker horizons, used to correlate the subsurface geology. The presence or absence of geophysical logging is one of the criteria used in the determination of points of observation for resource classification purposes. Under normal conditions coal-bearing sections of each drill hole were geophysically logged at the completion of drilling. In some instances, poor ground conditions restricted the ability to geophysically log the entire hole upon completion. In these cases, collapsed portions of holes were re-drilled in order to allow for density Page

99 and gamma logging to be accomplished by lowering the geophysical probe through the drill string Coal Quality Coal quality sampling was undertaken by GEMS and contract geologists, with the analysis testing being completed by PT Geoservices Coal Laboratories in Padang. PT Geoservices laboratories are accredited to ISO standards and quality control is maintained by daily analysis of standard samples and by participation in regular "round robin" testing programs. American Society for Testing and Materials (ASTM) methods has been used for all quality variables. Reporting was done on an air dried and as received basis The following tests were undertaken as standard on all coal samples: Total Moisture (as received basis only); Inherent Moisture (IM); Ash Content (Ash); Volatile Matter (VM); Fixed Carbon (FC); Total Sulphur (TS); Calorific Value-air dried basis (CV adb); and Relative Density (RD) Data validation by prior to geological model construction Prior to using the lithological (seam pick) and coal quality data for geological model construction purposes, performed the following data validation and verification checks on the data; Checking of seam picks against the down-hole geophysics in selected instances in order to validate seam pinch outs or correlations during structural model construction; Validation of coal quality sample intervals against seam pick intervals; Scatter plots of raw coal quality data pairs were constructed in order to determine outliers. In a few cases spurious data values were identified and removed from the quality data set prior to importing the data into Minescape; In cases where RD (adb) data was not determined for a sample, linear regression equations determined from the RD-ash scatter plot constructed from the rest of the raw coal quality data set were used to determine the RD value for the sample concerned from the ash value for that sample; Core recovery percentages per core run were compiled and merged with the coal quality sample data set in order to determine if any samples in the coal quality data set are from coal seam intersections with less than 90% core recovery over the seam width. No instances of this were identified as core recovery was observed to be generally good within the coal horizon itself although less than 90% recovery is often seen in the immediate roof or floor to the coal seam. Page

100 After compositing the coal quality samples over the seam width on a seam by seam basis, histograms were constructed of the composited raw coal quality for each seam, in each of the two resource areas (Appendix D). Analysis of these histograms shows that in a few instances, raw ash% outliers are present as a result of excessive overlap of the coal quality sample into the seam roof or floor. In all but one such instance, the proportion of outlier composite samples is very small compared to the total number of samples per seam and hence the presence of these outliers has no material impact on the modelled raw coal quality for affected seams. In the case of S200U for KIM West, the low number of samples for this minor seam has resulted in the fact that the single outlier sample has affected the overall coal quality estimate for this seam (biased to the high ash side). However this seam represents around 5% of the total resource, of which the majority is inferred. Therefore this is not considered to have a material impact on the coal quality of the KIM West resource as a whole. 5.5 Coal Density No information on in situ moisture was requested or obtained from the laboratory, resulting in the fact that the Preston and Sanders equation could not be applied to obtain in situ relative densities. As a result all resource tonnages are quoted on an air dried density basis. as volumes are calculated on an in situ basis and density on an air dried basis. However the density of in situ coal is in reality not at an air dried basis but at a higher moisture in situ moisture basis. The estimate of resources on an air dried basis will therefore result in a higher tonnage as compared to the equivalent in situ moisture basis calculation. This effect has been accounted for to a large extent in the reserving process, where the total moisture as been used as proxy for the in-situ moisture and a Preston Sanders calculation has been made on this basis. However, given the unknown accuracy of this approximation, this calculation was not done at the resource stage, preferring rather to use the more accurately known air dried density and state the moisture basis used in the resource. 5.6 Coal Quality Data Raw coal quality composite sample statistics for all seams in each resource area are given in Table 5:3 and Table 5:4. The coal quality in the KIM concession area can be summarised as moderate total moisture and moderate ash. The KIM East mean Calorific Value (adb) is 4,978 kcal/kg and has high sulphur. The KIM West mean Calorific Value (adb) is 5,161 kcal/kg and has low sulphur coal. Page

101 Table 5:3 KIM East - Summary of Drill Hole Raw Coal Quality by Seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb Number of Values S100U Min Value , Max Value , Mean , Number of Values S100L Min Value , Max Value , Mean , Number of Values S200U Min Value 6.9 4, Max Value , Mean , Number of Values S200 Min Value 6.7 3, Max Value , Mean , Number of Values S200L Min Value 5.7 4, Max Value , Mean , Number of Values S300U Min Value 6.0 4, Max Value , Mean , Number of Values S300L Min Value 9.0 1, Max Value , Mean , Page

102 Table 5:4 KIM West - Summary of Drill hole raw coal quality by seam SEAM ASH % adb CV adb FC % adb IM % adb RD adb TM % ar TS % adb VM % adb Number of Values S100U Min Value , Max Value , Mean , Number of Values S100L Min Value , Max Value , Mean , Number of Values S200U Min Value 6.0 4, Max Value , Mean , Number of Values S200 Min Value 7.1 4, Max Value , Mean , Number of Values S200L Min Value 2.8 4, Max Value , Mean , Number of Values S300U Min Value 9.7 5, Max Value , Mean , Number of Values S300L Min Value , Max Value , Mean , Page

103 6 Resource Model Construction Structural Model After completion of the previously detailed QA/QC processes, the available valid lithological and coal quality data was then imported into the MineScape software (Version 5.7) to generate both a structural model and a coal quality model for each of the two resource areas. The topographic model for each deposit was constructed by importing the Minex topography grid models for each area used previously by PT SMG Consultants. These topography models describe both virgin topography and mined voids within the concession as at 28 July The lithological data was then modelled to create structural grids. The schema, stored within the Stratmodel module of the MineScape software controls the modelling of seam elements and their structural relationships, grid model cell size, interpolators and other parameters. The details of these parameters stored in the applied schemas used in the structural modelling process are listed in Table 6:1. Within the modelling schema, all of the stratigraphic intervals were modelled with pinched continuity. This is applied in areas where intervals are missing in a drill hole. In this situation, the modelling algorithm stops the interpolation of the missing interval halfway between the two drill holes between which it ceases to be present Structural Model Validation Structural and thickness contours were generated and inspected to identify any irregularities, bulls-eyes, unexpected discontinuities etc. Cross-sections were also generated to identify any further structures such as faulting and any areas where seams were modelled as being discontinuous due to short drilling. Selected cross-sections from each resource area are shown in Appendix D. Table 6:1 Model Schema Settings and Parameters Model Component Modelling Software Schema Topography Model Topography Model Cell Size Structural Model Cell Size Interpolator (thickness)/order Interpolator (surface)/order Interpolator (trend)/order Extrapolation Distance Parting Modelled Minimum Ply Thickness Minimum Coal Parting Conformable Sequences Upper Limit for Seams Details Ventyx MineScape - Stratmodel module kime014,kimw2014 TOPE (KIM East), TOPW (KIM West) 20 m 20 m Finite Element Method (FEM)/0 Finite Element Method (FEM)/1 Finite Element Method (FEM)/ KIM West No 10 cm 30 cm (PP) otherwise not defined Weathered, Fresh Base of Weathering (BOW) Page

104 Model Component Details Control Points Yes Constraint File No Penetration File Yes Model Faults No Maximum Strip Ratio - Maximum Resource Depth 250 m Tonnage Calculations Based on volumes using relative density on an air dried basis 6.2 Coal Quality Model Coal quality data has been composited on a seam basis. The Inverse distance interpolator was selected for modelling coal quality as it has been shown to perform adequately for most coal quality attributes and it is also less likely to introduce spurious trends into the data. Testing indicated that a power value of two and a search radius of 2500 metres are the most suitable inverse distance interpolation parameters for modelling of the KIM coal deposits. Parameters used for quality modelling are summarized in Table 6:2. Table 6:2 Quality Model Parameters Model Component Details Coal Quality Data Type Raw Model Type MineScape Table Interpolator Inverse distance Power 2 Search Radius 2500 metres Quality Model Validation After the completion of quality model gridding, selected qualities for selected seams were contoured and contours inspected to ensure that quality models had been gridded correctly. As a second validation measure, average qualities reported during resource reporting for all seams were compared against the average qualities of the input data to ensure consistency between input and output data sets. Page

105 7 Coal Resources 7.1 Prospects for Eventual Economic Extraction and Resource Classification Coal Resources present in the KIM concession have been reported in accordance with the JORC Code, The JORC Code identifies three levels of confidence in the reporting of resource categories. These categories are briefly explained below. Measured..That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors to support detailed mine planning and financial evaluation ; Indicated That part of a Mineral Resources for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow for the application of Modifying Factors in sufficient detail to support mine planning and evaluation ; and Inferred That part of a Mineral Resources for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling.. For the purpose of coal resource classification according to JORC Code (2012), has considered a drill hole with a coal quality sample intersection and core recovery above 90% over the sampled interval as a valid point of observation. In terms of Coal Resource classification, is also guided by the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) (The Coal Guidelines) specifically referred to under clause 37 of the JORC Code (2012). According to the Coal Guidelines, maximum spacing s between points of observation for both structural and coal quality points of observation for Measured, Indicated and Inferred resources are 500 m, 1000 m and 4000 m respectively. Based on due consideration of the continuity of the coal seams as observed in the geological models for each of the two resource areas, the relative lack of evidence for significant faulting and the population statistics of the coal quality composites per seam, has sub-divided Coal Resources within the KIM concession into resource classification categories based on the following spacing s (expressed as a radius of influence around points of observation which is half of the spacing between points of observation): Measured 250m radius of influence; Indicated 500m radius of influence; and Inferred 2000m radius of influence Resource polygons for the main seams from each resource area are shown in Appendix E. It is furthermore a requirement of the JORC Code (2012) that the likelihood of eventual economic extraction be considered prior to the classification of coal resources. Therefore, given the average coal quality attributes of the coal seams considered, which makes it amenable to be marketed as a thermal coal for power generation purposes, considers that it is reasonable to Page

106 define all coal seams within the classification distances discussed above, to a depth of 250m below the topographic surface, as potential open cut coal resources. 7.2 Coal Resource Statement The Coal Resources which have been estimated, have been classified and reported according to the JORC Code (2012) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (2003) as at 31 July 2014 are detailed in Table 7:1. Topographic surfaces valid as at 28 July 2013 were used in all resource models. As no more current mined void information was available at the time of model construction, adjustments for mine production between 28 July 2013 and the date of this resource statement (31 July 2014) have been made. Pit Table 7:1 Coal Resource Estimate for KIM Coal concession as at 31 July 2014 Coal Resources (Mt) Measured Ash% adb CV adb kcal/kg Indicated Ash% adb CV adb kcal/kg Inferred Ash% adb CV adb kcal/kg KIM East , , , KIM West , , , Total Mineral Resources are reported inclusive of the Mineral Reserves. (Note: Final Inferred Resource rounded to nearest 5 Mt. Individual totals may differ due to rounding) 7.3 Comparison with Previous Estimates Previous resource estimate exists for the KIM deposit. In July 2013 PT SMG Consultants estimated a total resource of 212 million tonnes (Table 7:2). This latest (31 July 2014) Resource Estimate of 260 million tonnes differs from this previous PT SMG Consultants estimate for a number of reasons, namely; Total Measured and Indicated tonnes estimated by are within the 10% margin of error which is expected given that two different stratigraphic modelling software packages have been used by and PT SMGC (Minescape and Minex for HDR Salva and PT SMGC respectively). There is a 93% increase in Inferred tonnes due to an increase in the classification distance from 2000 m between holes to 4000 m between holes from the previous to the latest estimate. Total Table 7:2 Coal Resources - Comparison with Previous Estimate Resource Category 2014 PT SMGC 2013 (Mt) (Mt) Measured Indicated Total M&I Inferred Total Page

107 8 Reserve Estimation 8.1 Estimation Methodology prepared the Coal Resource estimate for KIM Concession coal deposit as at 31 July 2014 which is used as a basis for the Coal Reserve estimate. Coal Resources quoted in this report are inclusive of Coal Reserves. The Coal reserves estimates presented in this report are based on the outcome of pit optimisation results and the Techno-economics study carried out by. The mining schedule for the KIM concession blocks includes 2 operating open cut mines (KIM East and KIM West) which targets total coal requirement (client specified) of 3 Mtpa from both the pits. The Subject Specialist for Reserves considers the proposed mine plan and mining schedule is techno-economically viable and achievable. This has been done by reviewing all the modifying factors, estimating reserves in the pit shell and doing a strategic production schedule and economic model which confirms a positive cash margin using the cost and revenue factors as described below in this report. The KIM Mine is an operating mine since 2007 (KIM East pit commenced production in 2007 while the KIM West pit started in 2010). The KIM Mine is operated as single mining operation; even though the production from the Kim West pit has been temporarily suspended as part of normal operation control. It is planned to resume production from the KIM West pit by Q1, considers the Modifying Factors to be valid for both pits. The Modifying Factors used are based on actual operations at the KIM Mine which were independently verified by the HDR Salva s subject specialist during the site visit. Therefore, it is considered valid to use Modifying Factors from the operating KIM mine to satisfy clause 29 of the JORC Code. Further, has carried out independent life of Mine (LOM) Study to develop the mining schedule and its economic evaluation of the Mine. 8.2 Modifying Factors The following Table (Table 8:1) outlines the factors used to run the mine optimisation and estimate the Coal Reserve Tonnage. Table 8:1 Modifying & Mine Optimisation Factors Factor Chosen Criteria Seam roof & floor coal loss of 0.05 m each 0.10m Seam roof & floor dilution 0.02 m each 0.04m Geological & Mining loss including loss in transportation and 5% handling at port Minimum mining thickness minable coal seam 0.3m Dilution default density 2.2bcm/t Dilution default calorific value 500Kcal/kg Dilution default ash 75% Overall Highwall and Endwall slope 20 deg to 40 deg Maximum Pit depth Varies from m max. Minimum Mining width at Pit bottom 50m Page

108 Factor Exclusion of Mining lease (IUP) and offset from Pit crest Mining, Coal handling and Transport Cost supplied by client and validated by Coal Selling Price for Break-even Stripping Ratio calculation Government Documents / approvals - supplied by client Environment Report Geotechnical Report Hydrogeology Report Chosen Criteria 50m Available & Used US$ 56.5/t Available & Used Availabe & Used Available& Used Available & Used 8.3 Notes on Modifying Factors Mining Factors General The mining limits are determined by considering physical limitations, mining parameters, economic factors and general modifying factors as above (Table 8:1). The mining factors applied to the Coal Resource model for deriving mining quantities were selected based on the use of suitably sized excavators and trucks. The assumptions are that due to the shallow to moderate dip of the coal, mining will need to occur in benches. The mining factors (such as recovery and dilution) were defined based on the proposed open cut mining method and the coal seam characteristics. The exclusion criteria included the lease boundary and a minimum working section thickness. Determination of Open Cut Limits The geological models that were used as the basis for the estimation of the Reserves are the MineScape geological models prepared by to compute the Coal Resources. Potential open cut reserves inside different blocks of the Project Area were identified with pit optimisation software utilising the Lerchs Grossman algorithm. By generating the financial value (positive or negative) for each mining block within a deposit and then applying the physical relationship between the blocks, the optimal economic pit can be determined. This method is widely accepted in the mining industry and is a suitable method for determining economic mining limits in this type of deposit. The optimiser was run across a wide range of coal prices using a standard set of costs that was developed by and based on typical industry costs in similar operations. These costs were adjusted to suit the conditions for this project. Unit Costs The Contractor and Owner unit costs used in the Lerchs Grossman optimiser for both Pits are detailed in Table 8:2 and Table 8:3. Table 8:2 Contractor Unit Rates (Real Terms) Cost Item Unit Rate Land Clearing $/ha 1,400 Topsoil Removal $/bcm 1.80 Page

109 Waste Mining $/bcm 1.80 Waste Haulage $/bcm/km 0.25 Coal Mining $/t 1.10 Haul to ROM Stockpile $/t km 0.10 Haul to Customer Road $/t km 0.10 All quoted cost in local currency is adjusted for fuel price and exchange rate. Table 8:3 Owner Unit Costs (Real Terms) Cost Item Unit Rate ROM Coal Handling $/t 0.30 Mine Closure $/ha 4,200 Environmental and Rehabilitation $/t 0.06 Salary and Wages $/t 0.25 Medical & Community Development $/t 0.05 Corporate Overheads $/t 0.50 Contingency $/t 2.35 Royalty was estimated 5% based on the respective sale prices of the coal. A 10% VAT and 15% operating contingency was also considered. These costs were used to create a series of waste and coal cost grids which were used to generate the optimiser nested pit shells. Base Pit for Optimiser In addition to these constraints, the optimisers were mostly limited by a 3 dimensional shell which was built for each block following either a surface constraint or geological model extent. These constraints are detailed in Table 8:4. This pit shell effectively represented the maximum pit possible in the deposit that was reasonable for the estimation of Coal Reserves. Table 8:4 Block wise Optimiser Base Pit limits Pit North South East West KIM West IUP and Geomodel Subcrop & River IUP and Geomodel IUP and Geomodel KIM East Geomodel IUP and subcrop IUP and Geomodel IUP and River Past Mining in KIM East and KIM West Mining is being carried out in KIM East and KIM west since 2007 and 2010 respectively. The last surveyed topo as at 31 July 2014 has been used as the surface for the optimisation for these Pits to exclude mined out tonnage from the current reserve estimate Optimisation Result The optimiser produced a series of nested pit shells using same cost parameters with varying sale price of coal. The method starts with a very low discounted sale price following a high discount factor and moves toward higher sale prices by decreasing the discount on sale price. It estimates the net margin by subtracting the total cost from the revenue within a particular shell at a particular discount factor using the cost-revenue parameters and the physical quantities within the pit shell. As the method progresses, the incremental margin per ton of coal slowly drops down Page

110 to zero at zero discount factor and then goes negative as the pit shells go deeper following higher sale prices. As a result the cumulative margin slowly rises up to a maximum level at zero discount factor and then starts dropping off. Thus the pit shell (OPT000) which represents the zero discount factor is called the optimum pit shell as any smaller or bigger shell will have a lower cumulative margin and value Selection of Pit Shell United Fiber is proposing to mine 3Mtpa of coal from KIM coal concession blocks from 2018 onwards. An economic model was prepared for the mining operation from each of the KIM coal concessions to determine the project breakeven or incremental stripping ratio. The pit optimisation results were examined and pit shells selected where the incremental stripping ratios were less than or equal to break even strip ratio determined at a point where the costs for mining and handling the coal equalled the revenue generated by the coal. Break Even Stripping Ratio Table 8:5 summarises the calculation of the Break Even Stripping Ratio. The methodology adopted involves taking the cost to mine a tonne of coal to the point of sale. Table 8:5 Break-even Stripping Ratio (BESR) Estimation of Break Even Stripping Ratio KIM West & KIM East Coal Price, US$/t $56.52 Total of Road haulage & Royalty, US$/t $29.03 Price at Mine Head, US$/t $27.49 Other mine related cost, US$/t $8.18 Coal Price ex mine, US$/t $19.31 Cost of mining incl. haulage (Coal), US$/t $1.56 Cost of mining incl. land clearing, topsoil & haulage (Waste), US$/bcm $1.99 Break-even stripping ratio, bcm/t 8.89 Total mineable quantities have been estimated based on the in-situ density of coal. The in-situ density of the coal has been estimated using the Preston-Sanders method to account for the difference between air-dried density and in-situ density. The formula and inputs were as follows: RD2 = RD1 x (100 M1) / (100 + RD1 x (M2 M1) M2) Where RD2 = In-situ Relative Density (arb); RD1 = Relative density (adb); M1 = Inherent Moisture (adb); and M2 = Total Moisture (arb). It should be noted that while the total moisture from laboratory measurements may not necessarily equal the in-situ moisture, this is considered to be a best estimate given the limited amount of data. has assumed that no moisture reduction takes place for the determination of product quality. Page

111 8.3.4 Geotechnical Factors The KIM East and KIM West Pits occupy areas that comprise relatively flat topped plateaus at around RL 150 m that have been dissected to depths of 20 to 30 m by mainly south to north aligned creeks. The Batang Asam River runs from south to north in a highly meandering path between the two existing mine areas. In general, the mining areas are being developed into coal measure rocks that are overlain by ignimbrite, as shown below in Figure 8:1. Figure 8:1 Soil & Rock lithology KIM Project The thickness of the ignimbrite has quite a big variation in KIM East Pit varying from 5 m in the SW corner of the pit but it goes up to 55 m on the western side, 40 m on the eastern side and to around 22 m in the central north side. There have been wall and inpit dump failures reported due to excessive tuff, undercut bedding and structure and internal dump developments in the existing mining areas in KIM pits. The current geotechnical study for the KIM area recommends a high wall slope which is depicted in the figure below. Page

112 Figure 8:2 Geotech Recommendations Surface Water Management Pit water management is of critical importance for the effective operation of the mine. Dewatering operations observed during the site visit were considered to be of a high standard with well constructed pit sumps and efficient drainage from operating areas into the sump. The overall strategy for water management over the life of mine will be to: Minimise surface water entering the pit by: o Building dams and drains to divert water from external catchments away from pits; an o Profiling dumps so that water is diverted away from the pits. Removing water from excavations by: o Constructing a main sump at the deepest point of each pit and draining all in pit water to that sump; and o Installing sufficient pumps and pipes of suitable size to pump water from the pit. Two stage pumping will be required in deeper areas in the later years of the mine life Mining Method & Operations Mining operation commenced in 2007 in KIM East and in 2010 in KIM West Pits. The KIM Mine is an open pit mine using standard truck and excavator methods which are a common practice in Indonesia. Waste material is mined using hydraulic excavators and loaded into standard rear tipping off-highway trucks and hauled to dumps in close proximity to the pits or to in-pit dumps where possible. For the purpose of this Reserve Statement, it is proposed that contractors will continue to be used for mining and haulage operations over the life of mine, and the unit costs used for the Reserve estimate reflect this style of mining. The mining method can be described as a multi seam, moderate dip, open cut coal mine using truck and shovel equipment in a combination of strip and haulback operations Processing Factors & Product Quality The coal is to be sold unwashed so no processing factors have been applied. Other than crushing to a 50 mm top size no other beneficiation will be applied. Page

113 8.3.8 Mine Logistics Factors has carried out a high level review of logistic options to access the KIM Project economics. Based on assessment of available information, data gathered during the site visit and while visiting GEM office in Jakarta, following logistic chain for coal blocks comprising the KIM project is considered appropriate. Coal Logistics The mined out coal from KIM project is currently being sold to domestic customers. The mine to end user plant supply chain involves hauling of coal to the ROM stockpile, followed by transportation using public road to the domestic customers. Till recent past, the mined out coal from the KIM project had been sold to export customers as well. At present, domestic sales have better margin compared to exporting the product. However, an option to export coal to overseas customers still exists if margin improves in the future. Mined out coal is halued to the ROM stockpile, located at an approximate distance of 10 km from the KIM pits, using rigid body coal haulage trucks. Although facilities for crushing and screening exist at ROM stockpile area, crushing is not required for sales to most domestic customers. Coal from the ROM stockpile is hauled (262km) along public roads to customers. It is anticipated that most of the coal will be sold to the Lontar Papyrus pulp and paper plant in the near term. However, in mid term, some of the coal produced from the KIM Project may go into to nearby power plants under construction including one at Jambi and Teluk Sirih. Haulage on Public Roads The Jambi provincial government in conjunction with regency governments from Jambi s major coal producing regions have agreed on a suspension of coal trucks using public roads, starting from 31 December 2012 (Jambi Province Regulation No 13 Year 2012). The provincial government is planning to construct an alternative route for coal trucks, in order to avoid resistance from local public and minimise the loss of royalty from coal producers in the area. Presently, GEMS have developed plans to build a new haul road which will connect the KIM Pits to the existing special road leading to Port Nilau (owned by GEMS) via Lontar Pypras Pulp and Paper Plant. This dedicated connecting road is expected to be completed in 36 months (likely to be completed in 2017). Although the interpretation of this regulation is little ambiguous in nature, has been advised by GEMS that government is likely to allow hauling by public road where a coal company is developing an own dedicated haul road. The current and proposed logistic map for KIM project is shown in Figure 8:3. Page

114 Figure 8:3 Current and Proposed Coal Logistics, KIM Project Permits and Approvals understands that the permits and approvals with regard to further mining activities in the KIM Coal Concession deposits are in good standing. This was independently verified by Lasutlay and Pane Advocates in Indonesia stating that tenements are in good standing. HDR Salva has relied on this The KIM concession area is located in Other Use area which requires no permit from the forestry department. There are no known significant environmental factors that influence the estimation of Reserves within the KIM project area as the environmental management includes the development of waste management facilities and monitoring activities ongoing. The western IUPs of KIM are located adjacent to the border of the Jambi province and West Sumatra province of which some are cultural land. As a positive note, till recently cultural land owners have requested to get overburden materials from KIM to fill their land as they are less productive areas in the steep hills for cultivation. A small road crossing the coal haul road from west area to Batang Asam River has also been provided as a shortcut for few local residents. Page

115 Environment and Community Relations A preliminary assessment of potential issues pertaining to environment and community relations which may impact the Reserves estimation was carried out by. These included following activities: Review of environment management procedure at site; Visit to GEMS Jakarta office and inspection of environmental management plans; Review of the Analisis Mengenai Dampak Lingkungan Hidup (AMDAL) - environment impact assessment and management plans; and Review of Corporate Social Responsibility Reports. s preliminary assessment did not reveal any issues related to environment and community relations that will adversely impact project valuation. However, it should be noted that s assessment was only preliminary in nature and cannot provide any guarantee or warranty that significant environmental or community issues will not affect the operation. Key environmental and community relations issues are discussed below. Environmental Aspects Key issues which can have potential impact on project valuations are: Water Run-off, noise and dust and rehabilitation. Water Run-off from site If sediment loads are high or if water is acidic, water run-off from dumps, stockpiles, roads and water pumped from pits has the potential to pollute local rivers, creeks and vegetation. This is managed through the use of bunds, drains and sediment ponds of sufficient size to allow small particles to settle out of the water. Regular monitoring of water discharge points is required under government regulations. Noise and Dust Noise and Dust originating from mine operations haulage and coal handling have the potential to impact the local environment, particularly if villages and local communities are located within close proximity to mining and coal handling operations. Dust is generally managed by using water trucks on haul roads, and by spraying water or dust suppressant chemicals to minimise dust being airborne and suppressing it. Rehabilitation A large area of land will be cleared as part of the KIM mining operation, although much of this area is not covered by any forest land. The disturbed area is generally rehabilitated by removing the topsoil prior to mining, storing the topsoil onsite during mining and covering the final landform with topsoil at the completion of mining. The area to be rehabilitated is then panted with suitable vegetation. Management at the KIM Project have established procedures and a nursery in place to prepare for revegetation to take place. To prevent the dust hazard, the company is currently using dust Page

116 suppressant and water sprinkling system. notes that the current approved AMDAL for the KIM concessions allows the company to mine in excess of the proposed throughput. Mine closure plans for the updated mine plan have yet to be completed; however does not foresee any significant issues with this aspect of the operation. A reasonable allowance has been made in for environmental management, rehabilitation and mine closure Social Aspects Maintaining a good relationship with local communities is a key requirement for the success of the KIM operation. Efforts must be made to continue the ongoing community development programs in coordination with the local government. reviewed KIM s Corporate Social Responsibility programs which include the following aspects: Economy Economic development of the local community is set to include activities to assist with the economic development of the community by providing employment and business opportunities once mining operations have finished. Current programs include training in sewing skills and establishing aquaculture infrastructure. Health It includes programs to improve health in the local communities and to increase people s knowledge through education in health issues Cost and Revenue Factors General GEMS provided a data sheet of indicative unit costs and revenues relevant for this project which was subject to review and agreement with United Fiber. did an independent coal marketing study to review the coal prices forecast for reasonableness. also reviewed the costs for reasonableness against known current mining costs for similar mining conditions within Indonesia. developed a NPV based economic model was developed to show that the project and reserves are economic". The model produced a positive NPV of $26 Million at 11.5% discount rate. These unit rates were then used to estimate the cost to deliver coal to the domestic consumers. This allowed a break even strip ratio to be estimated and the rates were 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; Long term coal price of US $ per tonne; Royalties of 5% of revenue less marketing costs have been allowed along with VAT of 10% and Contingency of 5%; Allowances were made for hauling, crushing, quality control, stockpiling and road transport to customer which totalled approximately US $34.08 per tonne; Coal mining rate considered is US $1.10 per tonne; and Waste mining rate considered is US $1.80 per bank cubic metre. Page

117 Operating Cost Total operating costs per tonne of coal product including royalty for the KIM Project has been estimated as US $52.08 per tonne over the life of the mine. The cost components for the different heads have been given in Table 8:6 below. Table 8:6 Average Unit Operating Cost (Real Terms) over Life of Mine Cost Item $/t Land Clearing $0.02 Topsoil Removal $0.05 Waste Mining $12.25 Waste Haulage $1.00 Coal Mining $1.10 Haul to ROM Stockpile $0.45 ROM Coal Handling $0.30 Haul to Customer $26.20 Mine Closure $0.07 Environmental and Rehabilitation $0.06 Salary and Wages $0.25 Medical & Community Development $0.05 Corporate Overheads $0.50 Local Government Fees $0.50 VAT $4.11 Contingency $2.35 Operating Cost Excl. Royalty $49.25 Royalty $2.83 Operating Cost incl. Royalty $52.08 Capital Cost The KIM project is an operating mine with most of the mine infrastructure already established and in-place. has assumed mining operations to be continued using contractor s mining equipment. The major capital required for the continuation of the project is linked with the land acquisition for the development of the mine over its life and the cost associated with the construction of dedicated road to link the KIM Project with the existing Jalan WKS special road. The total capital cost estimate for KIM Project including road logistics is estimated to be US $58.4M which includes a contingency of US $7.6M. A contingency of 15% has been included in the capital cost estimate. These estimated are considered to have an accuracy of ± 15%. While preparing these estimates, has relied on industry benchmarks, internal database, internal studies and expertise on the KIM concessions. The capital costs for road construction is considered to be relatively well understood, although a conservative approach to estimating these costs has been taken. Page

118 The Capital Cost estimates and the basis of its estimation is shown in Table 8:7. The cost estimate was prepared in Q in US dollars ($). Table 8:7 Capital Cost (Real Terms) Particulars Direct Cost ($M) Contingency ($M) Total Cost ($M) Land Compensation Land and Land Development Site Infrastructure Mine Infrastructure Haul Road Construction Hauling to Customers Total Project Capital has compared these against the industry benchmarks and estimated these to be reasonable Marketing Factors The KIM Project produces coal which is sold in the domestic market. The sales price assumptions used in this study are based on domestic coal prices received for coal sold from the KIM project in the current market. does not see any difficulties marketing the coal from the KIM project as a domestic thermal coal. At Present, the primary markets for this coal are paper and pulp mills located in Sumatra. But in future, some of the coal produced from the KIM Project may go into nearby power plants which are currently under construction. also reviewed the economics for export sales from the concession. It was found that with the current mining costs for the operation, the margins for export sales were lower than domestic sales for current and forecast coal prices. In future, this situation may change with the increase in coal prices. Considering the present uncertainty with the global export market, and to be on conservative side, has opted to use domestic price forecast only which has been estimated to be US $56.5/t in the real term Product Quality As previously stated, have assumed no moisture change in the product coal chain. Therefore it is assumed that the final product will have the same quality of ROM coal which is summarised in the Table 8:8 below. Table 8:8 Product Coal Quality Pits RD adb IM adb CV arb TM arb % Ash adb % t/m3 % Kcal/Kg TS adb % KIM West , KIM East , Total , Page

119 Other Factors Surface constraints to the mining operations at KIM projects are limited to the concession boundary and seam sub crops. Other constraints that were used to define the project were limits of exploration drilling, constraints due to river and variable land compensation rates. No significant surface features exist that would further constrains mining activities. There are a number of planning issues which may impact on the stated mining reserves. These include: detailed geotechnical studies to confirm the overall slope angles and other parameters; detailed hydrogeological studies to know the water flow gradient and dewatering arrangement; more quality data as well as detailed drilling and updates to the geological model; land compensation issues; and changes in life of mine schedule, infrastructure constraints, coal transportation issues and due to changes in marketing and costing during the mining operation. These issues may cause the pit shell and mining quantities to change in future Reserve Statements. is not aware of any other environmental, legal, marketing, social or government factors which may hinder the economic extraction of the Coal Reserves other than those disclosed in this report. In the opinion of the uncertainties in areas discussed in the report such as in structural and geotechnical area, use of public haul road for coal hauling etc. are not sufficiently material to prevent the classification of areas deemed Measured Resources to be areas of Proved Reserves for the purpose of this report. also believes that the uncertainties in each of these area also not sufficiently material to prevent the classification of areas deemed Indicated Resources to be areas of Probable Reserve. Key project risk for the KIM Project emanates from the following factors in order of importance: Lower long term coal prices or domestic coal demand; Higher life of mine operating costs and logistics issues: and Higher Capital costs Any downside to these factors will likely have a significant impact on the economic feasibility of this project. 8.4 Final Pit Design For the purposes of this report, has limited the pit depth to the limit of exploration drilling within the limit applied to the Resource estimates. Other factors considered in the final optimum pit designs included: The location and proximity of coal to exploration data; Proximity to the concession boundary; Out of pit dumping room; Geotechnical parameters; and Surface water management considerations. The final pit designs closely followed the selected pit shell in most locations (Figure 8:4 and Figure 8:5). Page

120 8.4.1 Cut-off Parameters and Pit Limit Overall low-wall slopes as per the basal seam dip, endwall slopes and highwall slopes for the final pit design were considered as per Table 8:9 given below. The slope parameters are based on the geotechnical study carried out for KIM project. Table 8:9 Pit Design Parameters for KIM Project Pit Design Parameters KIM Pits Overall Highwall Slope 40 deg up to 90 m depth, 20 deg for depth up-to 200m depth Bench Slope 70 deg Bench Height 10 m Highwall berm 10 m Low wall slope 12 deg Ramp Width 30 m Maximum Ramp Grade 8% Pit Design The coal seam distribution within the KIM Concession deposits resulted in the Optimiser identifying pits with the 300L basal seam (Figure 8:4 and Figure 8:5). The pits were subjected to adjustments to form a practical pit design, which lead to the exclusion of the minor narrow pit shells and the resultant formation of Mineable Pit Shells, which formed the basis of the subsequent reserves estimate. Optimsed Pits for various blocks have been designed within the limits as defined by the pit optimisation analysis. These limits are rationalised to ensure access between floor benches and walls were straightened to generate mineable pits. The overall highwall batter angle approximately varies from 20 to 40 degrees as the ultimate pit depth ranges from a little more than 80 m to 200 m. This was done in accordance with the geotechnical study done on KIM projects Page

121 Figure 8:4 Selected Optimiser Pit shell & Final Pit Design - KIM West Figure 8:5 Selected Optimiser Pit shell & Final Pit Design- KIM East. 300L Seam Floor Selected Pit Shell KIM East KIM ML East Pit Crest Pit Toe Final Pit Design KIM East Page

122 The ROM coal quantities within the Mineable Pit Shells were then tested so that only Measured and Indicated Coal Resources were classified as Coal Reserves. Coal Reserves within the seams having Measured Resources are reported as Proved Reserves whereas seams having Indicated Resources are reported as Probable Reserves. The Final pit design of the selected pit shells and associated cross sections for estimating Coal Reserves for KIM Coal concession deposits are shown in Figure 8:6 to Figure 8:9 below: Figure 8:6 Final Pit Design - KIM West Section Figure 8:7 Representative Cross Section- KIM West Page

123 Figure 8:8 Representative Cross Section - KIM East Mining Schedule A life of mine plan was plan was completed based on the final pit design. This was done to ensure that the proposed mining method would be practical and achievable and that the proposed dumping strategy would be able to contain the waste mined in the final pit design. This provides a check on the reasonableness of the assumed waste mining costs and estimates the average waste haul per period. The schedule targets production of 0.4 Mt in year 1 (2014), 2 Mt by year 4 (2017) and ramping up to 3 Mt from year 5 (2018) onwards. KIM East produced 1.07 Mt of coal in 2013 and was initially targeted to produce 1 Mt of coal in But due to the market outlook, it is scheduled to produce 0.4Mt only in 2014 from KIM East. There is no coal being produced from KIM West in GEMS is proposing to restart the mining operations in KIM West from The production history from KIM mines as shown below shows that both the mines have produced 2.22 Mt in 2012 and can achieve the scheduled target of 3 Mtpa. Table 8:10 Historical Production from KIM Mines Pits Quantities KIM OB, Mcum East Coal, Mt KIM OB, Mcum West Coal, Mt Total OB, Mcum Coal, Mt Figure 8:10 shows the existing mining condition at the KIM West Pit as there is no mining operations are being carried out currently. Mining activities are being carried out at the KIM East Pit which is shown in Figure 8:11. Page

124 Figure 8:9 KIM West Pit Figure 8:10 KIM East Pit 8.5 Audits and Reviews Checks were done to validate the Minex Coal Resources to Coal Reserves estimation by repeating it manually in an Excel spread sheet. Other validation work included estimating the total volume of coal and waste in the pit shells using the separate industry standard computer programs MineScape. As MineScape structure and quality grids were imported into Minex for optimisation work, volume and area checks were also carried out in Minex within the pit shells. Page

125 The difference between the Proved and Probable Reserves with respect to Measured and Indicated Resources respectively is explained by the following: The Measured and Indicated Resource polygons extend beyond the Mineable Pit Shells; There are some Inferred tonnes in the pit shell which cannot be counted as Coal Reserves; and There are geological and mining losses and dilution gains in the coal reserve estimation. 8.6 Discussion of Relative Accuracy and Confidence A comparison between the actual coal mined and geo model predicted coal tonnages have been done in the KIM East Pit since commencement of mining in 2007 till end of Q2, 2014 and it shows an overall 91% recovery for the said period as shown in Table 8:11. The Ply-by-Ply in-situ Geo Model was used for generating the model predicted number. Table 8:11 Production Reconciliation Actual Coal Tonnes, Mt Geo-Model Coal Tonnes (Mt) Difference in Percentage (%) Reserves Classification Under the JORC Code as shown below only Measured and Indicated Coal Resources can be considered for conversion to Coal Reserves after consideration of the Modifying Factors including mining, processing, infrastructure, economic, marketing, legal, environmental, and social and government factors. To convert Resources to Reserves it must be demonstrated that extraction could be justified after applying reasonable investment assumptions. The highest confidence level establishes Proved Reserves from Measured Resources and a lesser confidence level establishes Probable Reserves from Indicated Resources. A level of uncertainty in any one or more of the Modifying Factors may result in Measured Resources converting to Probable Reserves depending on materiality. A high level of uncertainty in any one or more of the Modifying Factors may preclude the conversion of the affected Resources to Reserves. This classification is also consistent with the level of detail in the mine planning completed for KIM Coal concession deposits. Inferred Coal Resources in the mineable pit shell have been excluded from the Reserve Statement. In the opinion of, the uncertainties in most of these are not sufficiently material to prevent the classifications of areas deemed Measured Resources to be areas of Proved Reserves and areas deemed Indicated Resources to be the areas of Probable Reserves. Page

126 Figure 8:11 Relationships between Mineral Resources & Ore Reserves Source: JORC Code 2012 Page

127 9 Statement of Coal Reserves The Statement of Coal Reserves has been prepared in accordance with the 2012 Edition of the JORC Code. Total ROM Coal Reserves for PT Kuansing Inti Makmur coal deposit ( KIM ) are summarised in Table 9:1 as of 31 July ROM coal reserves are same as Marketable coal reserves. Table 9:1 ROM Coal Reserves for KIM Coal Concession as at 31 July 2014 Area Proved Reserves Probable Reserves Total Reserves Mt Mt Mt KIM West Pit KIM East Pit Total, KIM Project Total ROM Coal Reserves for each of KIM coal concessions are reported by seam and are presented in Table 9:2 and 9:3. Table 9:2 ROM Coal Reserves for KIM West as at 31 July 2014 Seams IM, Reserve (Mt) Ash, TM, ar TS, adb CV RD, adb adb (Gar) adb Proven Probable Total % % % % kcal/kg 100U , L , U , L , U , L ,367 Total ,995 Table 9:3 ROM Coal Reserves for KIM East as at 31 July 2014 Seams Ash, IM, TM, Reserve (Mt) TS, adb RD, adb adb arb adb Proved Probable Total % % % % CV (Gar) kcal/kg 100U , L , U , , L , U , L ,291 Total ,967 Page

128 10 JORC Table 1 This Coal Reserve Report has been carried out in recognition of The 2012 JORC Code published by the Joint Ore Reserves Committee ( JORC ) in Under the report guidelines all geological and other relevant factors for this deposit are considered in sufficient detail to serve as a guide to on-going development and mining. In the context of complying with the Principles of the Code, Table 1 of the JORC code (Appendix B) has been used as a checklist by in the preparation of this report and any comments made on the relevant sections of Table 1 have been provided on an if not, why not basis. This has been done to ensure that it is clear to an investor whether items have been considered and deemed of low consequence or have yet to be addressed or resolved. The order and grouping of criteria in Table 1 reflects the normal systematic approach to exploration and evaluation. Relevance and Materiality are the overriding principles which determine what information should be publicly reported and has attempted to provide sufficient comment on all matters that might materially affect a reader s understanding or interpretation of the results or estimates being reported. It is important to note that the relative importance of the criteria will vary with the particular project and the legal and economic conditions pertaining at the time of determination. In some cases it may be appropriate for a Public Report to exclude some commercially sensitive information. A decision to exclude commercially sensitive information would be a decision for the company issuing the Public Report, and such a decision should be made in accordance with any relevant corporation regulations in that jurisdiction. In cases where commercially sensitive information is excluded from a Public Report, the report should provide summary information (for example the methodology used to determine economic assumptions where the numerical value of those assumptions is commercially sensitive) and context for the purpose of informing investors or potential investors and their advisers. Page

129 References Amier, Rubianto Indrayudha, Coals, source rocks and hydrocarbons in the South Palembang sub-basin, south Sumatra, Indonesia, Master of Science (Hons) thesis, Department of Geology, University of Wollongong, 1991, ASIC, Regulatory Guide 112: Independence of Experts. Australian Securities & Investments Commission [online]. Available from: < [Accessed 22 August 2012]. Bishop, M.G, 2001, South Sumatra Basin Province, Indonesia: The Lahat/Talang Akar- Cenozoic Total Petroleum System, USGS Open-File Report S JORC, Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves The JORC Code 2012 Edition [online], The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia. PT SMG Consultants JORC Resource Statement KIM Project 21st October Tamtomo, Budi, Yuswar, Irzan, and Widianto, Eko, 1997, Transgressive Talang Akar sands of the Duang area, south Sumatra basin: origin, distribution and implication for exploration play concept, in Howes, J. V. G, and Noble, R. A., eds., Proceedings of the Petroleum Systems of Se Asia and Australasia: Indonesian Petroleum Association Conference, May 1997, p Page

130 Appendix A: CVs Person Role Manish Garg (Director - Consulting) Qualification B. Eng. (Hons), MAppFin Prof. Membership MAusIMM; MAICD Contribution Overall Supervision, Economic Assessment (VALMIN 2005) Manish has more than 25 years experience in mining Industry. Manish have worked for mining majors including Vedanta, Pasminco, WMC Resources, Oceanagold, BHP Billiton - Illawarra Coal and Rio Tinto Coal. Manish has been in consulting roles for past 5 years predominately Experience focusing on due diligence, valuations and M&A area. A trusted advisor, Manish has qualifications and wide experience in delivering due diligences, feasibility studies and project valuations for banks, financial investors and mining companies on global projects, some of these deals are valued at over US$5 billion. Craig Williams (Principal Consultant - Geology) Qualification B. Sc. (Hons), M.Sc. (Geology) Prof. Membership MAusIMM Contribution Geology, Resource (JORC 2012) Experience Craig is a geologist with 19 years experience in the mining industry. He has worked at De Beers, Anglo Coal and Vale along with significant consulting experience. Craig s experience covers mineral exploration, underground coal mine production, technical management, and resource estimation, together with due diligence, mineral audits and review, coal quality and exploration. To date, Craig has worked on over 30 coal projects around the world, inclusive of both thermal and coking coal, in the Bowen, Hunter, Surat, Galilee and Collie Basins of Australia, as well as in Africa, Madagascar, Mongolia and Indonesia. Sunil Kumar (Principal Consultant - Mining) Qualification B. Engg. (Mining) Prof. Membership MAusIMM Contribution Mine Scheduling, Reserve (JORC 2012) Experience Sunil is a mining engineer with 25 years experience in the mining industry across operations and consulting. His career spans 4 years in working in mining operations and about 21 years as a mining consultant primarily in the mine planning & design role which included estimation of coal reserves, DFS/FS, due diligence studies, techno-commercial evaluations and technical inputs for mining contracts. Prior to joining, Sunil was working as Principal Mining Engineer at Xstrata Coal. To date Sunil has worked on over 25 coal projects around the world, inclusive of thermal and coking coal projects in Australia, as well as in major coalfields in India, Indonesia, Mongolia and Mozambique. Page

131 Appendix B: JORC Table 1 Criteria Explanation Comment Nature and quality of sampling (e.g. cut channels, random chips etc.) and measures taken to ensure sample representivity. Sampling techniques Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used. Aspects of the determination of mineralisation that are Material to the Public Report. In cases where industry standard work has been done this would be relatively simple (e.g. reverse circulation drilling was used to obtain 1m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay ). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information. Chip samples were collected at every 1m for lithology logging. Sampled all cored coal, sampled separately any bands and taken 10cm of roof and floor for non coal samples. Drilling techniques Drill type (e.g.. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka etc.) and details (e.g.. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.). Used man-portable top drive hydraulic rigs, capable of HQ3 coring. Drill sample recovery Whether core and chip sample recoveries have been properly recorded and results assessed. Measures taken to maximise sample recovery and ensure representative nature of the samples. Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material. After the completion of each core run, core loss is determined by the on site geologist and recorded in the drill hole completion sheet. If recovery is found to be less than 90% within a coal seam intersection, the hole is re-drilled in order to re-sample this seam with greater than 90% core recovery. All samples with less than 90% core recovery over the width of the seam intersection were excluded from the coal quality database. Followed drilling SOP's for loose and carbonaceous formations to achieve full sample recovery. Logging Sub-sampling techniques and sample preparation Whether core and chip samples have been logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. Whether logging is qualitative or quantitative in nature. Core (or costean, channel etc.) photography. The total length and percentage of the relevant intersections logged. If core, whether cut or sawn and whether quarter, half or all core taken. If non-core, whether riffled, tube sampled, rotary split etc. and whether sampled wet or dry. For all sample types, the nature, quality and appropriateness of the sample preparation technique. Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples. Detailed logging of chips and core. Core photographs were taken. No sub-sampling of the core. Page

132 Criteria Explanation Comment Measures taken to ensure that the sampling is representative of the in situ material collected. Whether sample sizes are appropriate to the grainsize of the material being sampled. Quality of assay data and laboratory tests The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total. For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc. Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established. PT Geoservices laboratories are accredited to ISO standards. Coal quality laboratory adheres to internal QAQC and inter-laboratory QAQC checks. ISO methods have been used for MHC tests. Australian Standards have been used for RD and American Society for testing and materials (ASTM) methods have been used for all other quality variables. Geophysical traces were observed to be generally of good quality. Verification of sampling and assaying The verification of significant intersections by either independent or alternative company personnel. The use of twinned holes. Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols. Discuss any adjustment to assay data. Coal quality sampling undertaken by GEMS. Visual inspection on site. Twinned holes checked for agreement of seam intersection depths and in almost all cases there was good agreement. Location of data points Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation. Specification of the grid system used. Quality and adequacy of topographic control. Borehole collars have been surveyed using standard total station techniques employed by the survey contractors. Surveys have been validated by GEMS survey staff. The surveyed borehole locations for KIM match well with topographic data. The topography was generated by PT Surtech Utama across KIM project area using LIDAR remote sensing data. Data spacing and Distribution Data spacing for reporting of Exploration Results. Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied. Whether sample compositing has been applied. Data spacing sufficient to establish continuity in both thickness and coal quality. Data sets include topography and base of weathering as well as seam structure and coal quality. Ply sampling methodology use. Sample compositing has been applied. Orientation of data in relation to geological structure Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type. If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material. Ply by Ply sampling used therefore orientation of sampling not seen to introduce bias as all drilling is vertical. Sample Security The measures taken to ensure sample security. Proper measures for sample security were taken. Audits or reviews The results of any audits or reviews of sampling PTSMGC conducted a review of the drill Page

133 Criteria Explanation Comment techniques and data. hole database in Standard database checks also performed by HDR Salva as outlined on Section prior to resource modelling. Mineral tenement and land tenure status Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings. The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area. All tenure is secured and currently available.. Exploration done by other parties Acknowledgment and appraisal of exploration by other parties. No exploration by other parties. Geology Deposit type, geological setting and style of mineralisation. See Section 4 of the Resource and Reserve Report. A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes: Drill hole information easting and northing of the drill hole collar elevation or RL (Reduced Level elevation above sea level in metres) of the drill hole collar dip and azimuth of the hole down hole length and interception depth hole length. This report pertains to resource estimation not exploration results. As such the details of the drill holes used in the estimate are too numerous to list in this Table. If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case. Data aggregation methods In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations and cut-off grades are usually material and should be stated. Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail. The assumptions used for any reporting of metal equivalent values should be clearly stated. All samples have been composited over full seam thickness and reported using Minescape modelling software. No metal equivalents used. Relationship between mineralisation widths and intercept lengths These relationships are particularly important in the reporting of Exploration Results. If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. If it is not known and only the down-hole lengths are reported, there should be a clear statement to this effect (e.g. downhole length, true width not known ). Ply sampling methodology prevents samples from crossing ply boundaries. Therefore orientation of sampling not seen to introduce bias as all drilling is vertical and seams mostly gently dipping.. Page

134 Criteria Explanation Comment Diagrams Where possible, maps and sections (with scales) and tabulations of intercepts should be included for any material discovery being reported if such diagrams significantly clarify the report. See figures in the Report and Appendices. Balanced reporting Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practised to avoid misleading reporting of Exploration Results. No reporting of exploration results. Other substantive exploration data Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances. Geophysical survey results available for majority of the holes. Further work The nature and scale of planned further work (e.g.. tests for lateral extensions or depth extensions or largescale step-out drilling). Further work will be necessary to improve the confidence levels of the deposits and understanding of the full seam stratigraphy. No proposed exploration plan has been proposed in this report. Database integrity Site Visits Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes. Data validation procedures used. Site Visits undertaken by the Competent Person and the outcome of these visits. If no site visits have been undertaken, indicate why this is the case The database for all blocks is considered of an acceptable standard to report a Coal Resource. Drill hole data used to construct Minescape model. Checks against original down hole geophysics (las) files used to verify data during modelling. Site visit by Mining Engineer (CP for Reserving) but not the geologist (CP for Resource). Geological site visit not conducted due to the fact that the geology had been well documented by previous workers. Geological interpretation Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit. Nature of the data used and of any assumptions made. The effect, if any, of alternative interpretations on Mineral Resource estimation. The use of geology in guiding and controlling Mineral Resource estimation. The factors affecting continuity both of grade and geology. High degree of confidence in seam picks made using down hole geophysical data. The KIM geological models created by are considered to accurately represent the deposits. No major faults have been reported. Current Minescape model tonnes agree with previous model by PT SMGC Minex model to within 10% error margin, excluding the effect of different classification distances. Dimensions The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource. See figures in the Report and Appendices. Page

135 Criteria Explanation Comment Estimation and modelling techniques The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data. The assumptions made regarding recovery of byproducts. Estimation of deleterious elements or other non-grade variables of economic significance (eg sulphur for acid mine drainage characterisation). In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed. Any assumptions behind modelling of selective mining units. Any assumptions about correlation between variables. Description of how the geological interpretation was used to control the resource estimates. Discussion of basis for using or not using grade cutting or capping. The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available. FEM interpolator used for surface elevation, thickness and trend. Inverse distance squared used for coal quality throughout. Based on experienced gained in the modelling of over 40 coal deposits around the world, the FEM interpolator is considered to be the most appropriate for structure and inverse distance the most appropriate for coal quality. Grid cell size of 25 m for the topographic model, 25 m for the structural model. Visual validation of all model grids performed. Sulphur is below 1% on average for most seams. Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content. All tonnages estimated on air dried basis. Cut-off parameters The basis of the adopted cut-off grade(s) or quality parameters applied. The coal resources contained in this report are confined within the concession boundary. The resources were limited to 250m below topography. A minimum ply thickness of 10cm and maximum thickness of 30cm was used for coal partings. Mining factors or assumptions Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It may not always be possible to make assumptions regarding mining methods and parameters when estimating Mineral Resources. Where no assumptions have been made, this should be reported. The KIM East and KIM West areas are currently being mined as open pit excavations by truck and shovel method. Metallurgical factors or assumptions The basis for assumptions or predictions regarding metallurgical amenability. It may not always be possible to make assumptions regarding metallurgical treatment processes and parameters when reporting Mineral Resources. Where no assumptions have been made, this should be reported. N/A in situ air dried tonnes quoted Page

136 Criteria Explanation Comment Environmental Factors Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfield project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made. N/A Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples. N/A in situ air dried tonnes quoted. Classification Audits or reviews The basis for the classification of the Mineral Resources into varying confidence categories. Whether appropriate account has been taken of all relevant factors i.e. relative confidence in tonnage/grade computations, confidence in continuity of geology and metal values, quality, quantity and distribution of the data. Whether the result appropriately reflects the Competent Person(s) view of the deposit. The results of any audits or reviews of Mineral Resource estimates. Classification distances based on an assessment of the variability of critical variables through statistical analysis and by an assessment of the degree of geological complexity. Classification radii for the three resource categories are: Measured:250m Indicated:500m Inferred:2000m Reconciliation exercises between planned and actual mining is occurring on an ongoing basis. Discussion of relative accuracy/confidence Where appropriate a statement of the relative accuracy and/or confidence in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate. The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages or volumes, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available. Spacing ranges for the three resource categories are considered to adequately reflect the degree of confidence in the underlying estimate on a global basis. Significant local variation to estimated values may arise which should be addressed by adequate grade control procedures. Page

137 Criteria Explanation Comment Mineral Resource Estimate for conversion to Ore Reserves Description of the Mineral Resource estimate used as a basis for the conversion to an Ore Reserve. Clear statement as to whether the Mineral Resources are reported additional to, or inclusive of, the Ore Reserves. Basis of the estimates is KIM JORC Resource Statement as at 30 July Coal resources is inclusive of Coal reserves. Site Visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits. If no site visits have been undertaken indicate why this is the case. Mr Sunil Kumar, Mining Engineer, CP, made the site visit and held discussions during July Study Status The type and level of study undertaken to enable Mineral Resources to be converted to Ore Reserves. The Code requires that a study to at least Pre- Feasibility Study level has been undertaken to convert Mineral Resources to Ore Reserves. Such studies will have been carried out and will have determined a mine plan that is technically achievable and economically viable, and that material Modifying Factors have been considered. The Kim Mine is an operating mine. KIM East Pit is being currently mined. KIM West Pit was mined till the end of 2013 and is proposed to be mined again from Q1, Cut-off parameters The basis of the cut-off grade(s) or quality parameters applied Refer Table 8:4, Break even Stripping Ratio analysis Mining factors or assumptions The method and assumptions used as reported in the Pre-Feasibility or Feasibility Study to convert the Mineral Resource to an Ore Reserve (i.e. either by application of appropriate factors by optimisation or by preliminary or detailed design). The choice, nature and appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre-strip, access, etc. The assumptions made regarding geotechnical parameters (eg pit slopes, stope sizes, etc.), grade control and pre-production drilling. The major assumptions made and Mineral Resource model used for pit and stope optimisation (if appropriate). The mining dilution factors used. The mining recovery factors used. Any minimum mining widths used. The manner in which Inferred Mineral Resources are utilised in mining studies and the sensitivity of the outcome to their inclusion. The infrastructure requirements of the selected mining methods. Refer Table 8:1 Modifying Factors and Pit Optimisation Parameters and Section 8:3 on Notes on Modifying Factors. The KIM Mine is an operating mine since 2007 (KIM East pit commenced production in 2007 while the KIM West pit started in 2010). The KIM Mine is operated as single mining operation; even though the production from the Kim West pit has been temporarily suspended as part of normal operation control. It is planned to resume production from the KIM West pit by Q1, considers the Modifying Factors to be valid for both pits. The Modifying Factors used are based on actual operations at the KIM Mine which were independently verified by the HDR Salva s subject specialist during the site visit. Therefore it is considered valid to use Modifying Factors from the operating KIM mine to satisfy clause 29 of the JORC Code. While JORC 2012 in not explicit with reference to operating mines, the guidance given in ASX FAQ no. 9 is considered relevant in this regard. Further, has carried out independent life of Mine (LOM) Study to develop the mining schedule and its economic evaluation of the Mine. Page

138 Criteria Explanation Comment The metallurgical process proposed and the appropriateness of that process to the style of mineralisation. Whether the metallurgical process is well-tested technology or novel in nature. Metallurgical Factors or assumptions The nature, amount and representativeness of metallurgical test work undertaken, the nature of the metallurgical domaining applied and the corresponding metallurgical recovery factors applied. Any assumptions or allowances made for deleterious elements. The existence of any bulk sample or pilot scale test work and the degree to which such samples are considered representative of the ore body as a whole. For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications. The coal is to be sold unwashed so no processing factors have been applied. Other than crushing to a 50 mm top size no other beneficiation will be applied. Environmental The status of studies of potential environmental impacts of the mining and processing operation. Details of waste rock characterisation and the consideration of potential sites, status of design options considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported. Refer Section 8.3.9, Permits and approvals Infrastructure The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed. Discussed in Section Mine Logistic Factors Costs The derivation of, or assumptions made, regarding projected capital costs in the study. The methodology used to estimate operating costs. Allowances made for the content of deleterious elements. The derivation of assumptions made of metal or commodity price(s), for the principal minerals and coproducts. The source of exchange rates used in the study. Derivation of transportation charges. The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc. The allowances made for royalties payable, both Government and private. Discussed in Section Cost and Revenue factors. Revenue Factors The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc. The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products Discussed in Section Cost and Revenue factors Page

139 Criteria Explanation Comment The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future. Market Assessment A customer and competitor analysis along with the identification of likely market windows for the product. Price and volume forecasts and the basis for these forecasts. For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract. Discussed in Section Marketing Factors Economic The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc. NPV ranges and sensitivity to variations in the significant assumptions and inputs Economic analysis (NPV) done based on long term price outlook and the cost estimates (Contractor mining operation) Social The status of agreements with key stakeholders and matters leading to social licence to operate Refer Section 8.3.9, Permits and approvals Other To the extent relevant, the impact of the following on the project and/or on the estimation and classification of the Ore Reserves: Any identified material naturally occurring risks. The status of material legal agreements and marketing arrangements. The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre- Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingency. Discussed under Section , Other Factors Classification The basis for the classification of the Ore Reserves into varying confidence categories. Whether the result appropriately reflects the Competent Person s view of the deposit. The proportion of Probable Ore Reserves that have been derived from Measured Mineral Resources (if any). Discussed under Section 8.7, Reserve Classification Audit & Reviews The results of any audits or reviews of Ore Reserve estimates. Discussed under Section 8.5, Audits & Reviews Page

140 Criteria Explanation Comment Where appropriate a statement of the relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the reserve within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate. Discussion of Relative accuracy/confidence The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used. Accuracy and confidence discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage. It is recognised that this may not be possible or appropriate in all circumstances. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available. Discussed under Section 8.6, Relative Accuracy and confidence Page

141 Appendix C: Raw Coal Quality Histograms per Seam KIM EAST Page

142 KIM WEST Page

143 Page

144 Appendix D: Cross-Sections Page

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146 971

147 Appendix E: Resource Polygons for selected seams Page

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155 980

156 Appendix F: Drill Hole Location Plans Page

157 982

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159 984

160 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT Date:19January2015 ReportNo:R IndependentQualifiedPerson sreportandvaluation CoalAssetsofPTTrisulaKencanaSakti RegencyofBaritoUtara,CentralKalimantan Indonesia Onbehalfof For:MsPaulineLee UnitedFiberSystemLimited 50RafflesPlace #3201SingaporeLandTower SINGAPORE U NITEDFIBERSYSTEMLTD By IanWollff(BSc,MAusIMM,MAIG,IAGI(CPI)) RayCary(BSc,FAusIMM(CP),FAIG) Approved: JohnBishop DirectorSingapore 985

161 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti AuthorandReviewerSignatures Principal Author: IanWollff Signature: Contributors: DAG&BSc (Geology) MAusIMM,MAIG, IAGI(CPI) RayCary,Dwiyoko Taruno Date: 19January2015 Principal Reviewer: RayCary Signature: Other Reviewers: BSc(Geology, PhysicalChemistry) FAusIMM(CP),FAIG JohnBishop Date: 19January2015 CSA Authorisation: JohnBishop Signature BSc(Geology), MAusIMM,MAIG Date 19January2015 Revision: RevNo. Date Revisions Author Approved ReportNo:R I 986

162 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti ExecutiveSummary UnitedFiberSystemLimited( UFS )hasrequestedcsaglobalptyltd( CSA )topreparean Independent Qualified Person s Report and Valuation of two adjacent Coal Izin Usaha Pertambangan ( IUP ) or Mining Business Permit that are in the Production Operation PermitstageforcoallocatedinCentralKalimantan,Indonesia(Figure1)( Report ).TheIUPs areheldbypttrisulakencanasakti( TKS )andaretobeacquiredbyufs,acompanylisted onthesingaporestockexchange( SGX ),aspartoftheproposedreversetakeoverofufs by PT Golden Energy Mines Tbk ( GEMS ) ( the Proposed RTO ). The Report is to be included in its entirety within a Circular to be sent to UFS shareholders ahead of an ExtraordinaryGeneralMeetingtoapprovetheProposedRTO. TheIUPshaveatotalareaof9,707haandliewithinadesignatedProductionForest.Within theiupsisa699haizinpinjampakaikawasanhutan( IPPKH )orforestryborrowanduse PermitwhichallowstheminingofcoalwithinthedesignatedProductionForest.TheIPPKH areacanbeprogressivelyadjustedasminingactivityprogresses.theiupsandippkhhave been confirmed as being in good standing by independent enquiry of the legal firm LasutLay&Pane( LLP ). TheIUPsarelocated58kmeastofthetownofMuaraTewehwhichisontheBaritoRiver (Figure2).RoaddistancefromtheminesitetoabargeportontheBaritoRiveratPangkuis 47km. The Barito River allows barge loading of the coal and shipment to the coast (approximately 485km) for loading onto larger bulk coal carriers at the Taboneo TranshipmentPoint.AlternativeroadtransportroutesfromtheminetotheBaritoRiverare alsoavailable.thepangkuriverportisownedbyacompanynotassociatedwithtkswhilst thehaulroadispartofanetworkof haulroadsownedbyseveralothercompanies.coal productioncommenced withintheippkhareainaugust2010andceasedinmarch2012. SalesceasedinSeptember2012.Atotalof218,522tofcoalwasminedand184,514tsold. Within the IUPs coal is present in the Tanjung Formation (~40My old), the Montalat Formation(~20Myold)andtheWarukinFormation(~15Myold).Theseformationsarepart of the Barito Basin stratigraphy. The known resources are restricted to the Montalat and Warukin Formations. The outcrop pattern of these formations is controlled by an east northeasttowestsouthwesttrendingsynclinewhichcompletesastructuralclosurewithin thecentralpartoftheiupsaffordingcontinuouscoverageofthecoalbearingstratigraphy foradistance24kmaroundashallowbasinlikestructure.anadjacentsubparallelanticline islocatedinthesoutheastportionoftheiups. Atotalof494drillholesaggregating40,168mhavebeencompletedwithintheIUPs.Atleast 21separatecoalseamshavebeenidentifiedwithanaveragetotalcombinedthicknessof 15.05mwithinasedimentpackage575mthick.Individualseamsrangefrom0.10mto3.88m thickandaverage1.00minthickness.coalqualityanalyseshavebeencompletedon709nq coresamplesfrom261drillholeswhichindicatethatthecoalisofasubbituminousrank ReportNo:R II 987

163 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti withalowtomoderateenergycontent (averagecv 1 of<5500kcal/kg 2 ar 3 )andhighsulphur (averagets 4 >1.5%ar). Figure1.LocationofTKSCoalProjectinIndonesia Figure2.LocationofTKSCoalProjectinCentralKalimantan 1 CV Calorific Value 2 kcal/kg kilocalories/kilogram 3 ar as received referring to thee test sample 4 TS total sulphur ReportNo:R III

164 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Indonesia based resource consultants PT Danmar Explorindo ( Danmar ) prepared a QualifiedPerson sreportofcoalresourcesdated15january2015whicharesummarisedin the tables below. Danmar states that the estimates were prepared according to the AustralasianCodeforReportingofExplorationResults,MineralResourcesandOreReserves The JORC Code 2012 Edition ( JORC Code ). Danmar s report includes the appropriate CompetentPersonsstatementandtheJORCCode2012Table1checklist.CSA sscopedoes notincludeanauditofdanmar scoalresourceestimates. InSituCoalResourceswithinIUPs(asat31July2014) MEASURED(Mt) INDICATED(Mt) INFERRED(Mt) TOTAL(Mt) WeightedAverageCoalQualityforAllResources(asat31July2014) TM 5 IM 6 ASH VM 7 FC 8 TS CV CV CV % % % % % % Kcal/kg Kcal/kg Kcal/kg ar adb 9 adb adb adb adb adb ar daf ,811 5,352 7,356 The Hardgrove Grindability Index is 59 and Relative Density (in situ) is The resources are estimatedtoa100mdepth. CSAhasreviewedDanmar sestimateandhasformedanindependentviewthatabout53mt oftheresourcesmightsatisfythejorccoderequirementforreportingofcoalresources, i.e. thattherearereasonableprospectsforeventualeconomicextraction(i.e.morelikely thannot). Despitethepastproductionactivity,DanmardidnotundertakeaCoalReserveEstimatedue to a lack of a suitable prefeasibility study and due to prevailing coal prices at or below expectedcosts. OutsidetheidentifiedresourcesDanmarhasrecognisedpotentialforadditionalresources andhassuggestedan ExplorationTarget (JORC2012)of20Mtto113Mtofcoal,someof whichisexpectedtohavecvsintherangeof5,700kcal/kgto6,500kcal/kg(ar)andtsin therange0.3%to3.0%(adb).althoughlittledrillinghasbeencompletedovermostofthe prospective areas, CSA considers that the area of IUPs outside that underlain by the resources(6,827ha)hassubstantialcoalpotential. Afteranalysisofthetransactionsinvolvinglandonly,CSAhasformedtheopinionthatthe areaoutsidethatunderlainbyresourceshasavalueintherangeus$11.6mtous$18.7m, with a preferred value near the upper end of the range at US$15M due to the excellent prospects for realising the exploration targets. Analysis of the transactions for which resourcesandresources/landareaswerereportedsuggestsavalueintherangeus$16mto US$21Mforthe53MtofResources,withapreferredvaluenearthelowerendoftherange, thatis,us$18m. 5 TM total moisture 6 IM inherent moisture 7 VM volatile matter 8 FC fixed carbon 9 adb air dried basis 10 daf dry ash free basis ReportNo:R IV 989

165 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti InCSA sopinion,thefairmarketvalueofthetksiupsasat31july2014laywithintherange US$28MtoUS$40M,withamostlikelyvalueofUS$33M.Itisstressedthatthisisonlyan opinionastothelikelyvalue,whichcanonlybeconfirmedbygoingtothemarket.despite the valuations having been based on transactions that largely took place over the last 24 monthsorso,csacautionsthatthecontinuingvolatilemarketforthermalcoalexperienced sincethebeginningof2012couldpotentiallyandmateriallyalterthemarketvalueofthe assetfromthatderivedinthisreport. ThisReporthasbeenpreparedinaccordancewiththeCodefortheTechnicalAssessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports( VALMINCode )andthesgxmainboardadmissionrulesformineral,oilandgas companies( MOGRules ).AllreferencestounitsofcurrencyinthisReportaretoUSDollars ( $ or US$ ).Standardabbreviationsusedarekilometres( km ),metres( m ),hectare ( ha ),million( M ),kilogram( kg )andtonne/s( t ). ReportNo:R V 990

166 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Contents AuthorandReviewerSignatures...I ExecutiveSummary... II Contents......VI 1 Introduction ScopeandTermsofReference ReportingStandards AuthorsofReport BasisforReport Independence DeclarationsandLimitations PreviousValuations CoalMininginIndonesia IndonesianMiningLaw KalimantanCoalGeology TKSIUPs LocationandAccess Tenure RegionalGeologicalSetting ProjectGeology CoalStratigraphy PreviousExplorationandMining CoalDepositModelling CoalResources CoalTransport CoalMarketability ExplorationPotential SiteInspection ProjectRisks CoalPricesandOutlook ValuationofTKSIUPs ValuationConcepts ValuationMethods ValuationofTKSIUPs ValuationofLandArea ValuationofResources ValuationConclusions References Glossary Figures Figure1.LocationofTKSCoalProjectinIndonesia...III Figure2.LocationofTKSCoalProjectinCentralKalimantan...III Figure3.IndonesianCoalBasinsandMajorCoalMines...6 Figure4.CoalBasinsofKalimantan...11 Figure5.LocationofTKSCoalProjectinNorthBarito,CentralKalimantan...13 Figure6.TKSProjectTitleAreasandAccessRoads(UTMZone50S)...14 Figure7.SimplifiedTKSProjectGeology(modifiedafterDanmar2015)...16 Figure8.TKSDrillHoleandCoalOutcroplocations...18 ReportNo:R VI 991

167 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure9.TKSCoalResourceAreas...20 Figure10.TKSExplorationTargetAreas(ModifiedafterDanmar2015)...25 Figure11.SelectedIndonesianThermalCoalPricesfromJuly2009toJuly Figure12.SelectedIndonesianCoalPricesfromJuly2012toJuly Tables Table1.DetailsofIUPsforCoal(LasutLay&Pane2015)...8 Table 2. TKS WarukinMontalat Formation Coal Seam Stratigraphy and Thicknesses (Danmar2015) Table3.TKSCoalProduction(Danmar2015)...18 Table4.InSituCoalResourceswithinTKSIUPs(Danmar2015)...20 Table5.WeightedAverageCoalQualityAllResources(Danmar2015)...21 Table6.CoalResourcesbyDepth(Danmar2015)...21 Table7.CoalResourcesbySeam(Danmar2015)...21 Table8.CoalResourceQualitybySeam(Danmar2015)...22 Table9.CoalResourcesbyFormation(Danmar2015)...22 Table10.CoalResourceQualitybyFormation(Danmar2015)...23 Table11.TKSCoalShipments(Danmar2015)...24 Table12.CoalBrandandPrice(HBAJuly2014)...28 Table13.TKSCoalandIndicativePrice¹(July2014)...29 Table14.SummaryofComparableIndonesianCoalProjectTransactions...35 Appendices Appendix1 Appendix2 Appendix3 LasutLay&PaneReport...45 TKSCoalStratigraphy(Danmar2015)...46 SiteVisit17July ReportNo:R VII 992

168 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 1 Introduction 1.1 ScopeandTermsofReference On15May2014thedirectorsofUnitedFiberSystemLimitedcommissionedCSAGlobalPtyLtd to prepare an Independent Qualified Person s Report and Valuation of two Izin Usaha Pertambangan or IUP with Production Operation Permits for coal located in the Regency of BaritoUtara,CentralKalimantan,Indonesia.TheIUPsarecurrentlyheldbyPTTrisulaKencana SaktiandaretobeacquiredbyUFS,acompanylistedontheSingaporeStockExchange,aspart of the proposed reverse takeover of UFS by PT Golden Energy Mines Tbk ( GEMS ), a mining company listed on the Indonesia Stock Exchange ( IDX ).TKS is beneficially owned by GEMS whichisamemberofthesinarmasgroup( SinarMas ).UponcompletionoftheProposedRTO, thecontrollingshareholdersofgemswillbecomethecontrollingshareholdersofufs. CSA s Report and valuations have been prepared as at 31 July 2014 ( Valuation Date ). The ReportistobeincludedinitsentiretywithinacirculartobesenttoUFSshareholdersaheadof an Extraordinary General Meeting to approve the Proposed RTO ( Circular ), and has been preparedinaccordancewiththeprevailingsgxmainboardadmissionrulesformineral,oiland gas companies ( MOG Rules ). Under the MOG Rules, Rule 1015 requires that if a very substantialacquisitionorreversetakeoverrelatestotheacquisitionofamineral,oilorgasasset ofamineral,oilorgascompany,thecircularthatmustbesenttoshareholdersmustcontaina reportpreparedbyanindependentqualifiedpersoninaccordancewiththevalmincodeoran equivalentstandardthatisacceptabletosgx.csahaspreparedthisreportaccordingly. CSA sscopedoesnotincludeanauditofdanmar scoalresourceestimates,nordoesitinclude anauditofthelasutlay&pane( LLP )legalreviewofthevariouspermitsorcorporatematters. 1.2 ReportingStandards InFebruary1995theAustralasianInstituteofMiningandMetallurgy( AusIMM )adoptedthe CodeandGuidelinesforAssessmentandValuationofMineralAssetsandMineralSecuritiesfor IndependentExpertReports.Therehavesincebeenanumberofrevisededitions,thelatestof whichwasissuedinmid2005underthetitle CodefortheTechnicalAssessmentandValuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports ( VALMIN Code ).TheVALMINCodeisbindingonmembersoftheAusIMMandAIG.CSAhaspreparedthis ReportinaccordancetotheVALMINCode. TheAustralasianCodeforReportingofExplorationResults,MineralResourcesandOreReserves 2012Editionsetsoutminimumstandards,recommendationsandguidelinesforPublicReporting ofexplorationresults,mineralresourcesandorereserves.thejorccodehasbeenadopted bytheausimmandaig,andisthereforebindingonmembersofthoseorganisations. 1.3 AuthorsofReport ThisReporthasbeenpreparedbyCSAGlobalPtyLtd.CSAisaninternationalmineralsindustry consultancywithitsheadofficeinperth,westernaustralia,branchofficesindarwin,brisbane ReportNo:R

169 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti and Adelaide, and overseas offices in the United Kingdom, South Africa, Canada, Russia, Indonesia and Singapore.The Company has provided geological consulting services to the explorationandminingindustriesinaustralia,asia,europe,africa,andtheamericasforover30 years.these services include estimation, assessment and evaluation of a wide range of both metallicandnonmetallicdeposits,andithasadvisedupon,designedandperformedexploration programs, carried out valuations, due diligence studies, and mine development studies and producedindependentreportsonminingandexplorationproperties. TheprincipalauthorofthisReportisMrIanWollffaPrincipalGeologistandDirectorofPT.CSA GlobalIndonesia.MrWollffgraduatedfromtheBallaratSchoolofMinesandIndustriesin1972 withadiplomaofappliedgeologyandin1982completedabachelorofscienceingeology.heis amemberoftheausimmandamemberoftheaig.heisalsoanaccreditedwiththeindonesian Ikatan Ahli Geologi Indonesia ( IAGI ) as a Competent Person Indonesia ( CPI ) for public reportingofcoalresources.hehasover40yearsofindustryexperienceincludingsome30years inindonesiathatincludesexploration,resourceevaluationandprefeasibilitystudiesinaustralia and Indonesia plus construction of coal mines in Indonesia. Commodities have included coal, uranium,basemetalsandgold.mrwollffhasthenecessaryqualificationsandexperiencetobe considereda Specialist underthevalmincode. ThecoauthorofthisReportisMrRayCary.MrCaryisanAssociateConsultantwithCSA,and also the Director and Principal of Northwind Resources Pty Ltd ( NRPL ) of Perth, Western Australia.MrCarygraduatedfromtheUniversityofWesternAustraliain1970withaBachelorof Science,majoringinGeologyandPhysicalChemistry.HeisaFellowoftheAusIMMandaFellow oftheaig.hehasworkedintheminingandexplorationsectorsforover40yearsinexploration, resourceevaluation,feasibilitystudies,projectdevelopment,miningoperations,corporateand asset acquisitions, resource project financing and company directorships. He has prepared numerous public and private evaluations of companies, mining operations and exploration projects,andhasextensiveexperienceinfinancialmodellingforoperationsinvolvingavarietyof commoditiesincludinggold,nickel,basemetalsandironore.thegeographicspreadofthese activitiesincludesaustralia,newzealand,centralandsoutheastasia,westandcentralafrica, Europe, Northern and Central America and the Pacific region. Mr Cary has the necessary qualificationsandexperiencetobeconsideredan Expert underthevalmincodewithmore than5years experienceintheassessmentandvaluationofmineralassets. TheReportwaspreparedundertheoverallsupervisionofMrJohnBishop,PresidentDirectorof PTCSAGlobalIndonesiaandDirectorofCSAGlobal(Singapore)PteLtd.MrBishopgraduated fromtheuniversityofcanterbury,newzealand,in1982withabachelorofscience,majoringin Geology.HeisaMemberoftheAusIMMandaMemberoftheAIG.Hehasmorethan30years internationalexperienceinthemanagement,evaluationanddevelopmentofmineralandcoal projects,includingmorethan7yearsintheindonesianminingindustry. 1.4 BasisforReport TheinformationuponwhichthisreportisbasedhasbeenprovidedtoCSAbyGEMSorhasbeen sourced from the public domain. Coal Resources within the IUPs have been estimated by PT Danmar Explorindo under instruction from UFS. The status and legal standing of the IUPs has beenestablishedbylasutlay&pane( LLP ).Danmar sfinalreportdated15january2015was made available to CSA on 18 January 2015, and LLP s final report dated 16 January 2015 was ReportNo:R

170 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti received 17 January The Danmar and LLP reports were prepared to incorporate informationupto31july2014.llpdeterminedthattheiupsandippkhwereingoodstandingat thetimeoftheirreport,whichwouldhavebeenthecaseatthevaluationdate.csaprovideda draftofthisreporttodanmarandtollp,bothofwhomhaveadvisedthattheyconsenttothe inclusion in this Report of the discussion of their work in the form and context in which it appears. CSAhasmadereasonableenquiriesandexerciseditsjudgementonthereasonableuseofthe informationprovidedbydanmarandllp,andcsahasnoreasontodoubtthereliabilityofany oftheinformationortobelievethatinformationhasbeenwithheldorisincomplete.however, theinformationhasnotbeenindependentlyaudited,norhasanyauditbeenconductedofanyof GEMS,TKSorUFS,theirsubsidiariesorassociatedentities,oranyotherpartiestotheProposed RTO.AllmaterialsourcesofinformationareshowninthefootnoteofTable11andSection8at therearofthereport. ThestatementsandopinionsincludedintheReportaregiveningoodfaithandinthebeliefthat theyarenotfalse,misleadingorincomplete.acopyofthereportwasprovidedtoufsindraft form with a written request for comment as to errors of fact or interpretation, material omissions,orsubstantivedisagreementastotheconclusionsreachedherein.theopinionsand conclusions presented in the Report are believed to be appropriate on the basis of the informationavailableatthetime.theseopinionsandconclusionscouldhoweverbesubjectto change over time should new information become available, or with changes in other factors thatmayaffectthequantumofcoalresourceswithintheiupsortheprospectivityoftheiups. TheVALMINCodestipulatesthatafieldinspectionofamaterialMineralorPetroleumAssetor tenement must be made where an inspection is likely to reveal information or data that is Material to a Report, providing it is practicable to do so. CSA Senior Coal Resource Geologist DwiyokoTarunowastheSpecialistwhovisitedtheIUPsonthe17July2014inthecompanyof TKS ssitecommunitydevelopmentofficermruppu.mrdwiyoko sobservationsarediscussed insection5.12ofthisreport. 1.5 Independence None of CSA, NRPL, any of their employees, partners, directors, substantial shareholders, affiliates, Associates or subsidiaries, nor the authors of this report, have, or have had any association with any of UFS, GEMS, TKS or any of their directors, subsidiaries, substantial shareholders,itsadvisersandtheirassociateswhichcouldreasonablybeconstruedasaffecting CSA s independence in the preparation of this Report. None of CSA, NRPL, any of their employees, partners, directors, substantial shareholders, affiliates, Associates or subsidiaries, nor the authors of this report has, or has had, any shareholding, or the right (whether enforceableornot)tosubscribeforsecurities,ortheright(whetherlegallyenforceableornot) tonominatepersonstosubscribeforsecuritiesinufs,gemsoranyothercompanydiscussedin this Report. None of CSA, NRPL, any of their employees, partners, directors, substantial shareholders,affiliates,associatesorsubsidiaries,northeauthorsofthisreporthas,orhashad, anyinterestintheiupsdiscussedinthisreport,oranyotheroftheassetsandundertakingsof UFSorGEMSortheirsubsidiariesorassociatedcompanies.NomemberoremployeeofCSAor NRPLis,orisintendedtobe,adirector,officerorotherdirectemployeeofUFSorGEMS. ReportNo:R

171 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti CSA is an independent geological consultancy. Fees are being charged to UFS under normal commercial terms for the preparation of this Report, the payment of which is not contingent upontheconclusionsofthereport.csahasnotpreviouslyprovidedprofessionalservicestoufs or GEMS, and there is no agreement or understanding between CSA and/or GEMS as to CSA performing future work for them. CSA s relationship with UFS is solely one of professional associationbetweenclientandindependentconsultant. 1.6 DeclarationsandLimitations ThisReporthasbeenpreparedbyCSAGlobalPtyLtdattherequestof,andforthesolebenefitof UFS.ItssolepurposeistoprovideanindependentvaluationoftwoIUPs[188.45/207/2010and /208/2010]locatedintheBaritoUtararegencyofCentralKalimantanandwhichareheld bytks.thisreportistobeincludedinthecircularinitsentirety.thereportisnotintendedto serve any purpose beyond that stated herein and should not be relied upon for any other purpose. Havingtakenallreasonablecaretoensurethatsuchisthecase,CSAandtheauthorsconfirm that,tothebestoftheirknowledge,theinformationcontainedinthereportisinaccordance withthefacts,containsnoomissionlikelytoaffectitsimport,andnochangehasoccurredfrom thevaluationdatetothedatehereofthatwouldrequireanyamendmenttothereport. ThetermsofCSA sappointmentincludetheprovisionofanindemnitywherebyufshasagreed to hold CSA, its directors, employees and Associates harmless from any liabilities, costs and expenses relating to, or arising from this engagement (including, without limitation, legal fees andthetimeofcsa spersonnelinvolved)incurredbyreasonofanyactioncsamaytakeingood faith, unless CSA has been negligent. UFS will indemnify and compensate CSA in respect of preparingthereportagainstanyandalllosses,claims,damagesandliabilitiestowhichcsaorits Associatesmaybecomesubjectunderanyapplicablelaworotherwisetotheextentthatsuch loss,claim,damageorliabilityisadirectresultofufsoranyofitsdirectorsorofficersknowingly providing CSA with any false or misleading information, or knowingly withholding material information.ufshasagreedthatifitmakesanyclaimagainstcsaforlossasaresultofabreach ofcontract,andthatlossiscontributedtobyufs sownactions,thenliabilityforthelosswillbe apportionedasisappropriatehavingregardtotherespectiveresponsibilityofthepartiesforthe loss. This report has been prepared for the sole use of the Directors of UFS for inclusion in the Circular.CSAhasconsentedtotheinclusionoftheReportintheCircularintheformandcontext in which it is to appear, and has not since withdrawn that consent. Other than the Circular, neitherthewholenoranypartofthereport,noranyreferencetoit,maybeincludedinorwith, orattachedtoanydocuments,circular,resolution,letterorstatementwithoutthepriorwritten consentofcsaastotheformandcontextinwhichitistoappear. 1.7 PreviousValuations It is a requirement of the VALMIN Code that previous valuations for the assets concerned be discussed.tothebestofcsa sknowledgetherearenopreviousvaluationsofthetksproperties inthepublicdomain. ReportNo:R

172 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 2 CoalMininginIndonesia ModerncoalexplorationwasinitiatedinIndonesiainthe1970swhentheGovernmentinvited tenders from major international mining companies to participate in the exploration and development of coal resources in Sumatra, East Kalimantan and South Kalimantan (Figure 3). Companies such as CRA (now Rio Tinto), BP Coal, Utah Coal, ARCO and Enadisma lodged applicationsforlargeblocksofprospectiveterrainineastandsouthkalimantan.theareaswere known as Coal Contracts of Work ( CCoW ), now known as 1st Generation CCOWs, which allowedtheholdertoexploreanddevelopthecoalresourceswithinthemoveraperiodof30 years.aroyaltyof13.5%waspayableduringproduction. Coal production began from these CCOW s in the late 1980s, and from 1989 to 1999 annual productionincreasedfromabout4.5mttoabout81mtandfrom81mtto380mtbetween1999 and 2012 representing an annual growth rate of 13% (Patersons Securities Limited, January 2013). In 1994 the Indonesian Government awarded 2nd Generation CCoWs to 17 Indonesian based companiesbutthissystemoftenurewasdiscontinuedthefollowingyear. In1997the3rdGenerationCCoWsystemwasintroducedandendureduntil2000.CCoWsunder thissystemwereofferedto117companiesalmostallofwhichweredomesticallyowned. Between 2000 and 2009, domestic investors, with Government support, gained majority ownershipofindonesia slargestcoalproducersincludingptkaltimprimacoalfromriotinto/bp and PT Arutmin from BHP. During this time, the industry was subjected to greater regulatory controlbyprovincialandregencygovernmentsandproductionexpandedatarateof12%per annum towhereindonesiabecame theworld slargestexporterofthermalcoalin2009,with 117Mt shipped compared with 115Mt from Australia. Indonesia continues to be the world s largestexporterofthermalcoal.in2012indonesianproducersshipped380mtofthermalcoal, withproductionderivedfrommorethan40differentminesitesinkalimantanandsumatra. Coalisgenerallytransportedfromminestoshippingpointsviaacombinationoftruckingand bargingtypicallyperformedbycontractors.atmostoperations,coalistruckeddirectlytoacoal processing/bargeloadingfacilitylocatedonthetidewateroronariverthatisnavigablebybarge. Coaltruckingdistancesforthesedirecthauloperationstypicallyvarybetween10kmand35km, with a few mines experiencing longer hauls of up to 75km. The majority of export coals are loaded into barges at either river or coastal loading facilities and transported to an offshore transferpointforloadingontooceangoingvessels,orbargedtoadeepwaterpoint,suchasthe BalikpapanCoalTerminal,IndonesiaBulkTerminalorArutmin snorthpulaulautcoalterminal. PTKaltimPrimaCoalhasitsowndedicateddeepwatershippingterminalwhichisconnectedto thecoalminingoperationsbya13kmlongconveyorbelt. ReportNo:R

173 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure3.IndonesianCoalBasinsandMajorCoalMines In2009anewMiningLawwasintroducedwhichestablishedanewsystemofexplorationand developmenttitlesforprivatecompaniesknownasaniup(izinusahapertambangan).theolder CCoWs are to be replaced by IUPs over a time frame set out for the various Generations of CCoWsanddifferentoperators.ADomesticMarketObligation( DMO )wasalsoimposedwhich mandates that a coal mining company make available for domestic consumption a certain percentageofitsproduction,tobedeterminedonanannualbasis.thisistobenohigherthan 35%inanyoneyear,however,inpractice,suppliesofcoaltoIndonesianpowerstationshave beenmorethanadequatetomeetdemandoverthepastfewyears.anindonesiancoalprice Reference, called the Harga Batubara Acuan ( HBA ), has also been established which determinesonamonthlybasisaminimumpriceforparticulartypesofcoalaccordingtotheir energy content and other quality parameters that is used to calculate a royalty payment irrespectiveoftheactualsellingpriceofthecoalifbelowthehbaprice. ReportNo:R

174 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 3 IndonesianMiningLaw ThelegalframeworkforthemininglawinIndonesiaisbuiltontheprinciplethatland,waterand natural resources contained therein are controlled by the state and must be used for the greatestbenefitofthepeople.onjanuary12,2009,lawno.4,2009concerningmineraland CoalMining( MiningLaw2009 )cameintoeffect(appendix1).thisintroducedanewlicensing systemintheformofminingbusinesslicences(iups),specialminingbusinesslicences(iupks), and People s Mining Licences (IPRs). One significant feature of the Mining Law 2009 is that foreigninvestorsarerecognizedasownersofcoaliup s,thoughwithvariousrestrictions. ThekeychangesintroducedundertheMiningLaw2009include: Abolition of the contractbased system to be replaced by a licensebased system applicabletobothforeignanddomesticinvestors.existingccowsaretobehonoured untiltheirexpiry,subjecttocertainamendments. Miningopenforforeigninvestmentbutwithmandatorydivestment. Designationofminingareaspermittedforminingactivities. Allnewcoalminingconcessionsmustbegrantedbywayoftender. DomesticMarketObligations( DMO ). Key implementing regulations under the Mining Law 2009 which have been issued to date include: Therequirementforprogressivedivestmentofupto51%ofIUPinterestsheldbyforeign investorsbytheendofthe10thyearofproduction; Restrictionsontheexportofunprocessedmineraloreandtherequirementforfurther incountryprocessing; Imposingminimumdomesticmarketsalesobligationsproceduresoncoal; Imposingabenchmarkpricingframeworkforcoalandmineralexportstosetaminimum pricefortransactionsinsuchcommodities;and An IUP may be an Exploration IUP or a Production Operation IUP (Table 1). If the exploration carriedoutbyanexplorationiupholdercontinuesintoexploitation,aproductionoperationiup may be granted. The holder of an Exploration IUP is guaranteed to be granted a Production OperationIUPinrespectofthesameminingcommoditywithinthesameminingarea. ReportNo:R

175 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table1.DetailsofIUPsforCoal(LasutLay&Pane2015) IUPpursuanttothe MiningLaw2009 ScopeofActivities MaximumPeriodGranted MaximumArea Granted ExplorationIUP Generalsurvey,exploration, researchandfeasibilitystudy ofcoalmining Seven(7)years 50,000ha ProductionOperationIUP Construction,mining, processingandrefining,and logisticsandsalesofcoal Twenty(20)yearswithan optionfortwo(2)ten(10) yearextensions. 15,000ha TheareaofaCoalExplorationIUPmustbereducedtoamaximumof25,000haafterthreeyears. All existing IUP s were converted or granted under the previous Kuasa Pertambangan ( KP ) system.therehavebeennonewiup sgrantedunderthemininglawof2009tendersystem. An IUP in respect of coal does not automatically grant the holder the right to explore for or exploitotherminerals,however,theholderoftheiupisgivenprioritytoapplyforaniupfor other minerals within the same WIUP (the IUP tender or application area). A business entity, includingbothforeigninvestmentanddomesticcompanies,acooperativeoranindividualmay apply for and be awarded an IUP. A privately held company can only hold one IUP, and only companieslistedontheindonesiastockexchangeareentitledtoholdmorethanonelicense. TransferofownershiporsharesintheIUPholder(miningcompany)canonlybeeffectedafter explorationhasreachedacertainphasewheretwoprospectivediscoverieshavebeenmadeand whentheiuphasenteredtheproductionstatus.theholderofaniupwillhavetitletothecoalit recoversonlyafterproduction. PriortoengaginginmineownershipforeignpartiesmustestablishaPMA(foreigninvestment) company.foreignpartiescaninitiallywhollyownapmaminingcompany,however,indonesian ownershipinthepmacompanymustbeatleast51%attheendofthetenthyearfollowingthe commencementofcommercialproduction.thedivestmentsharesmustfirstbeofferedtothe Central Government and the relevant regional government. If the Central or regional governments decline the offer, the divestment shares must then be offered to Central or regionalgovernmentbusinessentities,andifthoseentitiesdecline,toprivateentities.theoffer ofthedivestmentsharestocentralorregionalgovernmententitiesisbyanassessedvalue,and divestmenttoprivateentitiesmustbemadebywayofatender.thedivestmentofsharesisto occurprogressivelyfromthesixthyearafterthecommencementofoperations. Coalproducersarerequiredtopaynationalandregionalincometaxes,valueaddedtax,import duties and regional levies, permanent land rent, building taxes and production royalties. Productionroyaltiesarenotpayableformaterialsremovedaswasteunlesstheyareusedbythe holderbytheiup.therateofpermanentrentandproductionroyaltiesvariesbasedonthescale ofmining,productionlevelandcommodityprices. TheIndonesianCoalPriceReference(HBA)issetbytheMinisteronamonthlybasisasthefloor priceforthecalculationofroyalty.iftheactualsalespriceishigherthanthehba,theroyalty calculation is based on the actual sales price; if actual sales are below the HBA, the royalty calculation is based on the HBA. Specific coal types (e.g. fine coal, reject coal, and coal with specific impurities) and coal for specific purposes can be sold below the HBA with the prior approvalofthedirectorgeneralofmineralsandcoal( DGMC ). ReportNo:R

176 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti HoldersofanIUParerequiredtoprocessandrefinetheircoalinIndonesiatoincreaseitsvalue before exporting. The processing and refining can be undertaken by third parties that have already obtained a special Production Operation IUP for processing and refining. Processing includes any of the following coal crushing, washing, blending, upgrading, briquetting, liquefactionandgasification. TheMiningLaw2009andimplementingregulationscontainaframeworkforaDomesticMarket Obligation( DMO ),wherethecentralgovernmenthastheauthoritytocontrolproductionand exportofcoalinordertoguaranteesupplyforanincreasingdomesticdemandforcoal.under the policy, mining companies must sell a certain minimum percentage of their production to domesticusers.therefore,thelevelofproductionwilldependonwhetherornotthecompany hascompliedwiththeirdmo.thepriceofcoalsoldtodomesticusersisreferencedtothehba. TheMinisterdeterminestheminimumamountofcoaltobeallocatedtodomesticusersonan annualbasis. ReportNo:R

177 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 4 KalimantanCoalGeology EconomiccoaldepositsinIndonesiaarelocatedontheislandsofKalimantanandSumatrawhere they are present in relatively young geological strata preserved in large sedimentary basins (Figure3). InKalimantan,thecoalmeasuresarefoundwithinPalaeogeneandNeogenesediments(Figure 4). The Eocene Epoch of the Palaeogene Period hosts the older coal measures whilst the Miocene Epoch of the Neogene Period hosts the younger coal measures. The intervening Oligocene Epoch was a time of higher relative sea level which resulted in the deposition of mainlymarinesediments,whilsttheplioceneepoch,whichisyoungerthanthemiocene,saw thedepositionoflowrankandlowenergycoals(friederichet.al,1999).thepresenceofhigher rankcoalsatornearthelandsurfaceisdependentontectonicupliftorthepresenceofigneous intrusionsorareasofhistoricgreatergeothermalgradient. Ingeneraltherearesignificantdifferencesinthecoalqualityandthicknessofcoalseamsfrom the Eocene and MiocenePliocene Epochs. The Eocene coals generally tend to be more continuous but thinner than coal formed during the MiocenePliocene. The Eocene coals are thoughttohaveformedunderextensionalstructuralregimes(i.e.inariftbasin)intransgressive depositional environments (i.e. rising sea level). Coal seams are typically up to 6m thick in exposed economic deposits. The rank of Eocene coals is generally higher, with their lower moisturecontentsandhighercalorificvaluesmakingthemsuitablefortheexportthermalcoal market. In some areas of Central and Western Kalimantan, Eocene coals with coking coal propertieshavebeenfound. TheMiocenecoalsweremostlydepositedduringtheregressivephase(i.e.recedingsealevel)of thedepositionalandtectonichistoryofthebasins.progradingdeltaicenvironmentalconditions predominated during deposition which mirrors the current coastal environments in East and SouthKalimantan.Coalseamthicknessisvariable,butgenerallythicker(upto10mormore)and seams more numerous than Eocene coals. Miocene coal seams in the Kutai and Barito Basins (Figure 4) are commonly characterised by the occurrence of intensive splitting and washouts causedbysandchannelling.increasedcoalseamthicknessissometimesduetothepresenceof raisedpeatdomeswhichallowedverylowashcoalseamstobeformed.ingeneralthemiocene coalshavemuchlowerashthantheeocenecoals. The quality of Kalimantan coals varies across the island and is strongly influenced by the geological environment, resulting in a wide variation of coal characteristics including coking properties.ingeneralterms,thevariationincoalpropertiesisdependentonthedepositional environment (coal type) and the degree of coalification (coal rank).coal rank varies quite markedly, from lignite through subbituminous, high to low volatile bituminous and semi anthracitetoanthracite.eocenecoalsarecommonlybituminousorhigherinrank.therankof Miocene coals in normal geological conditions is relatively low, except for areas with an unusually higher geothermal gradient such as in the vicinity of the anticlines and structural domes in the Kutai Basin north of Samarinda. Both the Eocene and Miocene coals are rich in vitrinitemacerals,whilstinertiniteisalmostabsent.vitrinitecontentiscommonly80%to90%. ReportNo:R

178 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti KalimantancoalsdiffergreatlyfrommostAustralianorUSbituminouscoals,butaresimilarto thetertiarycoalsofnewzealandandthegippslandbasinofaustralia(cookanddaulay,2000). Figure4.CoalBasinsofKalimantan ReportNo:R

179 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 5TKSIUPs On the 15 January 2015 the Indonesiabased resource consultants PT Danmar Explorindo preparedareporttitled PTTrisulaKencanaSakti,QualifiedPerson sreportofcoalresources accordingtoinstructionsfromufs.thedanmarreportrelieduponinformationavailableupto 31 July CSA received a final version of Danmar s report on 18 January Danmar s report includes descriptions of the geology and coal occurrences within the IUPs, historical exploration,andthemethodsitadoptedtoestimatecoalresourceswithinthetksiups,which have been reported in compliance with the JORC Code The discussion on these topics below is based on the information presented in Danmar s report. CSA has been advised that Danmar sreportistobeincludedinitsentiretywithinthecircular. 5.1 LocationandAccess TheTKSIUPsarelocated58kmeastofthetownofMuaraTeweh,CentralKalimantan(Figure5). Accesstositeisviaunsealedpublicroads,andisajourneyofapproximately1.5hours.Muara TewehisservicedbylightcommercialaircraftdailyfromBalikpapanandthreedaysaweekfrom Banjarmasin(Figure2inExecutiveSummary).AsealedprovincialroadconnectsMuaraTeweh withthecityofbanjarmasin,a220kmroadjourneyofapproximatelyeighthours.banjarmasin hasregularcommercialflightstojakartaandotherindonesiancentres. 5.2 Tenure Clause 67 of the VALMIN Code states that the status of tenements is material and requires disclosure. Determination of the status of tenements must be based on recent independent inquiry. LasutLay & Pane ( LLP ), a Jakartabased legal firm, was commissioned by GEMS to prepareareportinrespectofthelegalaspectsoftheminingactivitiesofgems subsidiarypt TrisulaKencanaSakti,solelyfromtheperspectiveofthelawsofIndonesia(Appendix1).LLP s scopewastoconfirmthat: TKShasgoodtitletoitsminingconcessions;and TKS has complied with material, applicable provisions of the Mining Law 2009 and its implementingregulations,environmentallaw,forestrylawandotherrelevantlaws(as applicable). LLP sduediligencewasnotconcernedwithbusiness,geological,financialortaxationmattersor anevaluationofbusinessrisksandtaxationorfinancialissues.llp sfinalreportdated16january 2015wasissuedon17January2015.TheLLPreportwasmadeavailabletoCSAforreferencein preparingthisreport. ReportNo:R

180 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure5.LocationofTKSCoalProjectinNorthBarito,CentralKalimantan TKSisthebeneficialholderofthreeOperationandProductionIUPs,twoofwhicharethesubject ofthisreport.thetwoiupsofinterest(figure6)are: /207/2010 tentang Penyesuaian Izin KP Eksploitasi Menjadi Izin Usaha Pertambangan Operasi Produksi a/n PT Trisula Kencana Sakti / concerning the AdjustmentofMiningExploitationPermittoProductionOperationMiningPermit.Issued bynorthbaritoregent,kalimantantengahprovinceandvalidfrom26april2010until 26 April 2026, covering an area of 4,748ha, located at North Barito Regency, Central KalimantanProvince /208/2010tentangPenyesuaianIzinKPEksploitasimenjadiIUPOperasiProduksi a/n PT Trisula Kencana Sakti / concerning the Adjustment of Exploitation Permit to ProductionOperationMiningPermit.IssuedbyNorthBaritoRegent,KalimantanTengah provinceandvalidfrom26april2010until26april2028,coveringanareaof4,959ha, locatedatnorthbaritoregency,centralkalimantanprovince. LLP reports that TKS s granted Production and Operation IUPs are in good standing, with permanent rent requirements met. TKS has complied with all applicable environmental regulationsandtherearenopendinginvestigationsbygovernmentagenciesonenvironmental issues.bothiup sweregranted CleanandClear statusbythegeneraldirectorofmineraland Coalonthe28February2012. ReportNo:R

181 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti AlthoughnotspecificallydiscussedbyLLP,DanmarreportthatbothIUPsarewithinadesignated ProductionForest,andthereforeaForestryBorrowandUsePermit(calledanIPPKH)isrequired formining.llpidentifythefollowingborrowandusepermitwhichisofrelevancetothisreport: SK.319/MENHUTII/2010 tentang Izin Pinjam Pakai Kawasan Hutan untuk Eksploitasi Batu Bara dan Sarana Penunjangnya pada Kawasan Hutan Produksi Terbatas dan Kawasan Hutan Produksi yang dapat Dikonversi a/n PT Trisula Kencana Sakti seluas Ha / concerning borrow and use permit for Coal Exploitation and its Infrastructure in Limited Production Forest Area and Production Forest which can be convertedtopttrisulakencanasaktiwithanareaof698.58ha.issuedbytheminister offorestryandvalidfrom19may2010until19may2020; CSA understands that mining activities can only be carried out within this IPPKH however the Permitareacanbeprogressivelyadjustedasminingactivityprogresses.Fordrillingoutsidethe IPPKHaseparateexplorationcategoryIPPKHpermitmustbeobtained. Figure6.TKSProjectTitleAreasandAccessRoads(UTMZone50S) 5.3 RegionalGeologicalSetting The TKS IUPs are within the Barito Basin of Central Kalimantan (Figure 4). The Barito Basin is definedbythemeratusmountainstotheeastandseparatedfromthekutaibasintothenorth byaflexureparalleltothewnweseorientatedadangfault.thebaritobasinbegantodevelop inthelatecretaceousfollowingamicrocontinentalcollisionbetweenthepaternosterandthe SW Borneo micro continents (Darman and Sidi, 2000). Early Tertiary extensional deformation occurredasatectonicconsequenceofthatobliqueconvergence,producingaseriesofnwse ReportNo:R

182 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti trending rifts. Tight SSWNNE trending folds, parallel to the bounding Meratus Mountains, dominatestructure. BaritoBasincoalmeasuresoccurwithinsedimentsofthe: TanjungFormation midtolateeoceneage(4536myago); MontalatFormation earlymioceneage(2416myago); WarukinFormation midtolatemioceneage(1610myago). 5.4 ProjectGeology Published 1:250,000 scale geological maps identify coal outcrops of the Tanjung Formation, Montalat Formation and Warukin Formation within the TKS IUPs (Figure 7), however, whilst TKS smappinganddrillinghaveconfirmedthatthesecoalseamsarepresent,danmarbelieves thatthepublishedgeologicalmapsfortheareaareinaccurate.danmar sinterpretation,based upon1,361pointsofobservation,describeslowerqualitywarukincoalseamsinthecoreofa syncline,gradingtohigherqualitymontalatcoalseamstowardtheouteredgesofthestructure. The WarukinMontalat boundary is important in the geologic record as it approximates the changeinsedimentationfromatransgressivetoregressiveregime. The Tanjung Formation geology within the TKS project is less well understood because explorationhasbeenlimitedtocoaloutcropmapping.itisexpectedthatcoalseamsdiscovered in the older Tanjung Formation will have a higher calorific value and generally better quality characteristics than the younger Warukin and Montalat coal seams. It is inferred that the 12 million year unconformity between the Tanjung Formation and the Montalat Formation has beenthelociforregionalscaleshearing/faulting. ReportNo:R

183 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure7.SimplifiedTKSProjectGeology(modifiedafterDanmar2015) 5.5 CoalStratigraphy Drilling has confirmed that there are twenty one (21) coal seams within the Warukin and MontalatFormationswithintheTKSIUPs(Appendix2,Table2).Nine(9)occurintheWarukin Formation and twelve (12) in the Montalat Formation. Seam S400 is the basal seam of the WarukinFormation(Figure7)andS1200thebasalseamoftheMontalatFormation.TheS100, S200,S300andS400seamsarethemostsignificanteconomicgroupingwithanaverageof5mof combined coal thickness within a 31m sedimentary sequence (Appendix 2). The main seam is S200 with an average thickness of 1.80m. Interburden sediments are generally mudstone. A massive37mthicksandstoneunitmarkstheendofmontalatsedimentationperiod. ReportNo:R

184 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table2.TKSWarukinMontalatFormationCoalSeamStratigraphyandThicknesses(Danmar 2015) SeamID Minimum Thickness (m) Maximum Thickness (m) Average Thickness (m) S S S S S S S S S S S S600U S600L S700U S700L S S S S S S PreviousExplorationandMining Exploration work within the IUPs commenced in September 2005 and ceased during Activitiesincluded: Coaloutcropmapping200observations,30sampleanalyses(Figure8); Verticaldrilling494holes,40,168m,averagedepth80m(Figure8); Downholegeophysicallogging; Coalandnoncoalqualityanalyses(709samples); Light Detection and Ranging ( LIDAR ) topographic survey over the entire area of the IUPs; GroundsurveysbyTotalStation(holecollars,benchmarks). TKS stotalexplorationexpendituretojuly2014wasus$3.5m(danmar2015). ReportNo:R

185 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure8.TKSDrillHoleandCoalOutcroplocations TKScommencedconventionaltruckandshovelmininginAugust2010andceasedinMarch2012 (Table 3), however few details are available. The open pit location is shown in Figure 8. Production was primarily from the S100, S200 and S300 seams, with total production volumetricallysmallcomparedtotheoverallcoalresourceinventory. Table3.TKSCoalProduction(Danmar2015) PERIOD OVERBURDEN (BCM) COALMINED (Tonnes) STRIPRATIO (BCM/Tonnes) AUGDEC ,011 9, JANDEC2011 1,392, , JANMAR ,989 50, TOTAL 2,098, , Note:BCM=bankcubicmetres 5.7 CoalDepositModelling Drillholesweregenerallyspacedona250mx250mor500mx500mgridandprovided1,361 points of observation to determine seam geometry and seam distribution. Danmar s report describes TKS s data collection procedures and the data validation techniques Danmar employed,priortocreatingthecoalseammodelforthes20tos1200seams.asperindustry ReportNo:R

186 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti standard practice, coal seam correlations and coal seam thicknesses were interpreted by referencetodownholegeophysicalloggingevidence. CSAnotesthat: Thedrillingtraverseorientationsandverticaldrillingwereappropriatetointersectthe shallowdipping(0 to20 )coalseams. Thereliabilityofdrillingdataappearsgenerallygood. The sampling methodology across the coalnoncoal interface is adequate however plybyply sampling rather than bulk sampling of the coal seams would have better identifiedthoseportionsoftheseamswithdeleteriousmaterialsuchashighashorhigh sulphur. All samples (coal and noncoal) were sent to PT Geoservices Laboratory, Banjarbaru, SouthKalimantanforISOandASTMstandardpreparationandanalyses. The3DcoalseammodelcreatedbyDanmarusingGEMCOMSurpacsoftwareisvalidfor resourceestimationpurposes. 5.8 CoalResources TheinformationinthisReportthatrelatestoExplorationResultsandCoalResourcesisbasedon information compiled by Mr Daniel Madre, who is a Member of the AIG (number 5632).Mr MadreisaDirectorofPTDanmarExplorindoandhassufficientexperiencerelevanttothecoal deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of ExplorationResults,MineralResourcesandOreReserves(JORC2012).MrMadreconsentsto theinclusioninthisreportofthemattersbasedonhisinformationintheformandcontextin whichitappears. Danmar report Coal Resources only as the project study status precludes a Coal Reserve Estimate.TheResourceEstimatereliesonacoalseammodelconstructedbyDanmar.Theseam modelconsideredallpointsofobservation( POB anintersectionofaseaminadrillhole), however,onlyhighreliabilitypobswherethedrillholecollarhadanominallocationalaccuracy inspaceof0.1morbetter,andgeologicallogginghadbeenreconciledtogeophysicaldownhole loggingresults,wereusedforthecoalresourceestimates.highreliabilitypobscomprised82% ofthedatabase.theblockmodellingfunctioninthesurpacsoftwarepackagewasusedtocreate ablockmodelconstrainedbythecoalseammodelandthebaseofweatheringatanassumed levelof3mbelowsurface.theblockmodelwasconstructedwithprimaryblocks100m(y)x50m (X) x 1.5m (Z), and subblocks 25m (Y) x 12.5m (X) x 0.375m (Z). Blocks were not created for seamslessthan0.4mthick.coalseamthicknessesandanalyticaldatawereinterpolatedfrom thepobsintotheblockmodelwithinversedistancesquaredweightingofdata. ReportNo:R

187 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Resourcecategoriesforcoalwithin100mofsurfacewereassignedasfollows: Measured 200m influence (radius) from a high reliability POB, a minimum of 5 overlappingpobsand3ormorepobswithcoalqualityanalyses; Indicated 400minfluencefromahighreliabilityPOB,aminimumof4overlappingPOBs and2ormorepobs withcoalqualityanalyses;and Inferred 800minfluencefromaPOB,aminimumof3POBsand2ormorePOBswith coalqualityanalyses. CSAconsidersDanmar sresourceclassificationcriteriatobeconservative. CoalResourceswereestimatedusingGEMCOMSurpacminingsoftware.Theareasunderlainby the Resources together with the outline of the open pit are shown in Figure 9. TheResource Estimates are summarised in Tables 4 to 10. Note that the ResourceR Estimate has not been depletedforpreviousproduction(0.2mt);howeverthelatterisnotmaterial.resourceswerenot estimatedforseamswithatruethicknessoflessthan0.4m. Figure9. TKSCoalResourceAreas Table4.InSituCoalResourceswithinTKSIUPs(Danmar2015) MEASURED(Mt) ) 40 INDICATED(Mt) 12 INFERRED(Mt) 25 TOTAL(Mt) 777 ReportNo:R

188 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table5.WeightedAverageCoalQualityAllResources(Danmar2015) TM IM ASH VM FC TS CV CV CV % % % % % % Kcal/kg Kcal/kg Kcal/kg ar adb adb adb adb adb adb ar daf , ,356 Table6.CoalResourcesbyDepth(Danmar2015) DEPTHRANGE MEASURED(Mt) INDICATED(Mt) INFERRED(Mt) TOTAL(Mt) 050m m TOTAL Note:Roundingerrorsareacceptable Table7.CoalResourcesbySeam(Danmar2015) SeamID COALRESOURCESINSITU(Mt)to100mdepth MEASURED INDICATED INFERRED TOTAL S S S S S S S S S S S S600U S600L S700U S700L S S S S S S ALL Note:Roundingerrorsareacceptable Major seams S100, S200, S300 and S400 contain 32Mt of Measured Resources and 5Mt of IndicatedResources. ReportNo:R

189 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table8.CoalResourceQualitybySeam(Danmar2015) SeamID COALQUALITY(Insitu)to100mdepth TM IM ASH VM FC TS CV CV CV HGI RD % % % % % % Kcal/kg Kcal/kg Kcal/kg Insitu ar adb adb adb adb adb adb ar daf point g/cm 3 S ,370 4,879 7,234 S ,252 5,686 7, S ,277 4,731 7, S ,288 4,685 7, S ,762 5,272 7, S ,576 5,005 7, S ,775 5,253 7, S ,374 4,902 7, S ,980 5,595 7, S ,756 5,588 7, S600U ,182 5,855 7, S600L ,193 5,827 7, S700U ,159 5,854 7, S700L ,315 5,929 7, S ,427 6,142 7, S ,868 5,630 7, S ,255 6,103 7, S ,546 6,296 7, S ,650 6,470 7, S ,563 6,375 7, Average ,811 5,352 7, Note1 SeamS10excludedfromthequalitymodel(novalidatedsamples) Note2 TM(Totalmoisture),IM(InherentMoisture),ASH(Ashcontent),VM(Volatilematter), FC(Fixedcarbon),TS(Totalsulphur),CV(Calorificvalue),HGI(hardgrovegrindabilityindex), RDinsitu(relativedensitylabresultsadjustedtoinsituusingthePrestonSandersformula) ar(asreceivedcalculation),adb(airdriedbasislaboratoryresult),daf(dryashfreecalculation) Table9.CoalResourcesbyFormation(Danmar2015) FormationID COALRESOURCESINSITU(Mt)to100mdepth MEASURED INDICATED INFERRED TOTAL WARUKIN MONTALAT ALL Note:Warukin=seamsS20toS400andMontalat=seamsS500toS1200 ReportNo:R

190 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table10.CoalResourceQualitybyFormation(Danmar2015) Formation ID COALQUALITY(Insitu)to100mdepth TM IM ASH VM FC TS CV CV CV HGI RD % % % % % % Kcal/kg Kcal/kg Kcal/kg In situ ar adb adb adb adb adb adb ar daf point g/cm 3 WARUKIN ,628 5,102 7, MONTALAT ,215 5,904 7, ALL ,811 5,352 7, Note:Warukin=seamsS20toS400andMontalat=seamsS500toS1200 CSAisoftheopinionthattheMontalatCoalResources,thosestratigraphicallybelowtheS400 seam,areunlikely tomeetthe JORCCoderequirementfor reasonableprospectsof eventual economicextraction.belowthes400seamthereare12widelyspacedseams(s500tos1200 Appendix2)withanapparentratioofcoaltointerburdensedimentsof1:59.Bycontrastthe uppers20tos400sequence(thewarukinformation)containsagoodgroupingofmajorseams andanapparentcoaltointerburdenratioof1:11.giventhethinnatureoftheindividualseams belowthes400,particularlyoncemininglossesareaccountedfor,theconsiderablethicknesses ofinterburdenseparatingthem,currentcoalpricesandtheoutlookforprices(section6)and likelyoperatingcosts,csaisoftheviewthatonlyalimitedtonnageoftheresourcebelowthe S400seamwillbeeconomicallyrecoverableunderreasonablyforeseeablecircumstances.CSA has concluded that the 53 Mt of Warukin Coal Resources, in seams S20 to S400, provides a reasonablebasisforthepurposeofitsvaluation. 5.9 CoalTransport TheIUPsarewelllocatednearthetownofMuaraTeweh,existinginfrastructureandanavigable bargingriver(figure2andfigure3)duringmuchoftheyear.tkshadanumberofcontractsor lease agreements with owners for use of logging roads for coal hauling, port stockpile managementandbargeloadingbutthesehaveexpired.whenoperating,runofminecoalwas generallyhauled47kmtotheportofpangkuforcrushingandloadingonto3,500tbarges.this wasoftenapointofsale(fobbarge).theloadingcapacityoftheportfacilitywasnotdeclared. Thestockpileyardcanaccommodate200,000tonnes.AnalternativeloadingportisBuntokBaru, located70kmsouthwestoftheiups.riverdepthsatbuntokbaruaresuitablefor5000tbarges. Loadingconveyorswithacapacityof1,000t/hrorgreaterareavailableforthirdpartyhire. CoalloadedontobargesateitherBuntokBaruorPangkuisusuallytranshippedto8,000tbarges at Timbau and thence to the Mother Vessel (MV) (Figure 2). Pangku is approximately 235km from Timbau and Timbau is approximately 250km from the Taboneo Transhipment point. TimbauisavailableyearroundtobargecoaltoTaboneo.PortsintheupperreachesoftheBarito Rivermayhaveonlylimitedseasonalaccessand/orhavelimitsonbargesizesduetoseasonal fluctuationsinwaterlevel. ReportNo:R

191 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 5.10 CoalMarketability Resource coal quality analyses are reported in Table 8 above. Coal production quality reconciliationstotheresourcemodelwerenotavailableforreview.coalmarketingstudieswere notavailableforreviewhowevercoalmarketabilityhasbeenprovenbysalesevidence (Table 11). Table11.TKSCoalShipments(Danmar2015) Date SalesTerm Sale Price $US/t Price MV $US/t TM % ar Ash % adb TS % adb CV KCal/Kg GAR Tonnes Mar11 FOBBuntokPort ,200 2,299 Aug11 FOTROMStockpile ,200 60,008 Oct11 FOBPangkuhPort ,300 2,777 Nov11 FOBPangkuhPort ,300 3,675 Dec11 FOBPangkuhPort ,300 3,593 Dec11 FOBTimbauPort ,300 7,506 Jan12 FOBPangkuhPort ,300 3,451 Feb12 FOBMVTaboneo ,000 37,111 Mar12 FOBPangkuhPort ,300 3,495 May12 FOBPangkuhPort ,300 3,495 Jul12 FOBTimbauPort ,000 12,106 Sep12 FASTaboneoPort ,000 45,000 ALL , ,515 TKScoalcanbedescribedasasubbituminousrank,lowtomoderateenergyandhighsulphur thermalcoalwhichhasbeensuccessfullysoldtotradersasablendingcoal.thetotalsulphur (TS)contentistheprimarydeleteriousmaterialwhichattractsadiscountifTSisabove1.0%.TS variesbetweenseams,withinaseamprofileandbygeographicarea.thenatureofthesulphur andwhereitoccursisnotwelldefined ExplorationPotential DanmarhaveidentifiedfourExplorationTarget(JORC2012)areaswhich,withfurtherdrilling, havepotentialforthediscoveryof20mtto113mtofcoal(figure10): Target1haspotentialfor5Mtto50Mtinapreviouslyuntestedareaandnewgeological setting (the older Tanjung Formation). The coal quality is expected to be superior to Resources defined to date. CSA is of the opinion that the Danmar prediction is conservativeandpossiblyunderstatestheupsidepotentialforfurthercoaldiscovery. Target 2 has potential to add 5Mt to 25Mt to the Resource inventory from Montalat formationcoalseams. ReportNo:R

192 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Target 3 has potential for the discovery of 5Mt to 10Mt in an area with untested Montalatformationcoalseams. Target4is5Mtto28Mtofcoalpreviouslycategorisedasresourcesatdepthsfrom100 to200mbelowsurface. TherangeofcoalqualityforsuchExplorationTargetcoalisTM12%to21% %(ar),im9%to19% (adb),ts0.3%to3.0%(adb) andcv5,700to6,400kcal/kg(ar). Figure10.TKSExplorationTargetAreas(ModifiedafterDanmar2015) 5.12 SiteInspection MrDwiyokoTaruno,SeniorCoalResourceGeologist,PTCSAGlobalIndonesia,undertookasite inspection of the TKS project on 17 July Mr Dwiyoko graduated from the University of Padjadjaran, Indonesia, in 2003 with a Bachelor of Engineering, majoring in Geology. He is a Member of the AusIMM and a Member of the AIG. He has 11 years experience in the management,evaluationanddevelopmentofcoalprojectsinindonesiaandmongolia.heisa competentperson(cp)forcoalresourceestimation(jorc2012). NotesandphotographicevidencefromthesitevisitarepresentedasAppendix3. CSAareoftheopinionthatsufficientfieldevidenceexiststoconfirmthe materialinformation presentedinthedanmarreport,particularly: ReportNo:R

193 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti CoaloccurswithintheIUPtitleandIPPKHpermitareas. Coalobservedinoutcropissimilartothatdescribedanddefinedbydrilling. CoalmininghasoccurredasperFigure22oftheDanmarreport. Surveying and drilling has been undertaken to the extent and professional standard indicatedbythedanmarreport. Infrastructure, haul roads and jetty used during the previous TKS mine production periodremaininauseablecondition ProjectRisks Based upon CSA s review of the Danmar report, site inspection and Indonesian coal industry knowledge,thefollowingprojectrisksareconsideredmaterial: Geologicalrisk lowbecausethegentlesynclinalstructureiswelldefinedbydrilling andgenerallyfavourableforopenpitmining; Future mining risk low due to previous mining history, available transport infrastructureandactiveopenpitminingintheregion; Coaltransportrisk moderateduetotheinfluenceofseasonalweathereventsupon dirthaulroadsandbargingonthebaritoriver; Coalmarketingrisk highduetotheprevailingcoalpricesclosetothemarginalcostof productionforthiscoaltypeandhigh(>1%)totalsulphurcontentoftkscoal. ReportNo:R

194 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 6 CoalPricesandOutlook IntheperiodFebruary2011 tojuly2012therewasadramaticdeclineinindonesianthermalcoal prices(figure11).sincejuly2012indonesiancoalpricesforlowercvcoalssuchas Envirocoal and Ecocoal have been less variable however they gently declined to November 2009 price levels(figure11andfigure12). TheIndonesianCoalReferencePrice(HBA)wasUS$72.45/tinJuly2014. Figure11.SelectedIndonesianThermalCoalPricesfromJuly2009toJuly2014 ReportNo:R

195 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Figure12.SelectedIndonesianCoalPricesfromJuly2012toJuly2014 The Danmar report states that the Indonesian Government Coal Reference Price ( HBA) for Envirocoalisastandardforcoalwithcalorificvalueof5,000kcal/kg(gar)inIndonesia.Sungkai HighSulphurbrandisalsoincludedasitsqualitymorecloselyresemblesthecoalatTKS (Figure 12, Table12).SungkaiHighSulphurcoalqualityissimilartothe Warukin Formationweighted averagecoalquality(table12,table13).thecoalqualityfor allseamscloselyresemblesthe MahakamCoalBbrand(Table12,Table13andFigure12). Table12.CoalBrandandPrice(HBAJuly2014) CoalBrand TM%(ar) Ash%(adb) TS%(adb) CVkcal/kg(ar) Price$US/t Envirocoal , SungkaiHighSulphur , MahakamCoalB , ReportNo:R

196 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table13.TKSCoalandIndicativePrice¹(July2014) CoalType TM%(ar) Ash%(adb) TS%(adb) CVkcal/kg(ar) Price$US/t WarukinFormation , MontalatFormation² , TKSRESOURCE(allseams) , Source: 2.CSAisoftheopinionthattheMontalatCoalResourcesareunlikelytomeettheJORCCoderequirement for reasonableprospectsofeventualeconomicextraction.refertosection5.8above. TheCoalSpot.comwebsiteallowsthecalculationofpricebasedonHBAcoalbrandsandinputsof total moisture, ash, calorific value and total sulphur for a specific coal. This online calculator suggests a July 2014 price of US$52.80 for the TKS Resource coal, US$48.39 for TKS Warukin FormationcoalandUS$62.99forMontalatFormationcoal.Arangeofproductsandpricesmay beexpectedasindividualseamsaremined,dependingonmarketing,miningtechnique,blending andmineplanning. SinceJuly2012,TKStypecoalshavebeengenerallyrangeboundbetweenpricesofUS$45/tto US$60/t (Figure 12). Future prices for internationally traded thermal coal are uncertain and drivenbyavarietyoffactors: Inthenearterm,continuinghighstockpilesandreducing/slowingdemandfromChina forthermalcoal. A growing abundance of relatively cheap shale gas in the USA and the increasing conversion of electricity power plants from coal fired to gas fired in the US (BMO CapitalMarkets,2012). Diversionofsomelowercostthermalcoalproduction(inparticularfromthePowder RiverBasininWyoming)tothePacificBasinexportthermalcoalmarketthroughwest coastus/canadaports(bmocapitalmarkets,2012). Countering these negative trends is the projected increasing demand from India for imported thermalcoalalthoughportandrailinfrastructureconstraintsmaylimitdeliveryinindiainthe short term (Economist, August 2012). On the other hand, Goldman Sachs (July 2013) in an analysis entitled The window for thermal coal investment is closing suggest that prices will remainflatnearthemarginalcostofproduction. Platts(7July2014)forwardcurvecoal,July7forFOBNewcastlemidpointforAugust2014is $70.00andispredictedtoincreasegraduallyto$72.95inQ2of2015(4.2%annualincrease),to $76.75for2016(5.2%annualincrease)andto$80.45for2017(4.8%annualincrease).TheHBA fortkstypecoalmaybeexpectedtofollowthislongertermpriceincreasetrend. ReportNo:R

197 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 7 ValuationofTKSIUPs 7.1 ValuationConcepts Thereareanumberofrecognisedmethodsusedforvaluingmineralassets,withtheselectionof themostappropriatemethoddependentonanumberoffactors,includingthetypeandquantity ofinformationavailableandtherelativestageofevaluationand/ordevelopmentofthe asset concerned.thevalmincodedefinesmineralassetsas: allpropertyincluding,butnotlimitedtorealproperty,intellectualproperty,and/orminingand explorationtenementsheldoracquiredinconnectionwiththeexploration,developmentand/or productionfromthosetenementstogetherwithallplant,equipmentandinfrastructureowned oracquiredforthedevelopment,extractionandprocessingofmineralsinconnectionwiththose tenements. TheVALMINCodenotesthatmostMineralAssetscanbeclassifiedaseither: ExplorationAreas propertieswheremineralisationmayormaynothavebeenidentified,but whereamineralresourcehasnotbeenidentified. AdvancedExplorationAreas propertieswhereconsiderableexplorationhasbeenundertaken andspecifictargetshavebeenidentified,butwhereamineralresourcehasnotbeenidentified, thatwarrantfurtherdetailedevaluation,usuallybydrilltesting,trenchingorsomeotherformof detailedgeologicalsampling.aresourceestimatemayormaynothavebeenmadebutsufficient workwillhavebeenundertakenonatleastoneprospecttoprovidebothagoodunderstanding ofthetypeofmineralisationpresentandencouragementthatfurtherworkwillelevateoneor moreoftheprospectstotheresourcecategory. PreDevelopmentProjects propertieswheremineralresourceshavebeenidentifiedandtheir extentestimated(possiblyincompletely)butwhereadecisiontoproceedwithdevelopmenthas notbeenmade.propertiesattheearlyassessmentstage,propertiesforwhichadecisionhasnot beenmadetoproceedwithdevelopment,propertiesoncareandmaintenanceandproperties heldinretentiontitlesareincludedinthiscategoryifmineralresourceshavebeenidentified, evenifnofurtherevaluationoradvancedexplorationisbeingundertaken. Development Projects properties for which a decision has been made to proceed with constructionand/orproduction,butwhicharenotyetcommissionedorarenotyetoperatingat designlevel. OperatingMines mineralproperties,particularlyminesandprocessingplantsthathavebeen commissionedandareinproduction. Eachoftheserequiresadifferentvaluationapproach.TheTKSIUPsareatanadvancedstageof explorationwithidentifiedcoalresources.therehasbeenlimitedminingwhichwassuspended afterarelativelyshortperiodduetodecliningcoalprices.forthepurposesofvaluation,that partoftheiupsunderlainbyresourcesisconsideredtobeapredevelopmentproject,rather ReportNo:R

198 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti thanadevelopmentproject,andthebalance,withlittleexplorationbutanexplorationtarget, anadvancedexplorationarea. The VALMIN Code (Definition 43). defines Value as the Fair Market Value which is the amount of money (or the cash equivalent of some other consideration) determined by the ExpertinaccordancewiththeprovisionsoftheVALMINCode,forwhichtheMineralAssetor Security should change hands on the Valuation Date in an open and unrestricted market between a willing buyer and a willing seller in an arm s length transaction, with each party actingknowledgeably,prudentlyandwithoutcompulsion. Value is usually comprised of two components, the underlying or Technical Value of the Mineral Asset., and a premium or discount relating to market, strategic or other considerations. TheconceptofFairMarketValuehingesuponthenotionofanassetchanginghandsandmust thereforetakeintoaccount,interalia,marketconsiderations,whichcanonlybedeterminedby reference to comparable transactions. Generally, truly comparable transactions for Mineral Assetsaredifficulttoidentifyduetotherelativeinfrequencyoftransactionsinvolvingproducing assetsand/orresources,thegreatdiversityofmineralexplorationproperties,thestagetowhich their evaluationhasprogressed,perceptionsofprospectivity,tenement types,the commodity involved and so on. An important consideration when valuing an exploration property is the potentialofthepropertytohostaneconomicdeposit,whichisakeydeterminantforwhatthe propertywillbejudgedtobeworthwhenassessedbythemarket. TheVALMINCodestatesthatValueshouldbeselectedasthemostlikelyfigurefromwithina rangeaftertakingaccountofriskandotherfactorswhichmightimpactonvalue. 7.2 ValuationMethods TheFairMarketValueofexplorationpropertiesandundevelopedMineralResourcesaremost oftendeterminedbyfourgeneralapproaches: TheGeoscienceFactorMethodwhichseekstorankandweightgeologicalaspects,including proximity to mines and other deposits, the significance of the mineralised district and the commoditysought.themethodisonlyapplicabletoexplorationtenements. TheAppraisedValueMethodconsidersthecostsandresultsofhistoricalexplorationandis againonlyapplicabletoexplorationtenements. The Market Approach or Comparable Transaction Method looks at recent arm s length transactionsforcomparablepropertiesandisapplicabletoalltypesofmineralassets The Income Approach most often used to value Operating Mines and properties for which mineral resources have been defined and sufficiently detailed feasibility studies have been completed to estimate likely future cashflows. A Net Present Value ( NPV ) is derived by forecastingthecashflowsthatwouldaccruefromminingthedepositanddiscountingthemback tothepresentday.npvmustgenerallybefactoredtotakeintoaccountrisk,marketandother factors,includingthestageofevaluationand/ordevelopment. ReportNo:R

199 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti The Market Approach or Comparable Transaction Method has been selected as the most appropriateforvaluingthetksiupsandhasbeenusedtoseparatelyvaluethecoalresources and the exploration areas away from the Resources. DCF analysis was not considered as the previousminingwasrendereduneconomicwhencoalpricesretreatedtotheirpresentlevel.csa is not in a position to speculate when coal prices might recover to a level that will enable a resumptionofoperations. Analysisofmarkettransactionsisalwaysverydifficultastheassetsinvolvedmaycompriseland only(tenements)forexplorationandadvancedexplorationareas,landplusresources/reserves for predevelopment and early development projects, and land plus resources/reserves plus infrastructure assets for advanced development projects and operating mines. If these assets weretobevaluedintheconventionalmanner,separatevalueswouldbeattributedtotheland, theresources/reservesandtheinfrastructureassets,inthesamewayasacommercialtrading enterprisemightbevalued land,improvements,stock,cashatbankandgoodwill. Fortransactionsinvolvingtheacquisitionofallorpartofacorporateentity sshares,ratherthan a direct cash consideration for specific assets, the analysis becomes more uncertain as the amount of cash as a component of a company s assets, the amount of goodwill attributed to share values and the premium that may perhaps have been paid for a change in control or similar,maydistorttheapparentvalueoftheunderlyingassets.further,theremayhavebeen anynumberofotherconsiderationsinthenegotiation,includingtheperceivedprospectivityof tenements,qualityofresources/reserves,capitalandoperatingcosts,profitability,strategicfit with existing operations, backtoback deals and so on, most, if not all of which cannot be determinedfrompublicdomaindata. Withoutbeingprivytothedetailsofhowatransactionconsiderationwasarrivedatbetweenthe partiesconcerned,itisnighonimpossibletoconfidentlydeterminevaluesforindividualasset classes.hencetheprocessofvaluationforthecurrentpurposemustnecessarilyinvolveahigh levelofjudgementandsubjectivity. Thebasicpremiseistotryandidentifyanumberoftransactionswhichappeartohaveanumber offeaturesincommon,andfromthesederiveareasonableestimateofwhatappearstobea goingrate forlandandresources/reserves.thesearewhatareknownas yardstickvalues.in manycasestherewillbewhatappeartobe outliers inthedatasetwhichmayreflectanyof thespecialcircumstancesmentionedabove. 7.3 ValuationofTKSIUPs Prior to July 2012, there was a general expectation that (then) high coal prices would be sustained.sincemid2012,themarketoutlookhaschangedwiththerealisationthatthedecline incoalpriceswasunlikelytobetemporary,andasaresult,therewouldbefeweropportunities forentryintothemarketanddiminishedprospectsforgrowth.itisthereforeconsideredthat transactionssincejuly2012willbemoreindicativeofcurrentmarketconditionsforthesaleof coalassetsthanthosethatoccurredbeforethisdate. Withthisinmind,adatabaseofsixteenIndonesiancoalassettransactionsthatwerereported betweenaugust2012andjune2014hasbeenassembled.thesearealltransactionsofwhich CSAisawarefortheperiod31July2012to31July2014.Thetransactionsaresummarisedin ReportNo:R

200 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table14,andforsimplicityofreferencehavebeennumberedthereinfrom1to16.Thevalues US$/haandUS$/tforcoalresourcesshowninTable14aresimplythetransactionvaluedivided byhectaresorresourcetonnesasthe casemaybe,withnoattempttoallocatevaluetooneor theother.dividingthetransactionamountbytheunitsofareaorresourceswillberespectively, themaximumpossibleasbyimplicationnovalueisascribedtotheothercomponent ValuationofLandArea TheTKSIUPshaveanareaof9,707ha,ofwhich2,880haareunderlainbyresources(Section5.8). Acoalexplorationtargetof20Mtto113Mt,including5Mtto50MtofhighlyprospectiveTanjung Formation,hasbeenidentifiedwithinthe6,827hanotunderlainbyresources(Section5.11). ReferringtoTable14,transactions1,4,8,10,12,and16involvelandonly,thusprovidingagood indicationofalikelyyardstickvalue.theweightedaveragelandvaluefromthesetransactionsis US$713/hawithinarangeUS$262toUS$2,745/ha.Transactions5,9and13haveonlyverysmall coalresourcessuggestingthatthesetransactionswerealsolargelybasedaroundthelandvalues. IncludingtheseintheanalysisindicatesaweightedaveragelandvalueofUS$969/hawithinthe same range. Transaction 7 reportedly involved resources of 276Mt, however, these were not JORCCodecompliantandwerenotbasedonanydrilling.Itisthereforeconsideredreasonableto include transaction 7 in the landonly dataset, which indicates an average land value of US$1,035/ha, again within the same range. Compared with the other indicated land values, transactions 1 (US$262/ha) and 10 (US$354/ha) are clearly outliers. Removing these from the datasetindicatesayardsticklandvalueofus$1,400/hawithinarangeus$1,140tous$2,745/ha; themedianvalueisus$1,700/ha.theupperendoftherange(transactions5and12)isnotan outlier.previousanalysisofindonesiancoalassetsconductedbycsaonamorelimiteddataset indicatedayardstickvalueofaroundus$1,600/ha,withinasimilarrangeaboutus$300/hato US$2,900/ha,with,asnow,thelowervaluesappearingtobeoutliers. AlltransactionsdiscussedaboveinvolvedIUPs,ratherthanCCoWs,thusthenatureoftenureis notafactorinthevariationsinlandvalueindicatedfromtheanalysis.transactions5,9,12and 16 have the highest indicated land value/ha, and all have either a modest history of coal production or are currently producing on a modest scale. They all however involve only very smallareas,rangingfrom100hato2,117ha.transactionvalue/harelativetocoalqualitydoes notappeartobeafactor. Thehistoryofalbeit,verylimitedcoalproductionandthesignificantcoalexplorationtargetthat has been identified within the TKS IUPs both justify a yardstick value somewhat above the average. In CSA s opinion, a yardstick value of US$2,200/ha is appropriate, being the approximatemidpointbetweenthemedianvalueof$1,700/haandthemaximum(whichoccurs twice)ofus$2,745/ha,indicatingavalueforthe6,827hanotunderlainbyresourcesofus$15m withinarangeus$11.6mtous$18.7m ValuationofResources InTable14,Transactions2,6,and15areallveryhighvalue,allinvolvelargecoalresourcesand allareproducingmines,withproductionrangingfrom1.5mtpato29mtpa.simplydividingthe transactionvaluebythelandareaproducesoutcomesatleastanorderofmagnitudegreater ReportNo:R

201 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti than the yardstick values derived for land above. Obviously, the transactions were driven by resources/reservesandprofitability,whichinturnwilldeterminethevalueoftheresources.for thesethreetransactions,theaveragetransactionvalue/resourcetonneisus$0.75withinarange US$0.49/ttoUS$1.11/t;themedianisUS$0.70/t. AlloperationsarelocatedwithinCCoWs,whichareamoresecureformoftitlethanIUPs,butare subjecttohighertaxesandroyalties.ifthehighest$/halandvalueidentifiedabove(2,745/ha)is assignedtothelandareaintransactions2,6and15andthissubtractedfromthetransaction price, the resulting coal resource yardstick values are an average of US$0.72/t within a range US$0.43toUS$1.05/t,withamedianofUS$0.63/t. Allthreetransactionsweresharebased,soalltheuncertaintiesregardingthetruemarketvalue oftheunderlyingassetsdescribedabove,andparticularlytheresources,apply.further, asall assets were medium to large scale producing mines, there were very likely substantial infrastructureassetsinplace.itisnotpossibletoformaviewonthelikelyprofitabilityofthe resources, which will impact on their value. In CSA s opinion, the resource yardstick values indicatedbythesethreetransactionsareabsolutemaximumvalues. Transactions 3, 11 and 14 all indicate high land or resource values (considered alone) for no apparent reason. If the average yardstick values for land and resources derived above are appliedtothesecomponentsoftherespectivetransactions,theresultingfairmarketvaluethat isindicatedisbetween30%and60%ofthatactuallypaid.thesetransactionsarenotconsidered typical forwhateverreasonandhavenotbeenconsideredintheanalysis. Danmarhasestimated77MtofCoalResourceswithintheIUPs(Section5.8).CSAhasreviewed Danmar s estimate and has formed an independent view that about 53Mt of the Resources might satisfy the JORC Code requirement for reporting of Coal Resources, i.e. that there are reasonableprospectsforeventualeconomicextraction(i.e.morelikelythannot) (Section5.8). TheIUPsareinaremotelocation,withassociatedhightransportcosts.Thehighsulphurcontent of the coal will mean it is less readily marketable than low sulphur coals. It therefore seems reasonable to assign a yardstick value at, or below the lower end of the range. CSA has concludedthatanappropriateyardstickvalueforthetksresourcesisus$0.35/twithinarange US$0.30/ttoUS$0.40/t,resultinginaValuefora53MtresourceofUS$16MtoUS$21M,witha mostlikelyvalueofus$18m ValuationConclusions ItisCSA sopinionthatasat31july2014thecombinedfairmarketvaluefortheresourcesand theareaoftheiupsnotunderlainbyresourcesisintherangeus$28mtous$40m,withamost likelyvalueofus$33m.itisstressedthatthisisonlyanopinionastothelikelyvalue,whichcan onlybeconfirmedbygoingtothemarket. ReportNo:R

202 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Table14.SummaryofComparableIndonesianCoalProjectTransactions REF NO INDONESIANCOAL PROJECT PROVINCE DATE BUYER SELLER ASSET TRANSACTION AREA BASEDATA IMPLIEDVALUE ha Mt Mt US$M US$/ha US$/t US$/t 9, PTKodioMulticon (KM) South Kalimantan 20/08/12 AlturaMiningLtd (ASX:AJM) PTKodioMulticon (KM) TwoIUPExplorationtitleswitha combinedareaof9,560ha Alturaacquired80%,US$2mplusUS $2.50coalsalesroyalty Eocenecoalformations PTMarangkaya BaraMakarti (MBM) PTMarangkaya BaraMakarti (MBM) ImmediatelysouthofAltura'sTabalong JV NoResourcesorReserves 2 PTBahariCakrawala Sebuku (BCS) South Kalimantan 27/08/12 PTTMiningLtd (HongKong) afullyowned subsidiaryof PTTInternational CoLtd (Thailand) SakariResources Ltd (SGX:AJI) SebukuCoalMineproduced2.7Mtin 2012 BCS2ndgenerationCCOW,KM&MBR IUPProduction, CV6,000Kcal/kgGAR,TM15%GAR,Ash 9.3%AD,TS0.68%AD PTKarbon Mahakam (KM) COAL RESOURCES COAL RESERVES PRICE 100% BASIS AREA COAL RESOURCES COAL RESERVES 27/8/12PTTannouncedanofferofSGD $1.90/sharefor54.6%ofSakari PTTalreadyowned45.4%,theoffer expired8/10/12,sgxdelisting15/1/13 The27/8/12dealvaluedSakariatSGD $2,198M(USD$1,754M) Combinedarea18,000ha DBSVickersvaluedthedealat$12/tfor Reservesand$1.1/tforResources PTMetalindoBumi Raya (MBR) 31/12/13Resources(JORC)BCS836Mt, MBR51Mt,KM10Mt(All897Mt) 31/12/13Reserves(JORC)SebukuAll 29.6Mt 30, , PTMuaraBara Jembayan (MBJ) East Kalimantan JembayanCoalMineproduced8.0Mtin 2012 CV5,500Kcal/kgGAR,TM20%GAR,Ash 7%AD,TS0.7%AD IUPProduction(12,000ha) 31/12/13Resources(JORC)Jembayan All689Mt 31/12/13Reserves(JORC)JembayanAll 145.2Mt 3 PTPirantiJaya Utama (PJU) Central Kalimantan 21/09/12 PTUnited Tractors (IDX:UNTR)and subsidiary PTTuahTurangga Agung(TTA) PTBorneoBerkat Makmur (BBM) PJUownsaminewithaCoalReserveof 45Mt 21/09/13UNTR&TTAcompleteda100% acquisitionofbbmforus$51m 4, , CV4,700Kcal/kg BBMowns60%ofPJU 5 PJUconcessionareais4800ha 4 PTKaryaUsaha Pertiwi (KUP) East Kalimantan 28/09/12 PTHarumEnergy Tbk (IDX:HRUM) PTKaryaWijaya AnekaMineral (KWAM) IUPExploration(2,662ha) HarumEnergyacquireda50.5%stakefor US$2M Noresourcesorreserves. 28/09/12conditionalsale&purchase agreement 23/01/13acquisitioncompleted 5 PTInditaPertama (IP) South Kalimantan 2/11/12 YinfoGoldCorp (USA) HitricResources PteLtd (Singapore) InferredResources1.76Mt,planto produce150ktpafrommarch2013 CV:6,0007,000kcal/kg,Ash314%,TS % IUPExploration(1,116ha),clean&clear Yinfuacquire51%inHitricforUS$1.25 togaincontrolofindita Inditais80%ownedbyHitricimplied valueofindiataisus$3.06m 2, , , , NOTE ReportNo:R

203 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti REF NO INDONESIANCOAL PROJECT PROVINCE DATE BUYER SELLER ASSET TRANSACTION AREA BASEDATA IMPLIEDVALUE ha Mt Mt US$M US$/ha US$/t US$/t 24, , PTBaramultiSukses Sarana (BSS) East Kalimantan 8/11/12 Khopoli Investments Limited owned100%by TataPower CompanyLtd PTBaramulti SuksessaranaTbk (IDX:BSSR) BSS(owned99.99%byBSSR)IUP Production(2,459.8ha) Resources207.4Mt(JORC),Reserves 54.6Mt(JORC) MiningcommencedJune2012,aim 1.5Mtpaby2014 8/11/12Khopoliexercisedtheiroptions toacquire23.4%inbssr(11) 8/11/12BSSR261,500IPOcompleted, firstdayonidx(12) 7/11/12BSSRsharesamountto 2,616,500,000(13) Fourcoalproducts,qualityranges: 8/11/12BSSRsharescloseat1940IDR each(14) CV(kcal/kgadb)5,1005,300,TM(%gar) ,TS(%adb) /11/12(US$1=9625IDR)BSSRMarket Cap$527.4M(15) COAL RESOURCES COAL RESERVES PRICE 100% BASIS AREA COAL RESOURCES COAL RESERVES NOTE PTAntangGunung Meratus (AGM) South Kalimantan AGM(owned99.99%byBSSR):2nd generationcoalcontractofwork (CCOW),22,433ha Resources860.7Mt(JORC),Reserves 59.6Mt(JORC) Mined>3Mtpain2012,aim7Mtpain 2014 Sixcoalproducts,qualityranges: CV(kcal/kgadb)5,3207,007,TM(%gar) ,TS(%adb) PTTambang SekarsaAdadaya (TSA) West Sulawesi 3/01/13 PHIGroupInc (PHIL:OTCUS) PTTambang SekarsaAdadaya (TSA) IUPExploration(9,690ha),Resources 276Mt(nonJORC,nodrilling) CV6,278kcal/kg(adb),TM6%(ar),Ash 17%(adb),TS0.87%(adb) NoReserves 8 PTBatanhariEnergi Prima (BEP) Jambi (Sumatra) 25/01/13 IndusCoalLtd (ASX:ICZ) PTBatanhari EnergiPrima (BEP) Jambicoalprojects,presumablyIUP Exploration,lowCVhighTM BEPBlock7(5,001ha)&Block8(4,380 Ha) PTBerlianMahkota Coal PTBerlian MahkotaCoal (BMC) (BMC) NoResourcesorReserves 9 B26Project East Kalimantan 31/01/13 PTMegaCoal OrpheusEnergy Limited (ASX:OEG) 3/1/13PHIsignedadefinitiveagreement toacquire70%oftsa ConsiderationUS$5.25McashplusUS $5.25Mstock 9, , /01/13completedpurchaseof38%of BMC&BEPforUS$6.5M 14, , BMCBlock9(5,013ha) PTBerkahBumiAbadi(Block6),IUP Exploration(1,951.57ha) PTPolarAndikaRealtor(Block2),IUP Production(164.97ha) Block2&6areknownastheB26Project, CV(kcal/kg) ADB SinceOct2012mining30,000tpm, presumablyiupproduction 3/12/12Resources1.13Mt(JORC), explorationtarget2.84.5mt 10 PTTambangBenua AlamRaya (TBAR) Central Kalimantan 13/02/13 CokalLtd (ASX:CKA) PTTambang BenuaAlamRaya (TBAR) IUPExploration(18,850ha),prospective forcokingcoal AdjacenttoCokal sbbmcokingcoal project OEGsoldtheir51%equityinB26backto JVpartner(Mega)forUS$2M. 2, , CokaltopayUS$5Min4stages,subject tomilestoneachievement UponcompletionCokalwillearn75% equityintbar Noresourcesorreserves. Asat14July2014Cokalhadnotearned their75%equity. 18, ReportNo:R

204 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti REF NO INDONESIANCOAL PROJECT PROVINCE DATE BUYER SELLER ASSET TRANSACTION AREA BASEDATA IMPLIEDVALUE ha Mt Mt US$M US$/ha US$/t US$/t 11 PTBinamitra Purchase33.33%ofDeltaforUS$25M 1, , Sumberata (PBS) East Kalimantan 28/02/13 AlturaMiningLtd (ASX:AJM) PTDeltaUltima Coal (Delta) IUPProduction(1,260ha),miningrate 1.5Mtpa,5kmto8,000tbargejetty Resources57.4Mt(JORC),noReserves InitialpaymentofUS$12.5M,remainder ininstalmentsovernext3years CoalproducedCV(kcal/kg) GAR,TM(%)2628, Ash(%)48GAR,TS(%)0.51.0AR 12 PTBorneoEmas Hitam (BEH) East Kalimantan 9/05/13 KillaraResources Ltd (ASX:CKA) PTBorneoEmas Hitam (BEH) IUPProduction(1,002ha),mining 12/2013to4/2014 Remnantresourcesorreservesnot defined Coaloutcropsamplinginunminedarea 5,500to7,500kcal/kgCV, ashcontent120%,totalmoisture5to 20%andtotalsulphur0.2to6% 13 PTBumiBarito Mineral (BBM) Central Kalimantan 8/07/13 BlumontGroup Ltd (SGX:A33) CokalLimited (ASX:CKA) IUPProduction(15,000ha)plusIUP Exploration(4,400ha)=19,400ha PTBorneoBara Prima (BBP) Resources7MtIndicated&70Mt Inferred(JORC),to300m 77Mtx60%=46.2Mtattributableto Cokal(70%Coking&30%PCIcoal) PTAnugerahAlam Katingan (AAK) NoReservesbutDFS&mine infrastructureworksunderway Productionsharingstatisticsindicatethat PBSis99.99%ownedbyDelta COAL RESOURCES COAL RESERVES PRICE 100% BASIS AREA COAL RESOURCES COAL RESERVES NOTE 25 KillaratopayUS$2.2mfor80%inBEH 1, , BindingMOUannounced9/5/13, acquisitioncompleted23/5/13 BBMowned60%byCokal 8/7/13privateplacementof60,057,034 CokalsharestoBlumont@ 27 A$0.16/sharetoraiseA$9,609,125.44, tobepaidin5tranchesfrom 60, , /07/13to15/11/13(28) 30 30/06/13411,046,892Cokalshares(29) 31 31/12/13471,103,926Cokalshares, 12.75%controlledbyBlumont(30,31) Ona100%basis,thedealvaluedCokalat A$75,376,628(US$68,889,715) PTAnugerahAlam Manuhing (AAM) BBPIUPExploration(13,050ha),owned 60%byCokal AAKIUPExploration(5,000ha),owned 75%byCokal AAMIUPExploration(10,000ha), owned75%bycokal PTSilangkopNusa Raya (SNR) West Kalimantan SNRIUPExploration(13,000ha),owned 75.2%byCokal Allcokingcoalexplorationfocus,no resourcesorreserves TBAR(seeabove)Cokalearning75%,no equityyet,notincluded /7/13A$1=US$ ReportNo:R

205 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti REF NO INDONESIANCOAL PROJECT PROVINCE DATE BUYER SELLER ASSET TRANSACTION AREA BASEDATA IMPLIEDVALUE ha Mt Mt US$M US$/ha US$/t US$/t 4, , PTJhoswa MahakamMineral (JMM) East Kalimantan 23/12/13 PTTriTunggal Pitriaati(TTP) afullyowned subsidiaryof EnergyEarth PublicCoLtd (Thailand) PTJhoswa Mahakam Mineral IUPExploration(4,017ha),IUP Productionapplicationpending 43Mt(nonJORC)Resource(?),CV5,300 5,500Kcal/kg Bt3,820,657,500(US$116,846,825)for 100%share (JMM) 21/12/13USD$1=32.698Baht 15 PTArutmin Indonesia (Arutmin) South& East Kalimantan 31/01/14 "abakrieenitity" TataPowerCoLtd (India) FirstGenerationCCOW(59,260ha)in Block6. Operates6opencutmines(variouscoal products): Senakin,Satui,Mulia,Batulicin,Asam asamandkintap Tata,via100%ownedsubsidiaries,signs anagreementtoselltheir30% shareinarutmin&associatedcompanies forapproximatelyus$500m COAL RESOURCES COAL RESERVES PRICE 100% BASIS AREA COAL RESOURCES COAL RESERVES 59,260 2, ,667 28, NOTE coalproduced=29Mt 31/12/2013Resources2,377Mt 31/12/2013Reserves397Mt 16 PTTunggalPutra Nusantara (TPN) West Sumatra 26/06/14 CoalFEResources Ltd (ASX:CES) PTTunggalPutra Nusantara (TPN) IUPProduction(100ha),operating anthracitemine(30kt/month) Quality(adb)CV7,200Kcal/kg,TM 4.96%,Ash8.43%,TS2.21% 7/5/14conditionalagreementtoacquire 70%ofTPN ConsiderationUS$0.25M&US$5/tcoal salesroyalty. Noresourcesorreserves. 24/6/14amendeddeal,US$0.15M& US$5/troyaltyfor70%ofTPN , Notes: %20Sale%20and%20Purchase%20Agreement%20Signed%20for%202%20Coal%20Projects.pdf Mine.html %20cokal%20acquires%20adjoining%20tbar%20iup.pdf BBM.pdf PTBumiResourceSTbkAnnualReport ReportNo:R

206 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 8 References BMOCapitalMarkets,2012,CoaltoGasSwitching,AreWeDoneYet? Cook,A.,andDaulay,B.,2000,TheIndonesianCoalIndustry:TheAustralianCoalReview(April 2000). Petromindo,2012,IndonesianCoalBook2012/2013. Darman,H.andSidi,F.H.,2000,AnOutlineoftheGeologyofIndonesia,IndonesianAssociation ofgeologists(iagi) Economist,2012,AnAreaofDarkness,GiantelectricitycutscasthalfofIndiaintodarkness and highlightitslousyinfrastructure,august2012. Friederich,M,Langford,R&Moore,T,1999,ThegeologicalsettingofIndonesiancoaldeposits: TheAusIMMProceedingsNo2.pp Goldman Sachs, July 2013, Rocks & Ores, The window for thermal coal investment is closing, CommoditiesResearchdated24/7/2013. Lasut,R.,16January2015,ReportonGEMSGroupMiningRightsforTKSConcessions,Reportto theboardofdirectorsofunitedfibersystemslimitedbylasutlay&panereceived17 January2015. Lucarelli B, 2010, The History and Future of Indonesia s Coal Industry: Impact of Politics and Regulatory Framework on Industry and Performance, Working Paper No93, PESD Stanford,ProgramofEnergyandSustainableDevelopment(July2010). PatersonsSecuritiesLtd,January2013,IndonesianCoalReviewTheshorttermoptiondated16 January2013. PlattsMcGrawHillFinancial7July2014,CoalTraderInternationalVol14,issue129,Monday July7,2014. PTDanmarExplorindo,15January2015,PTTrisulaKencanaSakti,QualifiedPerson sreportof CoalResources,reporttoUnitedFiberSystemLtdreceived18January2015. SNI 5015:2011, Standar National Indonesia. Pedoman pelaporan, sumberdaya, dan cadangan batubara.ics07.060badanstandardisasinational(bsn) TheJORCCode,2012Edition,AustralasianCodeforReportingofExplorationResults,Minerals ResourcesandOreReserves:AusIMM,MCA&AIG. TheValminCode,2005Edition,CodefortheTechnicalAssessmentandValuationofMineraland PetroleumAssetsandSecuritiesforIndependentExpertReports:AusIMM,MCA&AIG. ReportNo:R

207 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti 9 Glossary Term Meaning afm Ashfreemoisturebasis adoradb Airdriedbasisforreportingcoalanalyses.Ananalyticalsampleisspreadoutandexposedto airforameasuretimeperiodsothatitsmoisturecontentcomesintoequilibriumwiththe humidityofthelaboratory. alluvial Pertainingtosilt, sandandgravelmaterial,transportedanddepositedbyariver. alluvium Claysilt,sand,gravel,orotherrockmaterialstransportedbyflowingwateranddepositedin comparativelyrecentgeologictimeassortedorsemisortedsedimentsinriverbeds, estuaries,andfloodplains,onlakes,shoresandinfansatthebaseofmountainslopesand estuaries. analysisproximate Theanalysisofcoalorcokeintermsofmoisture,volatilematter,ashandfixedcarbon. analysisultimate Theanalysisofcoalintermsofcarbon,hydrogen,sulphurandoxygen. andesite Anintermediatevolcanicrockcomposedofandesineandoneormoremaficminerals. anthracite Coalwiththehighestenergycontent,from86%to98%,byweight,andhighcaloricvalues. anticline Aconvexupwardfoldstructurehavingolderrocksinthecore.Thefoldedstrataorlayersare inclineddownwardfromtheaxialplane. ar Asreceivedconditionorasreceivedbasis.Representsananalysisofasampleasreceivedata laboratory. ash Impurities(usuallyasediment)consistingofiron,aluminaandotherincombustiblematter thatarecontainedincoal.sinceashincreasestheweightofcoal,itaddstothecostof handlingandcanaffecttheburningcharacteristicsofcoal. ashanalysis Determinationoftheinorganicconstituentspresentincoalashorcokeash,usually expressedasoxides. asl Abovesealevel assay Thetestingandquantificationmetalsofinterestwithinasample. AIG AustralianInstituteofGeoscientists ASX AustralianSecuritiesExchange AusIMM AustralasianInstituteofMiningandMetallurgy basin Alargegeologicaldepressionfilledwithtectonicallyrelatedsedimentaryorvolcanicrocks. Bcm Bankcubicmetres bedding Stratificationinsedimentaryrocksbroughtaboutbydepositionofdifferentmaterials. Bituminouscoal Themostcommontypeofcoalandcharacterizedbyamoisturecontentoflessthan20%by weight,heatingvalueofgreaterthan6330kcal/kg(afmbasis)andvolatilemattergreater than14%.bituminouscoalisasoft,denseandblackcoalcontaininglargeamountsofcarbon, oftenwithwelldefinedbandsofbrightanddullmaterial.itisusedprimarilyasfuelinsteam electricpowergeneration,withsubstantialquantitiesalsousedforheatandpower applicationsinmanufacturingandtomakecoke. Blends Amixtureoftwoormorecoaltypesorbrands.Inthecaseofcokemaking,blendingprovides themanufacturerwiththepotentialtomixlowercostpoorercokingcoalswithhighercost hardcokingcoalsandtherebyreducetheoverallcostofthecokeovenfeed. Calorificvalue(CV)orCoalsample senergycontentmeasuredastheheatreleasedoncompletecombustioninair specificenergy oroxygen,usuallyexpressedastheamountofheat(measuredinkilocalories)perunitweight ofcoal(measuredinkilograms)or(kcal/kgormj/kg). carbon,fixed(fc) Afigureobtainedbysubtractingfrom100thesumofthepercentagesofmoisture,volatile matterandashasexpressedonacommonmoisturebasis;formspartoftheproximate analysis CCOW CoalContractofWork,astateagreementtitlewiththeIndonesiangovernment clastic Pertainingtoarockmadeupoffragmentsorpebbles(clasts). ReportNo:R

208 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Cleat Afractureorsystemoffracturesinacoalseamorlithotype,usuallyroughlyperpendicularto thebeddingandalongwhichthecoalismoreeasilybrokenup. Coal Areadilycombustibleblackorbrownishblackrockwithacomposition,includinginherent moisture,whichconsistsofmorethan50%byweightandmorethan70%byvolumeof carbonaceousmaterial.itisformedfromplantremainsthathavebeencompacted, hardened,chemicallyalteredandmetamorphosedbyheatandpressureovertime. Coalmeasures Alayeredsequenceessentiallyofsedimentaryrockscontainingcoalseams. Coalrankorrank Thedegreeofalteration(ormetamorphism)thatoccursasacoalmaturesfrompeatto anthraciteisreferredtoasthe rank ofthecoal.lowrankcoalsincludeligniteandsub bituminouscoals.thesecoalshavelowerenergycontentbecausetheyhavelowcarbon content.theyarelighter(earthier)andhavehighermoisturelevels.astime,heat,andburial pressureallincrease,therankdoesaswell.highrankcoals,includingbituminousand anthracitecoals,containmorecarbonthanlowerrankcoalswhichresultsinamuchhigher energycontent.theyhaveamorevitreous(shiny)appearanceandlowermoisturecontent thenlowerrankcoals. Coalseamorseam Coaldepositsoccurinlayersinabedofcoallyingbetweenaroofandfloorwitheachlayer calleda seam. Coke Hard,drycarbonsubstanceproducedbyheatingcoaltoaveryhightemperatureinthe absenceofairandusedinthemanufactureofironandsteel. Cokingcoal Coalusedtomakecokeandalsoreferredtoasmetallurgicalcoal. Core,slim Borecoreshavingdiametersusuallyintherange45mmto65mm. csvfile Commaseparatedvaluefile CP CompetentPerson(JORCCode)&CharteredProfessional(AusIMM) CV Calorificvalue seeabove DCF DiscountedCashFlow DMO DomesticMarketObligation daf DryashfreeAtheoreticalmeasureofcoal(orotherorganicmaterial),basedonasamplein whichthemoistureandasharetotallyeliminatedandtheremainingconstituentsare recalculatedtototal100percent;ananalysisexpressedonthebasisofacoalsamplefrom whichthetotalmoistureandtheashhaveintheorybeenremoved dip Theacuteanglebetweenabeddingplaneoranystructuralsurface(egfaultplane)anda horizontalplane,measuredinaplanenormaltothestrike. dolerite Mediumgrainedmaficintrusiverockcomposedmostlyofpyroxenesandsodiumcalcium feldspar. drycoalbasis Coalqualitydatacalculatedonatheoreticalbasisin whichnomoistureisassociatedwiththe sample. DWT DeadWeightTonnes dyke Bodyofintrudingigneousrockthatcrosscutsthehoststrataatahighangle. Fault Afractureorfractureszoneacrosswhichrelativedisplacementhasoccurredintherock mass.thedisplacementandthenatureordirectionofmovementcanvary. FC Fixedcarbon(seecarbonfixeddefinitionabove) Fob/FOB FreeonBoard formation Theprimaryformalunitoflithostratigraphic classification.itisabodyofrockstrataof intermediaterankinthehierarchyoflithostratigraphicunits. g/m³ AunitinthecategoryofDensity.Itisalsoknownasgramspercubicmeter,gramspercubic metre,grampercubicmetre,gram/cubicmeter,gram/cubicmetre.grampercubicmeter (g/m3)hasadimensionofml3wheremismass,andlislength.itcanbeconvertedtothe correspondingstandardsiunitkg/m3bymultiplyingitsvaluebyafactorof0.001 HGI ICPR IDX HardgroveGrindabilityindexTherelativegrindabilityoforesandmineralsincomparisonwith standardcoal,chosenas100grindability,asdeterminedbyaminiatureballringpulverizer. AlsoknownasHardgrovenumber. IndonesianCoalPriceReference IndonesianStockExchange ReportNo:R

209 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti IM InherentMoisture(bedmoisture,equilibriummoisture,capacitymoisture)isassumedtobe thewaterheldwithintheporesystemandcapillariesofcoalandisnottobeidentifiedwith residualmoisture. inertinite Amaceralgroupformedfromplantmatterthathasbeenoxidizedtovariousdegrees.It normallyexhibitsahigherreflectancethanliptiniteorvitrinite. IPPKH IzinPinjamPakaiKawasanHutan(ForestryPermitforMining) IUP IzinUsahaPertambangan,(MiningBusinessLicense) JORCCode AustralasianCodeforReportingofExplorationResults,MineralResourcesandOreReserves preparedbythejointorereservescommitteeoftheaustralasianinstituteofminingand Metallurgy,AustralianInstituteofGeoscientistsandMineralsCouncilofAustralia(JORC), December2012. cal/g Caloriespergram. Kabupatenor SecondtieroflocalgovernmentinIndonesia,havingitsownlocalgovernmentandlegislative Regency body Kcal/kg Kilocaloriesperkilogram KecamatanorDistrict ThirdtieroflocalgovernmentinIndonesia k Kilo(1,000) kg kilogram kt Kilotonnes KP KuasaPertambangan TenementtitlepriortoIndonesianmininglaw2009 lignite Thelowestrankedcoal.Oftencalled soft or brown coal,itisabrownishblackcoalwith carboncontentof2535%.ithasenergyvaluesrangingfrom15,00020,000kj/kg(6,300 8,300BTUs/lb)andhighmoisturecontentofupto45%byweight.Ligniteisstrictlyathermal coalandisusedasafuelinpowergeneratingplants. Liptinite Amaceralgroup formedfromsubstanceshighinhydrogen,yieldingahighproportionof volatilematterandresistanttodecayanddecomposition. Macerals Themicroscopicallyrecognizableorganicconstituentsofcoal,analogoustothemineralsin inorganicrocks,butdifferingfromthelatterinthatmaceralsarenotcharacterizedby crystallographicpropertiesnoraretheyconstantinchemicalcomposition.themaceralsare distinguishedmicroscopicallybypropertiessuchasreflectance,colour,morphology, fluorescence,anisotropyandhardness.theyoriginatedfromtheremainsofdifferentorgans andtissuesofplantsandhaveacquiredtheirpropertiesduringpeataccumulationand coalification. MCAF Miningcostadjustmentfactor MEE MultipleExplorationExpenditure metallurgicalcoal Thevariousgradesofcoalsuitableformakingsteel,suchascokingcoal,whichisusedto makecoke,andpcicoal,whichisusedinthesteelmakingprocessforitscalorificvalue. metamorphic Rockthathasbeenalteredbyphysicalandchemicalprocessesinvolvingheat,pressureand derivedfluids. Mudstone Finegrainedsedimentaryrockwhoseoriginalconstituentswereclaysormuds;hardened mud;amixofsiltandclaysizedparticles MV MotherVessel NPV NetPresentValue NQ Drillcorewithdiameterof45mm opencutmining Formofminingdesignedtoextractmineralsthatlienearthesurface.Overburdenisremoved toexposethemineralsformining.rockcoveringthemineralsmaybeblastedandremoved bylargedraglinesorelectricshovelsandtrucks. PCIcoal Coalthatispulverizedandinjectedintoablastfurnace.ThosegradesofcoalusedinthePCI processaregenerallynoncoking.however,sincesuchgradesareutilizedbythemetallurgical industry,theyareconsideredtobeametallurgicalcoal.pcigradecoalisusedprimarilyasa heatsourceinthesteelmakingprocessinpartialreplacementforhighqualitycokingcoals whicharetypicallymoreexpensive. PEM ProspectivityEnhancementMultiplier ReportNo:R

210 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti reserves,coal Thosepartsofthecoalresourcesforwhichsufficientinformationisavailabletoenable detailedorconceptualmineplanningandforwhichsuchdetailedplanninghasbeen undertaken.reservesarequotedunderdifferentcategories,dependingonthedegreeof planningconducted. resources,coal Allthepotentiallyuseablecoalinadefinedarea,basedonpointsofobservationand extrapolationsfromthosepoints. ply Alayerofcoalseamnormallydifferinginpropertiesfromadjacentlayers.Anydistinctive layermayberegardedasaply. pointsofobservation Anintersectionataknownlocationofcoalbearingstrata,whichprovidesinformationabout (POB) thestrataincludingcoalseamsbyoneofthefollowingmethods; Observation,measurementandtestingofsurfaceorundergroundexposures. Observation,measurementandtestingofborecores. Observationandtestingofcuttings,anduseofdownholegeophysicallogsonnon coredboreholes. PrestonSanders ThePreston&Sandersequationforthecalculationofrelativedensity(RD)toestimateinsitu formula relativedensity Province Highesttieroflocalgovernment,subnationalentityinIndonesia,havingitsownlocal government,headedbyagovernor. RD Theratioofthedensity(massofaunitvolume)ofasubstancetothedensityofagiven referencematerialbylaboratoryanalysis RDinsitu Intheground,undisturbedrelativedensity sandstone Aclasticsedimentaryrockcomposedmainlyofsandsizedmineralsorrockgrains schist Acrystallinemetamorphicrockhavingafoliatedorparallelstructureduetothe recrystallizationoftheconstituentminerals. seamthickness Thetotalthicknessofcoalandotherinterbandedsedimentsthatconstituteoneseam, measuredatrightanglestothebedding. sedimentary Termdescribingarockformedfromsediment. SGX SingaporeStockExchange shale Finegrained,laminatedsedimentaryrockformedfromclay,mudandsilt. sills Sheetsofigneousrockwhichisflatlyingorhasintrudedparalleltostratigraphy. silts Finegrainedsediments,withagrainsizebetweenthoseofsandandclay. SRTM ShuttleRadarTopographyMission stocks Smallintrusivemassofigneousrock,usuallypossessingacircularorellipticalshapeinplan view. strata Sedimentaryrocklayers. stratigraphic Composition,sequenceandcorrelationofstratifiedrocks. strike Horizontaldirectionortrendofageologicalstructure. subbituminouscoal Dullblackcoalwithcarboncontentof3545%,energycontentvaluesintherangeof20,000 27,000kJ/kg(8,30010,500BTUs/lb)andmoisturecontentgenerallybetween20%and30% byweight.subbituminouscoalgenerallyhasalowersulphurcontentwhichmakesit attractiveforcombustionpurposes.itisprimarilyusedasafuelsourceinthermalpower plantsandforindustrialheatingpurposes. sulphur Oneoftheelementspresent,invaryingquantities, incoalthatcontributestoenvironmental degradationwhencoalisburned.sulphurdioxideisproducedasagaseousbyproductofcoal combustion.lowsulphur"coalhasavarietyofdefinitions,buttypicallyisusedtodescribe coalconsistingof1.0%orlesssulphur. syncline Aconcaveupwardfoldinwhichthestratigraphicallyyoungestrocksoccurinthecore. thermalcoal Coalthatisusedprimarilyforitsheatingvalue.Thermalcoaltendsnottohavethe carbonizationpropertiespossessedbymetallurgicalcoals.mostthermalcoalisusedto produceelectricityinthermalpowerplants. totalmoisture(tm) Thepercentageofwaterinallforms(exceptwaterofcrystallizationofthemineralmatter) thatresideswithinthecoalmatrix Totalsulphur(TS) Seesulphurabove tonnes Metrictonortonnewhichisequivalentto1,000kilograms,or2,204.60pounds. ReportNo:R

211 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti VALMINCode TheVALMINCodeestablishesstandardsofbestpracticeforthetechnicalassessmentand valuationofmineralandpetroleumassetsandsecuritiesbygeologistsinvolvedinthe preparationofindependentexpertreports.thevalmincodeisbindingonmembersofthe AusIMMwhenpreparingpublicIndependentExpertReportsrequiredbytheCorporationsAct concerningmineralandpetroleumassetsandsecurities. volatilematter(vm) Thoseproducts,exclusiveofmoisture,releasedbyamaterialasgasorvapour volcanic Formedorderivedfromavolcano. ReportNo:R

212 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Appendix1LasutLay&PaneReport ReportNo:R

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237 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT 1062

238 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT 1063

239 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Appendix2TKSCoalStratigraphy (Danmar2015) Age MIDDLE Formation WARUKIN STRATIGRAPHICCOLUMNTKSPROJECT Lithology COALQUALITY(INSITU ) Description Thickness SeamID TM IM ASH VM FC TS CV CV CV Ave(m) airdriedbasis Gar Daf RD HGI Soil 2.6 Mudstone 6 Coal 0.29 S10 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Mudstone 14 Coal 0.73 S n/a n/a Mudstone 16 Coal 0.48 S Mudstone 13 Coal 0.48 S n/a Mudstone 11 Coal 0.33 S Mudstone 15 Coal 1.59 S Mudstone 8 Coal 1.80 S Mudstone 8 Coal 0.86 S Mudstone 10 Coal 0.75 S Sandstone 37 Coal 0.89 S Mudstone 31 Coal 0.68 S n/a Mudstone 39 MIOCENE EARLY MONTALAT Coal 0.51 S600U n/a Mudstone 7 Coal 0.73 S600L n/a Mudstonewith sandstone 20 Sandstone withmudstone 33 bands Coal 0.84 S700U n/a Mudstone 8 Coal 0.74 S700L n/a Mudstone 64 Coal 0.49 S n/a Mudstone 22 Coal 0.51 S n/a Mudstone 13 Coal 0.50 S n/a Mudstonewith sandstone 49 bands Coal 0.70 S n/a Mudstonewith sandstone bands 45 Coal 0.62 S n/a Mudstonewith sandstone bands 48 Coal 0.53 S n/a Mudstone 40 TOTALSEDIMENTTHICKNESS 575 ReportNo:R

240 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti Appendix3 SiteVisit17July2014 Map1 Map2 GPSReadingsbelowareUTM_Z50S ReportNo:R

241 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti SITE1 SITE2 TKSpitlookingtoNWfrom E N Damagedbenchmarkat E N TKSPitlookingtoWfrom E N SITE3 Stockpilesurveypointat E N SITE3 TMRsiteoffice TMRCamp TrinityMineResources(TMR),TKSminingcontractor. SiteOfficeandCampat E ThiscampislocatedwithintheTKStenementarea,though thecurrentrelationshipwithtksregardingsuchfacilitiesisnotknown. OnthisTMSsiteCSAobserved: : a. 12buildingsincludingsiteoffice,camp,mosque, facility,etc. b. 1unitKomatsuBulldozer(inoperable) c. 3unitMitsubishiLightvehicle(inoperable) d. 8unitNissanDumpTruck(inoperable) ReportNo:R

242 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti SITE4 SITE5 ROMStockpileat E N Around11hawithmaximumcoalcapacityof50,000t SITE6 Weighbridgeat E N SITE7 TKSdrillholecollarat E N SITE7 Provinceroad(sealed)intersectionwithPTAustalByna loggingroad,viewtosw SITE7 PTAustralBynaLoggingroadtoport HaulroadfromTKSPit Site8TKSsiteofficeandfacilities( E N),10kmfromtheROMstockpile. TheassetisoutsidetheIUPtitlearea.TKSownthe4halandsite. a. 1unitofficebuilding b. 1unitmessfacilities c. 2unitunfinishedbuilding d. 1unitgensetroom. ReportNo:R

243 APPENDIX 6C TKS INDEPENDENT QUALIFIED PERSON S REPORT UnitedFiberSystemLtd CoalAssetsofPTTrisulaKencanaSakti SITE8 SITE8 TKSSiteOffice TKSMess Unfinishedbuilding1 UnfinishedBuilU ding2 TKSGensetshed Camproad Note CSAwereunabletovisitthePangkuportfacilitiesduetoaroadblockagebyUjubarovillagers.Thedispute does not involve TKS. A sitevisitv by CSA in 2012 confirmed the nature of the port at that time, with a capacity of up to 200,000t with the yard and barge loading conveyor owned by PT. Sinomas Mining, whereintkshadaleasetousesuchfacilities.danmaralsoreportsonthesefacilities.thepublichighway leadingfromnearthetenementtomuaratewehisnotgenerallyavailableforcoalhauling ReportNo:R

244 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1069

245 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1070

246 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1071

247 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1072

248 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1073

249 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1074

250 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1075

251 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1076

252 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1077

253 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1078

254 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1079

255 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1080

256 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1081

257 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1082

258 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1083

259 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1084

260 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1085

261 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1086

262 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1087

263 APPENDIX 7 INDEPENDENT BUSINESS VALUATION REPORT 1088