COLTON COAL PTY LTD COLTON MINE PROJECT - MINING LEASE APPLICATION COLTON C

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1 November 2010 COLTON COAL PTY LTD COLTON MINE PROJECT - MINING LEASE APPLICATION COLTON C Section 15 - Accompaniments 1.0 INTRODUCTION 1.1 PROJECT OVERVIEW Colton Coal Pty Ltd ACN (Colton Coal) makes this Mining Lease Application (MLA) of 1.5 ha, Colton C MLA, over part of the area of Parcel Prospecting Permit (PP) number as issued to Colton Coal and EPC 1082 as held by Colton Coal to allow development of the Colton Mine Project (Project). MLA Colton A and MLA Colton B were made on 28 January, Together these three contiguous MLAs comprise the Project. As the Project develops, additional MLAs to provide for additional and expanded mine production are expected to be made. This MLA is an application for a mining lease under section 234(1) of the Mineral Resources Act 1989 (MR Act). The principal purpose of this MLA, is to provide tenure for part of the rail infrastructure that is required to service the mine. The Project at this first stage consists of the development of a ~5.0 Million tonne (Mt) coking coal Inferred Resource of the Burrum Coal Measures in the Maryborough Basin in South East Queensland, Australia. The Project is planned to mine up to 0.85 Mt of Run of Mine (ROM) coal per annum (pa) by open cut methods to produce on average 0.5 Mtpa of product coal for export. Project production life is anticipated to be 8-10 years based on current economic assessment of the resource. However, continuing exploration success should extend the known resource and hence the duration of the Project. The Project is located in the Fraser Coast Regional Council area in southern Queensland, approximately 10 km north of Maryborough and 300 km north of Brisbane, as shown in Figure 1. Access to the Project area is via the Churchill Mine Road. The target commencement date for mine construction for the Project, subject to the grant of the Mining Leases and Environmental Authority for the Project is early in calendar year The Project construction period on site prior to the start of coal production is anticipated to be 6 months. The Project will involve open cut mining using truck and excavator methods. A Coal Handling and Preparation Plant (CHPP) and associated mine infrastructure will be required on site. Topsoil stripped prior to mining will be stockpiled for later use in rehabilitation. Overburden will be relocated from above the coal seams to in-pit dumps, and in out-of-pit spoil dumps located on site and contiguous with the pit excavations. Processing will involve crushing, screening and washing to separate coal from waste materials. Waste rejects will be de-watered, with water recycled to the processing plant and solids disposed of within spoil dumps. Mail Address Level 5 Phone: GPO Box Edward St Fax: Brisbane Qld 4001 Brisbane Qld admin@rcm.com.au

2 Product coal will be transported from a purpose constructed train loading facility located within the mining leases and near to Queensland Rail s North Coast Line approximately 270 kilometres initially to the Barney Point Coal Terminal at Gladstone and later to the Wiggins Island Coal Export Terminal once there is capacity for Colton Coal for export. During construction and then at full production, the Project is estimated to provide employment for up to 100 full time employees with flow on effects to another full time equivalent positions. Figure 1: Project Area Location 2

3 1.2 PROJECT PROPONENT Colton Coal is the Project proponent. Colton Coal is a wholly owned subsidiary of Northern Energy Corporation Limited (NEC). NEC is the manager of and the responsible entity for all business activity carried out on and in connection with the Colton Coal tenures. NEC is a Brisbane based coal exploration and development company which listed on the Australian Stock Exchange in February 2005 ASX Company Code - NEC. NEC has numerous granted exploration tenements in Queensland and northern NSW which contain both thermal and coking coals. The Colton Mine Project is one of four projects NEC is actively progressing from resource identification and proving through to mine development and operation. NEC s office is located at: Level 5 60 Edward Street Brisbane, Qld. GPO Box 5283 Phone: (61) Facsimile: (61) Website: Taroom Coal Proprietary Limited ACN (Taroom Coal) is also a wholly owned subsidiary of NEC. NEC is the manager of and the responsible entity for all business activity carried out on and in connection with Taroom Coal's tenures. The Project area is within the area of Exploration Permit Coal (EPC) 923 held by Taroom Coal. Taroom Coal's letter of consent to this ML application and grant is included as part of this application documentation. 1.3 PROJECT AND RELATED TENEMENTS. Summary details of the Colton Coal PPP that underpins this application is as shown in Table 1 following and with reference to the Survey Plans which accompany the MLAs. Table 1: Colton Coal Pty Ltd Parcel Prospecting Permits Permit Number Lot Number Plan Owner Address Current use Subject to erosion control works Lot 14 USL State of Queensland Dept Environment & Resource Management, Po Box 212, Maryborough. Q 4650 None - vacant land No - no visible evidence The part of PPP and EPC 1082 that overlap with the mining lease application area is currently undeveloped. The area has vegetation coverage of grasses and trees and there is no evidence of erosion control works having been constructed in the general area. Full details of the land status are included in the Environmental Management Plan for the Project. 3

4 Colton Coal's PPP overlaps with Taroom Coal's EPC 923. This exploration tenement is the subject of applications for assignment from Taroom Coal to Colton Coal. Once assignment of the EPC(s) from Taroom Coal to Colton Coal is completed Colton Coal will hold the following exploration tenements associated with the Project: the PPPs that supported the three mining lease applications; EPC 923; and EPC EPC 923 was first granted to Taroom Coal from October 2005 and was renewed after some relinquishment of area in October 2008 for a further five years. On renewal the tenure contained 64 Queensland Department of Mines and Energy (QDME) exploration sub blocks - 19,804.7 hectares (ha). EPC 1082 was granted to Taroom Coal in November 2007 for three years. It contains three QDME sub blocks ha. Taroom Coal's and Colton Coal s exploration tenures overlap with oil and gas exploration tenures Authority to Prospect (ATP) 613 and applications ATPA 733 and ATPA 674 (in the case of EPC 923), all registered to Magellan Petroleum (Eastern) Pty Ltd (Magellan) as at 27 October, Magellan has a Farm-in Agreement with Eureka Petroleum Pty Ltd (Eureka), a wholly owned subsidiary of Blue Energy Limited (Blue Energy) under which Eureka can earn a 75% interest in the tenures on completion of a Native Title Agreement process which will allow grant by the Queensland Government of ATP 613P (excluded lands) and ATPA 733 and ATPA 674 in the Maryborough Basin. ATP 613 was granted on 23 March, 1995 for a term to 31 March, NEC for Taroom Coal/Colton Coal initiated discussions with Blue Energy in 2008 towards making a Co-Development Agreement. Colton Coal wishes to negotiate a Co-Development Agreement that provides for efficient and expedited processes under which the parties may each beneficially utilise their respective tenements. As noted above the Project comprises at this stage three contiguous MLAs - two overlapping with ATP 613 and another overlapping with ATPA see Figure 2. Figure 2: Colton Project Area - Mining and Petroleum Tenures 4

5 2.0 PROJECT DESCRIPTION 2.1 Human, technical and financial resources of the applicant NEC is the manager of and the responsible entity for all business activity carried out on and in connection with the Taroom Coal/Colton Coal tenures. See attachments for details of the human, technical and financial resources available to Colton Coal due to its subsidiary status to NEC. 5

6 2.2 Project Resources NEC, as manager of the business of Taroom Coal/Colton Coal, has carried out extensive exploration and investigations to establish a significant exploration resource target of some Mt of near surface coking coal amenable to open pit mining within the Burrum Coal Measures within EPC 923 and EPC As part of these investigations an area on the South- Western rim of the Burrum Coal Measures was selected as the area for intensive investigations. As a result of this work Colton Coal was able to identify an Inferred Resource of ~5.0Mt of near surface coking coal suitable to form the basis for the Project - see Figure 3. This resource statement was announced to the ASX in July 2009 (see and select "Investor Info" and " Million Tonnes Hard Coking Coal Resource at Maryborough" for the announcement). Figure 3: Isoview of the Burrum Syncline with Resource Area For the purpose of resource estimation, only holes drilled by Taroom Coal have been used as points of observation. Although the information obtained from the NS (Queensland Government) series holes has aided in re-correlation of stratigraphy, and a limited number of historical holes have been resurveyed and included in the structure model, the confidence in the validity of the information in these holes is still not sufficient for them to be included as points of observation according to the JORC code. In particular, confidence in the location of these holes will remain low until they can be accurately surveyed within the GDA94 datum. It is anticipated that when further survey and confirmation drilling is conducted (i.e. survey of locations and twinning of historical holes) then the confidence in the validity 6

7 of the historical holes can be increased, which may allow them to be included as points of observation in the future. In order to prove structural continuity, both core holes with geophysics and open holes with geophysics have been used as points of observation. In order to prove quality continuity, only core holes with analysed seam intersections have been used as points of observation. A drill hole spacing of a maximum of 300 m has been used to define structural continuity of the coal seams reflecting the lenticular nature of the deposit. A drill hole spacing of a maximum of 500 m has been used to define quality. It is considered that not enough information is currently available to accurately model the coal quality of individual seams within the Project area. The confidence of coal quality continuity is therefore low and the initial resource for the Project deposit can only be classified as inferred. Only seams in the stratigraphic sequence down to the B2L have been considered for resource estimation. This excludes the B3, C and D seam groups, which have been intersected by drilling, but are considered to be too thin and too deep to be mined economically. No depth cut off has been applied to the resource estimation, however the maximum depth to the bottom seam (B2L) in the inferred resource polygon is approximately 175m. A minimum thickness of 0.1 m has been applied to all seams. A minimum parting limit of 0.0 m has been applied to the model, therefore all non-coal material (i.e. internal parting) within the designated seam has been excluded from the resource estimate. Due to the absence of sufficient coal quality data to allow robust quality modelling, a default relative density of 1.35 g/cc has been applied to the coal volume in order to estimate the inferred tonnage of coal. The tonnages shown in Table 2 have been rounded (down) to reflect resource determination confidence. Table 2: Inferred Resources - Colton Project Area Seam Group Inferred Resource -Tonnes A Seam Group B Seam Group C Seam Group Ellengowan Group Globe Seam Group Jubilee Seam group TOTAL 3,200, ,000 40, , , ,000 5,000,000 (rounded) Indicative raw coal quality is summarised in Table 3. This analysis has been carried out on a full sample basis and included partings. It is therefore indicative of the likely ROM coal quality prior to processing. 7

8 Table 3: Indicative Raw Coal Quality COAL PROPERTY Average (Indicative) Inherent Moisture % 2.6 Ash % ad 20 Volatile matter %ad 27 Total Sulphur %ad 1.3 CSN 6 Indicative product coal quality is summarized in Table 4. A low ash coking coal with good plastic properties is indicated. Table 4: Indicative Product Coal Quality COAL PROPERTY SPECIFICATION (Indicative) Total Moisture % 9-10 Inherent Moisture % 1.6 Ash % ad 7 Volatile matter %ad Total Sulphur %ad 0.7 Phosphorous %ad.04 CSN 8-9 Gray King Coke Type G9-G10 Maximum Fluidity ddpm >2000 Fluidity plastic Range Deg C 85 Total dilatation % >150 Vitrinite % Vol 80 Reflectance Ro Max % 1.0 Alkalis in ash %

9 2.2 Mine Operations Prior to the development of the Project mine topsoil will be progressively removed from the footprint area and stockpiled for later re-use in rehabilitation activities. Progressive rehabilitation will be undertaken through the life of the Project as mined out areas become available. At the current stage of Project definition, land disturbance will include mining disturbance of ~350 ha (whole of project), CHPP and infrastructure, workshops and offices, and roads and tracks of ~70 ha, overburden dumps, and surface water management dams of ~350 ha. The total area of land disturbance is estimated at approximately 770 ha over the life of the Project. Areas of land disturbance are based on a prefeasibility mine design and are provided as a broad indication of disturbance. A layout of the Project Mining Area is provided in Figure 4. The final size and location of infrastructure and mining excavation boundaries are dependant on continued exploration, project investigation and design, and identification of environmental issues. Figure 4: Conceptual Mining Layout Plan Showing Production Areas - Year 2 9

10 The deposit to be mined within the Colton A and Colton B MLA areas comprises three major seam sets of economic interest; the Ellengowan, the Jubilee and the A Seams and all seam groups subcrop within the proposed mining area. The subcrops strike generally NNW-SSE in the mining area and dip o at approximately 20 to the ENE. Base of weathering is ~150 m. The interburden between the Ellengowan (uppermost seam set) and the Jubilee seam set is 15 m and between the Jubilee and the A seam set 20 m. Each seam set is typically made up of three to five significant plies. The configuration of the seams favours excavator and truck mining methods. Spoil will initially be placed out of pit beside the first excavations and thereafter backfilled to the mining void. The Project plan proposes two open pit areas initially on the western and eastern sides of the mining zone with subsequent mining of the middle between the two. Initial boxcut excavations, some 100 m wide, will advance along strike for approximately 500 m before mining commences in the middle part. The spoil from these initial boxcuts will be stacked out of pit beside the excavations and all subsequent spoil will be dumped in pit. The ~0.85 Mtpa average ROM coal rate to produce ~0.5 Mtpa product is based on a CHPP operating for 3,300 hours per year. To minimise raw (new) water requirements, fine reject materials are to be dewatered and then transported back into storage cells in the mine overburden. No permanent tailings storage facilities are proposed for the Project. Coarse reject material will be placed in the overburden as part of the mining operation. The final rehabilitation plan for overburden dumps will be detailed in the Environmental Management Plan (EMP) for the Project. The planning for this has assumed the final slope of the overburden dump face to be between the angle of repose and 20 degrees depending on the competency of the waste material. Where necessary, berms will be constructed on the outer faces and graded to slope back towards the dump to act as a water control structure for any stormwater flowing from the spoil above. The slopes and top of the dumps will be topsoiled and deep ripped to bind in the material. Revegetation will use species suitable for the final land use. The final pit voids after spoil recontouring of the excavation will be protected by constructing an exclusion bund wall around the perimeter from competent rock and/or by fencing, depending on the parameters of the final void. The exclusion bund wall will be constructed as described in Technical Guidelines for the Environmental Management of Exploration and Mining in Queensland. This guideline states that the bund wall should be of a minimum height of 2 m, with a minimum base width of 4 m and be located at least 10 m beyond the area potentially affected by any instability of the pit edge. Where water quality within the void is suitable for stock, a safe access to the water shall be provided for stock, or the water will be pumped to a stock watering point. Consultation with landholders will be undertaken to determine the preferred use for the water. Where water in voids is not suitable for stock then the voids will be bunded or fenced to prevent stock access. 2.3 Mine Infrastructure The following mine infrastructure is proposed for the Project: Access and haul roads; 10

11 Offices, workshops and ablutions facilities; CHPP; ROM pads and lay-down area; Surface water management dams; Raw water storage dam; Water pipelines; Fuel, oil and chemical storages; Transmission lines and power supply infrastructure; Train loading facility, and Explosives magazine. Approvals for off-lease transmission lines and water pipelines to be provided by others will be undertaken separately to the Project approvals. The proposed infrastructure layout is as shown in Figure 5. Figure 5: Mine Infrastructure Layout 11

12 2.4 Product Transport and Port Transport of the Project product coal is proposed to be by heavy freight rail to the Barney Point Coal Terminal at Gladstone and later to the Wiggins Island Coal Terminal once capacity becomes available. NEC is a party to the development of the Wiggins Island Coal Terminal at Gladstone, a significant coal export facility being planned by the Gladstone Port Corporation and WICET, a private sector consortium. The terminal is anticipated to have initial annual export capacity of 25 Mt and total capacity in excess of 70 Mt when all phases of construction are completed. The Queensland Rail Network North Coast Line is located immediately to the west of the MLA area. A new rail spur some 2.5km long will be built (rebuilt) from the QR North Coast Line along the alignment of the old Pialba rail corridor and a balloon loop and train loading area constructed at the end near to the coal processing plant. The rail distance to Gladstone from the Colton Mine is approximately 270 km. Because of restrictions due to the configuration of the North Coast Line a non standard train (when compared to coal haulage on the Central Queensland Rail Networks) is required. The train will have a payload of approximately 2,200 t. 2.5 Project Services Colton Coal has determined that the Project s water supply requirement for the mining and processing activities including water required for dust suppression (at the planned production rate of 0.85 Mtpa ROM) will be in the range Megalitres (Ml) per annum. Site investigations and water modelling has shown that the Project will generate, by a combination of groundwater and surface rain water, initially at least 300Ml per annum, sufficient water to meet the Project s immediate production needs. The modelling further shows that this quantity will rise over a few years to more than 1000Ml per annum as a combination of ground water released as part of the mine excavation operations and from rainfall captured within the boundaries of the mining lease. Whereas the groundwater contribution is expected to be relatively constant through the year, the rainfall contribution may be sporadic. Colton Coal has investigated the feasibility of storing excess water on site, relying on evaporation to keep the quantity within manageable bounds. Based on these investigations, Colton Coal has concluded that this is not a practical solution as any evaporative losses would be unlikely to match even rainfall contribution let alone the additional groundwater volumes. Therefore excess water will be removed from site and discharged in accordance with the Environmental Protection Act 1994 and its subordinate legislation. Site water will be managed by having dams to store both clean (typically rainwater run-off) and process (typically water from the mine excavation and from processing) water sources. The dams will provide a buffer between the somewhat erratic supply of water (i.e. rainfall effect), and relatively constant use. These storages will be sized to provide appropriate storage capacity, allow for settlement of any solids and precipitates and provide for blending of water to enable discharge criteria to be met. 12

13 Wherever possible the available water will be used on-site for activities such as coal processing, dust suppression, wash down and sanitation. In its untreated form, the site process water is anticipated to be unsuitable for uses such as irrigation and stock water. Colton Coal proposes to manage discharge of the excess site water through a pipeline to the Mary River during tidal flow so as to maximise mixing of the water from the Project with the muddy and salty river water. The estimated installed electrical energy load for the Project is 3.2 Megawatts which covers the operation of mining equipment, the CHPP and maintenance and domestic use. A supply connection to the area power grid is under investigation through discussions with Ergon Energy Corporation Limited. However, as the lead time for a grid connection is potentially much longer than the time it takes to bring the mine into production once the Mining Lease is granted start up power will be via gas or diesel powered generators located on site near the CHPP. A high pressure gas trunk line connecting the Bundaberg and Maryborough areas runs beside the Project on its western side near the North Coast Rail line. A connection to this gas pipeline is an option to provide gas to the site generators. Approval of transmission lines and related power supply infrastructure outside of the MLA, will be undertaken separately. Coal seam gas powered generators may be located on site (near the CHPP) for use as a power source during the construction stage and as a back up supply when connection to the power grid is established. 2.6 Staffing and Accommodation The Project is located in Fraser Coast Regional Council area approximately 10 km north of Maryborough and 300 km north of Brisbane. NEC s planning for the mine operation indicates that a 7 day week mining operation will be required to meet the work hours and production requirements for the targeted level of activity. Coal preparation operations will be required for the equivalent of three or four days each week and product railing to Gladstone will be scheduled overnight each day. Working rosters will be decided at the time of detailed operations planning. The Project is proposed as a mixed contractor and owner operation with Colton Coal providing site management and operations and maintenance personnel and the Contractor providing plant and equipment. The Project is estimated to directly employ up to 100 full time staff at full production with additional staff required for periodic large maintenance tasks and for special projects. An indicative distribution of the workforce by function is as shown in Table 5. Project construction is also expected to require approximately 100 site employees and additional employment supporting site fabrication and manufacture of components. Table 5: Mine Site Employment by Work Category Unit Personnel Maintenance Operations Management and Support Total Site Workforce 100 One of the advantages of the Project is its location in the Fraser Coast area being attractive to a prospective workforce. NEC for Colton Coal has been contacted by numerous experienced mine 13

14 workers who are currently working on coal mines throughout Queensland but live in the vicinity of the Project. The ability to attract a skilled workforce for the Project is therefore considered to be high. It is expected that the Project will not place any additional load on Council provided services for its workforce and will utilise the services of a waste management contractor for waste services on site. Colton Coal is not planning on providing housing or accommodation to the workforce. 2.7 Site Rehabilitation The Project MLAs are to mine coal located in the area of the mining lease and to provide land for infrastructure for the Project. All such plant and facilities will be constructed at the start of the Project and remain in place to the end of the production time. Once their use in the mining operations is finished buildings and the like will be removed and the areas re-contoured to blend in with the surrounding land and then revegetated. Surface preparation before revegetation will include surface contouring, ripping and spreading topsoil. Surface contouring will occur to minimise soil erosion. Topsoil removed as part of the inital site preparation for mining will be stockpiled for use in rehabilitation as it contains organic material and local seed banks. Preserved topsoil will be spread to a thickness similar to the original topsoil. After appropriate surface preparation has occurred as outlined above, disturbed land will be revegetated as follows: Spread fertiliser and/or other ameliorates, such as gypsum at an appropriate rate, if required; Native species occurring naturally in the local area will be chosen for areas requiring the reestablishment of local native habitat; Where an agricultural land use is planned, the species planted will be those commonly used for pasture known to be successful on soils of similar texture; and Where practicable, revegetation will occur through direct seeding of selected species. Where direct seeding is not possible (e.g. small areas with limited access), seeds will be manually broadcast. 2.8 Environmental Management Environmental impacts and management considerations for the Project will be fully documented in the Environmental Management Plan (EMP) and in the Plan of Operation (PoOP) for the Project. An Application for an Environmental Authority (EA) for the Project is made in parallel with the Project MLAs. The EA application applies to the Project as a whole and therefore captures the works planned on all three of the Project MLAs. The environmental management outcomes required of the Project will be detailed in the Project s EA. The Project does not meet the trigger criteria which would require a Terms of Reference for and the development of an Environmental Impact Statement (EIS) principally because of its small size. However, as the requirements for an environmental study for an open pit coal mine are well known, the EMP process effectively replicates the reporting requirements of an EIS. 14

15 3.0 APPLICATION BOUNDARY AND AREA The Project comprises three MLAs for a total area of 1,035.1 ha. Note that, in reference to the underlying EPCs held by Colton Coal and Taroom Coal the total area of which is 20,738 ha, 1,028.0 ha is within EPC 923 and 7.1 ha is within EPC This Colton C MLA captures 1.5 ha of the total Project area. The Project is based on the land necessary to accommodate: the mine excavation ~350 ha as currently planned; additional area for waste dumps for mine overburden materials ~200 ha; fixed infrastructure such as road access, processing plant, workshops, power generators and train loading ~80 ha; drainage and water management ~150 ha; buffer zone for water, noise and trespass management ~250 ha; and to provide access corridors for services and (potentially) for haulage operations from new mining lease areas on the eastern rim of the resource area. The Project MLAs shape has been chosen so as to provide sufficient room for mine operations whilst avoiding the land leased as part of the Fraser Coast Shooting Complex. The permanent infrastructure has been located away from resources and near to the North Coast Rail Line where it can be readily accessible to potential open pit mining operations (on new mining lease areas) on the eastern side of the Burrum Coal Measures. 4.0 MINING LEASE TERM This Colton C MLA is made for a mining lease of twenty (20) years duration and is aligned with the proposed term of MLA Colton A and MLA Colton B. This time is based on: project construction prior to start of production being estimated to take in the order of 6 months; the mine production period at ~0.5 Mtpa average product taking 8 to 10 years from the first resource area, but with provision to utilize the infrastructure from the first resource area as the base for mine development (on new mining leases) from other parts of the Burrum Coal Fields for a potential whole of project production period of twenty years; and project de-commissioning taking up to 5 years depending on progress with site rehabilitation works. 5.0 LAND TENURE and NATIVE TITLE The land within the MLA area is Unallocated State Land, except for the (presently unused) rail land and the road. The land is owned by the State Government and administered by the Department of Environment and Resource Management. A tenure history report suggests that the land has always been Unallocated State Land and it does not reveal any other tenure grants. Unallocated State Land will not extinguish native title. Colton Coal is conducting exploration under Queensland s native title protection conditions. Cultural heritage surveys have been conducted prior to any exploration activity within the native title area in that tenure and no 15

16 sites or items of cultural significant have been identified. Colton Coal will enter into an agreement, if required under s 31 of the Native Title Act 1993 (Cth), with the native title applicants, if registered, prior to the granting of a mining lease. 6.0 PUBLIC INTEREST STATEMENT Coal is Queensland s highest value export and the coal industry provides significant value to the State by way of direct and indirect employment, purchase of goods and services and payment of taxes and royalties. The Project provides an opportunity to add to the contribution the industry makes to the State with its development. The Project will also provide benefit to the country on a national scale. This is achieved through increased foreign revenue from the export of coal and general economic stimulus through increased employment and the purchase of goods and services. Colton Coal has identified an initial Inferred Resource of some ~5.0 Mt within the Project Area amenable to open pit extraction to make up to 5.0 Mt product for sale. The Project is anticipated to have an initial production life of 8 to 10 years based on the first resource but a full project life nearer 20 years on the basis that exploration success will lead to additional parts of the near surface parts Burrum Coal Measures area being suitable for open pit mining. The value of infrastructure construction is estimated to be $60 million (2010 dollars) and a mining fleet an additional $30 million. Although many of the mining inputs will be imported into the regional economy the construction workforce is expected to be recruited locally given the already substantial number of people who have expressed interest in working on the Project. It is expected that about $50 million of construction expenditures will be sourced from domestic suppliers and $40 million will be spent on imports mostly associated with the mining equipment fleet and processing plant components. The wage costs during construction are estimated to be $5-6 million, most of which will be locally based. In terms of on-going impacts from operations, the major direct regional impact will occur through the expenditure of income. The annual gross wages bill is expected to be around $10.5 million when the Project commences. This will result in a significant increase in regional consumption. A range of operational expenditures will be sourced from Queensland based firms including rail services, port services, power and water and plant maintenance. Full year expenditures on rail and port services are expected to exceed $10 million per annum. The Project will pay significant on-going revenue to the State Government through royalty and payroll tax obligations. Without the mine these payments will not be received. The annual royalty payment to the State resulting from sales of the product from mining operations is estimated to average $7.5 million at full production at today s coal pricing. The present value of revenue payments to the State over the life of the mine is estimated to be $42 million for royalties and $3 million in payroll tax (2010 dollars). Annual employee payroll is expected to be more than $10 million per year and PAYG and payroll taxes will increase throughout the life of the Project. Full year payments to the Federal, State and Local Governments as taxes and charges are estimated to be in excess of $21 million per annum on average. 16

17 The Project will directly generate approximately 100 full time equivalent jobs during construction and then during production to generate spending potential in the regional area where the workforce is located of approximately $7 million directly each year and another $3.6 million through idirect employment. The Project will have a positive impact on the economy of the region and the State through ongoing expenditures for materials and services, payment of rates, purchase of infrastructure, plant and consumables, use of service industries and payment of taxes. 17