1. GENERAL PT. Kertawira Sera Lestari is a private company with its Head Office is located in Jakarta, Indonesia.

The Company has its Representative Office in Tamiang Layang, the capital of the Regency of Barito Timur in the Province of Central Kalimantan. The Company possesses a coal Exploitation and Mining Rights over an area of 4,133 hectares within Barito Timur Regency. An initial coal exploration works has been carried out within the period between December 2004 and March 2005. The second stage of coal exploration works were carried out within the period between February and May 2006.

2. LOCATION The coal deposits area is located about 11 km to the north of the town of Tamiang Layang. It has an access to a loading point at the Barito River through a gravel road built by Pertamina (the Indonesian Government Oil Company). The road has a width of 20 meters and is capable to support heavy equipment and 20 tonnes trucks. The nearest airport to the location is Syamsudin Airport to the city of Banjarmasin). It has a distance from the town of Tamiang Layang, and connected main road (with hot mix asphalt surfaces), which within 4 hours. Nur Airport (the of about 250 km by a hard cover can be reached

3. TOPOGRAPHY The coal deposits area is a low land and is relatively flat area with an altitude between 30 m to 50 m above the sea level. It is covered mostly by low bushes vegetation with some agricultural field belongs to local farmers.

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A detailed Topographical Map, with a scale of 1:5,000, and covers about 500 hectares of the coal deposits area has been prepared in the first stage of the exploration works. In the second stage of the exploration works, a detailed Topographical Map, with a scale of 1:1,000, which cover an area of 400 hectares within the selected detailed exploration area, has been prepared for the initial coal mining design.

4. GEOLOGY The Geological Map, which covers almost all of the concession area, has been prepared. The geology of the coal deposits area is classified as a moderate geology. About 4,133 Ha, are of Warukin Formation, which bears the coal deposits. The coal deposits consist of more than 3 (three) seams and some of the coal seams have a thickness of over 3 meter. The coal seams have a relatively small dipping, which varies from 5 to 15 degrees, and in the direction of north-east to south-west.

5. EXPLORATION WORKS The initial exploration works have been carried out between December 2004 and March 2005. The exploration was mainly performed by shallow drillings of up to 25 m in depth. There are 24 holes have been drilled within the coal deposits area, and whenever it hits coal seams a core drilling is performed to get coal samples and some litho logical data. Geophysical well loggings are also performed in all drill holes. The geophysical loggings measured and recorded data within the drill holes with the following parameters: gamma ray, resistivity and the calliper. Out of the 24 exploration drill holes, 12 drilling works were carried out scatterly on the tops of (or nearby) the visible and discovered outcrops of the coal deposits within the concession area. While the other 12 drilling works were carried out within a 72 Ha. area, which were chosen for the detailed exploration investigations.

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In the second stage of the exploration works, that were carried out between February and May 2006, an area of 1,369 Ha. were selected for a detailed exploration works. The plan is to drill about 49 drill holes, at a depth of up to 50 m., following a pattern on a grid system and with the distance between each drill holes of about 500 m. During this period, out of the 49 planned drilling works, 20 drill holes have been completed. 6. COAL RESERVES The results of the first stage coal exploration works produced the following estimates on the coal reserves: - the Proven/Measured Coal Reserves = 4.0 millions Mt of coal (within the 72 Ha. detailed exploration area), - the Indicated Coal Reserves = 14.7 millions Mt of coal (based on the 12 drilling works carried out scatterly on top/nearby coal outcrops), - the Probable/Inferred Coal Reserves = 92.6 millions Mt of coal, and - the Potential Coal Reserves of over 200 millions Mt of coal within the whole Concession Area. Since the drilling works is only performed on a maximum depth of the drill holes of only up to 25 m, there are potentially more and bigger coal reserves that could be discovered bellow it. The nearest big coal mine in the area is the ADARO MINE, which is about 20 km to the south-east of PT. Kertawira Sera Lestari area. ADARO Coal Mine has discovered a big coal deposits with a proven coal reserve of over 2.0 billion metric tons. A detailed exploration work is carried out in small area of the coal deposits (of about 72 hectares) with 12 drill holes. The results of this works (which is only performed to an average drilling depth of 25 m) has produced a proven (measured) coal deposits of about 4.0 million metric tons. The outcome of the second stage detailed exploration works, which were compiled from the results of the 22 completed drilling works, and

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covered an area of 550 Ha. within the Concession Area, has produced an estimated Proven/Measured Coal Reserves of 21.1 millions Mt. of coal (Table-1).

1. COAL QUALITY All coal samples that have been collected from the drill holes were sent to a reputable Laboratory for coal analysis. The followings are the results of the coal quality laboratory analysis:
NO. COMPONENT UNIT LOW HIGH

1 2 3 4 5 6

Moisture Ash Content Volatile Matter Fixed Carbon Total Sulphur Calorific Value

% adb % adb % adb % adb % adb kkal/kg (adb)

15.16 3.50 36.08 30.93 0.24 4,409

19.40 17.79 41.38 38.09 0.49 5,192

8. THE INITIAL COAL MINING PLAN From the results of the Second Stage Detailed Exploration activities, an area of 100 Ha., which covered by 4 (four) drill holes (RB-17, RB-18, RB-19, and RB-20), and with a dimension of 2,000 x 500 m, were chosen as the initial Coal Mining Plan as shown on Figure-1. The Proven/Measured Coal Reserves within the area is estimated at 6.9 million mt. of coal (Table-2), consist of several coal seams, and having a stripping ratio of less than 1 : 5. Using a very conservative estimate on the coal selling price, and a liberal estimate on the coal mining and transportation costs, a cashflows has been generated and presented onTable-3. The production capacity is set up at a low level and the mine life will continue for at least 3 (three) years. The results of the economic evaluation and the economic feasibility study are summarized on Table-4. It is clearly shown in the study that this coal mining project is very viable and very profitable.

9. CONCLUSION

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The outcome of the First Stage Exploration activities conducted by P.T. Kertawira Sera Lestari, revealed that there is a Potential Coal Reserves of over 200,000,000 MT within the 4,133 Ha of the Concession Area. This is partly has been confirmed and proved by the results from the 22 drilling works carried out within an area of 550 Ha. for a detailed exploration program in the Second Stage Exploration activities. Since the depth of the drill holes is only up to 50 m., there are more potential coal reserves could be expected to be discovered below the depth of 50 m.
TOTAL DEPTH (M) ELEVATION (M.asl) TOP OF COAL (M) BOTTOM OF COAL (M) COAL THICKN ESS (M) a AREA OF IN F LU EN CE (M ) b SG (gr/ Cm ) c COAL RESERVES (Tons) axbxc

N O

BOREHOLE N UMBER

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

BHSD-6 BHSD-07 BHSD-08 BHM-03 RB-15 RB-01 RB-08 RB-16 RB-02 RB-17 RB-03 RB-10 RB-18 RB-19 RB-12 RB-11 RB-04 RB-26 RB-07 RB-20 RB-14 RB-25

23.30 25.00 25.60 24.50 51.00 50.00 50.00 51.27 54.50 54.45 50.00 51.50 52.21 55.00 50.24 50.38 41.80 48.00 50.00 50.00 50.00 52.60

37.500 37.500 54.000 50.000 56.710 39.320 37.810 39.810 46.010 36.370 64.200 53.220 35.560 43.370 50.012 40.241 47.342 48.028 51.000 60.000 45.000 51.000

5.30 2.00 11.00 10.40 35.84 8.15 4.60 6.30 15.50 4.50 4.83 21.14 4.45 2.95 6.46 9.20 6.00 4.38 7.00 17.10 4.60 13.70

19.20 13.60 12.85 21.75 36.96 30.70 44.34 40.38 50.90 52.15 34.03 33.70 48.47 55.00 47.99 48.88 39.65 46.83 44.75 34.60 47.80 50.30

3.14 1.80 1.60 1.90 1.12 1.85 1.25 3.08 2.60 4.70 1.72 2.80 6.21 4.42 3.08 3.32 1.66 1.90 2.20 5.95 5.55 3.10

250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000

1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30

1,020,500 585,000 520,000 617,500 364,000 601,250 406,250 1,001,000 845,000 1,527,500 559,000 910,000 2,018,250 1,436,500 1,001,000 1,079,000 539,500 617,500 715,000 1,933,750 1,803,750 1,007,500

TOTAL AREA:

550 Ha.

TOTAL COAL RESERVES:

21,108,750

Table-1 THE CALCULATIONS OF PROVEN COAL RESERVES WHITHIN THE DETAILED EXPLORATION AREA

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N O

BOREHOLE N U MBER

TOTAL DEPTH (M)

ELEVATION (M.asl)

TOP OF COAL (M)

BOTTOM OF COAL (M)

COAL THICKN ESS (M) a

AREA OF IN F LU EN CE (M ) b

SG (gr/ Cm ) c

COAL RESERVES (Tons) axbxc

1 2 3 4

RB-17 RB-18 RB-19 RB-20

54.45 52.21 55.00 50.00

36.37 35.56 43.37 60.00

4.50 4.45 2.95 17.10

52.15 48.47 55.00 34.60

4.70 6.21 4.42 5.95

250,000 250,000 250,000 250,000

1.30 1.30 1.30 1.30

1,527,500 2,018,250 1,436,500 1,933,750

TOTAL AREA:

100 Ha.

TOTAL COAL RESERVES:

6,916,000

Table-2 THE CALCULATIONS OF PROVEN COAL RESERVES WHITHIN THE DETAILED EXPLORATION AREA (BOREHOLES NO. RB-17, RB-18, RB-19 AND RB-20)

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T HE L OCAT IONS OF DR ILLHOLES W IT HIN T HE DET AILED EXPLOR AT ION AREA AND T HE L OCAT ION F OR T HE INIT IAL COAL MINING PL AN R B-17, RB-18, RB-19 AND RB 20

FIGURE - 1 THE DRILL HOLES LOCATION WITHIN THE DETAILED EXPLORATION AREA AND THE LOCATION FOR THE INITIAL COAL MINING PLAN

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D:\KSL\Table-3. Cash-Flows Mine (1).xls

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No.

Description

Unit

II

III

A. VARIABLES:
1 2 3 4 Selling Price fob Barges Production Costs Production Capacity Total Investment USD/T USD/T Tons USD 20.00 As Set As Set (1,475,000) 21.00 As Set As Set (1,475,000) 22.00 As Set As Set (1,475,000)

B. RESULTS:
1 2 3 4 5 6 Total Production Total Gross Margin Total Net Cash-Flows Net Present Value @ 30% Payback Period Return on Investment (ROI) Tons USD USD USD Months % 6,100,000 19,276,000 16,056,000 14,581,000 7 Mo 236.9 6,100,000 25,376,000 22,156,000 20,681,000 6 Mo 283.4 6,100,000 31,476,000 28,256,000 26,781,000 5 Mo 325.2

Table 4 RESULTS OF THE ECONOMIC FEASIBILITY STUDY

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