Mining Operation and Logistics

The Company mines coal from the different mine sites at MSJ and SB, using open-pit along strike strip mining methods. To date, maximum mine depth can be achieved up to approximately 60 meters using 250-tonne class hydraulic excavators and 85-tonne to 100-tonne off-highway dump trucks to mine both waste and coal seams with mining commencing at shallow cover and continuing down dip. Initially, vegetation is cleared ahead of mining with top soil being removed and stockpiled for later use in rehabilitation of mined-out areas. The majority of the waste is drilled and blasted before being loaded into rear dump trucks and hauled, initially to external waste dumps, and then into in-pit dumps as soon as practical to reduce the overall land disturbance. Both external and in-pit waste dumps are reshaped and progressively rehabilitated throughout the life of mine operation. Multiple benches are then exposed down dip, allowing multiple waste and coal horizons to be simultaneously mined to allow for "as contracted" specific blending for the Company's customers.

The Company's mine operations can be impacted by adverse weather conditions, particularly during the monsoon season from October to December, when heavy rains can slow overburden removal and reduce coal production volumes by up to 15%. The Company's mine planning function anticipates and adjusts production levels to take into account such weather related delays and the Company maintains a two-week coal stock pile at Separi and at intervals along the road in order to mitigate the impact of weather related delays.

Trucks transport coal directly from MSJ's and SB's mines and travel up to 50 km to the Company's coal processing, stock-piling and barge loading facility at Separi, located on the banks of the Mahakam River.

All coals from MSJ and SB are delivered to the Separi stock-piling and barge loading facility which consists of conventional coal handling equipment, including weigh bridge, ROM stockpile, crusher, crushed coal stockpile, reclamation system and barge-loader for each of MSJ and SB, an elevated single rear dump station, equipped with a receiving hopper and a primary crusher designed to pass coal at a rate of 1,000 tonnes per hour (tph). Once TBH commences operations, coal from TBH is anticipated to be processed separately at its own facility. Gravity screening of undersize and secondary crushing at a rated capacity of 1,000 tph then allows for the coal to be placed on a conveyor to a traveling tripper on a sky conveyor to a 240,000-tonne capacity crushed coal stockpile or directly to a barge-loader.

Almost all of the coal sold by the Company is loaded on the buyers' vessels in the open sea. At Separi, coal is loaded onto barges (capacity 8,000 tonnes each) and transported to the open sea transshipment anchorages either at Muara Jawa (approximately 80 nautical miles or 143 km) or Muara Berau (approximately 140 nautical miles or 265 km). The coal is then transferred into the customer's vessels using the vessels' own cranes, in the case of geared vessels, or using separate floating cranes, in the case of gearless vessels. Barging and transshipment operations including floating crane activities are conducted by the Company's subsidiary, LLJ, which owns and operates a fleet of tugboats and barges. LLJ has a 35.0% interest in LCM that operates a number of floating cranes.