Indonesian Coal Book 2008/2009

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KODYAPALANGKARAYA

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Rantau

Kandangan

Barabai

Amuntai Paringin

Tanjung

Tanah Laut Regency

Tanah Bumbu Regency

Tapin Regency

Hulu Sungai Selatan Regency

Hulu Sungai Tengah Regency

Hulu Sungai Utara Regency

Balangan Regency

Tabalong Regency

Kota Baru Regency

h

Antang

Mantimin Coal Mining

Tamiang Layang

Bara Pramulya

h

h

Laut Island

BANJARMASIN

JAVA SEA

SOUTH KALIMANTAN

CENTRAL KALIMANTAN

EAST KALIMANTAN

Kelanis Barge Loading Facilities

IBT Export Coal Terminal

Banjar Regency

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Trans ShimpmentLocation

Concession Area

Barito Kuala Regency

PT Adaro Indonesia

OverviewPT Adaro Indonesia signed a contract with the government, which was represented by state-owned mining firm PT Tambang Batubara Bukit Asam, on November 16, 1982 to develop a coal mine in the Tanjung district in South Kalimantan province.

Under the contract, Adaro Indonesia is the sole operator of the concession area, which has an operating period until October 2022. The company has the rights for an extension of the contract for another term under a mutual agreement with the government, which receives 13.5 percent of the company’s annual production as royalty.

Adaro Indonesia which began exploration activities in 1982, commenced commercial production in 1992. The mining activities were initially conducted in the Paringin area but now all production activities are concentrated on the Tutupan mine, the largest single pit coal mine in Indonesia, with total production of about 36 million tons in 2007.

Concession areaAdaro Indonesia concession area is located near the town of Tanjung, some 230 km from the province’s capital Banjarmasin, or at the midway between the cities of Balikpapan and Banjarmasin. The two-lane Kalimantan Highway linking the cities pass by the company’s mining site.

Both Banjarmasin and Balikpapan can be reached by flights from Jakarta. International flights from Balikpapan to several neighboring countries are also available at present.

Adaro Indonesia has built a number of sealed and unsealed roads to link mining areas within the company’s mining site.

Exploration was initially carried out by a Spanish company Enadimsa. Coal deposits are found in three mining areas including Paringin, Tutupan and Wara. The mining activities in the Paringin area commenced in 1991 and continued until 2000, with a peak production of over 8.5 million tons in 1996. Production activities at the Tutupan area began in 1997 with total production of 4.4 million tons a year. The production from this mining area rapidly increased in the following years, reaching over 36 million tons in 2007.

The Wara mining site produced about 500,000 tons during the trial production which was conducted between 1995 and 1998.

Head Office Dahai OfficeMenara Karya, 22nd-23rd floor Dahai, Balangan RegencyJl. HR Rasuna Said Blok X-5, Kav.1-2 South KalimantanJakarta 12950 & +62-526-2021997/8

& +62-21-5211265 2 +62-526-20219962 +62-21-5211266 e-mail : dahai@ptadaro.come-mail : marketing@ptadaro.comhomepage : www.adaro-envirocoal.com

Status

Contract Scheme : First Generation PKP2B

Contract Signing : November 16, 1982

Investment Scheme : Foreign Investment (PMA)

Tenement Status : Production

Production Commencement : 1992

Initial Area : 148,148 hectares (ha)

Retained Area : 35,800 ha

Ownership

Shareholder Share (%) Country

PT Alam Tri Abadi 60.23 Indonesia

PT Viscaya Investments 28.33 Indonesia

PT Dianlia Setyamukti 5.84 Indonesia

Indonesia Coal Pty, Ltd 4.67 Australia

Mec Indo Coal, B.V. 0.93 Netherlands

Company Officer

Name Position

Garibaldi Thohir President Director

Ah Hoo Chia Director and Chief Operating Officer

Sandiaga S. Uno Director

David Tendian Director and Chief Financial Officer

Christian A. Rachmat Director

Alastair B. Grant Director and Chief Marketing Officer

Coal Mining Company

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The coal deposit in the Tutupan mining area, with strikes of approximately 18 km in length has been extensively mined. The coal seams are generally between 10 to 50 meters in thickness.

Coal reservesAdaro Indonesia’s coal deposits are located on the north-eastern margin of the Barito Basin, which is up to 250 km in width, of Eocene to Pliocene age and occupies much of the province of Central Kalimantan and the western part of South Kalimantan. It is bounded to the west by the Sunda Shield and to the east by basement rocks which form the Meratus Range.

Eight separate coal deposits have been found in the firm’s concession. Although up to 13 seams may be present within a single deposit, correlation of seams between deposits is generally not possible. The seams are lenticular in shape and also vary in thickness due to converging and splitting. Individual seams may be up to 60 meters thick.

The reserves and resources were defined by over 1,000 drill holes, mostly in the Tutupan area, and the details have been confirmed by independent mining consultants. The reserves and resources are all surface mineable with coal quality essentially being consistent over the life of the mine.

Coal reserves and resources (in million tons)Field Tutupan Paringin Wara Total

Reserves 659 - 328 987

Resources 1,453 264 1,086 2,803

Coal qualityParameter Unit Tutupan Wara

Calorific Value (adb) kcal/kg 5,515 4,715

Sulphur (adb) % 0.1 0.15

Ash (adb) % 1.65 2

Total Moisture (ar) % 26.0 38

adb: air dried basis; ar: as received

Mining and haulingAdaro Indonesia has used open pit mining method to produce coal since it started production in 1991, with primary waste stripping and coal mining being performed by hydraulic excavators and trucks.

Overburden and interburden are loaded into rear-dump haul trucks and hauled to out-of-pit dumps in or to in-pit dumping at the south end of the Tutupan mine.

Coal is loaded into rear-dump haul trucks and transported from the pit to one of a number of run of mine (ROM) coal stockpile areas adjacent to the pit. Trucking is conducted via a series of footwall, highwall and hanging wall ramps, as well as across in-pit access bridges.

Haul roads are designed with 12 meters high mining benches, although where backhoe excavators are in use, a split bench of 6 meters is used. Approximately 70 percent of the overburden is blasted prior to excavation to increase the efficiency of the overburden removal operation.

Four Indonesian mining contractors are hired by Adaro Indonesia to carry out mining activities at the Tutupan area. All the contracts are for overburden removal and dumping, coal mining, and transportation of coal to processing and barge loading facility at Kelanis on Barito River. The contactors are PT Pamapersada Nusantara, PT Rahman Abdijaya, PT Bukit Makmur Mandiri Utama and PT Saptaindra Sejati.

Coal from the ROM stockpile areas adjacent to the open pit is loaded into a coal haul trains using front end loaders and transported to Adaro’s coal processing and barge loading facility at Kelanis. Each coal haul train consists of a primer mover and up to three 65-ton trailers.

The haulage to Kelanis is via an 80-km purpose-built private all-weather haul road and is carried out by contractors as part of the mining contracts. This

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road was built by Adaro Indonesia and the surface is a chipseal.

Processing and barge loadingAt Kelanis, Adaro Indonesia owns and operates:

• truckreceivingstations;• coalprocessingandstockpilingfacilities;and• barge loading facilities located by the Barito

River.

The truck receiving facilities have five parallel streams, all of which incorporate screening at 50 mm followed by crushing of oversize coal to a maximum 50 mm sizing. Coal is then either delivered by overhead tripper conveyor to one of two 200,000-ton stockpiles, or fed directly to one of two barge-loaders.

Stockpiled coal is recovered by bulldozing into reclaim feeders, which feed onto dual 2,000-ton per-hour conveyors leading to the two barge-loaders.

can accommodate vessels with a capacity of up to 200,000 dwt.

Pulau Laut Coal TerminalAdaro Indonesia is the major user of the IBT located on Laut Island in the south-east of Kalimantan. The IBT coal terminal is a public, common-user facility, which serves a number of coal producers in south-eastern Kalimantan. The terminal is located in a deep water location, which allows safe and easy berthing of bulk carriers. The facility includes a barge unloader, coal stockpiles, and a shiploader.

From Kelanis the barges are tug-hauled 200 km down Barito River to the river mouth. From here the coal is transported by barge to either:• a transshipment facility 14 km offshore at

Taboneo; or• tothePTIndonesiaBulkTerminal (IBT)facilities,

some 250 km to the south-east at Pulau Laut; or• directlytodomesticcustomers.

The shipment is carried out under at least five-year contracts with three separate contractors.

Ship loading at TaboneoTransshipment of coal from barge to bulk carriers is carried out at Taboneo anchorage, offshore Banjarmasin. This transshipment is carried out using floating crane barges or self geared vessels. Four cranes are used, with a capacity in excess of 15,000 tons per day each to load the coal. Taboneo

Coal productAdaro Indonesia coal is a thermal coal suitable for power plant consumption or use in industrial markets. The coal has ultra-low ash and ultra-low sulphur and is promoted and marketed under the brand name envirocoal. Despite having a lower energy than most of the competing coals, envirocoal has achieved good market penetration worldwide because of its very low levels of impurities. More than 70 percent of Adaro Indonesia production are exported to countries in Asia, Europe and North America, with the remainder being sold domestically in Indonesia.

Shown are the standard specifications for envirocoal.

Coal product: envirocoalParameter Unit Value

Total Moisture (ar) % 26.0

Inherent Moisture (adb) % 14.5

Ash (adb) % 1.5

Volatile Matter (adb) % 43.0

Fixed Carbon (adb) % 41.0

Calorific Value (ar) kcal/kg 5,100

Calorific Value (adb) kcal/kg 5,900

Total Sulphur (ar) % 0.1

HGI 50

adb: air dried basis; ar: as received; HGI: Hardgrove Grindability Index

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MarketFor the year of 2007, Adaro Indonesia has term or annual contracts for over 98 percent of its production , with the balance being sold as optional tonnage under contracts. Long-term contracts for approximately 25 percent of sales are held with a number of customers including the following:- Carboex in Spain;- Quezon Power in the Philippines;- Paiton Energy in East Java; and- Newmont in West Nusa Tenggara

Compared to other internationally traded thermal coals, the envirocoal has extremely very low levels of ash and sulphur. With this special quality, envirocoal is highly in demand in environmentally sensitive markets.

Production and sales (in million tons)Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Production 0.95 1.37 2.42 5.55 8.64 9.41 10.93 13.60 15.48 17.71

Sales Europe 0.80 1.40 2.08 2.81 4.12 4.50 2.93 3.21 3.69

Asia 0.20 0.18 2.01 2.73 2.62 2.96 6.61 5.78 7.59

Americas 0.12 0.50 0.64 1.10 1.24 0.96 0.51 0.14 0.16

Export 0.85 1.12 2.07 4.73 6.64 7.98 8.42 10.05 9.13 11.44

Indonesia 0.02 0.09 0.44 0.87 1.69 1.64 2.79 3.78 7.19 7.34

Total 0.87 1.21 2.51 5.60 8.33 9.62 11.21 13.83 16.32 18.78

Year 2002 2003 2004 2005 2006 2007

Production 20.80 22.49 24.40 26.61 34.37 36.10

Sales Europe 3.83 3.33 4.63 4.57 6.32 6.12

Asia 8.29 9.76 10.32 11.51 16.67 17.61

Americas 0.64 1.12 1.47 1.23 1.45 2.81

Export 12.76 14.21 16.42 17.31 10.44 26.54

Indonesia 8.49 8.87 8.69 8.78 10.02 10.04

Total 21.25 23.08 25.11 26.09 34.46 36.58