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KALIMANTAN COAL CONFERENCE Balikpapan

2-5 Sept 2013

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Growth Prospects and Marketing Strategies

n Supply and Demand pressures

n Strategies to develop

n Maximising sales prices

n Marketing essentials

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Supply pressures

n Rain/locale (climate change, volatility)

n Logistics (river, barges, inter-island)

n Quality (it is what it is !)

n Competition (local/int’l)

n Regulatory/licencing/policy

n Funding (local banks, credit, security)

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The Concession Tremendous Production Upside and Long Reserve Life

n  Holds two coking coal deposits - Kohong and Telakon blocks, within 21,630 hectares of concession area

n  JORC compliant Reserves and Resources of 167.8mt and 317.8 mt, respectively, ―  Equivalent to 30+

years of production at the forecast 2013 rate of 5 million tonnes

n  CCoW production permitted until 2039

n  Production share (“Royalty”) 13.5%

n  Potential future Resource and Reserve gains from on-going drilling and exploration

JORC Mineable Reserves at March 2013

(mt) Proved Probable Total

Kohong 53.0 84.0 137.0

Telakon 4.0 26.8 30.8

Total 57.0 110.8 167.8

JORC Resources at October 2012

(mt) Measured Indicated Inferred Total

Kohong 77.9 70.4 81.8 230.1

Telakon 4.7 30.8 52.2 87.7

Total 82.6 101.2 134.0 317.8

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BORN - Logistical Solutions Increase Self-sufficiency And Decrease Reliance On The Barito River

n  Alternative transportation route through Mahakam River a possible medium/long term solution

n  Haul road from mine to Melak port n  8,000 tonne barges can be operated

all year round

n  ISP at Damparan, to AKT design, 1MT stockpile, 3,000tph unload, 4,000tph loading capacity

n  On-river transshipment capability from 4,000 to 8,000 tonne barges

Mahakam River (355 km)

Existing logistics - Haul Road (36 km)

Existing logistics - Barito River (290 km)

Existing logistics - Barito River (272 km)

Haul Road (112 km)

Taboneo anchorage

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Description Typical Quality

Basis Average Quality Shipped

Total Moisture 9% AR 8.88%

Inherent Moisture 1.7% ADB

Volatile Matter 26.5% ADB 26.58%

Ash Content 7.5% ADB 6.31%

Sulphur 0.75% Dry Ash Free 0.74%

Gross CV 7,847 Kcal/Kg ADB

Fixed Carbon 65% ADB

CRI 26

HGI >100

Vitrinite 97%

CSR 60

CSN 9 8.69

Fluidity 450 DDPM 550

Romax 1.2% 1.22

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 2012  2013  Later    mt  mt  mtpa  

AKT  Tuhup  4.2  4.2  10  BHPB  Maruwai  0  0  15-­‐20  Energy  Alliance  0.8  0.9  1  MGM  Itochu  1.5  1.6  3  SMM  Itochu  0  0.4  2  Cokal  0  0  2-­‐3  Gemida  0.9  1.0  2  Mamahak  0.4  0.6  1  Bayan  0.5  0.4  0.5  Tanito  0.2  0.1  0  KSM  0.5  0.6  0  Anugerah  0  0.3  1  MTU  0  0.5  2  Palace  0  0  2-­‐3  Others  0.5  1.0  3-­‐5  Total  8.1  11.2  40-­‐50  

* Personal estimates

Potential new coking coal supplies :

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Regulatory issues

u Mining Law & implementation rules (uncertainty)

u Value Added requirements (definition?)

u DMO 'requirement' (no market yet)

u Environmental (changing, banks' requirements)

u Local communities (more aware, more demanding)

u Resource Nationalism (IUP, PP, so many licences!)

u Local policies (bridges, railways, roads, ports)

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Demand pressures

n More local users (expectations of supply)

n DMO (cost)

n Quality differentials (BF sizes, targets)

n Competition (local, int’l)

n Equity ties (expectation, discount)

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 Capacity  2013  Later    mtpa  

Posco/PTKS  JV  3(6)  0.4  3.0  PTKS  1.2  0  0.8  Gunung  Garuda  1.5  0  1.0  Wuhan/Garuda  2.0  0  1.5  Titan  1.0  0.2  0.6  Indoferro  NPI  0.5  0.1  0.4  Shenrong  0.5  0.1  0.2    Sebuku  PI  0.8  0.1  0.4  Linfen  PI  0.5  0  0.4  Others…      3.0      0.2  2.0  Total  13.7  0.7  9.3  

* Personal estimates

Potential users of Indonesian coking coal:

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Strategies to Develop

Demand side : Consistent quality (perception) Partners (offtake, equity, agency, funding) Funding (contractors, banks, IPO’s, China link) Rising costs : Changed paradigms for costs and prices Use contractors Efficiencies/benchmarking Economies of scale Know where you are on the cost curve

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Market dynamics

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Current dilemma

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Changed paradigms –costs and prices

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Coking Coal Market changes

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Maximising coal prices

Consistent quality & delivery Understand coking coals Know your quality/qualities Know your customer base Be aware of your competitive advantages Target best fit customers Target Japan, Korea, Taiwan LT contracts fare better over time than spot Understand the volatility in the market Hedging your bets ? Do CFR deals help ? Use an agent ! Equity partners won’t add to ASP

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Premium Hard Coking Coal Product Consistently Achieved ASP Similar To T2 Australian Hard Coking Coal

0.4 0.4 0.4 0.5 0.5 0.7 0.8 1.0 1.7

012

Mechal Rio Tinto Teck Wesfarmers BMA Riversdale Coal of Africa Consol Energy

1,100 750 350 251 100 18450 (+)

01,000

15,000

Consol Energy Coal of Africa BMA Teck Rio Tinto Riversdale Wesfarmers Mechal

More Favorable

Caking Properties (Crucible Swelling Number or “CSN”)

Fluidity

15,000 11,600 ddpm

Volatile Matter

% adb

Sulphur

% adb

Ash

% adb

Less Favorable

6.6 7.0 7.3 8.5 8.9 9.5 10.0 10.0 10.5

06

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Consol Energy Wesfarmers Rio Tinto BMA Teck Coal of Africa Mechal Riversdale

18.5 20.7 21.5 23.1 24.3 26.5 26.8 29.9 37.0

02550

Mechal Rio Tinto Wesfarmers Riversdale BMA Teck Coal of Africa Consol Energy

9.0 9.0 9.0 9.0 8.0 8.0 7.5 7.0 6.5 0 6 12

Coal of Africa Riversdale Mechal BMA Wesfarmers Consol Energy Rio Tinto Teck

Source: AME

Tuhup Coal is considered a premium hard coking coal product with very high vitrinite content, which is rare

18 Tuhup Coking Coal Project

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Source : Bristow & Wilson, 2002

Coal Rank Comparatives Tuhup

Coking Coal

19 Tuhup ‘coke’ being pushed into the truck before quenching, ACIRL

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Tuhup Coal after being coked at ACIRL, Brisbane

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Cost curve comparatives

0

20

40

60

80

100

120

140

160

180

200

0

2012

FO

B c

ash

cost

s (U

S$/

tonn

e)

Cumulative production (Mt)

Oaky Creek Saraji O/C Peak Downs O/C Goonyella

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BORN

BORN Commands a Significant 1st Quartile Cost Advantage Compared to Global Peers

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Tier 1

Tier 2

Tier 3

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Close Proximity to Largest and Fastest Growing Markets

Significant cost and delivery time advantages to large end users in East Asia and India

India

China

Japan South Korea

Indonesia

Australian coking coal companies

Taiwan

Source: Wood Mackenzie, Trade Data

Estimated Shipping Time to Destination & Cost per Tonne

Producers Destination Estimated time to

destination (Days) Estimated cost

per tonne (US$/t)

Japan 7-9 6-9

China 8-10 7-9

Japan 10-13 10-14

China 12-15 11-15

Japan 14-16 12-32

China 15-18 14-28

Japan 27-33 17-25

China 29-35 20-27

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Marketing essentials

All of the above ! Agent or offtaker (commission or risk sharer) Buyers come to you – but not best prices Need a wide spread of customers (market diversity; smaller quantities; different VIU) Appreciate/anticipate/watch trends Defend your coal Guard your reputation/brand HBA/HPB standards (specific to your coal)

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$0.00  

$50.00  

$100.00  

$150.00  

$200.00  

$250.00  

$300.00  

$350.00  

HCC  

SSCC  

Appreciate trends

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Tuhup Coal is Used by a Diverse Mix of Premium End-Users

China General Nice China General Nice, Zhonglian, Zhejiang Materials Industry

Turkey Erdemir

India Tata Steel, Apex Energy

Japan Nisshin Steel, Nippon Steel

Taiwan China Steel

Korea Hyundai Steel

Vietnam Hoa Phat Company Ltd

China Baosteel, Wanxiang, Shente, CNBM, General Nice

Turkey & Romania

DBK, Erdemir

India Tata Steel, Taurian

Japan Nisshin Steel, JFE

Taiwan China Steel

Vietnam Trungdung Trading

n  Our exclusive marketing agreement with Glencore ended in July 2012

n  Coal off-take agreements were signed with Noble starting from November 2011

China Baosteel, Wanxiang, Shente, Ningbo, Huajian, Benxi, ShunLi

Turkey & Romania

DBK, Erdemir

India JSW Steel, Shaurastra

Japan Sumitomo

Korea POSCO

Taiwan China Steel

Vietnam Han Nam Trading, Trung Dung

2009 China, 100%

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Pricing impacts of additional supply

v Seaborne trade and equilibrium ('controlled' mkt)

v Competition (Australia, USA, new mines)

v HBA (which index?, quality differentials harder than thermal, hurdle or price setting?)

v DMO (one size fits all ? penalty for having quality)

v Domestic users (Rupiah pricing; HBA price ?)

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Thank you