white knights option trading and resource nos, page-2

Bali Bagus,

It wasn't so much the drilling program as the expert's arithmetic and way with words that dented the blue sky estimate.

First of all on page 21 of his October 2008 report he does an illustrative back of the envelope calculation as a prelude to concluding the 500Mt-1000Mt blue sky estimate.

He states on page 21
" A coal seam with a thickness of 2.5m over an area of 50 sq km amounts to 350Mt (density 1.4) As drilling has indicated multiple seams within the tenement search, there would be an excellent chance of finding 500-1000 Mt of underground and open cut coal. "

However if he had done his arithmetic correctly he would have found that 50sq km x 2.5m x 1.4 comes out to 175 Mt, half the quantity he calculated. To my way of thinking this should have lead him to perhaps an estimate of 250-500Mt of blue sky potential

Note that in October he gave the potential quantity of underground AND open cut coal.

In his July 2009 report, on page 18 he does the arithmetic again and this time gets the right answer (after he and BWN were told in March / April the arithmetic in October was wrong).

On page 18 he writes:

"A coal seam with a thickness of 2.5m over an area of 50 sq km amounts to 175 Mt (density 1.4). As drilling has indicated multiple seams in some areas, there would seem to be an excellent chance of finding in excess of 200 Mt of underground coal, however considerable drilling would be necessary."

Note that this time around he is only offering an opinion on blue sky potential for underground coal, not for underground and open cut coal as he had done in October.

Note also the other qualifiers he added in July
- multiple seams, but only "in some areas"
- considerable drilling would now be necessary to find the blue sky quantity (no mention in October of the amount of drilling needed to find the 500-1,000Mt)