Ann: Completion of Due Diligence and Notice of Me, page-116

re: Ann: Completion of Due Diligence and Noti... I received a reply today to an enquiry I sent to the company requesting information on what opportunities they saw for marketing South Pakar coal. My request and the response are provided below. If you'd like to save yourself some reading the essence was that they'd come up with something or to quote directly "There are many options that may be considered and all of these will be continuously reviewed by KRL and Bayan Resources post-13 June to ensure the best outcome for KRL".

Personally I'd have liked a few examples of the 'many options' as that was the point of the question. The IER certainly didn't make any suggestions about what could be done with the product. They really have an almost offensive attitude to shareholders asking for information. They release a statement that says they're going to give a majority stake of the comapny to Bayan in return for a coal asset the IER says is massive but of poor quality and limited mareketability (plus another 11% of the company to a mysterious entity they refuse to give details about) and expect us to vote in favour without any clue about how we might be able to realise value from it. Without question I would vote the lot down if it weren't for the criticality of having Bayan onside to actually give us production and logicstics ability. Anyway... here 'tis

Dear Sir(s)

In reviewing the IER provided by the company I have found an assessment included that was initially provided in a report to IBU from PT Runge Indonesia. In assessing the market for coal from both North and South Pakar they came to the conclusion that a blend could be put together from North Pakar with a calorific value of around 3800 Kcal/kg for which a market was emerging. They go on however to say ?Pakar South coal is of lower quality and as such has limited market potential at this time.?

In light of this assessment and the fact that the vast majority of the value of the Pakar Project is in the Southern precinct can you tell me what plans KRL have in place for marketing this coal. Current discussions I am involved with with the report authors have led to a suggestion that I pose this question to the company itself while they review the document to give me some guidance on interpreting this anomaly in valuing the project.

Regards

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Thank you for your mail and your interest in the Company.
Regarding your query, please let me quote from the IER to establish the scenario of your query;

Internationally, Pakar coal is at the lower end of thermal coal quality in the world market and is considered to be part of an ?emerging? market rather than an ?established? market. Marketing information indicates that there is a current demand for coal of similar rank to that of the TJ/DE Project coal, but this coal needs to be used as a blending coal with compatible higher rank coals in order to produce a blended product suitable for power generation. One of the advantages for Pakar coal is that existing networks are already in place for take-up by the Indonesian power generating sector through Indonesia?s state electricity firm PT Perusahaan Listrik Negara (?PLN?). It can be barged directly to power stations as per supplier contracts.

As the IER implies, the higher moisture coal at Pakar South is of less value than the lower moisture coal from Pakar North, although this does not mean that it has ?no value?. There are many options that may be considered and all of these will be continuously reviewed by KRL and Bayan Resources post-13 June to ensure the best outcome for KRL.

Under ASX guidelines, production forecasts should not be publicly disclosed until such time as the operation is in production, and as part of all our disclosure requirements, we will outline our plans though the release of public announcements.

We hope this answers your question and we are grateful for your ongoing support.