indonesian coal acquisition, page-8

Well done Ace. Your information on the coal deal was very close to the mark.

The Tapan Project has the type of thermal coal which can be sold anywhere. High quality bitumous coal measuring at 5800-7100 KCal/Kg is higher than I expected. This would be some of the best coal in Sumatra.

Badvibes, these grades are far superior to what your source was telling you. Tell your mate that he is full of the brown stuff.

Now that we know the coal quality is good, we will have to wait and see how much of the inferred 15 MT can be converted to a measured resource.

My other concern was hauling and loading the coal for shipping. Adavale will control 2 port facilities capable of loading the coal onto barges. They have already reached agreement with local authorities over haulage road access. So far, so good.

Can Adavale bring all of this together by themselves? I was surprised that they didn't bring in a JV partner. This means more risk but more reward. The IB Daiwa shareholder will bring some coal expertise to the board.

So if all goes well, next year Adavale will be mining high quality, high demand coal. And then we have the Jambi Coal Project, covering a larger lease than Tapan and with a higher inferred coal resource.

I have been working on some very rubbery figures regarding revenues and costs of the Tapan Mine. Bitumous coal of this quality has a spot price of around US$60+ per ton. The contract price could be as low as US$35. The cash cost should be around US$20/T. The royalty will be 13.5%.

Assuming Adavale can mine 1 MT p.a, this produces revenue of at least US$35 million. Subtract US$5 million in royalties and US$20 million in costs, leaving US$10 million EBITDA. If Adavale can sell the coal for more than US$35/T, then the profits will be higher.

There are still some unknowns to be addressed, but with a market capitalisation of $9 million and $4.6 million in the bank, ADD is starting to look the goods.

Keep in touch with your source Ace and keep us posted.