Ann: Update on Coal Off-Take Finance LOI, page-42

The initial deal is for 150K ton in 50K ton monthly amounts commencing March 2018 and pre=paid
a month in advance. I assume that price negotiated will be FOB Indonesia & not FIS China. A FOB
Kalimantan of say $130 US/ton would be reasonable and afford CKA a price of say $100 USD ex mine.


If so, the fairest FOB benchmark would be FOB Australia discounted even though the shipping distance from Aus to China is a day or so longer that that from Kalimantan.

The balance of 2.5 mil will, I assume, be paid FOB Kalimantan (not a month in advance) so the FOB
formula should be that much easier with the remaining 20% being paid FIS China once quantity & quality
is confirmed.

If the Chinese are looking for a 4 year/set price contract @ 50K ton/mo, then this would not be a good idea, IMO. In 2012 when the ass began to fall out of Iron Ore pricing, many Chinese buyers defaulted
on forward contracts. MGX comes to mind.

Let's face it, CKA is only getting the benefit of a month's pre-pay for 50K ton over 3 months for a total
of 150K ton. To lock-in a 4 year forward contract which would be enforceable & fair to both parties would have to have outs which would devalue the forward sales contract substantially. The norm at present
is 3 month forward contracts with price negotiated 4 times a year and highly geared to spot price with adjustments made for quality.