APAC Coal Limited (AAL)

Tenement

Location

The 68360 hectare tenement is located in East Kalimantan on Borneo Island. Balikpapan, the provincial capital of East Kalimantan, lies 110 kilometres due NE of the tenement. There are regular daily commercial flights between Jakarta and Balikpapan International Airport. The flying time from Jakarta to Balikpapan is approximately two hours.

Tanah Grogot, a large well organised town with all modern amenities, is the closest town to the project area. By road Tanah Grogot is approximately 150 kilometres from Balikpapan. It takes approximately three hours to drive from Balikpapan to Tanah Grogot.

From Tanah Grogot there are numerous secondary roads leading into the tenement. These secondary roads are unsealed roads which are generally in a good condition. These roads serve as access roads to villages. Within the tenement area there is also a network of plantation roads.

The Below Figure shows the roads and tracks travelled during the field visit. There are numerous other tracks within the tenement area not shown. Access within the tenement is excellent because of the comprehensive network of secondary and plantation roads.

From a logistical point of view the PT BSS tenement is well situated. The tenement area is very accessible by road from Balikpapan and Tanah Grogot. Access to the sea, particularly in the north eastern portion of the tenement is good. There are three major rivers within the tenement area from which coal can be barged to the open sea. Should a mineable reserve be delineated on the property transport costs to get the coal to tanker ships will be relatively low.

Geology

Regional Geology

Numerous Tertiary, hydrocarbon bearing basins occur around the periphery of Borneo (Hutchison, 1989). A large portion of East Kalimantan is covered by the Kutei Basin. The Kutei Basin is the largest (160000 square kilometres) and deepest (12000 to 14000 metres) Tertiary basin in Indonesia.

Local Geology

Coal bearing units of the Kuaro, Tanjung and Pamaluan Formations are exposed in the PT BSS tenement. All of these formations hold the potential of containing economic coal deposits. Additional work will be needed to assess the full potential of this very large tenement area.

In the north eastern portion of the tenement units of the Kuaro Formation and the Pamaluan Formation are developed. These units form the western limb of a broad anticline trending in a NNW direction. Coal bearing units are developed for the entire length of this north eastern portion of the tenement.

In the south western portion of the tenement, coal bearing units of the Tanjung and Pamaluan Formations are confined to the northern portion of this area.

Potential

Coal Seam Thickness

Drilling within the Bekorok Block has confirmed the existence of two coal seams. Seam A and Seam B have a respective thickness of 1.37 m and 2.96 m.

Outcrop mapping and drilling supposedly done before 2006 detected very thick coal seams at various localities within the larger tenement area. Coal seam thickness intersected in boreholes at Lempesu range from 2.73 to 49.27 metres. At Liburdinding recorded thicknesses of coal seam intersections range from 0.41 to 2.06 metres.

Number of Coal Seams

Drilling done by APAC has confirmed that there are two mineable coal seams developed in the Bekorok Block.

Calorific Value

Average calorific values of the two seams drilled in the Bekorok Block are 4732 and 3560 cal/g. Although the calorific values are on the low side, it appears that there are other coal seams within the larger tenement area containing much higher calorific values.

Reported calorific values from the drilling supposedly done at Lempesu range from 5986 to 7637 cal/g. At Liburdinding the reported calorific values range from 5785 to 7670 cal/g.

Exploration Potential

There are coal-bearing units developed throughout the PT BSS tenement. To date a relatively small percentage of the coal-bearing lithologies have been explored (mapped, sampled or drilled). The larger tenement area therefore holds immense exploration potential.

APAC's 2006 drilling program was confined within the 8.9 km2 Berorok Block. Although 22 boreholes have already been drilled, this block holds additional exploration potential. Only the northern 2.2 kilometres of Seam A has been drill tested. The southern 2.2 km strike extension of Seam A has not been drilled. The southern strike extension of Seam A could contain an additional two to three million tons of coal.

Limited drilling has been done on Seam B. Although the calorific value of Seam B is low, this seam holds huge tonnage potential.

Seam A and Seam B developed in the Berorok Block occur in the Kuaro Formation. The Kuaro Formation extends 5 kilometres south and 12 kilometres north of the Berorok Block. Strike extension of the Kuaro Formation therefore holds excellent exploration potential.