ABOUT THE BERAU THERMAL COAL PROJECT

(100%, East Kalimantan, Indonesia)

 

The project concessions totalling 5,000 hectares are located 40 kilometres south-west of Tanjung Redeb (Berau) (the capital of the Berau Regency) and 350 kilometres north of Balikpapan, East Kalimantan.

 

Strike has recently completed a Feasibility Study which focussed on the development of an open-cut contract mining operation with production scaling up from 1.5 Mt per annum (Mtpa) to 3 Mtpa. 

 

The study has confirmed that the Berau Project has the potential to generate an annual operating surplus of approximately US$33m, with:

·                total capital cost of approximately US$19m;

·                average operating costs of approximately US$41 per tonne;

·                a projected coal price of approximately US$52/tonne, FOB ship;

·                a run of mine coal product of medium calorific value of 5,400-5,600 kcal/kg GAR with low sulphur - 0.66%, as received (AR); ash - 7.3%, AR and total moisture - 16.6%, AR; and

·                a development timetable of 8 months from receipt of development approvals to production.

 

Mining will be an open-pit operation undertaken by a contract miner.  Coal will then be transported by truck along a 30km road to a new barge port on the Segah River, where it will be stockpiled.  Barges will then collect the coal and transport it 90km to the coast and then on to a trans-shipment point located 30km offshore, where the coal will be offloaded to ships for delivery to customers.

 

There is an established coal mining industry in the region.  Other coal operators regularly barge coal down the Segah River for trans-shipment.  It is envisaged that the coal from the project will be sold to one or more power station operators and/or industry consumers in South East Asia.  In this regard, Strike has recently signed two Heads of Agreement for the sale of 2.4 million tonnes of coal over two years. 

 

JORC Resources and Reserves 

Blocks within the concession	Coal Resources (Mt)
	Measured	Indicated	Inferred	Sub-Total
Nyapa West block	1.8	8.6	3.6	14.0
Nyapa East block	-	-	6.8	6.8
Total	1.8	8.6	10.4	20.8

Probable Reserves(Mt)	Calorific Value kcal/kg (gross as received)	Total Sulphur (as received)	Ash (ar)	Total Moisture (ar)
7.7 Mt (within the Nyapa West block)	5,546	0.66%	7.3%	16.6%

 The figure below shows the concession area over geological mapping:

 

 

 

Please refer to Strike's market announcement for further details about the current Berau Coal JORC Resource and Reserve.

Coal Sale Heads of Agreements

Strike has executed Heads of Agreement with two customers - CNBM International Corporation (CNBM) of China and Formosa Plastics Group (FPG) of Taiwan.  These agreements provide for the sale of 1.2 Mt of coal over a two year period to each of CNBM and FPG. 

 

Please refer to Strike’s ASX announcement entitled “Berau Project Coal Sale Heads Agreement” for further details on these matters.

 

Strike continues to investigate further marketing opportunities in India, China and South-East Asia.

 

Project Development

On 30 May 2009, Strike executed a contract to purchase a parcel of land on the Segah River to construct its barging port.  Completion is expected to occur in August 2009.

The AMDAL (Environmental and Social Impact Assessment) and related technical and community reports have been submitted to the local communities and local government authorities as a precursor to a consultative process for the grant of a production licence.  An initial series of meetings have been set for 5 and 6 August 2009 to present these reports to relevant stakeholders.

Tenders for road development and other civil works at the mine and port sites and construction of mine and barge port infrastructure have been invited from Indonesian and overseas parties.  Tenders will be closing on 21 August 2009.

Consultations with local communities, land owners, concession holders and government authorities are continuing, in order to facilitate the securing of all necessary approvals for road access and mine development and the acquisition of privately held freehold land.

In this regard, royalty agreements have been signed with local communities affected by the proposed mining operations. Strike is very encouraged by the Berau Project economics demonstrated by the recently completed Feasibility Study and the apparent strengthening of the thermal coal market, which is supported by recent increases in thermal coal prices.  The Company is focussing its efforts on achieving necessary approvals to commence mining and construction and discovering additional coal mineralisation in the Berau Project concession through an ongoing drilling campaign.  The figure below shows the concession area over geological mapping.

 

Resource Expansion

The current 20.8 Mt JORC Resource is based upon ~10,000m of drilling along a 3km strike length out of a total strike length of 5km.  Intermittent occurrences of outcropping coal have been mapped all along the 5km strike length, leaving 2km of strike along which Strike expects to outline an additional resource.

In particular, within the Nyapa East block, Strike notes that:

• the deposit comprising the 6.8Mt JORC Inferred Resource remains open and untested along a further 2km strike to the south-east in the “nose” of the syncline, where intermittent occurrences of outcropping coal have been mapped.  This is depicted in the figure below;