ABOUT
SGP

BUSINESS
ACTIVITIES

Business Overview
PT. Singlurus Pratama was established as a single-purpose company to carry out coal mining operation and distribution activities up to a maximum period of 30 years starting from production commencement year of 2009 until 2039 as stipulated under the 3rd generation Coal Contract of Work (CCOW III) regulations, granted by the Government of Indonesia. The concession area is subdivided into three blocks Sungai Merdeka, Argosari and Mutiara. The Company’s coal mining operation is in Balikpapan District, East Kalimantan, having current coal production capacity of 2,000,000 metric tons per year from the Sungai Merdeka Block. On August 26th 2011, the Company’s Environmental Impact Assessment report on the impact to the environment based on planned increase of production volume from 2 million metric tons to 6 million metric tons, starting from 2012 was approved by the Governor of East Kalimantan, with subsequent permission by the Department of Mine and Energy was also granted on September 27, 2011.

Location
PT. Singlurus Pratama lies within the East Kalimantan province of Indonesia on the island of Borneo and lies largely within the district of Kabupaten Kutai Kartanegara, but also within Kota Balikpapan to the south and Kabupaten Pasir to the southwest. It lies approximately 20 km northeast of the city of Balikpapan and nearby the coast. PT. Singlurus Pratama’s existing port lies at Sungai Merdeka on the river Mentawir, some 24 kilometers west of the licensed area and upstream from Balikpapan and second port is planned at Argosari where production will commence in 2013.

Coal Characteristics
Coal is formed in several stages from plant remains that have been compacted, hardened, chemically altered and metamorphosed by heat and pressure over millions of years. Therefore, in order to develop a coalmine, coal exploration works are required for the collection and interpretation of geological data in order to learn about the thickness of coal seams, boundary areas of the coal resource, chemical content and quality, and economic reserve estimation. The development of coal deposit is generally based on the information and data obtained from these exploration programs.

Coal Exploration
The exploration program begins with the preliminary collection and analysis of the land surface and geological data at the target areas. Subsequently, fieldwork includes scout drilling, delineation drilling, detail drilling to study the formation and type of soil and rock and geological structure of the target areas to ascertain that there, exists the coal deposit. After coal deposits have been identified, survey and drilling activities are performed to assess coal quality and reserve estimation for economic analysis to facilitate a decision for further development of the coalmine. After which more drilling work need to be perform before and during mining operation. The recent drilling work at PT. Singlurus Pratama was commenced since 2006 and is continuing. Up to the end of 2011, more than 115,000 meter has been drilled.

Mining Operation
Currently all mining activities at PT. Singlurus is derived from the Merdeka block using conventional open pit coal mining techniques with all overburden stripping and coal winning undertaken by mining contractors. However, starting in 2012, coal winning operation will be carryout by Company’s own newly developed production unit.

Coal Dressing
In order to attain the quality as required by the end-users or traders, coal extracted from the coal mining operation need to go through coal dressing processes which includes crushing, sizing, sorting and magnetic separating unit, to remove any contaminations. In the near future the Company envisages adding a washing plant to further increase the coal recovery volume and coal quality, by washing the current high-ash coal parting zone.

Coal Distribution
All beneficiation processes are located at the Company’s existing loading port. The Company’s port and jetty facilities is located on the bank of Mentawir River north of the Balikpapan Bay. Barging capacity at the current port and jetty is up to 10,000 metric tons per trip, equivalent to a 330 feet barge. After the coal was loaded on to the barge, it is transported for further loading into vessel, which will transport the coal overseas to the end-users. The majority of the Company’s coal products are sold and exported to several Asian countries; namely, China, Hong Kong, India, Korea, Taiwan and Thailand.

Coal Pricing
Coal pricing is mainly determined by the coal quality and specifications, such as the calorific value, total moisture, ash, total sulfur content, etc. Coal sale price for each customer varies depending on certain factors such as order volume, coal specifications, credit term and other conditions specified by the customer. Nonetheless, the Indonesian Government by the Ministry of Energy and Mineral Resources has established and issued regulations concerning the Indonesian Coal Price Reference (HBA) to be used as reference or benchmark price and calculation for the floor price of coal. The benchmark price (HBA), is the monthly average of four international coal indices, including ICI, Platts, Newcastle Export Index (NEX) and Global Coal Index.

Medium-Term Prospects
Indonesia exports nearly 75 percent of coal produced and remains the largest supplier of seaborne thermal coal market. The bulk of the demands are mostly driven by energy hungry countries like China, India, South Korea and Taiwan which together accounted for over 75 percent of the country’s exports in 2011. The demand growth for export should remain healthy in a foreseeable future driven mostly by rising coal based power generating capacity in the fast growing Asia markets with China and India playing a dominant role on the demand side. At the same time, domestic demand growth is also expected to stay robust in the coming few years owing to an expected increase in power generating capacity, in line with solid economic growth and large population base. PT. Perusahaan Listrik Negara (PLN), a state-own power utility, plans to add some 9 gigawatts of capacity through 2014, which would require some additional 30 million tons of coal.