Resource Report MMB Kutai
Resource Report MMB Kutai
CONTENTS
Page No.
SUMMARY................................................................................................................. 1
1. INTRODUCTION AND TERMS OF REFERENCE .......................................... 6
2. DISCLAIMER .................................................................................................. 7
3. PROPERTY LOCATION, OWNERSHIP, PERMITTING AND REGULATORY
REQUIREMENTS............................................................................................ 8
3.1 LOCATION ........................................................................................................... 8
3.2 OWNERSHIP ........................................................................................................ 9
3.3 PERMITTING ........................................................................................................ 9
3.4 REGULATORY REQUIREMENTS ....................................................................... 9
4. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE,
AND PHYSIOGRAPHY ................................................................................. 11
5. HISTORY....................................................................................................... 12
6. GEOLOGICAL SETTING .............................................................................. 13
6.1 LOCAL GEOLOGY............................................................................................. 13
6.2 LOCAL STRUCTURE......................................................................................... 14
7. DEPOSIT TYPE............................................................................................. 15
8. MINERALISATION........................................................................................ 16
8.1 QA: ALLUVIUM .................................................................................................. 17
8.2 TMQM: MENTULANG VOLCANICS .................................................................. 17
8.3 TPKB: KAMPUNGBARU FORMATION............................................................. 18
8.4 TMBP: BALIKPAPAN FORMATION.................................................................. 18
8.5 TOMA: ATAN INTRUSIVE ROCKS ................................................................... 18
8.6 TOMW: WAHAU FORMATION .......................................................................... 18
8.7 TEA: BATU AYAU FORMATION ....................................................................... 19
8.8 TEM: MARAH FORMATION .............................................................................. 19
8.9 TEK: BATU KELAU FORMATION..................................................................... 19
8.10 HE: HALOQ FORMATION ................................................................................. 20
8.11 TMBP: PULAU BALANG FORMATION ............................................................ 20
9. EXPLORATION............................................................................................. 22
9.1 DRILLING ........................................................................................................... 22
9.2 SURVEY ............................................................................................................. 22
9.3 GEOPHYSICAL LOGGING ................................................................................ 22
10. SAMPLING METHOD AND APPROACH ..................................................... 23
11. SAMPLE PREPARATION, ANALYSIS AND SECURITY............................. 25
12. DATA VERIFICATION .................................................................................. 29
13. ADJACENT PROPERTIES ........................................................................... 30
14. MINERAL PROCESSING AND METALLURGICAL TESTING..................... 31
15. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES................ 32
15.1 APPROACH ....................................................................................................... 32
15.2 COAL RESOURCE ESTIMATION...................................................................... 34
15.2.1 Database Integrity................................................................................. 34
15.2.2 Geological Interpretation...................................................................... 34
15.2.3 Dimensions............................................................................................ 36
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TABLES
Page No.
Table 1 – Average Rainfall (mm) and Rainy Days for the Kutai Barat Regent in Last 5
Years .......................................................................................................................................... 11
Table 2 – SW and E Block Drilling History .............................................................................. 12
Table 3 – E Block Coal Quality Summary................................................................................ 25
Table 4 – SW Block Coal Quality Data..................................................................................... 25
Table 5 – E Block Local Stratigraphy ...................................................................................... 35
Table 6 – SW Block Local Stratigraphy ................................................................................... 35
Table 7 – E Block Seam Thicknesses...................................................................................... 35
Table 8 – SW Block Seam Thicknesses .................................................................................. 35
Table 9 – Summary of the SW and E Block Extents and Seams Intersected....................... 36
Table 10 – Resource Classifications ....................................................................................... 43
Table 11 – Topographical Surface to Collar Discrepancies Greater than 2m (E Block)...... 44
Table 12 – Topographical Surface to Collar Discrepancies Greater than 2m (SW Block) .. 44
Table 13 – E Block Resources.................................................................................................. 52
Table 14 – SW Block Resources............................................................................................... 53
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FIGURES
Page No.
APPENDIX
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SUMMARY
The following report was prepared by Mark Manners of PT SMG Consultants (PT SMGC) for
SouthGobi Energy Resources. PT Mamahak Coal Mining area contains the SW and E Blocks
located in the Long Bagun District, Kutai Barat Regency, East Kalimantan Province (see Figure
1). This report predominantly addresses the geology, quality, history and coal resources of the
SW Block and the E Blocks 1, 2 & 3.
The general area has been explored and mapped on four separate occasions, twice for coal,
once for petroleum and once to help establish a regional stratigraphy. However none of this prior
exploration involved localised drilling and sampling of the four blocks as conducted and ongoing
by PT Mamahak Coal Mining. As seen in Figure 3 the four blocks have been divided into a SW
Block and an E Block (consisting of E Block 1, 2 & 3). Exploration of both the SW Block and the
E Block is yet to be completed and hence this report is limited to data supplied by PT Mamahak
Coal Mining as of the 5th November 2008. Exploration prior to PT SMGC’s involvement had
been sporadic with drilling only undertaken in areas where tracks or roads allowed easy access.
Drilling was also in general very shallow making it difficult to determine a complete stratigraphic
sequence for the local area. Recent drilling at planned intervals and depths has allowed for the
E Block to be covered predominantly to a JORC (Joint Ore Reserves Committee) compliant
measured and indicated status. The SW block only contains inferred resources, this is due to a
current shortage of quality data for this area. Future drilling and sampling as proposed by PT
SMGC should allow for both blocks to be covered to a JORC compliant measured and indicated
status.
The geological sources of information used in this report are from previous reports and
exploration data as input into a Minex geological database. The author of this report is a qualified
senior coal exploration geologist, and has observed exploration activities onsite.
The SW and E Blocks are located approximately at a latitude 326100E and longitude of 50300N.
The surrounding area features a moderately undulating morphology. Elevation ranges from 480m
to 611m meters above sea level with moderately to steeply dipping slopes.
Coal from the Mamahak Coal Mining concession began forming in the early Miocene as a part of
the wider Kutai Basin. Coal seams of the region bearing metallurgical properties are know to
range up to 2m in thickness.
Based on the analysed samples taken to date it is known that the coals from Mamahak Coal
Mining concession are high energy, relatively low ash, low moisture and moderate to high
sulphur. Qualities are tabulated on block by block and seam by seam basis in this report.
Recent bulk sampling and petrographic analysis completed by PT Geoservices reveals high
fluidity values and a reactives percentage of over 95%. The results of this testing can be seen in
detail in Appendix 1.
A resource comprising 4.96Mt measured, 7.3Mt indicated and 2.66Mt inferred resources has
been estimated for the E block and a resource of 2.61Mt has been estimated for the SW Block
comprising 2.61Mt inferred resources. The average quality values for the E and SW Blocks can
be seen below.
E Block All Seams TM IM Ash VM FC TS CV_ADB CV_DAF RD CSN HGI
Average 3.2 1.7 9.6 40.5 48.2 1.53 7453 8402 1.31 4.5 50
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Resources stated in this report have been calculated to JORC standards, which in relation to this
deposit classify the same measured, indicated and inferred resource areas as the National
Instrument 43-101. Resource estimates contained in this report are as of January 19, 2009 and
are based on data gathered up to November 5, 2008.
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115°0'0"E 115°30'0"E 116°0'0"E 116°30'0"E 117°0'0"E
Long Deho
Village
Kasu River
Batu Ampar
Road
KP Area Long Nah
Gemar Baru
Shoreline
Tabang Bewiti
Long Bangun Lake
Ujoh Bitang
0°30'0"N
0°30'0"N
MCM KP Area (5,011 ha)
Muara AncalungMuara Bengkal
Tanjung Belatung Muara Ritan
Laham
Senyiur
Muara Ratah
Long Beleh
0°0'0"
Longiram Kahala
Selerong Ambalut
Muara Muntai Mara Badak
Panyinggahan INDEX MAP
Tenggarong
0°30'0"S
Lambing Samarinda
Tanjung Isuy Loahkulu
Mantalat Bangkanai Muara Kedang Sungai Mariam !
Nunukan
Map Location Tarakan
!
Tanjung Selor
Muara Tuhup Jonggon !
Tanjungredeb
!
Mountong
!
Pontianak
! !
" Sangau Samarinda
Puruk Cahu !"
! ! Palu Luwuk
Muara Inu Sungaitiram !
"
Muara Teweh
Balikpapan "
POSO "
!
Palangkaraya
!
Pangkalanbun"Tanjung!!Amuntai Mamuju
! !
!
Muara Lahai Banjarmasin
! ! !
" !Martapura Majene
Pelaihari ! !
Kendari
!
Enrekang!Pinrang !
Sabuh Sigagu
1°0'0"S
1°0'0"S
MAMAHAK COAL PROJECT
Sungai Seluang
Mentawir LONG BAGUN DISTRICT
Sampirang KUTAI BARAT REGION
KALIMANTAN TIMUR
Muarabutung
:
Tapin
Sepinggan
Manggar
Panajam
Balikpapan
10 5 0 10 20 30
KM
Waru 1:1,000,000
KP LOCATION MAP
115°0'0"E 115°30'0"E 116°0'0"E 116°30'0"E 117°0'0"E
Resource Report – Mamahak Coal Project PT Multi Mamahak Batubara
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2. DISCLAIMER
The resource estimate has been prepared in accordance with the ‘JORC code’ by PT SMGC,
however the technical report is NI 43-101 compliant.
All information contained within this Report has been prepared on the basis of present
knowledge and assumptions. Geological and coal quality information used in the preparation of
the resources was provided by third parties according to standard operating procedures prepared
by SMGC. SMGC undertook random audits of adherence to SOP and detected no significant
deviation other than those disclosed elsewhere in this report.
The estimate of the Mamahak resources has been calculated and reviewed by Mr. Manners, a
Competent Person in accordance with the requirements of the 2004 Australasian Code for
Reporting of Mineral Resources and Ore Reserves (the JORC Code). Mr Manners is a qualified
person as defined by NI 43-101, for details of his qualifications refer to section 19.2 of this report.
The Resources comply with all of the major requirements of the JORC Code, with the following
qualifications:
Resources are current as of January 19, 2009 and are based on data acquired up to
November 5, 2008,
the Resource model and estimations were developed using the MINEX geological and
mine planning software system, a worldwide industry proven system used primarily for coal
mining operations,
the modelling algorithms available for generating the geological model in the MINEX
system, includes growth technique. The grid mesh size used for modelling the geology at
Mamahak is 15 metres,
the Resources were calculated using the Resource Estimation tools in the MINEX software
system. This tool has been used extensively and proven to be reasonably accurate when
compared to manual estimations of Resources,
acquisition of geological data from drilling activities has been conducted professionally and
accurately accordance with the principles and definitions of the JORC Code. The sampling
and logging procedure on the drilling program has been conducted under supervision by
PT Mamahak Coal Mining personnel, and
Resources are based upon true relative density estimates derived from laboratory analysis.
The tonnage is based on the air dried Relative Density (RD).
Opinions presented in this report apply to the conditions and features as noted in the
documentation, and those reasonably foreseeable. These opinions cannot necessarily apply to
conditions and features that may arise after the date of this report, about which PT SMGC have
had no prior knowledge nor had the opportunity to evaluate.
SMGC makes no warranty or representation to SouthGobi Energy Resources or third parties
(express or implied) in respect of the report, particularly with regard to:
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3.1 LOCATION
The area covered by a KP exploitasi held by PT Mamahak Coal Mining (“MCM KP”) is one of 4
KP areas (See below) being evaluated by SouthGobi Energy Resources through its affiliate
companies and third party partners in what is referred to as the Mamahak Joint Venture. The
boundaries of the KP areas were based on covering coal outcrops and favourably dipping strata
from limited reconnaissance mapping programs in the Haloq Formation. These KP areas are
identified on the following illustration which also defines their current size and development
status as defined by the local government of the Kutai Barat Regency of East Kalimantan.
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Resource Report – Mamahak Coal Project PT Multi Mamahak Batubara
3.2 OWNERSHIP
Area
KP Name Status Date Term
(HA)
TOTAL 22,968
SouthGobi Energy Resources holds an 85% interest in the Mamahak Project through a Joint
Venture with Score Resources Ltd. The Mamahak Project KPs are held directly by Indonesian
companies referenced in the table above. SouthGobi Energy Resources, through its Indonesian
based joint venture subsidiary, PT Multi Mamahak Batubara (PT MMB), has signed
comprehensive agreements granting PT MMB exclusive rights to develop, mine and sell the coal
from the Mamahak Project. At present, SouthGobi Energy Resources may acquire the remaining
15% on completion of mining the initial 150,000 tonnes from the project.
The structure through which SouthGobi Energy Resources holds its interest in the Mamahak
Project is typical for foreign companies conducting mining operations in Indonesia. Prior to
January 2009, Indonesian Laws and Regulations related to mining stipulated that the only legal
entities that can hold KPs are those whose capital is owned entirely by Indonesian citizens or
parties of Indonesian origin. In January 2009, a new law regarding mineral and coal mining was
enacted which replaced the previous regime. This new Indonesian law now forms the basic
framework for the mining regime in Indonesia and contemplates direct foreign ownership of
mining licenses. The exact implementation of the new Indonesian mining law remains uncertain
until further implementing regulations are issued by the Indonesian Government. SouthGobi
Energy Resources is considering the possibility of acquiring shares in the Indonesian companies
holding the KPs in order to have direct control over mining licenses and authorizations in
Indonesia.
3.3 PERMITTING
An Ijin Lokasi permit for the SW Surface Mine on the MCM KP was recently received from the
local Government of Kutai Barat Regency and allows for mining to commence from the SW
Block. There are no permits still pending to allow the company to export coal from the project.
Compensation of local owners for land required for pit areas, haul roads and the river terminal
has been completed such that road and port construction is underway and initial contract mining
equipment is being mobilized. Land compensation is undertaken by the Companies Public affairs
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Resource Report – Mamahak Coal Project PT Multi Mamahak Batubara
team based in Melak downstream from the project site, land compensation is based on a rate
schedule established by the Kutai Barat Regency.
The Company / PT MMB is planning to commence delivering trial cargos to Asian Steel mills in
the 1st Half of 2009
2. Explorasi Stage Obtain approval for more detailed exploration work comprising drilling,
sampling , bulk sampling etc based on reporting finding from the PU Stage
KP’s at the Explorasi Stage are subject to an annual renewal fee referred to as “dead
rent” which escalates from 2,000 IDR per hectare in year 1, 2,500 IDR per hectare in
year 2 and 3,000 IDR per hectare in year 3 (Note exchange rates vary however
approximately 10,000 IDR was equivalent to US $1.00 during January 2009)
4. Mining Stage Coal mine operations will be subject to a production royalty of 7% of the
sale value of all coal produced. Local Government inspections of the mine operation will
take place to ensure the operation is compliant with Indonesian Safety and
Environmental Standards
Environmental obligations including reclamation bonding and the companies’ plans for
reclamation have been approved by the local government as part of the mine approval process;
35,000,000 IDR is to be posted for each Ha of land to be disturbed during mine operations. The
projects topography and geologic structure will allow for minimized waste dump areas by
designing in pit waste dumping which will also minimize haul costs.
A new mining law for Indonesia was approved in January 2009, which will require the
enactment of any new mining regulations prior to any change being made to the existing
legislative process for mine development. It is widely understood that the enactment of new
regulations will take at least 1 year to be put in place, in the interim the company will continue its
current project development plans. Once of the primary purposes of the new mining law is to
allow for direct foreign ownership of KPs in the future as a means of promoting foreign
investment in the country.
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The minimum temperature for the region is 21◦C and the maximum 34◦C, a range of only 13◦C.
Generally the cooler months occur from October to January and warmer months from July to
August. For coal operations in the Kutai Barat Regency PT SMGC engineers typically allow for
1300 hours of downtime per year.
Established resources in the area are logging and limited private farming. Land compensation
for both mining areas and infrastructure (roads and terminals) have been successfully obtained
according to established land compensation guidelines established by the Regency government.
Future mine development will rely on the Mahakam River and various rivers throughout the
property for water and local diesel generators for all project power.
The use of Mining contractors coupled with the presence of nearby villages is expected to
provide both skilled and unskilled labour to the project. The availability and suitability of future
land for project development are not considered to be constraints for this project.
The physiography of the 2 resource areas covered in this report are described as gently rolling
hills ranging from 125 metres in elevation to 500 metres in elevation, many areas have been
previously logged.
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Resource Report – Mamahak Coal Project PT Multi Mamahak Batubara
5. HISTORY
The general area (Kutai Barat) has been explored and mapped on four separate occasions, twice
for coal, once for petroleum and once to help establish a regional stratigraphy. However none of
this prior exploration involved localised drilling and sampling of the four blocks as conducted and
ongoing by PT Mamahak Coal Mining. A seen in Figure 3, the four blocks have been divided into
a SW Block and the E Block (consisting of three smaller blocks). Exploration at both the SW
Block and the E Block is yet to be completed and hence this report is limited to data supplied by
PT Mamahak Coal Mining as of the 5th, November 2008.
Historical research has been completed by the following organisations/authors:
Survey Pendahuluan Batubara Daerah Longiram dan Paser by Eddy R Sumaatmaja from
Pusat Sumberdaya Geologi, Dinas Energi dan Sumberdaya Mineral, Indonesia, June
2006,
Zonasi Daerah Potensi Batubara Untuk Tambang Dalam, Propinsi Kalimantan Timur by
Fatimah, Soleh Basuki and Robert L Tobing from Subdit Batubara, Direktorat Inventarisasi
Sumberdaya Mineral Indonesia, February 14 2007,
Kutai Basin Overview by United States Geological Survey – World Petroleum Assessment
2000,
Tectonostratigraphic Correlation and Paleogeographic Reconstruction at Circum Borneo
Basin yang dilakukan Dr. Rasoul Sorkhabi, David Curtiss, M.S. dan Dr. Raymond Levey
dan disponsori oleh Konsorsium Perusahaan Minyak di Indonesia, April 2006, and
Coal Exploration by PT Mamahak Coal Mining. February 2008.
Table 2 summarises the drilling completed thus far by PT Mamahak Coal Mining at the SW and
E Blocks.
Table 2 – SW and E Block Drilling History
Drill Holes in Current Application Area
Operator Block Year Samples
Drilled Open holed Cored Meters
E 2008 130 108 22 7670.7 173 *
Multi Resources
Indonesia
SW 2008 88 84 4 3711 4*
Note:
* All samples are taken from drilling activity
No historical tonnage estimates exist for the area as it is a greenfields exploration site.
The 4 KPs comprising the Mamahak Project are owned by Indonesian nationals; no work
programs were undertaken by these owners. Ownership of the KPs was granted to the Indonesian
nationals through application to the local government of the Kutai Barat Regency of East
Kalimantan, Indonesia. Undocumented local communication suggests that limited historical
extraction of coal seams on or near the Mahakam River in the area was undertaken to fuel
‘steam powered’ river vessels. The Indonesian nationals acquired the interest in the KPs directly
from the local government of the Kutai Barat Recency of East Kalimantan, Indonesia.
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6. GEOLOGICAL SETTING
The sedimentary sequences of East Kalimantan were formed by subduction of the ‘Lempeng
Indo-Australia’ plate beneath the ‘Lempeng Pasific Barat’ plate as seen in Figure 4. The
structural setting and sedimentary processes of Kalimantan regionally depended on location
relative to the Meratus High. Based on the ‘plate tectonic concept’ of Katili (1978) and
Situmorang (1982) the East Kutai basin can be summarised as a back arc basin formed to the
east of the ‘Lempeng Indo-Australia’ plate subduction zone and the Meratus high.
Figure 4 – Geological Formation of the East Kutai Basin
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7. DEPOSIT TYPE
The definition of “Deposit Type” for coal properties is different from that applied to other types of
geological deposits. Criteria applied to coal deposits for the purposes of determination of coal
resources and reserves include both “Geology Type” as well as “Deposit Type”. For coal
deposits this is an important concept because the classification of a coal deposit as a particular
type determines the range of limiting criteria that may be applied during the estimation of
Reserves and Resources.
“Geology Type” for coal deposits is a parameter that is specified in Geological Survey of Canada
Paper 88-21, which is a reference for coal deposits as specified in NI 43-101. Coal “Geology
Type” is a definition of the amount of geological complexity, usually imposed by the structural
complexity of the area, and the classification of a coal deposit by “Geology Type” determines the
approach to be used for the Resource/Reserve estimation methodology and the limits to be
applied to certain key estimation criteria. The identification of a particular geology type for a coal
property defines the confidence that can be placed in the extrapolation of data values away from
a particular point of reference.
The classification scheme of GSC Paper 88-21 is similar to many other international coal reserve
classification systems but it has one significant difference. This system is designed to
accommodate differences in the degree of tectonic deformation of different coal deposits in
Canada. Four classes are provided for that range from the first, which is for deposits of the
Plains type with low tectonic disturbance, to the fourth which is for Rocky Mountains type
deposits such as that of Byron Creek, which is classed as “severe”. The third class is referred to
as “complex”; the steeply dipping and moderately faulted strata of the Sage Creek Area are
typical of this class.
“Deposit Type” as defined in GSC Paper 88-21 refers to the extraction method most suited to the
coal deposit. There are four categories:
surface,
underground,
non-conventional, and
sterilised.
With respect to Deposit Type, both the SW and E Blocks would be considered to be a surface
mineable deposit of moderate complexity. This was concluded after reviewing a combination of
seam thicknesses, seam floor contours, dips and calculated stripping ratios for the area.
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8. MINERALISATION
The first phase of sedimentation in the Kutai Basin was a transgressive phase which began in
the early Miocene, this was followed by a phase of regression that continues today. Sediments
within the basin characteristically consist of clastic fine grain quartz sandstones, siltstones and
claystones. Other sediments include intercalated siltstones, limestones and coal deposited in
parallic, neritic or littoral deltaic environments grading to open marine.
In the general East Kalimantan region, the stratigraphic column has been correlated according to
Figure 4.
Most of the units present represent Tertiary sediments that have accumulated within the Kutai
Basin; some of these sequences are coal-bearing. The stratigraphic sequence has accumulated
as a series of prograding alluvial fans over time and, in certain areas, half-graben structures have
thickened the accumulation of certain sediments and enhanced the potential for coal deposition.
Within the Mamahak Project the dominant formation is the Haloq Formation as seen in Figure 6.
Both blocks contain stratigraphic sequences interpreted as the coal-bearing segments of this
formation.
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Within the Mamahak Project, lithology in the southernmost area consists predominantly of clay
and fine grain sandstones. These units can be described as:
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9. EXPLORATION
9.1 DRILLING
The drilling has and continues to be carried out using portable hydraulic drill rigs contracted from
CV Tulus Samarinda and PT Maxidrill Indonesia. There are 9 drilling rigs in total consisting of:
9.2 SURVEY
Survey activities were carried out by PT Arjatek Indonesia. The Topographical survey was
completed using Nikon Total Station and Topcon T-0 survey units. The survey was carried out
on a 30 to 50 metre grid interval system with each survey block referenced to the nearest
benchmark. The position and elevation of drill holes were picked up using total station and re-
picked up on completion of drilling activities. Results of collar surveying can be seen in Appendix
2.
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all seams were sampled as composites – please refer to Figure 7 and Figure 8 for a
diagrammatic explanation of how these samples were collected,
samples are collected from the roof and floor rock plus seam partings to be used for
dilution calculations, and are necessary during later mine planning studies, and
all core holes were digitally photographed before sampling.
Figure 7 – Sampling Procedure for Unsplit Intervals
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All coal quality testing was completed by PT Sucofindo Indonesia (a certified laboratory) in
Samarinda, Indonesia to ISO (International Standards Organisation) standards, with the
exception of Relative Density which was tested to Australian Standards. No aspects of sample
preparation were conducted by an employee, officer, director or associate of SouthGobi Energy
Resources Ltd.
SMGC undertook random audits of data acquisition and preparation procedures for adherence to
‘Standard Operating Procedures’ as defined by SMGC. Consistency checks between data from
audited periods and unaudited period do not reveal any underlying inconsistency or error.
The author is of the opinion that the sampling methods and approach utilised onsite at the
Mamahak Project is of high standards and representative of the projects coal quality. The author
has no knowledge of drilling, sampling or recovery factors that could materially impact the
accuracy and reliability of the results.
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E 12 2.9 1.7 9.2 40.6 48.6 0.75 7536 8451 1.31 5.1 50 11
13 3.0 1.6 8.8 41.1 48.5 1.50 7551 8440 1.30 4.4 49 17
14 3.2 1.6 14.0 38.4 46.0 2.63 7095 8391 1.37 4.5 55 12
15 3.0 1.7 7.2 41.6 49.5 0.47 7640 8388 1.29 5.4 51 9
Average 3.2 1.7 9.6 40.5 48.2 1.53 7453 8402 1.31 4.5 50
The author is of the opinion that sample preparation/procedures, security and analytical
procedures have produced representative and accurate coal sample records. The sampling
procedure and security measures conducted on site as outlined by Figure 8 and observed onsite
by the author are considered to be of high standards.
All coal quality testing was completed by PT Sucofindo Indonesia in Samarinda, Indonesia to ISO
(International Standards Organisation) standards, with the exception of Relative Density which
was tested to Australian Standards and Total Sulphur which was tested to ASTM (American
Society for Testing and Materials). The following coal quality parameters were tested:
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MAMAHAK PROJECT
COAL SAMPLING PROCEDURE & PROCESS.
An open hole is to be drilled and geophysically logged to provide a guide to drill crews for
the completion of a nearby (twinned) core hole from which coal samples will be taken by On
Site Geologist.
• Sample submission sheets are signed by an authorized Site Geologist at the Mamahak
Site Office and sent to the Samarinda Site Office.
• The Samarinda Site Office confirms samples are properly identified and foreward
them to the independent Laboratory for analysis.
• The independent laboratory analysis results are sent to the Samarinda Site Office for
verification and reviewed before being sent to S.M.G.C. Jakarta ( the Project
Geological Consulting Group ) to be entered into the Geologic Model of each deposit.
Resource Report – Mamahak Coal Project PT Multi Mamahak Batubara
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15.1 APPROACH
Resources for this deposit were calculated to JORC standards; this involves calculating
resources to a measured, indicated or inferred status. These resource categories can be seen
below and are as outlined in ‘The 2004 Australasian Code for Reporting Exploration Results,
Mineral Resources and Ore Reserves (The JORC Code)’.The Canadian Institute of Mining (CIM)
Standards/definitions on Mineral Resources and Mineral Reserves as contained in this report
were incorporated into the National Instrument 43-101 and effective as of February 1, 2001.
These standards as adopted from the JORC code and in relation to this deposit classify the
same measured, indicated and inferred resource areas as the JORC code when implemented.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and
mineral content can be estimated with a low level of confidence. It is inferred from geological
evidence and assumed but not verified geological and/or grade continuity. It is based on
information gathered through appropriate techniques from locations such as outcrops, trenches,
pits, working and drill holes which may be limited or of uncertain quality and reliability. An
inferred Mineral Resource has a lower level of confidence than that applying to an Indicated
Mineral Resource.
The Inferred category is intended to cover situations where a mineral concentration or
occurrence has been identified and limited measurements and sampling completed, but where
the data are insufficient to allow the geological and/or grade continuity to be confidently
interpreted. Commonly, it would be reasonable to expect that the majority of Inferred Mineral
Resources would upgrade to Indicated Mineral Resources, it should not be assumed that such
upgrading will always occur. Confidence in the estimate of Inferred Mineral Resources is usually
not sufficient to allow the results of the application of technical and economic parameters to be
used for detailed planning. For this reason, there is no direct link from and Inferred Resource to
any category of Mineral Reserves. Caution should be exercised if this category is considered in
technical and economic studies.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities,
shape, physical characteristics, grade and mineral content can be estimated with a reasonable
level of confidence. It is based on exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill
holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade
continuity but are spaced closely enough for continuity to be assumed. An Indicated Mineral
Resource has a lower level of confidence than that applying to a Measured Mineral Resource,
but has a higher level of confidence than that applying to an Inferred Mineral Resource.
Mineralisation may be classified as an Indicated Mineral Resource when the nature, quality,
amount and distribution of data are such as to allow confident interpretation of the geological
framework and to assume continuity of mineralisation. Confidence in the estimate is sufficient to
allow the application of technical and economic viability.
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A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities,
shape, physical characteristics, grade and mineral content can be estimated with a high level of
confidence. It is based on detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes. The locations are spaced closely enough to confirm geological and
grade continuity.
Mineralisation may be classified as a Measured Mineral Resource when the nature, quality,
amount and distribution of data are such as to leave no reasonable doubt, in the opinion of the
Competent Person determining the Mineral Resource, that the tonnage and grade of the
mineralisation can be estimated to within close limits, and that any variation from the estimate
would be unlikely to significantly affect potential economic viability. This category requires a high
level of confidence in, and understanding of, the geology and controls of the mineral deposit.
Confidence in the estimate is sufficient to allow the application of technical and economic
parameters and to enable an evaluation of economic viability that has a greater degree of
certainty than an evaluation based on an Indicated Mineral Resource.
The choice of the appropriate category of Mineral resource depends upon the quantity,
distribution and quality of data available and the level of confidence that attaches to those data.
The appropriate Mineral Resource category must be determined by a Competent Person or
Persons.
The following CIM Definition Standards on Mineral Resources and Mineral Reserves were
Prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM
Council.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, and physical characteristics are so well established that they can be
estimated with confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the economic viability of
the deposit. The estimate is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes that are spaced closely enough to confirm both geological and
grade continuity.
Mineralization or other natural material of economic interest may be classified as a Measured
Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of
data are such that the tonnage and grade of the mineralization can be estimated to within close
limits and that variation from the estimate would not significantly affect potential economic
viability. This category requires a high level of confidence in, and understanding of, the geology
and controls of the mineral deposit.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics, can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably assumed.
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Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when
the nature, quality, quantity and distribution of data are such as to allow confident interpretation
of the geological framework and to reasonably assume the continuity of mineralization. The
Qualified Person must recognize the importance of the Indicated Mineral Resource category to
the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of
sufficient quality to support a Preliminary Feasibility Study which can serve as the basis for major
development decisions.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and
reasonably assumed, but not verified, geological and grade continuity. The estimate is based on
limited information and sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes.
Due to the uncertainty which may attach to Inferred Mineral Resources, it cannot be assumed
that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured
Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient
to allow the meaningful application of technical and economic parameters or to enable an
evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be
excluded from estimates forming the basis of feasibility or other economic studies.
In summary the classification of coal resources according to assurance categories (i.e. Proven,
Probable or inferred) for both Australian (JORC) and Canadian (NI 43-101) Standards is
dependent on the average spacing of data points (density of drill hole intersections) from which
reliable coal seam thickness and coal seam quality have been obtained. The geological
complexity of the coal deposits being evaluated dictate the level of drilling density required to
meet both JORC and NI 43-101 Standards. The E and SW Resource Blocks in this report are
considered to be of “Moderate“ geological complexity according to the NI 43-101 Standard. The
drilling density required to meet the NI 43-101 Standard has been met or exceeded in this report.
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Seam thickness histograms are provided for both bocks in the Illustrations section of this report.
It is to be noted that high values for the value ‘0 seam thickness’ on these graphs is due to seam
washouts and barren boreholes. The thickness of coal seams from the SW and E Blocks is
tabulated below in Table 7 and Table 8.
Table 7 – E Block Seam Thicknesses
Seam Thickness
Seam ID
Minimum Maximum Average
10U 0.10 0.89 0.43
10L 0.10 0.88 0.42
11U 0.10 0.72 0.31
11L 0.12 0.84 0.35
12 0.10 1.60 0.58
13 0.20 0.80 0.56
14 0.23 1.16 0.51
15 0.35 0.90 0.55
Average 0.16 0.97 0.46
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15.2.3 Dimensions
Both the SW and E Blocks are situated in the southern region of the Mamahak Coal Mining KP.
The SW Block is 750 m west of the E Block’s most western extent. Block E is divided into 3
small blocks that is the block E1, E2, and E3 however has been reported on as the combined E
Block area. The E Block covers 474.837 Ha, whilst the SW block covers 163.290 Ha, a general
summary of this can be seen in Table 7.
Table 9 – Summary of the SW and E Block Extents and Seams Intersected
The strike length of the E Block is approximately 5.5km with seams dipping to the south at
approximately 20 degrees as seen in Figure 11, Figure 12 and Figure 13. The strike length of
the SW Block is approximately 2.8km with seams also dipping to the south at approximately 20
degrees as seen in Figure 14, Figure 15 and Figure 16.
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The resource classification polygons for each seam of the E Block can be seen in Figure 21 to
Figure 27. No resource classification figures for the SW Block are provided as the area is only
covered to an inferred status.
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15.3.3 Topography
Surface topography for geological modelling was generated using a combination of ground
survey points and collar data. Only 6 holes contained topographical surface to collar
discrepancies of greater than 2m in the E Block (as seen in Table 9). This is considered
acceptable as terrain in the Mamahak region is undulating. Hence a review after gridding of the
topography revealed no significant anomalies. The SW Block only contained two collar to
topography differences of greater than 2m, which like the E Block is within an acceptable range
considering the morphology of the area.
Table 11 – Topographical Surface to Collar Discrepancies Greater than 2m (E Block)
Bore ID Easting Northing Borehole Value Grid Value Difference
J_0013C 329083 51964 228.01 230.57 -2.56
PR_0011 326958 51375 171.21 169.02 2.19
PR_0047R1 328893 52043 235.93 231.86 4.06
PR_0053 329115 52172 233.88 236.23 -2.35
PR_0060 329542 52064 157.94 160.29 -2.35
PR_0065 329708 52686 275.73 273.54 2.19
The ground survey used to generate topographical surfaces in both Blocks was not completed to
the full extents of the Blocks. In both cases the topography was extrapolated to meet the Block
boundaries. The extrapolation distance was at its greatest 100m. This extrapolation of
topography may have lead to some incorrect sub-crop and strip ratio values in both blocks.
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E 12 2.9 1.7 9.2 40.6 48.6 0.75 7536 8451 1.31 5.1 50 11
13 3.0 1.6 8.8 41.1 48.5 1.50 7551 8440 1.30 4.4 49 17
14 3.2 1.6 14.0 38.4 46.0 2.63 7095 8391 1.37 4.5 55 12
15 3.0 1.7 7.2 41.6 49.5 0.47 7640 8388 1.29 5.4 51 9
Average 3.2 1.7 9.6 40.5 48.2 1.53 7453 8402 1.31 4.5 50
* Thick : Thickness (m)
The resource estimates for the E and SW Blocks are based on data collected up to November 5, 2008.
As seen in Table 14 an inferred resource of 2.61Mt has been estimated for the SW Block. All
resources in the SW Block were considered by the author only to be sufficient to meet a JORC
compliant Inferred resource status; this is due to the lack of coal quality data for the area. For
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‘points of observation’ to be JORC compliant they must be surveyed, geophysically logged and
sampled. Once Exploration is completed successfully on the SW Block the resources contained
should all be categorised to either a measured or indicated status.
Table 14 – SW Block Resources
SW Block
Inferred
Seam Mean
Tonnes
Thickness
SW_E 40,593 0.51
SW_D 319,273 0.47
SW_C 1,324,774 0.75
SW_B 926,359 0.65
Total 2,610,999
Inferred resources have been estimated for the SW Block as of January 19, 2009.
Tonnages for the E Block were calculated using a quality grid generated using the ‘Minex growth
technique’ based on sample data provided by PT Mamahak Coal Mining. A default tonnage of
1.35 was used for the SW block as insufficient data exists to model the density of the area
accurately.
The resource classification polygons for each seam of the E Block can be seen in Figure 21 to
Figure 27. No resource classification figures for the SW Block are provided as the area is only
covered to an inferred status.
The author is unaware of any environmental, permitting, legal title, taxation, socio-economic,
mining, metallurgical, infrastructure, marketing or political issues which the estimate may be
materially affected by.
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18. REFERENCES
PT Buena Persada Mining Services, 2008, Exploration Report, the Mamahak Coal Project,
Australasian Code for Reporting Exploration Results, Mineral Resources and Ore
Reserves – JORC – December 2004,
Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and
Coal Reserves – Coalfields Geology Council of New South Wales and Queensland Mining
Council – March 2003, and
Standards of Disclosure for Mineral Projects “NI 43-101”, The Companion Policy to NI 43-
101 and Form 43-101FI.
19. RECOMMENDATIONS
It is the opinion of the author that this is a property of merit and the main objectives of future
exploration should be to:
complete a program of testing to more thoroughly define the coal quality and extents for
the whole Mamahak Project,
obtain correlation and structure confirmation data and, more importantly, to obtain high
quality data concerning the quality of the coal and the geotechnical properties of the
sequence to be mined,
obtain further coal quality data pertinent to current coal markets through additional bulk
sampling. In the second drilling season, obtain large diameter cores that can serve as a
bulk samples, and
complete a feasibility study for this area once the bulk sample coal test results are
available.
The author also recommends that mine planning be undertaken based on the geological models
prepared for these deposits by SMGC.
The company has indicated it has incurred approximately US$3,000,000 on the work programs
supporting the preparation of this report and anticipate that similar expenditures should be
anticipated on each of the other 3 KPs comprising the project.
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20. CERTIFICATIONS
20.1 TENURE
SGQ Batubara (A) Pte, Ltd who retains exclusive development, marketing and mining
agreements with the owners of the PT Mamahak Coal Mining KP (which is a part of the
Mamahak Coal Project) supplied SMGC with 2 documents referring to the tenure of the SW and
E Blocks. The first document “Pemberi Ijin Kuasa Pertambangan Eksplorasi Tahun Kedua Atas
Nama PT Mamahak Coal Mining”, No 545/K.243/2007 was issued to PT Mamahak Coal Mining
in April 2007 over an area of 4,996 Ha. The second document “Pemberi Kuasa Pertambangan
Eksploitasi Atas Nama PT Mamahak Coal Mining”, No 545/K.647/2008 was issued to PT
Mamahak Coal Mining in July 2008 over an area of 4996 Ha.
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Mark J. Manners
Principal Geologist
SMG Consultants Pty Ltd.
Dated the 26th March, 2009 in Jakarta, Indonesia.
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21. ILLUSTRATIONS
Seam thickness histograms for the E block can be seen in Figure 28 to Figure 35, whilst seam
thickness histograms for the SW Block can be seen in Figure 36 to Figure 39. It is to be noted
that seam recorded seam thicknesses of zero in these table are due to washouts and barren
holes.
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Appendix 1 – PT Geoservices LTD Bulk Sample Analysis Results
Mamahak Project Bulk Sample Analysis Results as of October 21, 2008
SouthGobi Energy Resources and its Indonesian Affiliate Company, PT Multi Mamahak Batubara
(PT MMB) have received results from the independent laboratory analysis of a recent Bulk
Sample it has taken on the SW Resource Block within the MCM KP. The Bulk sample was taken
by a hydraulic excavator and is comprised of a proportioned blending of seams from an area
where the company plans to commence mining coal in the 1st Quarter of 2009. The MCM KP is
the southernmost of 4 areas under development by the company at Mamahak and is located
approximately 30 kilometres from the Mahakam River where river barges are planned to
transport coal to ocean going vessels. We have approximately 520 kg of this sample available in
storage at Balikpapan for shipment to potential customers. The proximate analysis and related
testing of the Bulk Sample raw coal was obtained by PT GEOSERVICES LTD. and is listed as
follows:
Gray Gieseler
Max. Max. CSN/
Chlorine Phosphorus HGI King Max. Fluidity
Cont. Dil. FSI
Coke ddpm
13,560 -
.01% .007% 49 24 129 G6 7½ -7½ *
17,408 *
ASH ANALYSIS
SiO2 Al2O3 Fe2O3 CaO MgO Na2O K2O TiO2 Mn3O4 SO3 P2O5
% % % % % % % % % % %
73.6 10.1 8.6 2.3 .98 .08 .26 .28 .015 2.0 .187
WET SCREENS
SIZE (mm) WT % Cum. WT% SAMPLE # ASH% SULPHUR%
-2 x 1 36.5 36.5 KT12838/08 4.0 .90
1 x .5 25.2 61.7 KT12839/08 4.3 1.08
.5 x .25 15.6 77.3 KT12840/08 7.1 1.60
-.25 22.7 100.0 KT12841/08 29.1 2.12