BASIC FEASIBILITY STUDY ON THE AIR MANGGUS AREA

OF BENGKULU PROVINCE, SUMATRA, INDONESIA(SUMMARY)

March, 1999

NEDOBIS

E98082.EW ENERGEY AND INDUSTRIAL TECHNOLOGY

DEVELOPMENT ORGANIZATION

020004995-5

SUMMARY

1. Outline

This study, " Basic Feasibility Study on the Air Manggus Area of Bengkulu Province, Sumatra, Indonesia ", was executed in accordance with " Scope of Work for Detailed Coal Exploration in the Air Manggus Area of Bengkulu Province, Sumatra, Indonesia" concluded between New Energy and Industrial Technology Development Organization (NEDO) and PT. Danu Mashitam (DMH), owner of coal concessions of the investigation area, on June 30, 1998. The study was entrusted to Sumitomo Coal Mining Co., Ltd.

The investigated area is situated about 30 kilometers east of Bengkulu, the capital of Bengkulu Province, in the southwestern part of Sumatra, Republic of Indonesia (Fig. 1). Road distance between the area investigated and Bengkulu is about 40 kilometers. The area comprises low mountainous area with a rough relief and steep slopes ranging in elevation from 250 to 500 meters above sea level.

The field investigation comprises geological and drilling exploration, and investigation of development condition of open-pit mining and infrastructure. Investigation period and personnel allocated are as follows:

1) Geological and drilling explorationPeriod : October 8, 1998 — December 27, 1998Personnel : Two geologists stationed during the period

and a leader.2) Investigation of development condition of open-pit mining

and infrastructurePeriod : January 23, 1999 - February 5, 1999Personnel : Three specialists

1

A.ManggusA.Kemumu

TABAPENANJUNG

A.Bengkulu Exploration Area

BT.KABU

Pulau BaaiA.Nelas

102° 30102°20

Fig. 1 Location map of Air Manggns Area

These field works are outlined below.

(1) Geological and drilling exploration1) Geological reconnaissance Area investigated : 8knT2) Drilling exploration

Total number of drilled hole 29 holesTotal drilled length 2,271.30 mAverage drilled length 78.32 m / hole

3) Trenching Total 2 Test Pits4) Analysis of coal samples

Core samples : Total 128 samplesTrench samples : Total 2 samples

Analysis items are as folloes;All samples : Proximate analysis, total sulfur

and calorific value.Representative 4 samples : Ultimate analysis, ash composition,

ash fusion temperature and Hardgrove grindability index in addition to the above items.

Representative 2 samples : Sink-and-float test.All data obtained during this exploration are inputted in MINEX Mine

Evaluation and Planning Computer System for geological evaluation and preliminary feasibility study of the area.

Fig. 2 shows location of boreholes.

(2) Investigation of development condition of open-pit mining and infrastructure

Present state of the following existing open-pit coal mines and infrastructure was investigated.

1) Current open-pit mining area of DMH.2) Open-pit mine of PT. Bukit Sunur and PT. Bukit Bara Utama3) Truck haulage road (mining area - Pulau Baai port)4) Pulau Baai Port (loading site for ocean going vessel)

3

Various sorts of data and information related to current mining activities, existing facilities, heavy machineries, etc. are also obtained from DMH, PT.Bukit Sunur, PT. Bukit Bara Utama and contractors of these companies.

Table 1 shows progress of this work.

2. Results of Investigation

2.1 Geology

(1) Geology of the Area

The Bengkulu coalfield, in which the area investigated is situated, belongs tectonically to the Bengkulu zone (fore-arc zone) continuing from the western edge of the Barisan Zone (volcanic arc zone), which forms tectonical core of Sumatra. Andesitic to basaltic volcanic rocks and pyroclastics intruded and erupted during Quaternary time are widely distributed in the coalfield. Sedimentary rocks including coal seams are found in isolated small areas as scattered inliers mainly along rivers and streams.

Coal-bearing formation in the investigated area is the Simpangaur Formation of late Miocene to early Pliocene age, which is composed mainly of sandstone and siltstone. The formation is lithologically divided into a lower unit including coal seams and an upper unit. The dip of the beds is variable with wide range affected by the intrusion and tectonic movement. The beds strike south to north and dip north and dip west in the South Block. The dip in the South Block is extremely variable showing 10° to vertical angle, even reverse bed in local . The beds in the North Block strike NW~SE to NEE^SWW and dip NE to NNW in 10° to 70° making a syncline which plunges to NE. Though the strike and dip are changeable as mentioned above, it can be said that the area shows an anticlinal structure in general. Some faults with throw less than one meter and NE ~SW direction are identified in the course of geological mapping, however, no big fault so as affect mining exists in the area.Fig. 3 shows geologic map of Bengkulu area.Fig. 4 illustrates modified stratigraphic column of the area.Geologic map of the area is shown in Fig. 5.

5

Table 1 Progress of this work

Alluvium (Qa)

Swamp Deposit (Qs)

Alluvium Terraces (Qat)

Breccia Volcanic Rocks (Qhv)

Anitesite-Basalt (Qv)

Bintunan Formation (Qtb)

Simpangaur Formation (Traps)

^/// Lemau Formation (Tml)

Bal Formation (Tmba)

Gumai Formation (Tmg)

Scblat Formation (Toms)

Hulusimpang Formation (Tomb)

Legend

Andesite (Tpan)

Granite (Tngr, Tmdi)

Fault

Strike, Dip

Coal Seam

Main Road

□Exploration Aren

Fig.3 Geological map of Benglmlu Area

LithologyThickness

Alluvium, Alluvium Terraces (Qa, Qat)

Andesite-Basalt (Qv)

Andesitic to basaltic lava,

tuffs, volcanic breccia

partly with dyke and sheet

Rhyorite-Andesite (Qtv)

Dasite to andesitic laba,

tuff, volcanic breccia,

partly with dyke

Simpangaur Formation (Tmps)

Mainly fine to coase-grained sandstone,

and siltstone, intercalated with

breccia in parts

Upper. S.

Main. S.Mainly fine to coase-grained with

intercalation of siltstone and coal

and in parts conglomerate Lower. S.

Fig.4 Modified stratigraphic column8

(2) Coal Seams

The target coal seams in the study are four seams consisting of the Lower, Main, Upper 2 and Upper 1 Seams in ascending order, which occur in the shallow part of the North and South Blocks.

The coal seams in the South Block get deep rapidly from their outcrops to dipping direction and the dip become moderate at the deeper part. The south east part of the North Block is characterized by its steep dipping, while the beds in the north west part of the Block dip gently accompanying the steep or thrust faults by the sill intruded into the roof of the coal seam.

The Main Seam is a most thick and stable among the target seam in the studied area. The Upper 1 Seam and Upper 2 Seams get thinner toward north to northeast in the South Block. These two seams are locally affected by the volcanic intrusion.

The Lower seam was expected to occur stably before te current exploration. However the work revealed that the sandstone interburden betweeen the Main Seam and Lower Seam was too thick to exploit the Lower Seam. Therefor no drill reached to the Lower Seam. The Main Seam is 7.8m(coal)/9.6m(seam) thick in average in the South Block and 5.3m/6.5m in the North Block. The Main Seam is characterized by a plenty of partings, two of which are kaolinitic tuff making good rey beds.

Figs. 6,7,8 and 9 illustrate structure contour and isopach maps of the Main Seam respectively.

(3) Coal Reserves

Measured in situ coal reserves of Main Seam, Upper 1 Seam and Upper 2 Seam are calculated on the basis of calculation standard of the U.S. Geological Survey as follows:Measured Coal Reserves Main Seam (North area) 10,960,000 tonnes

Main Seam (South area) 20,985,000 tonnesUpper 1 Seam 1,656,000 tonnesUpper 2 Seam 3.198.000 tonnesTotal 36,799,000 tonnes

10

(4) Coal Quality

Coal in the area is characterized by increased coalification rank caused by thermal effect of the volcanic intrusions. It ranges wide rank from high volatile C bituminous according to the ASTM system of clarification of coals.

(Air dry basis)

ItemArea Average

South All South All

Inherent moisture (%) 5—9 3-9.5 7.4 7.2

Ash (%) bi 00 "m 4.5-13 6.5 6.7

Volatile matter <%) 39.5—42.5 33-41 41.2 40.7

Fixed carbon (%) 43—48 43—55 44.6 45.0

Specific energy (kcal/kg)6,450—

7,060

5,960—

7,3806,660 6,670

Total Sulfur (%) 0.37—0.63 0.35-0.63 0.44 0.45

Fig. 10 shows isocalorific value map of the Main Seam(in the South Block).

2.2 Preliminary Mining Plan

Preliminary mining plan of the investigated area was made on the basis of the results of present geological evaluation of the area. Continuity of the coal seams, conditions of volcanic intrusions and minable coal reserves were also considered in this study. The south area which is the main target area in this study is located in the north of the present open pit exploited by PT. DMH. The following mining plan is prepared in line with the basic concept by PT. DMH. An outline of the plan is as follows:

(1) Mining method: Open-pit mining by truck & shovel methodBench cut mining (Bench height 10m)Final highwall (30 degrees)

(2) Coal seam: Main Seam, Upper 1 Seam, Upper 2 Seam

15

(3) Minable reserves Total minable coal reserves 8,606,000tonnes and overburden: Total overburden 44,707,000 BCM

(average stripping ratio 5.19 BCM/ton)Raw coal : 500,000 tonnes/year Overburden is dumped at the south east of the mining pit at the beginning of development, later it is backfilled in the mined-out pit.

(4) Production:(5) Overburden

dumping:

Fig. 11 illustrates proposed mining pit of the area.

PT. DMH is planing to produce ROM coal of 500,000 tonnes per year from the existing pit (AGG).

2.3 Quality control and mining method

The salable coal reserves are estimated as follows;

ROM Reserves : 8,360,000 tonsYield including fine coal : 95%Yield excluding fine coal : 85%Salable Reserves Including Fine Coal : 7,942,000 tonsSalable Reserves Excluding Fine Coal : 7,106,000 tons

The quality of the present salable coal excluding fine coal, originated from production at ATS pit is as follows; (air dry basis)

Moisture 7-11 %

Ash : 10-12 %

Volatile Mutter : 26-38 %

Fixed Carbon : 42—45 %

Total Sulfur : 0.5—0.6 %

Calorific Value : 6,300-6,500 kcal/kg

17

The Main Seam is extracted at present by means of selective mining of 7 plies to avoid deterioration. However, the precise mining such as present method might be resulted in decrease of extracted coal tonnage per unit time and in higher mining cost. To avoid this disadvantage, it is recommendable to adopt the following alternative mining method, that is, the Main Seam is extracted at 3 times being grouped to 3 parts instead of 7 plies (groups) and 7 extractions. The raw coal quality of the Main Seam by the alternative mining method mentioned above is estimated according to the analysis results of the current coal samples as follows; (air dry basis)

Moisture : 7.4 %

Ash : 15.2 %

Volatile Mutter : 37.4 %

Fixed Carbon : 39.6 %

Total Sulfur : 0.44 %

Calorific Value : 5,870 kcal/kg

The quality of raw coal obtained by the alternative mining method will get worse due to dilution than to that of present method, therefore washing coal is indispensable to keep same quality as that of the present salable coal.

It is recommended to produce clean coal with 9 % ash judging from the result of washability and also possible to produce the export coal to Japan with 6,700 kcal/kg (6.2 % of ash) of calorific value at the sacrifice of yield.

2.4 Infrastructure

Outline of related infrastructure composeing current coal chain is as follows:

(1) Coal transport road

Road distance from the sizing plant to coal loading port is about 65

19

kilometers, gravel mine road 8 kilometers and asphalt public road 57 kilometers.

(2) Pulau Baai Port (coal loading port)

Coal loading pier facility with berth 165 meters long and 18 meters wide is installed at Pulau Baai port for ocean going vessel. Draft of berth front is 10 meters at low tide. Received maximum vessel up to now is 33,000 DWT. Fixed shiploaders with capacity of 500 tonnes per hour and 1,000 tonnes per hour are installed at this pier. Coal stock yard of DMH at the port can store about 120,000 tonnes.

3. Conclusion

Total measured coal reserves of 36.8 million tonnes were calculated for four coal seams in the Air Manggus area from this investigation. Minable coal reserves is 8.6 million tonnes with average stripping ratio: 5.19 BCM/ton in the South Area.

The coal in this area is good quality which is high calorific value and low sulfur. This is important to export especialy.

The coal in this area is good quality which is high calorific value and low sulfur. This is important to export especially.

DMH intends to develop this area as early as possible in order to expand their production scale for the market of Indonesia and Southeast Asian countries including Japan, as coal demand of these countries are expected to increase in the future. In this respect, it is expected that the results of this basic feasibility study will contribute the development of the Air Manggus area.

20