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Coal Quality

COAL PRODUCTSCOAL PRODUCTS

We benefit from having access to several concessions which produce coal of different qualities, including bothbituminous coal and sub-bituminous coal. Bituminous coal has high calorific value and is primarily used bycustomers in the steel industries due to its cleaner burning characteristics and high energy content. Sub-bituminous coal has a lower calorific value than bituminous coal and is used primarily by electricity generationplants.

The following table sets forth the average coal reserve specifications for each project:

Sub-Bituminous CoalSub-Bituminous CoalProducing ProjectsProducing Projects

Quality ParameterQua lit y Pa rame te r Wah an aWahana

Gunung BayanGunung Bayan

TeguhTeguh FirmanFirman PerkasaPerkasa FTBFTBBlock IIBlock II Block IBlock I

Gross Calorific Value(kcal/kg arb)

5,900 -6,500

6,100 -7,200

6,800 -7,300

5,600 -6,100

5,700 -6,300

4,200 - 4,500 4,200 - 5,300

Total Moisture (% arb)8.0 -12.0

6.0 -12.0

8.0-12.0

15.0 -18.0

10.0 -14.0

28.0 - 35.0 25.0 - 36.0

Ash Content (% adb)9.0 -18.0

6.0 -10.0

6.0 -11.0

4.0 - 7.06.0 -10.0

4.0 - 6.0 4.0 - 6.0

Total Sulfur (% adb) 0.4 - 0.8 0.6 - 2.5 0.6 - 2.5 0.8 - 1.5 0.8 - 1.5 1.0 - 2.0 0.1 - 0.8

COAL LOGISTICSCOAL LOGISTICS

We extract coal and then transfer it via trucks to locations closer to a river or the open sea where our bargeloading facilities can load the coal onto barges for transfer to the Balikpapan Coal Terminal or other vesselloading options. In the barge loading facilities, coal is crushed and stockpiled. It is then loaded onto barges viaconveyors. Most of our barging facilities are located near our concessions.

The majority of coal at all of our projects is mined clean. Less than five percent of the coal from theGunungbayan Block II Project is mined dirty and must be processed in a wash plant before being transported tothe crushing, stockpiling and barge loading facilities. We commissioned the Gunungbayan Block II Projects washplant in April 2002, which has an operational capacity of 25,000 tonnes of clean coal output per month.

COAL TECHNOLOGYCOAL TECHNOLOGY

Bayan Resources has acquired 49% interest that Bayan International Pte Ltd(BI) has in PT Kaltim Supacoal. BIpreviously in June 2006 has signed a joint venture agreement with Binderless Coal Briquetting Company Pty Ltdfor the construction of a coal upgrading plant at Tabang Mine.

The Binderless Coal Briguetting (BCB) process upgrades low calorific value coals by reducing the moisture andcompacting into dense, physically and chemically stable lumps that can be handled, transported and utilized likenormal coal.

The BCB process is shown by the following illustration:

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