2016

Lubel Mine New Project

European Coking Coal Project

Project status

Invested funds - >USD 54,9m

Mine construction project and electricity and other technical supply terms approved;

Land is allocated, infrastructure construction in progress: roads, bridges, drainage systems,

removal of soil etc.;

PAT «Luganskdiproshakht» elaborated an updated version of BFS in January 2014.

In 2015 CCMC (potential general contractor) and Hefei project institute developed an adaptation

of BFS according to terms and rules of potential international creditors, incl. Chinese financial

institutions

Term of construction, according to CCMC, will not exceed 38 months, planned start of operations

– 1st quarter of 2020; CCMC will provide the performance guarantee on estimated mine output,

construction term and quality of equipment

The Company is continuing preparation works for construction commencement and finalized

drilling of 15 boreholes (field #3) for further reclassification of resources according to JORC

standard

Mine project elaborated by CCMC is being modified by Yuzhgiproshakht according to local

standards

Unique Opportunity with

a Pure-Play Coking Coal

Development Company

located in a European

Country close to the end-

users

Project Consultants

General Advisor – BMO (Bank of Montreal)

Company Auditor – Deloitte & Touché

Corporate Secretaries – PwC (PricewaterhouseCoopers)

General Designers – PAT “Luhanskgiproshakht”, Hefei design and research institute of coal industry (China)

General Contractor – China Coal #3 Construction Group Corp. (CCMC, China)

Project Developers:

- Geology and Mining section: – IMC Montan (Germany); – Mineral and Energy Economy Research Institute

(Poland); – Wardell Armstrong (UK)

Process Design and Washing Plant Project Development:

– Capital Equipment and Trading Corporation (CETCO) – USA

Coal Quality: – UKHIN (Ukrainian Institute of Coal Chemistry)

Other Project Sections: – >10 Design and Research Institutes involved

Mining parameters

Lubel 1-2 Lubel 3 Total

Mining method Underground / Longwall system

Mine life (years) 27 23 42

Coking coal of grade K, Mt 129,87 -- 129,87

Coking coal of grade Ж/Zh, Mt

-- 99.74 99,74

Steam coal, Mt -- 4,52 4,52

Total – Salable Coal 129,87 104,26 234,13

About Lubel Coal Company

Lubel Coal Company Ltd.(BVI) – a privately-owned company focused on mine construction

project implementation on coking coal mining. Company owns 100% in Lubel Coal Project located in

Western Ukraine

Investment

Potential Factors

Strategic location with well-developed infrastructure Situated in a region of high demand on coking coal with convenient infrastructure for coal

supply

Located in close proximity to European steelmakers

Available high-skilled and experienced mine workers in the region

High quality coking coal with potential for resource extension

High quality coking coal with attractive metallurgical characteristics

Major project with long-term operation period based on high quality coking coal resources

177Mt of reserves at block No.1 and block No.2 according to JORC classification

129 Mt additional reserves of Ж/Zh-grade ranked by DKZ(1) at block No.3 and 108Mt of

Ж/Zh-grade at Lubel No.4 block to be compliant to JORC standards based on existing 3D

model

Positioned to be among the largest pure-play coking coal producers globally Underground mine with average salable coal production capacity over 6.1 Mt p.a. DKZ-

compliant К-grade(2) and DKZ-compliant Ж/Zh-grade(2) hard coking coal per annum

Clear construction scheduling not exceeding 38 months (term of construction and reaching

the project capacity are warranted by general contractor CCMC), potential commissioning in

2020

Mine life of 42 years

Project attractive economics Latest studies allow to achieve an IRR more then 38% for the Lubel Project

Attractive low production costs below US$ 30.0 per ton (average cash cost during full

operational years according to Luganskgiproshakht BFS). In accordance with CCMC BFS

average cost per ton is US$26,6 for the period of first 8 operational years

High productivity mining method

Modern, high-productive plow systems Caterpillar applied at similar operations in the world

mines

The use of the latest plow technology allows to improve throughput and achieve lower

operating costs

Environment and Labor safety The Company pays greatest attention to the key environmental and labor protection

issues: USD 27m (included in coal mine construction budget) will be spent to implement

modern environmental and labor protection measures providing effective limitation or

complete elimination of effects of technogenic pressing

Positive statements and conclusions were received from Scientific Institute of Environmental

Problems, Lugansk Expertise & Technology Center (No.44.05.3443.C08), State Sanitary

and Epidemiological Department of the Ministry of Health Protection of Ukraine

(No.05.03.03-07/53177)

Construction Project has been approved by “Environmental Expertise” as stated in the

Environmental State Expertise Conclusion No 680 issued by the Ministry Of Environmental

Protection of Ukraine

1. State Committee for Useful Mineral Reserves of Ukraine (DKZ)

2. International codes of K-grade coking coal : 12 0 30 8 22 07 08 36; 12 0 20 8 24 04 08 36, and

Ж /Zh-grade:11 X 22 X 26 14 17 35

Strong Coking

Coal Industry

Fundamentals

Strong Long Term Outlook

Long term demand for high quality coking coal is driven by steel industry

In its turn, the steel industry is driven primarily by demand of developing China and India

Although coastal regions of China and India approach peak steel intensity, intense urbanization of inland areas is expected

European net demand for coking coal is expected to be 50 Mt in 2016 which is anticipated to increase following the closure of several German mines by 2017

Current shortage of coking coal in Ukraine amounts to 12-13Mt per year

Coal prices forecast (USD/t, FOB Newcastle)

Source: AME

1 Compound Annual Growth Rate

2 Million tons

Recovery in Steel Making

Rising Demands for Imports of Coking Coal

Anticipation that the construction sector is entering the early stages of recovery with 4.0%

CAGR(1) over the next decade provides assurance that steel market will rebound

In its turn, global coking coal demand is expected to grow by 4.5% CAGR, tracking crude steel production

Over the mid-term, a shortage of higher quality coking coal supply is expected to exist in the market as China and India become substantial importers of coking coal

--

10

20

30

40

50

60

70

80

90

Japan China South

Korea

India Taiwan Ger. Italy UK

Export

Dem

and (

Mt(

2) )

50% Demand Growth from Top 10 Importers (2012-2022)

Regional Lubel Export Markets

Brazil Ukraine

Potential Global Lubel Export Markets

Source: AME

Strategic

Location

Well positioned in a region

of high coking coal demand

and highly developed

infrastructure

Close proximity to European Steelmakers

Power

Mine equipment installed capacity 66MWt; annual demand 235 mln kWt*h at full production of mine

Existing 600 MWt power plant in Dobrotvor

Two new power lines to be constructed

Production of steam coal will be sufficient for thermal power plant operation of 75-100MWt during mine life period, 75% of produced electric power can be sold at the market

Located nearby to steel mills in western Europe as well as Ukraine and Russia

Export demand for these countries expected to be to grow to ~ 85 Mt of coking coal by 2022

Project location offers competitive transport advantages upon delivery by end-user ~ US $ 25 / t comparing to imports from North America, Mozambique and Australia

Closure of several German mines until 2017 expected to further tighten the coking coal supply in Germany

Workforce

Availability of skilled and high experienced coal miners from nearby Chervonohrad mining region

Mine commissioning allows to reduce considerably an unemployment in the region

Railway

30 km to Poland border

12km rail link to be constructed from Dobrosin station to Lubel mine site

Potential supply of coking coal concentrate to Indian and Chinese markets via Black see ports

High Quality

Coking Coal

with Potential

for Resource

Extension

Existing mines

Mines under development

Coalfields prepared for development

Extensively explored coalfields

Preliminary explored coalfields

Exploration works expected

Closed mines

Lubel No.3 – potential expansion

Existing railway

Proposed rail link

Road

Town

Resources for Lubel No.1 and Lubel

No.2 areas amount to 177 Mt

Large-scale geological exploration

program since 1978.

Drilled 437 boreholes with 250x500

drill spacing.

Three coal seems lying at the depth

of 700-850m.

Recoverable thickness of coal seams

ranging 0.9 ÷ 1.8м.

Low potential of methane at blocks

No’s 1 and No.2, continuous and flat

bedding of seams

Lubel No’s 3 and No.4

areas -potential increase

of reserves

Additional resources of 129 Mt for block No.3

Additional 108Mt resources at Lubel No.4 area currently not included in economic analysis

High Quality Coking Coal Products with Attractive Metallurgical Characteristics

Based on extensive drill data and core samples testing for washing, the Lubel coal has been approved as a high-quality hard coking coal

*Parameters will be determined during detailed exploration of Lubel No3

Source: Luganskgiproshakht BFS, Platts, Agrus Coal Specification Guide and GlobalCoal

Note: (ad) – air dry; (db) – dry basis; (daf) – dry ash-free basis; (ar) – as received

Vitrinite Ro

CSR

Swelling Index CSN

1.1 1.17-1.4

60-64%

5

1.4

67-74%

8.5

1.23

>60%

FSI 8.5

1.07

*

*

Mine / Project

Quality Poor / Marginal Fair / Good Excellent Lubel No1&2 Lubel No.3

Moisture (ar) >9.0% >9.0% <8.0% < 7.5% < 7.3%

Ash (ad) >9.0% <8.0% <6 - 7% < 5.6% < 4.75%

Volatile matter (ad) >32% <31% , >23% 17-22% 23.0% 27.0%

Total sulphur (ad) >1.0% 0.8-1.0% <0.7% < 0.8% < 1.0%

Phosphorus (ad) >0.12% 0.05-0.12% <0.05% 0.05% 0.05%

Lubel Coal Company

Co

al

Qu

ality

Data Benchmarks 1

In 2013-2015 the Company has drilled 15 boreholes drilling on the field #3 for further reclassification of resources to a higher class in accordance with JORC standards (depth of each hole is 750-1050m)

Geological survey expedition was formed allowing to achieve saving due to 2x lower drilling costs

The company has confirmed K-grade coal quality on a block #1-2, the checks and analysis were done by two independent qualified laboratories

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

To

tal

Sa

lab

le C

oa

l

('0

00

t)

Operation Years (2020 – 1st year of operations)

Well-managed Construction Schedule*

Project High

Economic

Indicators

*CAPEX increased due to reclassification of operational costs to capital expenditures and decrease of construction term

**VAT credit is recovery upon putting in operation, potential VAT recovery before that moment is not considered

*** CCMC BFS analyzes 13 years from the start of preparation period, Luganskgiproshakht analyzed mine life during 42 years

from the commencement of extraction

Coking concentrate production schedule during mine operation period*

Project design

Surface works

Shafts construction

Equipment assembly for underground works

Initial output

Production output

2017 2018 2019 2020 2021 2022 2015 2016 2023

Bankable Feasibility Study Results

«Luhanskgiproshakht»

СCMC

Total investments, US$Mm: + net investment + pre-production expenses (surveyor services, insurance) = Total – Investment net of VAT + VAT = Total – investment inc. VAT + capitalized interest charges + capital demand (1st year of service) = Total project budget

708,63 73,58

782,21 109,65 891,86

70,60 17,81

980,27

772,14*

70,96 843,10

134,80** 977,90

76,82 27,12

1081,84

Payback period, years, inc. : - preparation period - construction - Payback period from the date of putting in operation

7.25 years 12 months 57 months 18 months

6.0 years 12 months 38 months 22 months

IRR, post tax, ungeared (100% equity) 44,0% 38,5%

Cash cost – per 1t coal concentrate, US$ 30,0 26,6

Staff 2900-3100 2754

Financial data for first 8 operating years*** - average EBITDA p.a., US$Mm - Annual average income tax, US$Mm

946,5 136,0

938,9 147,0

NPV (net present value ), US$Mm*** 2403,0 1959,5

Grade K Grade Zh/Ж Steam coal

Model sensitivity

Positioned to be

among the Largest

Potential Coking

Coal Producers

High Production

Capacity

Contacts

100% 100% 100% 100% 100% 100%

70% 70%61%

50%

6%

30% 30%39%

50%

94%100%

Lu

be

l C

oal

Ra

spa

dska

ya

Sou

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ob

i R

esou

rce

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Ca

rde

ro

EastC

oa

l

Co

lonia

l C

oal

JS

W

Wa

lter

Ene

rgy

Co

rsa

Coa

l

Ne

w W

orl

d R

eso

urc

es

Sad

ova

ya

LW

Bog

dan

ka

302 2,078 757 250 118 46 1,932 375 131 396 51

(2)

(4)

(3)

255

(2)

(3)

(1)

Total resources Thermal coal Coking coal

(1) Lubel Mine (blocks No’s 1, No.2 and No.3) – 100% resources – coking coal

8m diameter two shafts of 920m and 940m in depth

State-of the-art high-production mechanized plow system

High productive Caterpillar plow systems to be applied

Scale and method of production are similar to LW Bogdanka

Mine (Poland)

– Recently achieved 24 400 t/day from one face equipped

with plow system

– Seam thickness of 1.63m

ССМС – world-known coal mine construction company, the

EPC contractor of Lubel mine construction, upon visit to

Bogdanka mine in July 2014, has confirmed annual output

capacities for Lubel mine of ca. 8Mt p.a.

up to 8,0 Mt p.a. from 2 long-

walls (6,1-6,5 Mt salable coal)

12,9 Mt p.a. ROM coal from 2

longwalls, 8,5 Mt salable coal

(2015FY data)

Lubel Coal Company Ltd.

Chairman of the Board, Boris Pokrass

Str. B.Khmelnitskoho, 56, 6th floor

01030 Kyiv, Ukraine

tel. +380 44 206 1726

fax +380 44 206 1727

e-mail: office@minpm.com.ua

SC “CCI-Lubelia“

Director, Yaroslav Humen

Str.Voyiniv UPA, 8-G

80300 Zhovkva, Lviv region.

tel./fax +38 (03252) 62067

e-mail: lubelya@ukrpost.ua

lubelya@mail.lviv.ua

www.lubelcoal.com

BOGDANKA

Resources (Mt)

Model sensitivity (varying coal price scenarios)

Coking coal price/t -> Ratios

USD 174 USD 160 USD 140* USD 120 USD 100

Payback period (upon commence-ment of operations) in months

22,0 23,4 26,1 29,8 35,3

Average annual sales, USD m (first full 8 operational years)

1108,0 1018,9 891,5 764,1 636,8

Average annual EBITDA, USD m (first full 8 operational years)

938,9 852,0 727,8 603,6 479,5

IRR, % 38,5% 36,0% 32,1% 27,7% 22,6%

* According to data on coking coal 2015FY import contracts (bought by companies in Ukraine, low volatile

matter similar to Lubel coal, state company Zovnishinform statistics) an average weighted CIF price equalled

to USD 147/t