METEOR DOWNS SOUTH OPEN PIT PROVED MARKETABLE COAL RESERVES STATEMENT 11 FEBRUARY Meteor Downs South Project Overview

Transcription

1 METEOR DOWNS SOUTH OPEN PIT PROVED MARKETABLE COAL RESERVES STATEMENT 11 FEBRUARY 2014 Meteor Downs South Project Overview U&D s Meteor Downs South Project (MDS) is located in EPC 1517 and MLA centred approximately midway between (35km) between the town of Springsure and the Township of Rolleston in the Central Highlands Regional Council of the south western sector of the Bowen Basin in Central Queensland. Access within the tenements is generally via well maintained sealed and unsealed roads and private tracks. However, access to areas in the south and west can prove difficult due to the more rugged terrain and lack of suitable tracks. The Dawson Highway connecting Springsure and Rolleston traverses EPC 1517 linking it further to the major coal services and mining centres of Emerald and Moura. The tenement is approximately 410km from the Port of Gladstone. This reserve statement, first completed in 2012, details costs and returns to three different delivery points for the prices and AUD values assumed. In respect of mining reserves, there is overall no material change between the 2004 and 2012 JORC Proved Coal Marketable Reserves. Table 1, as required by the 2012 JORC code, is included as an Appendix to this statement with information provided for Section 4 of the Table 1 requirements. Meteor Downs South JORC Resource Estimate The MDS JORC Resources were updated to the 2012 JORC code in 2013 and have not materially changed from the 2004 Code compliant Resource estimate used previously. Further details as to the MDS Resource and geology can be found in the U&D Prospectus dated 05 December 2013 and associated JORC 2012 Table 1 disclosure. MDS Proved Marketable Coal Reserves JORC Compliant The mine has been scheduled over a total period of ten years at a notional rate of 1.5 Mtpa. The maximum annual production rate is 1.9 Mtpa in the third year of operation. The pit design used for this study and scheduled over the mine life consumes some 13 Mt of the resource base of 16.8 Mt. The difference is taken up in small coal losses during the coal mining and coal in the boundary pillars along the eastern and southern boundaries of MLA The Proved Marketable Coal Reserves are in fact the same as the Proved Coal Reserves and amount to Mt of ROM coal. The MDS Resources reported include all Proved Marketable Coal Reserves.

2 MDS Proved Marketable Coal Reserves JORC Compliant This Reserves statement has updated the earlier 2012 version in the following ways; Operating costs have reduced, some in the order of 10%; The Mining and Carbon Tax impacts have been removed on the assumption the Australian Government Senate will pass the necessary amending legislation in mid-2014; Any impact on the mine plan arising from restricted land consent and other mining lease negotiations with external stakeholders have been assessed. This Marketable Reserves statement has been prepared on the assumption that Restricted Land consent will be obtained at some point in the future; Recent thermal coal prices and AUD values; No changes were made to the capital costs between the two reserve estimates, but it is likely that these have reduced significantly, due to lower demand for construction materials and services. Results of the financial modelling indicated a positive return for the three development options of Free on Truck, Free on Rail and Free on Board which is consistent with those previously reported against the 2004 JORC Code. Further information on the financial modelling results can be found in the Company s Prospectus dated 5 th December 2013.

3 Competent Persons Declaration and Compliance with the JORC 2012 Code Assessment Criteria This Proved Marketable Coal Reserves Statement was prepared under the direction of Jeff Jamieson, a self-employed consultant based in Brisbane, Australia, whose signature appears below. Jeff Jamieson is a Fellow of Australian Institute of Mining and Metallurgy (AusIMM) and has the relevant experience (30 years) in relation to the mineralisation being reported to qualify as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code 2012 Edition). Mark Bryant assisted Jeff Jamieson to undertake this Proved Marketable Reserve assessment. Mark Bryant s key role was to interrogate the geological and mining models and where necessary schedules that underpin the Proved Marketable Reserve estimate. John Tynan also contributed to this Marketable Reserves estimate by undertaking costing and financial modelling aspects. The Original Proved Marketable Reserve estimate completed under the 2004 JORC code is based on work undertaken by Minserve and reported on in the Meteor Downs South Mining Evaluation Study dated 29 February A number of other consultants also contributed to this study in respect of both site establishment costs and power, water supply, rail and port costs. The Proved Marketable Reserves estimate is based on the case reported by Minserve where coal is sold off the crushed stockpile. Jeff Jamieson understands and agrees to be named in any public disclosures relating to the Marketable Coal Reserves estimate. Jeff Jamieson declares that he is an independent third party and clear of any conflict of interest holding no shares in U&D Coal Limited. Independent Reviewer: JORC Code, 2012 Edition Table 1

4 Section 4: Estimation and Reporting of Ore Reserves Criteria Mineral Resource estimate for conversion to Ore Reserves Commentary The Mineral Resource estimate was compiled by Mr Mal Blaik, a full time employee of JB Mining Services and has sufficient experience for this type of resource to be classified as a Competent Person. The details of the MDS Resource estimate can be found in above and in the Company's Prospectus dated 05 December Site Visits The reserve assessor visited the Meteor Downs South site in November 2011, in company with other consultants from the Feasibility study team. Study Status Cut off parameters Mining factors or assumptions Metallurgical factors or assumptions Environmental Infrastructure The reserve assessment has been based on a full Feasibility Study, which was completed in 2012 for the then owner, Endocoal Ltd. The resource is based on a thick coal seam with minimal splitting and coalescing, which is relatively shallow and the whole of the available resource was scheduled for mining apart from the insitu coal left in the boundary pillars, which at the time of reporting were not subject to a boundary coal agreement. The Feasibility Study completed included all the usual factors and assumptions reasonably required in an open cut coal mining study. The study was based on three points of possible coal delivery to potential customers and included the capital costs of the infrastructure required for each of the delivery methods. Further details and information on mining factors and assumptions used in the Feasibility Study can be found in the Company's Prospectus dated 05 December It was assumed that the coal would be sold as a run of mine product requiring only crushing and screening to size specification. No coal washing or beneficiation was required due to low ash level of the ROM coal. Due to the small size and production rate of the MDS project, a full EIS assessment was not undertaken, but an Environmental Management Plan (EMP) was undertaken. The EMP has been completed and submitted and is currently in the final stages of the approval process. Further information on the EMP can be found in the Company's Prospectus dated 05 December A full engineering study was undertaken for each of the three options and site layouts for each individual delivery option. Further details on infrastructure can be found in the Company's Prospectus dated 05 December 2013.

5 Costs The Australian to US dollar exchange rate used in the Reserves estimate is $0.85 for all financial modelling. Inflation is set at 3%. In a real basis model, inflation is not applied to revenue or expenses, but is used in the calculation to convert a nominal discount rate to real for the NPV calculation. Queensland State Mining Royalty has been applied to the rate of 7% of revenue up to $100/t and additional 3% (10% total) for revenue over $100/t. Royalty is calculated on each sales price for the relevant scenario. Liability for additional royalty (i.e. on the final sales price) is assumed as passing to and payable by the buying party. Carbon tax effect has been removed in accord with the current Australian Government Policy. The effects of the MRRT have not been modelled in accord with the current Australian Government Policy. Rail and Port costs have been based on WICETT participation where costs are significantly higher than existing operating points at Gladstone Coal Export Ports. Revenue Factors Meteor Downs South has been modelled as producing a single thermal coal product. The targeted product is a crushed ROM product, with no further beneficiation requirements. Thermal coal price assumptions are in real terms for benchmark thermal coal. The rates contained in the modelling range from USD76/tonne for "Low' case, USD95/tonne for "Mid" case and USD 114/t for "High' case. Due to the qualities of the Meteor Downs South thermal coal product, an energy discount to the bench mark Newcastle export thermal coal price has been advised by U&D via a coal marketing consultant at 87% of benchmark. Additionally, each of the three point of sale cases - Free on Truck, Free on Rail and Free on Board - have relevant discounts applied to account for early stage sales transaction at a lower price. For initial investigations, the pricing points have been calculated to generate a 20% project IRR. This results in the following pricing for the scenarios; Free on Truck (FOT) = AUD$41.14/tonne Free on Rail = AUD$53.76/ tonne Free on Board (FOB) = AUD$98.36/ tonne. It should provide significant comfort that this methodology has resulted in prices that reconcile reasonably with current thermal coal market prices. Market Assessment Due to the size of the resource, and its low operating costs, it was assumed that all of the coal produced could be sold into current export markets. Due to the lower heat values than the 'standard' benchmark Newcastle thermal coal sold on an FOB basis, a discount of 13% was applied in the financial modelling

6 Economic Results of the financial modelling indicated a positive return for the three development options of Free on Truck, Free on Rail and Free on Board which is consistent with those previously reported against the 2004 JORC Code. Further information on the financial modelling results can be found in the Company s Prospectus dated 5 th December Social Other All standard agreements for nearby stakeholders and the community were included in the assessment. Further information on the MDS Reserves and Feasibility Study can be found in the Company's Prospectus dated 5th December Classification The resources have been correctly classified in accordance with the 2012 JORC code Audits and Reviews Discussion on relative accuracy/ confidence The 2012 Feasibility Study was audited by one outside technical group and the study was also reviewed by consultants working for U&D during the acquisition of Endocoal Ltd. The resource assessment is believed to be at a reasonable level of accuracy, given both the thickness of the coal seam involved, the simple geology and the shallow setting of the deposit.

7 Resource Estimate Report for EPC 1517 Orion Downs - Meteor Downs South Deposit Page 1 of 4 EPC1517 Table 1 - Checklist of Assessment and Reporting Criteria (The JORC Code, 2012 Edition) Section 1 - Sampling Techniques and Data Criteria Sampling techniques Explanation Core samples are HQ size (63mm diameter) and PQ size (100mm) diameter core. Open hole rotary drilling provided chip samples where seams were not cored. Drilling techniques Drill sample recovery Logging Sub-sampling techniques and preparation Quality of assay data and laboratory tests Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Drilling rigs comprised top head drive units. Rotary drilling using downhole blades, PCD or hammer bit. All holes were attempted to be drilled vertical. Core sample drilled and recovery noted by supervising geologist. Sample lengths are compared with estimated drilled lengths to aid determination of sample recovery. Seam intervals with less than 95% linear recovery were not used as data points for coal assay. Core and chip samples were logged by Endocoal geologists experienced in coal resource investigation and evaluation. Wireline logging of all drill holes has been routinely undertaken for the industry standard suite of logs - calliper, gamma, short spaced and Long spaced density. No exploration or geological evaluation activity has been undertaken within the tenement since early The coal seam structure and coal quality have not altered since Whole cores were despatched to the laboratory for sample testing. Samples have been crushed and sub-sampled at NATA registered laboratories following appropriate Australian Standards for coal testing. NATA registered laboratories have been used for all coal testing. These laboratories conduct regular check testing between laboratories on a round-robin basis. Sample raw coal ash is compared with density logs to check for inconsistencies. Most drillhole collars have been surveyed by registered surveyors from T.R. Bailie Consulting Surveyors. All co-ordinates are supplied in MGA/GDA 1994 for Zone 55. A DTM was flown in Hole collars were checked and found to be consistent with the DTM. Drillhole spacing ranges from m and is sufficient to confirm coal seam continuity at a high confidence level. Drilling has been attempted at all times to maintain hole verticality. Deviation from vertical is minimal due to shallow hole depths. All core samples designated for coal quality analysis were bagged and retained on site prior to transport to the testing laboratory by the geological field services personnel. JB Mining Services Pty Ltd has not undertaken any formal review or audit of the sampling techniques and procedures utilised during exploration activities. JB Mining Services Pty Ltd / November 2013

8 Resource Estimate Report for EPC 1517 Orion Downs - Meteor Downs South Deposit Page 2 of 4 Section 2 - Reporting of Exploration Results Mineral tenement EPC1517 covering 300 sub-blocks was granted to Endocoal Limited on and land tenure 10th February 2009 for a period of 5 years. The EPC has since been status renewed and expires on 10 th February A mining lease application covering the deposit (MLA 70452) was lodged in April Endocoal Limited is the owner of the tenement assets whilst U&D Mining Industry (Australia) Pty Ltd is the operator of all group assets. Exploration done by other parties Brigalow Mines Pty Ltd conducted regional exploration in the area under Authority to Prospect 57C in the late 70 s and early 80 s resulting in the discovery and later development of the nearby Rolleston deposit. Geology The resource area is located in the southern part of the Permo-Triassic Bowen Basin and consists of Quaternary alluvium and Tertiary basalt overlying Permian sedimentary rocks. The economic seams are contained in the Late Permian Blackwater Group equivalents of the Rangal Coal Measures. The Rangal Coal Measures are underlain by the marine Black Alley Shale and overlain by the Late Permian to Early Triassic Rewan Group. Potentially economic seams in EPC1517 are B, C and D seams. Structurally, the deposit lies within the Denison trough no large faults are evident from drillhole data. Drill hole information Drillhole information is not included in Table 1 as no major exploration or geological evaluation is being reported here. Further details on drillhole locations and information can be found within the U&D Coal Limited Prospectus dated 5 th December Data aggregation methods Relationship between mineralisation widths and intercept depths Diagrams Balanced reporting Other substantive exploration data Further Work A number of contiguous coal seam samples may have been composited on an industry standard length by density basis. Reported coal quality is for the full seam inclusive of non-coal intervals generally less than 0.30m thick. Coal thickness is quoted for downhole thickness. Drill holes are assumed to be vertical. Seam by seam plans and cross-sections produced as part of the JORC Resource Report are not included in Table 1. Information on coal resource geology can be found within the U&D Coal Limited Prospectus dated 5 th December All drillhole data used in geological modelling and resource estimation are included in appendices to the JORC Resources Report. Information on coal resource geology can be found within the U&D Coal Limited Prospectus dated 5 th December Limited field mapping has been undertaken in the area during early phases of exploration prior to tenure by EndoCoal Limited. No field mapping has been undertaken by JB Mining Services Pty Ltd. Additional chip and core drilling will be required to increase confidence levels particularly in the B & C seams. JB Mining Services Pty Ltd / November 2013

9 Resource Estimate Report for EPC 1517 Orion Downs - Meteor Downs South Deposit Page 3 of 4 Section 3 - Estimation and Reporting of Mineral Resources Database integrity Lithological logs, wireline geophysical logs, assay results and coal intersection depths were reconciled before modelling and resource estimation. Site visits No specific site visit has been undertaken by the competent person. The CP has performed coal exploration in this part of the Bowen Basin. Geological interpretation Dimensions Estimation and modelling techniques Moisture Cut-off parameters Mining factors or assumptions Metallurgical factors or assumptions Environmental factors or assumptions Bulk density Classification Audits or reviews Discussion of relative accuracy/confidence The geological interpretation is based in the integration of all historical drillhole and recent assay data. Consistency with the previous JORC resource estimate indicates that the estimate is robust. The resource has the same seam sequence to the nearby Rolleston coal mine. The extent of the resource area reported is approximately 1.8 km in a strike length and 0.8 km down-dip. Further information on coal resource dimensions can be found within the U&D Coal Limited Prospectus dated 5 th December Geological modelling has been undertaken using Version 8.1 of Maptek s VULCAN 3-D geological modelling software. Resources have been estimated using standard Vulcan estimation tools. There are no known deleterious elements of economic significance. In-situ moisture has been assumed to be 17% and coal density used for resource estimation has been adjusted using the Preston & Sanders method. The up-dip limit is the projected full seam weathered lox line. Lateral and down-dip limits are set by seam split lines and /or lease boundaries. No maximum depth limit has been applied as the resource is at less than 100 metres depth. Due to low waste to coal tonnes ratios- the resource is viewed as being amenable to open-cut extraction. No minimum seam thickness constraints have been applied. No mining factors or assumptions have been applied. Based on adjacent mining operations in these coal measures it has been shown that open cut coal extraction is viable. Coal seam raw ash is very low and the coal may not require beneficiation for marketing. The higher ash seams will require blending with the low ash C and D seams. No environmental factors or assumptions have been considered for the resource. Laboratory (True) RD is modelled directly from Laboratory RD data. In situ density is calculated via the Preston & Sanders formula using the True RD model, Inherent Moisture model and assumed In situ Moisture of 17%. The Inherent moisture is in the range of 11 to 12%. The classification of resources into Indicated and Inferred categories is based on radii from points of observation of approximately 250m for Measured and 500m for Indicated resources. Resources are reported on a seam by seam basis. Apart from internal review of the draft version by U&D Mining personnel no formal audit or review has been undertaken to date as the resource estimate has not altered from previous estimates. Confidence in the resource estimation is enhanced by the consistency of seam thickness and density/ash profiles, the apparent benign structure and reasonable drilling density. JB Mining Services Pty Ltd / November 2013

10 Resource Estimate Report for EPC 1517 Orion Downs - Meteor Downs South Deposit Page 4 of 4 Section 4 - Estimation and Reporting of Ore Reserves Section 4 is not applicable for the reporting of coal resources as it is intended for the reporting of coal reserves. Section 5 - Estimation and Reporting of Diamonds and Other Gemstones Section 5 is not applicable for the reporting of coal resources. JB Mining Services Pty Ltd / November 2013

11 Resource Estimate Report for EPC818 Page 1 of 3 EPC818 Broughton Table 1 - Checklist of Assessment and Reporting Criteria (The JORC Code, 2012 Edition) Section 1 - Sampling Techniques and Data Criteria Sampling techniques Explanation All core holes were partly cored over the coal interval. Drilling rigs comprised conventional units providing core samples of 100mm diameter core. Openhole rotary drilling provided chip samples where seams were not cored. All holes were drilled vertical and all holes intersecting coal were geophysically logged. Drilling techniques Drill sample recovery Logging Sub-sampling techniques and preparation Quality of assay data and laboratory tests Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Rotary drilling using downhole blades or hammer bit and triple tube core barrel with tungsten carbide faced drilling bit. Core sample drilled and linear core recovery noted by supervising geologist. Required core recovery better than 95% linear recovery. Core and chip samples were logged by geologists experienced in coal resource investigation and evaluation. Where possible, wireline logging of all drill holes has been routinely undertaken for the industry standard suite of logs - calliper, gamma and density. Original geological field logs were corrected to geophysics. No major exploration or geological evaluation activity has been undertaken within the tenement since The coal seam structure and coal quality within the tenement has not altered since Full cores were used for sample testing. Samples have been crushed and sub-sampled by NATA registered laboratories following the appropriate Australian Standards for coal testing. NATA registered laboratories have been used for all coal testing. These laboratories conduct regular check testing between laboratories on a round robin basis. Undertaken in the field by Queensland Geological Services personnel. Drillhole collars for all holes were surveyed by a registered surveyor from Richard Wilson Survey using RTC GPS equipment and reported in the AMG84 co-ordinate system. An aerial survey was flown in 2007 and a DTM compiled. All location data has been converted to the MGA/GDA94 co-ordinate system for Zone 55. Nominal data spacing is 100 metres along drill lines spaced nominally 250 metres apart. Core holes are spaced at 500 metre centres with geophysically logged hole between. All drillholes are assumed to be vertical. Drill lines are oriented perpendicular to strike. All core samples designated for coal quality analysis were bagged and retained on site prior to transport to the testing laboratory by the geological field services personnel and/or local transport contractor. JB Mining Services Pty Ltd has not undertaken any formal review or audit of the sampling techniques and processes utilised during exploration activities. JB Mining Services Pty Ltd / August 2013

12 Resource Estimate Report for EPC818 Page 2 of 3 Section 2 - Reporting of Exploration Results Mineral tenement and land tenure status Exploration done by other parties Geology EPC818 is held by U&D Mining Industry (Australia).Pty Ltd. The tenure of EPC818 expires on 21 st November Prior exploration by OptiMine Pty Ltd and Eastern Corporation Limited with evaluation carried out by KORE Consulting of the Minserve Group. The coal deposit is contained within the Rangal Coal Measures in the northern portion of the Permian aged Bowen Basin in central Queensland. There is some indication of igneous intrusions. Multiple coal seams strike in a generally north-north-westerly direction. There is little evidence of major faulting and the overall seam dips are of the order of 12 to 18 degrees towards the south-east. Drill hole information Drillhole information is not included in Table 1 as no major exploration or geological evaluation is being reported here. Further details on drillhole locations and information can be found within the U&D Coal Limited Prospectus dated 5 th December Data aggregation methods Relationship between mineralisation widths and intercept depths Diagrams Balanced reporting Other substantive exploration data Further Work Coal sampling and analysis was carried out on core samples selected assuming thin seam mining techniques would be employed. Coal thickness is quoted for downhole vertical thickness. Seam by seam plans produced as part of the JORC Resource Report are not included in Table 1 due to the number of diagrams required. Further information on coal resource geology can be found in the U&D Coal Limited Prospectus dated 5 th December All drillhole data used in geological modelling and resource estimation are included as appendices to the JORC Resource Report. Further information on coal resource geology can be found in the U&D Coal Limited Prospectus dated 5 th December No field mapping has been undertaken by JB Mining Services Pty Ltd. Additional drilling both chip and core - would be required to upgrade the indicated and inferred resource categories and to extend the measured resource down-dip. Future core drilling should utilise 150mm diameter core to provide sufficient sample mass for reliable coal washability analysis. Section 3 - Estimation and Reporting of Mineral Resources Database integrity Lithological logs, wireline geophysical logs, assay results and coal intersection depths were reconciled before modelling and resource estimation. Coal quality data was reviewed by independent consultants prior to resource estimation. Site visits Geological interpretation Given the current level of exploration a site visit has been deemed to be unnecessary. The geological interpretation is based in the integration of all historical drillhole and recent assay data. Resource estimates include the latest available drilling and analytical information. JB Mining Services Pty Ltd / August 2013

13 Resource Estimate Report for EPC818 Page 3 of 3 Dimensions Estimation and modelling techniques Moisture Cut-off parameters Mining factors or assumptions Metallurgical factors or assumptions Environmental factors or assumptions Bulk density Classification Audits or reviews Discussion of relative accuracy/confidence Resources are contained in an area within EPC818 comprising approximately 880Ha which represents approximately the eastern half of the tenement. Coal resources are reported from below the base of weathering by depth increments to 300 metres and greater than 300 metres. Further information on coal resource dimensions can be found in the U&D Coal Limited Prospectus dated 5 th December Geological modelling has been undertaken using Version of Maptek s VULCAN 3-D geological modelling software. Resources have been estimated by the competent person using standard Vulcan estimation tools. To date there are no known deleterious elements of economic significance. Several intersections of heat affected coal have been noted in two of drillholes. In-situ moisture has been assumed to be 10% and coal density used for resource estimation has been adjusted using the Preston & Sanders method. No minimum seam thickness to 200 metres depth and seams greater than 1 metre thick for depths greater than 200 metres. No mining factors or assumptions have been applied to the resource although coal sampling has been conducted on the basis that thin seam mining techniques will be utilised for coal extraction. No metallurgical factors or assumptions have been applied; however the coal will require beneficiation in order to make a suitable product. No environmental factors or assumptions have been considered for the in situ resource estimation. Any area/s of environmental significance have not been excised from the resource area. In-situ density has been estimated using the Preston & Sanders formula and in-situ moisture of 10%. The classification of resources into Measured, Indicated and Inferred categories is based on the 2003 Australian Guidelines. Coal resources have been estimated only for seams that have at least three valid points of observation (raw ash and relative density as a minimum with intermediate geophysical logs where appropriate). Apart from internal review by U&D Mining, no formal audit or review has been undertaken. Difference between the current resource estimate and the 2005 estimate occurs because the 2005 resources were restricted to a 15:1 cumulative vertical overburden to coal ratio limit, whereas the current resource has no ratio limit applied. This is the second resource statement for EPC818. The Competent Person has previous experience with resource assessment for this tenement. Section 4 - Estimation and Reporting of Ore Reserves Section 4 is not applicable for the reporting of coal resources as it is intended for the reporting of coal reserves. Section 5 - Estimation and Reporting of Diamonds and Other Gemstones Section 5 is not applicable for the reporting of coal resources. JB Mining Services Pty Ltd / August 2013

14 Resource Estimate Report for EPC 1514 Rockwood Page 1 of 3 EXPLORATION PERMIT (COAL) 1514 Rockwood Table 1 - Checklist of Assessment and Reporting Criteria (The JORC Code, 2012 Edition) Section 1 - Sampling Techniques and Data Criteria Sampling techniques Explanation Core samples are generally HQ (63mm diameter) and PQ (100mm) diameter core. Open hole rotary drilling provided chip samples where seams were not cored. Drilling techniques Drilling rigs comprised top head drive units using downhole blades, PCD or hammer bits. All holes were attempted to be drilled vertical. Drill sample recovery Logging Sub-sampling techniques and preparation Quality of assay data and laboratory tests Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Core sample recovery was noted by logging geologist. Sample lengths are compared with estimated drilled lengths to aid determination of sample recovery. Seam intervals with less than 95% linear recovery were not used as data points for coal assay. Core and chip samples were logged by Endocoal geologists experienced in coal resource investigation and evaluation. Wireline logging of all drill holes has been routinely undertaken for the industry standard suite of logs - calliper, gamma, short spaced and long spaced density. No exploration or geological evaluation activity has been undertaken within the tenement since early The coal seam structure and coal quality have not altered since Whole cores were despatched to the laboratory for sample testing. Samples have been crushed and sub-sampled at NATA registered laboratories following appropriate Australian Standards for coal testing. PrepLab Testing Services Pty Ltd, a NATA accredited laboratory, has been used for all coal testing related to the Rockwood project. Sample Raw Coal ash is compared with density logs to check for any inconsistencies. NATA registered laboratories conduct regular check testing between laboratories on a round-robin basis. All drillhole collars have been surveyed by registered surveyors from T.R. Bailie Consulting Surveyors. All co-ordinates are supplied in GDA 1994 for Zone 55. As there is no DTM coverage over the Rockwood area, the modelled topographic surface has been derived from drillhole collar levels together with ground control points from the gravity survey. Drillhole spacing in the northern portion of the resource area is sufficient to confirm coal seam continuity with a reasonable level of confidence. Drillhole spacing in the southern portion of the tenement area is sufficient to imply coal seam continuity with a moderate level of confidence. Drilling has been attempted at all times to maintain hole verticality. Although most holes have been logged for verticality because of the structural complexity, current models assume that all holes are vertical. All core samples designated for coal quality analysis were bagged and retained on site prior to transport to the testing laboratory by the geological field services personnel. JB Mining Services Pty Ltd has not undertaken any formal review or audit of the sampling techniques and procedures utilised during exploration activities. JB Mining Services Pty Ltd / January 2014

15 Resource Estimate Report for EPC 1514 Rockwood Page 2 of 3 Section 2 - Reporting of Exploration Results Mineral tenement EPC1514 covering 29 sub-blocks was granted to Endocoal Limited on 10 th and land tenure March Subsequent renewal of tenure has the EPC expiring on 9 th status March Endocoal Limited is the owner of the tenement assets whilst U&D Mining Industry (Australia) Pty Ltd is the operator of all group assets. Exploration done by other parties Geology Daishsat Pty Ltd, Aeroquest Airborne Australia and Velseis Pty Ltd conducted ground gravity, airborne magnetic and seismic traverses/surveys respectively on behalf of EndoCoal Limited. The resource area is located in the north-eastern part of the Permo- Triassic Bowen Basin. The economic seams are contained in the Permian Moranbah Coal Measures. The area is structurally complex with tight folding and significant faulting. Coal seams dip at up to 50 degrees to the south-west and north-east across a series of north-westerly trending complementary anticlines and synclines. Tertiary cover is widespread across much of the resource area Drill hole information All drillhole information used in the evaluation of the coal resources is included as appendices to the report. Further details on drillhole locations and information can be found within the U&D Coal Limited Prospectus dated 5 th December Data aggregation methods Relationship between mineralisation widths and intercept depths Diagrams Balanced reporting Other substantive exploration data Further Work Reported coal quality is for the full seam inclusive of non-coal intervals generally less than 0.30m thick. Coal thickness is quoted for downhole thickness. Drill holes are assumed to be vertical. Deviation logs have not been assessed in any detail. Seam by seam plans and cross-sections produced as part of the JORC Resource Report are not included in Table 1 due to the number of diagrams required. Further information on coal resource geology can be found within the U&D Coal Limited Prospectus dated 5 th December All drillhole data used in geological modelling and resource estimation is included in appendices to the JORC Resource Report. Further information on coal resource geology can be found in the U&D Coal Prospectus dated 5 th December Other exploration data includes field mapping, gravity and magnetics surveys and several seismic traverses over the area along with detailed interpretation by third parties. Additional chip and core drilling will be required to increase the level of confidence of the Rockwood resource. Section 3 - Estimation and Reporting of Mineral Resources Database integrity Lithological logs, wireline geophysical logs, assay results and coal intersection depths were reconciled before any modelling and resource estimation. Site visits Geological interpretation No specific site visits have been undertaken by the Competent Person. The geological interpretation is based in the integration of all drillhole and remote sensing data. Resource estimates include the latest available JB Mining Services Pty Ltd / January 2014

16 Resource Estimate Report for EPC 1514 Rockwood Page 3 of 3 drilling and analytical information. Dimensions Estimation and modelling techniques Moisture Cut-off parameters Mining factors or assumptions Metallurgical factors or assumptions Environmental factors or assumptions Bulk density Classification Audits or reviews The total resource area extends approximately two kilometres east-west and nine kilometres in a north-south direction. Further information on coal resource dimensions can be found within the U&D Coal Limited Prospectus dated 5 th December Geological modelling has been undertaken using Version 8 of Maptek s VULCAN 3-D geological modelling software with coal resources being estimated using standard Vulcan estimation tools. Inferred resources in the Carfax Road (southern) area were determined manually using seam polygon area, seam thickness from drillhole intercept and 1.67 as default density. In-situ moisture has been assumed to be 6% and coal density used for resource estimation has been adjusted using the Preston & Sanders method. Weathered coal was excluded. No minimum coal thickness was applied and stone material generally greater than 0.3 metre thick was excluded. No mining factors or assumptions have been applied. No metallurgical factors or assumptions have been applied, but it is expected that the coal will require some form of beneficiation to provide a marketable product. No environmental factors or assumptions have been considered during the estimation of the in situ resources. Laboratory (True) RD is modelled directly from Laboratory RD data. In situ RD is calculated via the Preston & Sanders formula using the True RD model, Inherent Moisture model and assumed in situ Moisture of 6%. The Inherent moisture is in the range of 2 to 3%. The classification of resources into Indicated and Inferred categories is based, generally, on radii from points of observation of approximately 500m for Indicated and 2000m for Inferred resources. Resources are reported on a seam by seam basis. No formal audit or review has been undertaken to date. The resource estimate has not altered from estimates made previously. Discussion of relative accuracy/confidence Whilst geologically complex the Rockwood resource estimation is supported to a large degree by the geological interpretation work of the GeoDiscovery Group together with the various remote sensing surveys that have been undertaken. Section 4 - Estimation and Reporting of Ore Reserves Section 4 is not applicable for the reporting of coal resources as it is intended for the reporting of coal reserves. Section 5 - Estimation and Reporting of Diamonds and Other Gemstones Section 5 is not applicable for the reporting of coal resources. JB Mining Services Pty Ltd / January 2014

17 Resource Estimate Report for EPC 1517 Orion Downs - Inderi Deposit Page 1 of 4 EXPLORATION PERMIT (COAL) 1517 Orion Downs Table 1 - Checklist of Assessment and Reporting Criteria (The JORC Code, 2012 Edition) Section 1 - Sampling Techniques and Data Criteria Sampling techniques Explanation Core samples are generally HQ (63mm diameter) and PQ (100mm) diameter core. Open hole rotary drilling provided chip samples where seams were not cored. Drilling techniques Drill sample recovery Logging Sub-sampling techniques and preparation Quality of assay data and laboratory tests Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Drilling rigs comprised top head drive units using downhole blades, PCD or hammer bits. All holes were attempted to be drilled vertical. Core sample recovery was noted by logging geologist. Sample lengths are compared with estimated drilled lengths to aid determination of sample recovery. Seam intervals with less than 95% linear recovery were not used as data points for coal assay. Core and chip samples were logged by Endocoal geologists experienced in coal resource investigation and evaluation. Wireline logging of all drill holes has been routinely undertaken for the industry standard suite of logs - calliper, gamma, short spaced and long spaced density. Original geological field logs were corrected to geophysics. No exploration or evaluation has been undertaken on the Inderi project since Coal seam structure and coal quality have not altered since Whole cores were despatched to the laboratory for sample testing. Samples have been crushed and sub-sampled at NATA registered laboratories following appropriate Australian Standards for coal testing. NATA registered laboratories have been used for all coal testing. These laboratories conduct regular check testing between laboratories on a round-robin basis. Sample raw coal ash is compared with density logs to check for any inconsistencies. Most drillhole collars have been surveyed by registered surveyors from T.R. Bailie Consulting Surveyors. All co-ordinates are supplied in GDA 1994 for Zone 55. As there is no DTM coverage over the Inderi area, the modelled topographic surface has been derived from drillhole collar levels. Nominal drillhole spacing is between 250 to 300 metres which is sufficient to confirm coal seam continuity with a high level of confidence. Drilling has been attempted at all times to maintain hole verticality. Deviation from vertical is minimal due to shallow hole depths. Most recent drillholes have been logged for verticality. All core samples designated for coal quality analysis were bagged and retained on site prior to transport to the testing laboratory by the geological field services personnel. JB Mining Services Pty Ltd has not undertaken any formal review or audit of the sampling techniques and processes utilised during exploration activities. JB Mining Services Pty Ltd / January 2014

18 Resource Estimate Report for EPC 1517 Orion Downs - Inderi Deposit Page 2 of 4 Section 2 - Reporting of Exploration Results Mineral tenement and land tenure EPC1517 covering 300 sub-blocks was granted to Endocoal Limited on 10 th February Subsequent renewal of tenure has the EPC expiring status on 9 th February A mining lease application covering the deposit (MLA 70452) was lodged in April Endocoal Limited is the owner of the tenement assets whilst U&D Mining Industry (Australia) Pty Ltd is the operator of all group assets. Exploration done by other parties Geology Brigalow Mines Pty Ltd conducted regional exploration in the area under ATP57C in the late 70 s and early 80 s resulting in the discovery of the nearby Rolleston deposit. The resource area is located in the southern part of the Permo-Triassic Bowen Basin and consists of Quaternary alluvium and Tertiary basalt overlying Permian sedimentary rocks. The economic seams are contained in the Late Permian Blackwater Group equivalents of the Rangal Coal Measures. They are overlain by the Late Permian to Early Triassic Rewan Group and underlain by the marine Black Alley Shale. Structurally, the deposit lies within the Denison Trough. No large faults are evident. The potentially economic seams are B, C and D seams. Topography over the area is relatively gentle with steeper topography occurring to the west. Drill hole information Drillhole information is not included in Table 1 as no major exploration or geological evaluation is being reported here. Further details on drillhole locations and information can be found within the U&D Coal Limited Prospectus dated 5 th December Data aggregation methods Relationship between mineralisation widths and intercept depths Diagrams Balanced reporting Other substantive exploration data Further Work A number of contiguous coal seam samples may have been composited on an industry standard length by density basis. Reported coal quality is for the full seam (inclusive of non-coal intervals generally less than 0.30m thick. Coal thickness is quoted for downhole thickness. Drill holes are assumed to be vertical. Deviation logs indicate only minimal deviation from the vertical. Seam by seam plans and cross-sections produced as part of the JORC Resource Report are not included in Table 1. Information on coal resource geology can be found within the U&D Coal Limited Prospectus dated 5 th December All drillhole data used in geological modelling and resource estimation are included in appendices to the JORC Resources Report. Information on coal resource geology can be found within the U&D Coal Limited Prospectus dated 5 th December Limited field mapping has been undertaken in the area during early exploration by previous tenure holders. No field mapping has been undertaken by JB Mining Services Pty Ltd. Additional chip and core drilling will be required to increase confidence particularly in the B & C seams. Section 3 - Estimation and Reporting of Mineral Resources Database integrity Lithological logs, wireline geophysical logs, assay results and coal intersection depths were reconciled before any modelling and resource estimation was commenced. Site visits No specific site visits have been undertaken by the Competent Person. The Competent Person has experience in exploration and feasibility of adjacent coal deposits in this area. JB Mining Services Pty Ltd / January 2014

19 Resource Estimate Report for EPC 1517 Orion Downs - Inderi Deposit Page 3 of 4 Geological interpretation Dimensions Estimation and modelling techniques Moisture Cut-off parameters Mining factors or assumptions Metallurgical factors or assumptions Environmental factors or assumptions Bulk density The geological interpretation is based in the integration of all historical drillhole and recent assay data. Consistency with the previous JORC resource estimate indicates that the estimate is robust. The resource has the same seam sequence to the nearby Rolleston coal mine. Evidence of heating effects in coal has been noted in one drillhole. The total resource area extends approximately two kilometres east-west and four kilometres in a north-south direction and is bounded on its eastern margins by the tenement boundary. Further information on the coal resource dimensions can be found in the U&D Prospectus dated 5 th December Geological modelling has been undertaken using Version 8 of Maptek s VULCAN 3-D geological modelling software with coal resources being estimated by the competent person using standard Vulcan estimation tools. Vulcan grid models were generated for the base of weathering, base of basalt and coal seam roof, floor, thickness and midburdens for each seam. Seam roof and floor grids were clipped to the base of weathering to exclude weathered coal from reporting into subsequent volume calculations. The base of weathering surface was controlled to remain below the base of basalt, thus accurately reflecting the Permian weathering surface. All structure grids were developed using triangulation with zero trending and zero smoothing. Raw coal quality was initially processed via Excel prior to loading into Vulcan. This process cross-referenced raw assay against its corresponding lithological interval using sample numbers and base depths. Raw ash, raw volatile matter, raw inherent moisture and relative density (all at air dried basis) mapfiles and grid models were generated over the same geographical area as the structure grids using Inverse Distance to the second power. In-situ moisture has been assumed to be 17% and coal density used for resource estimation has been adjusted using the Preston & Sanders method. The up-dip limit is the projected full seam weathered lox line. Lateral and down-dip limits are set by seam split lines and /or lease boundaries. No maximum depth limit has been applied as the resource is at depths of less than 100 metres. Due to low waste to coal tonnes ratios the resource has potential for open cut coal extraction. No minimum thickness constraints have been applied. Raw coal has very low ash and the coal may not require beneficiation for marketing. No mining factors or assumptions have been applied. Based on adjacent mining operations in these coal measures it has been shown that open cut coal extraction is viable. Although parts of the area are covered by Tertiary basalt of varying thickness. It is expected that the coal could be utilised in its raw state requiring minimal blending and no further beneficiation. No environmental factors or assumptions have been considered for the resources. Laboratory (True) RD is modelled directly from Laboratory RD data. In situ RD is calculated via the Preston & Sanders formula using the True RD model, Inherent Moisture model and assumed in situ Moisture of 17%. The Inherent moisture is in the range of 11 to 12%. JB Mining Services Pty Ltd / January 2014

20 Resource Estimate Report for EPC 1517 Orion Downs - Inderi Deposit Page 4 of 4 Classification Audits or reviews The classification of resources into Measured and Indicated categories is based on radii from points of observation of approximately 250m for Measured and 500m for Indicated resources. Resources are reported on a seam by seam basis. Apart from internal review of the draft version by U&D Mining personnel no formal audit or review has been undertaken to date as the resource estimate has not altered from previous estimates and is very similar to the original estimate made by an independent consultant. Discussion of relative accuracy/confidence Confidence in the resource estimation is enhanced by the consistency of seam thickness and density/ash profiles, the apparent benign structure and reasonable drilling density. The Competent Person has past experience with evaluation of the adjacent Rolleston project during its feasibility phase. Section 4 - Estimation and Reporting of Ore Reserves Section 4 is not applicable for the reporting of coal resources as it is intended for the reporting of coal reserves. Section 5 - Estimation and Reporting of Diamonds and Other Gemstones Section 5 is not applicable for the reporting of coal resources. JB Mining Services Pty Ltd / January 2014

21 COMPETENT PERSONS STATEMENTS U&D COAL JORC 2012 TABLE 1 DISCLOSURE The information in JORC 2012 Table 1 that relates to Proven and Probable Reserves at U&D s Meteor Downs South Project is based on a mine plan, a mine schedule and costs prepared by the Minserve Group Pty Ltd. Mr Jeff Jamieson was responsible for the reports preparation, the reserve statement and the preparation of the JORC 2012 Table 1. Jeff is both a Fellow of the Australian Institute of Mining and Metallurgy and a Chartered Professional (Mining) and is a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Jamieson consents to the disclosure of the information in the JORC 2012 Table 1 MDS Proved Marketable Coal Reserves in the form and context in which it appears. The information in JORC 2012 Table 1 that relates to the Meteor Downs South coal resources (part of Orion Downs) is based on information compiled by Mr Mal Blaik of JB Mining Services. The reporting is in compliance with the 2012 JORC Code. Mr Blaik is a qualified Geologist, a member of the Australasian Institute of Mining and Metallurgy (No ) and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves published by the Joint Ore Reserves Committee (JORC Code). Mr Blaik has given his consent for the inclusion of this information in JORC 2012 Table 1 and has reviewed all statements pertaining to this information in the form and context in which it appears. The information in JORC 2012 Table 1 that relates to the Broughton coal resources is based on information compiled by Mr Phillip A J Sides of JB Mining Services. The reporting is in compliance with the 2012 JORC Code. Mr Sides is a qualified Geologist, a member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves published by the Joint Ore Reserves Committee (JORC Code). Mr Sides has given his consent for the inclusion of this information in JORC 2012 Table 1 and has reviewed all statements pertaining to this information in the form and context in which it appears. The information in JORC 2012 Table 1 that relates to the Inderi coal resources (part of Orion Downs) is based on information compiled by Mr Phillip A J Sides of JB Mining Services. The reporting is in compliance with the 2012 JORC Code. Mr Sides is a qualified Geologist, a member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of 1 / 2

22 U&D COAL LIMITED mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves published by the Joint Ore Reserves Committee (JORC Code). Mr Sides has given his consent for the inclusion of this information in JORC 2012 Table 1 and has reviewed all statements pertaining to this information in the form and context in which it appears. The information in JORC 2012 Table 1 that relates to the Rockwood coal resources is based on information compiled by Mr Phillip A J Sides of JB Mining Services. The reporting is in compliance with the 2012 JORC Code. Mr Sides is a qualified Geologist, a member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves published by the Joint Ore Reserves Committee (JORC Code). Mr Sides has given his consent for the inclusion of this information in JORC 2012 Table 1 and has reviewed all statements pertaining to this information in the form and context in which it appears. 2 / 2