Realm Resources : Updated JORC Statement for PT Katingan Ria in Indonesia

Company Announcements ASX Limited

By Electronic Lodgement 9 May 2017

Updated JORC Statement of Coal Resources and Reserves for PT Katingan Ria Thermal Coal Project, Indonesia Highlights

• Coal Resources and Reserves for PT Katingan Ria have been updated in accordance with the JORC Code 2012

• PT Katingan Ria coal (4,200 Kcal/Kg GAR) is a typical low rank, sub-bituminous thermal coal with low sulphur and nitrogen contents and complies with the Argus Indonesian Coal Index (4,200 GAR)

• Coal Resources (which includes Reserves) are 87.5Mt (6.5Mt Measured, 44Mt Indicated and 37Mt Inferred)

• Coal Reserves are 27.4Mt (all classified as Probable)

• Base case project NPV (10%) valuation of US$57m based on a US$40.00/t long term coal price and US$32.24/t FOB cash cost forecasts1

• Coal reserves and the valuation in this announcement have been prepared based on an export operation. Realm, in addition, is investigating the potential to supply a domestic mine mouth power station near the project and will provide further updates when possible.

1. INTRODUCTION

   Realm Resources Limited (ASX: RRP) ("Realm" or the "Company") is pleased to announce that it has undertaken the necessary geological assessments and studies required to update the estimated Coal Resources and Reserves for the PT Katingan Ria thermal coal project in Indonesia ("PTKR") (in which Realm holds a 51% interest) in accordance with the reporting guidelines of the 2012 Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists, and Minerals Council of Australia ("JORC Code 2012").

   Xenith Consulting Pty Ltd ("Xenith") was commissioned by Realm to complete an independent estimate (the "Statement") of the Open Cut Coal Resources and Reserves within IUP Production No. 540/208/KPTS/V/2013 (the "Lease"), located in Central Kalimantan, Indonesia. The Statement, which reports the following coal resources and reserves for the Lease as at 28 February 2017, has been undertaken in accordance with the JORC Code 2012:

2. total Coal Resources (inclusive of Reserves) for PTKR have been estimated at 87.5Mt (6.5Mt Measured, 44Mt Indicated and 37Mt Inferred); and

3. total Coal Reserves for PTKR have been estimated at 27.4Mt (all classified as Probable).

   1 Refer to section 3 of this announcement for a summary of the financial model, material assumptions and disclosures in relation to the production target on which the NPV valuation is based.

   The Coal Resources and Reserves estimate supersedes the prior estimate in 2013 with minor changes (approximately minus 1.5Mt to both Resources and Reserves) attributed to the changes in the domaining requirements in the 2014 Australian Guidelines for the Estimation and Classification of Coal Resources) (refer to Realm ASX announcements dated 14 February 2013 and 8 March 2013 for further details). Realm confirms that other than as set out in this announcement, the Company is not aware of any new information or data that materially affects the information included in the prior announcements and, other than as set out in this announcement, that all material assumptions and technical parameters underpinning the estimates in the prior announcements continue to apply and have not materially changed.

   All Coal Resources and Reserves are quoted on a 100% basis.

   The following information prescribed by the JORC Code 2012 is included in this announcement and its Appendices:

4. detail of the Coal Resources (see Table 1 in Section 2) and Reserves for PTKR (see Table 2 and Table 3 in Section 2); and

5. a summary of important assessment and reporting criteria used for the reporting of mineral resources and ore reserves in accordance with the Table 1 checklist in the JORC Code 2012 (Appendix 1, Appendix 2 and Appendix 4).

7. STATEMENT OF RESOURCES AND RESERVES - PTKR
8. Coal Resources Table 1: - Coal Resources

   RESOURCE CATEGORY	SEAM	TOTAL VOLUME (Mbcm)	PLAN AREA (Ha)	MASS (MT)	THICKNESS (m)
   NORTH
   INDICATED	B	4.20	301.12	5.00	1.40
   INDICATED	MAIN	14.70	385.17	19.00	3.84
   INFERRED	C	5.20	310.86	7.00	1.66
   INFERRED	B	2.70	215.41	3.00	1.25
   INFERRED	MAIN	9.60	260.68	12.00	3.76
   INFERRED	A2	0.90	204.19	1.00	0.43
   SUBTOTAL	47.00
   SOUTH
   MEASURED	MAIN	5.10	113.45	6.50	4.46
   INDICATED	MAIN	14.20	328.36	18.00	4.31
   INDICATED	B	1.20	101.75	2.00	1.14
   INFERRED	MAIN	6.10	219.58	8.00	2.76
   INFERRED	C	1.30	71.84	2.00	1.82
   INFERRED	3	1.80	501.18	2.00	0.36
   INFERRED	2	1.90	403.22	2.00	0.46
   SUBTOTAL	40.50
   SEAMS
   MAIN UPPER SEAMS		49.60 15.40	63.50 20.00	3.89 1.42

   RESOURCE CATEGORY	SEAM	TOTAL VOLUME (Mbcm)	PLAN AREA (Ha)	MASS (MT)	THICKNESS (m)
   LOWER SEAMS		3.70		4.00	0.41
   TOTAL MEASURED	5.10	6.50
   TOTAL INDICATED	34.20	44.00
   TOTAL INFERRED	29.40	37.00
   GRAND TOTAL	87.50

   Notes:

   • Tonnages are estimated on an in-situ basis.

   • The Preston-Sanders equation has been used to calculate the in-situ density. The in-situ moisture has been fixed at 32.0% for tonnage calculation purposes.

   • Resources were limited to seams with thickness greater than 0.1m, a maximum raw ash percentage (standardised to 17% moisture) of 50% and a depth limit for open cut resources of 100m below topography.

   • Mining Method: Open Cut.

   • Inferred Resources are rounded to reflect the relative uncertainty of the estimate.

9. Coal Reserves Table 2: - Total Open Cut Coal Reserve Quantities

   Area	B Seam Probable (Mt)	Main Seam Probable (Mt)	Total Reserves Probable (Mt)
   North of Fault	1.6	6.5	8.1
   South of Fault - Permit Zone	0.8	16.8	17.6
   South of Fault - Other	0.2	1.5	1.7
   Total	2.6	24.8	27.4

   Table 3: - Total Open Cut Coal Reserve Qualities (ar @ 32% moisture)

   Area	B Seam Ash	B Seam CV	Main Seam Ash	Main Seam CV	Avg. Ash	Avg. CV
   North of Fault	12.60	4,058	10.46	4,324	10.57	4,311
   South of Fault - Permit Zone	15.47	4,242	8.28	4,248	8.64	4,248
   South of Fault - Other	9.86	4,252	9.86	4,273	9.86	4,272
   Total	13.34	4,129	8.94	4,269	9.35	4,256

   Notes

   • Mining Method: Open Cut.

   • All Coal Reserves have been classified as Probable due to the coal price and barging risks.

   • The coal produced at the Project is not washed resulting in 100% yield. Therefore, the Coal Reserve is equal to Marketable Reserve.

   • Reserves are reported on an AR moisture basis (at 32% moisture).

10. Coal Reserves have been estimated by applying realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and government factors to the Coal Resources. The mining factors (such as recovery and dilution) have been defined from the proposed open cut mining method. No metallurgical factors are applicable as the ROM coal is sold as a raw coal without processing. The mine is not a producing mine and is therefore in the process of gaining the legal, environmental and government approvals to operate.

    The Coal Reserves quoted in this Statement are based on a long-term coal price of US$40/t for PT Katingan Ria coal. This is based on the CRU International forecast dated February 2017. Based on the current spot price (US$41.75/t FOB Kalimantan 4,200 kcal/kg GAR coal, January 25th 2017), the project is economic and Reserves exist.

    Pit Optimisation was carried out on the PT Katingan Ria deposit in a previous Mining and Barging Options Study conducted by Xenith in February 2013. This study delineated an area of the deposit that was economical to mine at a reasonably low product coal sales price. For this Statement, the optimiser was re-run with updated coal price and costing assumptions which showed the results of the previous study were still considered to be appropriate. The current PT Katingan Ria LOM pit (used in this Reserves Statement) was within the economic mining limits.

    All the Coal Reserves are classified based on the level of detail completed in the mine planning and the level of confidence in the Resources. Coal Resources are reported inclusive of Coal Reserves (that is, Coal Reserves are not additional to Coal Resources).

    To allow Realm to carry out coal mining operations and production at PTKR, PTKR must obtain the Borrow to Use Forestry Permit (Izin Pinjam Pakai) from the Minister of Forestry. PTKR received the Extended Principle Forestry License No. 11/1/PP-PKH/PMA/2015 dated 1 June 2015 regarding the extension of the Principle License to use the forestry area for coal production operation activity and its supporting facilities for PT Katingan Ria for the area of 3,058.25 Ha. The Company will only be in a position to progress this final permit stage when there is certainty regarding the development proposal and the timing thereof. In addition to the Borrow to Use Forestry Permit, the Company will also be required to obtain standard and ordinary course legal, regulatory and governmental approvals and permits which will be applied for once the Borrow to Use Forestry Permit has been obtained.

11. VALUATION
12. Financial Analysis

    Base case project NPV (10%) valuation of US$57m based on a US$40.00/t long term coal price and US$32.24/t FOB cash cost forecasts.

    Xenith built a financial model to confirm that the project is economically feasible after the application of all modifying factors. All financial modelling has been completed based on marketing a single product. Using the capital costs, operating costs and sales price assumptions combined with the life of mine plans, the financial models show the project to be economically feasible.

    Table 4: - Summary of discounted cash flow valuation ranges for PTKR

    Production Parameters	Units	Value
    ROM Production	Mtpa	2.5
    Product Coal	Mtpa	2.5
    Average Strip Ratio	BCM:ROM t	3.5
    Average Coal Price	USD/t	40
    LOM Average Operating Cost (Real)	USD/Prod t	32.24
    Capital Cost (LOM Real)	USD M	24.4
    Net Present Value
    7.5% real discount rate	USD M	74
    10% real discount rate	USD M	57
    12.5% real discount rate	USD M	44

    There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.

13. Assumptions

    The economic assumptions used in the financial evaluation of the mining operation are reasonable and are consistent with current mining industry practices in Kalimantan. A variety of sources have been used in determining key inputs, including quotes from contractors, independent reports, Xenith's cost database, The project feasibility study and build-up of costs from first principles. The key discounted cash flow assumptions used in the Xenith analysis include:

14. The estimated ore reserves and mineral resources underpinning the production target have been prepared by a competent person or persons in accordance with the requirement in Appendix 5A (JORC Code);

15. cash flow allocated to the Life of Mine ("LOM") schedule (from the 2013 Feasibility Study) of which 27.4 Mt is Probable JORC Reserve, 7 Mt is in the Inferred Resource category. It is noted the inferred coal is scheduled in the last 4 years of mine life. Note: There is a low level of geological confidence associated with the inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised;

16. typically, 2.5 Mtpa ROM, as per the 2013 Feasibility study;

17. a mine life of 16 years, as per the 2013 Feasibility study;

18. it is assumed all coal is mined and sold in the same year;

19. standalone operation using contract mining, as per the 2013 Feasibility study;

20. cash flow is discounted to 1st January 2017 on a 100% ungeared basis;

21. LOM average operating costs of $32.24/t based on a November 2016 operating cost update carried out by Britmindo (a breakdown of the operating cost is provided in Table 5 below);

22. LOM total capital costs of $24.4 million, which includes allowances for mine site development, haul road construction, river dredging, stockpile construction, land compensation, engineering and project management, sustaining capital and a 30% contingency (a breakdown of capital cost is provided in Table 6 below);

23. revenue assumptions are based on a long-term coal price of $40/t for PT Katingan Ria coal.

    This is based on the CRU International forecast dated February 2017; and

24. a discount rate of 10% (real) with a lower of 7.5% and an upper of 12.5% has been adopted based on discussions with Realm.

25. A summary of capital costs is given in the table below.

    Table 5: - Operating Cost

    Cost Structure	Units	Unit Cost (USD)
    Direct Operating Cost
    O/B removal - Truck and Shovel	$/bcm	1.70
    O/B removal - Dozer Push	$/bcm	0.80
    Coal Mining	$/t	1.50
    Indirect Operating Cost
    Coal Hauling ROM to Stockpile at Port (incl. Road Maint.) [41.1 km]	$/t/km	0.12
    ROM Stockpile and Feed to Crushing Plant	$/t	1.00
    Crushing	$/t	1.00
    Barge Loading at Jetty Terminal	$/t	0.50

    Cost Structure	Units	Unit Cost (USD)
    Barging to Ship Loading Anchorage [130 km]	$/t/km	0.025
    Barge Transfer	$/t	1.75
    Barging to Ship Loading Anchorage [304 km]	$/t/km	0.020
    Stevedoring floating crane etc	$/t	1.75
    Quality Testing*	$/t	0.20
    General & Administration Cost
    Community Development	$/t	0.15
    Provision for Rehabilitation	$/t	0.20
    Other fixed Costs (inclusive Demurrage)	$/t	0.15
    Overhead Expenses	$/t	0.25
    Marketing	% Coal Price	1%
    VAT on Contracting Services	% Selected Costs	10%
    Royalty	% Coal Price	5%
    Total Costs FOB Mother Vessel	US$/t	32.24

    Source: Britmindo (November 2016 Operating Cost Update)

    Major risks to the Coal Reserve Estimate are a reduction in the thermal coal price and challenges associated with transporting the coal to market, namely barging on the Katingan River.

    Table 6: - Capital Cost

    Item	Cost (US$ M)
    Mine Development - Mine Site	2.0
    Haul Road	3.4
    River Dredging	3.0
    Upper Stockpile (USP)	2.2
    Kasongan Staging Post	1.5
    Land Compensation / Acquisition	1.0
    Engineering and Project Management	1.1
    Project Contingency (30%)	4.3
    Total Capital	18.5
    Working Capital Requirement	5.9
    Total Capital + Working Capital	24.4
    Sustaining Capital Expenditure (per Annum)	1.5

    The table shows that the PT Katingan Ria project is not capital intensive. This is due to the use of local contractors through most stages of the project.

    A summary of Life of Mine (LOM) operating costs is presented table below. The costs presented in the table below are from the November 2016 Britmindo Operating Cost Update.

26. GENERAL
28. Forward-looking assumptions

    Preparation of the Statement required the Competent Person to adopt certain forward-looking assumptions including export coal price and mining cost assumptions. These assumptions are commercially confi dential. Long-term export price assumptions are considered reasonable but may differ from actual prices. These types of forward-looking assumptions are necessarily subject to risks,

    uncertainties, and other factors, many of which are outside the control of the Company. For the avoidance of doubt, neither the Competent Persons nor the Company makes any undertaking to subsequently update any forward-looking statements in this release to refl ect events after the date of this release.

29. JORC Code 2012

    The statement of Coal Resources and Reserves presented in this report has been prepared by Competent Persons in accordance with the JORC Code 2012. Additional materials with respect to detailed reporting for PTKR are included below.

    The estimated ore reserves and mineral resources underpinning the production target have been prepared by a competent person or persons in accordance with the requirement in Appendix 5A (JORC Code).

30. Competent Persons

    The information in this Announcement relating to coal resources and reserves is based on, and fairly represents, information compiled by Competent Persons (as defi ned in the JORC Code 2012, and listed below). All Competent Persons have at the time of reporting, suffi cient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity they are undertaking to qualify as a Competent Person as defi ned by the JORC Code 2012. Each Competent Person consents to the inclusion in this report of the matters based on their information in the form and context in which it appears.

    Coal Resources: Mr Troy Turner, Xenith Consulting Pty Ltd (Member AusIMM) Coal Reserves: Mr Grant Walker, Xenith Consulting Pty Ltd (Member AusIMM) See Appendix 3 for the relevant Competent Persons' Statements.

31. About Realm

The company's primary focus is creating shareholder value through the operation of the Foxleigh Mine in Central Queensland, while advancing development ready projects throughout the Australasian region. Additionally, Realm seeks to acquire value accretive coal operations and grow the Company into a mid-tier coal supplier.

Information on Realm Resources Limited is available on the Company's website at www.realmresources.com.au.

For further information, please contact:

Gemma Yeates

Financial & Corporate Relations (FCR) T: [phone]

[e-mail]

Forward Looking Statements

This presentation includes various forward looking statements which are identified by the use of forward looking words such as "may", "could", "will", "expect", "believes", "intend", "plan", "estimate", "anticipate", "continue", and "guidance", or other similar words and may include, without limitation statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs. Statements other than statements of historical fact may be forward looking statements. Realm believe that it has reasonable grounds for making all statements relating to future matters attributed to it in this Announcement.

Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance and achievements to differ materially from any future results, performance or achievements. Relevant factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licences and permits and diminishing quantities or grades of resources or reserves, political and social risks, changes to the regulatory framework within which the Company operates or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation. Investors should note that any reference to past performance is not intended to be, nor should it be, relied upon as a guide to any future performance.

Forward looking statements are based on the Company and its management's good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the Company's business and operations in the future. The Company does not give any assurance that the assumptions on which forward looking statements are based will prove to be correct, or that the Company's business or operations will not be affected in any material manner by these or other factors not foreseen or foreseeable by the Company or management or beyond the Company's control.

Although the Company attempts to identify factors that would cause actual actions, events or results to differ materially from those disclosed in forward looking statements, there may be other factors that could cause actual results, performance, achievements or events not to be anticipated, estimated or intended, and many events are beyond the reasonable control of the Company. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Actual results, values, performance or achievements may differ materially from results, values, performance or achievements expressed or implied in any forward looking statement. None of Realm, its officers or any of its advisors make any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any results, values, performance or achievements expressed or implied in any forward looking statement except to the extent required by law.

Forward looking statements in this Announcement are given as at the date of issue only. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.

No representation, warranty or liability

Whilst it is provided in good faith, no representation or warranty is made by Realm or any of its advisers, agents or employees as to the accuracy, completeness, currency or reasonableness of the information in this Announcement or provided in connection with it, including the accuracy or attainability of any Forward Looking Statements set out in this Announcement.

Realm does not accept any responsibility to inform you of any matter arising or coming to Realm's notice after the date of this Announcement which may affect any matter referred to in this Announcement. Any liability of Realm, its advisers, agents and employees to you or to any other person or entity arising out of this Announcement including pursuant to common law, the Corporations Act 2001 (Cth) and the Australian Consumer Law as set out in Schedule 2 of the Competition and Consumer Act 2010, or any other applicable law is, to the maximum extent permitted by law, expressly disclaimed and excluded.

APPENDIX 1 Additional Information - Coal Resources Estimates
1. Background

   The Coal Resource estimate for PTKR is supported by the JORC Code 2012 Table 1 (Sections 1 to 3) documents provided in Appendix 4.

   The following summary of information for the Coal Reserve estimate is provided in accordance with Listing Rule 5.8 of the ASX Listing Rules.

2. Geology and geological interpretation

   The PT Katingan Ria site is characterised by undulating terrain with relatively steeply incised drainage paths to the south and east of the concession. Coal is observed as a series of flat lying seams ranging in thickness from 0.1m to 8m, interbedded with sediments ranging from extremely weathered to weathered sandstones. A granitic basement generally underlies the sequence.

   The resource lies within a shallow dipping, multi seam deposit. Areas of the Lease are subject to gentle folding with dips ranging from six degrees to flat lying, with an average dip of approximately three degrees. The area has one major fault trending southwest to northeast which has become a natural divide within the deposit, with areas described as either south or north of this fault. The most laterally extensive seam is the Main Seam, which remains the predominant target seam for the project. The Main Seam typically ranges in thickness from 4.5m to 5.5m in areas to the southeast of the fault, and has an average total thickness of 3.9m across the total resource area. The Main Seam has a low raw ash averaging 10.6% (standardised to 17% moisture).

   Seams stratigraphically above the Main Seam, known as the Upper Seam Sequence, generally occur in areas to the north of the major fault. The Upper Seam Sequence seams included in the Resource Estimate range in thickness from 0.3m to 2.7m but have a higher raw ash, averaging 18.2% (standardised to 17% moisture). The average cumulative coal thickness for the reported Upper Seam Sequence is approximately 3.7m, but with inclusion of the overlying D Seams, which have not been reported in the Resource Estimate, the average cumulative thickness increases to approximately 5.6m.

   The Lower Seam Sequence, which occurs stratigraphically below the Main Seam, is generally found 5m to 15m below the Main Seam. The Lower Seam Sequence seams included in the Resource Estimate are thinner and have a moderate raw ash averaging 12.1% (standardised to 17% moisture). The average cumulative coal thickness for the reported Lower Seam Sequence is approximately 0.8m.

   The coal from the project area presents as a typical low rank, sub-bituminous thermal coal with very low sulphur content and low nitrogen content. This coal also complies with the Argus Indonesian Coal Index (4,200 GAR).

   Based on the results of the coal quality data, the coal contained within the Lease can be classified as a Sub-Bituminous, Type A Coal. This classification is based on the ASTM classification of Coals by Rank.

3. Sampling and sub-sampling techniques

   Sampling of the core samples was undertaken at the drill site. Samples were identified and logged by the field geologists and then double bagged at the drill site before being transported to the fly camp for storage. Samples were sub-sampled based on minimum thickness criteria and the visual observation of stone bands or other geological boundaries.

4. Drilling techniques

   Drilling has been conducted using both man-portable and track mounted drill rigs. These rigs are suitable for the task given the steep topography and lack of wide access tracks. The Drilling has included both open hole drilling with geophysics and slimcores (HQ core at 63mm). Drilling generally included pilot chip holes, before a core hole was planned to ensure maximum core recovery.

5. Criteria used for classification

   Measured, Indicated and Inferred resource categories have been classified in the project depending on the level of confidence in the seam structure and continuity plus the level of variability in the coal quality data. No maximum distances between points of observation (POB) have been prescribed for the resource categories. The approach was to understand each seam's quality and quantity and variability thereof. By then assessing the variability domains of similar confidence (thickness, seam signature, quality and limited by faults) have been identified.

6. Sample analysis method

   All coal samples were double bagged on site and transported to the laboratory for testing. The laboratory used was PT Geoservices at Banjarbaru, for earlier drillhole programs, and PT Geoservices Balikpapan for the latest drillhole program.

   For more recent samples sent to Balikpapan, PT Geoservices, cored coal was sampled on a seam basis, with stone bands included within the sampled seam. Previous drill programs had already allowed for relatively accurate seam predictions.

   Further laboratory analysis programs including float sink (F1.4, F1.6 and F1.8 sg), proximate analysis, ash fusion temperature, ultimate analysis, trace element analysis, chlorine and forms of sulphur analysis were undertaken on selected holes from the latest drill hole program only.

7. Estimation methodology

   The geological model and resource estimate were constructed using Ventyx Minescape software (version 5.9), using the Finite Element Method (FEM) interpolator with (0, 1, 0) parameters for thickness, surface and trend respectively.

   Cross Correlation plots of raw ash and RD were used to validate the data. Any outliers were excluded. The maximum extrapolation distance of 1000m from the last data point was used for the model. Limits were placed on the Resource Estimate in line with the 0.1m thickness cut-off applied to all coal seams. The model has been validated by checking cross sections, surface and thickness contours, and comparison with drillhole postings. Grid spacing is 10 m x 10 m.

8. Cut-off grade

   Any coal seams less than 0.30m have been excluded from the resource estimate. Coal with raw ash higher that 50% has been excluded. The resource estimate has been limited to coal seams with a maximum depth of 100m below topographic surface.

9. Mining and metallurgical methods and modifying factors

The Project is planned as an open cut mine operated using a contractor to mine overburden and coal. The planned operation consists of an open cut haul back mining method using hydraulic loaders and rear dump trucks to dump both in-pit and ex-pit. Dozers will be utilised to move waste in certain areas. Coal will be transported from the pit by 60 t road trucks approximately 45 km (40 km in the early years as the pit commences in the southern portion of the Lease) to a stockpiling and barge loading facility on the Katingan River. Barges will then transport coal 435 km from the stockpile area to the River mouth for transhipment into coal ships for delivery to market.

Coal is planned to be sold "unwashed", meaning there is no metallurgical treatment required to achieve a saleable product. The coal is expected to predominately be sold as a high moisture, low energy thermal product to the export market with all ROM coal considered saleable product.

APPENDIX 2 Additional Information - Coal Reserve Estimates
1. Background

   The Coal Reserve estimates for PTKR is supported by the JORC Code 2012 Table 1 provided in Appendix 4.

   The following summary of information for the Coal Reserve estimate is provided in accordance with Listing Rule 5.9 of the ASX Listing Rules.

   The statement of Coal Reserves presented in this report has been produced in accordance with the JORC Code 2012.

2. Economic assumptions

   Xenith has developed an economic model from first principles which utilises the Discounted Cash Flow (DCF) methodology.

   The model was built to confirm that the project is economically feasible after the application of all modifying factors. All financial modelling has been completed based on marketing a single product. Using the capital costs, operating costs and sales price assumptions combined with the life of mine plans, the financial models show the project to be economically feasible.

   The economic assumptions used in the financial evaluation of the mining operation are reasonable and are consistent with current mining industry practices in Kalimantan.

   The key discounted cash flow assumptions used in the economic model include:

   • Standalone operation using contract mining;

   • Cash Flow allocated to the Life of Mine ("LOM") schedule of 36.9 Mt, of which 27.4 Mt is Probable JORC Reserve, 7 Mt is in the Inferred Resource category and 3 Mt does not have a Resource category. It is noted the inferred and non-classified coal is scheduled in the last 4 years of mine life;

   • Typically 2.5 Mtpa ROM;

   • A mine life of 16 years;

   • It is assumed all coal is mined and sold in the same year;

   • Cash flow is discounted to 1st January 2017 on a 100% ungeared basis;

   • A discount rate of 10% (real) with a lower of 7.5% and an upper of 12.5% has been adopted based on discussions with Realm;

   • Revenue assumptions are based on a long-term coal price of $40/t for PT Katingan Ria coal;

   • Xenith has applied a corporate tax of 30% to mining profits;

   • The overall Royalty payable is 5% of coal sale price;

   • Any residual value of plant and equipment is not considered to be material; and

   • Costs and Value are in USD.

3. Criteria used for classification

   Coal Reserves have been classified based on the confidence of the Coal Resources, the level of detail in the mine planning, and the level of risk associated with the project. All Indicated Resources have been classified as Probable Reserves. Measured Resources within the pit shell have also been

   classified as Probable Reserves to reflect the preliminary stage of the project. No Inferred Resources have been reported in this estimate.

4. Mining and recovery factors

   In the PT Katingan Ria open pit the Ore Reserve estimate is based on a conventional open pit mining operation.

   The practical pit shell is based on the Lerchs-Grossman pit optimisation procedure. This shell has been used to estimate JORC Reserves. Other constraints included the Resource classification polygons, lease boundaries, and initial mining permit zone.

   The selected method of mining will be conventional truck and shovel strip mining in combination with dozer push. This method suits the geometry of the deposit and in particular the shallow and outcropping nature of the coal. Dumping will take place ex-pit initially and subsequently in-pit as backfill when the open void is large enough.

5. Coal processing method

   ROM Coal would be trucked from the mine site and dumped onto the ROM stockpile at the upper stockpile (USP). ROM Coal would be loaded to the bin hopper using a front-end wheel loader (FEL) and then crushed in the primary crusher (1 m to 200 mm).

   From the USP, coal will be loaded onto barges and transported approximately 435 km on the Katingan River to the coast, where coal ships will be loaded for delivery to market.

   The coal produced at the Project is not washed resulting in 100% yield. Therefore, Coal Reserve is equal to Marketable Reserve.

6. Cut-off grade

   The mining factors applied to the Coal Resources model for deriving ROM Coal quantities have been selected based on the use of excavators and trucks. The assumption is that clean accurate mining practices will be adopted to avoid any downgrade in the coal quality. The process to convert in-situ to ROM coal and the application of mining factors incorporated the following assumptions:

   • Minimum interburden (parting) thickness: The minimum parting thickness has been taken as

     0.2 m. Interburden less than this thickness will be taken as ROM coal.

   • Minimum seam thickness: It is assumed that only coal seams greater than or equal to 0.3 m in thickness will be mined as ROM coal. Coal less than this thickness will be treated as waste.

   • Roof and floor dilution: 0.01 m has been applied at both the roof and floor for coal dilution to represent a selective mining operation where more time is taken to ensure 'clean mining'.

   • Roof and floor loss: 0.05 m has been applied to at both the roof and floor for coal loss. This represents an aggressive clean-up of the roof and floor to target a low ash product.

   • Global loss: 7% of all coal mined has been assumed to be lost. This global allowance is made up of a geological loss, resulting from variations in the coal seams not captured in the geological model, and a mining loss that covers losses occurring along edges, including wedges and ramps.

     The ROM geological model has been reported at 32% as received moisture

7. Estimation methodology

This revised Ore Reserve estimate is in line with Industry best practice standards and reported according to the guidelines set by the JORC Code, 2012 Edition.

Realm had previously released a Coal reserve in February 2013. This updated Reserve has 1.7 Mt less Probable Reserve than the February 2013 Reserve Estimate. There have been no updates to the geology model or no updates to the pit shell. The only update has been to the Resource/Reserve