COAL BUSINESS

Company’s core business is in the coal production and distribution domestically and overseas, having coal mine projects located in Indonesia as its base for coal production and distribution activities. In addition, the Company has ocean freight transport service business in Singapore to effectively support and manage coal transport for distribution in the Country or delivery to other countries.

DOMESTIC COAL BUSINESS
The Company imports coal from the joint venture coal mining projects in Indonesia and from other sources for distribution in the domestic market by either direct delivery or for inventory and processing before delivery to the customers. Coal inventory and processing are operated at Ayutthaya Coal Center, located in Nakornluang District, Ayutthaya Province on an area of 31 rai and 29 square wah, which can support over 200,000 tons of coal inventory. The Company’s domestic coal market share in 2011 was approximately 3.79 percent.
The majority of domestic coal consumption in 2011 was mainly by the cement industry at around 35.92 percent with remaining 64.08 percent by electricity production and other industries. It is expected that the consumption of coal, with lower cost per heat unit than other types of fuel, will continue to increase in the future. Especially with the rising price of oil, more industrial operators will turn to utilize coal as the source of energy for their production activities.
OVERSEAS COAL BUSINESS
For more than ten years, the Company has invested in joint venture coal mining projects in Indonesia, of which coal is imported for distribution to the domestic customers and exported to other countries especially in the Asia region market, such as India, Japan, South Korea, Taiwan and Hong Kong, etc. Coal produced by the Company has good quality with reputable brand and trusted by both domestic and overseas customers. The Company is one highly regarded and reliable coal company in the Asia region.
(1) Lanna (Singapore) Pte. Ltd., a subsidiary company registered in Singapore with Lanna Resources Public Co., Ltd. holding 100 percent of direct and indirect shares of the paid-up capital, is a holding company for investment purpose in the coal business, having invested in three joint venture coal mining projects in Indonesia. The Company has transferred each of its 55 percent shareholding in PT. Lanna Harita Indonesia and PT. Citra Harita Mineral, which have investment in Coal Mine Project No. 1 and No. 2 in Indonesia, respectively, to Lanna Resources Public Co., Ltd. Consequently, Lanna Resources Public Co., Ltd. has become the direct shareholder in both subsidiary companies since 2007. Lanna (Singapore) Pte. Ltd. has also sold and transferred its 65 percent shares of the paid-up capital in PT. Singlurus Pratama, which has investment in Coal Mine Project No. 3 in Indonesia, to Lanna Resources Public Co., Ltd., which has become a direct shareholder of this subsidiary company since 2009. In 2011, Lanna (Singapore) Pte. Ltd. filed for dissolution and is currently under liquidation to adjust the investment structure in order to avoid double taxation.
(2) PT. Lanna Harita Indonesia, a subsidiary company registered in Indonesia with Lanna Resource Public Co., Ltd. holding shares at 55 percent of the paid-up capital, conducts coal mining business operation (the 1st Mine) in Samarinda district, Kutai Regency, in East Kalimantan, having received the coal mining concession (Coal Contract of Work) from the Indonesian Government for coal production and distribution for a period of 30 years (from 2001 to 2031). SRK Consulting (UK) Limited has been hired to assess all of the existing coal reserves according to the Australasian Code for Reporting Mineral Resources Standards, or “JORC Code”, and the assessment reveals that the proved and probable coal reserves is estimated at 70 million tons. Currently, the production capacity is of 3 million tons per year, which will be increased to 3.80 million tons per year by 2015.
(3) PT. Citra Harita Mineral, a subsidiary company registered in Indonesia with Lanna Resources Public Co., Ltd. holding shares at 55 percent of the paid-up capital, had conducted its business in coal mining (the 2nd Mine) in Samarinda district in East Kalimantan, by entering into the cooperation agreement within the KP License concession areas of PT. Cahaya Tiara (formerly CV. Cahaya Tiara). However, mining operation at this coal mine has been stopped since the middle of year 2008 due to a revocation of KP License by the order of the Supreme Court of Indonesia resulting from a dispute between the government sector and previous owner of the KP License. Currently, PT. Citra Harita Mineral has changed its business to become a service provider of coal transport route and coal loading port and jetty facilities.
(4) PT. Singlurus Pratama, a subsidiary company registered in Indonesia, with Lanna Resources Public Co., Ltd. holding shares at 65 percent of the paid-up capital, conducts coal mining business operation (the 3rd Mine) in Kutai Regency, East Kalimantan, having received the coal mining concession (Coal Contract of Work) from the Indonesian Government for coal production and distribution for a period of 30 years (from 2009 to 2039). Currently, SRK Consulting (UK) Limited has been assessing all of the existing coal reserves according to the Australasian Code for Reporting Mineral Resources Standards, or “JORC Code.” The assessment is expected to be completed in 2012. According to existing data, the mineable coal reserves have been estimated at least 25 million tons, having coal production capacity of approximately 2.50 million tons per year, which will be increased to 6 million tons per year by 2015.
(5) PT Lanna Mining Services, a subsidiary company registered in Indonesia with Lanna Resources Public Co., Ltd. holding shares directly and indirectly at 99.9975 percent of the paid-up capital, has been assigned to develop the above-mentioned Coal Mine Project No. 3. After the development of this coal mine project has been completed in the middle of 2009, PT. Lanna Mining Services has turned into coal trading business, sourcing coal from other coal resources in Indonesia.
COAL INVESTMENT POLICY AND DIRECTION
(1) PT. Lanna Harita Indonesia (LHI), a subsidiary company registered in Indonesia, with Lanna Resources Public Co., Ltd. holding 55 percent of paid-up capital, has been granted the Coal Contract of Work (“CCOW”) from the government of Indonesia for exploration, mining, and selling of coal in Samarinda City and Kutai Regency, East Kalimantan, with a total exploration area of approximately 30,018 hectares for a concession period of 30 years. The concession has 19 years remaining, or until 2031.
(2) PT. Singlurus Pratama (SGP), a subsidiary company registered in Indonesia, with Lanna Resources Public Co., Ltd. holding 65 percent of paid-up capital, has been granted the Coal Contract of Work (“CCOW”) from the government of Indonesia for exploration, mining and selling of coal in Kutai Regency, East Kalimantan, with total exploration area of approximately 24,760 hectares for a concession period of 30 years. The concession has 27 years remaining, or until 2039.
The Company has planned the investment to expand the production capacity of the above two mining concessions in the next five years (2012 – 2016) as follows.
 

Subsidiary CompaniesProduction Capacity per Year (Unit: Million Metric Tons)
20122013201420152016
PT. Lanna Harita Indonesia3.03.33.63.83.8
PT. Singlurus Pratama2.53.75.06.06.0