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• maximises value. The recommended economic ranking study, discussed further in Section <br />2.4, can assist with improved understanding of the Collom resource options. <br />Development of Collom will require purchase of additional Lease -By- Acquisition (LBA) coal, <br />currently estimated at approximately 98M tons in -situ. Financial evaluations for Collom to <br />date have assumed an LBA price of US$0.30 /t. This appears low to TS, given expectations <br />of higher future coal sales prices and recent bids for lower BTU, albeit lower strip ratio <br />Powder River Basin coal in the vicinity of US$0.90 /t. TS recommends that future project <br />evaluation adopts a supportable Central Estimate assumption of the LBA cost and includes <br />explicit sensitivity analysis. <br />2.3 Resource Assessment <br />CCC initiated an exploration program during 2004 to provide additional geological, <br />geotechnical and hydrological data on the Collom resource. This exploration program has <br />been resourced with a team of contract geologists, managed by a CCC Senior Engineer. The <br />program comprises a planned 40 holes with 6 rigs deployed to complete the drilling before <br />the winter. At the time of this review the drilling was more than 50% complete and reportedly <br />on schedule for completion by the end of November 2004. Sample analysis, reporting and <br />geological modelling is planned for completion within the first quarter of 2005. <br />This latest exploration program adds to data available from prior drilling by Utah International <br />• and W. R. Grace (previous owner of CCC). The geological work program includes validation <br />of this earlier data and re- modelling of the Collom resource structural geology and coal <br />quality. <br />The resource assessment program appears to be generally well resourced and organised. <br />The Rio Tinto Energy Mine Planning Guidelines (Open Cut Coal) provide extensive reference <br />on good practice resource assessment procedures within Rio Tinto. TS recommends CCC <br />improve familiarity with the Guidelines and confirm consistency of the current program with <br />their content. <br />2.3.1 Coal Sampling Methodology <br />Correct and consistent initial sampling of coal core requires strict adherence to defined <br />standards and procedures in order to ensure the integrity of downstream test work and <br />interpretations. <br />CCC has adequately addressed the following areas; <br />• Minimum linear core recovery of 95% and adequate volumetric core recovery <br />• Lithological and geotechnical logging of the core <br />• Nomination of seam working section composite sample intervals <br />• Use of calibrated geophysical logs to aid in the identification of marker bands <br />• (sampling datum), bed boundaries and correct lithological assignment of core loss. <br />For Collom, the recognised datums are the coal seams, the "KM" volcanic ash <br />marker band and the Trout Creek Sandstone. <br />RIO <br />TINTO <br />TS Ref: DRAFT Version: 1 6 Teehui,ai se„ -i-s <br />