JINCHENG ANTHRACITE MINING GROUP S HANXI PROVINCE

Opportunities for Investment in Coal Mine Methane Projects

One of China’s most important coal producers, the Jincheng Anthracite Mining Group has five active coal mines producing more than 10 million tonnes of coal annually. Production is increasing as new mine construction continues. These mines liberate more than 91 million cubic meters (3 billion cubic feet) of methane annually, creating significant opportunity for investment in coal mine methane recovery and utilization projects.

The Jincheng Anthracite Mining Group seeks investment for:

• Constructing a new coal mine methane-fueled power plant

• Supplanting gasoline and diesel fuel with coal mine methane in mine vehicles

• Using coal mine methane to produce carbon black, which is widely used in tire manufacturing COAL MINE METHANE OPPORTUNITIES WITH THE JINCHENG MINING GROUP

CHINA

The Jincheng Anthracite Mining Group Co. Ltd. (informally known as the Jincheng Mining Group) began operation in 1958 as the Jincheng Coal Mining Administration. The company’s long term plan for development is based on comprehensive development of coal, coalbed methane, and coal- related products. Jincheng Mining Area Preliminary economic analyses of each of the project options described below suggests the potential for profitable returns on investment. In addition, these projects reduce emissions of methane, a greenhouse gas, to the atmosphere, and may become opportunities for greenhouse gas offset credits.

EXPANDING POWER GENERATION AT THE SIHE MINE The Jincheng Mining Group’s Sihe mine currently uses coal mine methane fueled gas engines to produce 5.6 MW of energy. The Jincheng Mining Group seeks investment to help further expand capacity by an additional 16.25 MW, using five coal mine methane fueled gas engines. This project requires an estimated capital investment of 94.7 million yuan ($US 11.5 million), which includes equipment purchase, civil engineering, installation engineering, and other expenses. The Jincheng Mining Group seeks an outside investor for at least 65% of this amount.

Preliminary Economic Analysis The project would also recover 32.4 million cubic meters (1 BCF) of methane annually, and will Investment: 95 million yuan ( $US 11.5 million) reduce coal combustion by 58.5 thousand tonnes of NPV: 10 million yuan ($US 1.2 million) coal each year. Together, this is a reduction in IRR: 26 % 558,000 tonnes of CO2 equivalent annually. Payout: 6 years Project Life: 20 years MINE VEHICLE REFUELING PROJECT

This project would entail the construction of two coal mine methane fueling stations (a main station and a substation) and fuel conversion of 200 vehicles currently operating in the mine area. Coal mine methane produced from surface wells would be transported via pipeline to the main station, purified, and pressurized to 25 MPa. The combined capacity of the fueling stations would be 1,500 m3 per hour. The Jincheng Mining Group estimates that construction of the fueling stations and retrofitting the vehicles will require a total investment of 10 million yuan ($US 1.2 million), and that it will cost 4 million yuan ($US 0.5 million) per year to operate the fueling stations. They are seeking investors to finance the project.

The project would recover 3.6 mil- lion cubic meters (127 MMCF) of methane Preliminary Economic Analysis annually, and would save 2.2 million kg (2,400 short tons) of gasoline each year. Investment: 10 million yuan ($US 1.2 million) Together, this equals a reduction of more NPV: 14.3 million yuan ( $US 1.7 million) IRR: 31 % than 51,630 tonnes of CO2 equivalent an- nually. Payout: 5 years Project Life: 15 years

CARBON BLACK PRODUCTION PROJECT

With the rapid development of China’s automotive industry, demand for carbon black, which is widely used in tire manufacture, is growing rapidly. The methane concentration in the gas produced at the Jincheng Mining Group’s Sihe mine averages 55-65%, which is ideal for a semi-reinforcement carbon black production plant. The proposed plant would produce 1,300 tonnes of carbon black per year. The Carbon Black Industry Research Institute of the China Rubber Group would design the plant.

The Jincheng Mining Group is seeking an investor to help finance the project. They estimate that capital investment would total 3.9 million yuan ($US 0.5 million), and that operating costs would total 2.5 million yuan ($US 0.3 million) annually.

Preliminary Economic Analysis The project would also recover 7.2 million cubic meters (254 MMCF) of Investment: 3.9 million yuan ($US 0.5 million) methane annually, the equivalent of

NPV: 20.5 million yuan ($US 2.5 million) reducing more than 102,000 tonnes of CO2 IRR: 64 % annually. Payout: 3 years Project Life: 20 years PARTNERSHIPS SOUGHT Summary: Preliminary Analysis of Project Opportunities The Jincheng Mining Group seeks PROJECT CH4 CAPITAL NPV IRR investors interested in helping finance USED COST ($US (%) one or more of these projects. Based (106 m3) ($US million) on the preliminary economic analysis million) * described herein, these projects are Power 32.4 11.5 1.2 26 potentially highly profitable, and Generation provide the added benefit of reducing emissions of methane and other Vehicle Fueling 3.6 1.2 3.1 31 greenhouse gases. Carbon Black 7.2 0.5 2.5 64

Total 43.2 13.2 6.8 In particular, Jincheng Mining Group seeks the following: *Based on exchange rate of 8.27 yuan per $US 1 Assumes project life of 20 years for power generation and carbon black • Equity investment in the form of projects, 15 years for vehicle refueling project joint venture partners • Partners with technical expertise in gas projects Jincheng Mining Group is eager to do business with foreign • Modern, efficient methane partners, and strives for straightforward business relationships. We make every effort to address the concerns of investors and utilization technologies meet their goals. With total assets of 8.8 billion yuan ($US 1 billion), Jincheng Mining Group is a reliable business partner.

HOW TO BEGIN WORKING WITH US Jincheng Mining Group encourages those interested in project opportunities in the Jincheng Mining Area to contact them for more information. In conjunction with the China Coalbed Methane Clearinghouse, we have prepared market packages describing these opportunities in more detail. The data package includes maps, information on energy prices, markets, preferential tax policies and more, and is available to interested parties upon request.

“Financial institutions and companies from both home and abroad are all welcome to come here for investiga- tion and investment. Let us join our hands to develop coalbed methane, a new energy that is cleaner and of promising commercial prospect.”—Yuan Zongben

Yuan Zongben, Chairman Li Bangdun, First Vice Chairman Jincheng Anthracite Mining Group Co. Beishidian Jincheng Shanxi 048006, China Phone / Fax: (86) (356) 366-2663 Email: [email protected] China Coalbed Methane 35 Shaoyaoju, Chaoyang 100029, China Phone / Fax: (86) (10) 8461-0779 Email: [email protected] Website: http://www.coalinfo.net.cn

Please visit www.coalinfo.net.cn/coalbed for updated information that may be available on the status of activities and development plans in the Jincheng Mining Area.