Aquarian has acquired Indonesian coal properties in the Riau coal basin of Sumatra covering approximately 52,000 hectares. Property potential described as 'world class', and indicates the possibility of very substantial reserves of coal with low overburden and available infrastructure to a navigable tidal river.

INDONESIA'S COAL FIELDS

License Description

The license is located in the Indragiri Hulu area of Sumatra. Aquarian's license borders two significant discoveries; one to the north where the Indonesian government has an indicated reserve of 85 million tonnes; Kabupaten Kampar to the South East which is about to start production

The tenement position is attractive for both moderate calorific value thermal coal and higher calorific value coals. The scale of this license will make for exploration efficiency, and increases significantly the chance of discovering enough reserves to mount a large, low cost operation. The company has acquired a world-class ground position within an favourable geological setting. There has been no drilling program to date, however earlier exploration has indicated the presence of over 2.5 million tonnes of medium calorific, low ash/sulphur content bitumous coal in the only small area tested, located in the north of the license.

The licenses are located in the north west of Sumatra which has excellent shipping links with South East Asia. From here it is also relatively easy for ACC to transport to the Indian sub continent as well as to China and Japan. The license has good local transport potential being only 20kms from a navigable river which can carry the end product to a port for international shipping.

General

Carbon forms more than 50% by weight and more than 70% by volume of coal although high rank (black) coals such as Anthracite achieve ~95% purity and graphite is almost pure carbon, peat and lignite (brown coal) in comparison contains about 60%. The carbon content is usually quoted as 'mined' or 'moisture free' on the basis of its water content. Additionally, to prevent spontaneous combustion coals can be mined and stored 'wet'.

The formation of black coal deposits occurred most notably (but not exclusively) in the Carboniferous period 280 to 345 Ma, when swampy ecosystems prevailed over much of the earths' continental surface. Such systems provided anaerobic conditions where accumulations of dead plant material, prevented from complete decay, compressed together over time to form layers of peat. These deposits, when subjected to increased pressure and heat, expelled water, volatiles and other elements to leave behind a carbon-rich material. This dehydration process is thought to require between 10 and 30 metres of peat to form a coal seam 1 metre thick. Brown coals are more typical of sedimentary basins dating from the Tertiary period that have not, in general, undergone deep burial, but exceptions do occur where coals have been exposed to high temperatures due to local geological conditions.

The development from peat to coal is summarized below:

• Plant materials buried under sediments decay to form peat , a compressed mass of plant remains.
• Compaction forces water out of the sediments to form lignite , a soft, brown coal and the lowest rank. Used almost exclusively for steam-electric power generation. Sub-bituminous coal (a stage in-between lignite and bituminous coal) is also used primarily for this purpose.
• Further compression and ageing turn lignite into bituminous coal, a soft, black coal. Used primarily as fuel in steam-electric power generation, for heat and power applications in manufacturing and to make coke.
• Heat and pressure metamorphose bituminous coal to anthracite , a hard coal that is almost pure carbon. Used primarily for residential and commercial space heating.

The differences in the kinds of plant materials (called maceral) comprising the bed of coal (referred to as type), the degree of metamorphism (rank) and range of impurities (grade) are used in classifying coal deposits. Coal rank is particularly important as the percentage of volatiles, ash and moisture is reciprocal to the amount of fixed carbon in coal provides a measure of energy that is available.

Geological setting of the Indonesian Tenements

The regional geology of the Indragiri Hulu area is dominated by generally young swamp deposits in the east, with Tertiary (and older) sedimentary formations to the west. Trending northwest-southeast are the Tigapuluh Mountains comprising pre-Tertiary metamorphic complexes of Permian-Carboniferous sediments and Triassic-Cretaceous granite intrusives. The mountain range is flanked to the west, north and east by the Tertiary sedimentary formations. The main structures of the area include a series of regional scale anticlines, synclines and warped sedimentary sequences.

The Tertiary deposits in the Central Sumatra Basin comprise mottled clays, carbonaceous muds and fine sand and silts with formation of coal seams and deposition of massive, dark brown, lacustrine shales to the north of the basin. This period of relatively quiescent sedimentation was succeeded by uplift, folding and faulting accompanied by minor intrusions of granite. Subsequent coastal marine transgression led to deposition of sandstone, shale and coal on limestone beds with progression in the Lower to Middle Miocene period to a fully marine environment that extended from the southwest. Sedimentation continued throughout the Upper Miocene in the deepest parts of the basin, but uplift and folding, accompanied by intrusive and extrusive igneous activity, led to erosion of lower Middle Miocene and Lower Miocene strata, particularly in the present-day coastal plain in the east, where some Miocene planktonic zones are absent. Sedimentation continued under conditions that became paralic (coal forming) in the Pliocene, until halted by the Barisan Orogeny in the Late Pliocene. The orogeny, as in the North Sumatra Basin , has continued until the present day.

Prospectivity

Data from previous workers in the Indragiri Hulu area, including Dutch geologists, indicate a number of outcrops and seam locations throughout the area. These seams are characterized by favourable low ash and sulphur contents. The tenement position is located within a highly prospective geological setting where structures such as anticlines and synclines, form close to geological contacts with faulting and folding creating potential for repetitions of coal seams over a wider area.

The position of the seams within the overall stratigraphy is considered important with older stratigraphic positioned coal seams likely to have higher calorific values then the younger Neogene coals. Known operations and prospects in the area, such as the soon to be opened RBH mine in Indragiri Hulu, smaller mines in the adjacent areas such as the NRK deposit in the Kabupaten Kampar and the yet to be developed Cerenti deposit add confidence that the Indragiri Hulu area contains significant potential to host both low calorific, large tonnage coal deposits and lower tonnage, high calorific deposits.

Aquarian will begin studies of the area and will follow up with a program of shallow drilling to expand and delineate extensions and repetitions of the existing coal resource.