STRAITS ASIA RESOURCES LIMITED Mining for Asia’s Growth Release/2011/SAR 2010 AR.pdf · 15 Hoe...

15 Hoe Chiang Road #09-01 Tower Fifteen Singapore 089316 Tel: 65 6327 4111 www.straitsasia.com Mining for Asia’s GrowthAnnual Report 2010

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CORPORATE DIRECTORY

Directors

Dr. Chitrapongse Kwangsukstith Non-Executive Chairman

Dr. Chua Yong Hai Independent Non-Executive Director

Mr. Martin David Purvis Executive Director and Chief Executive Officer

Mr. Apisit Rujikeatkamjorn Independent Non-Executive Director

Mr. Han Eng Juan Independent Non-Executive Director

Mr. Peerachat Pinprayong Non-Executive Director

Ms. Julie Therese Hall Independent Non-Executive Director

Audit, Risk & Compliance Committee

Mr. Han Eng Juan Chairman

Dr. Chua Yong Hai

Mr. Apisit Rujikeatkamjorn

Remuneration Committee

Dr. Chua Yong Hai Chairman

Mr. Han Eng Juan


Nomination Committee

Mr. Apisit Rujikeatkamjorn Chairman

Dr. Chua Yong Hai

Mr. Han Eng Juan

Company Secretaries Share Register

Graeme Bruce Tivey Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01Singapore Land Tower, Singapore 048623

Yip Ming Fai

Registered & Head Office Independent Auditors

15 Hoe Chiang Road #09-01 Tower Fifteen Singapore 089316 Telephone: (65) 6327 4111Facsimile: (65) 6327 4222Website: www.straitsasia.com

PricewaterhouseCoopers8 Cross StreetPWC BuildingSingapore 048424

Audit Partner: Graham LeeYear of appointment: 2008

02 Corporate Vision, Mission and Values 03 Financial Highlights 04 Five-year FinancialSummary 05 Chairman’s Statement 08 Chief Executive Officer’s Review 13 Board ofDirectors 16 Key Executives 18 Financial Review 24 Coal Production and Operations28 Human Resources 30 Occupational Health & Safety 32 Environment 34 Community36 Investor Relations 37 Coal Resource Statement 38 Coal Reserve Statement39 Corporate Governance 57 Financial Statements 136 Shareholder Information138 Notice of Annual General Meeting 145 Proxy Form IBC Corporate Directory

CONTENTS

The following definitions apply throughout this Annual Report;

“ASP” Average selling price“Board” The Board of Directors of Straits Asia“CEO” Chief Executive Officer“Straits Asia”, “Company” Straits Asia Resources Limited“Group” Straits Asia and its subsidiaries“Mt” Millions of metric tonnes“pa” per year“PTTAPM” PTT Asia Pacific Mining Pty Ltd, Straits Asia’s immediate holding company “t” One metric tonne“Kt” Thousands of metric tonnes“$”, “US$” United States dollars, the Group’s financial currency, unless otherwise stated“$M” Millions of United States dollars“A$” Australian dollars“Q1” First quarter“Q2” Second quarter“Q3” Third quarter“Q4” Fourth quarter“H1” First half of the year“H2” Second half of the year“mmpm” Millimetre per month

CORPORATE VISION, mISSION ANd VAluES

We are Straits Asia Resources, an emerging international coal company with an Asian focus.

Vision To be recognised as the Best Coal Company in Asia, for the value we deliver to all our stakeholders.

MissionTo enrich and improve lives through the reliable and responsible delivery of energy products

ValuesTrust, Respect, Resolve, Teamwork, Excellence, Ethics, Responsibility and Enthusiasm

02Straits Asia Resources limited

FINANCIAl hIghlIghTS

Annual Report 201003

Five-Year Financial SummaryYear ending 31 Dec (US$M)

2006 2007 2008 2009 2010

Profitability

Coal product 3.5 3.4 8.6 8.5 10.6 Coal revenue 135.0 135.3 570.8 732.8 736.5 Other revenue 143.8 115.6 14.4 15.5 - COGS (214.7) (193.6) (357.7) (448.0) (555.6)Gross profit 64.1 57.3 227.5 300.3 180.9 Other operating income/(expense) 3.5 3.9 6.3 (1.0) (5.1)Administrative, Corp & Technical (9.4) (21.6) (37.8) (57.5) (36.5)Operating profit 58.2 39.6 196.0 241.8 139.3 Financial expenses (0.1) (0.9) (14.8) (22.9) (13.7)PBT 58.1 38.7 181.2 218.9 125.7 Tax (10.0) (10.2) (56.8) (85.4) (37.5)Net profit 48.2 28.6 124.4 133.5 88.2 Dividend (21.5) (16.6) (77.2) (82.8) (52.9)Dividend Payout % 45% 58% 62% 62% 60%EBITDA 61.6 43.7 236.6 281.3 178.0

Balance Sheet

Total Current assets 59.6 129.8 242.9 212.8 259.1

Total long-term assets 36.9 606.3 631.1 790.2 838.9 Total current liabilities 41.4 349.3 230.1 378.7 167.9

Total long-term liabilities 6.6 82.5 268.1 152.2 406.3

Total equity 48.5 304.2 375.7 472.1 523.8 Net Debt (19.0) 184.7 116.9 174.4 232.5

FIVE-YEAR FINANCIAl SummARY


“I am confident that we now have the platform and capability to consolidate the improvements and achievements of the past 12 months and start to unlock the full potential of our assets within a rapidly strengthening energy market.”

Dear Shareholders,

In time to come I believe that we will see 2010 as something of a watershed for our Company. In essence it was a year in which your Group made very solid advances whilst working successfully through some significant challenges and changes, and produced a good outcome in results and dividends for shareholders. As we turn the corner into 2011, I am confident that we now have the platform and capability to consolidate the improvements and achievements of the past 12 months and start to unlock the full potential of our assets within a rapidly strengthening energy market.

Looking back, cautious optimism was evident at the start of 2010 as the world

ChAIRmAN’S STATEmENT

economy began to show signs of recovery from the 2009 Global Financial Crisis. As the year progressed confidence grew and the emerging market economies of Asia, in which your Group conducts its business, showed very strong recoveries and growth rates.

The tight supply-demand dynamics of the seaborne thermal coal market became more obvious later in 2010 as buyers realised that weather could seriously disrupt their supply chains with no substitute supply sources easily available. Coal prices reacted accordingly and significantly strengthened towards the year end, although for most of 2010 prices were still well below those that Straits Asia achieved in 2009.


In parallel with the features of the coal price over the year, the Group began 2010 facing a number of challenges including: economic uncertainty, management restructuring, weak market fundamentals and operational constraints at both mines. The overriding strategy was therefore to work through the challenges and strive to consolidate a solid platform for future growth. Against this background I am pleased to report that management has worked through the broad range of issues in a methodical and determined fashion and by year end this had manifested into a platform that delivered aggregate record production and good profits.

The Chief Executive Officer’s review of 2010 appears later in this Annual Report and I endorse the comments that he has made about the many successes your Group had in 2010.

Several key changes were made to the Board of Straits Asia in 2010. Mr. Richard Ong handed over the reins in March 2010

after working to provide a smooth transfer of his responsibilities to Mr. Martin Purvis. We wish Richard every success in his future endeavours. Mr. Peerachat Pinprayong was appointed as a Non-Executive Director in June 2010 following his nomination by PTT International Company Limited. Mr. Peerachat is the Executive Vice President of PTT International Company Limited’s coal and mining business and brings to our Board a wealth of experience of natural resources and business development. Please join me in formally welcoming him to the Board. Ms. Julie Hall also joined the Board in March 2011. Ms. Hall has a wealth of experience in coal projects throughout Asia. As a qualified geologist and a Director on several coal projects, her contributions will be of great benefit to the Board and the Company.

Mr. Milan Jerkovic and Mr. Michael Gibson decided to concentrate on developing the metals businesses of Straits Resources Limited in Australia and resigned from the Board of Straits Asia in November 2010.

ChAIRmAN’S STATEmENT (cont’d)


Milan and Michael made a substantial contribution to the formation and development of the Company over a long association and we thank them for their valuable service and wish them well in their future.

The inherent value in our shareholders, customers and supplier relationships is something that is never overlooked by Straits Asia. I hope and trust that all our stakeholders have been able to benefit from our performance during the year. I also offer Group’s thanks to the many public officers and communities that we deal with in Indonesia and elsewhere for their diligent approach to the many issues that arise in the course of the Group’s daily business. I would also like to offer my sincere appreciation to my fellow directors and the entire management and staff of Straits Asia for the support and commitment they have demonstrated over the past year and the continuous improvement that has clearly been achieved throughout the Group.

By way of an update I would like to conclude with the news that PTT has very recently consolidated its shareholding in PTTAPM to 100% ownership, spending A$544 million in the exercise. This is a substantial commitment and shows PTT Group’s confidence in Straits Asia’s assets and management team. I believe that shareholders can look forward to an exciting future as Straits Asia is pushed to deliver on PTT’s ambitions and to execute opportunities to build a major thermal coal business in the Asia Pacific region.

Dr. Chitrapongse Kwangsukstith Chairman


“In many respects this hard work has yet to be fully recognised in Straits Asia’s bottom line but the seeds have been planted and the platforms established for the mines to deliver improved performance and growth in the near future.”

ChIEF EXECuTIVE OFFICER’S REVIEW

Dear Shareholders,

Following on from the Chairman’s comments I would agree that 2010 was a year of substantial change and progress for your Company. The management team set out with a simple plan and a clear set of goals for the year: to establish realistic and achievable targets at both operations; to rebuild the production platform at Sebuku and logistics chain at Jembayan; to restructure the organisation into functional management units with the introduction of Licence to Operate, Technical Support, Business Development and Performance Marketing teams; to provide robust and reliable guidance to the market and introduce a culture of continuous improvement and best practice across the Group.

To achieve the targeted outcomes the management team had to adjust to some very significant changes, both corporately

and in some cases personally, but through strong commitment and endeavour they have delivered a result that has met and mostly exceeded all the key targets for the year. In many respects this hard work has yet to be fully recognised in Straits Asia’s bottom line but the seeds have been planted and the platforms established for the mines to deliver improved performance and growth in the near future.

In terms of the headline numbers, Group production increased to 10.6 million tonnes of coal in 2010, which was 25% higher than 2009 (2009: 8.5 million tonnes). A reduction in net profit to $88.2m (2009: $133.5m) was mainly due to two factors, both of which reflect the impact of external market forces. Most significantly, the Group’s average selling price for 2010 of $72.8/t (2009: 82.1/t) was lower year-on-year due to the


onset of weaker market demand in the wake of the Global Financial Crisis and, secondly, a substantial recovery in oil prices added to costs and reduced operating margins from the prior year.

Operations

Group Management

To meet the growing demands on the business, the management team has been refocused and fortified by the addition of several highly talented individuals. Responsibilities have been clarified so as to give all managers more time to focus on specific areas and to utilise team skills more effectively. The team is now able to cover all aspects of Straits Asia’s operations and has substantially removed the need for external support in core functions and operations. In terms of cost, corporate and technical expenses reduced by 37% in 2010 to $36.5m (2009: $57.5m).

Many members of the technical team are now based in a new office in Balikpapan that services both mines and deals with local government relations.

Jembayan Mine

Jembayan continued its very successful story in 2010, producing 9.4 million tonnes of coal (2009: 6.5 million tonnes) and again representing the bulk of the Group’s production. This was an excellent achievement by the whole team, including our main contractor PAMA. It was achieved despite suffering from more rainfall in 2010 than historic averages (2010 average: 208mmpm; 5-year average: 180mmpm) and having to use temporary load-out facilities whilst construction work was being undertaken on the new permanent Line 2 loader.

Cash costs at Jembayan trended upwards in the year to $47.03/t (2009: $42.86/t) mainly due to oil prices being 33% higher than 2009 and the cost impact of using temporary load-out facilities. The new Line 2 load-out will commence operation in the second quarter of 2011.


Sebuku Mine

Sebuku Mine also performed well in very difficult operating conditions that combined atrocious weather, limited space, mud and lack of inventory. In the event, production of 1.1 million tonnes of coal for 2010 (2009: 2.0 million tonnes) was a good outcome.

The mine began 2010 with in-pit coal inventories that were insufficient to maintain the production rates of 2009 and the mine continued to be constrained by its licence issue. A new plan for 2010 had to be developed that envisaged working in H1 to restore pit inventory and then ramping up production in H2. After completing the pit preparation work in H1, the island suffered a deluge of rain in Q3 and part of Q4, losing the mine over 50% of its budgeted production time in some months. In the last 6 weeks or so of 2010, the rain relented and the planned ramp up of production was finally started. Sebuku mine produced 495Kt in the final quarter compared to an average of about 220Kt for each of the previous 3 quarters. The

mine therefore gained some momentum as it entered 2011 and is in much better condition to sustain production targets than was the case at the start of 2010.

Inevitably, given the very difficult operating conditions and delays in ramping up production output due to the weather, costs jumped substantially at Sebuku compared to the previous year. To compound matters, oil prices were also 33% above the previous year’s average. Cash costs averaged $45.75/t (2009: $33.69/t) for the year although the trend was very much in decline over the last quarter as the output from the mine increased.

Exploration

The intensive drilling programme in 2007-2009 has yielded sufficient information to prepare a robust long-term mine plan for Jembayan. Drilling at Jembayan is therefore concentrated on gaining sufficient quality information and ongoing reserves upgrades to maintain at least 10 years of detailed mine life and output ahead of us.

ChIEF EXECuTIVE OFFICER’S REVIEW (cont’d)


Jembayan’s marketable reserves were reported at 127Mt in August 2010, since then the Group has mined approximately 4.89Mt from the pits.

The exploration programme at Sebuku has been limited as drilling within Sebuku’s next phase of operations in the Northern Leases cannot commence until the final licence is received. The current pit is fully explored and there is sufficient information on the Western Leases to complete the studies that are required at this stage.

Marketing

The marketing and sales team was re-established under a new vehicle, Tiger Energy Trading Pte Ltd (“Tiger Energy”), in 2010 in order to focus the division clearly on its profit contribution to the Group. A new Managing Director of Tiger Energy has been appointed to lead this re-invigorated division and the team was further strengthened in several key areas. Results have been delivered quickly with average sales prices increasing from US$71.63/t in Q1 to US$75.53/t in Q4, averaging US$72.80/t in 2010. Although the average sales price achieved in 2010 was lower than 2009, 2010 average sales prices were amongst the highest achieved by Indonesian producers on an energy adjusted basis. Additionally, demurrage, which we include in our cash costs of mining, was only US$0.26/t in 2010

despite the dreadful weather conditions and temporary loading systems affecting production and delivery schedules.

All key customer accounts were maintained and a number of new accounts were opened with other independent power utilities. The Group will add to its customer base to spread risk as sales increase. Going forward Tiger Energy will be working closely with the production teams at both mine sites to optimise the product specifications and brand value as we seek to add further value to Group’s revenue and enhance customer demand.

Financial Performance

The key reasons for the lower net profit in 2010 compared to 2009 were factors largely beyond management’s control, principally lower prevailing selling prices (down $9.3/t) and cost pressures led by oil prices averaging 33% higher year on year. The results are therefore positive in the circumstances and underline the success of Straits Asia’s operational achievements and delivery of its mine plans by management.

The balance sheet is substantially stronger than it was at 31 December 2009 and this has enabled the Group to keep to its dividend policy of paying 60% of net profit to shareholders. The total payout for 2010 will be 4.68 US cents per share.


Environment, Health & Safety

2010 was another year of noteworthy performance from both operations in terms of Occupational Health & Safety (“OH&S”). As a result Jembayan and Sebuku mines were again presented with annual provincial environmental management awards for environmental achievement and management.

Sebuku ended 2010 with a third consecutive year of zero Lost Time Incident (“LTI”) figures which is an outstanding achievement in itself. Jembayan recorded 2 LTIs, the same as 2009 despite the significant increase in activity on site.

Outlook

2010 proved to be a year of consolidation and growth and marked a year in which the Company laid the foundations for future developments and expansions. The outcome in the face of considerable challenges has proved that the Group has a solid management team capable of delivering continuous improvement in all areas of its business.

Jembayan’s mine plan is supported by a large body of knowledge surrounding

the geology and potential of the resource base, backed up by a very robust reserves number. Production increases are targeted again for 2011. The forestry licence at Sebuku is close to being issued, which will allow the long-awaited development of the Northern Leases at Sebuku. The main benefits of the ramp up will be felt in 2012 and beyond as the mine proves its true nature as one of the region’s most profitable thermal coal mines for the seaborne market.

The supply-demand equation in the seaborne coal markets is still favourable for suppliers and all indications are that relatively high coal prices will prevail in 2011. Even though costs will be under pressure due to the effects of inflation, higher average oil prices and longer haul distances for waste material at Jembayan, the outlook for the Straits Asia Group is very positive.

In closing, I would like to underline my thanks to the Board and shareholders for their support over the past year and my gratitude to the management team and staff for the way in which they have embraced the new “route map” for Straits Asia.

Martin David PurvisChief Executive Officer

ChIEF EXECuTIVE OFFICER’S REVIEW (cont’d)


BOARd OF dIRECTORS

Seated:Left: Mr. Martin David Purvis Right: Dr. Chitrapongse Kwangsukstith

Standing from left:Mr. Han Eng Juan, Mr. Apisit Rujikeatkamjorn, Ms. Julie Therese Hall, Dr. Chua Yong Hai,Mr. Peerachat Pinprayong.


dr. Chitrapongse KwangsukstithNon-Executive Chairman

Dr. Chitrapongse holds a Masters degree and a Doctorate in Industrial Engineering from the Lamar University, Texas, USA. His career in the natural resources industry began with positions in several major international companies in Thailand and the USA. He has worked with the Petroleum Authority of Thailand, subsequently renamed to PTT Public Company Limited, where he held the position of Deputy Governor Corporate Strategy until 1999. In 2000, Dr. Chitrapongse was assigned by PTT to assume a position as the Chief Executive Officer of PTT Exploration and Production Public Company Limited and retired in 2009 as the Chief Operating Officer of the Upstream Petroleum and Gas Business Group of PTT Public Company Limited. Dr. Chitrapongse holds Directorships in several subsidiary companies of PTT, including PTT Asia Pacific Mining Pty Ltd and is also President of the Thailand Association for Natural Gas.

mr. martin david Purvis Executive director and Chief Executive Officer

Mr. Purvis obtained his honours degree in Mining Engineering from Leeds University in the UK and originally joined the Straits Asia Group in 1997 to develop the Sebuku coal mine in Indonesia. He has close to 30 years experience in the resources industry working in a wide range of senior management and operating roles in major mining companies in South Africa, Indonesia, Singapore and Australia. For a large part of this time his focus has been on the evaluation, development and commercialisation of coal opportunities and projects and through these roles he has gained extensive knowledge and contacts within the international coal industry. Mr. Purvis joined the Board of Straits Asia in 2006 prior to its IPO and was appointed Chief Executive Officer in March 2010.

dr. Chua Yong haiIndependent Non-Executive director

Dr. Chua holds postgraduate qualifications in chemical engineering and business administration. He has served on the boards of several listed companies in Singapore and Australia, is chairman of 2 other public companies and a director of several private companies. In the public sector, he was a Deputy Secretary in the Singapore Government Administrative Service where his last held positions were Director of Investments in the Ministry of Finance and General Manager of Temasek Holdings Private Limited. In the private sector, Dr. Chua was Chief Executive and Managing Director of United Engineers Limited and the Group General Manager of Suntec City Development Private Limited. He is Singapore’s non-resident High Commissioner to Maldives and has been awarded a Public Service Medal and a Public Service Star by the President of Singapore for social and community work.

BOARd OF dIRECTORS (cont’d)


mr. han Eng JuanIndependent Non-Executive director

Mr. Han is a qualified accountant. He is a Director of the Singapore Deposit Insurance Corporation Limited, a member of the Citizenship Committee of Inquiry and Treasurer of the Singapore Red Cross Society. Mr. Han has been awarded the Public Administration Medal (Silver) for service in the public sector and the Public Service Medal for community work. In the public sector, Mr. Han has held senior positions in the Board of Commissioners of Currency Singapore and the Monetary Authority of Singapore. His last position in the private sector was as Senior Managing Director and Singapore Country Head of Dexia Banque Internationale à Luxembourg.

mr. Apisit RujikeatkamjornIndependent Non-Executive director

Mr. Apisit holds a Bachelor degree in Civil Engineering from Khonkaen University, Thailand and a Master in Engineering from Lamar University, Texas, USA. He has had a long and distinguished career in the oil and gas industry, including appointments as Department Director and Senior Vice President for the Petroleum Authority of Thailand and Senior Assistant Governor at companies including Star Petroleum Refining Limited and Petro Asia (Thailand). Mr. Apisit worked for PTT Group from 2000 to 2006 when he retired as Senior Executive Vice President of the Oil Business Group of PTT Public Company Limited. In addition to his Directorship of Straits Asia, Mr. Apisit serves as a Non-Executive Director on the boards of several other companies in the ASEAN region.

mr. Peerachat PinprayongNon-Executive director

Mr. Peerachat holds a Bachelor in Science in Geology and a Master of Management qualification from the Chulalongkorn University. He has worked with PTT Group since 1997 specialising in business development and planning positions in various major subsidiary companies. He is now the Executive Vice President of PTT International Company Limited’s Coal & Mining Business. Mr. Peerachat has been a Director of PTTAPM since April 2010 and was appointed as a Director of Straits Asia in June 2010.

ms. Julie Therese hallIndependent Non-Executive director

Ms. Hall is a qualified geologist and also holds several diplomas in corporate directorship and financial planning. She is a Senior Fellow of the Corporate Directors Association in Australia, a member of the Australian Institute of Directors and a Senior Fellow of the Australian Financial Securities Institute. Ms. Hall has almost 30 years experience in mining projects in Australia and Asia, including 13 years at BHP Ltd. She is an Executive Director of Far East Energy Corporate Pty Limited and its subsidiaries, and a Director of Pegnel Resources Pty Limited, a private resources consultancy company.


KEY EXECuTIVES

mr. martin david PurvisChief Executive Officer

Mr. Purvis was appointed Chief Executive Officer (“CEO”) of Straits Asia Resources on 1st of March 2010.

mr. david limChief Operating Officer

Mr. Lim was appointed as Chief Operating Officer in March 2009. He is responsible for managing all operational aspects of our coal mining business, including exploration, mining, processing, environmental rehabilitation, safety, and contractor management. Mr. Lim is an experienced mining executive with a career that spans 27 years in South East Asia, of which 25 have been spent working in Indonesia in civil engineering, marine engineering, coal and gold mining. He joined Straits Asia Group in 2003 and spent 4 years working at Sebuku mine as the Resident Manager.

mr. Shaun dayChief Financial Officer

Mr. Day has over 15 years professional experience in a range of business and investment banking roles, with particular focus on the mining sector. He has performed Chief Financial Officer (“CFO”) and Treasury roles in ASX listed companies, with in-depth exposure to a number of bank and capital market financings. Mr. Day holds a Bachelor of Commerce from UWA and is a Chartered Accountant. He was appointed CFO of Straits Asia in 2010.

Ir. ginarsa TandinegaraPresident director, Indonesia

Ir. Ginarsa was appointed President Director Indonesia in 1993, holding responsibility for key government relationships, operating licences, tax and legal compliance in Indonesia. He has a degree in Civil Engineering and nearly 40 years working experience in Indonesia of which over one-half has been based in Jakarta and Balikpapan. Ir. Ginarsa was a key member of the original project team that developed the Sebuku coal mine in 1997.

mr. dany Aswingeneral manager,Community and government Relations

Mr. Aswin is a geologist with qualifications in Economic Geology from universities in Indonesia and Australia and almost 29 years of experience working with the Government of Indonesia. He joined Straits Group in 1996 as Geologist. Mr. Aswin was a member of the team that assessed the potential in the Jembayan mine prior to its acquisition in December 2007 and oversaw the subsequent exploration and drill out to JORC standards. In 2010 he was promoted to his present position, a key role in the “Licence to Operate” team, with responsibility for managing government relations and community development programmes.


mr. Nicholas Stephensmanaging director, marketing

Mr. Stephens graduated in 1992 with a Bachelor of Business (Honours) majoring in Marketing and Finance. His career includes over 16 years sales and marketing experience in the mining industry working in a range of senior commercial roles within Australia and the United Kingdom with Rio Tinto and Straits Resources. Mr. Stephens has been directly involved in the marketing and freight logistics of a broad range of commodities including iron ore, coal, copper, zinc, lead and industrial minerals.

mr. Archie EnriquezExecutive director, marketing

Mr. Enriquez has been associated with companies in the Group since 1983. He was transferred to Sebuku when it first began commercial production in 1997 with responsibilities to set up marketing and shipping functions for Sebuku coal. He is now an Executive Director of Straits Asia’s wholly-owned marketing subsidiary, Tiger Energy Trading Pte Ltd.

mr. graeme Tivey Executive general manager,Business Systems and Company Secretary

Mr. Tivey, Bachelor of Economics and Master of Business Administration, is a Chartered Accountant and a Chartered Company Secretary with almost 30 years experience in a diverse range of industries, multi-national companies and high profile organizations in Australia and in Indonesia. He has lived and worked in Asia for over 12 years and joined Straits Asia Resources in 2008 as General Manager Finance.

mr. lon TaranakiExecutive general manager,Business development

Mr. Taranaki has responsibility for risk management, new business generation, analysis of new developments and targets and due diligence. He has over 16 years experience in the mining industry of which 12 years have been in the coal industry, working for BHP Coal, Sedgman’s and as a member of the management team for Straits Asia’s Sebuku coal mine.

mr. Jeremy Figginsgroup manager Corporate Relations

Mr. Figgins was a member of the professional team for the Initial Public Offering of Straits Asia and formally joined the Group in 2007. In a career covering finance, commerce and industry he has held positions up to and including Managing Director for major international banking and finance organizations. Mr. Figgins has also had wide experience in the commercial and industrial field and been an advisor to the owners of some of South-East Asia’s largest companies. He is a lawyer by background and has lived and worked in Asia for over 26 years.


2010US$’000

2009US$’000

Change%

Sales revenue 736,537 748,354 (1.6)Cost of sales (555,590) (448,024) (24.0)Gross profit 180,947 300,330 (39.8)

Other income 3,190 4,747 (32.8)Other losses (8,256) (5,737) (43.9)

Expenses- Administrative, corporate and technical support (36,534) (57,511) 36.5- Finance cost (13,676) (22,923) 40.3Profit Before Income Tax 125,671 218,906 (42.6)Income tax expense (37,473) (85,375) 56.1Net profit after tax 88,198 133,531 (33.9)

2010US$’000

2009US$’000

Change%

Other Financial Information

Cash and cash equivalents 80,743 31,779 154.1%

Total assets 1,098,004 1,002,963 9.5%

Total debt 313,202 206,501 51.7%

Total equity 523,782 472,124 10.9%

FINANCIAl REVIEW


Discussion and Analysis of the major reasons for variances between FY 2010 and FY 2009

Net Profit after Tax

Net profit after tax of the year ended 31 December 2010 was US$88.2 million compared to US$133.5 million in 2009, representing a 34% decrease year-on-year. The decrease in net profit after tax is largely due to a lower average selling price per tonne (“ASP”) compared to 2009, however this was offset to some degree by higher sales quantities. ASP for 2010 was US$72.81 compared to US$82.14 in 2009 while sales increased from 9.21Mt to 10.71Mt in 2010.

Gross Profit margin fell from 40% in 2009 to 25% in 2010 as ASP decreased while operating costs increased

Operating costs were higher due to the larger volumes mined at Jembayan which has a significantly higher stripping ratio (“SR”) than Sebuku. The SR at Jembayan was 10.3 :1 in 2010 compared to 11.3:1 in 2009. At Sebuku the SR was 4.9:1 in 2010 and 3.7:1 in 2009 as the constraints of the work area in the Tanah Putih pit increased.

Fuel costs, a major factor in our operations, increased 33% from 2009 on rising fuel prices.

Other Revenue reduced to US$3.2 million in 2010 from US$US$4.7 million in 2009 due to reduced logistics service income following reduced sales to those customers requiring these services.

Other losses increased to US$8.3 million in 2010 from US$5.7 million in 2009 following increased foreign exchange losses and a combined write-down of property plant and equipment, and exploration and evaluation costs of US$2.1 million.

Finance costs reduced by 40.3% from US$22.9 million in 2009 to US$13.67 million in 2010 as the benefits of the new banking facility and a lower interest rate climate were experienced during the year. Administration costs also reduced by 36% as the 2009 figures included the one off costs of the Jembayan equipment write-off, the professional fees in relation to the mandatory general offer and the Warrant expenses in relation to the 35 million warrants exercised by Standard Chartered Bank.


FINANCIAl REVIEW (cont’d)

Coal

Sales volume for the Group for 2010 was 10.71Mt compared to 9.21Mt in 2009. The 2009 sales included approximately 930Kt of purchased coal, while the 2010 sales figure included only 41Kt of purchased coal.

Coal sales revenue for 2010 was US$736.54 million compared to US$732.77 million. The increase in coal sales revenue was a result of increased volumes sold offset by the impact of lower ASPs, which resulted in a 0.5% gain in coal sales revenue from 2009 to 2010.

The lower ASPs derive from the fact that most of 2009’s sales prices were fixed when coal prices were at record levels in 2008. International prices had not recovered to those former levels in 2010 although the market strengthened as the year progressed. Also in 2010 the volume of sales of higher grade and higher priced Sebuku coal were lower than the comparative periods.

Other revenue reduced to zero in 2010 following the sale of the Marine Engineering Division on 31 December 2009.

FY 2010US$’000

FY 2009US$’000

Coal Revenue 736,537 732,774

Sales Volume (Kt) 10,712 9,210

Other Revenue - 15,580

Total Revenue 736,537 748,354


Cost of Sales

The cost of sales in 2010 related entirely to the production of coal following the sale of the Marine Engineering Division. Cost of sales associated with coal production for 2010 was US$555.59 million compared to US$437.28 million in 2009. This 27% increase year-on-year is attributable to increased volumes mined and increased fuel costs. Additional costs were also incurred during the year loading coal through temporary arrangements following the collapse of the coal loader in October 2009. The construction of the replacement loader is well progressed and will bring some cost savings in second half of 2011.

Income Tax Expense

Income tax expense decreased to US$37.47 million in 2010 from US$85.38 million in 2009. The decrease is attributable to 3% reduction in Indonesia’s company tax rates to 25% in 2010, lower profits and lower non-deductible expenses, such as the warrant expenses in 2009. Included in the 2010 tax expense is US$2.78 million of withholding taxes, paid by Indonesian subsidiaries on dividends into Singapore, substantially necessitated by payments of dividends to Straits Asia’s shareholders. In 2009 withholding taxes on dividends were US$7.94 million.

Cashflow

Cash inflow from operating activities reduced to US$75.16 million for 2010 from an inflow of US$180.73 million due mainly to lower margins as explained above.

FY 2010US$’000

FY 2009US$’000

Coal Production Cost 555,590 437,284

Other Cost of Sales - 10,740

Total Cost of Sales 555,590 448,024


Cash outflow from investing activities was US$115.09 million for 2010 compared to an outflow of US$154.39 million in 2009. The following amounts have been spent on investing activities during 2010:

Net cash inflow from financing activities was US$89.17 million in 2010 after an outflow of US$165.11 million in 2009. The positive cashflow was due to the draw down under the 2009 Facility Agreement less retirement of previous bank facilities.

Balance Sheet

(References to the “Period” are the period between 31 December 2009 and 31 December 2010).

Cash and cash equivalents benefitted during the Period from the transfer of US$25.00 million from restricted cash that became unrestricted upon the 2009 Facility drawdown. The remaining restricted cash under Non-current assets represents security for bid bonds and performance bonds.

Financial assets at fair value through profit or loss during the Period represented fair value of 3,425,000 share options in Xanadu, which were acquired during the Period.

Trade and other receivables increased by US$5.53 million in the Period reflecting normal collection patterns. At the Company level, the increase of US$90.58 million over the Period was due to loans to subsidiaries.

As at 31 December 2010, trade and other receivables disclosed on the Group balance sheet includes a provisional amount of US$18.8 million recognised as an insurance receivable. This amount is more fully explained in the Financial Statements in note 3 (vii).

Inventories decreased by US$10.32 million in the Period. Coal stocks at Sebuku and

Item Amount US$ million

Northern Leases Purchase Price 47

Jembayan Load Out 17

Land Compensation 9

Sebuku High Wall Stabilization 19

Exploration at Sebuku and Jembayan 7

Others 16

TOTAl 115

FINANCIAl REVIEW (cont’d)


Jembayan as at 31 December 2010 were 85kt and 540kt compared to 53kt and 795kt at 31 December 2009 respectively.

Prepaid taxes represent instalments paid in advance of the calculated tax liability.

Non-current other receivables represent amounts receivable on sale of a coal fired power station to PT Indo Muro Kencana in May 2010 that are scheduled for payment over a 5-year period.

Property, plant and equipment increased in the Period by US$32.53 million due to infrastructure projects at Jembayan and mud stabilisation at Sebuku. Mine properties are now included as a class under property, plant and equipment.

Intangible assets includes goodwill acquired as part of the Jembayan coal mine and the Sebuku Northern Leases acquisitions.

Exploration and evaluation asset represents exploration expenditure from Western leases and Northern leases.

Available-for-sale financial asset increased by US$7.55 million on additional investments and an increase in fair value during the Period. Xanadu Mines Limited, which is exploring for coal resources in Mongolia, was listed on the Australian Securities Exchange in December 2010.

Current trade and other payables increased by US$32.98 million to US$160.05 million

during the Period. The amount includes a reclassification of US$56.00 million from ‘Other non-current liabilities’ in 2009, of which a balance of US$31.00 million remains to be paid as the purchase price for the Northern Leases as of 31 December 2010.

Current income tax payable decreased by US$39.57 million in the Period following an increase in the amount of prepaid tax instalments that have been paid to the Indonesian tax authorities.

Current and non-current interest bearing borrowings increased by US$106.70 million to US$313.20 million during the Period. The amount represents the loan outstanding under the 2009 Facility Agreement.

Current and non-current provisions for other liabilities and charges include amounts provided for in respect of long service leave and termination benefits required by Indonesian law and rehabilitation and dismantling costs.

Deferred income tax liabilities of US$87.85 million are mainly attributed to the fair value recognition of the assets acquired with the Jembayan mine and the Northern Leases.

Other non-current liabilities were nil as at 31 December 2010. The decrease of US$56.00 million was on account of reclassification of the acquisition costs for Northern Leases as explained above under ‘Current trade and other payables’.


COAl PROduCTION ANd OPERATIONS

Although the logistics chains of the Group’s two mines are similar, mining conditions at site are very different mainly because of licensing, geography and geology. The licence problems of Sebuku mine have effectively pushed the operations there into a small remaining area making mining extremely difficult in 2010. Jembayan, conversely, was able to operate 3 pits during 2010.

Rainfall, the natural enemy of mining in Kalimantan, was above average in most areas and took its toll on operations at

Sebuku, where at times over 50% of planned production time was lost to rain stoppages; Jembayan, which is some 350 kilometers north of Sebuku, also suffered high rainfall but its wider operating area gave more flexibility when rain fell. The strip ratios at Jembayan were 10.3:1, in line with its expected long-term average of about 11:1; Sebuku’s tight operating conditions led to it having its highest ever annual strip ratio of 4.9:1.

Full Year Ended 31 December

2010 2009

SEBUKU

Coal mined (Kt) 1,268 2,364

Product coal (Kt) 1,104 1,983

Sales (Kt) 1,091 1,922

JEMBAYAN

Coal mined (Kt) 9,287 7,019


Sales (Kt) 9,621 7,288

TOTAl

Coal mined (Kt) 10,555 9,383


Sales (Kt) 10,712 9,210

Group


2010 Coal Production (Mt) Jembayan Sebuku Group Total

Q1 2,091 244 2,335

Q2 2,465 199 2,664

Q3 2,557 166 2,723

Q4 2,333 495 2,828

Total 9,446 1,104 10,550

Total coal production for the year of 10.6Mt surpassed the previous record high of 8.5Mt.


Jembayan Mine

Again the major contributor for the Group, Jembayan mine’s output grew steadily towards another record year even though it experienced heavier than anticipated rainfall. The mine operations, its team and contractors have been outstanding all through 2010 and have continually focused on operational improvements in core fundamentals, mining strategies, equipment allocation and controls.

Despite higher production and improvements in cost control, cash costs at $47.03/t were higher in 2010 (2009: $42.86/t). The main reasons for the increase were fuel costs, which were 33% higher than 2009, and the costs of running temporary load-out facilities for part of production.

Work on the construction of the second permanent load-out line is continuing with commissioning scheduled for the end of March 2011. Some minor delays have been experienced in the project as

a result of additional engineering works at the site over the original scope of works and the delay in some material supplies. Once the new facility is operating it should have a beneficial impact on overall costs. Inventories, which began 2010 at above-average levels, were reduced as the year progressed and solutions were found for raising load-out rates. At year end 2010, inventories were at normal operating levels of around 500Kt.

The management team at Jembayan continues to explore, plan and introduce community development initiatives to enhance the benefits of the mine to the local community. Straits Asia takes the view that the support and understanding of the local community is one of the key success factors in any mining operation and Jembayan’s management team works at all levels with the local community and government to be a “good neighbour”.

COAl PROduCTION ANd OPERATIONS (cont’d)


Sebuku Mine

For the first half of 2010, a concerted effort was made to restore the pit inventory that had been lost at the end of 2009 and bring the mine back onto a plan that would at least optimize production whilst forestry licences were awaited. That work was successfully completed in H1 but unfortunately a deluge of incessant rain in Q3 resulted in work stoppages for Q3 of 545 hours or 39% of planned production time.

In Q4 the rain eased but still affected work for 402 hours or 29% of planned production time. Swift work by the management team to introduce counter-measures involving changes to our water management strategies, wall stability and innovative mining techniques, significantly improved the working conditions and the planned H2 ramp up finally began in mid Q4, several months later than originally planned. Sebuku therefore gave a comparatively strong performance in Q4, more than doubling the production of each of the previous quarters.

Strip ratios that began the year at over 6:1 fell as planned in Q4 to 3.4:1, but the average strip for 2010 of 4.9:1 was significantly over the long-term average for Sebuku mine. Cash costs in 2010 were therefore higher at $45.75/t (FY 09: $33.69/t) also reflecting higher fuel costs and lower production.

The news announced in early January 2011 that Sebuku had been issued Izin Prinsip for its Northern Leases substantially raises optimism for increasing the production rates from Sebuku mine and an end to doubts surrounding the mine’s continued viability.


humAN RESOuRCES

The Group’s workforce has grown with our expanding operations and we now employ over 1,000 people directly in 3 countries. Add to this another 4,000 people who are employed by contractors to work at our mines or in the coal logistics chains, and our Group has over 5,000 people and their families counting on our business for their livelihoods. Employment Policies

In 2010 we have spent a considerable amount of time reviewing our HR function and its policies to make sure we are still at the forefront of best practices and that the pace of the Group’s growth has not affected our commitment to training, career development and opportunity.

A cornerstone of our employment policy at our mines in Indonesia is to employ people from the communities around our mines. In doing this we upgrade skills and the benefits of employment flow directly back to those who might otherwise receive few immediate benefits and the most inconveniences from the mines. The table below shows the success of this policy:

We encourage equal opportunities at all levels in the Group although we have to recognize that working in the mines themselves almost exclusively attracts males in Indonesia. At a management, supervisory and office worker level, however, our policy is very evident. We are extremely pleased that we have the first female manager of a major mine in Indonesia and proud of the success that she has brought to Jembayan mine.

Skills Programmes

Every employee in our Group is given the opportunity to upgrade their skills and knowledge. Our mantra “Continuous Improvement” is visible in our offices.

Aside from general programmes that are continuous, such as safety training, computer literacy, understanding the environment, refresher courses, Straits Asia has programmes for improving management skills and career advancement. As individuals demonstrate their enthusiasm for improvement and that they can bring their training back into their daily schedules, so the programmes for that individual

Jembayan Mine Sebuku Mine

Total Headcount 471 451

% Local Employment 70% 75%


become more focused to maximize benefits for Straits Asia and the individual. The programmes include internal and external courses.

Our senior managers are encouraged to offer their wider experience to employees, not necessarily directly related to Straits Asia’s own business, through voluntary presentations on areas where they have special experience that may enhance the quality of life for their colleagues at work or socially. These presentations help greater management – staff interaction.

Straits Asia has paid particular attention to workplace safety education and the need to conform to standard operating procedures. The results can be seen through the Group’s lost time injury statistics from Jembayan and a zero LTI from Sebuku for over 3 years, a particularly laudable achievement by everyone at Sebuku.

Remuneration Policies

Our remuneration policies are set by the Board on recommendation of the Remuneration Committee and they are described in the Corporate Governance Section of this Annual Report.

The policies are designed to emphasise teamwork and Group responsibility whilst also recognising individual contributions. Outstanding performances receive outstanding awards. Straits Asia operates 2 equity schemes that aim to align the longer term remuneration of the more senior managers with the overall rewards of shareholders.


OCCuPATIONAl hEAlTh & SAFETY

Continuous Improvement

The Group’s culture of “Continuous Improvement” aims to deliver positive results by providing all employees and contractors with a safe and healthy working environment as is evident from our outstanding safety record:

Site LTI FR Severity Rate

Days since last LTI

Jembayan 0.60 10.65 9

Sebuku 0.00 0 1,218

Group 0.47 8.38

LTI FR = Lost time injury frequency rate

The commitment to Continuous Improve-ment in health and safety is non-negotiable. We focus substantial resources to ensure that all our employees, contractors and local communities continue to benefit from living and working in a safe and healthy environment.

Continuous Improvement requires a continuous review of health and safety rules: accordingly through the review process, regular changes are made to rules, sometimes significant, as the Group grows and needs change. We ensure that the rules and changes are understood throughout the workforce: for instance, many of the Group’s fundamental safety practices are rehearsed on a daily basis to remind employees of safety culture and procedures. There are

compulsory daily safety checks before the start of work. Where higher risks are involved, we conduct refresher courses on a set periodical basis.

All the Group’s work activities are governed by international standard Occupational Health, Safety and Environment (“OHSE”) practices. Jembayan Mine achieved certification by Occupational Health and Safety Standard (“OHSAS”) 18001:2007 in October 2010.

Group employees are given proper training for their specific tasks and are regularly retrained to improve competency. If skills are lacking or require refreshing, this will be done before a person may return to work so as to ensure that only personnel with proven competence carry out assigned duties.

Work habits are closely monitored by safety supervisors who are tasked with identifying shortfalls in the practice of health and safety procedures. Where shortfalls arise, counter-measures are undertaken or new policies are introduced to remove the resultant risk. If an incident occurs, safety teams are required to investigate and determine the root cause and to recommend and implement immediate counter-measures. These investigations are detailed and in-depth with those persons responsible for the incident being identified and held accountable. Normally after the


investigation, those involved will be required to agree to retraining, or can be suspended or terminated depending on severity.

Sebuku’s safety record is first rate. Jembayan Mine, being a significantly bigger operation with a much wider spread of activity, faces a larger number of challenges. Its record has improved substantially since the Group acquired the mine in late 2007 and management intends to continue to achieve reductions in the number of incidents.

Health and safety strategy is aimed primarily at prevention of incidents and to place safety above economic returns. At Sebuku in 2010, the Group lost substantial work hours and productivity due to the extra time and precautions taken to ensure safe working conditions before crews were allowed to start work after every rain interruption.

Audits

In addition to internal audits which have been outsourced, an external audit is conducted yearly. This is to identify weaknesses and to implement immediate preventive-measures. In addition, opportunities for further improvements identified are adopted across the Group to drive positive change.

Performance is measured against KPI’s. Areas of significance include:

• Measurement of performance against a set of leading indicators

• Compliance with legislation and regulations

• Summary and rating of incidents • Details of OHS topics discussed during

tool-box briefings and safety meetings • Summaries of compliance to OHS

training plans • Number of corrective actions

completed by due date• Number of OHS inspections completed

by due date• Number of job hazard analyses or risk

assessments completed

OHS = Occupational Health and Safety


ENVIRONmENT

Straits Asia Group is steadfastly committed to environmental protection. Rehabilitation is one of the Group’s top KPIs and each year the Group devotes substantial resources to ensure delivery on our commitment.

Straits Asia received a total of 6 awards from the Indonesian government for environment protection and improvement work in 2010. These were 3 Utama (main) awards for overall Environment Management at Jembayan and Sebuku, one Pratama (pre-main) award at Jembayan, and one Green Award and one Blue Award from the Provincial Environment Assessment Controlling Agency. The awards are based on independent and governmental agencies assessment of environment protection practices across the activities of all major mining companies in Indonesia.

The Group follows corporate Environment Performance Standards and has adopted a system conforming to ISO14001. This framework assists managers to identify and reach best practice in environment management standards, and to conform

to legislative requirements, special project regulatory commitments and the general corporate objective of Continuous Improvement.

All the Group’s environment-related KPI’s are subject to vigorous periodical checks. There is a regular internal audit and an external audit of environment work, which are designed to ensure that targets are being achieved, that business is conforming to standards plus identifying any areas for improvement. The scopes of these audits are broad and include risk identification and solutions. Special emphasis is given to independent Government audits and inspections as they provide a focal point for the Group’s resource allocation on environment matters. The discussion and feedback from the audit process are aimed at providing a platform for management to continually learn more about environment issues, practices and the need to ensure the Group’s overall compliance in meeting statutory obligations. All this is fed back into standards and to improve the Group’s programmes.


Operations

All sites underwent environment impact assessment with the Environment Ministry resulting in relevant approvals to support the Group’s mines’ expansions. The Group achieved its targeted performance without compromising any environment compliance requirements in 2010.

Research

Straits Asia continues to fund research for better environmental management practices. We work in collaboration with Indonesian and Singaporean Universities at both undergraduate and graduate levels. The Sebuku mine collaborates with the Indonesian Department of Forestry in many areas including rehabilitation techniques in the post-mined landscaping and associated completion criteria. A rehabilitation study for the Tanah Putih pit in collaboration with a nationally recognised university has started and the results will be terms of reference to implement reclamation works in the area. Straits Asia will continue to engage regional and national universities and international environment consultants when conducting environmental studies to better manage our operations.


COmmuNITY

Straits Asia is committed to ensuring community values are upheld through open, continuous and transparent relationships maintained with all key stakeholders, including government and non-government institutions, local communities, indigenous people and the broader community. Community work is primarily aimed at developing infrastructure that will improve living standards and provide long-term and sustainable economic benefits, particularly for the indigenous community around the Group’s mines.

Discussion forums with the community and governmental agencies on proposed development or improvement programmes are held periodically to ensure their views are taken into consideration, weighed and reviewed and that programmes are agreed upon before implementation. The Group’s working principals are that programmes should be managed by the community and the Group should provide financial support and practical management guidance. This is to ensure that skills are developed by the community and that they have fundamental ownership of the activity along with responsibility for the outcome. This then leads to commitment, and sustainable, long-term economic development for the community.

Examples of successful skills development programmes and how they have provided long-term and lasting employment and business opportunities for the community can be seen in new farms and crop plantations in the Group’s mines’ rehabilitation areas. Some of the programmes that the Group sponsored to help our communities to learn and manage over the years include:

• Fish, chicken and duck farming • Vocational programmes for development of local furniture and handicrafts• Vocational programmes to develop cooking skills• Development of technology in farming • Development of basic management skills In addition to economic development, the Group is committed to improving general living standards of the community by focusing resources on the community around the Group’s mines. Monthly meetings are held with community leaders to discuss issues and progress of community programmes. The proof of the Group’s commitment to improve the lives of communities can be seen through the many awards that the Group has received for community work.


One of the Group’s proudest achievements has been to lower infant mortality through pre and post natal care education for parents. The Group has sponsored schools and awards scholarships to children, some of who have gone on to achieve university graduation and professional qualifications such as doctors and accountants. These skills have then been brought back to our local communities, thus providing lasting and self-sustaining benefits.

Infrastructure that we have developed for nearby villages includes:

• New roads and rebuilding of damaged roads • New bridges and rebuilding of old bridges• Supply of clean water • Supply of electric power generation • Building of village municipal buildings for local administration• Building of new schools and providing existing schools with better facilities• Refurbishment of mosques• Maintenance work for village markets

These infrastructure programmes involve long-term plans and budgets. Initiatives are developed annually from agreed inputs from each village and a sign-off of the package by the local government and the village heads.

Our employment policies require the Group to give priority to the local community.

Recognising that necessary skills and academic qualifications will not be easily available in all cases, we are committed to provide basic training and skills development for local people who are keen to upgrade and we will provide them with long-term employment. This practice extends to our contractors’ work opportunities at the mines.

As a policy we treat local businesses as preferred suppliers for small scale business contracts.

Our commitment to trying to make the community part of our family can also be seen in our employment statistics. We have over 70% local employment at both Jembayan and Sebuku Mines and over 80% of small scale contracts have been awarded to the local community or companies that work in collaboration with the local community.

Straits Asia is committed to facilitating the preservation and protection of local properties, local customs and indigenous cultural heritage areas. All development work is implemented to preserve and protect these as a first principle.

Inevitably disputes arise. When they do we try to establish the underlying problem and then resolve it amicably and in a way that builds up trust and understanding. There were no significant disputes encountered in 2010.


INVESTOR RElATIONS

The Group’s investor relations policy is to be transparent and open with everyone in the investment community. In 2010, as in previous years, we have replied promptly to queries and requests for information from all shareholders, potential investors or analysts wherever they may be. Information is shared with all shareholders on an equal basis through communication methods that are widely available to everyone.

It is well known that Straits Asia has a proactive approach to investors and fund managers by participating in international road-shows, investor meetings and conference calls. This gives the investment community access to our top management on a regular basis to ensure that our policies, strategies and progress are understood and properly disseminated to everyone. The presentation materials that are used in these exercises are posted on the SGXNet and can also be easily accessed through the Investor Relations section of our website www.straitsasia.com.

Investors can also follow Straits Asia through our public announcements of corporate and financial news via our press releases, letters to shareholders and annual reports, all of which are disseminated in a timely manner and uploaded on Singapore’s SGXNet and our website www.straitsasia.com.

Any shareholder or other person who is interested in Straits Asia’s activities is encouraged to subscribe to the Group’s news flows by registering through our website www.straitsasia.com. Our investor relations team will also respond to direct queries as promptly as possible. The contact details are in the Company register at the front of this Annual Report.

We also encourage shareholders to come to our Annual General Meeting (“AGM”) where they can communicate directly with the Board and Management formally during the meeting and informally when the meeting has closed. Aside from being able to meet Directors face to face at the AGM, shareholders can also voice any questions or concerns they have about the Group or its business.


Project(as at 31December 2010) Measured Indicated Meas. And Ind. Inferred TOTAL

SEBUKU Tonnes(Mt)

Tonnes(Mt)

Tonnes(Mt)

Tonnes(Mt)

Tonnes(Mt)

Sebuku Island 18 40 58 42 100

Sebuku Western Leases - 420 420 380 800

Sub Total Sebuku 18 460 478 422 900

Jembayan 60 445 505 100 605

GRAND TOTAl 78 905 983 522 1,505

COAl RESOuRCE STATEmENT

General

1 The information on Coal Reserves and Resources was prepared by or under the supervision of Competent Persons as defined in the JORC code.

2 The JORC Code requires the use of reasonable economic assumptions. These include long-range commodity price forecasts which are prepared by in-house specialists. Coal Reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental regulations and relevant new information and therefore can vary from year to year.

3 Coal Resources are inclusive of Coal Reserves.

4 Rounding of figures may cause computational discrepancies.

Coal Resource Statement

1 The information in this statement that relates to Coal Resources is based on information compiled by Mr. Chris Ramsay, who is a Member of The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists.

2 Mr. Ramsay is a full-time employee of Straits Asia Resources Ltd.

3 Mr. Ramsay has sufficient experience which is relevant to the type of mineralisation and style of deposit under consideration and to the activity which he is undertaking to qualify as the Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Ramsay consents to the inclusion in this statement of the matters based on his information in the form and context in which it appears.

SUMMARY OF CHANGES

1 Changes to the Sebuku resource from 928Mt to 900Mt are the result of adjustments made to boundaries on the island. This requires that 28Mt of coal now be removed from the resource statement as an area of ground has been reclassified.

2 Changes to the Jembayan resources from 610Mt last reported at August 2010 to 605Mt at December 2010 are a result of mining depletion.


Project(as at 31December 2010) Proved Probable Total Marketable

SEBUKU Tonnes(‘000t)

Tonnes(‘000t)

Tonnes(‘000t)

Tonnes(‘000t)

Tanah Putih 4.1 - 4.1 3.4

Total Sebuku 4.1 - 4.1 3.4

JEMBAYAN Tonnes(‘000t)

Tonnes(‘000t)

Tonnes(‘000t)

Tonnes(‘000t)

Total Jembayan 20.0 102.0 122.0 122.0

GRAND TOTAl RESERVES 24.1 102.0 126.1 125.4

Coal Reserve Statement

1 The information in this statement that relates to Coal Reserves is based on information compiled by Mr. Jeremy Taylor, who is a Member of The Australasian Institute of Mining and Metallurgy.

2 Mr. Taylor is a full-time employee of PTT Asia Pacific Mining Pty. Ltd.

3 Mr. Taylor has sufficient experience which is relevant to the type of mineralisation and style of deposit under consideration and to the activity which he is undertaking to qualify as the Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Taylor consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

SUMMARY OF CHANGES

1 Sebuku Reserves have been adjusted by production to December 31, 2010. Additionally, the previously reported reserves of 1.9Mt (marketable) for coal recovered from high wall mining methods has been removed from consideration at this time due to economic and technical factors. Other minor adjustments were made to arrive at the new reserves (marketable) figure.

2 Changes to the Jembayan reserves from 127Mt last reported at August 2010 to 122Mt at December 2010 are a result of mining depletion.

COAl RESERVE STATEmENT


corporate governance

BASIS

The statement below explains the basis for the principles that Straits Asia’s Directors apply in relation to rules for corporate governance for the Group:

“Effective corporate governance.......

1. ....will improve Straits Asia’s performance2. ....will enhance corporate social responsibility3. ....will benefit all stakeholders4. ....does not mean adherence to a static set of principles5. ....requires the principles and rules to be consistently in mind for improvement6. ....targets substance over form, with improvements reflecting the circumstances

of Straits Asia Group as it grows and evolves.”

Straits Asia has various self-regulatory and monitoring mechanisms, including the appointment of external parties, to ensure that it delivers effective corporate governance in practice and all stakeholders are informed about the affairs of the Group. Straits Asia adheres to the principles embodied in the Code of Corporate Governance issued by the Singapore Council on Corporate Disclosure and Governance and complies with all material aspects of the Code.

THE BOARD

The members of the Board of Directors as at 15 March 2011 were:

Director Position Status

Dr. Chitrapongse Kwangsukstith Chairman Non-Executive Non-Independent

Dr. Chua Yong Hai Deputy Chairman Non-Executive Independent

Mr. Martin David Purvis Chief Executive Officer Executive Non-Independent

Mr. Apisit Rujikeatkamjorn Director Non-Executive Independent

Mr. Han Eng Juan Director Non-Executive Independent

Mr. Peerachat Pinprayong Director Non-Executive Non-Independent

Ms Julie Therese Hall Director Non-Executive Independent

annual report 201039


Three other persons held office as Directors at the beginning of 2010 and resigned during the year:

Name Date of Resignation Status

Mr. Richard Ong Chui Chat 1 March 2010 Executive Non-Independent

Mr. Milan Jerkovic(alternate: Peter Storey)

15 November 2010 Non-Executive Non-Independent

Mr. Michael George Gibson(alternate: James Carter)

15 November 2010 Non-Executive Non-Independent

Details of Board members’ experience, expertise and qualifications are set out earlier in this annual report. As at 15 March 2011 the Board consisted of seven Directors, of which more than one-half are considered independent. There was no change to the independence status of the Directors in 2010.

The Board has adopted a formal charter (available for download through Straits Asia website at www.straitsasia.com) that includes a requirement for division of responsibilities of the Chairman and CEO. The Chairman and the CEO are not related.

The Board believes the current structure of the Board is appropriate taking into account the nature and extent of the Group’s activities. As a group, the Board bring with them a broad range of industry knowledge, expertise and international experience in areas such as resources, geology, mining engineering, marketing, financing and accounting.

Broadly the key responsibilities of the Board are:

1. setting the strategic direction of Straits Asia with management and monitoring management implementation of that strategy;

2. evaluating, approving and monitoring major capital expenditure, capital management and all major corporate transactions;

3. approving the annual operating budget, annual shareholders report and annual financial accounts;

4. appointing, monitoring, managing the performance of, and if necessary terminating the employment of the Chief Executive Officer;

5. approving and monitoring Straits Asia’s risk management framework; and 6. ensuring compliance with applicable law, SGX listing rules and other relevant

regulations.

40Straits asia resources Limited


The Board has adopted a set of guidelines on matters that require the Board’s approval. Matters that are specifically reserved to the Board for decision include those involving business plans and budgets, material acquisitions and disposal of assets, corporate or financial restructuring, corporate strategy, share issuance, dividends, and other returns to shareholders.

The Board has delegated specific responsibilities to three Committees:

• Audit,RiskandComplianceCommittee; • NominationCommittee;and • RemunerationCommittee.

More information on these Committees is set out below. The Committees have authority to examine particular issues and report back to the Board with their decisions and recommendations, so that responsibility for the final decision on all matters lies with the Board.

The Chairman of the Board, Dr Chitrapongse Kwangsukstith, a Non-Executive Director, is responsible for leading the Board and facilitating its effectiveness. In addition the Chairman’s responsibilities include:

1. ensuring that Board meetings are held as and when necessary;2. leading the Board to ensure its effectiveness;3. approving the agenda of each Board meeting in consultation with the other Directors

and Company Secretary;4. reviewing Board papers and ensuring that Board members are provided with

accurate, timely and clear information;5. facilitating effective contribution from the Non-Executive Directors in particular;6. encouraging constructive relations between the Executive Directors and Non-

Executive Directors; and7. promoting high standards of corporate governance.

The Non-Executive Directors’ role is to constructively challenge and help to develop proposals on strategy. Non-Executive Directors also review the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They meet on their own from time to time without the presence of management.


The Board schedules four regular Board meetings per year with other meetings held as and when deemed necessary. Key matters requiring decision are reserved for resolution at Board meetings rather than by circulation to facilitate discussion. The Articles of Association of Straits Asia allow directors to participate in a Board meeting by telephone conference or videoconference, whereby all persons participating in the meeting are able to communicate as a group, without requiring the director’s physical presence at the meeting.

Board and Committee meetings held during 2010 and attendance by each Director was:

Board Audit Committee



Number of Meetings 4 4 2 1Attendance by Directors holding office at the date of this Annual Report:Dr. Chitrapongse Kwangsukstith 4 * * *Mr. Martin David Purvis 4 * * *Mr. Apisit Rujikeatkamjorn 4 4 2 1Mr. Peerachat PinprayongAppointed on 1 June 2010

2 * * *

Dr. Chua Yong Hai 4 4 1 1Mr. Han Eng Juan 4 4 1 1Ms. Julie Therese HallAppointed on 15 March 2011

0 * * *

Attendance by Directors who resigned during the year:Mr. Richard Ong Chui ChatResigned on 1 March 2010

1 * * *

Mr. Milan JerkovicResigned on 12 November 2010

3 * * 1

Mr. Michael George GibsonResigned on 12 November 2010

3 4 * *

* Not applicable

The CEO, Mr. Martin David Purvis, is an executive Director responsible for the business direction and operational decisions of the Group.

The Company Secretary has a clearly defined set of responsibilities. The Company Secretary attends all meetings of the Board and ensures that Board’s procedures are followed and that applicable rules and regulations are complied with. Under the Articles of Association of Straits Asia, the decision to appoint or remove the Company Secretary can only be taken by the Board as a whole. The Company Secretary holds instructions to bring to Directors’ attention, information on any seminars that may be of relevance or use to them.



All directors (and key executives reporting to the CEO) have been given formal letters of appointment outlining key terms and conditions of their appointment.

New directors to the Board are provided with an orientation of the Group’s activities including briefings by key executives and visits to the Group’s operations. Copies of relevant policies and procedures, operating budgets and corporate governance practices (including dealing in Straits Asia’s securities) are provided to the Directors upon commencement.

BOARD INFORMATION

In order to assist directors fulfil the Board’s responsibilities, management is required to provide the directors with monthly reports on the Group’s activities containing adequate summarised information, discussion and analysis about the Group’s results, key performance indicators, profit and loss, cash flow and balance sheet statements. Papers for Board meetings are generally issued to the directors within three to five days prior to the meeting, which allows sufficient time to prepare for the meeting and, if necessary, to enable the Directors to obtain further explanations and briefings prior to the meeting. The Board papers include reports on:

• PerformanceoftheGroup’soperatingdivisions; • Health,safetyandenvironmentalmatters; • TheGroup’srelationswithcommunities; • Explorationactivities; • Groupmanagementaccountsandtreasuryinformation; • MinutesofthepreviousBoardandCommitteemeetings; • Contractreporting;and • Businessdevelopmentandmarketing

The reports include explanatory information relating to matters to be brought to the Board, copies of relevant documents, budgets, projections and monthly financial statements (with major variances against budgets highlighted and explained). All directors also have unrestricted access to the Group’s records, senior management and information if they request for further information or explanations on any matter. Senior managers who have prepared papers for a Board meeting, or who can provide additional insight into a matter to be discussed, are invited to present the paper or attend at the relevant time during the Board meeting.



All directors have separate and independent access to Straits Asia’s senior management, including the CEO, the Company Secretary and the Group’s external and internal auditors. Queries by individual directors on circulated papers are directed to management who will respond accordingly. A director of Straits Asia is entitled to seek independent professional advice (including legal, accounting and financial advice) at Straits Asia’s expense on any matter connected with the discharge of the Director’s responsibilities. This is formalised in the Board Charter.

NOMINATION COMMITTEE

The Nomination Committee is responsible for making recommendations to the Board on all Board appointments and also for: 1. making recommendations to the Board on the re-nomination of directors at regular

intervals and at least once every 3 years for each director, as required by the Articles of Association of Straits Asia;

2. determining annually the independence of directors;3. conducting a formal assessment of the effectiveness of the Board as a whole; and4. determining whether a director who has multiple Board representations is able to

and has been adequately carrying out his duties as a director.

The Committee held 1 meeting during 2010.

The members of the Nomination Committee during 2010 were all independent and Non-Executive Directors:

• Mr.ApisitRujikeatkamjorn(Chairman) • Dr.ChuaYongHai • Mr.HanEngJuan

The Committee has a written charter that has been endorsed by the Board and is available for download through Straits Asia website at www.straitsasia.com. The Chairman, Mr Apisit Rujikeatkamjorn does not have any relationship with a substantial shareholder (a person holding greater 5% of Straits Asia’s issued capital). The Board is satisfied that the structure of the Committee is appropriate at this stage of Straits Asia’s activities.



In a search, nomination and selection process for new Directors, the Nomination Committee identifies the key attributes that an incoming Director should have, based on the experience and skills of the existing Board, and the requirements for the Group. After endorsement by the Board of the key attributes, the Nomination Committee searches for an appropriate person through personal and professional contacts and if required, executive search firms. The Chairman of the Board also provides feedback to the Committee on the appointment or nomination of new Directors or resignation of existing Directors. When the Committee considers recommendations for re-nomination to the Board, the Director’s contribution and performance are taken into account.

In deciding how to evaluate the Board’s performance the Committee proposes objective performance criteria to the Board for assessing how the Board has enhanced long-term shareholder value. This includes a process where each director separately reviews the Board’s size, composition, information, effectiveness, contributions, accountability and standards of conduct, and an assessment by the Committee of Straits Asia’s share price performance against relevant market indices and peers, returns on equity and assets. The Board has decided that the present appraisal system is sufficient and it does not conduct an assessment of the contribution by each individual director to the effectiveness of the Board. Each member of the Nominating Committee must abstain from voting on any resolutions in respect of his re-nomination as director.

The Board considered its overall performance for 2010 had improved from the prior year with improved average scores in most areas of the assessment. While the number of areas receiving a notably lower average score had reduced, the Nomination Committee and management will continue to focus on areas receiving the lowest average scores to seek improvements.

The Nomination Committee is satisfied that sufficient time and attention are being given by the directors to the affairs of the Group, notwithstanding that some of the directors have multiple board representations, and there is presently no need to implement internal guidelines to address their competing time commitments.

REMUNERATION COMMITTEE

The Remuneration Committee has a written charter that has been endorsed by the Board and is available for download through Straits Asia website at www.straitsasia.com. The Committee is responsible for reviewing and making recommendations to the Board on:

1. executive remuneration and incentives (including cash and long-term incentives) including the remuneration of the CEO;

2. the remuneration of Non-Executive Directors;3. superannuation arrangements;4. recruitment, retention performance measurement and terminations policies and

procedures for directors, and senior executives; and5. remuneration of employees who are related to our Substantial Shareholders.



The Committee is also responsible for administering the Straits Asia Employee Share Option Plan and the Straits Asia Executive Share Acquisition Plan.

The Remuneration Committee consists entirely of independent Directors and its members are:

• Dr.ChuaYongHai(Chairman) • Mr.ApisitRujikeatkamjorn • Mr.HanEngJuan

The Committee held 2 meetings during 2010.

The Committee undertakes reviews of its policies annually and makes recommendations, in consultation with the Chairman of the Board, to the Board for approval. Straits Asia’s annual reports disclose the remuneration of our Directors, our top five key executive officers as well as employees who are immediate family members of a director or our Chief Executive Officer and whose annual remuneration exceeds S$150,000.

In the event that any member of the Committee is interested in a decision to be made by the Remuneration Committee, he must abstain from participating in the decision-making process.

Principles Used for Determining Remuneration

The objective of Straits Asia’s executive remuneration framework is to ensure rewards for performance are competitive and appropriate for the results delivered. The framework aims to align executive rewards with achievement of the Group’s strategic objectives and the creation of value for shareholders.

When making recommendations on compensation and incentive plans the Committee has regard to market conditions, the performance of individuals and the Group as a whole. The Remuneration Committee has a formal set of calculations for its consideration when assessing levels of remuneration. There is emphasis on performance of Straits Asia in the current year and incentives for future years with an important consideration being the alignment of management with shareholder interests. The Remuneration Committee may also consider advice and views from external sources (such as expert consultants and labour market surveys) and from internal recommendations provided by management.

Compensation for Directors and Executives are set at levels to attract and retain a strong team to manage and oversee Straits Asia’s activities. The framework provides a mix of fixed cash and short-term rewards (bonuses) and longer-term incentives through participation in Straits Asia’s equity programs. As executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of “at risk” rewards and long-term incentives.



Executive Pay

Remuneration packages are based around a combination of:

• cashsalary; • benefits; • short-termincentives(cashbonus);and • long-termincentivesthroughparticipation intheStraitsAsiaoptionandshare

acquisition plans.

Service contracts for Executive Directors (of which there is only one at present) are for fixed appointment periods that are not excessively long and they do not contain onerous removal clauses. The Remuneration Committee is responsible for reviewing the compensation commitments, if any, that the directors’ contracts of service entail in the event of early termination.

The level of short-term incentive (cash bonus) for executives is determined after completion of the full-year audited accounts. In reaching recommendations, the Committee has used formulas that include shareholder returns, performance against budget, the Group’s cash needs, net profit and the Group’s prior performance. The review is normally performed in February and the bonus (if any) is paid in March.

Senior executives undergo a performance appraisal by the Chief Executive Officer, and these results are reported to the Remuneration Committee and the Board of Directors. When approving the review of a senior executive’s package (including cash bonus), the Board takes into consideration the performance of the individual and the Group during the year, comparisons with industry surveys and cost of living adjustments. The Board believes the structure of each executive’s cash package (excluding equity participation) is at the right levels to maintain and keep what the Board believes is a talented and capable senior executive team. Benefits principally include medical insurance, expatriate living allowances, motor vehicle and flight allowances.

Option and Share Acquisition Plans

The Board uses its discretion when deciding on the allocation of shares, options and bonus payments. The allocation of shares to executives during 2010 was based on a meaningful allotment that will incentivise and align the executive’s interests with those of other shareholders. There have been allocations of shares and options over a period of years now and the Board believes that encourages the executives to have an appropriate balance of short-term and long-term outlooks on Straits Asia’s performance.



Directors and Non-Executive Directors

Fees and payments to Directors and Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the directors. The Board reviews Non-Executive Directors’ fees and payments annually. The Chairman is not present at any discussions relating to determination of his own remuneration. Non-Executive Directors are remunerated by way of director’s fees and a special award of options approved by shareholders. Non-Executive Directors are not eligible to receive retirement benefits.

The remuneration of Directors and top 5 key executives in 2010 is set-out below. Unless stated otherwise all executives were employed in the Group for the full year.

Name Position Cash Fees Bonus Benefits in kind Equity

Total 2010

Notes (B) (C) (D) (E)DirectorsS$4,000,000 to below S$4,250,000Mr. Richard Ong (A)

Former Chief Executive Officer

79% 0% 0% 21% 0% 100%

S$750,000 to below S$1,000,000Mr. Martin David Purvis

Chief Executive Officer 95% 0% 0% 0% 5% 100%

Below S$250,000Dr. Chitrapongse Kwangsukstith

Non Executive Chairman

0% 100% 0% 0% 0% 100%


0% 100% 0% 0% 0% 100%


Independent Non-Executive Director

0% 100% 0% 0% 0% 100%


0% 100% 0% 0% 0% 100%

Key executives S$750,000 to below S$1,000,000Mr. David Lim Chief Operating Officer 64% 0% 17% 0% 19% 100%S$500,000 to below S$750,000Mr. Graeme Tivey Company Secretary 57% 0% 18% 15% 10% 100%S$250,000 to below S$500,000Mr. Shaun Day (F) Chief Financial Officer 89% 0% 0% 6% 5% 100%Mr. Archie Enriquez

Director, Marketing 62% 0% 17% 13% 8% 100%

Mr. Jeremy Figgins

Group Manager Corporate Relations

72% 0% 16% 0% 12% 100%



Notes: A Mr. Richard Ong resigned as a Director and CEO with effect from 1 March 2010. B Includes expatriate country allowances, contributions to the Central Provident

Fund and leave payouts (where applicable). C Includes short term performance bonus and service bonus (where applicable).

Assessment of 2010 performance bonuses for the CEO and Key Management Personnel was considered and approved after the finalisation of the 2010 audited accounts.

D Includes, housing, motor vehicle and annual flight allowances. E The fair value of shares issued under the Executive Share Acquisition Plan

and Employee Share Option Plan in 2010. There are no cash benefits to the directors and key executives until the share price exceeds the issue or exercise price and the minimum holding periods have been satisfied. The inputs for pricing the grant of shares and options to directors and key executives under the shareholder approved schemes were:

S$2.27 options issued

June 2010

S$2.64 shares issued

November 2010Exercise price (5-day volume weighted average price (“VWAP”) before the offer date)

2.27 -

Issue price (Last closing price before the offer date) - 2.64Grant date June 2010 November 2010Expiry date June 2015 -Expected volatility of company’s shares 65% -Expected dividend yield 3.35% -Risk-free interest rate 0.84% -

F Commenced 30 May 2010.

2009


Total 2009

Notes (B) (C) (D) (E)DirectorsS$1,500,000 to below S$1,750,000Mr. Richard Ong (A) Chief Executive Officer 45% 0% 13% 2% 40% 100%S$250,000 to below S$500,000Mr. James Carter (F) Former Chief Financial

Officer (Alternate to Michael Gibson)

54% 0% 17% 0% 29% 100%




Total 2009

Below S$250,000Dr. Chitrapongse Kwangsukstith

Non Executive Chairman

0% 100% 0% 0% 0% 100%


0% 100% 0% 0% 0% 100%


0% 100% 0% 0% 0% 100%


Independent Non-Executive Director

0% 100% 0% 0% 0% 100%

Key Management Personnel S$500,000 to below S$750,000Mr. David Lim Chief Operating Officer 59% 0% 13% 0% 28% 100%S$500,000 to below S$750,000Mr. Hui Mun Leong General Manager

Business Development & Engineering

66% 0% 11% 0% 23% 100%

S$250,000 to below S$500,000Mr. Graeme Tivey Chief Financial Officer 49% 0% 12% 24% 15% 100%Mr. Jeremy Figgins Chief Corporate Officer 58% 0% 11% 0% 31% 100%Mr. Dwi Suseno General Manager Tax

and Offshore Legal Affairs

62% 0% 6% 32% 0% 100%

Notes: A Mr Richard Ong resigned as a Director and CEO with effect from 1 March 2010. B Includes expatriate country allowances, contributions to the Central Provident

Fund and leave payouts (where applicable). C Includes short term performance bonus and service bonus (where applicable).

Assessment of 2010 performance bonuses for the CEO and Key Management Personal was considered and approved after the finalisation of the 2009 audited accounts.

D Includes, housing, car and annual airfares allowances. E The fair value of shares issued under the Executive Share Acquisition Plan

and Employee Share Option Plan in 2009. There are no cash benefits to the directors and key executives until the share price exceeds the issue or exercise price and the minimum holding periods have been satisfied. The inputs for pricing the grant of shares and options to directors and key executives under the shareholder approved schemes were:




April 2009


April 2009

S$1.22 options issued

April 2009Issue price (5 day Volume weighted average price (“VWAP”) before the offer date) S$1.12 S$1.105Exercise price for options - - $1.22Grant date April 2009 April 2009 April 2009Expiry date - - April 2014Expected volatility of company’s shares - - 65%Expected dividend yield - - 3-5%Risk-free interest rate - - 1.42%

F Mr James Carter was Chief Financial Officer until May 1, 2009 and his remuneration relates to his holding that office as an employee of Straits Asia.

ACCOUNTABILITY, AUDIT AND RISK MANAGEMENT

The Board is responsible for providing a balanced and understandable assessment of the Group’s performance, position and prospects when presenting interim and other price sensitive public reports and reports to regulators (if required).

Management provides to members of the Board for their endorsement, annual operating and capital budgets, longer term scenario planning and key performance indicator targets for management.

There is a whistleblower procedure in place whereby staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

Audit, Risk and Compliance Committee

The Audit, Risk and Compliance Committee (“Audit Committee”) has a written charter that has been endorsed by the Board and is available for download through Straits Asia website at www.straitsasia.com. The roles and responsibilities of the Audit Committee include:

• reviewingtheannualauditplansofourexternalandinternalauditors; • reviewingtheexternalandinternalauditors’findingsontheirevaluationofthe

Group’s system of internal controls, including accounting controls; • reviewing the significant financial reporting issues and judgments so as to

ensure the integrity of the financial statements of Straits Asia and any formal announcements relating to Straits Asia’s financial performance;



Audit, Risk and Compliance Committee (continued)

• reviewingthescopeandresultsoftheauditanditscost-effectiveness,andtheindependence and objectivity of the external auditors;

• reviewing the adequacy of our internal controls and the effectiveness of ourinternal audit function;

• reviewingthequarterly,half-yearandfull-yearbalancesheetsandprofitandlossaccounts of the Group;

• reviewingtheassistancegivenbyourofficerstotheAuditCommittee,externalauditors and internal auditors, where applicable;

• reviewinginterestedpersontransactions; • makingrecommendationstotheBoardontheappointment,reappointmentand

removal of our external auditors, and approving the remuneration and terms of engagement of the external auditor; and

• meetingwith theexternalauditors,andwith the internalauditors,without thepresence of Straits Asia’s management, at least annually;

Apart from duties listed above, the Audit Committee will commission and review the findings of internal investigations into any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position.

During 2010, the Audit Committee comprised only Non-Executive Directors and the members were:

• MrHanEngJuan (Chairman) • MrApisitRujikeatkamjorn • DrChuaYongHai

Details of the qualifications and experience of the Audit Committee members are detailed on pages 14 and 15 of this Annual Report. The Board considers that all members are suitably qualified to perform the roles and responsibilities of the Audit Committee.

The Committee held 4 meetings during 2010. Some of these meetings were also attended by the Chief Financial Officer. External auditors were also present at the relevant times during the meetings. The Committee also met 4 times with the external and internal auditors without any management being present.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and recommends to the Board the nomination of the external auditors for re-appointment. The Audit Committee has conducted an annual review of all non-audit services provided by the auditors and is satisfied that the nature and extent of such services do not affect the independence of the external auditors.



A summary of audit and non-audit fees paid by the Group to the Auditors in 2010 and 2009 is set out below:

US$’000 2010 2009Auditors remuneration paid/payable 939 628Other fees paid/payable * 43 168

* Mainly relates to tax advisory services.

Risk Assessment and Management

An extensive overview of potential risks facing the operations of our business as seen at the time of our IPO in November 2006, was disclosed in our IPO offering document, a copy of which is available for download from our website www.straitsasia.com. These risks are reviewed by management and reported on to the Audit Committee on a formal basis.

The integrity of Straits Asia’s financial reporting relies upon a sound system of risk management and control. Straits Asia does not have a separate Risk Management Committee as, given the current size of the Group and Board, the directors believe there are no efficiencies in forming a separate Risk Management Committee. The Board has directed the Audit Committee to cover risk matters.

Straits Asia continued to undertake an annual formal risk management review in 2010. Straits Asia does not have a single specific risk management policy, but rather, financial and operating risks are addressed through approved policies and procedures covering specific issues in the various aspect of the Group’s operations i.e. including financial, contract management, safety and environmental activities.

Straits Asia engages an insurance broker for an annual assessment of the coverage for insured assets and risks.

The Board believes that it has a thorough understanding of Straits Asia’s key risks and is managing them appropriately.



Internal Audit and non-Financial Audits

The Board (through the Audit Committee) is responsible for reviewing the adequacy of the Group’s internal controls and the effectiveness of the internal audit function. After assessing the relative size and comparative lack of complexity in the Group’s operations, the Board has determined that the appointment of a full-time internal auditor is not warranted and therefore Straits Asia retains an external firm, Ethos Advisory Pte Ltd, to carry out the Group’s internal audit function. The internal auditor reports primarily to the Chairman of the Audit Committee, which is responsible for approving the internal audit plan and ensuring that it is adequately resourced. The internal auditor has adopted the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors.

The Audit Committee reviews the adequacy of the Group’s internal controls with the Internal Auditors by a continuous process. Various specific and general assignments have been conducted by the internal auditors during 2010. Results of internal audits are discussed formally with management at the Audit Committee and, where necessary, policies and procedures are revised and improved and an action timetable is agreed for implementation.

In addition to financial audits, Straits Asia’s mines are subjected to annual external safety and environmental audits to international standards. Straits Asia engages an insurance brokering firm as part of Straits Asia’s annual assessment of the coverage for insured assets and risks. The results of all the various audits and insurance reviews are reported to Board at least annually.

The Board has reviewed and is satisfied with the adequacy of the Group’s internal controls established by management.

COMMUNICATION WITH SHAREHOLDERS

Strategy

Straits Asia aims to maintain an open and transparent position with all stakeholders by using effective communication methods that are widely available to members of the public. Shareholders and other persons interested in Straits Asia’s activities are able to subscribe to Straits Asia news through Straits Asia’s website www.straitsasia.com. Our investor relations programme will also respond to queries from shareholders or other interested persons as promptly as possible.

Straits Asia observes the obligation to provide timely and fair disclosure of material information in accordance with the Corporate Disclosure Policy of the SGX-ST.



All information disclosed to the Singapore Exchange is posted on Straits Asia’s website as soon as it is disclosed to the Singapore Exchange. When analysts are briefed or other presentations or briefings are given to members of the public about the Group, the material used in the presentation is released to the Singapore Exchange and posted on Straits Asia’s website www.straitsasia.com.

Procedures are in place to determine if price sensitive information has been inadvertently disclosed, and if this should happen, the information will be released to the Singapore Exchange and posted on Straits Asia’s website www.straitsasia.com.

Shareholder Participation and General Meetings

The views of shareholders on matters affecting the Group are welcome at any time, not limited to shareholder meetings and shareholder participation at general meetings is particularly encouraged and prepared for.

At Straits Asia’s Annual General Meeting, the Board (through the CEO), presents an overview on the progress and performance of the Group. The Chairmen of the Audit, Nomination and Remuneration Committees, or members of the Committees standing in for them, are present at the meeting (and other shareholder meetings held by the Straits Asia if necessary) to address shareholders’ queries. Senior management are also present to respond to operational questions from shareholders. The external auditors attend the Annual General Meeting and are available to respond to questions about the conduct of the audit and content of the independent audit report. Separate resolutions are proposed for substantially separate issues at the meeting. Shareholder participation is additionally encouraged through a question and answer session, as well as through the opportunity to meet informally with the directors, senior management and auditors personally after the meeting closes.

Straits Asia’s Articles of Association allow a shareholder to vote through one or more proxies who can be nominated by the shareholder. The Board has not considered at this point in time in upgrading this provision although the Articles of Association allow for the Board to approve and implement voting methods including by mail, e-mail or facsimile. The Board has not approved any of these alterative voting methods but may do so if this is of sufficient interest to Straits Asia’s shareholders.

In accordance with the Singapore Companies Act, minutes of general meetings are available to be inspected by any shareholder without charge at Straits Asia’s premises. Minutes will include any substantial comments or queries from shareholders and responses from the Board and management.



OTHER GOVERNANCE MATTERS

Securities Trading Policy

A formal Securities Trading Policy applies to all employees of the Group and its Directors and is available for download through Straits Asia website at www.straitsasia.com.

The policy prohibits Directors and Senior Management from dealing in Straits Asia’s securities during closed or embargo periods (two weeks before the date of announcement of results for each of the first three quarters of the Group’s financial year and one month before the date of announcement of the full year’s financial results). This restriction is over and above the requirement prohibiting trade in Straits Asia’s securities when in possession of inside information. Interested Person Transactions

Straits Asia has established procedures to ensure that all transactions with interested persons are reported on a timely basis to the Audit Committee and that the transactions are carried out on normal commercial terms. At the Annual General Meeting, shareholders may be invited to mandate under Rule 920 of the rules of the SGX-ST (Shareholders’ Mandate), specific Interested Party Transactions (“IPTs”) that are anticipated in the next financial period. All IPTs are reviewed by the internal auditors which report their findings to the Audit Committee.

The aggregate value of all interested person transactions (excluding transactions less than $100,000) for the financial year ended 31 December 2010 are shown in the table below. There were no transactions conducted under a Shareholders’ Mandate in 2010 as no mandate was sought from Shareholders in 2010.

Interested Person Not conducted under

Shareholders’ MandateConducted under

Shareholders’ Mandate PT Indo Muro Kencana $3,300,000 -PTT Asia Pacific Mining Pty Ltd $1,837,080 -Director $1,213,000 -



FInancIaLStateMentS

Directors’ Report

Statement by Directors

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Balance Sheets

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Shareholder Information

Notice of Annual General Meeting

Proxy Form

586869

71

72

73

74

75

76

136

138

145

DIrectorS’ reportFor the financial year ended 31 December 2010

The directors present their report to the members together with the audited financial statements of Straits Asia Resources Limited and its subsidiaries (“the Group”) for the financial year ended 31 December 2010 and the balance sheet of Straits Asia Resources Limited (“the Company”) as at 31 December 2010.

Directors

The directors of the Company in office at the date of this report are as follows:

Dr. Chitrapongse Kwangsukstith Non-Executive ChairmanDr. Chua Yong Hai Independent Non-Executive DirectorMr. Martin David Purvis Executive Director and Chief Executive OfficerMr. Peerachat Pinprayong Non Executive Director (appointed on 1 June 2010)Mr. Han Eng Juan Independent Non-Executive DirectorMr. Apisit Rujikeatkamjorn Independent Non-Executive Director

Arrangements to enable directors to acquire shares or debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed under “Options issued to directors” on page 64 of this report.


DIrectorS’ report (cont’D)For the financial year ended 31 December 2010

Directors’ interests in shares or debentures

a) According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Holdings registered in nameof director or nominee

Holdings in which a directoris deemed to have

an interest

At 31.12.2010

At 1.1.2010or date of

appointment,if later At 31.12.2010


appointment,if later

Company

(No. of ordinary shares)

Mr. Martin David Purvis 1,322,242 375,000 - -

Dr. Chua Yong Hai - 100,000 100,000

Straits Resources LimitedRelated corporationMr. Martin David Purvis 2,529,826 2,529,826 110,000 110,000

PTT Public Company LimitedUltimate holding corporationMr. Apisit Rujikeatkamjorn - 20,000 216,018 217,708

Dr. Chitrapongse Kwangsukstith 206,590 206,590 34,800 -



Directors’ interests in shares or debentures (continued)

Directors’ interests in shares or debentures

Holdings registered in nameof director or nominee

Holdings in which a directoris deemed to have

an interest

At 31.12.2010


appointment,if later At 31.12.2010


appointment,if later

PTT Exploration andProduction Public Company LimitedRelated corporationMr. Apisit Rujikeatkamjorn 100,000 - - 107,500

Dr. Chitrapongse Kwangsukstith 222,000 - 160,000 -

Mr. Peerachat Pinprayong 16,500 - - -

PTT Chemical PlcRelated corporationMr. Apisit Rujikeatkamjorn - - 47,094 -

PTT Aromatics and Refining PlcRelated corporationMr. Apisit Rujikeatkamjorn - - 467,999 -

(b) According to the register of directors’ shareholdings, certain directors holding office at the end of the financial year had interests in options to subscribe for ordinary shares of the Company granted pursuant to the Straits Asia Resources Limited option plan as set out below and under “Options issued to directors” on page 64 of this report.

No. of unissued ordinary shares under option

2008 Options At 31.12.2010

At 1.1.2010 or date ofappointment,

if later

Dr. Chua Yong Hai 150,000 150,000

Mr. Han Eng Juan 100,000 100,000

(c) The director’s interests in the ordinary shares of the Company as at 21 February 2011 were the same as those at 31 December 2010.



Directors’ contractual benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report, except that. Dr Chitrapongse Kwangsukstith has a directorship with a related corporation of PTT Public Company Limited and has received remuneration in that capacity, and Mr Apisit Rujikeatkamjorn has a directorship with a related corporation of PTT Public Company Limited and has received remuneration in that capacity.

Employee Share Option Plans

The Company’s initial Employee Share Option Plan (“Option Plan 2007”) for key management personnel and employees of the Group was approved by shareholders of the Company at the Annual General Meeting on 30 April 2007. Option Plan 2007 complies with the relevant rules set out in the Singapore Exchange Listing Manual. In order to remain an attractive and competitive employer, it is essential that the Company adopt incentive plans which will enable us to reward and retain employees. Option Plan 2007 gives the Company the flexibility to build a variable component into the remuneration package of all deserving employees through the grant of options.

The objective of Option Plan 2007 is to provide employees of the Company and its subsidiaries with the opportunity of participating in the equity of the Company so as to provide an incentive for employees to achieve greater success and profitability for the Group and to maximise the long term performance of the Group.

The exercise price of the options is determined at the average of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange for five market days immediately preceding the date of the grant, plus a 10% premium. No options are granted at a discount to the prevailing market price of the shares. 50% of the options vest one year from the grant date and the remaining 50% of the options vest two years from the grant date. Once the options are vested, they are exercisable for a period up to five years from the grant date.

The aggregate number of shares granted under Option Plan 2007 shall be limited to 15% of the issued share capital of the Company from time to time. The restriction on the size of Option Plan 2007 shall not be amended without the prior approval of the shareholders of the Company and provided that the aggregate number of new shares granted under Option Plan 2007 on any date, when added to the number of new shares issued and issuable in respect of:

(a) all options granted under Option Plan 2007, and

(b) all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company and for the time being in force, shall not exceed 15% of the issued share capital of the Company on the day preceding that date.

Only full or part time employees (excluding any directors of the Company) of the Group are eligible to participate in Option Plan 2007 (“Eligible Employees”). Notwithstanding the above, Controlling Shareholders and their Associates are not eligible to participate in Option Plan 2007.


Employee Share Option Plans (continued)

Option Plan 2007 is administered by the Remuneration Committee in its absolute discretion with such powers and duties as are conferred on it by the Board.

The Remuneration Committee may in its absolute discretion offer options to Eligible Employees during the period which Option Plan 2007 is in force, which is 10 years from the date it was adopted by our shareholders, provided that in the event that an announcement on any matter of any exceptional nature involving unpublished price sensitive information is made, options may only be granted on or after the second market day from the date on which such announcement is made.

No options have been granted to Controlling Shareholders of the Company or their Associates (as defined in the Listing Manual of the Singapore Exchange Securities Trading Limited).

No participant under the scheme has received 5% or more of the total number of options available under the scheme.

Option Plan 2007 became operative upon the Company granting options to subscribe for 735,000 ordinary shares of the Company on 24 March 2008 (“2008 Options”) and additional options to subscribe for 250,000 ordinary shares of the Company on 30 April 2008 (“2008 Options”). On 23 April 2009, the Company granted options to subscribe for 535,000 ordinary shares of the Company at an exercise price of S$1.22 per share (“2009 Options”). Particulars of the 2008 Options and 2009 Options were set out in the Directors’ Report for the financial years ended 31 December 2008 and 31 December 2009 respectively.

On 23 June 2010, the Company granted options to subscribe for 485,000 ordinary shares of the Company at an exercise price of S$2.27 per share (“2010 Options”). 50% of these shares are exercisable from 23 June 2011, with the remaining 50% exercisable from 23 June 2012. These options expire on 23 June 2015. The total fair value of these options granted was US$300,000 using the Binomial Option Pricing Model.

No more options to subscribe to ordinary shares will be granted under the Option Plan 2007.

The Company’s revised Employee Share Option Plan (“Option Plan 2010”) for key management personnel and employees of the Group was approved by shareholders of the Company at an Extraordinary General Meeting on 19 November 2010. Option Plan 2010 complies with the relevant rules set out in the Singapore Exchange Listing Manual. In order to remain an attractive and competitive employer, it is essential that the Company adopt incentive plans which will enable us to attract, reward, motivate and retain employees. Option Plan 2010 gives the Company the flexibility to build a variable component into the remuneration package of all deserving employees through the grant of options and is key in ensuring that the Company offers market-competitive and responsible remuneration.

The objective of Option Plan 2010 is to provide employees of the Company and its subsidiaries with the opportunity of participating in the equity of the Company so as to provide an incentive for employees to achieve greater success and profitability for the Group and to maximise the long term performance of the Group.

The exercise price in respect of each option is the last traded share price of the Company’s ordinary shares as quoted on the Singapore Exchange for the day immediately preceding the date of the grant, rounded to the nearest whole cent. No options are granted at a discount to the prevailing market price of the shares. 40% of the options vest one year from the grant date; a further 30% of the options vest between the second



Employee Share Option Plans (continued)

and third year anniversary of the grant date; and the remaining 30% of the options vest three years from the grant date. Once the options have vested, they are exercisable for a period up to five years from the grant date, after which they expire.

The aggregate number of shares granted under Option Plan 2010 shall be limited to 15% of the issued share capital of the Company from time to time. The restriction on the size of Option Plan shall not be amended without the prior approval of the shareholders of the Company and provided that the aggregate number of new shares granted under Option Plan 2010 on any date, when added to the number of new shares issued and issuable in respect of:

(a) all options granted under Option Plan 2010; and

(b) all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company for the benefit of employees and for the time being in force, including the Straits Asia Executive Share Acquisition Plans and any other old plans and schemes, shall not exceed 15% of the issued share capital of the Company on the day preceding that date.

All employees of the Group are eligible to participate in Option Plan 2010 except:

(a) controlling shareholders;

(b) associates of controlling shareholders;

(c) directors of controlling shareholders; and

(d) directors of associates of controlling shareholders

As at 31 December 2010, PTT Asia Pacific Mining Pty Ltd (“PTT APM”), a company incorporated in Australia and having its registered address at Level 2, 56 Ord St., West Perth, W.A., Australia, holds in aggregate, 514,679,220 Shares in the Company, amounting to 45.6% of the entire issued and fully paid-up share capital of the Company, excluding those outstanding under the executive share acquisition plan. Even though PTT APM has power over less than 50% of the voting rights of the Company, PTT APM has effective control of the Board of Directors and as such, PTT APM is the immediate parent entity of the Company. Some of the eligible employees hold appointments as directors of subsidiaries of PTTAPM (other than the Group Companies), (“Parent Participants”) and will be entitled to participate in the Straits Asia Share Plans (“Option Plan 2010” and/or “Share Plan 2010”). Such subsidiaries are unrelated to the business activities of Straits Asia.

Option Plan 2010 shall be administered by the Remuneration Committee in its absolute discretion with such powers and duties as are conferred on it by the Board. In exercising its discretion, the Remuneration Committee must act in accordance with any guidelines that may be provided by the Board. The Committee may, with the sanction of the Board, from time to time make, determine or vary regulations, arrangements, guidelines and procedures in accordance with the rules of Option Plan 2010 for the proper and efficient administration and implementation of Option Plan 2010. The Board’s decision as to the interpretation, effect or application of the rules of Option Plan 2010 or any restrictions or other conditions relating to any shares issued under Option Plan 2010 is final and conclusive. No director or member of the Remuneration Committee shall participate in any deliberation or decision in respect of Options granted or to be granted to him or held by him.

No share options to subscribe to ordinary shares have been granted under the Option Plan 2010.



Options issued to directors

On 30 April 2008, the Company granted options to subscribe for 250,000 ordinary shares of the Company at an exercise price of S$3.67 per share. These options were approved at the Annual General Meeting on 30 April 2008. The options are fully exercisable from 30 April 2010 and expire on 30 April 2013. The total fair value of these options granted was estimated to be $293,000 using the Binomial Option Pricing Model.

Details of the options granted to directors of the Company are as follows:

No. of unissued ordinary shares of the Company under option

Granted infinancial

year ended

Aggregategranted since

commencement of scheme to

Aggregateexercised since

commencementof scheme to

Aggregateoutstanding

as at

Name of director 31.12.2010 31.12.2010 31.12.2010 31.12.2010Dr Chua Yong Hai - 150,000 - 150,000Mr Han Eng Juan - 100,000 - 100,000

No options have been granted to controlling shareholders of the Company or their associates (as defined in the Listing Manual of the Singapore Exchange Securities Trading Limited).

No participant under the option plan has received 5% or more of the total number of shares under option available under the option plans.

Share options issued

The number of unissued ordinary shares of the Company under option in relation to the Straits Asia Resources Limited Employee Share Option Plan outstanding at the end of the financial year was as follows:

No. of unissued ordinary shares under option at

31.12.2010 Exercise price Exercise period

2008 Options 450,000 S$3.14 24.03.2009 - 24.03.20132008 Options 250,000 S$3.67 30.04.2009 - 30.04.20132009 Options 295,000 S$1.22 24.04.2010 - 24.04.20142010 Options 475,000 S$2.27 23.06.2011 - 23.06.2015

Executive Share Acquisition Plan

In addition to the Straits Asia Resources Limited Employee Share Option Plan, the shareholders approved the Straits Executive Share Acquisition Plan (“Share Plan 2007”) at the Annual General Meeting on 30 April 2007. Share Plan 2007 gives the Company the flexibility to build a variable component into the remuneration package of all deserving executives. A summary of the rules of Share Plan 2007 is set out as follows.



The purpose of Share Plan 2007 is to attract, retain, motivate and reward key executive employees. Share Plan 2007 provides full time executive employees of the Group (“Eligible Participants”) with an opportunity to acquire an ownership interest in the Company. This aligns their interests with those of other shareholders as a means of encouraging them to ensure that the Company’s performance increases shareholder value through long term growth.

All full time employees of the Group with executive responsibilities (excluding Directors of our Company) are eligible to participate in Share Plan 2007. Controlling Shareholders or their Associates are not eligible to participate in Share Plan 2007.

Share Plan 2007 is administered by the Remuneration Committee with such discretion, powers and duties as are conferred to it by the Board.

The aggregate number of new shares granted under Share Plan 2007 is limited to 15% of the issued share capital of the Company from time to time. The restriction on the size of Share Plan 2007 shall not be amended without the prior approval of the shareholders of the Company and provided that the aggregate number of shares which the Remuneration Committee may issue under Share Plan 2007 on any date, when added to the number of shares issued and issuable in respect of all shares granted under Share Plan 2007 and all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company and for the time being in force, shall not exceed 15% of the issued share capital of the Company on the day preceding that date.

The acquisition of shares under Share Plan 2007 by an Eligible Participant who has accepted an Award (“Participant”) will be exclusively and fully funded by an interest free loan advanced to him/her by the Company, which will be applied directly towards payment of the subscription price of the Plan Shares to be acquired. Until such time as a loan under Share Plan 2007 is repaid in full, the Company will retain all dividends payable in respect of the Plan Shares acquired by the Participant, which dividends shall be applied in reduction of the loan. At any time while a loan balance exists and prior to termination of his/her employment a Participant may elect to repay a loan in full and have the relevant shares fully vested in his name.

No shares have been granted to Controlling Shareholders of the Company or their Associates.

No Participant under Share Plan 2007 has received 5% or more of the total number of shares available under the scheme. A total of 3,400,000 shares have been issued to Participants of the plan since the commencement of Share Plan 2007.

No more shares of the Company will be issued to executives under Share Plan 2007.

The Company’s new Executive Share Acquisition Plan (“Share Plan 2010”) for all executives of the Group was approved by shareholders of the Company at an Extraordinary General Meeting on 19 November 2010.

Share issues under Share Plan 2010 will provide eligible executives with an opportunity to acquire an ownership interest in the Company. Share Plan 2010 thereby aligns the eligible executives’ interests with those of the Shareholders and creates an incentive for eligible executives to increase the long-term value of the Company for the benefit of all Shareholders.

The Group has executives in a number of jurisdictions and Share Plan 2010 seeks to provide a consistent benefit to the executives in such jurisdictions.

The subscription price of the shares granted under Share Plan 2010 shall be the last traded share price of the Company on the Singapore Exchange before the date of grant of the shares, rounded to the nearest whole cent. No shares issued under Share Plan 2010 will be issued at a discount.



Executive Share Acquisition Plan (continued)

The aggregate number of shares which the Remuneration Committee may, with the sanction of the Board, issue under Share Plan 2010 on any date, when added to the number of shares issued and issuable in respect of all shares granted under Share Plan 2010 and all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company and for the time being in force, including Share Plan 2007, Options Plan 2007 and Option Plan 2010, shall not exceed 15% of the issued share capital of the Company on the day preceding that date. The restriction on the size of Share Plan 2010 shall not be amended without the prior approval of the Shareholders of the Company.

All executives of the Group are eligible to participate in Share Plan 2010 except:

(a) controlling shareholders;

(b) associates of controlling shareholders;

(c) directors of controlling shareholders; and

(d) directors of associates of controlling shareholders

Executive Directors will be entitled to participate in Share Plan 2010 whereas non-executive Directors and Controlling Shareholders and their associates are not eligible to participate in Share Plan 2010. For the avoidance of doubt and in connection with rule 853 of the Listing Manual, the Company confirms that, as at the Latest Practicable Date and assuming that Share Plan 2010 are in force, none of the persons currently entitled to participate in Share Plan 2010 are Controlling Shareholders or associates of Controlling Shareholders.

Some of the eligible Share Plan 2010 executives hold appointments as directors of subsidiaries of PTTAPM (other than the Group Companies), (“Parent Participants”) and will be entitled to participate in the Straits Asia Share Plans. Such subsidiaries are unrelated to the business activities of the Group. This was approved by shareholders along with Share Plan 2010.

Share Plan 2010 shall be administered by the Remuneration Committee with such discretion, powers and duties as are conferred to it by the Board. In exercising its discretion, the Remuneration Committee must act in accordance with any guidelines that may be provided by the Board. The Remuneration Committee may, with the sanction of the Board, from time to time make, determine or vary regulations, arrangements, guidelines and procedures in accordance with the rules of Share Plan 2010 for the proper and efficient administration and implementation of Share Plan 2010. In the event of any disagreement or dispute with respect to the interpretation of the rules of Share Plan 2010 or the terms of a loan (other than matters to be confirmed by the auditors of the Company in accordance with the plan), such disagreement or dispute shall, unless otherwise specified in the rules of Share Plan 2010, be referred to the Board and the decision of the Board shall, in the absence of manifest error, be final and binding upon all parties.

The acquisition of shares under Share Plan 2010 by an Eligible Participant who has accepted an Award (“Participant”) will be exclusively and fully funded by an interest free loan advanced to him by the Company, which will be applied directly towards payment of the subscription price of the Plan Shares to be acquired. Until such time as a loan under Share Plan 2010 is repaid in full, the Company will retain 50% of dividends payable in respect of the Plan shares acquired by the Participant, which dividends shall be applied in reduction of the loan. At any time while a loan balance exists and prior to termination of his/her employment a Participant may elect to repay a loan in full and have the relevant shares fully vested in his/her name.



Executive Share Acquisition Plan (continued)

Pursuant to the rules of Share Plan 2010, the aggregate number of new Shares represented by options and/or shares granted under the respective Option Plan 2010 and/or Share Plan 2010 to Parent Participants shall not exceed 20% of all the new shares available under the respective Option Plan 2010 and/or Share Plan 2010 (the “Parent Participants Limit”) and the aggregate number of new shares represented by options and/or shares granted under each of the respective Option Plan 2010 and/or Share Plan 2010 to each Parent Participant shall not exceed 5% of all the new shares which are available to all such Parent Participants under the respective Option Plan 2010 and/or Share Plan 2010.

On 30 November 2010, the Company granted 2,622,694 ordinary shares of the Company at an issue price of S$2.64 per share to Company’s executives under the Share Plan 2010. The shares vest over four years, with 25% vesting after the first anniversary, a further 25% after the second anniversary, a further 25% after the third anniversary and the final 25% after the fourth anniversary.

Audit Committee

The members of the Audit Committee at the end of the financial year were as follows:

Mr Han Eng Juan (Chairman)

Dr Chua Yong Hai

Mr Apisit Rujikeatkamjorn

All members of the Audit Committee were non-executive directors. All members were independent.

The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act. In performing those functions, the Committee reviewed:

• the audit plan of the Company’s independent auditor and its report on the internal accountingcontrols arising from their statutory audit;

• theauditreportoftheCompany’sindependentauditor;• theassistancegivenbytheCompany’sofficerstotheindependentauditor;• thescope,auditplanandresultsofinternalauditprocedureswiththeinternalauditor;and• thebalancesheetoftheCompanyandtheconsolidatedfinancialstatementsoftheGroupforthe

financial year ended 31 December 2010 before their submission to the Board of Directors, as well as the independent auditor’s report on the balance sheet of the Company and the consolidated financial statements of the Group.

On behalf of the directors

Dr. Chitrapongse Kwangsukstith Mr. Martin PurvisDirector Director

21 February 2011



StateMent by DIrectorS31 December 2010

In the opinion of the directors,

(i) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 71 to 135 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2010 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and

(ii) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the directors

Dr. Chitrapongse Kwangsukstith Mr. Martin PurvisDirector Director

21 February 2011


InDepenDent auDItor’S report31 December 2010

Independent Auditor’s Report to the Members of Straits Asia Resources Limited

We have audited the accompanying financial statements of Straits Asia Resources Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 71 to 135 which comprise the consolidated balance sheet of the Group and the balance sheet of the Company as at 31 December 2010, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition, that transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


InDepenDent auDItor’S report (cont’D)31 December 2010

OpinionIn our opinion, the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010, and the results, changes in equity and cash flows of the Group for the financial year ended on that date.

Report on other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

PricewaterhouseCoopers LLPPublic Accountants and Certified Public Accountants

Singapore, 21 February 2011


conSoLIDateD IncoMe StateMentFor the financial year ended 31 December 2010

Group

Note2010

US$’0002009

US$’000

Revenue 4 736,537 748,354Cost of sales 7 (555,590) (448,024)Gross profit 180,947 300,330

Other income 5 3,190 4,747

Other losses - net 6 (8,256) (5,737)

Expenses Finance 9 (13,676) (22,923) Administrative, corporate and technical support 7 (36,534) (57,511)Profit before income tax 125,671 218,906Income tax expense 10 (37,473) (85,375)

Net profit after tax 88,198 133,531

Attributable to the equity holders of the Company 88,198 133,531

Cents CentsEarnings per share attributable to the equity holders of the Company (US cents per share):

- Basic 11 7.81 12.03- Diluted 11 7.81 12.03

The accompanying notes form an integral part of these financial statements.


conSoLIDateD StateMent oF coMprehenSIve IncoMeFor the financial year ended 31 December 2010

Group

Note2010

US$’0002009

US$’000

Profit for the year 88,198 33,531

Other comprehensive income: Financial assets, available-for-sale - Fair value gains 33 5,650 -

Other comprehensive income, net of tax 5,650 -

Total comprehensive income 93,848 133,531

Attributable to the equity holders of the Company 93,848 133,531



conSoLIDateD StateMent oF coMprehenSIve IncoMeFor the financial year ended 31 December 2010

baLance SheetSAs at 31 December 2010

Group Company

Note2010

US$’0002009

US$’0002010

US$’0002009

US$’000

ASSETSCurrent assetsCash and cash equivalents 12 80,743 31,779 42,400 9,265Restricted cash 13 - 25,000 - -Financial assets at fair value through profit or loss 14 1,207 - - -Trade and other receivables 15 113,437 107,911 570,372 479,787Inventories 16 21,315 31,634 - -Prepaid taxes 17 42,361 16,438 - -

259,063 212,762 612,772 489,052

Non current assetsRestricted cash 13 800 - - -Other receivables 18 2,670 - - -Property, plant and equipment 19 734,703 702,165 376 1,104Exploration and evaluation 20 6,627 1,359 - -Intangible assets 21 78,092 80,281 - -Deferred income tax assets 22 3,867 1,760 - 47Financial assets, available-for-sale 23 12,182 4,636 - -Investments in subsidiaries 24 - - 42,208 42,211

838,941 790,201 42,584 43,362Total assets 1,098,004 1,002,963 655,356 532,414

LIABILITIESCurrent liabilitiesTrade and other payables 25 160,046 127,067 7,411 3,409Current income tax liabilities 26 4,984 44,549 1,133 -Borrowings 27 - 206,501 - 200,434Provisions 28 2,894 558 1,154 454

167,924 378,675 9,698 204,297Non current liabilitiesBorrowings 27 313,202 - 313,202 -Provisions 29 5,242 3,662 - -Other non-current liabilities 30 - 56,000 - -Deferred income tax liabilities 31 87,854 92,502 50 119

406,298 152,164 313,252 119Total liabilities 574,222 530,839 322,950 204,416Net assets 523,782 472,124 332,406 327,998

EQUITYCapital and reserves attributable to equityholders of the CompanyShare capital 32 325,758 322,093 325,758 322,093Other reserves 33 (12,874) (16,239) 2,425 4,740Retained earnings 210,898 166,270 4,223 1,165Total equity 523,782 472,124 332,406 327,998



conSoLIDateD StateMent oF changeS In equItyFor the financial year ended 31 December 2010

Attributable to equity holders of the Company

Note

Sharecapital

US$’000

OtherreservesUS$’000

Retained earnings US$’000

TotalUS$’000

2010Beginning of financial year 322,093 (16,239) 166,270 472,124Total comprehensive income for the financial year - 5,650 88,198 93,848Total recognised income for the financial year - 5,650 88,198 93,848

Transferred from/(to) share capital 32 3,487 (3,487) - -Share issue on exercise of options 32 178 - - 178Share based payments 33 - (983) - (983)Share plan loan repayment 33 - 2,155 - 2,155General reserves 33 - 30 - 30Dividends paid 34 - - (43,570) (43,570)End of financial year 325,758 (12,874) 210,898 523,782

2009Beginning of financial year 278,990 (17,068) 113,809 375,731Total comprehensive income for the financial year - - 133,531 133,531Total recognised income for the financial year - - 133,531 133,531

Share issue to directors 32 371 - - 371Employee ExSAP 32 297 - - 297ExSAP loans 32 (481) - - (481)Exercise of warrants 32 42,629 - - 42,629Transfered to share capital 33 287 (287) - -Share based payments 33 - 1,116 - 1,116Dividends paid 34 - - (81,070) (81,070)End of financial year 322,093 (16,239) 166,270 472,124



conSoLIDateD StateMent oF caSh FLoWS For the financial year ended 31 December 2010

Group

Note2010

US$’0002009

US$’000

Cash flows from operating activitiesReceipts from customers 768,049 756,473Payments to suppliers and employees (567,991) (450,436)

200,058 306,037

Interest received 743 920Interest paid (8,774) (13,009)Income taxes paid (116,869) (113,223)Net cash provided by operating activities 75,158 180,725

Cash flows from investing activitiesPayments for property, plant and equipment (108,898) (149,275)Proceeds from sale of property, plant and equipment 9 -Payments for exploration and evaluation 20 (4,314) (797)Disposal of subsidiaries, net of cash disposed of 12 - (3,073)Payments for financial assets, available-for-sale 23 (1,896) (1,251)Net cash used in investing activities (115,099) (154,396)

Cash flows from financing activitiesProceeds from issues of shares and other equity securities 2,021 26,995Proceeds from borrowings 321,000 53,410Proceeds from/(payments to) restricted cash 13 24,200 (24,331)Repayment of borrowings (214,410) (140,116)Payments for lease liabilities (67) -Dividends paid to equity holders of the Company ivalents 34 (43,570) (81,070)Net cash provided by/(used in) financing activities 89,174 (165,112)

Net increase/(decrease) in cash and cash equivalents 49,233 (138,783)Cash and cash equivalents at beginning of the financial year 31,779 170,562Effect of exchange rate movements on cash and cash equivalents (269) -Cash and cash equivalents at end of the financial year 12 80,743 31,779



These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1 GENERAL INFORMATIONStraits Asia Resources Limited (the “Company”) is listed on the Singapore Exchange and incorporated and domiciled in Singapore. The address of its registered office is 15 Hoe Chiang Road, #09-01 Tower Fifteen, Singapore 089316.

The principal activity of the Company is that of investment holding. The Group is principally engaged in the exploration, mining and marketing of coal.

The Company’s immediate parent company is PTT Asia Pacific Mining Pty Ltd, a company incorporated in Australia.

The Company’s ultimate parent company is PTT Public Company Limited, a company incorporated in Thailand. The address of PTT Public Company Limited is 555/2 Vibhavadi Rangsit Road, Chatuchak, Thailand.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparationThese financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

Interpretations and amendments to published standards effective in 2010

In 2010, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application for the year ended 31 December 2010. Changes to the Group’s accounting policies have been made as required, in accordance with the provisions in the respective FRS and INT FRS.

noteS to the FInancIaL StateMentS31 December 2010


noteS to the FInancIaL StateMentS (cont’D)31 December 2010

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Basis of preparation (continued)

The following are the new or amended FRS and INT FRS that are relevant to the Group:

• AmendmenttoFRS7CashFlowStatementsEffective for annual periods beginning on or after 1 January 2010. Under the amendment, expenditures that result in a recognised asset in the balance sheet can only be classified as investing activities in the statement of cash flows. Previously such expenditure could be classified as investing or operating activities in the statement of cash flows.

The amendment has no material effect on the amounts presented in the statement of cash flows for the current or prior year.

• AmendmentstoFRS102Share-basedPaymentEffective for the annual periods beginning on or after 1 January 2010. The amendments clarify the scope of the standard and also the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when that entity has no obligation to settle the share based payment transaction. The amendment also modifies the definition of vesting conditions and broadens the scope of accounting for cancellations of share-based payment arrangements.

The amendment has no material effect on the Group.

(b) Group accounting

i. ConsolidationSubsidiaries are entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to the majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.




(b) Group accounting (continued)Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of investments in subsidiaries, the difference between disposal proceeds and the carrying amount of the investments are recognised in profit or loss

ii. Acquisition of businessesThe acquisition method of accounting is used to account for business combinations by the Group.

The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.

The excess of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. Refer to the paragraph “Intangibles assets – Goodwill” for the subsequent accounting policy on goodwill.

iii. Disposal of subsidiariesWhen a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary the assets and liabilities of the subsidiary, including any goodwill, are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific accounting standard.

Any retained interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profit or loss.




(c) Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to members of management and the executive committee who are responsible for allocating resources and assessing performance of the operating segments.

(d) Foreign currency translationi. Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presented in United States Dollars, which is the functional currency of the Company.

ii. Transactions and balancesTransactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance date are recognised in profit or loss, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations.

Non monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.

(e) Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of management and agency services in the ordinary course of the Group’s activities. Sales are presented, net of value added tax, government royalties, rebates and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows:

i. Sale of goods - CoalRevenue from these sales are recognised when a Group entity has delivered the products to locations specified by its customers and the customers have accepted the products in accordance with the sales contract and the collectability of the related receivable is reasonably assured.




(e) Revenue recognition (continued)

ii. Provisional pricingRevenue from the sale of coal where the coal is provisionally priced pending a renegotiation of the sales contract is initially recognised at the invoiced provisional price. Subsequently, a best estimate based on the final benchmark price adjustment using an appropriate benchmark calculation is made. The difference between the carrying amount of the revenue recognised for the sale and the estimated price adjustment is recognised in revenue. This adjustment will continue until the contract price is negotiated.

iii. Rendering of servicesRevenue from management and agency services is recognised over the period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be performed.

iv. Interest incomeInterest income is recognised using the effective interest method.

(f) Income taxesCurrent income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Where timing of reversal is foreseeable, deferred tax liabilities are recognised.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.




(f) Income taxes (continued)

Deferred income tax is measured:i. at the tax rates that are expected to apply when the related deferred income tax

asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

ii. based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expenses in the income statement, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.

(g) LeasesThe Group leases office space, residential properties and office equipment under operating leases from non related parties.

Leases of office space, residential properties and office equipment where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight line basis over the period of the lease.

(h) Impairment of assetsGoodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the fair value less cost to sell and the value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Assets other than goodwill that suffered impairment losses are reviewed for possible reversal of the impairment loss at the end of each reporting period.

An impairment loss recognised in prior periods for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.

An impairment loss recognised for goodwill is recognised as an expense and is not reversed in a subsequent period.




(i) Cash and cash equivalentsFor the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as current borrowings on the balance sheet.

Cash and cash equivalents which are restricted as to usage are excluded from the amounts reported in the statement of cash flows.

(j) InventoriesRun of mine and finished product coal are valued at the lower of cost and net realisable value. The cost of coal inventories is determined using the weighted average cost method. Costs includes direct material, overburden removal, mining, processing, labour incurred in the extraction process and an appropriate proportion of variable and fixed overhead costs directly related to mining activities. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.

Inventories are classified as follows:

i. Run of mine: This is material extracted through the mining process.

ii. Finished product coal: These are products that have passed through all stages of the production process.

iii. Consumables: These are goods or supplies to be either directly or indirectly consumed in the production process.

(k) Financial assetsa) Classification

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the nature of the asset and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition.

i. Financial assets at fair value though profit or lossFinancial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets at fair value through profit or loss are carried on the consolidated balance sheet at fair value with gains or losses recognised in profit or loss.




(k) Financial assets (continued)ii. Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables”, “restricted cash” and “cash and cash equivalents” on the balance sheet.

iii. Financial assets, available-for-saleFinancial assets, available-for-sale, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless management intends to dispose of the assets within 12 months after the balance sheet date.

b) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on the trade date - the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is reclassified to profit or loss.

c) Initial measurementFinancial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transactions costs for financial assets at fair value through profit or loss are recognised immediately as expenses.

d) Subsequent measurementFinancial assets, both, available-for-sale and at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair value of financial assets at fair value through profit or loss including the effects of currency translation, interest and dividends, are recognised in profit or loss when the changes arise.




(k) Financial assets (continued)Interest and dividend income on financial assets, available-for-sale are recognised separately in income. Changes in the fair values of available-for-sale equity securities (non-monetary items) are recognised in the fair value reserve in other comprehensive income, together with the related currency translation differences and subsequently recognised in profit or loss when realised by sale or redemption, or when a reduction in fair value is judged to represent an impairment.

e) ImpairmentThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.

i. Loans and receivablesSignificant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss.

The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods.

ii. Financial assets, available-for-sale

Significant or prolonged declines in the fair value of an equity security below its cost is considered as an indicator that the available-for-sale financial asset is impaired.

If any evidence of impairment exists, the cumulative loss that was recognised in the fair value reserve is reclassified to profit or loss. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss previously recognised as an expense. The impairment losses recognised as an expense on equity securities are not reversed through profit or loss.




(l) Property, plant and equipmenti. Measurement

All items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.

ii. Components of costThe cost of an item of property, plant and equipment initially recognised includes its purchase price (including import duties and non-refundable purchase taxes), any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the estimated future costs of dismantling and removing the asset. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

iii. Mining properties Mining properties are classified as an asset under property, plant and equipment. Once a mining project has been established as commercially viable expenditure other than that on buildings, plant and equipment or land rights is capitalised under mining properties together with any amount transferred from exploration and evaluation.

Mining properties comprise: • Capitalised exploration and evaluation assets for properties now in

production • Developmentexpenditure(includingpre-productionstripping)• Acquisitioncostsandmineralrightsacquired• Productionstripping(asdescribedbelowin“overburdenremovalcosts”)

Development expenditureDevelopment activities commence after project sanctioning by the appropriate level of management. Judgement is applied by management in determining when a project is economically viable. Development expenditure is capitalised and classified as mining properties. Costs associated with commissioning new assets, in the period before they are capable of operating in the manner intended by management are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit. Interest on borrowings related to construction or development projects is capitalised until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. Development expenditure is recorded net of the proceeds from the sale of ore extracted during the development phase.




(l) Property, plant and equipment (continued)Overburden removal costs Overburden and other mine waste materials are often removed during the initial development of a mine site in order to access the mineral deposit. This activity is referred to as development stripping. The directly attributable costs (inclusive of an allocation of relevant overhead expenditure) are capitalised under mining properties. Capitalization of development stripping costs ceases at the time that saleable material begins to be extracted from the mine.

Production stripping commences at the time that saleable materials begin to be extracted from the mine and normally continues throughout the life of a mine. The costs of production stripping are charged to the income statement as operating costs when the ratio of waste material to ore extracted for an area of interest is expected to be constant throughout its estimated life.

Stripping costs are deferred during the production stage for those operations where this is the most appropriate basis for matching the costs against the related economic benefits and where the effect is material. This is generally the case where there are expected to be fluctuations in stripping costs over the life of the mine. The amount of stripping costs deferred is based on the ratio (“Ratio”) obtained by dividing the tonnage of waste mined either by the quantity of ore mined or by the quantity of minerals contained in the ore. Stripping costs incurred in the period are deferred, as a component of mining properties, to the extent that the current period Ratio exceeds the life of mine Ratio. Such deferred costs are then charged to the income statement as operating costs when the current period Ratio is less than the life of mine Ratio.

The life of mine Ratio is based on proved and probable reserves of the mine. The life of mine waste-to-ore ratio is a function of the pit design and therefore changes to that design will generally result in changes to the Ratio. Changes in other technical or economic parameters that have an impact on reserves will also have an impact on the life of mine Ratio even if they do not affect the pit design. Changes to the life of mine Ratio are accounted for prospectively.

In the production stage of some mines, further development of the mine requires a phase of unusually high overburden removal activity that is similar in nature to pre-production mine development. The costs of such unusually high overburden removal activity are deferred and charged to the income statement in subsequent periods on a units-of-production basis. This accounting treatment is consistent with that of stripping costs incurred during the development phase of a mine, before production commences.




(l) Property, plant and equipment (continued)iv. Depreciation of Plant, property and equipment

Items of property, plant and equipment are depreciated over their useful lives, or over the remaining life of the mine if shorter. Depreciation commences when an asset is available for use. The major categories of property, plant and equipment are depreciated either on a units-of-production and/or straight-line basis as follows:

Units of production basis

For mining properties and land rights and certain mining equipment, the economic benefits from the asset are consumed in a pattern which is linked to the production level. Except as noted below, such assets are depreciated on a units-of-production basis.

Straight line basis

Assets within operations for which production is not expected to fluctuate significantly from one year to another, which have a physical life shorter than the related mine or whose usage is not directly related to production levels, are depreciated on a straight line basis as follows:

• Buildings 3–10years• Plantandequipment 3–8years• Capitalworkinprogress Notdepreciated

Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively. In applying the units of production method, depreciation/amortisation is normally calculated using the quantity of material extracted from the mine in the period as a percentage of the total quantity of material to be extracted in current and future periods based on proved and probable reserves. Non reserve material may be included in depreciation/amortisation calculations where there is a high degree of confidence in its economic extraction. Reserves/resources and life of mine estimates are reviewed on an annual basis and depreciation calculations are adjusted accordingly where necessary.

v. Subsequent expenditureSubsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in the income statement when incurred.




(l) Property, plant and equipment (continued)vi. Disposal

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss.

(m) Exploration and evaluation expenditureExploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of the commercial viability of an identified resource. Costs incurred before the consolidated group has obtained the legal rights to explore an area are recognised in the income statement. Exploration and evaluation expenditure are capitalised in respect of each area of interest for which the rights to tenure are current and where:

i. The exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest; or alternatively, by its sale; or

ii. Exploration and evaluation activities in the area of interest have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the areas of interest are continuing.

Exploration and evaluation expenditure comprises costs that are directly attributable to: researching and analysing existing exploration data, gathering exploration data through topographical, geochemical and geophysical studies, exploratory drilling, trenching and sampling, determining and examining the volume and grade of the resource, examining and testing extraction and treatment methods, surveying transportation and infrastructure requirements, compiling pre-feasibility and feasibility studies and/or gaining access to areas of interest including occupancy and relocation compensation.

General and administration costs are allocated to, and included in, the cost of an exploration and evaluation asset only to the extent that those costs can be related directly to operational activities in the area of interest to which the exploration and evaluation asset relates. In all other cases, these costs are expensed as incurred.

Exploration and evaluation assets are transferred to mining properties, a component of property, plant and equipment, when the technical feasibility and commercial viability of extracting the mineral resource are demonstrable and sanctioned by management.




(m) Exploration and evaluation expenditure (continued)

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Where a potential impairment is indicated, assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration and evaluation is attributable. To the extent that capitalised exploration and evaluation expenditure is not expected to be recovered it is charged to the income statement.

Cash flows associated with exploration and evaluation expenditure are classified as investing activities in the cash flow statement.

(n) Intangible assetsGoodwill on acquisitions

Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets and contingent liabilities of the acquired subsidiaries at the date of acquisition.

Goodwill on subsidiaries is recognised separately as an intangible asset and carried at cost less accumulated impairment losses.

(o) Trade and other payables

Trade payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year, which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition.

(p) Borrowings

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date.

Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.




(q) Borrowing costsBorrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to borrowings acquired specifically for the construction or development of property, plant and equipment. This includes those costs on borrowings acquired specifically for the construction or development of property, plant and equipment, as well as those in relation to general borrowings used to finance construction or development of property, plant and equipment.

(r) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provision for restoration and rehabilitation

The Group has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment. The Group recognises the estimated costs of dismantlement, removal or restoration of items of property, plant and equipment arising from the acquisition or use of assets. The provisions are estimated based on the best estimate of the expenditure required to settle or transfer the obligation, taking into consideration time value of money.

The estimated costs are measured at the present value using the pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.

(s) Employee compensationEmployee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.

i. Wages and salaries, annual leave and sick leaveLiabilities for wages and salaries, including non monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised as accruals under “Trade and other payables” in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.




(s) Employee compensation (continued)ii. Share based compensation

The Group operates an equity settled, share-based compensation plan. Share-based payment benefits are provided to employees via the Executive Share Acquisition Plan (“ExSAP”) and Employee Share Option Plan (“ESOP”).

The fair value of the employee services received in exchange for the grant of options under the ESOP is recognised as an expense with a corresponding increase in the share based payment reserve over the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises its estimates of the number of shares under option that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates in profit or loss, with a corresponding adjustment to the share based payment reserve over the remaining vesting period.

The fair value at grant date is independently determined using a Binomial Option Pricing Model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. Upon the exercise of options, the proceeds received (net of transaction costs) and the balance previously recognised in the share based payment reserve relating to those options are credited to the share capital account.

Under the previous ESOP (“Option Plan 2007”), 50% of options issued by the Company to employees for no cash consideration vest one year after grant date and the remaining 50% vest two years after grant date. The market value of the shares issued is recognised as an employee benefit expense with a corresponding increase in equity.

Under the new ESOP (“Option Plan 2010”), 40% of options issued by the Company to employees for no cash consideration vest one year after grant date; 30% of the options vest between the second and third year anniversary of the grant date; and the remaining 30% vest three years after grant date. The market value of the shares issued is recognised as an employee benefit expense with a corresponding increase in equity.




(s) Employee compensation (continued)Share based compensation benefits are also provided to employees via the ExSAP (“Share Plan 2010”). The Group operates an equity settled, share based compensation plan by allowing participants to purchase shares in the Company at a price approved by the Board of Directors by way of a Company provided interest free loan. A holding lock is placed over the shares in the Company until the loan is repaid in full. The fair value of the employee services received in exchange for the grant of shares under the ExSAP is recognised as an expense with a corresponding increase in the share based payment reserve. When the loan under the ExSAP is fully repaid, the proceeds received (net of transaction costs) and the related balance previously recognised in the share based payment reserve are credited to the share capital account when the ordinary shares are paid up.

iii. Termination benefitsTermination benefits are those benefits which are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

iv. Defined contribution plansDefined contribution plans are post employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund of Singapore on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.

v. Defined benefit plansDefined benefit plans are post-employment benefit plans other than defined contribution plans, which the Group pays to an employee on termination of employment, whether the termination is voluntary or not. These benefits are mandatory under Indonesian law. Defined benefit plans define the amount of benefit that an employee will receive on or after termination, resignation or retirement, and where the benefit is dependent on one or more factors such as years of service and compensation. The liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the value of plan assets, together with adjustment for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. Actuarial gains and losses are recognised in the income statement when they arise.




(t) Share CapitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.

(u) DividendsDividends to the Company’s shareholders are recognised when the dividends are approved for payment.

(v) Earnings per sharei. Basic earnings per share

Basic earnings per share is calculated by dividing the net profit after income tax attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

ii. Diluted earnings per shareFor the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of dilutive potential ordinary shares.

(w) Rounding of amountsThe Board has determined that the financial reports of the Group are more clearly presented when rounded to the nearest thousand dollars. Amounts reported in the financial statements have been rounded on this basis.



3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTSEstimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances.

i. Estimation for the provision for rehabilitation and dismantlingProvision for rehabilitation and dismantling of related property, plant and equipment is estimated taking into consideration facts and circumstances of the Group’s mining properties available at the balance sheet date. These estimates are based on the expenditure required to transfer or settle the obligation for rehabilitation and dismantling, taking into consideration the time value of money.

ii. Estimated impairment of non financial assetsGoodwill is tested for impairment annually and whenever there is an indication that goodwill may be impaired. Property, plant and equipment, exploration and evaluation and investment in subsidiaries, are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. The recoverable amounts of assets and where applicable, cash generating units, have been determined based on value in use calculations. These calculations require the use of estimates.

iii. Uncertain tax positionsThe Group is subject to income taxes in Singapore, Indonesia and Australia. In determining the income tax liabilities, management is required to estimate the amount of capital allowances and the deductibility of certain expenses (“uncertain tax positions”) at each jurisdiction. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made.

iv. Determination of coal resources and reservesJudgement is required in determining the Group’s coal resources and reserves taking into account various assumptions regarding mining costs and the sale price of the particular resource concerned. The Group’s economically recoverable coal resources and reserves are sensitive to the cost and revenue assumptions used due to the geological structure of the deposits, which means that, all other factors remaining the same, if the cost assumption is higher or the price assumption is lower, the Group estimates lower resources or reserves, and if the cost assumption is lower or the price assumption is higher, the Group estimates more resources or reserves. The Group bases all assumptions on geological reports and uses only measured resources and reserves.



3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS (continued)Additional geological data is gathered during the course of mining operations and this, in conjunction with the various assumptions used could result in a change in estimated coal resources and reserves from period to period. Changes in estimated coal resources and reserves could affect the Group’s financial results in a numbers of ways, including the ratof depreciation and amortisation of plant, property and equipment as well as the carrying value of certain mine assets due to change in estimates of mine life and future discounted cash flows.

v. Deferred mining expenditure Certain mining costs, principally those that relate to the stripping of waste and which relate

to future economically recoverable coal to be mined, are capitalised and included in mining properties, which is classified in the balance sheet under property, plant and equipment. These costs are deferred and subsequently taken to the cost of production through the amortisation of mining properties. The waste to ore ratio and the remaining life of the mine are regularly assessed by the Directors and senior management to ensure the carrying value and rate of deferral is appropriate taking into consideration the available facts and circumstances from time to time.

vi. Capitalisation and impairment of exploration and evaluation assets Exploration and evaluation expenditures are capitalised in the balance sheet, in respect of

areas of interest for which the rights of tenure are current and where such costs are expected to be recouped or exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence of economically recoverable reserves. The carrying value of assets within each area of interest are reviewed regularly taking into consideration the available facts and circumstances, and to the extent to which the capitalised value exceeds its recoverable value, the excess is provided for or written off in the year in which this is determined.

vii. Insurance receivable The Group is currently pursuing an insurance claim in respect of property damage and

business interruption at the Jembayan mine site. As at 31 December 2010, trade and other receivables disclosed on the group balance sheet includes a provisional amount of US$18.8M recognised as an insurance receivable. This amount reflects the full value of the preliminary adjustment of quantum as at 31 December 2010. This matter remains subject to ongoing negotiations and possible arbitration, accordingly, the matter is considered commercially sensitive. The directors are of the opinion that the receivable stated in the results of the Group as at 31 December 2010 can be successfully recovered. An additional disclosure relating to a contingent asset in respect of this matter has been made, refer to note 35.



4 REVENUEGroup

2010US$’000

2009US$’000

Coal sales 736,537 732,774Services - 15,580

736,537 748,354

5 OTHER INCOMEGroup

2010US$’000

2009US$’000

Management fees 409 244Logistics service income and other sundry income 2,111 3,482Interest income – bank deposits 653 920Government grant – Jobs Credit Scheme 17 101

3,190 4,747

The Jobs Credit Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic downturn. The amount an employer can receive depends on the fulfilment of the conditions as stated in the scheme. This scheme ended on 30 June, 2010.

6 OTHER LOSSES - NETGroup

2010US$’000

2009US$’000

Fair value (gains)/losses at fair value through profit or loss (1,207) 15,669Insurance recoverable - (15,795)Foreign exchange losses - net 3,655 2,967Loss on disposal of subsidiaries - 2,896Other losses 3,601 -Loss on sale of property, plant and equipment 155 -Impairment of property, plant and equipment and exploration and evaluation (notes 19 and 20) 2,052 -

8,256 5,737



7 ExPENSES BY NATUREGroup

2010US$’000

2009US$’000

Third party commodity purchases 3,791 51,276Depreciation and amortisation (note 19) 38,274 37,481Write-off of plant and equipment - 20,733Impairment of intangible asset (note 21) 1,057 2,434Total amortisation, depreciation and impairment 39,331 60,648

Mining 310,880 226,605Processing 11,111 8,759Barging 38,343 26,614Freight, despatch and demurrage 60,044 46,201Agency fees and royalties 21,320 25,620Employee compensation (note 8) 25,062 22,701Value added tax 45,114 26,461Corporate and technical services fees 2,046 3,076Consulting and professional fees 3,443 9,636Changes in inventories 10,539 (25,140)Operating leases rentals 1,157 751Tax penalties - 1,853Allowance for impairment of receivables (note 15) 1,630 114Bad debts 198 214Other expenses 18,115 20,146Total cost of sales and administrative and technical support expenses 592,124 505,535

8 EMPLOYEE COMPENSATIONGroup

2010US$’000

2009US$’000

Wages and salaries 19,647 17,954Share based payments (983) 1,116Termination benefits 2,442 -Employer’s contributions to defined contribution plans including Central Provident Fund 726 223Other staff benefits 3,230 3,408

25,062 22,701



9 FINANCE ExPENSESGroup

2010US$’000

2009US$’000

Interest - borrowings 12,810 21,464Bank charges 866 1,459

13,676 22,923

10 INCOME TAxESGroup

2010US$’000

2009US$’000

Income tax expenseTax expense attributable to profit is made up of:Current income tax 39,868 79,497Deferred income tax benefit (5,804) (2,340)Withholding tax 2,780 7,940

36,844 85,097Under/(over) provision in prior financial yearCurrent income tax 559 (2,407)Deferred income tax 70 2,685Total income tax expense 37,473 85,375

Deferred income tax included in income tax expense comprises:(Increase)/decrease in deferred tax assets (note 22) (2,118) 2,478Decrease in deferred tax liabilities (note 31) (3,616) (2,133)

(5,734) 345



10 INCOME TAxES (continued)Group

2010US$’000

2009US$’000

The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax as explained below

125,671 218,906

Profit before taxTax calculated at tax rate of 17% (2009: 17%) 21,364 37,214

Effects of:Expenses not deductible for tax purposes 4,371 9,344Income subject to tax incentive (183) (143)Different tax rates in other countries 9,396 32,613Deferred withholding tax on foreign retained earnings 1,400 1,340Non taxable income (2,077) (3,177)Withholding tax paid 2,780 7,940Tax loss utilised (63) -Current year adjustment (132) -Sundry items (12) (34)Income tax expense 36,844 85,097

11 EARNINGS PER SHAREGroup

2010 2009

(a) Basic earnings per shareNet profit attributable to equity holders of the company (US$’000) 88,198 133,531Weighted average number of ordinary shares outstanding for basic earnings per share 1,128,777,293 1,109,900,450Basic earnings per share (US cents) 7.81 12.03

Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Group2010 2009

(b) Diluted earnings per shareNet profit attributable to equity holders of the company (US$’000) 88,198 133,531Weighted average number of ordinary outstanding for basic earnings per share 1,128,777,293 1,109,900,450Adjustments for:Share options 142,846 49,616Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 1,128,920,139 1,109,950,066 Diluted earnings per share (US cents) 7.81 12.03



11 EARNINGS PER SHARE (continued)

For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares : share options.

For share options, the weighted average number of shares on issue has been adjusted as if all dilutive share were exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less the number of shares that could have been issued at fair value (determined as the Company’s average share price for the financial year) for the same total proceeds is added to the denominator as the number of shares issued for no consideration. No adjustment is made to net profit.

12 CASH AND CASH EQUIVALENTSGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Cash at bank and on hand 80,743 26,779 42,400 4,265Short term bank deposits - 5,000 - 5,000

80,743 31,779 42,400 9,265

There is a pledge on the floating cash balance of several of the Group’s bank accounts. Cash and cash equivalents of US$64,564,000 (2009: US$7,790,000) of the Group and US$42,380,000 (2009: US$4,262,000) of the Company are pledged with a bank as security for the provision of a facility agreement (note 27).

2009 Disposal of subsidiariesOn 30 December 2009, Straits Marine and Infrastructure Pte. Ltd., a wholly-owned subsidiary, disposed of its 100% interest in Straits Asia Engineering Pte. Ltd. and PT Indo Straits for a cash consideration of US$4,000,000.



12 CASH AND CASH EQUIVALENTS (continued)

The aggregate effects of disposal of subsidiaries on the 2009 cash flows of the Group were as follows:

Carrying amount US$’000

Identifiable assets and liabilities Cash and cash equivalents 3,073Trade and other receivables 18,475Deferred income tax assets 980Property, plant and equipment 23,918Other current assets 4,557 Total assets 51,003 Trade and other payables (43,636)Current income tax liabilities (471 Total liabilities (44,107)

Identifiable net assets disposed 6,896Loss on disposal of subsidiaries 2,896

Cash receivable on disposal 4,000Less: cash and cash equivalents in subsidiaries disposed (3,073) Net cash flow from disposal 927

13 RESTRICTED CASHGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Current - 25,000 - -Non-current 800 - - -Restricted cash 800 5,000 - -

Restricted cash was used as backing for bank guarantees and letters of credit. The 2009 restricted cash related to funds on term deposit which was released to unrestricted cash in January 2010.



14 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

At fair value on initial recognitionUnlisted securities:

- Equity securities - Australia 1,207 - - -

Straits Energy Trading Pte Ltd, a subsidiary of the Company has an equity interest in Xanadu Mines Limited (“Xanadu”), a coal exploration company listed on the Australian Securities Exchange.

As part of this equity interest, Straits Energy Trading Pte Ltd acquired 3,425,000 options to subscribe for 3,425,000 fully paid shares which expire on 21 April 2011. The fair value of these options at balance date is US$1,207,000.

As stated in note 2(k), changes in the fair value of financial assets at fair value through profit or loss including the effects of currency translation, interest and dividends, are recognised in profit or loss when the changes arise.

15 TRADE AND OTHER RECEIVABLES Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000 Trade receivables

- Non-related parties 55,092 45,025 - - 55,092 45,025 - - Less: Allowance for impairment - (114) - - Trade receivables - net 55,092 44,911 - -

Other receivables - Immediate holding corporation - 199 - 199 - Related corporation - 5,475 - 20 - Subsidiaries - - 568,398 478,341 - Non-related parties 57,130 47,597 1,586 801

57,130 53,271 569,984 479,361

Less: Allowance for impairment (1,630) - - - Other receivables - net 55,500 53,271 569,984 479,361

Prepayments 2,845 9,729 388 426

113,437 107,911 570,372 479,787



15 TRADE AND OTHER RECEIVABLES (continued)

Other receivables include loans to subsidiaries from the Company which are unsecured, interest-bearing at the London Interbank Offered Rate (“LIBOR”) plus 4.50%-5.83% (2009: LIBOR plus 4.08%-8.38%) and will be repayable in full within one year of the balance sheet date.

All other receivables from the immediate holding corporation, related corporations and subsidiaries are generally unsecured and non-interest bearing.

There is no other class of financial assets that is past due and/or impaired except for trade and other receivables.

16 INVENTORIESGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Run of mine stockpiles - at cost 11,883 22,859 - -Finished product coal - at cost 7,907 7,478 - -Consumables 1,525 1,297 - -

21,315 31,634 - - 17 PREPAID TAxES

Prepaid taxes represent advance tax payments made by the Group which can be credited against the Group’s future corporate income tax payable.

18 OTHER RECEIVABLESGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Related corporation 2,670 - - -

This receivable is due from a related corporation of the Group in respect of the construction of property, plant and equipment. The receivable is unsecured and earns interest at 9% per annum.



19 PROPERTY, PLANT AND EQUIPMENT

Group

Capital work in

progress US$’000

Mining properties

US$’000Buildings US$’000

Plant and equipment

US$’000

Land rights

US$’000Total

US$’0002010Beginning of financial year 2,633 580,402 1,377 95,639 22,114 702,165Additions 37,941 22,048 - 3,689 13,848 77,526Transfers (to)/from other classes (4,390) 17,608 - (15,564) - (2,346)Depreciation/amortisation charge - (23,653) (189) (11,949) (2,483) (38,274)Disposal/write off - 23 (19) (3,712) - (3,708)Impairment - - - (660) - (660)End of financial year 36,184 596,428 1,169 67,443 33,479 734,703

At 31 December 2010Cost or fair value 36,184 692,735 3,636 102,647 41,993 877,195Accumulated depreciation/amortisation - (96,307) (2,467) (35,204) (8,514) (142,492)Net book amount 36,184 596,428 1,169 67,443 33,479 734,703

Group

Capital work in

progress US$’000

Mining properties

US$’000Buildings US$’000

Plant and equipment

US$’000

Land rights

US$’000Total

US$’0002009Beginning of financial year 64,871 453,518 643 32,286 12,304 563,622Additions 21,233 144,960 1,183 47,534 12,365 227,275Transfers (to)/from other classes (36,826) 5,994 5 35,049 (1,552) 2,670Depreciation/amortisation charge - (24,070) (56) (12,384) (971) (37,481)Disposal/write off (46,645) - (398) (6,846) (32) (53,921)End of financial year 2,633 580,402 1,377 95,639 22,114 702,165

At 31 December 2009Cost or fair value 2,633 652,614 3,671 119,896 28,612 807,426Accumulated depreciation/amortisation - (72,212) (2,294) (24,257) (6,498) (105,261)Net book amount 2,633 580,402 1,377 95,639 22,114 702,165



19 PROPERTY, PLANT AND EQUIPMENT (continued)

Company Plant and Capital work equipment in progress Total US$’000 US$’000 US$’000

2010 Beginning of financial year 1,104 - 1,104Additions 154 30 184Depreciation charge (693) - (693)Disposal (219) - (219) End of financial year 346 30 376

At 31 December 2010Cost or fair value 1,954 30 1,984Accumulated depreciation (1,608) - (1,608) Net book amount 346 30 376

2009Beginning of financial year 1,821 - 1,821Additions 14 - 14Depreciation charge (728) - (728)Disposal (3) - (3) End of financial year 1,104 - 1,104

At 31 December 2009 Cost or fair value 2,355 - 2,355Accumulated depreciation (1,251) - (1,251) Net book amount 1,104 - 1,104

20 ExPLORATION AND EVALUATION Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Beginning of financial year 1,359 3,232 - -Expenditure incurred 4,314 797 - -Transfers from/(to) other classes 2,346 (2,670) - -Impairment (1,392) - - End of financial year 6,627 1,359 - -



21 INTANGIBLE ASSETSGroup Goodwill US$’0002010Beginning of financial year 80,281Reclassifications (1,132)Impairment (1,057) End of financial year 78,092

2009 Beginning of financial year 54,852Additions 27,863Impairment (2,434) End of financial year 80,281

The impairment of the goodwill recognised is in relation to the Jembayan mine which was acquired in December 2007. The goodwill is impaired based on the depletion of the measured reserves and resources of the mine.

22 DEFERRED INCOME TAx ASSETS Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Deferred tax asset to be recovered after one year 3,867 1,760 - 47

Deferred income tax assets are recognised for tax losses and capital allowances carried forward to the extent that realisation of the related tax benefits through future taxable profits is probable.



22 DEFERRED INCOME TAx ASSETS (continued)Movement in deferred tax asset account is as follows:

Depreciation andGroup Tax losses amortisation Provisions Other Total US$’000 US$’000 US$’000 US$’000 US$’000

2010 Beginning of financial year 73 703 984 - 1,760Tax charged to income statement 760 1,182 223 - 2,165Others - (11) - - (11)Over provision in prior year (47) - - - (47) End of financial year 786 1,874 1,207 - 3,867

2009 Beginning of financial year 2,850 897 1,422 171 5,340Tax charged to income statement 73 178 (81) 37 207(Over)/under provision in prior year (2,850) 165 - - (2,685)Disposal of subsidiaries - (537) (357) (208) (1,102) End of financial year 73 703 984 - 1,760

TaxCompany losses Total US$’000 US$’000

2010Beginning of financial year 47 47Tax charged to income statement - -Over provision in prior year (47) (47) End of financial year - -

2009Beginning of financial year 2,850 2,850Tax charged to income statement 47 47Over provision in prior year (2,850) (2,850) End of financial year 47 47



23 FINANCIAL ASSETS, AVAILABLE-FOR-SALE Financial assets, available-for-sale, are analysed as follows:

Group Company

2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Beginning of financial year 4,636 3,385 - -Additions 1,896 1,251 - -Fair value gains recognised in other

comprehensive income 5,650 - - - End of financial year 12,182 4,636 - -

Group Company

2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Listed securities Equity securities – Australia 12,182 - - - Unlisted securitiesUnquoted equity investment - 4,636 - -

Straits Energy Trading Pte Ltd, a subsidiary of the Company has an equity interest in the previously unlisted Xanadu Mines Limited (“Xanadu”).

Xanadu officially listed on the Australian Securities Exchange on 20 December 2010.

As stated in note 2(k), the Group’s accounting policy with regard to available-for-sale investments is to carry items at fair value unless the fair value cannot be reliably measured in which case they are carried at cost. In 2009 and prior, the equity investment was unquoted and management were of the view that a single reliable fair value could not be obtained and elected to carry the investment at cost, being representative of fair value.

After the official listing date of Xanadu, the Group adopted the mark-to-market approach for this equity investment. As stated in note 2(k), changes in the fair values of available-for-sale equity securities (non-monetary items) are recognised in the fair value reserve, together with the related currency translation differences and subsequently recognised in profit or loss when realised by sale or redemption, or when a reduction in fair value is judged to represent an impairment.

During the year ending 31 December 2010, Straits Energy Trading Pte Ltd increased its equity interest for a consideration of US$1,896,000, bringing the total equity interest in Xanadu to 12.72% for a total cost of US$6,532,000. The fair value of these shares at 31 December 2010 is US$12,182,000.



24 INVESTMENTS IN SUBSIDIARIES Company

2010 2009 US$’000 US$’000

Equity investment at cost Beginning of financial year 42,211 42,211Wind up of subsidiary (3) - End of financial year 42,208 42,211

Details of subsidiaries are included in Note 41.

25 TRADE AND OTHER PAYABLES Group Company

2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Trade payables 72,749 33,425 - -Other payables - Ultimate holding corporation - 336 - 336 - Related corporations - 90 - - - Subsidiaries - - 1,808 1,827 - Non-related parties 7,193 52,208 4,096 279

Accrued expenses 80,104 41,008 1,507 967 160,046 127,067 7,411 3,409

26 CURRENT INCOME TAx LIABILITIES Group Company

2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Beginning of financial year 44,549 20,221 - -Income tax paid (49,970) (50,258) (3,104) (7,934)Provision for current year 8,603 74,524 3,916 7,941Disposal of subsidiary - (471) - -Others 1,175 - - -Foreign exchange differences 68 2,940 - -Under/(over) provision in respect to prior years 559 (2,407) 321 (7) End of financial year 4,984 44,549 1,133 -



27 BORROWINGSGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

CurrentSecured borrowings - 206,501 - 200,434

Non-currentSecured borrowings 313,202 - 313,202 -

Total borrowings 313,202 206,501 313,202 200,434

The exposure of the borrowings of the Group and of the Company to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows:

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

6 months or less 315,000 208,410 315,000 202,4106-12 months - 67 - -1 5 years - - - -Less: Capitalised borrowing costs (1,798) (1,976) (1,798) (1,976)

313,202 206,501 313,202 200,434

The total bank borrowings are denominated in United States Dollars.

The average effective interest rate of the total borrowings at balance sheet date was 3.62% (2009: 5.27%).

US$380M Term and Revolving Facilities Agreement (“2009 Facility Agreement”)

The 2009 Facility Agreement with a club of 4 banks was signed on 21 December 2009 and the first drawdown was made on 26 January 2010. The initial drawdown was used to repay the outstanding balance on the previous US$300M Term and Revolving Facility Agreement (“2008 Facility Agreement”) with Standard Chartered Bank and for working capital.

The banks in the club under the 2009 Facility Agreement are Siam Commercial Bank, Krung Thai Bank, Bangkok Bank and Standard Chartered Bank. The 2009 Facility Agreement provides for 3 Tranches:

a) a US$250M term facility for 5 years, with amortisation after 3 years; b) a US$100M working capital facility for 5 years; and c) a US$30M Letter of Credit and Bank Guarantee Facility, principally for bid bonds and

performance bonds for coal contracts for 5 years.



27 BORROWINGS (continued)

The 2009 Facility Agreement is a non-current borrowing due to fully mature 60 months after the first utilisation. The US$250M term facility amortises after the third anniversary of first drawdown with the Company to repay instalments of US$40M on six monthly intervals. The balance is to be repaid upon maturity in January 2015.

The 2009 Facility Agreement, which contains various conditions and undertakings, is principally secured by:

• AchargeovercertainbankaccountsoftheCompanyandcertainsubsidiaries;• SharechargesandpledgesbycertainsubsidiarieswithintheGroup;• Mainsalescontractsassignments,and• Guaranteesfromcertainsubsidiaries.

(a) Fair value of non current borrowings

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Bank borrowings 315,000 - 315,000 -

The 2008 Facility Agreement, which is no longer in effect, contained various conditions and undertakings, is principally secured by:

• AccountchargeovercertainbankaccountsoftheCompanyandsubsidiary;• Sharechargeoveroneofthesubsidiaries;• Pledgeof100%ofsharesinseveralsubsidiaries;and• Assignmentofmainpost-2008salescontracts

The 2008 Facility Agreement was also secured by a negative pledge that imposed certain covenants on the Group. The negative pledge stated that the Group would not provide any security over its assets, and would ensure that the following was not entered into:

• sale,assignment,transferordisposalofanyoftheGroup’sassets,and• sale,assignment,transferordisposalofanyoftheGroup’sreceivables.

The carrying amounts of assets pledged as security under the 2009 Facility Agreement and the previous 2008 Facility Agreement are as follows:

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Cash and cash equivalents 64,564 7,790 42,380 4,262Investment in subsidiaries - - 42,208 42,211Total current assets pledged as security 64,564 7,790 84,588 46,473

As the shares in the subsidiaries of the Company are pledged as security, the net tangible assets of the subsidiaries are considered pledged as security at Group level under the 2009 Facility Agreement and the previous 2008 Facility Agreement.



28 PROVISIONS - CURRENTGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Provisions for employee benefits 2,894 558 1,154 454

Movements in provisions

Movements in each class of provision are as follows:

Group

Provision for employee benefits

US$’000

2010Beginning of financial year 558Provisions made 3,174Provisions utilised during the year (1,375)Transfer from immediate holding corporation 537End of financial year 2,894

2009Beginning of financial year 254Provisions made 545Provisions utilised during the year (99)Disposal of subsidiaries (142)End of financial year 558

Company

Provision for employee benefits

US$’000

2010Beginning of financial year 454Provisions made 1,445Provisions utilised during the year (1,144)Transfer from immediate holding corporation 399End of financial year 1,154

2009Beginning of financial year 300Provisions made 654Provisions utilised during the year (500)End of financial year 454



29 PROVISIONS - NON CURRENTGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Provision for employee benefits 2,929 1,456 - -Provision for rehabilitation and dismantling 2,313 2,206 - -

5,242 3,662 - -

(a) Provision for employee benefitsProvision for employee benefits represents the amounts provided for in respect of long service leave and termination benefits required by Indonesian law. The Group is required to pay these benefits on termination of employment, whether the termination was voluntary or not. These amounts are disclosed as non-current as they are not expected to be paid within 12 months from the balance sheet date. However, there may be some voluntary departure of personnel in the next financial year which will require utilisation of the provision.

(b) Provision for rehabilitation and dismantlingProvision for rehabilitation and dismantling represents the expected cost to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment. This provision represents the best estimate of the present value of the expenditure required to settle the obligation at the balance sheet date. This amount represents provisions that are expected to be settled more than 12 months from the balance sheet date.

(c) Movements in provisionsMovements in each class of provision are as follows:

Group

Provision for employee

benefits US$’000

Provision for rehabilitation

and dismantling

US$’000Total

US$’000

2010Beginning of financial year 1,456 2,206 3,662Provisions made 1,484 107 1,591Provisions utilised during the year (11) - (11)End of financial year 2,929 2,313 5,242

2009Beginning of financial year 1,090 1,883 2,973Provisions made 687 480 1,167Provisions utilised during the year (166) (157) (323)Disposal of subsidiaries (155) - (155)Carrying amount at end of year 1,456 2,206 3,662



30 OTHER NON-CURRENT LIABILITIESGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Mining rights payable - 56,000 - -

The balance recognised as a non-current liability in 2009 is an amount payable in respect of the acquisition of mining rights. As the amount is expected to be settled within 12 months of the balance sheet date, the balance of US$56M has been reclassified to trade and other payables (note 25).

31 DEFERRED INCOME TAx LIABILITIESGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

To be settled after one year 87,854 92,502 50 119

Movement in deferred tax liabilities account is as follows:

Group

Mineproperties

US$’000Other

US$’000Total

US$’000

2010Beginning of financial year 88,719 3,783 92,502Tax credited to the income statement (1,476) (2,163) (3,639)Under provision in respect of prior year - 23 23Goodwill reclassification (1,132) - (1,132)Other (4) 104 100End of financial year 86,107 1,747 87,854

2009Beginning of financial year 64,277 2,310 66,587Tax (credited)/charged to the income statement (3,574) 1,441 (2,133)Under provision in respect of prior year 27,863 - 27,863Other 153 32 185End of financial year 88,719 3,783 92,502

Company OtherUS$’000

Total US$’000

2010Beginning of financial year 119 119Tax credited to the income statement (92) (92)Under provision in respect of prior year 23 23End of financial year 50 50

2009Beginning of financial year - -Tax credited to the income statement 119 119End of financial year 119 119



32 SHARE CAPITAL

Company Issued share capital

No. of sharesShare Capital

US$’0002010Beginning of financial year 1,128,736,614 322,093Shares issued under share plan (ii) 2,622,694 -Shares issued on exercise of options 110,000 178Transfer from share-based payment reserve (note 33) - 3,487End of financial year 1,131,469,308 325,758

2009Beginning of financial year 1,092,836,614 278,990Share issue to directors 500,000 371Shares issued under share plan (i) 400,000 297Exercise of warrants 35,000,000 42,629Transfer from share-based payment reserve - 287ExSAP loans - (481)End of financial year 1,128,736,614 322,093

i. An Executive Share Acquisition Plan (“Share Plan 2007”) was approved at the Annual General Meeting held on 30 April 2007. The purpose of the plan is to attract, retain, motivate and reward key executive employees. The plan operates by allowing participants to purchase shares in the Company at market price by way of a Company provided interest free loan. A holding lock is placed over the shares in the Company until the loan is repaid in full. Upon repayment, the Company will recognise the increase in share capital amount.

ii. The new Executive Share Acquisition Plan (“Share Plan 2010”) was approved at an Extraordinary General Meeting held on 19 November 2010. The purpose of the Share Plan 2010 is to align the Group’s executives’ interests with those of the shareholders and provides an incentive to executives to increase the long-term value of the Company for the benefit of all shareholders.

All issued ordinary shares are fully paid except for 4,137,694 shares issued under Share Plan 2007 and Share Plan 2010.

There is no par value for these ordinary shares.

Share options

Share options were granted to key management and employees under the Employee Share Option Plan (“Option Plan 2007”), which was approved at the Annual General Meeting held on 30 April 2007.

2008 OptionsOn 24 March 2008, the Company granted options to subscribe for 735,000 ordinary shares of the Company at an exercise price of S$3.14 per share (“2008 Options”). 50% of these options are exercisable from 24 March 2009, with the remaining 50% exercisable from 24 March 2010. These options expire on 24 March 2013 and 285,000 of these options have been forfeited to date. On 30 April 2008, the Company granted options to subscribe for 250,000 ordinary shares of the Company at an exercise price of S$3.67 per share. 50% of these options are exercisable from 30 April 2009, with the remaining 50% exercisable from 30 April 2010. The remaining options expire on 30 April 2013. The total fair value of these options granted in 2008 was estimated to be US$355,000 using the Binomial Option Pricing Model.



32 SHARE CAPITAL (continued)

2009 OptionsOn 23 April 2009, the Company granted options to subscribe for 535,000 ordinary shares of the Company at an exercise price of S$1.22 per share (“2009 Options”). 50% of these options are exercisable from 23 April 2010, with the remaining 50% exercisable from 23 April 2011. 130,000 options have been forfeited and 110,000 have been exercised since issue date. The remaining options expire on 23 April 2014. The total fair value of these options granted was estimated to be US$423,000 using the Binomial Option Pricing Model.

2010 OptionsOn 23 June 2010, the Company granted options to subscribe for 485,000 ordinary shares of the Company at an exercise price of S$2.27 per share (“2010 Options”). 50% of these options are exercisable from 23 June 2011, with the remaining 50% exercisable from 23 June 2012. These options expire on 23 June 2015. The total fair value of these options granted was estimated to be US$300,000 using the Binomial Option Pricing Model. 10,000 of these options were forfeited during the year.

The exercise price of the options is determined at the average of the closing price of the Company’s ordinary shares as quoted on the Singapore Exchange for five consecutive market closing prices immediately preceding the date of the grant, plus a 10% premium. No options are granted at a discount to the prevailing market price of the shares. 50% of the options vest one year from the grant date and the remaining 50% of the options vest two years from the grant date. Once the options are vested, they are exercisable for a period up to five years from the grant date.

No more options to subscribe for ordinary shares of the Company will be granted under the Option Plan 2007.

A new Employee Share Option Plan (“Option Plan 2010”) was approved by shareholders of the Company at an Extraordinary General Meeting on 19 November 2010. To date, no options to subscribe for ordinary shares of the Company have been granted under Option Plan 2010.

Beginning Granted Exercised Forfeited End of Exercise Exercise of financial during during during financial price period year financial financial financial year year year year

20102010 Options - 485,000 - (10,000) 475,000 S$2.27 23.06.2011 - 23.06.20152009 Options 405,000 - (110,000) - 295,000 S$1.22 23.04.2010 - 23.04.20142008 Options 575,000 - - (125,000) 450,000 S$3.14 24.03.2009 - 24.03.20132008 Options 250,000 - - - 250,000 S$3.67 30.04.2009 - 30.04.2013 1,230,000 485,000 (110,000) (135,000) 1,470,000 20092009 Options - 535,000 - (130,000) 405,000 S$1.22 23.04.2010 - 23.04.20142008 Options 735,000 - - (160,000) 575,000 S$3.14 24.03.2009 - 24.03.20132008 Options 250,000 - - - 250,000 S$3.67 30.04.2009 - 30.04.2013 985,000 535,000 - (290,000) 1,230,000



32 SHARE CAPITAL (continued)

During the year 2,622,694 (2009: 400,000) shares and 485,000 (2009: 535,000) options were granted with a total fair value at grant date of US$3,810,000 (2009: US$919,000) determined by Binomial Option Pricing Model. The shares issued under the Share Plan 2010 have a total market value of US$5,057,000 (2009: US$743,000) based on the closing price as quoted on the Singapore Exchange on 31 December 2010 and 31 December 2009 respectively. The significant inputs into the option model for shares issued under Share Plan 2010 for the financial year ended 31 December 2010 were the share price of S$2.64 one day prior the grant date, the exercise price of S$2.64, a standard deviation of expected share price return of 65%, the option life of 8 years and the annual risk-free interest rate of 1.18%. The volatility measured as the standard deviation of expected share price returns was estimated using Hoadley’s volatility calculator for a four year period using data extracted from Bloomberg.

The significant inputs into the option model for options issued under Option Plan 2007 during the financial year ended 31 December 2010 were the share price of S$2.00 one day prior the grant date, the exercise price of S$2.27, a standard deviation of expected share price return of 65%, the option life of 5 years and the annual risk-free interest rate of 0.84%. The volatility measured as the standard deviation of expected share price returns was estimated using GARCH (1,1) model, the EWMA model and the standard deviation of returns of the quoted share price.

33 OTHER RESERVESGroup Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Share based payments reserve (a) 2,425 4,740 2,425 4,740Capital reserve (b) (13,526) (13,526) - -General reserve (c) 329 299 - -Merger reserve (d) (7,752) (7,752) - -Fair value reserve(e) 5,650 - - -

(12,874) (16,239) 2,425 4,740

(a) Share based payments reserve

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Beginning of financial year 4,740 3,911 4,740 3,911Transferred from/(to) share capital (note 32) (3,487) (287) (3,487) (287)Share-based payment expense (note 8) (983) 1,116 (983) 1,116Executive share acquisition plan (“ExSAP”) loan repayment 2,155 - 2,155 -End of financial year 2,425 4,740 2,425 4,740



33 OTHER RESERVES (continued)

(b) Capital reserveIn January 2005, the Group acquired the remaining 20% equity interest of PT Bahari Cakrawala Sebuku (“PT BCS”) for a consideration of US$15,821,000. The acquisition consideration was satisfied by the allotment and issuance of 6,145,537 shares of S$1 each at a premium of S$3.18 per share. This reserve of US$13,526,000 represents the difference between the value of the consideration paid for the acquisition of the 20% minority interest in PT BCS prior to 2006 and the amount that these minority interests were recognised in the financial statements.

(c) General reserve

2010US$’000

2009US$’000

Beginning balance 299 299Additions 30 -End of financial year 329 299

The revised Indonesian Limited Company Law No. 40/2007 dated 16 August 2007 requires Indonesian companies to set up a general reserve amounting to 20% of the company’s issued and paid up share capital.

This reserve is non distributable.

(d) Merger reserve

Merger reserve arising from a restructuring exercise representing the excess of cash consideration paid over the subsidiaries capital acquired and accounted for using the pooling of interest method.

(e) Fair value reserve

Group2010

US$’0002009

US$’000

Beginning balance - -Fair value of available-for-sale financial asset 5,650 -End of financial year 5,650 -

The fair value reserve arising from the listing of Xanadu held by Straits Energy Trading Pte Ltd, a subsidiary of the Company, represents the mark to market gain over the cost of the investment of the equity interest (note 23).



34 DIVIDENDS 2010 2009 US$’000 US$’000

Final dividend of 2.03 cents per share for financial year 2009(2008: 2.18 cents) 22,913 23,844

Interim dividend paid in respect of the current financial year of 1.83 cents (2009: 1.94 cents) per share 20,657 21,219

2nd interim dividend paid in respect of the current financial year of nil (2009: 1.14 cents) per share - 12,868

3rd interim dividend paid in respect of the current financial year of nil (2009: 2.05 cents) per share - 23,139

43,570 81,070

35 CONTINGENCIES

Contingent assets

The Group has lodged an insurance claim in respect of the property damage and business interruption incurred at the Jembayan mine site. The matter is ongoing and having received legal advice, the directors and management believe that a favourable outcome is probable. An amount has been recognised as an insurance receivable, and is included in trade and other receivables in note 15 (refer also to note 3vii). The balance of the claim is considered a contingent asset estimated at US$17.9M, however, this amount has not been recognised as a receivable at 31 December 2010 as receipt of the amount is dependent on the outcome of ongoing negotiations and legal consultation.

Contingent liabilities

Group

A subsidiary of the Group has entered into a contractual arrangement in respect of a royalty deed with a third party which includes an amount payable of $8.5M contingent on performance.

Company

As at balance date, $3.1M has been utilized against the Company’s Letter of Credit and Bank Guarantee Facility, which in certain circumstances may be drawn for value against the Company.

36 CAPITAL COMMITMENTS

Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements, are as follows:

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Property, plant and equipment 10,953 - - -



37 OPERATING LEASE COMMITMENTS

The Group leases office space, residential properties and certain office equipment from non related parties under non cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

The future minimum lease payables under non cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities, are as follows:

Group Company

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Not later than one year 2,308 832 609 702Between one and five years 1,414 260 205 235Later than five years 1,000 - - -

4,722 1,092 814 937

38 FINANCIAL RISK MANAGEMENT

Financial risk factors

The Group’s operations are exposed to market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. Market risk arises from the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group’s overall risk management program focuses on understanding the key drivers of the business that are influenced by these risks, and seeks to minimise potential adverse effects on the Group’s financial performance. Currently, the Group does not use any derivative financial instruments to manage any of its main financial risks. This is not to say that the Group may not use derivative financial instruments in the future to hedge certain risk exposures. Any use of derivative financial instruments must be approved by the Board.

(a) Market risk

i. Currency risk

The Group operates in Singapore, Australia and Indonesia. Entities in the Group regularly transact in their respective functional currency, which is the United States dollar (“USD”). Currency risk arises when transactions are denominated in foreign currencies such as the Singapore dollar (“SGD”), Australian dollar (“AUD”) and Indonesia rupiah (“IDR”).

The Group’s exposure to foreign currencies is significantly less than its exposure to price risk. The Group does not use any financial instruments such as forward exchange contracts to mitigate the currency risks.



38 FINANCIAL RISK MANAGEMENT (continued)

(a) Market risk (continued)

The Group’s currency exposure based on the information provided to key management is as follows:

SGDUS$’000

USDUS$’000

IDRUS$’000

AUDUS$’000

TotalUS$’000

At 31 December 2010Financial assetsCash and cash equivalents 515 78,438 1,712 78 80,743Restricted cash - 800 - - 800Trade and other receivables 975 107,563 2,054 - 110,592Financial assets, at fair value through profit or loss - - - 1,207 1,207Other receivables - 2,670 - - 2,670Financial assets, available-for-sale - - - 12,182 12,182

1,490 189,471 3,766 13,467 208,194Financial liabilitiesTrade and other payables 412 154,681 4,411 542 160,046 Borrowings - 313,202 - - 313,202

412 467,883 4,411 542 473,248

SGDUS$’000

USDUS$’000

IDRUS$’000

AUDUS$’000

TotalUS$’000

At 31 December 2009Financial assetsCash and cash equivalents 958 27,527 3,294 - 31,779 Restricted cash - 25,000 - - 25,000 Trade and other receivables 7 97,654 506 15 98,182 Financial assets, available-for-sale - - - 4,636 4,636

965 150,181 3,800 4,651 159,597Financial liabilitiesTrade and other payables 1,341 124,570 568 588 127,067 Borrowings - 206,501 - - 206,501

1,341 331,071 568 588 333,568





The Company’s currency exposure based on the information provided to key management is as follows:

2010 2009 SGD USD AUD Total SGD USD AUD Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Financial assetsCash and cash

equivalents 290 42,110 - 42,400 728 8,537 - 9,265Trade and other

receivables 932 569,052 - 569,984 - 479,346 15 479,361 1,222 611,162 - 612,384 728 487,883 15 488,626

Financial liabilities Borrowings - 313,202 - 313,202 - 200,434 - 200,434Trade and other

payables 240 7,171 - 7,411 9 3,093 307 3,409 240 320,373 - 320,613 9 203,527 307 203,843

If the Singapore dollar, Australian dollar and Indonesian rupiah change against the United States dollar by 5% (2009: 4%), 8% (2009: 10%) and 2% (2009: 7%) respectively with all other variables including tax rate being held constant, the effects arising from the net financial liability/asset position will be as follows:

2010 2009 Increase/(Decrease) Other Profit after tax Other Profit Comprehensive Comprehensive after tax Income Income US$’000 US$’000 US$’000 US$’000 GroupSGD against USD

-strengthened (38) - 11 --weakened 38 - (11) -

IDR against USD -strengthened 9 - (158) --weakened (9) - 158 -

AUD against USD -strengthened (724) (975) 248 --weakened 724 975 (248) -

Company SGD against USD

-strengthened (41) - (17) --weakened 41 - 17 -

AUD against USD -strengthened - - 18 --weakened - - (18) -





ii. Price riskCoal price risk is managed through contractual arrangements negotiated directly with customers, usually for a period of 12 months. The approach of the Group is to allow full exposure to market prices, outside the 12 month period for which prices are fixed.

Another aspect of price risk is the contractual performance of counterparties when coal prices have been agreed, but the market rate has subsequently changed. The sales and marketing team, supported by corporate, seek to contract with counterparties of good repute and standing to manage this risk.

Fuel is a major component of the Group’s operating costs. The Group’s exposure to changes in fuel prices is ultimately based on reference to a USD Mean of Platts Singapore (“MOPS”) Gas Oil assessment price. This benchmark reference is used to determine diesel fuel prices in Indonesia, which are primarily passed through to the Group by our contractors through rise and fall adjustment clauses in our contracts. Historically, as sources of energy generation, there is a positive correlation between coal and oil prices, and this has served as a natural hedge to the Group’s exposure to changing fuel prices.

The Group has one equity investment on the balance sheet that is exposed to equity securities price risk. If the price of the equity security listed in Australia changed by 10% with all other variables including tax rate being held constant, the effects of profit after tax and other comprehensive income would have been an increase/(decrease) of US$193,000 and US$1,218,000 respectively.

iii. Cash flow and fair value interest rate risks

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest bearing assets, the Group’s income is substantially independent of changes in market interest rates.

The Group’s main interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

The Group’s and Company’s borrowings at variable rates are denominated in USD. If the USD interest rates had increased/decreased by 0.50% (2009: 0.50%) with all other variables including tax rate being held constant, the profit after tax will be lower/higher by US$1,083,000 (2009: US$1,588,000) as a result of higher/lower interest expense on these borrowings.




(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to trade customers, including outstanding receivables and contracted sales. The Group only deals with banks and financial institutions of good repute and standing. For trade customers, the corporate team assess and monitor the credit quality of each trade customer, taking into account their financial position, past experience and other relevant factors.

Credit exposure to an individual counterparty is restricted by the corporate team management based on ongoing credit evaluation. The counterparty’s payment profile and credit exposure are continuously monitored by management. Generally, the Group only enters into contracts with large counterparties (such as power utilities). Counterparty and payment risk is also managed through the use of letters of credit or telegraphic transfers payable within 7-21 days from a vessels bill of lading date. The Group’s trade receivables comprise 15 debtors (2009: 12 debtors) respectively that individually represented 1% to 20% of trade receivables at balance date.

The Group has a broad customer base with many sales secured by letters of credit. The majority of the Group’s customers belong to the power generation sector across various countries which represent some concentration of risk within this market.

The maximum exposure to credit risk for each class of financial instrument is the carrying amount of that class of financial assets presented on the balance sheet.

The credit risk for trade receivables, net of letters of credit, based on the information provided to key management is as follows:

Group 2010 2009 US$’000 US$’000

By geographical areas: Indonesia 14,089 23,633Singapore 41,003 21,278Less: Letters of credit (21,513) (5,360)

33,579 39,551

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit ratings assigned with international credit rating agencies. Trade receivables that are neither past due nor impaired are substantially with companies with a good collection track record with the Group.




(b) Credit risk (continued)

i. Financial assets that are past due and/or impaired

Where financial assets are past due but not impaired, the Group has assessed that the credit quality of these amounts has not changed and the amounts are still considered recoverable.

The age analysis of trade receivables past due but not impaired is as follows:


Past due < 3 months 3,432 707 - -Past due 3 to 6 months 27 29 - -Past due over 6 months 73 2,544 - -

3,532 3,280 - -

The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment is as follows:

Group Company

2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Past due 3 to 6 months - - - -Past due over 6 months - 114 - - - 114 - -Less: Allowance for

impairment (note 15) - (114) - - - - - -

Beginning of financial year 114 569 - -Allowance made - 114 - -Allowance utilised (114) (569) - - End of financial year - 114 - -

The Company’s other receivables due from subsidiaries are interest free and repayable on demand. The Company has not made any allowance as management is of the view that these receivables are recoverable.




(c) Liquidity risk

Prudent liquidity risk management implies maintaining at all times sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities so as to enable the Group to meet its obligations as and when they fall due. At the balance sheet date, assets held by the Group and Company for managing liquidity risk included cash and short-term deposits as disclosed in note 12.

Liquidity risk management covers daily, short term, and long term needs. The appropriate levels of liquidity are determined by both the nature of the Group’s business and its risk profile. The Group monitors its liquidity position on a daily basis and prepares short term weekly cash flows of up to three months, on a monthly basis. In addition to this, the Group looks at cash flows on a medium term (< 12 months) and long term (> 12 months) basis through regular forecasts, annual budgets and long term business plans.

The table below analyses the maturity profile of the Group’s and Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual discounted cash flows.

Less than Between Between Over 1 year 1 and 2 years 2 and 5 years 5 years

US$’000 US$’000 US$’000 US$’000

2010 Group Trade and other payables 160,046 - - -Borrowings - - 313,202 - 160,046 - 313,202 - Company Trade and other payables 7,411 - - -Borrowings - - 313,202 - 7,411 - 313,202 -

Less than Between Between Over 1 year 1 and 2 years 2 and 5 years 5 years

US$’000 US$’000 US$’000 US$’000

2009 Group Trade and other payables 127,067 - - -Borrowings 206,501 - - - 333,568 - - - Company Trade and other payables 3,409 - - -Borrowings 200,434 - - - 203,843 - - -

The Group’s borrowings have a carrying value of $313,202,000 and are due to mature between 2013 and 2015 (note 27).




(d) Capital risk

The Group’s objectives when managing capital are to maintain an optimal capital structure so as to maximise shareholder value and to safeguard the Group’s ability to continue as a going concern. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.

In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.

The Group will balance its overall capital structure through the payment of dividends, new share issues, new debt, refinancing or repayment of existing debt.

The gearing ratio is calculated as net debt divided by the total book value of capital. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents. Total capital is calculated as equity plus net debt.

The Group also evaluates its debt levels by measuring income gearing levels, or the level of interest expense relative to the Group’s net earnings. The level of gearing is also restricted in bank covenants as part of the Group’s US$380M refinance facility. These covenants include minimum ratios such as interest coverage and leverage ratios.

The Group and the Company are in compliance with all externally imposed capital requirements for the financial years ended 31 December 2009 and 2010.


Net debt 392,505 301,789 278,213 194,578Total equity 523,782 472,124 332,406 327,998 Total capital 916,287 773,913 610,619 522,576

Gearing ratio 42.84% 39.00% 45.56% 37.23%

(e) Fair value measurement

The following table presents assets measured at fair value and classified by level of the following fair value measurement hierarchy:

(a) Quoted prices (unadjusted) in active markets for identical assets (Level 1);(b) Input other than quoted prices included within Level 1 that are observable for the

asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

(c) Inputs for the asset that are not based on observable market data (unobservable inputs) (Level 3).




(e) Fair value measurement (continued) Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

2010Group Assets Financial assets at fair value

through profit or loss 1,207 - - 1,207Financial assets, available-for-sale 12,182 - - 12,182 Total assets 13,389 - - 13,389

Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

2009Group Assets Financial assets, available-for-sale - - 4,636 4,636 Total assets - - 4,636 4,636

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on the quoted market prices at the balance sheet date. The quoted market prices used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.

In 2009 and prior, the equity investment was unquoted and management considered that cost was representative of its fair value. The fair value measurement of this equity investment in 2009 was not based on observable market data and is therefore included under Level 3.

39 SEGMENT INFORMATION

Management has determined the operating segments based on the reports that are used to make strategic decisions. The principal business of the Group is coal mining including the exploration, mining and marketing of coal.

Other operations of the Group mainly comprise management services and investment holding, none of which constitutes a separately reportable segment. The Group’s marine infrastructure development business was sold during 2009.

Segment assets consist primarily of property, plant and equipment, exploration and evaluation assets, inventories, receivables and cash and cash equivalents. Segment liabilities comprise payables, accruals, provisions and borrowings. Capital expenditure comprises additions to property, plant and equipment and exploration and evaluation assets.



39 SEGMENT INFORMATION (continued)

The Group’s business operates principally in the geographical region of Asia. The pricing of the Group’s products is governed principally by reference to international market pricing and is benchmarked to the Newcastle Barlow Jonker Index (BJI) and adjusted for transport charges and relative calorific value. Hence, the Group is not materially subject to risk and return arising in differing economic environments in Asia.

The segment information for the reportable segment for the year ended 31 December 2010 is as follows:

All other Coal segments Total US$’000 US$’000 US$’000

2010GroupSalesTotal segment sales 736,537 - 736,537 Net profit after tax 88,091 107 88,198

Depreciation 14,621 - 14,621Amortisation 23,653 - 23,653Goodwill impairment 1,057 - 1,057Interest expense 12,810 - 12,810Interest income (511) (142) (653)Income tax expense 37,425 48 37,473 Total assets 1,073,440 24,564 1,098,004 Total assets includes: Financials assets, available-for-sale - 12,182 12,182Additions to:

- property, plant and equipment 77,526 - 77,526- exploration and evaluation 4,314 - 4,314

Total liabilities (551,801) (22,421) (574,222)



39 SEGMENT INFORMATION (continued)

The segment information for the reportable segment for the year ended 31 December 2009 is as follows:

All other Coal segments Total US$’000 US$’000 US$’000

2009GroupSalesTotal segment sales 734,903 13,451 748,354 Net profit after tax 141,095 (7,564) 133,531 Depreciation 11,171 2,240 13,411Amortisation 24,070 - 24,070Goodwill impairment 2,434 - 2,434Interest expense 21,464 - 21,464Interest income (850) (70) (920)Insurance recoverable (15,795) - (15,795)Income tax expense 84,513 862 85,375 Total assets 968,045 34,918 1,002,963 Total assets includes: Financials assets, available-for-sale - 4,636 4,636Additions to:

- property, plant and equipment 213,705 13,570 227,275- exploration and evaluation 797 - 797- intangible assets 27,863 - 27,863

Total liabilities (499,934) (30,905) (530,839)

The Group operates in 2 main geographical areas:

• Singapore–theCompanyisheadquarteredandhasoperationsinSingapore.Theoperationsin this area are principally the marketing of coal and investment holdings;

• Indonesia–theoperationsinthisareaareprincipallyexplorationandminingofcoal.

Revenues from external customers: Sales 2010 2009 US$’000 US$’000

Singapore 600,452 588,720Indonesia 136,085 159,634 736,537 748,354



40 RELATED PARTY TRANSACTIONS

(a) Key management personnel compensation

Group 2010 2009 US$’000 US$’000

Salaries and other short term employee benefits 4,568 3,692Termination benefits 2,442 -Share based compensation 322 1,141

7,332 4,833

Included in the total above is compensation provided to directors of the Company amounting to US$1,213,000 (2009: US$2,319,000).

In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties, which are considered arms length.

(b) Sales and purchases of goods and services

Group 2010 2009 US$’000 US$’000

Dividends paid to immediate holding corporation 19,867 37,623Sale of subsidiary company to entity in which a director

has a substantial interest - 4,000Management fees paid to immediate holding corporation 1,739 2,751Management fees received from immediate holding corporation 99 -Plant and equipment and services sold/rendered to

related corporation 3,300 -

Related parties comprise mainly companies which are controlled or significantly influenced by the Group’s ultimate holding company that are not part of the Group or companies which are controlled or significantly influenced by key management personnel and their close family members.



41 SUBSIDIARIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2(b):

Name of entityCountry of

incorporation Principal activityEquity 2010 %

Holding 2009 %

Tiger Energy Trading Pte Ltd (a) * Singapore Trading 100 100Straits Energy Trading Pte Ltd (a) Singapore Investment holding 100 100Straits Asia Energy Pte Ltd (a) Singapore Dormant 100 100Reyka Wahana Digdjaya Pte Ltd (b) Singapore Dormant 100 100PT Bahari Cakrawala Sebuku (c) Indonesia Coal mining 100 100PT Straits Consultancy Services (c) ** Indonesia Management

services100 100

PT Reyka Wahana Digdjaya (b) Indonesia Investment holding 100 100Straits Marine Infrastructure Pte Ltd (a) Singapore Marine Engineering 100 100SAR Resources (Australia) Pty Ltd (b) Australia Management

services100 100

PT Bumiborneo Pertiwi Nusantara (c) Indonesia Investment holding 100 100PT Borneo Citrapertiwi Nusantara (c) Indonesia Investment holding 100 100PT Separi Energy (c) Indonesia Investment holding 100 100PT Jembayan Muarabara (c) Indonesia Coal mining 100 100PT Kemilau Rindang Abadi (c) Indonesia Coal mining 100 100PT Arzara Baraindo Energitama (c) Indonesia Coal mining 100 100PT Karbon Mahakam (c) Indonesia Coal mining 100 100PT Metalindo Bumi Raya (c) Indonesia Coal mining 100 100PT Citra Pertiwi Nusantara (b) Indonesia Asset holding 100 100PT Kuda Perdana Pertiwi (b) Indonesia Dormant 100 100PT Bahari Perdana Persada (b) Indonesia Dormant 100 100PT Bahari Putra Perdana (b) Indonesia Dormant 100 100PT Bumi Borneo Metalindo (b) Indonesia Dormant 100 100PT Sakti Utama Luas (b) Indonesia Dormant 100 -PT Cakrawala Abadi Jaya (b) Indonesia Dormant 100 -Sebuku Investments Limited (d) Isle of Man Dissolved - 100

(a) Audited by PricewaterhouseCoopers LLP, Singapore.

(b) Not required to be audited under the law of the country of incorporation.

(c) Audited by KAP Tanudiredja, Wibisana & Rekan - a member firm of PricewaterhouseCoopers global network.

(d) Not required to be audited under the law of the country of incorporation. Company was dissolved on 18 May 2010.

* Formerly known as Straits Global Trading Pte Ltd

** Includes 1% indirect interest



42 RECLASSIFICATIONAs previously

reported in 2009 US$’000

Effect of reclassification

US$’000

As adjustedUS$’000

GroupBalance SheetsCurrent assetsTrade and other receivable 98,182 9,729 107,911Other current assets 9,729 (9,729) -Prepaid taxes - 16,438 16,438

Non-current assetsProperty, plant and equipment 121,763 580,402 702,165Mine properties 580,402 (580,402) -

Current liabilitiesTrade and other payables (126,411) (656) (127,067)Provisions 1,214) 656 (558)Current income tax liabilities (28,111) (16,438) (44,549)

Income StatementManagement fees 244 (244) -Logistics service income and other sundry income 3,482 (3,482) -Management fees (note 5) - 244 244Logistics service income and other sundry

income (note 5) - 3,482 3,482Interest income – bank deposits (note 5) - 920 920Government grant – Jobs Credit Scheme (note 5) - 101 101Interest income – bank deposits 920 (920) -Government grant – Jobs Credit Scheme 101 (101) -Value added tax (note 7) 2,265 24,196 26,461Other expenses (note 7) 57,141 (36,995) 20,146Mining (note 7) 237,927 (11,322) 226,605Barging (note 7) - 26,614 26,614Processing (note 7) - 8,759 8,759Equipment rental 9,089 (9,089) -Operating leases rentals (note 7) 2,914 (2,163) 751

CompanyBalance SheetsCurrent assetsTrade and other receivables 479,361 426 479,787Other current assets 426 (426) -

Current liabilitiesTrade and other payables (3,444) 35 (3,409)Provisions (419) (35) (454)

The reclassifications disclosed and incorporated into the financial statements have been applied in accordance with FRS 16 in relation to the inclusion of mine properties as a category under property, plant and equipment and also in accordance with the Framework and FRS 1 in relation to the overall presentation and enhancement of the financial statements.



43 RECONCILIATION OF PROFIT AFTER INCOME TAx TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Group2010

US$’0002009

US$’000

Net profit 88,198 133,531Depreciation and amortisation 38,274 37,481Impairment 3,109 2,434Foreign exchange loss 808 6,289Write off plant and equipment - 20,733Loss on sale of property, plant and equipment 155 -Insurance claim - (15,795)Loss on disposal of subsidiaries - 2,896Fair value gain on financial assets at fair value through profit and loss (1,207) -Other (1,600) -Non cash employee benefits expense share based payments (983) 1,116Warrants - 15,669

Changes in operating assets and liabilitiesIncrease in trade debtors and other receivables (13,959) (36,086)Decrease/(increase) in inventories 10,319 (25,140)(Increase)/decrease in deferred tax assets (2,107) 3,580Increase in prepaid taxes (25,923) -Increase in trade creditors, other payables and provisions 24,287 34,047(Decrease)/increase in deferred tax liabilities (4,648) 25,915Decrease in current tax liabilities (39,565) (25,945)Net cash inflow from operating activities 75,158 180,725



44 NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS

Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2011 or later periods and which the Group has not early adopted. The Group’s assessment of the impact of adopting those standards, amendments and interpretations that are relevant to the Group is set out below:

(a) Amendments to FRS 24 – Related party disclosures (effective for annual periods beginning on or after 1 January 2011)

(b) Amendments to FRS 32 Financial Instruments: Presentation – Classification of rights issues (effective for annual periods beginning on or after 1 February 2010)

(c) Amendments to INT FRS 114 – Prepayments of a minimum funding requirement (effective for annual periods commencing on or after 1 January 2011)

(d) INT FRS 119 Extinguishing financial liabilities with equity instruments (effective for annual periods commencing on or after 1 July 2010) FRS 8(30)(a)

Management anticipates that the adoption of the above FRSs, INT FRSs and amendments to FRS in the future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial adoption.

45 AUTHORISATION OF FINANCIAL STATEMENTS

These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Straits Asia Resources Limited on 21 February 2011.


SharehoLDer InForMatIonas at 19 March 2010

Share capitalNo. of shares on issue 1,133,942,680Class of Shares Ordinary sharesVoting rights 1 vote per ordinary share

Distribution of shareholdings

SHAREHOLDINGSNUMBER OF

SHAREHOLDERS % NO. OF SHARES %1 - 999 20 0.38 3,666 0.001,000 - 10,000 4,284 81.51 19,501,353 1.7210,001 - 1,000,000 931 17.71 39,615,636 3.491,000,001 and above 21 0.40 1,074,822,025 94.79TOTAL 5,256 100.00 1,133,942,680 100.00

Twenty largest shareholders

NO. NAME NO. OF SHARES %

1 PTT ASIA PACIFIC MINING PTY LTD 514,679,220 45.392 DBS NOMINEES PTE LTD 158,538,673 13.983 CITIBANK NOMINEES SINGAPORE PTE LTD 111,814,036 9.864 HSBC (SINGAPORE) NOMINEES PTE LTD 70,724,178 6.245 RAFFLES NOMINEES (PTE) LTD 62,616,968 5.526 DBSN SERVICES PTE LTD 47,200,338 4.167 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 45,638,100 4.028 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 14,820,000 1.319 UNITED OVERSEAS BANK NOMINEES (PTE) LTD 12,828,927 1.1310 BNP PARIBAS SECURITIES SERVICES SINGAPORE 9,486,500 0.8411 MERRILL LYNCH (SINGAPORE) PTE LTD 7,096,226 0.6312 ABN AMRO NOMINEES SINGAPORE PTE LTD 3,088,000 0.2713 DB NOMINEES (S) PTE LTD 2,834,828 0.2514 PHILLIP SECURITIES PTE LTD 2,472,000 0.2215 UOB KAY HIAN PTE LTD 2,459,000 0.2216 KIM ENG SECURITIES PTE. LTD. 2,009,001 0.1817 CIMB SECURITIES (SINGAPORE) PTE LTD 1,569,234 0.1418 KO OON HAN 1,400,000 0.1219 MACQUARIE CAPITAL SECURITIES 1,336,796 0.1220 ROYAL BANK OF CANADA (ASIA) LIMITED 1,160,000 0.10

TOTAL 1,073,772,025 94.70


Substantial Shareholders(As recorded in the Register of Substantial Shareholders)

Direct Interest

% Deemed Interest

%

PTT Asia Pacific Mining Pty Ltd 514,679,220 45.39 - -PTT Public Company Limited, PTT Mining Limited1

- - 514,679,220 45.39

International Coal Holding Limited (formerly known as Straits Resources LImtied)2

- - 514,679,220 45.39

Sloane Robinson LLP3 - - 66,537,100 5.87The Bank of New York Mellon Corporation4 - - 91,785,161 8.09Newton Investment Management Limited 90,966,000 8.02 - -

Notes:

1. PTT Public Company, PTT International Company Limited and PTT Mining Limited are deemed to be substantial shareholders by virtue of PTT Mining Limited holding 60% of the shares of PTT Asia Pacific Mining Pty Ltd and 100% of International Coal Holding Limited (formerly known as Straits Resources Limited).

2. International Coal Holdings Limited (formerly known as Straits Resources Limited) is deemed to be a substantial shareholder by virtue of its holding 40% of the shares of PTT Asia Pacific Mining Pty Ltd.

3. Sloane Robinson LLP is deemed to be a substantial shareholder by virtue of shares held by nominees.4. The Bank of New York Mellon Corporation is deemed to be substantial shareholder by virtue of shares

held by Newton Investment Management Limited and Mellon Capital Management Corporation.

SharehoLDer InForMatIon (cont’D)as at 19 March 2010


NOTICE IS HEREBY GIVEN that the Annual General Meeting of STRAITS ASIA RESOURCES LIMITED (“the Company”) will be held at 6 Shenton Way, DBS Tower 1, DBS Auditorium Level 3, Singapore 068809 on Wednesday, 20 April 2010 at 9.30 a.m. for the following purposes:

AS ORDINARY BUSINESS

To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2010 together with the Auditors’ Report thereon. (Resolution 1)

2. To declare a final dividend of 2.85 US cents per share (equivalent to approximately Singapore 3.61 cents per share), tax exempt for the year ended 31 December 2010 (2009: US 2.03 cents).

(Resolution 2)

3. To re-elect the following Directors retiring pursuant to Articles 94 and 100 of the Company’s Articles of Association:

Mr. Martin David Purvis [Retiring under Article 94] (Resolution 3)Dr. Chua Yong Hai [Retiring under Article 94] (Resolution 4)Mr. Peerachat Pinprayong [Retiring under Article 100] (Resolution 5)Ms. Julie Therese Hall [Retiring under Article 100] (Resolution 6)

Mr. Martin David Purvis will, upon re-election as a Director of the Company, remain as CEO of the Company and will be considered non-independent.

Dr. Chua Yong Hai will, upon re-election as a Director of the Company, remain as a member of the Audit, Risk and Compliance Committee and will be considered independent.

Mr. Peerachat Pinprayong will, upon re-election as a Director of the Company, be considered non-independent.

Ms. Julie Therese Hall will, upon re-election as a Director of the Company, be considered independent.

4. To approve the payment of directors’ fees of up to S$650,000 payable by the Company for the year ending 31 December 2011. (Resolution 7)

5. To re-appoint Messrs PricewaterhouseCoopers LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 8)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

notIce oF annuaL generaL MeetIng



AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following resolutions, of which Resolutions 9 to 12 will be proposed as Ordinary Resolutions and Resolution 13 will be proposed as a Special Resolution, with or without any modifications:

7. Authority to issue shares

As an Ordinary Resolution:

That pursuant to Section 161 of the Companies Act, Cap. 50 (“CA”) and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGx-ST”), the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,

provided that:

1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per cent. (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed twenty per cent. (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);


AS SPECIAL BUSINESS (continued)

7. Authority to issue shares (continued)

2) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

(b) new shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and

4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.

[See Explanatory Note (i)] (Resolution 9)

8. Authority to offer and grant options under the rules of the Straits Employee Share Option Plan (the “Option Plan”)


That pursuant to Section 161 of the CA, the Directors of the Company be authorised and empowered to offer and grant options under the rules of the Option Plan and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of the options granted under the Option Plan, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional shares to be issued under this Option Plan and all other share option, share incentive, performance share and restricted share plans implemented by the Company shall not exceed fifteen per centum (15%) of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (ii)] (Resolution 10)



9. Authority to allot and issue shares under the rules of the Straits Executive Share Acquisition Plan (the “Share Plan”)


That pursuant to Section 161 of the CA, the Directors of the Company be authorised and empowered to offer and grant awards under the rules of the Share Plan and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to awards granted under the Share Plan, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional shares to be issued pursuant to this Share Plan and all other share option, share incentive, performance share and restricted share plans implemented by the Company shall not exceed fifteen per centum (15%) of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (iii)] (Resolution 11)

10. Authority to offer and grant share options to Non-executive Directors as part of the directors’ fees to Non-executive Directors

As an Ordinary Resolution

That authority be and is hereby given to the Directors to offer and grant share options in accordance with the terms set out in the Addendum and to allot and issue an aggregate number of up to 280,000 shares in the capital of the Company pursuant to the exercise of such share options to the Non-executive Directors as follows:

(a) 77,236 ordinary shares to Dr. Chitrapongse Kwangsukstith; (b) 67,073 ordinary shares to Dr. Chua Yong Hai; (c) 50,813 ordinary shares to Mr. Han Eng Juan; (d) 48,780 ordinary shares to Mr. Apisit Rujikeatkamjorn; and (e) 30,488 ordinary shares to Mr. Peerachat Pinprayong,

and that any Director or Company Secretary be authorised to do all things necessary or appropriate to give effect to this Resolution as he may deem fit.

[See Explanatory Note (iv)] (Resolution 12)



AS SPECIAL BUSINESS (continued)

11. Authority to Change the Company Name

As a Special Resolution

That :

(a) the name of the Company “Straits Asia Resources Limited” be changed to “Tiger Energy Resources Limited” and that the name “Tiger Energy Resources Limited” be substituted for “Straits Asia Resources Limited” wherever the latter name appears in the Company’s Memorandum and Articles of Association; and

(b) any Director of the Company and/or the Company Secretary be and are hereby authorised to complete and do all such acts and things (including executing or amending all such documents as may be required) as he may consider expedient or necessary or appropriate to give effect to this Resolution.

[See Explanatory Note (v)] (Resolution 13)

By Order of the Board

Graeme TiveySecretarySingapore28 March 2011

Explanatory Notes:

(i) The Ordinary Resolution 9 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro rata basis to shareholders.



Explanatory Notes: (continued)

For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed, after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed, and any subsequent bonus issue, consolidation or subdivision of shares.

(ii) The Ordinary Resolution 10 in item 8 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the capital of the Company pursuant to the exercise of options granted or to be granted under the Option Plan and all other share option, share incentive, performance share and restricted share plans implemented by the Company, up to a number not exceeding in aggregate (for the entire duration of the Option Plan) fifteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iii) The Ordinary Resolution 11 in item 9 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the capital of the Company pursuant to awards granted under the Share Plan and all other share option, share incentive, performance share and restricted share plans implemented by the Company, up to a number not exceeding in aggregate (for the entire duration of the Share Plan) fifteen per centum (15%) of the issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iv) The Ordinary Resolution 12 in item 10, if passed, will authorise the Directors of the Company to issue up to 280,000 Options to Non-Executive Directors as described in the Addendum.

(v) The Special Resolution 13 in item 11 above, if passed, will change the Company’s name to “Tiger Energy Resources Limited”. The new name will clearly identify the Company as unrelated to Straits Resources Ltd, the previous holding company. Please refer to the Addendum dated 28 March 2011 to the Annual Report of the Company for the financial year ended 31 December 2010 for further discussion.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint one (1) or two (2) proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at #09-01 Tower Fifteen, 15 Hoe Chiang Road, Singapore 089316 not less than 48 hours before the time appointed for holding the Meeting.



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STRAITS ASIA RESOURCES LIMITED Company Registration No. 199504024R(Incorporated In The Republic of Singapore)

PROxY FORM(Please see notes overleaf before completing this Form)

I/We,

of

being a member/members of Straits Asia Resources Limited (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held at 6 Shenton Way, DBS Tower 1, DBS Auditorium Level 3, Singapore 068809 on Wednesday, 20 April 2011 at 9.30 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)No. Resolutions relating to: For Against1 Directors’ Report and Audited Accounts for the year ended 31 December 20102 Payment of proposed final dividend3 Re-election of Mr. Martin David Purvis as a Director4 Re-election of Dr. Chua Yong Hai as a Director5 Re-election of Mr. Peerachat Pinprayong as a Director6 Re-election of Ms. Julie Therese Hall as a Director7 Approval of Directors’ fees amounting to S$650,0008 Re-appointment of Messrs PricewaterhouseCoopers LLP as Auditors9 Authority to issue shares

10 Authority to offer and grant options under the rules of the Straits Employee Share Option Plan

11 Authority to allot and issue shares under the rules of the Straits Executive Share Acquisition Plan

12 Authority to offer and grant share options to Non-Executive Directors as part of the directors’ fees to Non-Executive Directors

13 Authority to Change the Company Name

Dated this day of 2011

Signature of Shareholder(s)or, Common Seal of Corporate Shareholder

IMPORTANT:

1. For investors who have used their CPF monies to buy Straits Asia Resources Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

Notes:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 15 Hoe Chiang Road, #09-01 Tower Fifteen, Singapore 089316 not less than 48 hours before the time appointed for the Meeting.

6. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.

7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

General:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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CORPORATE DIRECTORY

Directors

Dr. Chitrapongse Kwangsukstith Non-Executive Chairman


Mr. Martin David Purvis Executive Director and Chief Executive Officer

Mr. Apisit Rujikeatkamjorn Independent Non-Executive Director


Mr. Peerachat Pinprayong Non-Executive Director

Ms. Julie Therese Hall Independent Non-Executive Director

Audit, Risk & Compliance Committee

Mr. Han Eng Juan Chairman

Dr. Chua Yong Hai



Dr. Chua Yong Hai Chairman

Mr. Han Eng Juan



Mr. Apisit Rujikeatkamjorn Chairman

Dr. Chua Yong Hai

Mr. Han Eng Juan

Company Secretaries Share Register

Graeme Bruce Tivey Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01Singapore Land Tower, Singapore 048623

Yip Ming Fai

Registered & Head Office Independent Auditors

15 Hoe Chiang Road #09-01 Tower Fifteen Singapore 089316 Telephone: (65) 6327 4111Facsimile: (65) 6327 4222Website: www.straitsasia.com

PricewaterhouseCoopers8 Cross StreetPWC BuildingSingapore 048424

Audit Partner: Graham LeeYear of appointment: 2008

02 Corporate Vision, Mission and Values 03 Financial Highlights 04 Five-year FinancialSummary 05 Chairman’s Statement 08 Chief Executive Officer’s Review 13 Board ofDirectors 16 Key Executives 18 Financial Review 24 Coal Production and Operations28 Human Resources 30 Occupational Health & Safety 32 Environment 34 Community36 Investor Relations 37 Coal Resource Statement 38 Coal Reserve Statement39 Corporate Governance 57 Financial Statements 136 Shareholder Information138 Notice of Annual General Meeting 145 Proxy Form IBC Corporate Directory

CONTENTS

The following definitions apply throughout this Annual Report;

“ASP” Average selling price“Board” The Board of Directors of Straits Asia“CEO” Chief Executive Officer“Straits Asia”, “Company” Straits Asia Resources Limited“Group” Straits Asia and its subsidiaries“Mt” Millions of metric tonnes“pa” per year“PTTAPM” PTT Asia Pacific Mining Pty Ltd, Straits Asia’s immediate holding company “t” One metric tonne“Kt” Thousands of metric tonnes“$”, “US$” United States dollars, the Group’s financial currency, unless otherwise stated“$M” Millions of United States dollars“A$” Australian dollars“Q1” First quarter“Q2” Second quarter“Q3” Third quarter“Q4” Fourth quarter“H1” First half of the year“H2” Second half of the year“mmpm” Millimetre per month

15 Hoe Chiang Road #09-01 Tower Fifteen Singapore 089316 Tel: 65 6327 4111 www.straitsasia.com Mining for Asia’s GrowthAnnual Report 2010

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