ANNEX V

CP REPORTS – DAVAO ORIENTAL AND ZAMBOANGA-SIBUGAY PROJECTS

ANNEX V-A

INTERNAL GEOLOGIC REPORT

RESULT OF EXPLORATION
DAVAO COAL PROJECT
 INTERNAL GEOLOGIC REPORT
RESULT OF EXPLORATION
DAVAO COAL PROJECT
Municipality of Manay, Davao Oriental

Coal Operating Contract No. 159

of

TITAN MINING AND ENERGY CORPORATION

3/F JFKC Centre, 2155 Don Chino Roces Ave.
Makati City, Philippines

by:

Enrique C. Payawal
Geologist
Vice-President for Exploration
April 04, 2012
 TABLE OF CONTENTS
Section Description Page No.
1. CERTIFICATE AND CONSENT OF COMPETENT PERSON (CP) 5
2. SUMMARY 6
2.1 INTRODUCTION 6
2.2 PROPERTY DESCRIPTION 6
2.3 PROPERTY LOCATION 6
2.4 OWNERSHIP 9
2.5 GEOLOGY AND MINERALIZATION 9
2.6 EXPLORATION CONCEPT 9
2.7 STATUS OF EXPLORATION 10
2.8 CONCLUSIONS 10
2.9 RECOMMENDATIONS 11
3. INTRODUCTION 11
3.1 REPORT PREPARATION 11
3.2 COMPLIANCE OF REPORT WITH PHILIPPINE MINERAL REPORTING 11
CODE (PMRC)
3.3 PURPOSE OF REPORT AND SCOPE OF WORK 11
3.4 DURATION OF THE PREPARATION 11
3.5 MEMBERS OF THE TECHNICAL REPORT PREPARATION TEAM 12
4. RELIANCE ON OTHER EXPERTS 12
5. TENEMENT AND MINERAL RIGHTS 12
5.1 DESCRIPTION OF MINERAL RIGHTS 12
5.1.1 Type of Permit or Agreement with the Government 13
5.1.2 Number of Hectares Covered by Coal Operating Contract 13
(COC)
5.2 LOCATION 13
5.3 COORDINATE LOCATION AS PER DEPARTMENT OF ENERGY (DOE) 13
5.4 CURRENT OWNER OF MINERAL RIGHTS 13
5.5 LOCATION OF COAL RESOURCES 14
6. GEOGRAPHIC FEATURES 14
6.1 LOCATION AND ACCESSIBILITY 14
6.2 TOPOGRAPHY, PHYSIOGRAPHY, DRAINAGE AND VEGETATION 14
6.3 CLIMATE 15
6.4 LAND USE 15
6.5 POPULATION AND SOCIO ECONOMIC ENVIRONMENT 15
6.6 ENVIRONMENTAL FEATURES 15
6.6.1 Pedology 15
6.6.2 Biological Environment 16
6.6.3 Water Environment 16
7. PREVIOUS WORK 16
8. HISTORY OF PRODUCTION 16

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9. REGIONAL AND DISTRICT GEOLOGY 17
9.1 REGIONAL GEOLOGIC SETTING 17
9.2 STRATIGRAPHY 17
9.3 STRUCTURAL GEOLOGY 19
9.4 COAL OCCURRENCES 20
9.5 COAL QUALITY 22
10. COAL OPERATING CONTRACT (COC) AREA GEOLOGY 24
11. COAL OCCURRENCES IN THE COC AREA 26
12. DEPOSIT TYPES 30
12.1 MINERAL DEPOSIT TYPE 30
12.2 GEOLOGIC MODELLING 30
13. MINERALIZATION 31
13.1 DESCRIPTION OF SURROUNDING ROCK TYPES 31
13.2 MINERAL ZONES 31
13.3 COAL QUALITIES 31
14. EXPLORATION 32
14.1 SURFACE GEOLOGIC MAPPING 32
14.2 DIAMOND DRILLING 32
14.3 SAMPLING METHOD AND APPROACH 37
14.3.1 Borehole Drilling Operations 37
14.3.2 Quality Control Measures 37
14.3.3 Data Verification Procedures 37
14.4 SAMPLE PREPARATION, ANALYSES AND SECURITY 38
14.4.1 Geo-mechanical Logging of Core Samples 38
14.4.2 Sample Preparation Methods 38
14.4.3 Security Methods 38
15. ESTIMATE OF COAL RESOURCE 38
15.1 DATABASE USED 38
15.2 INTEGRITY OF DATABASE 39
15.3 DATA VERIFICATION AND VALIDATION 39
15.4 CUT-OFF GRADES USED IN ESTIMATION 39
15.5 ESTIMATION METHOD OF COAL RESOURCE 39
15.5.1 Resource Criteria 40
15.5.2 Data Resource and Modelling 40
15.6 ESTIMATE OF COAL RESOURCE 45
16. INTERPRETATION AND CONCLUSIONS 46
17. RECOMMENDATIONS 47
18. REFERENCES 49

3
LIST OF TABLES

Table Description Page

No.
1 COAL MINI BASINS AND COAL SEAMS 27
2 ANALYSES OF COAL SEAMS 29
3 DRILL HOLE COAL INTERCEPTS AND COAL OUTCROPS OF BACTINAN AREA 33
4 DRILL HOLE COAL INTERCEPTS AND COAL OUTCROPS OF MACOPA AREA 34
5 RESOURCE BLOCK TABULATION 44
6 ESTIMATE OF COAL RESOURCES AT BACTINAN AND MACOPA AREAS 45
7 ESTIMATE OF POTENTIAL TONNAGE 45
8 PHASES OF EXPLORATION/DEVELOPMENT 48

LIST OF FIGURES

Figure Description Page

No.
1 LOCATION MAP 7
2 TENEMENT MAP 8
3 REGIONAL STRATIGRAPHIC COLUMN 19
4 REGIONAL STRUCTURAL SETTING 21
5 GEOLOGIC MAP OF COC AREA 25
6 1:10,000 DRILL HOLE LOCATIONS AND OUTCROP MAP OF BACTINAN AREA 35
7 1:10,000 DRILL HOLE LOCATIONS AND OUTCROP MAP OF MACOPA AREA 36
8 RESOURCE BLOCKS OF BACTINAN AREA 42
9 RESOURCE BLOCKSOF MACOPA AREA 43

LIST OF ATTACHMENTS

Attachment Description
1 1:20,000 GEOLOGIC MAP OF THE COC AREA
2 1:20,000 IDEALIZED CROSS SECTION OF THE COC AREA
3 1:2000 GEOLOGY, RESOURCE BLOCK AND LOCATION MAP OF DRILL HOLES AND COAL
OUTCROPS OF BACTINAN AREA
4 1:2000 GEOLOGY, RESOURCE BLOCK AND LOCATION MAP OF DRILL HOLES AND COAL
OUTCROPS OF MACOPA AREA
5 1:2000 CROSS SECTIONS OF RESOURCE BLOCKS OF BACTINAN AREA
6 1:2000 CROSS SECTIONS OF RESOURCE BLOCKS OF MACOPA AREA
7 CERTIFICATES OF ANALYSIS

4
2.0 SUMMARY

2.1 INTRODUCTION

Titan Mining and Energy Corporation (TMEC) commissioned the preparation of the report to
consolidate and interpret the result of exploration conducted by TMEC’s exploration team on
its coal project area in Davao Oriental. The report is part of TMEC’s document pertinent to
TMEC’s rights offering to possible foreign investors.

The technical report preparation team has endeavoured to make this report compliant with the
Implementing Rules and Regulations (IRR) of the Philippine Mineral Reporting Code (PMRC).

Work on the technical report started on February 15, 2012 up to March 15, 2012 (gathering of
pertinent exploration reports, field visits and verification); March 16, 2012 to March 30, 2012
(collation, interpretation and review); April 1, 2012 to April 15, 2012 (writing and submission).

2.2 PROPERTY DESCRIPTION

The coal project area is covered by Coal Operating Contract No. 159 (COC #: 159) which was
granted by the Department of Energy (DOE) to TMEC on September 10, 2009.

The contract covers an exploration phase of two (2) years which may be extended for another
period of two (2) years and a development and operating phase of thirty two (32) years.

The exploration phase was extended by the Department of Energy (DOE), upon request by
TMEC, until September 15, 2013.

The development and operating phase will commence upon DOE’s validation of the resource
estimate made by TMEC.

COC #: 159 encompasses seven (7) adjoining 1000-hectare Coal Blocks (CBs) or a total area of
7,000-hectares as follows:

Coal Operating Contract No. Coal Block No. Area (has.) Location
136, 137 2,000 Manay,Davao Oriental
176, 177, 178 3,000 Manay,Davao Oriental
COC #: 159 217, 218 2,000 Manay and Tarragona, Davao Oriental
TOTAL 7,000

2.3 PROPERTY LOCATION

COC #: 159 is situated in Barangays Old Macopa, Holy Cross, San Ignacio, Capasnan, Lambog
and Rizal in the Municipality of Manay and Barangay Dadong, in the Municipality of Tarragona,
all in the Province of Davao Oriental.

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1

7
2

8
COC #: 159 is bounded by the following geographic coordinates:

Corner Latitude Longitude

1 7°14’00” 126°22’30”
2 7°14’00” 126°25’30”
3 7°12’00” 126°25’30”
4 7°12’00” 126°27’00”
5 7°08’00” 126°27’00”
6 7°08’00” 126°24’00”
7 7°10’00” 126°24’00”
8 7°10’00” 126°22’30”

2.4 OWNERSHIP

TMEC is the current holder of mineral rights over the coal project area by virtue of COC #: 159
which was granted to TMEC by the DOE on September 10, 2009.

2.5 GEOLOGY AND MINERALIZATION

The coal seams of the sedimentary basins in the Mindanao Pacific Cordillera occur within the
Mangagoy Formation of Late Oligocene to Early Miocene age. They are considered to be part of
a paralic belt of sediments that extends from the Mangagoy area along the length of eastern
Mindanao.

The coal seams are bounded above and below by clastic sedimentary rocks most commonly
mudstones, sandstones and siltstones. Within the seams are inter-seam partings of
predominantly mudstones.

2.6 EXPLORATION CONCEPT

Exploration was carried out by identifying on the ground geological paleo-environment of coal
deposition through detailed geologic mapping.

Individual coal outcrops located on the ground were trenched to fully expose the seams such
that these may be characterized and correlated.

Correlated coal outcrops were projected to identify coal seams that served as diamond drill
hole targets at depth.

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2.7 STATUS OF EXPLORATION

Detailed surface geologic mapping was conducted on the property and the results are as
follows:

Coal seams in the COC area are associated with the Carbonaceous Mudstone Member of the
Mangagoy Formation. The seams occur as interbeds and thus strike and dip congruently with
the mudstone beds.

Thirteen (13) individual carbonaceous mudstone “islands” or mini basins containing a total area
of 1, 204 has.were mapped in the project area.

Ten (10) out of the thirteen (13) mini basins contain a total of forty (40) outcrops of coal beds
with thickness ranging from 0.18 meter to 4.57 meters.

Three (3) individual coal seams were recognized after correlating the coal outcrops that were
mapped in the mini basins at Bactinan (Coal Block 136) and Macopa (Coal Block 217).

Table 1. shows the individual mini basins, their respective aerial extent and coal outcrops.

Diamond core drilling campaign was initiated in two (2) of the ten (10) identified coal bearing
mini basins namely Bactinan (Coal Block 136) and Macopa (Coal Block 217).

A total of twenty two (22) holes were drilled to date of which fifteen (15) holes intersected coal
seams at depth.

Diamond drilling activity is currently on-going to complete the subsurface exploration at

Bactinan.

2.8 CONCLUSIONS

Thirteen (13) individual mini coal depositional basins are located in the COC area. Ten (10) of
these basins are carbonaceous mudstones with interbeds of coal seams. Within these ten (10)
mini basins, a total of forty (40) coal outcrops with thickness ranging from 0.18 m to 4.57 m
were located.

Correlating the coal outcrops resulted into the identification of at least two (2) to three (3) coal
beds in the ten (10) individual mudstone mini basins.

Diamond Drilling Activities (22 holes completed) within Bactinan and Macopa, two (2) of the
ten (10) mini basins, confirmed the continuity of the coal seams at depth.

10
The estimated Measured and Indicated (M&I) coal resource within the drilled mini basins at
Bactinan and Macopa totals to 7.1 MMT and an Inferred Resource of 5.6 MMT (Table 5). The
entire COC area however has a remaining “Potential” or “Target” coal deposit of 59 MMT
(Table 6), that warrants further exploration activity.

2.9 RECOMMENDATIONS

Exploration activities conducted on the project as discussed in Section 12.0 represent Phase I,
Phase II and partial Phase III of the Philippines Mineral Reporting Code (PMRC) exploration /
development phases presented by Dr. PABLITO ONG in the PMRC’s accreditation training
seminar. (Table 8)

The result of exploration conducted on the area clearly indicates that Phase III should be
pursued further.

This entails further detailed geologic mapping, more trenching, and core drilling within the
remaining eight (8) mini basins.

3.0 INTRODUCTION

3.1 REPORT PREPARATION

TMEC commissioned the preparation of the report to consolidate and interpret the Result of
Exploration conducted by TMEC’s exploration team on its coal project area in Davao Oriental.
The report is part of TMEC’s document pertinent to TMEC’s rights offering to possible foreign
investors.

3.2 COMPLIANCE OF REPORT WITH PMRC

The technical report preparation team has endeavoured to make this report compliant with the
Implementing Rules and Regulations (IRR) of the PMRC.

3.3 PURPOSE OF REPORT AND SCOPE OF WORK

The purpose is to present the result of exploration in conformance with the IRR of the PMRC.
The report conforms with TR-Form 01 of the PMRC.

3.4 DURATION OF THE PREPARATION

Work started on February 15, 2012 up to March 15, 2012 (gathering of pertinent exploration
reports, field visits and verification); March 16, 2012 to March 30, 2012(collation, interpretation
and review); April 1, 2012 to April 15, 2012 (writing and submission).

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3.5 MEMBERS OF THE TECHNICAL REPORT PREPARATION TEAM

3.5.1 MR. ENRIQUE C. PAYAWAL

Geologist
VP-Exploration, TMEC

PRC Reg. No. 255

December 18, 1968

Competent Person (CP)

Philippine Mineral Reporting Code (PMRC)
June 02, 2009

3.5.2 MS. GIZELLA GRETA DJ. GONZALES

Senior Geologist
PRC Reg. No. 1425
August 23, 2000

3.5.3 ENGR. JOEY D. BALDONADE

Geodetic Engineer
PRC Reg. No. 07260
Feb. 17, 2006

4.0 RELIANCE ON OTHER EXPERTS

Mr. Arturo A. Ona, a geologist based at Reno, Nevada, USA and a registered geologist (No.
14646) in the State of Arizona, USA, spent one (1) week in the Project while gathering field
geological data for his National Instrument 43-101 (NI43-101) Independent Geological Report
on the property.

Mr. Ona visited all the coal outcrops, diamond drill hole locations and some strategically
located rock exposures. He likewise checked all the drill core boxes to confirm the integrity of
the drill logs.

5.0 TENEMENT AND MINERAL RIGHTS

5.1 DESCRIPTION OF MINERAL RIGHTS

5.1.1 Type of Permit or Agreement with Government

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The coal project area is covered by COC #: 159 which was granted by the DOE to TMEC on
September 10, 2009.

5.1.2 Number of Hectares (has) Covered by COC

COC #: 159 encompasses seven (7) adjoining 1,000-ha. CBs or a total area of 7,000 has. as
follows:

Coal Operating Coal Block Area Location

Contract No. No. (Has.)
136, 137 2,000 Manay,
Davao Oriental
COC #: 159 176, 177, 178 3,000 Manay,
Davao Oriental
217, 218 2,000 Manay and Tarragona,
Davao Oriental
TOTAL 7,000

5.2 LOCATION

COC #: 159 is situated in Barangays Old Macopa, Holy Cross, San Ignacio, Capasnan, Lambog
and Rizal in the Municipality of Manay and Barangay Dadong, in the Municipality of Tarragona,
all in the Province of Davao Oriental.

5.3 COORDINATE LOCATIONS AS PER DOE

COC #: 159 is bounded by the following geographic coordinates:

Corner Latitude Longitude

1 7°14’00” 126°22’30”
2 7°14’00” 126°25’30”
3 7°12’00” 126°25’30”
4 7°12’00” 126°27’00”
5 7°08’00” 126°27’00”
6 7°08’00” 126°24’00”
7 7°10’00” 126°24’00”
8 7°10’00” 126°22’30”

5.4 CURRENT OWNER OF MINERAL RIGHTS

TMEC is the current holder of mineral rights over the coal project area by virtue of COC #: 159
which was granted to TMEC by the DOE on September 10, 2009. COC # 159 was later renewed
by the DOE for another period of two (2) years (September 16, 2011 to September 15, 2013).

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5.5 LOCATION OF COAL RESOURCES

The coal prospects occur in CBs 136, 137, 176, 177, 178, 217, and 218 within COC #: 159. (see
Figure 2: Tenement Map)

6.0 GEOGRAPHIC FEATURES

6.1 LOCATION AND ACCESSIBILITY

A major portion of the 7000-ha. COC area falls within the Municipality of Manay, Davao
Oriental, more specifically in Barangays Old Macopa, San Ignacio, Holy Cross, Lambog and
Capasnan. A small fraction (703 has) is within Barangay Dadong, in the Municipality of
Tarragona.

The exploration base camp of TMEC is situated in Barangay Old Macopa.

Barangay Old Macopa is 11 kilometers (kms.) via dirt and gravel road from the Provincial
Coastal Highway at Barangay San Ignacio. Barangay San Ignacio of the Municipality of Manay is
approximately 51 kms. via the Provincial Highway from the Capital City of Mati.

The City of Mati is a 4-hour drive from the Davao International Airport.

6.2 TOPOGRAPHY, PHYSIOGRAPHY, DRAINAGE, AND VEGETATION

The project area is characterized by rugged terrain and high relief, manifested by steep cliffs
and slopes, sharp ridges, and deeply incised valleys. Elevation within the COC area ranges from
100 m Above Sea Level (ASL) to as high as 700 m ASL. Southwest of the COC area lies Mount
Mayo with summit elevation of 1760 m ASL. Mount Kampalili looms in the northwest and
towers at 2396 m ASL.

The project area is drained by two (2) major rivers. The Casauman River on the north, originates
from Mount Kampalili and flows south-easterly towards the Philippine Sea. The Quinonoan
River on the south, originates from Mount Mayo and flows north-easterly then south-easterly
until it also drains to the Philippine Sea.

Vegetation in the area is characterized by coconut and some fruit trees growing along valleys
and gentle slopes. A few patches of land are planted to Mangiums and Falcatas. Hardwood
trees and other plants typical of a tropical rain forest dominate areas of higher elevations and
steep slopes.

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6.3 CLIMATE

The province of Davao Oriental falls under Type II of Philippine Atmospheric Geophysical and
Astronomical Services Administration’s (PAGASA) modified Coronas Climate Classification
Scheme. Rainy season prevails the whole year-round with pronounced heavy rainfall during
December. The monthly mean temperature is 27.2°C and the average annual relative humidity
is recorded at 80%. The average annual precipitation varies from 1000 millimeters (mm) at the
south to 4000 mm in the north eastern section of the province.

6.4 LAND USE

Based on the 1997-2007 Comprehensive Municipal Development Plan (CMDP) of Manay, Davao
Oriental, land use in the municipality is classified into: (1) timberland covering 66.03% of the
total municipal land area, and (2) alienable and disposable, encompassing 33.97% of the total
land area.

The COC area falls within the second classification.

6.5 POPULATION AND SOCIO ECONOMIC ENVIRONMENT

Population of Manay was observed to be 35,428 in 1995. This was projected to have grown to
39,921 in 2007. In 1995 the urban population represents 63.25% of the total inhabitants.
55.44% is also considered to be economically productive. Majority of the labor force is engaged
in agriculture, forestry, and fishing. 16% is in manufacturing, charcoal making, and 3% is in
construction, transportation, and trading.

The population of Manay totalled 35,425 in 1995. Among the inhabitants of Manay, majority or
83% speaks Davaweno, 9% Cebuano, 5.4% Mandaya, and the rest speak either Tagalog,
Hiligaynon, Ilocano or Pampangeño.

6.6 ENVIRONMENTAL FEATURES

6.6.1 PEDOLOGY

Three (3) types of soil are recognized in the municipality. These are as follows:

Camansa Sandy Clay Loam. This soil type is present in ten (10) of the seventeen (17) barangays
and covers 36,952 has. or 77.04% of the Municipality.

Bolinao Clay Loam. This soil occupies 9,128 has. or 19.03% of Manay.

Matina Clay Loam. 1,884 has. or 3.93% of the municipal land area is covered by this type of soil.

15
All clay types recognized in the area are most suitable for diversified crops as per Municipal
Agriculture Office (MAO) record.

6.6.2 BIOLOGICAL ENVIRONMENT

The floral assemblage in the area is composed mostly of coconut and some fruit trees. Small
patches of Mangiums and Falcata trees cover some slopes dipping more than 20°. Hardwood
trees are recognizable in areas of higher elevation.

Faunal assemblage in the area is limited to small wild life such as field rats, birds of prey, lizards,
snakes, and insects. Domesticated animals such as chicken, dogs, and carabaos are almost
always present near small farms and households.

6.6.3 WATER ENVIRONMENT

No water quality test was conducted in the area. It was observed however that water from
selected streams is used for drinking and cooking.

Surface run-off drains to the east by the Casauman River and its tributaries, emptying to the
Philippine Sea in the Northern portion of the COC. The southern area is drained by the
Quinonoan River that also flows eastward to the Philippine Sea.

7.0 PREVIOUS WORK

Although no official record was available, verbal communication with the barangay residents
confirms the exploration activities conducted by the Philippine National Oil Company (PNOC) in
early 1980. Detailed stream traverses were conducted and coal outcrops appeared to have
been trenched. PNOC drilled a hole in Sitio Bactinan reportedly to intercept three (3) coal
seams at depth.

8.0 HISTORY OF PRODUCTION

The COC area has never been subjected to any mining activity.

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9.0 REGIONAL AND DISTRICT GEOLOGY

9.1 REGIONAL GEOLOGIC SETTING

The project area is situated in the Southern Pacific Cordillera in the south eastern corner of the
island of Mindanao.

The Pacific Cordillera is predominantly underlain by a sequence of Pre-Tertiary ophiolitic, and

metamorphic rocks, basalt flows, agglomerates and indurated clastic rocks. The younger rocks
consist of sedimentary and extrusive rocks dated Early Eocene to Middle Miocene to
Pleistocene.

9.2 STRATIGRAPHY

The stratigraphic sequence of the Southern Pacific Cordillera is described from the oldest to the
youngest as follows:

9.2.1 Pujada Ophiolitic Complex (Late Cretaceous)

This basement rock composed of undifferentiated ophiolitic and metamorphic rocks such as
amphibolite schists and serpentinites are recognized immediately north of the Calapagan –
Marayag Valley. Metasedimentary rocks consist of well-indurated sandstones with bioturbation
and slump feature were mapped in the Tarragona area. Cretaceous limestones were recognized
in Hijo River and Mati.

9.2.2 Barcelona Formation (Cretaceous – Paleogene)

The term Barcelona Formation was introduced by Aurelio and Peña to describe the rocks,
initially recognized by Vergara and Spencer (1957) along the eastern coast from Bislig to Lingig
as consisting of basalt flows with intercalated agglomerates, breccias and highly indurated
clastic sedimentary rocks. The presence of columnar and pillow structures are described.

9.2.3 Tagabakid Formation (Late Eocene)

The term Tagabakid Formation was also introduced by Aurelio and Peña to describe the Eocene
carbonates recognized by Quebral (1994) between Mati and Tarragona.

The Tagabakid Formation consists of a lower flysch member and upper carbonate member. The
lower clastic member starts with rhythmic intercalations of thin but well bedded fine
sandstones and mudstones. It contains more mudstones and marls towards the top until it
passes into the upper member represented by massive reefal limestone. Eocene limestones
have also been dated in Bislig and Hijo River.

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9.2.4 Cateel Quartz Diorite (Miocene)

The intrusive rock of the southern Pacific Cordillera consists mainly of plagioclase, hornblende,
biotite and quartz and is generally leucocratic, medium grained and hypidiomorphic granular.
Other phases are melanocratic, fine grained and porphyritic. The Cateel Quartz Diorite is best
exposed in the upper reaches of the Caraga and Cateel Rivers.

9.2.5 Mangagoy Formation (Late Oligocene – Early Miocene)

The Mangagoy Formation consists of a sequence of sandstone, mudstone, shale, coal and
conglomerate. Vergara and Spencer (1957) named this clastic sedimentary sequence.
Sandstones are the dominant lithology. They are dark gray, very poorly sorted and thick bedded
to massive with occasional conglomerate lenses. Petrified logs are often embedded within the
clastic rocks. The mudstones are black to dark gray to brown when weathered and contain large
amounts of carbonized plant remains, mollusk fragments, and coal lenses and beds.

9.2.6 Agtuuganon Limestone (Early Miocene – Middle Miocene)

The term Agtuuganon Formation was used by Metal Mining Institute of Japan-Japan
International Cooperation Agency (MMAJ-JICA) (1973) to refer to an 800-m. thick coralline
limestone occupying Mt. Agtuuganon in Davao del Norte. This limestone is found throughout
the Pacific Cordillera capping the Oligo-Miocene magmatic arc. It consists of a lower bedded
portion and an upper massive limestone member.

9.2.7 Tarragona Conglomerate (Late Pliocene – Early Pleistocene)

The Tarragona Conglomerate was described by Quebral (1994) in reference to massive cliff-
forming conglomerates best exposed near the mouth of the Baguan River in Tarragona. These
coarse conglomerates are massive. They are heterogeneous in size and composition, consisting
of well rounded clasts of ultramafic rocks, gabbros, basalt, diabase, andesite porphyry, diorites,
limestone and clastic sedimentary rocks. These conglomerates are unconformable on the
underlying Agtuuganon Limestone and are in turn unconformably overlain by the Manay
Formation. The formation is estimated to be 200 m thick.

9.2.8 Manay Formation (Early – Late Pleistocene)

The Manay Formation was introduced by Quebral (1994) to refer to a sequence defined by a
lower sandstone member and an upper limestone member. Fine sandstones rich in mollusk and
echinoderm fragments characterize the lower clastic member. The formation unconformably
overlies the Tarragona Conglomerate. The uplifted Quaternary reefal limestone is readily
recognized along the Pacific coast from Manay to south of the Cateel River.

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9.2.9 Amacan Volcanics (Holocene)

The Amacan Volcanics refer to the Quaternary volcanic deposits in the vicinity of Lake Leonard
in Davao aside from Maniayao Volcano in Surigao. It is the only area in eastern Mindanao
affected by Quaternary volcanism. This volcanic activity is manifested as domes, plugs and
flows of pyroclastic rocks of andesitic to dacitic composition.

FIGURE
3

9.3 STRUCTURAL GEOLOGY

Davao Oriental Province is characterized by several major north north west (NNW) normal and
thrust faults, anticlines and close folds. The southern part of the Philippine Rift Zone is
expressed by 75° dipping sediments at Pujada Peninsula, crushed or breccias zones along the

19
Bitanagan and Sumlog Rivers, steep escarpments fronting the Tagopo Mountain Range and
aligned ridges in the Northwestern (NW) side of the Tarragona Municipality. An active NW fault
line passes Tugupan Point to Jovellan area and intersects the Agusan-Davao tectonic line.

9.4 COAL OCCURRENCES

The coal seams of the sedimentary basins in the Mindanao Pacific Cordillera occur within the
Mangagoy Formation of Late Oligocene to Early Miocene age. They are considered to be part of
a paralic belt of sediments that extends from the Mangagoy area along the length of Eastern
Mindanao.

Velasquez and Llave (1969) first describe the occurrences of coal seams in the Dochony,
Tarragona and Manay areas of Davao Oriental during the investigations for an application by
Insular Mining Corporation to mine coal.

Utah International identified several areas containing lignitic to sub-bituminous C seams, inland
from Cateel in the north to Tarragona in the south as follows:’

Bongaga District. Outcrop. Low-ranking with high sulphur content.

Bangkokaan Creek. Three (3) seams dipping at 60° were identified, with thicknesses of 0.6 m,
0.3 m, and 0.3 m. The coal contains 5980 BTU/lb and has a high moisture, ash, and sulphur
content.

Dapdan Creek. One (1) 0.4-m seam, dipping at 7° west (W), with high moisture and low ash
content.

Banahaw / Mahanun. One (1) 0.5-m thick seam, dipping at 16° northeast (NE), with high
moisture content but with low ash and sulphur content.

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4

21
Pagloscon Creek. Three (3) outcrops of 1.2-m thick seam with some waste partings. The coal
contains 7,713 BTU/lb, 10% ash, and 21.3% moisture on an air dried basis.

Sambanganay Creek. Two (2) seams (2 m and 1 m thick) separated by 5 m of barren strata. The
lower seam has a 0.1 m and 0.3 m waste parting.

Tumugfa, Baguan River. Two (2) seams (0.15 m and 1.5 m thick). The lower seam has 8,300
BTU/lb 16.7% ash and 0.35% sulphur on an air dried basis.

In 1980, Almendras Mining Corporation contracted nine (9) CBs 216 to 218, 255 to 258, 295,
and 355. The area lies immediately south of Philippine National Oil Corporation-Coal
Corporation (PNOCC-CC’s) Manay prospect and 12 km from the town of Tarragona.

Twelve (12) seam outcrops with thickness varying from 0.7 m to 2.5 m (average 1.7 m) were
found in a coal-bearing horizon some 100 m thick. The beds strike generally to the northeast
and dip 12° to 40° (exceptionally at 60°) to the southeast.

Trenching and limited tunnelling by the company identified one (1) potentially workable seam
with an average thickness of 2.1 m (1.6 m to 3.5 m) containing 3 to 5 partings (0.15 to 0.02
meters thick). The seam dips between 22° and 40°. In-situ reserves, suitable for underground
mining, were estimated to be 1.6 million tons but the Bureau of Energy Development (BED) has
downgraded the estimate to 0.2 million tons.

9.5 COAL QUALITY

One analysis, reported by Almendras Mining Corporation in 1980, showed the coal to have an
ash content of 11.5% and a heating value of some 8,400 BTU/lb, both on air-dried basis, viz:

Total Moisture 17.0%

Air dried Moisture (105°C) 14.6%
Ash 11.5%
Volatile Matter 43.8%
Fixed Carbon 30.2%
Sulphur 1.7%
Heating Value 8,624
BTU/lb and
air-dried
basis

TMEC, based on analytical data gathered from different exploration companies that operated in
the area, described the coal quality from the Mangagoy Formation of eastern Mindanao as
follows:

22
Heating values for coals from Eastern Mindanao are generally in the range of 8,000 BTU/lb to
8,600 BTU/lb on an air-dried basis. Ash content is moderately high and varies between 10% to
20%. The sulphur content is high and commonly varies between 1.5% to 3%.

Carbon content of the coal is usually about 75% on air-dried, ash-free basis. Hardgrove
Grindability Indices commonly vary between 35 and 65. Limited ash analyses indicate that the
ash tends to be of the bituminous type with the percentage Fe2O3 generally greater than the
combined percentage of CaO and MgO.

The data source and analytical method conducted on the samples are described below:

1. Some seventy five (75) proximate and ultimate analyses carried out on as received, dry, and
dry ash free bases, done by Spencer and Vergara in 1957 on samples from Surigao del Sur.
These are supplemented by a similar number of Hardgrove Grindability Indices and Free
Swelling Indices.

2. One air-dried proximate and ultimate analysis done by Ariate in 1971, on a sample taken
from northeast Surigao del Norte.

3. Proximate and ultimate analyses of thirty two (32) samples from eastern Mindanao, done by
RRI Energy (RRI) in 1977. Some 20 Free Swelling Indices and Hardgrove Grindability Indices
were determined.

4. Nineteen (19) proximate analyses on an air dried basis done by Montegrin Mining
Corporation, on samples collected from Surigao del Sur in 1978. In 1983, an additional sixty
seven (67) samples were analyzed for proximate and analysis on a dry basis.

5. Air dried proximate analyses carried out by Jabpract Mining and Industrial Corporation in
1979, on twenty-one (21) samples from Surigao del Norte.

6. Seven (7) proximate analyses on an air dried basis done by Utah Development Company, on
samples from Davao Oriental and Surigao del Sur in 1979.

7. Some fifty two (52) proximate analyses on an air-dried basis, on samples from Surigao del
Sur done by the Philippine Oil Development Company (PODCO) in 1981. Fourteen (14)
samples were also analyzed on an as received basis and four (4) used for ultimate analysis,
ash analysis, ash fusion temperature and Hardgrove Grindability Index determinations.

8. Fifteen (15) proximate analyses on both air-dried and as received basis, on samples from
Surigao del Sur done by Andres Soriano Corporation and Atlas Consolidated Mining and
Development Corporation (ANSCOR-ACMDC) in 1981.

9. One (1) sample from Davao Oriental used for proximate analysis on air dried and as received
bases, done by Almendras Mining Corporation in 1981.

23
10. Air-dried proximate analyses on seven samples from Surigao del Sur, done by Piedra Negra
Mining Corporation in 1982.

11. Proximate and ultimate analyses, ash analyses, ash fusion temperature and Hardgrove
Grindability Indices determinations, done by Pauling Plc on fifteen (15) samples from Surigao
del Sur in 1982. Nineteen (19) additional proximate analyses were done on samples from the
same area in 1983.

12. Two (2) air-dried proximate analyses carried out on samples from Surigao del Sur, done by
Pearl Mines Resources Corporation in 1982.

13. Some 174 proximate analyses on air-dried and as received basis, done by the Benguet
Corporation on samples from Surigao del Sur in 1983.

14. Some nine (9) proximate analyses on air-dried and as received bases, with two air-dried
ultimate analyses, done by Diversified Mining Company on samples from Surigao del Sur in
1983.

15. Air-dried, as received and dry basis proximate analyses, done in 1983 by Atlas Consolidated
Mining and Development Company (ACMDC) on some 58 samples from Surigao del Sur.

16. Sixteen (16) air-dried and as received basis proximate analyses, done by Sabena Mining
Corporation in 1983 on samples from Surigao del Sur

17. Some 101 proximate analyses with some samples also analyzed for ultimate analyses, ash
analysis, ash fusion temperatures, and Hardgrove Grindability Indices determinations, done
by PNOC-CC on samples from all parts of eastern Mindanao in 1984 and 1985.

18. One (1) proximate analysis on a dry basis, done by Wardell Armstrong in 1985 on samples
from Surigao del Sur.

10.0 COAL OPERATING CONTRACT AREA GEOLOGY

The area covered by COC #: 159 is generally underlain by members of the Mangagoy Formation
and minor patches of stratigraphically older Barcelona Basalt, Tagabakid Limestone and
younger Agtuuganon Limestone.

The Barcelona Basalt is represented in the area by a porphyritic facies with short stubby
phenocrysts of pyroxene minerals. The aphanitic matrix is generally dark gray in color. This
volcanic patch is wedged at the intersection of faults and appears to have been thrusted.

24
5
5

25
The Tagabakid Limestone occurs at the southwestern edge of the COC area. It is partly
marbolized albeit outlines of foraminifera and corals may still be recognized. The Tagabakid
Limestone has been dated to be Late Eocene (Quebral, 1994).

The Mangagoy Formation which occupies about 90% of the COC area is represented by: (1)
massive, thick bedded pebbly sandstone with some petrified wood in the upper horizon. The
sandstone member occupies the ridges and steep slopes along deep gulleys and ravines; (2)
dark gray to brown mudstone, sometimes carbonaceous with interbeds of coal seams. The
mudstone member conformably overlies the older sandstone member and dips with the
sandstone at an approximate average angle of 20° to the northeast. The mudstone beds
occupy the gentler slopes of cuestas and occur as drapes over the sandstone extending down to
the areas of lower elevation; (3) dark brown pebbly mudstone (wacke) conformably overlies the
coal bearing mudstone and are located on the south eastern fringes of the COC. The youngest
rock unit in the area is the Agtuuganon Limestone. It overlies the Mangagoy Formation and
occurs as capping in the eastern edge of the coal project. The Agtuuganon Limestone is dated
as Early to Mid Miocene (Quebral, 1994).

An Idealized Geologic Cross Section of the COC Area is presented as Attachment 2.

11.0 COAL OCCURRENCES IN THE COC AREA

Coal seams in the COC area are associated with the Carbonaceous Mudstone Member of the
Mangagoy Formation. The seams occur as interbeds and thus strike and dip congruently with
the mudstone beds.

Thirteen (13) individual carbonaceous mudstone “islands” or mini basins containing a total area
of 1,204 has. were mapped in the project area.

Ten (10) out of the thirteen (13) mini basins contain a total of forty (40) outcrops of coal beds
with thickness ranging from 0.18 m to 4.57 m.

Table 1 and Figure 5 show the individual mini basins, their respective aerial extent and coal
outcrops.

An earlier report on Coal Resources of the Philippines by Wardell-Armstrong International Ltd.,

1985, mentioned three (3) coal seams (Seams A, B and C) within the Mangagoy Formation in
the Bactinan area covered by Coal Blocks 136 and 137.

Seam A has a thickness of 1.43 m to 2.26 m as identified in one (1) borehole and one (1)
outcrop. Seam B varies from 0.3 m to 1.3 m and has been located in six (6) outcrops and two (2)
boreholes. Seam C is 0.5 m thick as identified in two boreholes.

26
One sample from Seam A and four samples from Seam B were analyzed. The results are only for
clean coal and are reported on air dried basis;

Seam A B
Total Moisture 13.5% 18.0%
Ash 9.6% 9.4%
Volatile Matter 37.5% 36.3%
Total Sulphur 0.48% 1.29%
Heating Value 10180 Btu/lb 9649 Btu/lb

Recent drilling activities by TMEC encountered two (2) coal seams (Seams A and B) in the
Bactinan area which is covered by Block 136. The coal seams occur in a monocline that strikes
Northwest (NW) and dips to the Northeast (NE).

Seam A has a thickness of 1.28 m to 4.57 m as identified in five (5) cored holes and three (3)
outcrops. Seam B varies from 0.9 m to 7.11 m and has been located in two (2) outcrops and five
(5) cored holes. The dip angle of the coal seams vary from 20˚ to 30˚. Average thickness of Seam
A, is 2.61 m. The average thickness of Seam B is 3.4 m.

Table 1. Coal Mini Basin and Coal Seams

No. Coal Mini Area in No. of Coal No. of Coal Sample Code Thickness of
Basin (Sq. M.) Outcrops Seams Coal Seam
Identified Measured

1 KN - 1 2,755,000 3 2 BCT - 12 0.32

BCT - 13 0.5

2 BB - 2 500,200 4 2 BCT - 06 0.9

BCT - 07 0.9

3 BB - 2A 44,000 2 Seamlet (N.A.) (N.A.)

4 BT - 3 600,300 6 2 BCT – 04/02 1.73/1.45

BCT – 05/01 1.5/3

350,000 ? BCT - 03 1.39

5 BE - 4 3 2 BCT - 09 3.55

392,300 BCT - 10 1.7

6 AN - 5 2,755,000 1 1 ABT - 01 0.6

27
 7 TY - 6 2,500,000 3 3 KCT - 01 2.04

KCT - 02 0.62

KCT - 03 0.65

8 TY - 6A 4 1 OBT - 01 0.57

9 OM - 7 144,800 13 3 MCO - 09 1.10

6,500,200 OMO – 01 1.1

OMT - 03/02 4.27/.88

10 OM - 7A 1 1 MOC - 26 1.37

11 LK - 8 5,600,400 (N.A.) (N.A.) (N.A.) (N.A.)

12 LK - 9 70,400 (N.A.) (N.A.) (N.A.) (N.A.)

13 LK - 10 122,400 (N.A.) (N.A.) (N.A.) (N.A.)

TOTAL 12,307,400 21,000

*N.A. – Not Applicable

At Macopa area (Block 217), three (3) coal beds were identified based on coal outcrops and drill
intercepts. Seam A ranges in thickness from 0.10 m to 2.7 m. Seam B varies from 0.22 m to
4.57 m. Seam C varies from 0.15 m to 1.47 m. The dip angle of the seams also vary from 20˚ to
30˚. The average thickness of Seam A is 1.05 m, Seam B is 1.94 m and Seam C is 0.71 m. The
seams occur in a syncline with axis trending West Northwest (WNW) and plunging
approximately 1% to the East Southeast (ESE).

Analysis of twenty six (26) coal samples collected from the ten (10) mini basins yielded a range
of values from a low of 4,552 BTU/lb to a high of 11,758 BTU/lb. Five (5) samples of the twenty
six (26) coal samples or nineteen percent (19%) gave an average heating value of 5,262 BTU/lb.
Twenty one (21) samples of the twenty six (26) coal samples or eighty one percent (81%)
yielded an average value of 9,263 BTU/lb.

At Bactinan, all the ten (10) samples collected in the area gave an average heating value of
9,700 BTU/lb.

In Macopa, a total of nine (9) samples were collected. Three (3) of the nine (9) samples or thirty
three percent (33%) yielded an average heating value of 4,962 BTU/lb while six (6) samples or
sixty seven percent (67%) gave an average heating value of 8,601 BTU/lb.

Analyses of the coal outcrops and drill intercepts at Macopa and Bactinan are illustrated in
Table 2.

28
 Table 2. Analyses of Coal Seams
OLD Sample TOTAL
Hole_ID ADL RM TM ASH VM FC BTU_LB Area
Hole_ID Number SULFUR
BDH-02 BDH-03 533 7.94 6.56 13.98 8.81 41.56 43.07 11,758 1.78 BACTINAN

BDH-02 BDH-03 534 7.08 6.45 13.07 15.47 39.7 38.38 10,707 3.17 BACTINAN

BCT-02 BCT-02 9.48 18.54 10.28 38.84 41.4 10,386 1.46 BACTINAN

BDH-02 BDH-03 536 8.31 8.91 16.48 14.9 34.05 42.14 10,340 0.38 BACTINAN

BCT-04 BCT-04 7.79 20.16 14.84 36.58 40.79 10,276 1.14 BACTINAN

BCT-03 BCT-03 9.96 16.44 10.41 38.94 40.69 10,187 0.85 BACTINAN

43-L- 43-L-136 12.44 27.12 11.42 36.78 39.36 9,720 0.54 BACTINAN
136
BDH-03 BDH-04 537 10.06 7.12 16.46 27.96 34.43 30.49 8,334 2.41 BACTINAN

BCT-05 BCT-05 10.24 19.38 25.01 35.32 29.43 8,126 0.79 BACTINAN

BDH-03 BDH-04 535 13.58 5.59 18.41 40.64 24.69 29.08 7,166 2.48 BACTINAN

BCT-06 BCT-06 9.98 18.28 12.03 36.75 41.24 10,116 1.48 BATO-BATO

43-L- 43-L-137 11.23 32.38 8.71 37.9 42.16 9,968 0.64 E. BACTINAN
137
BCT-10 BCT-10 10.46 19.11 18.12 35.57 35.85 9,118 0.85 E. BACTINAN

BCT-09 BCT-09 9.42 17.8 27.93 34.88 27.77 8,216 0.47 E. BACTINAN

43-L- 43-L-217 13.81 28.62 8.22 35.9 42.07 9,758 0.52 MACOPA
217
43-L- 43-L-218 10.85 28.52 11.19 36.78 41.18 9,625 0.57 MACOPA
218
OMT-3 1407 11.43 13.03 22.97 12.41 38.82 35.74 9,056 9.08 MACOPA

MDH-06 1412 11.56 16.1 25.8 15.79 35.92 32.19 8,764 6.82 MACOPA

MDH-06 1409 12.45 13.13 23.95 27.55 34.02 25.3 7,331 2.33 MACOPA

MDH-06 1413 14.87 10.17 23.53 32.41 34.51 22.91 7,073 3.63 MACOPA

MDH-06 1408 15.23 8.72 22.62 41.52 29.09 20.67 5,610 2.78 MACOPA

MDH-06 1411 10.3 10.7 19.42 46.42 26.93 16.48 4,726 0.89 MACOPA

OMT-2 OMT-2 9 26.04 45.21 25.4 20.39 4,552 1.5 MACOPA

43-L- 43-L-178 11.64 26.77 18.8 33.53 36.03 8,516 0.49 TAGBAY
178
KCT-1-
KCT-1-
COM- COM-001/2 11.69 34.21 36.13 28.08 24.1 5,914 1.77 TAGBAY

001/2
KCT-1-
KCT-1-
COM- COM-001/1 11.41 33.16 39.07 27.05 22.47 5,508 1.93 TAGBAY

001/1

29
12.0 DEPOSIT TYPES

12.1 MINERAL DEPOSIT TYPE

Coal seams of varying thicknesses occur in paralic sedimentary environments. The coal seams
have calorific values in the 4,500 to 11,500 BTU range.

12.2 GEOLOGICAL MODELLING

Coal seams occur definitely within the shale, mudstone, siltstone member of the Mangagoy
Formation. The coal seams host rocks is underlain by a sequence of mostly sandstone with
minor pyroclastic beds. The top of the coal host lithologies is overlain by very young limestone.

The coal beds appear to be derived from thick accumulations of organic materials deposited in
a mud basin of paralic environment. Earlier accumulation of thick beds of sand of shallow
marine environment origin underlies the mud basin.

Subsequent marine transgression formed coral reefs and deposited calcareous sand above the
paralic basin.

Tectonic movement associated with the Philippine Fault folded and faulted the sedimentary
deposits and divided the paralic basin into isolated smaller portions.

The exploration program of TMEC is designed to locate the host lithologies and the other
lithologies that underlie and overlie the said host rocks.
Field mapping is done. This result is the production of a geologic map that shows the
relationships of different lithological formation. Coal outcrops are located, mapped, sampled
and measured.

An initial 10-hole drilling program is designed, targeting coal seams strike extensions and down
dip extensions. Drill logs are compiled. Coal samples from outcrop and drill holes are analyzed.
A program for verification of older and new coal analytical results are prepared.

An additional 10-hole drilling program is implemented to further pursue the seams extensions
at depth.

Upon completion of the drilling program, Resource Blocking is prepared and implemented in
areas where Indicated and Inferred Resources are identified.

30
13.0 MINERALIZATION

13.1 DESCRIPTION OF SURROUNDING ROCK TYPES

The coal seams of the sedimentary basins in the Mindanao Pacific Cordillera occur within
the Mangagoy Formation of Late Oligocene to Early Miocene age. They are considered to be
part of a paralic belt of sediments that extends from the Mangagoy area along the length of
eastern Mindanao.

The Mangagoy Formation is composed of two (2) distinct sedimentary members typified by
older sandstone and a younger mudstone stratum.

The sandstone member is generally dark gray, very poorly sorted and thick bedded to
massive with occasional conglomerate lenses.

The mudstone member is black to dark gray and contains large amount of carbonized plant
remains and mollusk fragments and interbeds of coal seams.

The coal seams are bounded above and below by clastic sedimentary rock most commonly
mudstones, sandstones and siltstones. Within the seams are inter-seam partings of
predominantly mudstones.

In some of the mudstone partings, angular coal fragments with very fine grains of pyrite are
present along the edges.

13.2 MINERAL ZONES

Three (3) coal seams are recognized within the mudstone member of the Mangagoy
Formation in the COC area. The coal seams are bounded above and below by clastic
sedimentary rock most commonly mudstone and siltstone strata. Within the seam are inter
seam partings of predominantly buff to buff green mudstones.

13.3 COAL QUALITIES

At Bactinan area, the heating value of the collected coal samples range from 6,500 to
11,758 BTU/lb (a.d.). In Macopa area, five (5) samples yielded an average heating value of
6,340 BTU/lb (a.d.) while five (5) samples gave an average heating value of 9,758 BTU/lb
(a.d.)

31
14.0 EXPLORATION

14.1 SURFACE GEOLOGIC MAPPING

Phase I of exploration activities commenced on October 28, 2009 and ended on November 23,
2009. This phase of exploration was initiated after the acquisition of mineral rights to obtain
initial data on the occurrence and characteristics of a coal depositional basin.

Reconnaissance geologic mapping and random sampling were conducted to cover majority of
the 7,000-ha COC area. Thirty four (34) outcrops of coal beds with thicknesses ranging from
0.45 m to 1.06 m were located. All coal outcrops were identified to be occurring within the
mudstone member of the Mangagoy Formation.

Phase II of the exploration work was implemented from May 4, 2010 to June 10, 2010 to
confirm and delineate the occurrence and extent of the coal basin, locate additional coal
outcrops and initially delineate the lateral and depth (strike and dip) extent of the coal beds and
roughly estimate the quantity and grade of a potential coal deposit.

Geologic traverses were conducted along 35 kms of creeks, 30 kms of trails and 18 kms of old
logging road using a GARMIN GPS 60CSX (accuracy +/- 3 m). Field data were encoded and
overlaid using MapInfo. Four (4) coal outcrops were identified in addition to the original thirty
four (34) outcrops located during Phase I. Thicknesses of the seams vary from 1.28m to 4.57m

Twenty four (24) trenches were excavated alongside major outcrops to fully expose the
thickness of the coal seam.

14.2 DIAMOND DRILLING

An initial 10-hole drilling campaign to probe the depth extension of the earlier located “mini
basins” (two of the thirteen identified mini basins), was initiated in late November, 2010.

The holes were positioned 100 meters and/or 200 meters from the surface trace of the coal
outcrops following the dip direction of the coal seams.

Geo Rock Incorporated, the drilling contractor provided three (3) drill rigs namely long year 38,
modified, vintage atlas Copco and Mindrill. The holes were drilled and cored with NQ bits/rods.

A total of thirteen (13) holes were drilled but four (4) of the holes were earlier abandoned due
to technical problems. Of the nine (9) completed holes, eight (8) intercepted coal seams at
depth as follows; five (5) holes at Bactinan area and three (3) holes at Macopa area.
The drilling contract was terminated in July 2011 due to several operational delays and
equipment inefficiency.

32
In August 2011, a new 10-hole drilling contract was awarded to Primo Asia Mining and Drilling
Inc. to further probe the depth extension of the coal seams at Bactinan and Macopa. Primo Asia
provided new drill rigs namely Atlas Copco CS1000 and Long year DB Diabort. Both machines
drilled the holes with PQ and NQ bits and rods.

In March 2012, the second 10-hole drilling contract was ended with nine (9) holes being
completed. Of the nine (9) drill holes, seven (7) holes intersected coal seams at depth. One (1)
hole did not penetrate the required target and one (1) was abandoned due to technical
problem.

The penetration of the drill holes range from a shallow depth of 68 meters to as deep as 230
meters.

In summary, five (5) drill holes intersected two (2) coal seams at Bactinan and ten (10)
intercepted three (3) coal seams at Macopa. (See Figures 6 and 7).

The description of the coal seams intersected by the drill holes are tabulated in Table 3 and 4.

TABLE 3. DRILL HOLE COAL INTERCEPTS AND COAL OUTCROPS

BACTINAN
Hole_ID SEAM_ID SEAM Thickness (m) Coal thickness (m)
BDH-02 A 4.01 2.70
BDH-04 A 4.00 0.70
BDH-05 A 3.29 2.13
BCT-2 A 1.40 1.50
BCT-4 A 1.28 1.20
BCT-3 A 1.70 1.60
Average Thickness SEAM A 2.61 1.63

Hole_ID SEAM_ID SEAM Thickness (m) Coal thickness (m)

BDH-02 B 4.12 0.81
BDH-03 B 3.77 1.00
BDH-04 B 0.90 0.20
BDH-05 B 7.11 0.43
BCT-1 B 3.00 3.00
BCT-5 B 1.50 1.40
Average Thickness SEAM B 3.40 1.14
Total of Averaged Seam Thicknesses
6.01 2.78
BACTINAN

33
 TABLE 4. DRILLHOLE COAL INTERCEPTS AND COAL OUTCROPS
OLD MACOPA AREA
Hole_ID SEAM_ID SEAM Thickness (m) Coal thickness (m)
MDH-12 A-North Limb 0.9 0.9
MDH-13 A-North Limb 2.7 1.25
MDH-14 A-North Limb 0.1 0.1
MDH-06 A-North Limb 2.3 0.8
MDH-07B A-North Limb 0.22 0.22
OMO-01 A-North Limb 1 1
MDH-03 A-South Limb 0.13 0.13
Average Thickness SEAM A 1.05 0.62

Hole_ID SEAM_ID SEAM Thickness (m) Coal thickness (m)

MDH-12 B-North Limb 0.55 0.55

MDH-14 B-North Limb 3.4 3.4
MDH-06 B-North Limb 1.4 1.4
MDH-07B B-North Limb 0.22 0.22
OMT-2 B-North Limb 0.78 0.6
OMT-3 B-North Limb 4.57 4.47
MDH-03 B-South Limb 2.03 1.01
OMT-4 B-South Limb 2.55 2.15
Average Thickness SEAM B 1.93 1.7

Hole_ID SEAM_ID SEAM Thickness (m) Coal thickness (m)

MDH-07B C-North Limb 1.47 0.62
MDH-05 C-North Limb 0.2 0.2
MCO-09 C-North Limb 1.1 1.1
OMT-3A C-North Limb 0.63 0.63
MDH-01 C-South Limb 0.15 0.15
Average Thickness SEAM C 0.71 0.54

Total of Averaged Seam Thicknesses

3.69 2.89
MACOPA

34
14.3 SAMPLING METHOD AND APPROACH

14.3.1 Borehole Drilling Operations (Sample Extraction)

14.3.1.1 Contracted drilling company crew is tasked to extract core from borehole locations on
the ground to designated core storage area.

14.3.1.2 Required core sample sizes are HQ and NQ, in the order of decreasing diameter and
utilization is of company’s preference except for reasons concerning technical matters
relating to unfavourable ground formations and rig’s capacity.

14.3.1.3 TMEC provides/assigns personnel to directly monitor the various drilling activities such
as normal down hole coring or advance as shown by each core-block in the core box,
casing/reaming, equipment break-down and repairs, tripping of rods/casings, stand-
by, etc. and check/confirm the veracity of the drillers’ daily shift reports before they
are submitted to the TMEC project-in-charge.

14.3.1.4 Core recovered from each run (% recovery and RQD) are being recorded by core
checkers assigned at each rig (8-hr shift, 24/7). Core checkers see to it that the
recovered samples are in proper order. The samples will be prepared safely and
carefully for transport to designated core storage area.

14.3.1.5 Quick and preliminary mineralogical logging conducted on the first shift of each day by
geologists or trained/experienced geologic aides and/or core checkers for daily
communication of the day’s lithology, mineralization, and estimated grade.

14.3.1.6 Coordination and procedures are established among those concerned for the punctual
and safe transport of the core boxes samples from the active drill site(s) to the
designated core storage area.

14.3.1.7 Initiate and coordinate the survey of borehole’s collar (Northing Easting & elevation)
during or immediately after completion.

14.3.2 Quality Control Measures

Collections of samples are always supervised by project geologists. Splitting and sampling of
drill cores are personally done by geologist core loggers. All samples collected are recorded on a
sample-tracking log book. Analyses results are compiled at the central office.

14.3.3 Data Verification Procedures

Analyses results of samples are initially cross-checked by sending duplicate samples, in every
five sample collected to a different laboratory.

37
Geologists’ field data are randomly verified on the field by the senior geologist on site and at
times, the Vice President for Exploration. A program to verify coal analyses had been started.

14.4 SAMPLE PREPARATION, ANALYSES AND SECURITY

14.4.1 Geo-Mechanical Logging Of Core Samples

Drill core are brought soonest from drill base to designated core storage areas. At the base
camp core house, the cores in each labelled box are inspected, cleaned (if warranted) and
advance meterage labels (or wooden core blocks) checked against the accompanying drilling
shift reports. Core boxes and core blocks are clearly labelled. Geo-mechanical logging (using a
comprehensive log form) is routinely conducted by our geologist or trained and experienced
geologic aides. Routine orderly compilation of original and soft copies of geo-mechanical
borehole logs are done and reported to TMEC corporate office.

14.4.2 Sample Preparation Methods

To collect samples from the coal seams, channels, a foot wide and a foot deep were cut
perpendicular to the thickness of the coal beds. Coal samples were then chiselled out of the
channel and collected in 1x2-feet plastic bags, sealed and properly labelled. Each bag weights
approximately 2-kilos. Samples from drill cores are collected by manually splitting the cores in
half wrapping the collected core in aluminum foil and sealing in plastic zip-locks. The samples
are properly labelled and corresponding wood markers were placed in the core box where the
samples were taken. The collected samples, drill cores and outcrops were then sent either the
Coal Test Center (CTC), a division of Toplis Marine Philippines Inc. or the Philippine National Oil
Company - Exploration Corporation (PNOC-EC) Malangas Laboratory for proximate analysis.

1.4.3. Security Methods

TMEC follows a detailed procedure to have samples labelled, placed in sample bags,
electronically logged using Microsoft (MS) Excel and dispatched from project site to the
laboratory with diligence.

15.0 ESTIMATE OF COAL RESOURCE

15.1 DATABASE USED

Data from TMEC were used for this report.

38
Geologic maps and sections, reports of analyses, and field geologic records were provided by
TMEC’s exploration team. Documents pertaining to mineral rights were also provided by TMEC.

15.2 INTEGRITY OF DATABASE

Information pertaining to mineral rights were gathered from the COC of TMEC with the DOE.

Geologic data were gathered from the field employing Garmin GPS 60CSX with accuracy of +/- 3
meters. All field information were plotted through a MapInfo program.

Bore holes were initially located on the ground by Garmin GPS 60CSX then later verified by
Gowin TKS total station.

15.3 DATA VERIFICATION AND VALIDATION

The CP spent two (2) weeks in the project site with TMEC’s exploration team.

Trenches were visited to map the major coal beds. Geologic contacts were checked to verify the
aerial extent of the individual coal mini basins.

Drill sites and core boxes were inspected. Drill logs were cross checked with the actual drill
cores.

15.4 CUT-OFF GRADES USED IN ESTIMATION

Coal outcrops and Drill intercepts with less than 4,500 BTU/lb of Gross Calorific Value were
initially not considered in the estimation of potential coal tonnage. However, the samples were
categorized and grouped into 4,500 to less than 7,000 BTU/lb and 7,000 to 11,500 BTU/lb
range. Likewise, isolated seamlets with thickness less than 0.75 m were initially set aside.

15.5 ESTIMATION METHOD OF COAL RESOURCE

Within the drilled areas of Bactinan and Macopa, the coal resources maybe estimated by
polygon method. Coal outcrops and drill hole coal intercepts were projected towards the dip
direction and along the strike length to 100 meters for measured resource and from 100 meters
to 300 meters for indicated resource. These parameters (metric distance) were considered
based on the observed correlability of outcrops that are located 100 meters apart. Te estimated
surface area of the polygon is then projected to the slope area of the coal bed using the
measured dip angle of the outcrop.

39
The potential tonnage of the coal deposit for the whole COC area however, is estimated by
correlating the coal outcrops into coal beds or seams, then projecting the beds within the aerial
extent of each mini basin.

15.5.1 Resource Criteria

The resource criteria used in the estimation are as follows:

1. Occurrence of surface outcrops

2. Drill hole intercept of coal seams
3. Area of host lithology

15.5.2 Data Sources and Modelling

The data sources include:

1. The thickness and length of coal outcrops, including strike and dip directions.
2. Projection of coal seams along strike.
3. Projection of coal seams in the dip direction.

Modelling method used (Figure 8 and Figure 9):

Resources are delineated using the following:

Measured Resource:
a) Where outcrops and drill hole intercepts are factored over a maximum distance
of 100 meters.

Indicated Resource:
a) Where outcrops and drill hole intercepts are factored beyond 100 m but within
300 meter distance.

Inferred Resource:
a) Where the host lithology exists.
b) Where coal outcrops exist with the host lithology.

The following parameters were considered in the calculation of resource:

1. Macopa and Bactinan Drilled Area

Specific gravity coal 1.4

Thickness of coal seams 6.01 m for Bactinan
3.7 m for Macopa (see Table 3).

40
 Area of resource block divided by the cosine of the dip angle of the coal bed.

Surface Area ÷ Cosine Dip Angle X Coal Thickness X Specific Gravity

2. Potential deposit for the whole COC area based on detailed geologic mapping where
the extent of the coal bearing paralic mudstone deposits were delineated and
thickness of coal outcrops were measured.

Total Coal Thickness x Area of Mini Basins x Specific Gravity

The details of computation of the Resource block using the polygon method of estimation is
presented in Table 5.

The estimation procedure used in the computation of the potential tonnage of the coal deposit
in the entire COC area is presented in Table 7.

41
 Table 5.Resource Block Tabulation 
COC # 159 MACOPA AREA 
SLOPE AREA 
RESOURCE  HORIZONTAL  DIP  (HORIZONTAL  THICKNESS 
S.G.  MT 
BLOCK NO.  AREA ( SQM)  ANGLE  AREA/COS OF DIP  (M) 
ANGLE) 
M1  143,542.02 30  165748.1251  3.70  1.40  858,575.29
IND 1  53,867.99 30  62201.42028  3.70  1.40  322,203.36
IND 2  33,276.66 30  38424.59167  3.70  1.40  199,039.38
INF 1  255,689.07 30  295244.4421  3.70  1.40  1,529,366.21
M2  40,000.49 22  43142.09754  3.70  1.40  223,476.07
M3  39,993.71 22  43134.78828  3.70  1.40  223,438.20
IND 3  172,942.42 22  186525.1807  3.70  1.40  966,200.44
INF 2  424,625.17 22  457974.9056  3.70  1.40  2,372,310.01
MEASURED  223,536.22 30/22  252,025.01  3.70  1.40  1,305,489.56
INDICATED  260,087.06 30/22  287,151.19  3.70  1.40  1,487,443.18
INFERRED  680,314.24 30/22  753,219.35  3.70  1.40  3,901,676.22

COC # 159 BACTINAN AREA 
SLOPE AREA 
RESOURCE  HORIZONTAL  DIP  (HORIZONTAL  THICKNESS 
S.G.  MT 
BLOCK NO.  AREA ( SQM)  ANGLE  AREA/COS OF DIP  (M) 
ANGLE) 
M1  164,300.00 30  189717.3869  6.01  1.40  1,596,282.09
IND 1  111,600.00 30  128864.6402  6.01  1.40  1,084,267.08
IND 2  86,500.00 30  99881.64314  6.01  1.40  840,404.15
IND 3  83,230.00 30  96105.77062  6.01  1.40  808,633.95
INF 1  170,100.00 30  196414.6532  6.01  1.40  1,652,632.89
MEASURED  164,300.00 30  189,717.39  6.01  1.40  1,596,282.09
INDICATED  281,330.00 30  324,852.05  6.01  1.40  2,733,305.18
INFERRED  170,100.00 30  196,414.65  6.01  1.40  1,652,632.89

COC # 159 AREA COMBINED MACOPA AND BACTINAN AREAS 
SLOPE AREA 
HORIZONTAL  DIP  (HORIZONTAL  THICKNESS 
RESOURCE  S.G.  MT 
AREA ( SQM)  ANGLE  AREA/COS OF DIP  (M) 
ANGLE) 
MEASURED  387,836.22 30/22  441,742.40  3.7/6.01  1.40  2,901,771.65
INDICATED  541,417.06 30/22  612,003.25  3.7/6.01  1.40  4,220,748.36
      INFERRED  850,414.24    30/22        949,634.00  3.7/6.01  1.40 5,554,309.11
 
 

44
15.6 ESTIMATE OF COAL RESOURCE 
 
 The Mineral Resource estimate for the drilled mini basins at Macopa (Blk 217) and Bactinan 
(Blk 136) are as follows: 
 
TABLE 6. ESTIMATE OF COAL RESOURCES AT BACTINAN AND MACOPA AREA
Bactinan Macopa Total
Resource Calorific Calorific Calorific
Volume Volume Volume
Value Value Value
Measured 1.6 M 8,930 BTU/lb 1.3 M 8,050 BTU/lb 2.9 M 8,535 BTU/lb
Indicated 2.7 M 8,930 BTU/lb 1.5 M 8,050 BTU/lb 4.2 M 8,615 BTU/lb
M&I 4.3 M 8,930 BTU/lb 2.8 M 8,050 BTU/lb 7.1 M 8,582 BTU/lb
Inferred 1.6 M 8,930 BTU/lb 4M 8,050 BTU/lb 5.6 M 8,301 BTU/lb
Note: Range of Calorific Values
Bactinan- 4,500 to 11,758 BTU/lb
Macopa- 6,340 to 9,758 BTU/lb
 
The  “potential”  or  “target  volume  of  coal  deposit  for  the  remaining  eight  (8)  mini  basins  in  the 
whole COC area, however is estimated at 59 MMT (Table 7). 
 
 
TABLE 7.ESTIMATE OF POTENTIAL TONNAGE (BASED ON OUTCROPS AND SIZE OF PARALIC BASINS) 
 
Potential
Coal No. of No. of Coal Thickness of Coal
Coal Area Volume
No. Mini Coal Seams Coal Seam Resource
Block No. (Sq. M.) (cu.m.)
Basin Outcrops Identified Measured SG =
1.4 (MT)
1 KN-1 136/137 2,755,000 3 2 0.5 (N.A.) (N.A.)
0.32 (N.A.) (N.A.)
2 BB-2 136 500,200 4 2 0.9 450,180 630,252
0.9 450,180 630,252
3 ABB-2A 136 44,000 2 Seamlet (N.A) (N.A.) (N.A.)
4 BT-3 136 600,300 6 2 1.73 1,800,900 1,453,927
3 1,800,900 2,521,260
5 BE-4 137 350,000 3 2 3.55 1,242,500 1,739,500
1.7 595,000 833,000
6 AN-5 177 292,300 1 1 0.6 (N.A.) (N.A.)
7 TY-6 178 2,500,000 3 3 2.04 5,100,000 7,140,000
0.62 (N.A.) (N.A.)
0.65 (N.A.) (N.A.)

45
                  

                 

8  TY‐6A  177  144,800  4  1  0.57  (N.A.)  (N.A.) 

9  OM‐7  217  6,500,200  13  3  0.88  5,720,176  8,008,246 

            0.5  (N.A.)  (N.A.) 

            4.27  27,755,854  38,858,196 

10  OM‐7A  218  5,600,400  1  1  1.37  7,672,548  10,741,567 

11  LK‐8  176  70,400  (N.A.)  (N.A.)  (N.A.)  (N.A.)  (N.A.) 

12  LK‐9  176  122,400  (N.A.)  (N.A.)  (N.A.)  (N.A.)  (N.A.) 

13  LK‐10  177  21,000  (N.A.)  (N.A.)  (N.A.)  (N.A.)  (N.A.) 

TOTAL    19,601,000        51,825,857  72,556,200 

*N.A.‐Not Applicable    =72 MMT 
Coal Seam˂0.75 m not considered  BACTINAN AND MACOPA 
  M&I                7.1 
  Inferred          5.6 
 
Potential deposit in the remaining           59  MMT 
 
eight (8) basins within the entire COC area 
 
 
 
16.0 INTERPRETATION AND CONCLUSIONS 
 
 
16.1  Thirteen  (13)  individual  mini  coal  depositional  basins  are  located  in  the  COC  area.  Ten 
(10) of these basins are carbonaceous mudstones with interbeds of coal seams. Within 
these ten (10) mini basins, a total of forty (40) coal outcrops with thickness ranging from 
0.18 m to  4.57m were located. 
 
           Correlating the coal outcrops and drilled intercepts resulted into the identification of at 
least two (2) to three (3) Coal Seams in the ten (10) individual mudstone mini‐basins. 
   
  At Bactinan, the coal seams occur in a monocline that trends to the Northwest (NW) and 
dips to Northeast (NE). 
   
  In  Macopa,  the  seams  are  within  a  synclinal  basin  that  trends  West  Northwest  (WNW) 
and plunges by 1% to the East Southeast (ESE). 
 
16.2    Two (2) coal seams were intersected by fifteen (15) diamond drill holes at Bactinan and 
Macopa areas. 
 
At Bactinan, the bottom seam (Seam A) ranges in thickness from 1.28 m to 4.57 m while 
the upper seam (Seam B) measures from 0.9 m to 7.11 m. The average thickness of Seam 
A is 2.61 m and Seam B is 3.4 m. 
 

46
 At Bactinan, the bottom seam (Seam A) ranges in thickness from 1.28 m to
4.57 m while the upper seam (Seam B) measures from 0.9 m to 7.11 m. The
average thickness of Seam A is 2.61 m and Seam B is 3.4 m.

At Table 1, the bottom seam (Seam A) measures 0.10 m to 2.7 m while Seam B
thickens from 0.22 m to 4.57 m. The upper seam (Seam C) varies from 0.15 m
to 1.47 m. The average thickness of Seam A is 1.05 m, Seam B is 1.94 m and
Seam C is 0.71 m.

16.3 The drilled areas at Bactinan and Macopa mini basins yielded a Measured
Resource of 2.9 MMT and an Indicated Resource of 4.2 MMT or an M&I
Resource of 7.1 MMT. The Inferred Resource is 5.6 MMT.

The remaining eight (8) mini basins in the entire COC area however has a
“Potential” or “Target” coal deposit of 59 MMT that warrants further
exploration activity.

16.4 The Resource estimated at Bactinan yielded an average heating value of 8,930
BTU/lb, an average ash content of 13.10% and an average sulphur content of
1.38%. The range of heating values of samples start at 6,500 to 11,758 BTU/lb.

The Resource estimated at Macopa gave two (2) sets of values. Fifty five
percent(55%) of the resource gave an average heating value of 9,758 BTU/lb,
an average of ash content of 11.80% and a sulphur content of 0.5%. Forty
fivepercent(45%) of the resource yielded an average heating value of 6,340
BTU/lb, an ash content of 39.04% and a sulphur content of 2.10 %.

17.0 RECOMMENDATIONS

Exploration activities conducted on the project as discussed in Section 11.0, represent

Phase I, Phase II and portion of Phase III of the PMRC exploration and development
phases presented by Dr. PABLITO M. ONG of PMRC’s accreditation committee.(Table
8). The result of exploration conducted on the area clearly indicates that Phase III
should be pursued.

This entails more detailed geologic mapping, further trenching and additional core
drilling. These activities should be pursued in all of the identified mini-basins
particularly at East Bactinan and Tagbay.

47
48
TABLE 8. PHASES OF EXPLORATION/DEVELOPMENT
 INTERNAL GEOLOGIC REPORT
RESULT OF EXPLORATION
DAVAO COAL PROJECT
Municipality of Manay, Davao Oriental

Coal Operating Contract No. 159

of

TITAN MINING AND ENERGY CORPORATION

3/F JFKC Centre, 2155 Don Chino Roces Ave.
Makati City, Philippines

(ATTACHMENTS)

by:

Enrique C. Payawal
Geologist
Vice-President for Exploration
April 04, 2012
ANNEX V-B

INTERNAL GEOLOGIC REPORT

RESULT OF EXPLORATION
ZAMBOANGA-SIBUGAY COAL PROJECT
 INTERNAL GEOLOGIC REPORT
ON THE ZAMBOANGA-SIBUGAY
COAL PROJECT
Municipalities of Diplahan, Buug, and Siay
Province of Zamboanga-Sibugay, Philippines

Coal Operating Contract No. 166 and 167

of

TITAN MINING AND ENERGY CORPORATION

3/F JFKC Centre, 2155 Don Chino Roces Ave.
Makati City, Philippines

by:

Gizella Greta D. J. Gonzales

Senior Geologist
April 26, 2012
 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

TABLE OF CONTENTS
Section Description Page No.
1. CERTIFICATE OF QUALIFICATION AND CONSENT 5
2. SUMMARY 6
2.1 INTRODUCTION 6
2.2 PROPERTY DESCRIPTION 6
2.3 PROPERTY LOCATION 6
2.4 OWNERSHIP 11
2.5 GEOLOGY AND MINERALIZATION 11
2.6 EXPLORATION CONCEPT 11
2.7 STATUS OF EXPLORATION 11
2.8 CONCLUSIONS 12
2.9 RECOMMENDATIONS 13
3. INTRODUCTION 13
3.1 REPORT PREPARATION 13
3.2 COMPLIANCE OF REPORT WITH PHILIPPINE MINERAL REPORTING 13
CODE (PMRC)
3.3 PURPOSE OF REPORT AND SCOPE OF WORK 13
3.4 DURATION OF THE PREPARATION 13
3.5 MEMBERS OF THE TECHNICAL REPORT PREPARATION TEAM 14
4. RELIANCE ON OTHER EXPERTS 14
5. TENEMENT AND MINERAL RIGHTS 15
5.1 DESCRIPTION OF MINERAL RIGHTS 15
5.1.1 Type of Permit or Agreement with the Government 15
5.1.2 Number of Hectares Covered by Coal Operating Contract 15
(COC)
5.2 LOCATION 15
5.3 CURRENT OWNER OF MINERAL RIGHTS 17
5.4 LOCATION OF COAL RESOURCES 17
6. GEOGRAPHIC FEATURES 18
6.1 LOCATION AND ACCESSIBILITY 18
6.2 TOPOGRAPHY, PHYSIOGRAPHY AND DRAINAGE 19
6.3 VEGETATION 19
6.4 CLIMATE 19
6.5 LAND USE 19
6.6 POPULATION AND SOCIO ECONOMIC ENVIRONMENT 19
6.7 ENVIRONMENTAL FEATURES 20
6.7.1 Pedology 20
6.7.2 Biological Environment 22
6.7.3 Water Environment 22

G.D.J. GONZALES Page 2

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

7. PREVIOUS WORK 22
8. HISTORY OF PRODUCTION 22
9. REGIONAL AND DISTRICT GEOLOGY 22
9.1 REGIONAL GEOLOGIC SETTING 22
9.2 STRATIGRAPHY 23
9.3 STRUCTURAL GEOLOGY 26
9.4 COAL OCCURRENCES 30
9.5 COAL QUALITY 30
10. COAL OPERATING CONTRACT (COC) AREA GEOLOGY 32
11. COAL OCCURRENCES IN THE COC AREA 32
12. DEPOSIT TYPES 34
12.1 MINERAL DEPOSIT TYPE 34
12.2 GEOLOGIC MODELLING 34
13. MINERALIZATION 36
13.1 DESCRIPTION OF SURROUNDING ROCK TYPES 36
13.2 MINERAL ZONES 36
13.3 COAL QUALITIES 36
14. EXPLORATION 37
14.1 SURFACE GEOLOGIC MAPPING 37
14.2 SUB-SURFACE EXPLORATION 38
14.3 SAMPLING AND ANALYSES 39
14.3.1 Quality Control Measures 39
14.3.2 Data Verification Procedures 39
14.4 SAMPLE PREPARATION, ANALYSES AND SECURITY 39
14.4.1 Geo-mechanical Logging of Core Samples 39
14.4.2 Sample Preparation Methods 40
14.4.3 Security Methods 40
15. ESTIMATE OF COAL RESOURCE 40
15.1 DATABASE USED 40
15.2 INTEGRITY OF DATABASE 40
15.3 DATA VERIFICATION AND VALIDATION 40
15.4 CUT-OFF GRADES USED IN ESTIMATION 41
15.5 ESTIMATION METHOD OF COAL RESOURCE 41
15.5.1 Resource Criteria 41
15.5.2 Data Resource and Modelling 41
15.6 ESTIMATE OF COAL RESOURCE 44
16. INTERPRETATION AND CONCLUSIONS 45
17. RECOMMENDATIONS 46
18. REFERENCES 46

G.D.J. GONZALES Page 3

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

LIST OF FIGURES

Figure Description Page

No.
1 LOCATION MAP 9
2 TENEMENT MAP 10
3 REGIONAL GEOLOGIC SETTING 27
4 REGIONAL STRATIGRAPHIC COLUMN 28
5 GEOLOGIC MAP OF COC AREA 29
6 REGIONAL STRATIGRAPHIC COLUMN OF COC 166 AND COC 167 31
7 1:10,000 DRILL HOLE LOCATIONS AND OUTCROP MAP OF COC 166 35
8 1:10,000 RESOURCE BLOCKS OF COC 166 43

LIST OF ATTACHMENTS

Attachments Description Page

No.
1 1:20,000 GEOLOGIC MAP OF COC 166
2 1:20,000 GEOLOGIC MAP OF COC 167
3 1:2000 RESOURCE BLOCK OF COC 166
4 1:2000 CROSS SECTION OF RESOURCE BLOCK OF COC 166
5 CERTIFICATE OF ANALYSIS

G.D.J. GONZALES Page 4

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

2.0 SUMMARY

2.1 INTRODUCTION

Titan Mining and Energy Corporation (TMEC) commissioned the preparation of the report to
consolidate, interpret and present the results of the exploration conducted by TMEC’s
exploration team on its coal project area in Zamboanga Sibugay, Philippines. (See Figure 1)

The technical report was designed to be compliant with the Implementing Rules and
Regulations (IRR) of the Philippine Mineral Reporting Code (PMRC).

Work on the technical report started on April 1, 2012 up to April 7, 2012, which included initial
review of TMEC data on the project. Field visits and work inspections at the project areas were
made on April 8, 2012 to April 15, 2012. Data collation, interpretation and report writing
followed on April 24, 2012. A final report was completed on April 26, 2012.

2.2 PROPERTY DESCRIPTION

The coal project area was initially covered by four (4) separate Coal Operating Contracts (COCs),
granted by the Department of Energy (DOE) to TMEC on September 16, 2009 (COC # 158) and
November 18, 2009 (COC # 166, 167, 168). In late 2011, two (2) COCs, namely COC 159 and 168
were dropped while COC 166 and COC 167 were retained and renewed.

The remaining COCs are described as follows:

Coal Operating Coal Block Area Location

Contract No. No. (has.)
CB – 280 1,000
CB – 320 1,000
COC #: 166 CB – 241 1,000 Diplahan- Buug
CB – 281 1,000
COC #: 167 CB – 358 1,000 Diplahan- Siay
CB – 359 1,000 (Parok)
TOTAL 6,000

2.3 PROPERTY LOCATION

The locations of the initial four (4) COCs comprising the Zamboanga Sibugay Coal Project are
briefly discussed below:

G.D.J. GONZALES Page 6

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

COC #:158 is situated in the Municipality of Payao, Province of Zamboanga Sibugay, Mindanao
Island, Philippines.

COC #:166 is situated in the Municipalities of Diplahan and Buug, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

COC #:167 is situated in the Municipalities of Diplahan and Siay, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

COC #:168 is situated in the Municipalities of Kabasalan and Siay, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

The COC areas may be accessed via some 70-kilometers (kms) of the Maria Clara Lobregat
Highway from Pagadian Airport. It is approximately 15-kms from the Malangas Pier which is
operated by the Philippines Ports Authority (PPA).

All COCs are located in the province of Zamboanga-Sibugay, southwestern Mindanao,

Philippines.

The coordinate locations of the four (4) COCs comprising the Zamboanga Sibugay Coal Project
are individually discussed below and shown in Figure 2.

COC #: 158 is bounded by the following geographic coordinates:

COC #: 158 Geographic Coordinates

Corner Latitude Longitude

1 7°34’00” 122°49’30”

2 7°34’00” 122°52’30”

3 7°32’00” 122°52’30”

4 7°32’00” 126°49’30”

G.D.J. GONZALES Page 7

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

COC #: 166 is bounded by the following geographic coordinates:

COC #: 166 Geographic Coordinates

Corner Latitude Longitude

1 7°48’00” 122°58’30”

2 7°48’00” 123°01’30”

3 7°44’00” 123°01’30”

4 7°44’00” 122°58’30”

COC #: 167 is bounded by the following geographic coordinates:

COC #: 167 Geographic Coordinates

Corner Latitude Longitude

1 7°44’00” 122°55’30”

2 7°44’00” 122°58’30”

3 7°42’00” 122°58’30”

4 7°42’00” 122°55’30”

COC #: 168 is bounded by the following geographic coordinates:

COC #: 168 Geographic Coordinates

Corner Latitude Longitude

1 7°48’00” 122°49’30”

2 7°48’00” 122°52’30”

3 7°46’00” 122°52’30”

4 7°46’00” 122°51’00”

5 7°44’00” 122°51’00”

G.D.J. GONZALES Page 8

 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

2.4 OWNERSHIP

TMEC is the current holder of mineral rights over the coal blocks CB-280, CB-320 CB–241, CB–
281, CB-358 and CB-359 by virtue of COC 166 and COC 167 which were granted to TMEC by the
DOE on November 8, 2009. Both COCs were renewed on November 2011.

2.5 GEOLOGY AND MINERALIZATION

The coal seams in the Zamboanga Sibugay Coal Area are associated with the predominantly
mudstone Lalat Member of the Lumbog Formation. The seams occur as interbeds and thus
strike and dip congruently with the mudstone beds.

The Lumbog Formation exposures consist of slightly to completely weathered interbedded dark
gray mudstones, light gray fine to medium grained lithic sandstones, pyroclastics and coal
seams.

In some of the mudstone partings, angular coal fragments with very fine grains of pyrite are
present along the edges.

2.6 EXPLORATION CONCEPT

Exploration was carried out by identifying on the ground geological paleo-environment of coal
deposition through detailed geologic mapping.

Individual coal outcrops located on the ground were trenched to fully expose the seams such
that these may be characterized and correlated.
Diamond core hole drilling was employed to probe the subsurface extension of previously
identified coal beds.

Geologic data generated by both surface and subsurface exploration were collated and
interpreted to arrive at a resource estimate.

2.7 STATUS OF EXPLORATION

Initial exploration activities commenced in December 2009 and ended in August 2010. Activities
were limited to reconnaissance and semi-detailed surface geologic mapping to identify and
delineate paleo-paralic basins.

Subsequent exploration activities to further evaluate the area started in October 2010 until
September 2011. These involve detailed geologic mapping such as stream traverses, outcrops
trenching and aditting.

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Having  delineated  the  areas  with  good  potential  for  coal,  a  10‐hole  drilling  campaign  was 
initiated in October 2011. Diamond drilling is currently in progress at COC 167. 
 
2.8 CONCLUSIONS 
 
Coal occurrences are confirmed within the Lumbog Formation, characterized by predominantly 
mudstone beds. 
 
Coal  seams  and  coal  beds  appear  to  be  concordant  with  the  regional  strike  (NE)  of  the 
mudstone beds. 
 
Two  (2)  individual  coal  depositional  basins,  one  (1)  for  each  COC  are  recognized  within  the 
Zamboanga Sibugay coal project. Within these basins a total of eleven (11) coal outcrops with 
thickness ranging from 0.03 m to 1.82 m were located.  
 
Correlating  the  coal  outcrops  and  the  coal  seams  encountered  in  the  diamond  drill  holes 
resulted into the identification of at least two (2) coal seams (thickness ranging from 0.11 m to 
3.94 m) in the paralic basin at COC 166. 
 
The coal resource within the 200‐has drilled area at COC 166 is estimated as follows: 
 
Resource  Million MT 
Measured & Indicated  1.2 
Inferred  2.3 
 
 
The total coal potential or prospectivity of COC 166 and COC 167 as based on the aereal extent 
of the coal bearing carbonaceous mudstone is presented below: 
 
COC #  Area of Basin  Coal Volume 
(has)  (MMT) 
166  547  30.6 
167  420  20.5 
TOTAL  967  51.1 
 
The estimated coal potential of the property is derived by measuring the total surface area of 
the delineated coal bearing paralic basin then multiplied by the average coal thickness as 
measured  from the outcrops then multiplied by the specific gravity of coal. 
 
Coal analysis from surface samples range from 9,056 BTU/lb to 13,976 BTU/lb with an average 
of 11,516 BTU/lb. 

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Small scale miners have produced 5,300 MT within COC 166 and COC 167 during the period of
September 2010 to March 2011.

There are other large mining entities in the region which has been in operation, i.e. Malangas
Coal Corporation and Brixton Energy and Mining Corporation.

2.9 RECOMMENDATIONS

Detailed geologic field mapping are to be pursued to locate other surface coal occurrences,
lithological and formation contacts. Structural observation, especially fault movements are to
be plotted carefully as to movement directions.

Pursue completion of current drilling program and implement subsequent closely-spaced

activity if found necessary.

Collate and interpret exploration results and implement resource blocking for resource
computation.

3.0 INTRODUCTION

3.1 REPORT PREPARATION

TMEC commissioned the preparation of the report to consolidate and interpret the result of
Exploration conducted by TMEC’s previous exploration team on its coal prospect area in
Zamboanga Sibugay. The report is part of TMEC’s document pertinent to TMEC’s rights offering
to possible foreign investors.

3.2 COMPLIANCE OF REPORT WITH PMRC

The technical report preparation team has endeavoured to make this report compliant with the
Implementing Rules and Regulations (IRR) of PMRC.

3.3 PURPOSE OF REPORT AND SCOPE OF WORK

The purpose is to present the result of exploration in conformance with the IRR of the PMRC.
The report conforms with TR-Form 01 of the PMRC.

3.4 DURATION OF THE PREPARATION

Work on the technical report started on April 1, 2012 up to April 7, 2012, which included initial
review of TMEC data on the project. Field visits and work inspections at the project areas were

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made on April 8, 2012 to April 15, 2012. Data collation, interpretation and report writing
followed on April 24, 2012. A final report was completed on April 26, 2012.

3.5 MEMBERS OF THE TECHNICAL REPORT PREPARATION TEAM

3.5.1 MS. GIZELLA GRETA DJ. GONZALES

Senior Geologist
PRC Reg. No. 1425
August 23, 2000

3.5.2 JACINTO CALUNSAG

Junior Geologist

3.5.3 REVIEWING PMRC-CP GEOLOGIST

ENRIQUE C. PAYAWAL
Registered Geologist
PRC Reg. No. 255
December 18, 1968

PTR No. 3303063

April 20, 2012
Makati City

Competent Person (CP)

Philippine Mineral Reporting Code (PMRC)
June 02, 2009

4.0 RELIANCE ON OTHER EXPERTS

Mr. Arturo A. Ona, a geologist based at Reno, Nevada, USA and a registered geologist (No.
14646) in the State of Arizona, USA, spent one (1) week in the Project while gathering field
geological data for his National Instrument 43-101 (NI43-101) Independent Geological Report
on the property.

Mr. Ona visited all the coal outcrops, diamond drill hole locations and some strategically
located rock exposures. He likewise checked all the drill core boxes to confirm the integrity of
the drill logs.

A report entitled Coal in the Sibugay Peninsula, Philippines by J.H. Medlin of the United States
Geological Survey which was prepared for National Economic Development Authority (NEDA) of

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the Philippines under the auspices of the United States Agency for International Development
(USAID) was also used as reference.

No other geologists were involved in the preparation of this report. However, samples collected
for the coal prospect area were analyzed by the Coal Test Center - a division of Toplis Marine
Philippines, Inc. which is a commercial laboratory, which holds office at Room 318 Valero
Center, R.S. Oca cor. Delgado Sts., Port Area, Manila.

5.0 TENEMENT AND MINERAL RIGHTS

5.1 DESCRIPTION OF MINERAL RIGHTS

5.1.1 Type of Permit or Agreement with Government

The coal project area was initially covered by four (4) separate Coal Operating Contracts (COCs),
granted by the Department of Energy (DOE) to TMEC on September 16, 2009 (COC # 158) and
November 18, 2009 (COC # 166, 167, 168). In late 2011, two (2) COCs, namely COC 159 and 168
were dropped while COC 166 and COC 167 were retained and renewed.

5.1.2 Number of Hectares (has) Covered by COC

The area covered by the COCs are described as follows:

Coal Operating Coal Block Area Location

Contract No. No. (has.)
CB – 280 1,000
CB – 320 1,000
COC #: 166 CB – 241 1,000 Diplahan- Buug
CB – 281 1,000
COC #: 167 CB – 358 1,000 Diplahan- Siay
CB – 359 1,000 (Parok)
TOTAL 6,000

5.2 LOCATION

The locations of the initial four (4) COCs comprising the Zamboanga Sibugay Coal Project are
briefly discussed below:

COC #:158 is situated in the Municipality of Payao, Province of Zamboanga Sibugay, Mindanao
Island, Philippines.

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COC #:166 is situated in the Municipalities of Diplahan and Buug, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

COC #:167 is situated in the Municipalities of Diplahan and Siay, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

COC #:168 is situated in the Municipalities of Kabasalan and Siay, Province of Zamboanga
Sibugay, Mindanao Island, Philippines.

The COC areas may be accessed via some 70-kilometers (kms) of the Maria Clara Lobregat
Highway from Pagadian Airport. It is approximately 15-kms from the Malangas Pier which is
operated by the Philippines Ports Authority (PPA).

All COCs are located in the province of Zamboanga-Sibugay, southwestern Mindanao,

Philippines.

The coordinate locations of the four (4) COCs comprising the Zamboanga Sibugay Coal Project
are individually discussed below and shown in Figure 2.

COC #: 158 is bounded by the following geographic coordinates:

COC #: 158 Geographic Coordinates

Corner Latitude Longitude

1 7°34’00” 122°49’30”

2 7°34’00” 122°52’30”

3 7°32’00” 122°52’30”

4 7°32’00” 126°49’30”

COC #: 166 is bounded by the following geographic coordinates:

COC #: 166 Geographic Coordinates

Corner Latitude Longitude
1 7°48’00” 122°58’30”
2 7°48’00” 123°01’30”
3 7°44’00” 123°01’30”

4 7°44’00” 122°58’30”

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COC #: 167 is bounded by the following geographic coordinates:

COC #: 167 Geographic Coordinates

Corner Latitude Longitude

1 7°44’00” 122°55’30”

2 7°44’00” 122°58’30”

3 7°42’00” 122°58’30”

4 7°42’00” 122°55’30”

COC #: 168 is bounded by the following geographic coordinates:

COC #: 168 Geographic Coordinates

Corner Latitude Longitude

1 7°48’00” 122°49’30”

2 7°48’00” 122°52’30”

3 7°46’00” 122°52’30”

4 7°46’00” 122°51’00”

5 7°44’00” 122°51’00”

5.3 CURRENT OWNER OF MINERAL RIGHTS

TMEC is the current holder of mineral rights over the coal blocks CB-280, CB-320 CB–241, CB–
281, CB-358 and CB-359 by virtue of COC 166 and COC 167 which were granted to TMEC by the
DOE on November 8, 2009. Both COCs were renewed on November 2011.

5.4 LOCATION OF COAL RESOURCES

The coal prospects occur in CBs 358 within COC #: 167 and CBs 280, 241, 320, 281 within COC #
167 CBs 358 within COC # 166. (see Figure 2: Tenement Map)

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6.0 GEOGRAPHIC FEATURES

6.1 LOCATION AND ACCESSIBILITY

The province of Zamboanga Sibugay is located in the Zamboanga Peninsula in Mindanao,

Philippines. The provincial capital is Ipil and is landlocked by Zamboanga del Norte, Zamboanga
del Sur and Zamboanga City on its north and east, west and southwest borders, while it faces
Sibuguey Bay and Dumanquillas Bay on the south.

Zamboanga Sibugay Province is subdivided into sixteen (16) municipalities:

 Alicia  Naga
 Buug  Olutanga
 Diplahan  Payao
 Imelda  Roseller T. Lim
 Ipil  Siay
 Kabasalan  Talusan
 Mabuhay  Titay
 Malangas  Tungawan

TMEC’s COCs are all situated in the following municipalities, all in the province of Zamboanga
Sibugay, Mindanao, Philippines.

COC Location

Coal Operating Contract Municipality Province

No.
 158 Payao
166 Diplahan Buug Zamboanga
167 Diplahan-Siay (Parok) Sibugay
 168 Kabasalan-Siay (Siay-
San Isidro)
 Tenement relinquished due to poor prospectivity potential

COC #:s 158, 166, 167, and 168 may be reached using 4WD vehicles from TMEC’s camp.

TMEC’s exploration camp is located in the town proper of Imelda, Zamboanga Sibugay. It may
be reached by 2-hour plane ride from Manila to Pagadian Airport and 60-km travel via Maria
Clara Lobregat Highway.

The COCs is approximately 15-kms via concrete road to the Malangas Port.

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6.2 TOPOGRAPHY, PHYSIOGRAPHY AND DRAINAGE,

The physiography of the prospect area consists mostly of hills and mountains. Verdant valleys,
swampy marshes, plateaus are also present.

The topography surrounding the prospect area may be described as mostly hilly (upland) to
mountainous. Elevations range from less than 100-m (low-lying) to > 500-m Above Sea Level
(MASL) (mountainous) [Elevation Map, Bureau of Soils and Water Management (BSWM)].

The prospect area is drained by four (4) rivers. The Sibuguey and Siay Rivers flow towards
Sibuguey Bay. Pamoantogbo River and Batu Creek, drain toward Taba Bay. Kawayan River,
flows to Tantanang Bay.

6.3 VEGETATION

The main vegetative covers are secondary forest, shrubs, and grasses with scattered patches of
corn, coconut, root crops and rubber.

6.4 CLIMATE

The Zamboanga Sibugay Coal prospect area falls under Type IV of the modified Coronas scale
(Modified Coronas Climate Map, BSWM). Type IV is characterized by a more or less evenly
distributed rainfall throughout the year. It is nearly similar to Type II since Type IV has no dry
season. The average annual rainfall is from 1,750-2,450-mm, and typhoon frequency is once
every 12-years. A temperature regime during growing periods is > 25°C. The average annual
relative humidity is about 82% (Concepcion, 2004).

6.5 LAND USE

Based on the 2006 Regional Development Agenda for Zamboanga Peninsula by the National
Development Authority (NEDA), land use in the province of Zamboanga Sibugay is classified
into: (1) forestland covering 61.92% of the total provincial land area, and (2) alienable and
disposable (i.e. land of Public Domain declared not needed for forest purposes), encompassing
38.08% of the total land area.

6.6 POPULATION AND SOCIO ECONOMIC ENVIRONMENT

As of the 2007 census, Zamboanga Sibugay has a population of 546, 186-people. The population
growth rate from 2000-2007 is 1.30.

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The major languages spoken in the province are Subanen, Cebuano, Ilonggo, and
Zamboangueño/ Chavacano. Tagalog, Ilocano, and other ethnic tongues are spoken as well, as
is English.

The leading industries are rice and corn milling, food processing, rattan and wood furniture
production and coal mining. New industries include concrete products, garments, wax and
candle factory, and other cottage industries.

Major crops produced include rice, corn, coconuts, rubber, fruits, vegetables, tobacco, coffee,
cacao, and root crops. Livestock and poultry productions are predominantly small-scale
backyard operations. Coal mining is also present in some areas of the province.

6.7. ENVIRONMENTAL FEATUTRES

6.7.1 Pedology

The Bureau of Solis recorded the presence of the following soil types in the COC areas, namely:
San Manuel S.H. Loam, Bulaoan Clay Loam and Antipolo Clay Loam. The San Manuel S.H. Loam
covers the Sibuguey Valley, while the Bulaon Clay Loam and the Antipolo Clay Loam blanket the
fingers of the valley and the steep hills, respectively.

The soil types are described as follows:

Bulaoan Clay Loam

a. Formation and Origin: Residual soil from igneous rocks

b. Profile:

1. Surface oil – brown to dark grayish brown, loose, friable and fine granular sandy
loam. Andesite and basalt boulders are present. Depth is 20 to 30 cm.

2. Sub-soil – brown to reddish brown clay loam with plenty of grovels and iron
secretions. In places, boulders are embodied in this horizon. Depth is 30 to 60 cm
from the surface.

3. Sub-stratum – brown to strong brown. Massive and friable clay loam. Boulders are
also present in these layers.

c. Relief: flat upland to undulating and rolling lands

d. Drainage: External is excessive and internal is embodied

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e. Vegetation: Second growth forest, cogon and shrubs cultivated areas are planted to rice,
corn and other farm crops.

San Manuel Silt Loam

a. Formation and Origin : Recent alluvial deposits

b. Profile:

1. Surface soil – Grayish brown to pale brown, loose and friable silt loam. Depth is 25 to
40 cm from the surface of the soil.

2. Sub-soil – Brownish gray light brown, friable and fine, granular silt loam.
Depth is 70 to 110 cm from the surface of the soil.

3. Sub-stratum – Yellowish brown to light reddish brown, fine sandy loam to medium
sandy loam.

c. Relief: nearly level and often subjected to flood.

d. Drainage: drainage condition is fair to good.

e. Vegetation: Cultivated to lowland rice, corn and root crops, vegetables and some fruit
trees.

f. Capability Class: Class “A”

Antipolo Clay Loam

a. Formation and Origin: Residual soil formed basalt, igneous and other volcanic rocks.

b. Profile:

1. Surface soil – Light reddish brown to almost red, friable and finely granulated clay.
Spherical tuffaceous concretions are present. Depth is 20 to 30 cm from the surface
of the soil.

2. Sub-soil – Reddish brown, granular and friable clay with fine spherical concretions,
loose sub-soil is earthy tuffaceous materials with free concretions. Depth is 50 to 90
cm from the surface of the soil.

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3. Sub-stratum – reddish brown to light reddish, coarse granular clay with numerous
iron concretions.

c. Relief: Rolling to mountainous, some portions are slightly rolling to almost flat.

d. Drainage: Surface drainage is good to excessive. Sub-soil drainage is poor.

e. Vegetation: Cogon, talahib, shrubs and secondary forest covers the hilly and
mountainous areas. Rice, corn, fruit trees and papaya are grown or could be grown in
the rolling areas.

f. Capability Class: Class “M”

6.7.2. BIOLOGICAL ENVIRONMENT

No baseline biological studies conducted as of yet.

6.7.3 WATER ENVIRONMENT

No water quality test was conducted in the area. It was observed, however that water from the
tributaries are used only for agricultural purposes. Surface run-off drains to the south by way of
the Sibugay and Siay rivers.

7.0 PREVIOUS WORK

The Sibugay Peninsula has been extensively explored for coal by various organizations notably
by the PNOC-CC in the 1980s. To date, PNOC operates the Malangas Coal Reservation (in
partnership with a Taiwanese company) as well as the Integrated Little Baguio Colliery. PNOC’s
exploration record covering TMEC’s COCs are non-available.

8.0 HISTORY OF PRODUCTION

The prospect area has not been subjected to large scale coal mining activity. Small Scale Mining
Permits (SSMPs) exist in COC #:s 166 and 167. No official records of activities exist.

9.0 REGIONAL AND DISTRICT GEOLOGY

9.1 Regional Geologic Settings

The Sulu-Zamboanga Arc is part of the aseismic Palawan microcontinental block (Sundaland-
Eurasia) (e.g. Rangin et al. 1999a, 1999b; Yumul et al. 2004, Yumul, 2007), and separates the

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Sulu Sea Basin from the Celebes Sea Basin. It is manifested as a group of islands in which some
are classified as Quaternary with one active volcano (Cruz, 1987). It is a volcanic arc considered
to be on its solfataric stage (Aurelio and Pena, 2002).

It is predominantly underlain by a sequence of Pre-Tertiary metamorphic rocks, ophiolites,

basalt flows and agglomerates. The younger rocks consist of sedimentary and volcanic rocks
dated Early Eocene to Late Miocene, Early Pliocene to Pleistocene which were intruded by Late
Miocene plutonic rocks.

The Zamboanga Sibugay Coal prospect area is situated in the Zamboanga-Misamis Occidental –
Sibuguey Peninsula-Olutanga Island part of the Sulu-Zamboanga Arc which is flanked and
formed by the Sulu Trench on the northwest in Western Mindanao.

9.2 Stratigraphy

The exploration target is the Lower Miocene Lumbog Formation coal measures that
conformably overly the Upper Oligocene to Lower Miocene Sibuguey Formation. The coal
measures are in turn unconformably overlain by the Upper Miocene to Pliocene Coloy
Formation and Andesitic Flows, the Pliocene to Pleistocene Flood Plain Basalt Flows and
Olutanga Limestones, and Recent Sediments. Upper Miocene to Pliocene andesitic dikes and
sills intrude the Lumbog and Sibuguey Formations.

The Pre-Tertiary basement complex consisting of schists, phyllites and ultramafics observed
further west; particularly in the Ipil-Siocon area, is not exposed on the Sibugay Peninsula.

For purposes of this report, only the Lumbog Formation (coal-bearing unit), the Sibuguey
Formation (underlying formation), the Coloy Formation (overlying formation) and the
Zamboanga Volcanic Complex are discussed below.

9.2.1 Lumbog Formation

Named by Ibanez and others, (1956), the Lumbog Formation consists of a sequence of clastic
and pyroclastic rocks with coal interbeds in the Malangas-Kabasalan region. It rests
conformably over the Sibuguey Formation. It is Early Miocene in age and is estimated to have a
maximum thickness of 525-m (Ibañez and others, 1956). It is divided into three members,
namely: lower Lalat, middle Gotas and upper Dumagok.

9.2.1.1 Lalat Member

Originally defined as a separate formation by Brown (1950), the Lalat Member consists of
mudstone, sandy shale, and sandstone with interbeds of pyroclastic rocks, coal and limestone.
The mudstone and shale are medium to dark gray, thin to medium bedded, but massive in

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places. The sandstone is light to dark gray, generally poorly bedded, and in places shows cross-
bedding. It is composed of fine to coarse subangular to subrounded grains of quartz, feldspar,
and chloritized lithic fragments. The coal beds attain a thickness of 3-m. The Lalat is well
exposed at the Diplahan-Butog and Lalat areas and is estimated to be 285-m thick. Fossils in this
member reported by Brown (1950) include Vicarya callosa, Ceritheum herklotsi, Cerithium
kenkinsi, Cerithium bandongensis and Terebra bicinncta.

9.2.1.2 Gotas Member

The Gotas Member is well-exposed along Gotas creek. It consists of mudstones, shale and
sandstone. Unlike the Lalat member, Gotas has thick interbeds of coarse pyroclastic rocks and
has no coal beds.

9.2.1.3 Dumagok Member

The Dumagok Member consists mainly of sandstones, including medium grained arkosic
sandstone with few interbeds of mudstone, coal, and pyroclastic rocks.

9.2.2 Sibuguey Formation

The Sibuguey Formation was named by Brown (1950) for the fairly uniform and thin-bedded
sequence of clastic rocks and coralline limestone along the Sibuguey River Valley. It is
conformably overlain by the Lumbog Formation. The Sibuguey covers most of the central
Sibuguey area, Dipili-Lake Wood area and most of the northern part of the Zamboanga
Peninsula divide.

The lower portion consists of mudstones with interbedded sandstone; the middle portion is
characterized by sandstones with interbedded mudstones and sandy shale; the upper portion is
composed of sandy shale with interbeds of limestone, calcareous shale and sandstones (Ibañez
and others, 1956). Antonio (1972) adopted the term to include the folded and thermally
metamorphosed interbedded sequence of clastic rocks and andesites with lenses of irregular
masses of marbleized limestone widely exposed west of Sibuguey River from Siogan in the
south to Luanan in the north. An Early Miocene age was assigned by Ibañez and others (1956)
for the rock unit, although Antonio (1972) extends its age down to Oligocene. Brown (1950)
gave a maximum thickness of 170-m for the formation, whereas Ibañez and others (1956)
estimate the thickness to be more than 385-m.

The limestone of the Sibuguey Formation occurs as white to black, fine to coarsely crystalline
rocks. At Mount Mujoh and near the headwaters of Bulacan River, the limestone is reef-like and
is at least 30-m thick (Brown, 1950). In few localities, the limestone was observed to occur as
small lenses in metavolcanic rocks (Antonio, 1972).

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9.2.3 Coloy Formation

The Coloy Formation was previously named Caloi Formation by Brown (1950) and renamed
Coloy for the sequence of pyroclastic and clastic rocks along Coloy Creek. This nearly flat
sequence lies disconformably over the Lumbog Formation. The Coloy consists of poorly
consolidated pyroclastic rocks and tuffaceous conglomerates with associated tuffaceous
sandstones and shales. The pyroclastic rocks are light gray fine grained tuff and gray volcanic
breccia. The conglomerate contains angular to rounded, pebble to boulder size, clasts of
andesite, petrified wood, quartz and basalt. It is considered Pliocene in age and has an
estimated thickness of 150-m.

9.2.4 Zamboanga Volcanic Complex

Antonio (1972) gave the formational name Zamboanga Volcanics to the Pliocene-Pleistocene
volcanic rocks which include basalt-andesite flows and associated pyroclastic rocks, hornblende
andesite plugs, and dacitic plugs and cinder cones in Sibuguey Peninsula. The basalt-andesite
flows constitute the most dominant rock unit of the formation. They blanket almost the entire
Margosatubig-Malangas volcanic plateau, although smaller bodies are also found sporadically in
the area. In general, the basalt is vesicular and amygdaloidal, while the andesite is
characterized by well-defined flow bands.

At Mt. Muntay area, the basalt flows cover almost the whole peak and the surrounding slopes.
Their textures vary from fine-grained to porphyritic, with some exhibiting vesiculated texture.
At Sitio Datagan I near Barrio Midsalip, plagioclase and olivine phenocrysts of the basalt have
been altered to clay minerals. Similar exposures can be found at Mt. Sampakang Laboyo,
Datagan II and Datagan III.

Associated with the basalts and andesites are glassy flows, flow breccias and agglomerates.
Santos-Yñigo (1953) previously mapped this basalt-andesite flow unit under his Mio-Pliocene
Andesite-Basalt Series. However, field observations showing its relationship with the
surrounding rocks led Antonio (1962) to assign a younger age to this unit.

Hornblende andesite plugs constitute the conical peaks in the northeastern portion of the
region. These volcanic plugs, ranging in elevation from 300-MASl to 1,563-MASL, with Mt. Sugar
Loaf (locally called Mt. Pinokis) as the highest, are disposed along the general fault pattern in
the area. In general, the rock is light to dark grey when fresh and pinkish to brick red when
weathered.

Also included in the Zamboanga Volcanic Complex are the dacitic plugs along Pagadian-
Malangas road and in Dinas-Balungating area, and the cinder cones at Camp VI, along Ozamis-
Pagadian Road and farther west of the area. Along the Pagadian-Malangas road, the dacitic
plugs may be porphyritic or glassy. The former is dark grey to greenish and massive, while the

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latter is light yellowish to grey. The cinder cones are characterized by poorly cemented but
fairly sorted thin to medium bedded cinder materials. They are mainly made up of angular,
granule- to boulder-sized scoriaceous basalt fragments cemented by finer cinder materials
and/or tuffaceous ash.

The Zamboanga Volcanic Complex may be correlated to the Sta. Maria Volcanic Complex in
Zamboanga Peninsula (Pena, 2008).

9.3 Structural Geology

The Zamboanga Sibugay Coal prospect area consists of steeply dipping normal and reverse
faults that are either northwest-southeast or northeast-southwest trending. It is traversed by
two (2) main faults: the northwest-southeast trending Botongan Fault that stretches from CB
274 and the northeast-southwest trending Guitom Fault that stretches from CB 280 that both
terminate towards the Diplahan Mountains. Asymmetrical anticlines and synclines that trend
east-northeast are also present.

G.D.J. GONZALES Page 26

Figure 3. Regional Geologic Setting (Yumul, 2007)

27
Figure 4. Regional Stratigraphic Column
(MGB, 2004)

28
 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

9.4 Coal Occurrences

Two (2) members of the Lumbog Formation, specifically Lalat and Dumagok, have coal seams.

The Lalat Member has five (5) main seams in descending order (seams E, D, C, B, and A), with
typical interval thickness ranging from less than 1-m (seams D and C) and greater than 1-m
(seams A, B, and E). Seams A, B, and E appear to be of mineable thickness (1.0-m or thicker).

The Dumagok Member contains three (3) major coal seams in descending order (seams H, G,
and F). Of the three coal seams, seam H is considered mineable. (J.H. Medlin, 1985).

The Lumbog Formation contains at least thirty (30) seams and seamlets of which four (4) are
considered mineable in the Lalat Area (Seams H, E, B, and A) and two (2) of these are mineable
in the MCC Area (LC-1 and LA) (PNOC-CC Exploration program results). Coal seam B of Lalat
Area is in the same stratigraphic position as LC-1 in the Malangas Coal Corporation (MCC)-
Diplahan Colliery (J.H. Medlin, 1985).

Details on coal seam average thickness are as follows:

Lalat Area
Seam H = 1.03-m
Seam E = 0.88-m
Seam B = 1.66-m
Seam A = 1.01-m

MCC Area
Seam LC-1 = 2.31-m
Seam LA = 1.62-m

Based on PNOC-CC Exploration Program results the significant coal deposits in the Sibugay
Peninsula include:

 MCC Coal Mine

 Lalat Coal Project
 Integrated Little Baguio Coal Project

9.5 Coal Quality

The Sibugay Peninsula contains the only coals of medium volatile bituminous and high rank in
the Philippines next to the Eocene coals of Catanduanes.

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

The Lalat Area contains five (5) named seams (Seams A to E) and two named seams (LA and
LC1) in the PNOC-CC mining area. LA and LC1 have been thermally affected by igneous
intrusions present in the area. The normally sub bituminous rank of the coal has been upgraded
to bituminous to semi-anthracite with an average heating value of some 10,300-BTU/lb on air-
dried basis (Wardell-Armstrong International, Ltd. Technical Report, 1985).

FIGURE 6 STRATIGRAPHIC COLUMN COC#: 166 & 167

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

10.0 COAL OPERATING CONTRACT AREA GEOLOGY

The Zamboanga Sibugay coal prospect is generally composed of Recent alluvium/colluvium,

Andesitic-Basaltic Volcanics, members of the Lumbog Formation and minor patches of Coloy
Formation, Sibuguey Formation.

The exploration target is the Lower Miocene Lumbog Formation coal measures that
conformably overlie the Upper Oligocene to Lower Miocene Sibuguey Formation. The coal
measures are in turn unconformably overlain by the Upper Miocene to Pliocene Coloy
Formation and Andesitic-Basaltic Volcanics, the Pliocene to Pleistocene Andesitic-Basaltic
Volcanics and Recent alluvium/ colluvium. Upper Miocene to Pliocene andesitic dikes and sills
intrude the Lumbog and Sibuguey Formations.

The coal seams are bounded above and below by clastic sedimentary rocks most commonly
mudstones indicative of paralic environment. Within the seams are inter-seam partings of
predominantly mudstones.

11.0 COAL OCCURRENCES IN THE COC AREA

Coal seams in the Zamboanga Sibugay Coal Area are associated with the predominantly
mudstone Lalat Member of the Lumbog Formation. The seams occur as interbeds and thus
strike and dip congruently with the mudstone beds.

Two (2) individual coal basins containing a total area of 991 has were mapped in the project
area.

Both basins contain a total of eleven (11) outcrops of coal beds with thickness ranging from
0.03 m to 1.82 m.

Drill intercepts at COC 166 however encountered two (2) coal seams with thickness varying
from 0.03 m to 3.94 m. The coal seams occur in a syncline whose axis strikes North-East (NE).

Details on coal seams thickness are as follows:

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

COC-166

Sta. No. Elev. Strike Thicknes

Latitude Longitude (m) Seam (°) Dip s (m) Roof Floor

Paez 7° 46' 123° 00'

SSM 08" 15" N.A. N.A. N.A. N.A. N.A. N.A. N.A.

Tony 7° 45' 122° 59'

SSM 32" 53" N.A. N.A. N.A. N.A. N.A. N.A. N.A.

7° 46' 123° 00' Bright 30S

BM-01 08" 15" 163 coal N50W W 1 N.A. N.A.

7° 45' 122° 59' Bright

BM-02 32" 53" N.A. coal N.A. N.A. 1 N.A. N.A.

COC-167

Remark
Sta. Latitude Longitude Ele Seam Strike Dip Thickness No. of s/Roof
No. v. (°) (m) Tunnel and
(m) s Floor
Dull Stringer
S-01 7° 42' 07" 122° 55' 58" 97 Coal N32W N.A. 1.22 N.A. s

H.M. 7° 42' 35" 122° 55' 31" N.A Dull N.A. N.A.
SSM . Coal 1.22 4 Inactive

D.B. 7° 42' 35" 122° 55' 53" N.A Dull N.A. N.A.
SSM . Coal 1.22 1 Inactive

E.P. 7° 42' 10" 122° 56' 07" N.A Dull N.A. N.A.
SSM . Coal 1.22 4 Inactive

H.L. 7° 42' 02" 122° 56' 17" N.A Dull N.A. N.A.
SSM . Coal 1.22 4 Inactive

G.M. 7° 42' 01" 122° 56' 10" N.A Dull N.A. N.A.
SSM . Coal 1.22 1 Active
Roof is
Dull 27S Mudsto
S-02 7° 42' 02" 122° 56' 10" 81 Coal N80W W 1.82 N.A. ne and
Floor is
Siltstone

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Laboratory analysis of coal samples from outcrops yielded a heating value range of 9,056
BTU/lb to 11,516 BTU/lb.

12.0 DEPOSIT TYPES

12.1 MINERAL DEPOSIT TYPE

The coal seams occur as interbeds within the mudstone, siltstone layers of the Lalat Member of
the Lumbog Formation.

The coal seams are composed of coal beds varying in thickness from 0.03 m to 1.98 m and
mudstone partings.

The sediments and coal beds appear to be deposited in a low energy environment in a paralic
basin.

Coal seams of varying thicknesses occur in paralic sedimentary environments. The coal seams
have calorific values in the 9,000 to 13,000 BTU range.

Samples of mudstone parting from three (3) outcrops were sampled and gave gold values of
values of less than 0.005, 0.579 and 2.362 g/t Au.

12.2 GEOLOGICAL MODELLING

Coal seams occur definitely within the mudstone Lalat and sandstone Dumagok member of the
Lumbog Formation. The seams occur as interbeds and thus strike and dip congruently with the
mudstone beds.

The coal seams appear to have formed through the accumulation of organic material deposited
in a mud and sand rich basin of paralic origin. Earlier shallow marine transgression formed coral
reefs and deposited calcareous sediments below the paralic basin.

Three episodes of volcanic activity occurred, depositing terrestrial volcanic over the paralic
basin.

The exploration program of TMEC is designed to locate the host lithologies and the other
litholigies that underlie and overlie the said host rocks.
Field mapping is done. This result is the production of a geologic map that shows the
relationships of the different lithological formations. Coal outcrops are located, mapped,
sampled and measured.

A drilling program is designed, targeting coal seams strike extensions and down dip extensions.

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13.0 MINERALIZATION

13.1 DESCRIPTION OF SURROUNDING ROCK TYPES

The coal seams of the sedimentary basins in the Sulu-Zamboanga Arc occur within the Lumbog
Formation of Lower Miocene age.

The Lumbog Formation exposures consist of slightly to completely weathered interbedded dark
gray mudstones, light gray fine to medium grained lithic sandstones, pyroclastics and coal
seams.

It is composed of three (3) distinct sedimentary members, namely: Lower Lalat, Middle Gotas
and Upper Dumagok.
The Lalat Member is generally composed of mudstone, sanfy shale and sandstone with
interbeds of pyroclastic rocks, coal and limestone.

The Gotas Member is made up of mudstone with thick coarse interbeds off pyroclastioc rocks.

The Dumagok Member consists of predominantly sandstone with few interbeds of mudstone,
coal and pyroclastic rocks.

The coal seams are bounded above and below by clastic sedimentary rock most commonly
mudstones, sandstones and siltstones. Within the seams are inter-seam partings of
predominantly mudstones.

In some of the mudstone partings, angular coal fragments with very fine grains of pyrite are
present along the edges.

13.2 MINERAL ZONES

Two (2) to three (3) coal seams are recognized in the paralic basins in both COCs. The coal
seams are confined within the Lalat member of the Lumbog Formation in the COC area. They
are bounded above and below by clastic sedimentary rocks most commonly mudstone and
siltstone strata. Mudstone occur as inter seam partings within the coal seams.

13.3 COAL QUALITIES

Coal analyses results from surface samples show ggross calorific values that range from 9,056
BTU/lb (53032 Kcal/kg) to 13,976 BTU/lb (7764 kcal/kg) probably averaging 11,516 BTU/lb
(6397 kcal/kg).

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

14.0 EXPLORATION

14.1 SURFACE GEOLOGIC MAPPING

Initial exploration commenced in December 2009 to identify/ delineate/ validate possible target
areas for test-drilling and subsequent coal blocking of resources. Field activities were limited to
geological mapping/sampling of coal measures with focus on coal seams. Abandoned
underground workings of small-scale illegal miners were also checked whenever possible.

Reconnaissance geologic mapping and random sampling were conducted to cover majority of
the 11,000-ha project area of the initial four (4) COCs. Seventeen (17) outcrops of coal beds
with thicknesses ranging from 0.03- to 1.82-m were located. All coal outcrops were identified to
be occurring within the Lalat member of the Lumbog Formation.
Initial exploration activities were concluded August 2010.

Re-evaluation of the initial exploration results commenced on October 2010. Geologic traverses
were conducted along creeks, trails, barangay roads and old logging roads using a GARMIN GPS
60CSX (accuracy +/- 3 m). Field data were encoded and overlaid using MapInfo.

Eleven (11) trenches and seven (7) test pits were excavated alongside major outcrops to fully
expose the thickness of the coal seam. Nineteen (19) adits of small scale illegal miners were
also checked.

Re-evaluation activities were concluded on January 2011.

A summary of exploration activities are shown in the table below:

Summary of Exploration Activities

COC -166

Activities Undertaken and Highlights

 Barangay and Logging Road Traverse
 Stream Traverse
 Prospecting for coal exposures
 Three (3) coal outcrops mapped
 Total area covered 4000 hectares
 Two (2) exploratory adits and one (1) trench were located
 Prepared geologic Map (1:10,000)
 Six cored holes drilled intercepted two (2) coal seams

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COC-167

Activities Undertaken and Highlights

 Barangay and Logging Road Traverse
 Stream Traverse
 Prospecting for coal outcrops
 Eight (8) coal outcrops mapped
 Total Area covered 2,000-has.
 Fifteen (15) exploratory adits and ten (10) trenches were located
 Drilling initiated as of this writing
 Prepared geologic Map (1:10,000)

Field surface mapping resulted to the delineation of two (2) coal seams in carbonaceous
mudstones basins. At COC 166 the basin measures 547 hectares and at COC 167, the basin
measures 420 hectares.

Re evaluation of the initial exploration results commenced in October 2010. Geologic traverses
were conducted along creeks, trails, Barangay, roads and old logging roads using GOWIN GPS
60 CSX (accuracy H.3m). Field data were encoded and overlaid using Map info.

Eleven (11) trenches and seven (7) test pits were excavated along side major outcrops to fully
expose the thickness of the coal seam. Nineteen (19) pits of small scale miners were also
checked.

14.2 SUB SURFACE EXPLORATION

In October 2011, an initial 10-hole drilling program was implemented in COC 166 using an Atlas
Copco CS-1000 drill rig with HQ drill rods and bits. Depths of drill holes range from 96.20 m to
245.50 m.

Five (5) holes were drilled in the area (COC 166). Four (4) holes intercepted two (2) coal seams.
The thickness of Seam A varies from 0.07 m to 1.18 m while Seam B ranges from 1.18 m to 3.94
m.

Hole ID Seam ID Seam Thickness

166-01 B 2.73
A 0.19
166-02 B 3.94
166-03 A 1.18
166-05 B 3.55
A 0.07

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As of this writing drilling activities is being prepared at COC 167.

14.3 SAMPLING AND ANALYSES

To collect samples from the coal seams, channels, a foot wide and a foot deep were cut
perpendicular to the thickness of the coal beds. Coal samples were then chiselled out of the
channel and collected in 1x2-feet plastic bags, sealed and properly labelled. Each bag weights
approximately 2-kilos. The collected samples were then sent to Coal Test Center, Toplis Marine
Philippines, Inc. for proximate analysis.

Each sample was analyzed for: Total Moisture, Inherent Moisture, Ash, Volatile Matter, Fixed
Carbon, Gross Calorific Value and Total Sulphur.

Coal samples from drill holes were collected as split samples packed in plastic bags, labelled,
sent to either Brixton Energy and Mining Corporation or Philippine National Oil Company-
Exploration Corporation (PNOC-EC) Malangas Laboratory for analysis.

14.3.1. Quality Control Measures

Collections of samples are always supervised by project geologists. Splitting and sampling of
drill cores are personally done by geologist core loggers. All samples collected are recorded on a
sample-tracking log book. Analyses results are compiled at the central office.

14.3.2. Data Verification Procedures

Analyses results of samples are initially cross-checked by sending duplicate samples, in every
five sample collected to a different laboratory.
Geologists’ field data are randomly verified on the field by the senior geologist on site and at
times, the Vice President for Exploration. A program to verify coal analyses had been started.

14.4 SAMPLE PREPARATION, ANALYSES AND SECURITY

14.4.1 Geo-Mechanical Logging Of Core Samples

Drill cores are brought soonest from drill base to designated core storage areas. At the base
camp core house, the cores in each labelled box are inspected, cleaned (if needed) and advance
meterage labelled (wooden core blocks) checked against the accompanying drilling shift
reports. Core boxes and core blocks are clearly labelled. Geo-mechanical logging (using a
comprehensive log form) is routinely conducted by our geologist or trained and experienced
geologic aides. Routine orderly compilation of original and soft copies of geo-mechanical
borehole logs are done and reported to TMEC corporate office.

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

14.4.2 Sample Preparation Methods

To collect samples from the coal seams, channels, a foot wide and a foot deep were cut
perpendicular to the thickness of the coal beds. Coal samples were then chiselled out of the
channel and collected in 1x2-feet plastic bags, sealed and properly labelled. Each bag weights
approximately 2-kilos. Samples from drill cores are collected by manually splitting the cores in
half wrapping the collected core in aluminum foil and sealing in plastic zip-locks. The samples
are properly labelled and corresponding wood markers were placed in the core box where the
samples were taken. The collected samples, drill cores and outcrops were then sent either the
Coal Test Center (CTC), a division of Toplis Marine Philippines Inc. or the Philippine National Oil
Company - Exploration Corporation (PNOC-EC) Malangas Laboratory for proximate analysis.

1.4.3. Security Methods

TMEC follows a detailed procedure to have samples labelled, placed in sample bags,
electronically logged using Microsoft (MS) Excel and dispatched from project site to the
laboratory with diligence.

15.0 ESTIMATE OF COAL RESOURCE

15.1 DATABASE USED

Geologic maps and sections, reports of analyses, and field geologic records were provided by
TMEC’s exploration team. Documents pertaining to mineral rights were also provided by TMEC.

15.2 INTEGRITY OF DATABASE

Information pertaining to mineral rights were gathered from the COC of TMEC with the DOE.

Geologic data were gathered from the field employing Garmin GPS 60CSX with accuracy of +/- 3
meters. All field information were plotted through a MapInfo program.

Bore holes were initially located on the ground by Garmin GPS 60CSX then later verified by
Gowin TKS total station.

15.3 DATA VERIFICATION AND VALIDATION

A PMRC-CP Geologist, Mr. ENRIQUE C. PAYAWAL, spent two (2) weeks in the project site with
TMEC’s exploration team.

Trenches were visited to map the major coal beds. Geologic contacts were checked to verify the
aerial extent of the individual coal mini basins.

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

Drill sites and core boxes were inspected. Drill logs were cross checked with the actual drill
cores.

15.4 CUT-OFF GRADES USED IN ESTIMATION

No drill core samples has been analyzed as of this writing. However, analyses of eight (8)
outcrops samples from COC 166 range in heating value from 9,056 BTU/lb to 13,057 BTU/lb.
Analyses of three samples from COC 167 varies from 12,070 BTU/lb to 13,976 Btu/lb. As such, a
cut-off grade of 7,000 BTU/lb is being initially considered.

15.5 ESTIMATION METHOD OF COAL RESOURCE

In the drilled area of COC 166, the coal resources maybe estimated by polygon method. Coal
outcrops and drill hole coal intercepts were projected towards the dip direction and along the
strike length to 100 meters for measured resource and from 100 meters to 300 meters for
indicated resource. These parameters (metric distance) were considered based on the observed
correlability of outcrops that are located 100 meters apart. The estimated surface area of the
polygon is then projected to the slope area of the coal bed using the measured dip angle of the
outcrop.

The potential tonnage of the coal deposit for the whole COC area however, is estimated by
correlating the coal outcrops into coal beds or seams, then projecting the beds within the aerial
extent of each mini basin.

15.5.1 Resource Criteria

The resource criteria used in the estimation are as follows:

1. Occurrence of surface outcrops

2. Drill hole intercept of coal seams
3. Area of host lithology

15.5.2 Data Sources and Modelling

The data sources include:

1. The thickness and length of coal outcrops, including strike and dip directions.
2. Projection of coal seams along strike.
3. Projection of coal seams in the dip direction.

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

Modelling method used (Figure 8):

Resources are delineated using the following:

Measured Resource:
a) Where outcrops and drill hole intercepts are factored over a maximum distance
of 100 meters.

Indicated Resource:
a) Where outcrops and drill hole intercepts are factored beyond 100 m but within
300 meter distance.

Inferred Resource:
a) Where the host lithology exists.
b) Where coal outcrops exist with the host lithology.

The following parameters were considered in the calculation of resource:

1. COC 166

Specific gravity coal 1.4

Thickness of coal seams 3.5 m

Area of resource block divided by the cosine of the dip angle of the coal bed.

Surface Area ÷ Cosine Dip Angle X Coal Thickness X Specific Gravity

2. Potential deposit for the whole COC area based on detailed geologic mapping where
the extent of the coal bearing paralic mudstone deposits were delineated and
thickness of coal outcrops were measured.

Total Coal Thickness x Area of Mini Basins x Specific Gravity

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

The  details  of  computation  of  the  Resource  block  using  the  polygon  method  of  estimation  is 
presented below: 
 
Resource Block Tabulation 
DRILLED AREA (COC # 166) 
SLOPE AREA 
RESOURCE  HORIZONTAL  DIP  (HORIZONTAL  THICKNESS 
S.G.  MT 
BLOCK NO.  AREA ( SQM)  ANGLE  AREA/COS OF DIP  (M) 
ANGLE) 
M1  17,300 20°  18,410.33 3.5  1.4  90,210.60
M2  16,600 20°  17,665.40 3.5  1.4  86,560.46
M3  20,000 20°  21,283.61 3.5  1.4  104,289.71
M4  18,200 20°  19,368.09 3.5  1.4  94,903.64
IND1  101,100 20°  107,588.67 3.5  1.4  527,184.50
IND2  89,300 20°  95,031.34 3.5  1.4  465,653.57
INF1  441,080 20°  469,389.06 3.5  1.4  2,300,006.41
MEASURED  53,900 20°  57,359.34 3.5  1.4  281,060.78
INDICATED  190,400 20°  202,620.01 3.5  1.4  992,838.06
INFERRED  441,080 20°  469,389.06 3.5  1.4  2,300,006.41

 
15.6 ESTIMATE OF COAL RESOURCE 
 
 The Mineral Resource estimate for the drilled area of COC 166 are as follows: 
 
Resource  Million MT 
Measured & Indicated  1.2 
Inferred  2.3 
 
 
The “potential” or “target volume of coal deposit in both Coal Basins in COC 166 and COC 167 
are as follows:  
ESTIMATE OF POTENTIAL TONNAGE 
 
COC #  Area of Basin  Coal Volume 
(has)  (MMT) 
166  547  30.6 
167  420  20.5 
TOTAL  967  51.1 
 

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

16.0 INTERPRETATION AND CONCLUSIONS 
 
Two (2) individual coal depositional basins were located in the project area. The basin in COC 
166 measures 547 has while the other basin in COC 167 measures 430 has. 
 
16.1    COC 166  
 
Three (3) coal outcrops with thickness varying from 0.18 m to 1.1 m were observed within   the 
coal basin at COC 166. 
 
Diamond drilling (5 holes) at COC 166 intercepted two (2) coal seams. 
    
The  lower  seam  measures  in  thickness  from  0.19  m  to  1.18  m  while  the  upper  seam  vary  in  
thickness from 2.73 m to 3.94 m. 
 
Correlating the coal outcrops and drill hole intercepts resulted into the identification of at least 
two  (2)  coal  seams,  Seam  A  and  Seam  B.  The  thickness  of  Seam  A  averages  .48  m,  Seam  B 
averages 3.4 m. 
 
The average heating value of the coal outcrops in COC 166 is 11,603 BTU/lb, with average total 
sulphur content of .54% and average ash content of 19.96 %. 
 
The estimated Measured and Indicated (M&I) Coal Resources of COC 166 is 1.2 MMT and the 
Inferred Resource is  2.3 MMT. 
 
Based on the measured area of the carbonaceous mudstone basin, COC 166 has a Coal Deposit 
Potential of 30.6 MMT. 
 
 16.2    COC 167 
 
Eight (8) coal outcrops and one (1) adit intercept were observed to have a range of   thickness 
from 1 m to 1.22  m. 
 
The average heating value of the samples collected from the outcrops and adit intercept is   12, 
815 BTU/lb with average total sulphur content of 0.74 %. 
 
Based on the measured area of the carbonaceous mudstone basin, COC 167, has a coal deposit 
potential of 2005 MMT. 
 
 
 
 

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 Internal Geological Report on the Zamboanga-Sibugay Coal Project Area

17.0 RECOMMENDATIONS

Detailed geologic field mapping are to be pursued to locate other surface coal occurrences,
lithological and formation contacts. Structural observation, especially fault movements are to
be plotted carefully as to movement directions.

Pursue completion of current drilling program and implement subsequent closely-spaced

drilling activity if found necessary.

Collate and interpret exploration results and implement resource blocking for resource
computation.

18.0 REFERENCES

18.1 Titan Mining and Energy Corporation. (2009), Application for Coal Operating Contract.

18.2 Peña, Rolando, and Geological Society of the Philippines. (2008), Lexicon of Philippine
Stratigraphy.

18.3 Wardell-Armstrong International Ltd. (1985), Report on coal resources of the Philippines.
Technical report submitted to Ministry of Energy, Philippines.

18.4 National Statistics Office, Philippines. (2008), 2007 Census of Population.

http://www.census.gov.ph/data/census2007/index.html.

18.5 Ben G. Bareja. (January 2011), Climate Types Affecting Plant Growth.
http://www.cropsreview.com/climate-types.html

18.6 Dr. Rogelio N. Concepcion, Bureau of Soils and Water Management (BSWM). (2004),
Compilation of Spatial Data for Philippines AEZ.
http://www.apipnm.org/swlwpnr/reports/y_ta/z_ph/phmp231.htm

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G.D.J. GONZALES Page 46

 INTERNAL GEOLOGIC REPORT
ON THE ZAMBOANGA-SIBUGAY
COAL PROJECT
Municipalities of Diplahan, Buug, and Siay
Province of Zamboanga-Sibugay, Philippines

Coal Operating Contract No. 166 and 167

of

TITAN MINING AND ENERGY CORPORATION

3/F JFKC Centre, 2155 Don Chino Roces Ave.
Makati City, Philippines

(ATTACHMENTS)

by:

Gizella Greta D. J. Gonzales

Senior Geologist
April 26, 2012
ANNEX VI

BREAKDOWN OF MINE EQUIPMENT TO BE ACQUIRED

FOR THE DAVAO ORIENTAL PROJECT
 Equipment No. of Units Estimated Cost Total
PRODUCTION UNIT OPERATIONS
Major Mine Equipment:
DOZER: Crawler Tractor, Diesel, 300 HP, w/ wide tooth straight blade, w/ ripper attachment 4 units P68,800,000
DOZER: Crawler Tractor, Diesel, 200 HP, w/ wide angle blade 2 units P32,250,000
HYDRAULIC SHOVEL EXCAVATOR: Crawler, Diesel, 270 HP, 3½ to 4 cubic yard bucketblade, w/ ripper attachment 1 unit P9,718,000
FE WHEEL BUCKET LOADER: Wheel, 200HP, 4 cubic yard bucket 3 units P26,187,000
HAUL TRUCK ADT 20T: Diesel, 300 HP 4 units P60,028,000 P196,983,000
Minor Mine Equipment:
DOZER: Crawler Tractor, Diesel, 200 HP (Recondition) 1 unit P9,000,000
EXCAVATOR 1 unit P4,000,000
FE WHEEL LOADER: Diesel, 2 cubic yard bucket (Recondition) 1 unit P4,000,000
DUMPTRUCK: Diesel, 10 T (Recondition) 3 units P6,000,000
GRADER: Diesel (Recondition) 1 unit P2,000,000
ALL TERRAIN CRANE: 10T, Telescopic, (Recondition) 1 unit P3,000,000
ROLLER/COMPACTOR: Diesel, 3 Wheel 2 Axle (Recondition) 1 unit P2,000,000
FUEL/LUBE TRUCKS: Diesel (Recondition) 1 unit P2,000,000
WATER TRUCK: Diesel, (Recondition) 1 unit P2,000,000
TIRE REPAIR TRUCK: Diesel, (Recondition) 1 unit P2,000,000
SERVICE TRUCK: 4WD, Diesel, 5T 3 units P2,100,000
RESCUE AMBULANCE VEHICLE: Diesel 1 unit P2,500,000
SERVICE PICK-UP: 4WD, Diesel 6 units P7,800,000
SHUTTLE BUS: Diesel (Recondition) 1 unit P2,000,000
SHEEP’S FOOT ROLLER: Tractor Pulled, (Used) 1 unit P200,000
RAMMER, PORTABLE: Manually operated, Gas 1 unit P100,000 P50,700,000
Subtotal - Production Unit Operations P247,683,000
Add: Freight, Insurance, and Transportation to Site P24,368,000
TOTAL PRODUCTION UNIT OPERATIONS P272,051,000
SUPPLEMENTAL/AUXILIARY EQUIPMENT, TOOLS, IMPLEMENTS, AND PARAPHERNALIA
SHOP EQUIPMENT TOOLS AND IMPLEMENTS (With Overhead Hoist) 1 lot P2,000,000
TRUCK LOAD SCALE 2 units P800,000
LABORATORY EQUIPMENT, IMPLEMENTS AND FURNISHINGS 1 lot P3,000,000
POWER GEN SETS AND DISTRIBUTION [Trailer 100KVA P1.2 M, Portable 6.7 KW P150,000] 2 units P1,400,000
TOWER LIGHTS (WORK SITE) 10 units P1,600,000
SURVEY EQUIPMENT, TOTAL STATION + GPS 1 lot P1,000,000
OFFICE EQUIPMENT AND FURNISHINGS 1 lot P3,000,000
QUARTERS, MESS AND CHANGE HOUSE FACILITIES WITH FURNISHINGS 1 lot P500,000
SAFETY EQUIPMENT AND PARAPHERNALIA [P1,000 per Head] 1 lot P200,000
CAMPSITE WATER STORAGE AND DISTRIBUTION 1 lot P100,000
COMMUNICATION EQUIPMENT, RADIO COMM. EQUIP/OFFICE INTERCOM 1 lot P1,000,000
MEDICAL EQUIPMENT AND PARAPHERNALIA 1 lot P500,000
Subtotal - Supplemental/Auxiliary Equipment, Tools, Implements, and Paraphernalia P15,100,000
Add: Freight, Insurance, and Transportation to Site P1,510,000
TOTAL SUPPLEMENTAL/AUXILIARY EQUIPMENT, TOOLS, IMPLEMENTS, AND PARAPHERNALIA P16,610,000
TOTAL MINE DEVELOPMENT EQUIPMENT P288,661,000
CONTINGENCY P1,339,000
TOTAL MINE DEVELOPMENT EQUIPMENT P290,000,000