v  China’s coal industry is primarily dominated by massive, government-controlled (SOE) companies

Ø  China Shenhua Energy Company: China’s largest coal producer and coal exporter, maintains the largest coal reserve in China. Shanghai listed; US$57.85b Market Cap

v  A handful of public companies operate within the coal industry as either fully integrated producers or strictly coal producers, such as China Coal Energy Company and Yanzhou Coal Mining

Ø  The remaining industry is a conglomeration of small mines scattered throughout the country

Ø  Small coal mines have more difficult time operating in the current environment due to growing government pressure of  to improve safety, environment, energy efficiency and sector consolidation measures

Ø  A significant amount of coal production comes from small provincial and township mines that fall under the governments new initiative to be consolidated with larger mines

Ø  Government is forcing consolidation by shutting down small mines and issuing a single mining permit for an entire region

v  The Chinese government is actively promoting coal-to-liquid facilities to help meet the increased demand for the country

v  High Energy Demand in China

Ø  China - the largest world consumer of coal

Ø  China has largest coal reserves in the world, but became a net importer in 2007

Ø  By 2025, China energy demands will surpass the United States

Ø  Projected 120% consumption increase from 2006 to 2030*

v  Strong Position within Heilongjiang Province

Ø  SongZai is the only privately financed, publicly traded coal company in the region

Ø  Immediate expansion opportunity at nearby sites

Ø  Strong support from local government and local mining authorities

v  Long-Term Growth Opportunities

Ø  Joint Ventures/partnerships with mine owners

Ø  Government forcing industry consolidation of mid-sized mines

Ø  Further opportunities to exploit properties initially developed by Xing An Group

Ø  Joint Ventures with Provincial Governments in alternative energy

v  Attractive Entry Point for Investors

Ø  Highly profitable with strong cash flow

Ø  Low Valuation

Ø  Low Risk method of participating in the Chinese coal sector

Ø Management commitment to transparency