Pan Asia Corporation Limited

Copyright © 2011 RM Research Please refer to important disclosures located at end of this report.

Investment Highlights

Pan Asia has made significant progress with its 75% controlled TCM Coal Project.A recent 115% increase in the coal resource at TCM speaks volumes for theprogress made, with the project hosting 114.6 million tonnes of measured,indicated and inferred resources of high calorific value thermal coal.

Significantly, the TCM Project has 35.6 million tonnes in Measured Resource andanother 35.1 million tonnes in Indicated category. A Feasibility Study is underwayto commence production and this is on track for completion in the 1Q 2012. Whilstthe vast majority of the coal resource is targeted for underground extraction, thereis strong early cash flow potential from an approximate 3Mt of potentially openpittable indicated resource, which could be mined by pushing back the high wall ofthe existing ATA Coal Mine, operated by PT Arutmin, a subsidiary of BumiResources, Indonesia’s largest coal producing company.

The TCM Project is part of a portfolio of projects that Pan Asia secured throughthe acquisition of Innovation West in November 2010. Innovation West’s projectportfolio covers the broad spectrum of operations, from cashflow to grass-rootsexploration and provides exposure to the burgeoning demand for thermal coal inSouth East Asia, India and China whilst deriving near-term cash flow.

The Innovation West acquisition has resulted in Pan Asia becoming a revenuepartner in one producing thermal coal mine (the Ranrich Project’s, previouslyknown as NAD). Additionally it has a right to a significant interest (50% or greater)in additional coal projects that have the potential to be developed into producingmining operations within the next few years as well as having access to a pipelineof new projects in Indonesia.

The TCM Project offers underground potential, which has been proven by recentdrilling and the subsequent resource re-estimation. This potential could becommercialised in the short to medium term unlocking significant value forshareholders. To unlock this potential, Pan Asia has commissioned PT KopexMining Contractors (KMC) to conduct a Feasibility Study into commencement ofcoal production at a rate of 1.5mtpa sellable coal.

The outlook for thermal coal demand in the South East Asia, India and Chinaregion is very robust. Due to its proximity to the developing nations of Asia,Indonesia has a freight advantage over the Australian export market. This ensuresthat demand for the product remains strong, as long as coal quality is acceptable.

Outlook RM Research believes that Pan Asia’s flagship TCM Project has significant

potential to become a long life, high value coal production centre. This potential isstarting to be recognised as the Resource grows in size and in confidence level. Itis our belief that Pan Asia has a portfolio of Indonesian coal projects that willdeliver substantial uplift in value to its shareholders. The Company is continuing toestablish the commercial building blocks necessary to deliver near-term coalproduction and has entered into a series of agreements and contracts that coveroff on production capability, funding of production ramp-up, marketing of end-product and assessing the economic feasibility of the TCM Project.

With a current market capitalisation of A$9.3 million, Pan Asia has substantialvaluation upside if it is able to execute its strategy to develop the TCM CoalProject.

Capital Structure

Sector Materials

Share Price (A$) 0.079

Fully Paid Ordinary Shares (m) 117.6

Opt (ex $0.20-$1.00, exp 12/14) (m) 11.7

Market Capitalisation (dil) (A$m) 9.3

Estimated Cash (A$) (m) 0.6

Directors & Management

Domenic Martino Non Exec Chairman

Alan Hopkins Chief Executive Officer

Luke Martino Non Exec Director

Honardy Boentario Non Exec Director

Michael Pixley Non Exec Director

Major Shareholders

Dudley James Elliott 4.25%

Honardy Boentario 4.25%

Ridgescan 3.74%

Accumcompany 3.40%

Analyst

Guy Le Page +61-8-9321 3277

Share Price Performance

21 November 2011

ASX Code PZC

Speculative BuyPan Asia Corporation LimitedTCM Project Measuring Up


21 November 2011

COMPANY BACKGROUNDPan Asia Corporation (“Pan Asia” or “the Company”) completed the acquisition of InnovationWest Pty Ltd (“Innovation West”), an Australian based entity headed by Domenic Martino, inNovember 2010. Highlights of this portfolio of coal projects include:

1) A flagship pre development project (TCM).2) Immediate cash flow from financing and offtake on a producing project.3) A flagship exploration project.4) A pipeline of project opportunities that mirror all the above.

As part of the acquisition the Company had to re-comply with Chapter 1 and 2 of ASX ListingRules, which it did by undergoing a one for twenty share reconstruction, acquiring InnovationWest for 32.8 million shares and issuing 5.0 million new shares at 20 cents each to raiseA$1.0 million. The acquisition also saw two new directors elected, Domenic Martino andHonardy Boentario.

INNOVATION WEST – Large Footprint of Projects in Indonesia

The acquisition of Innovation West was completed in November 2010 with the Companycomplying and relisting on ASX on 31 January 2011. RM Research considers thatmanagement have acted with diligence and is now starting to deliver a portfolio of qualityassets with multiple opportunities to generate strong investment returns. The acquisition waspredominantly scrip based so the Indonesian partners and project vendors have a valuecreation path aligned with those of the shareholders of Pan Asia.

The project portfolio consists of a flagship pre-development project, one cashflow asset and aflagship exploration project. All projects are located in Kalimantan, Indonesia’s largestproduction province, with a minor exploration project located in Sumatra.

The cashflow asset comprises repayment of a loan advanced to Ranrich plus loan marginplus off-take margin. Repayments are built around minimum production levels. By making thisadvance, Pan Asia gained entry into highly prospective exploration territory as well as furtherproject opportunities.

...A focus on Indonesia

Portfolio has been refinedto enhance quality andensure alignment ofinterests

FIGURE 1: IndonesianProjects (source: PanAsia Corporation).

Project portfolio consistsnear –term developmentand exploration assets


21 November 2011

In August 2010 the Company entered into a binding coal purchase and finance agreementwith Noble Resources Pte Ltd (Noble) whereby Noble agreed to purchase 4.8Mt of coalover the next 4 years from the Ranrich projects associated with Honardy Boentario. Noblehas provided prepayment finance of $2m as part of this coal purchase agreement.

In our view the jewel in the crown of the current asset portfolio is the pre-development project,TCM. It is proposed that Pan Asia will own a 75% interest in this project, which lies in thedown dip position of a current mining operation called ATA that is nearing the end of itsminelife.

A Production and Operation IUP (license) was granted for TCM in June 2010. This licensefacilitates the commercial extraction of coal from the 3,044 hectare project area for a period of15 years (renewable). This issuance of this license has allowed the Company to advanceplanning and discussions on commencing mining at TCM.

Discussions are advanced with a view to the ATA operation to continue mining across thetenement boundary. This presents the opportunity to derive a cash flow from this project atrelatively low risk whilst investigating the potential to extract further product throughunderground mining methods. KMC has commenced a Feasibility Study to commence

PT Arutmin ATA coal mine adjacent to TCMPT Arutmin ATA coal mine adjacent to TCM

• Adjacent to major PT Arutmin ATA mine

• 4 main coal seams dip into TCM

• Drilling to prove open pit & undergroundresources

• Thermal coal quality 6,300 – 7,100+ kcal / kg(adb)

TCMTRANSCOAL MINERGY (75% interest)South Kalimantan (4,148Ha)

TCMTRANSCOAL MINERGY (75% interest)South Kalimantan (4,148Ha)

Geological cross section sketch, based on exploration data & field reconfirmation at the active mining pits of PT Arutmin

FIGURE 2: TCM Projectin Kalimantan (source:Pan Asia Corporation).

Coal purchase and financeagreement with Nobleunderpins thedevelopment of NDV

We consider TCM to bethe jewel in the crown

FIGURE 3: TCM Project –proximity to existing ATAmine Projects (source:Pan Asia Corporation,Investor Presentation,ASX Announcement12/04/2010).

Project portfolio consistsnear –term developmentsand exploration assets


21 November 2011

underground operations at TCM, with a view to produce 1.5mtpa for at least 15 years ofreliable coal. The Final Feasibility Study is due for completion towards the end of the MarchQuarter 2012.

The quality of the product from the ATA mine and that expected from the TCM Project is ofvastly superior quality to that of most other operations in Kalimantan. This should enhanceproject economics and product demand.

RESOURCES AND RESERVESA maiden resource statementfor TCM (Table 1, Figure 4)was released in May 2010,estimating an indicated JORC-compliant resource of 19.7Mtwith an additional 11.0Mt ininferred category. The phase 2drilling programme resulted inthe resource increasing to 53.2million tonnes in total (a 73%increase), with 22.2Mt inIndicated category and theremaining 30.8Mt in Inferredcategory. This re-estimatedresource resulted in a small

decrease in coal quality with average calorific value of 6,566 kcal/kg (ADB) versus 6,682previously; ash content rising from 12.09% to 13.52%; total moisture increasing from 4.64% to6.41%; but sulphur content decreasing from 1.83% to 1.52%.

17/10/2011 31/01/2011 Increase/Decrease

Measured 35,602,319 -

Indicated 35,109,149 22,418,736 56.61%

Inferred 43,910,420 30,818,567 42.48%

TOTAL 114,621,888 53,237,303 115.30%

In October 2011, an additional 18 boreholes, bringing the total to 35, resulted in a further115% increase in Resource to a total of 114.6Mt. Enhanced understanding of the complexityof the TCM deposit achieved through the current drill programme facilitated a maidenMeasured Resource of 35.6Mt, as well as a 57% increase in Indicated Resource to 35.1Mtand a 42% increased in Inferred Resource to 43.9Mt.

Further drilling is ongoing with another 6 boreholes remaining from the current drillprogramme. RM Research anticipates further encouraging exploration results to flow throughto increased mineral resources. This should sustain a long-life coal mining operation thatshould underpin Pan Asia’s push into the ranks of coal production companies listed on theASX. Multiple exploration targets provide opportunities to further grow assets and expand coalproduction leveraging off the operational expertise the Company has and will continue todevelop, as well as its emerging marketing presence initially derived from its offtakeagreements.

TCM product should be ahigh quality bituminousthermal coal

FIGURE 4: TCM Project –Measured and Indicatedresource outlinestogether with drilllocations (source: PanAsia Corporation,September 2011Quarterly Report,28/10/2011).TCM maiden total JORCresource in excess of 30MTfollowed by upgrade to53MT and now 115MT

TABLE 1: TCM ProjectResources & Reserves(source: Pan AsiaCorporation, September2011 Quarterly Report28/10/2011).

Four high-qualityexploration targets shouldprovide opportunity toexpand coal production


21 November 2011

PRODUCTION OUTLOOK – What Could be AchievedPan Asia, in assembling the Innovation West project portfolio, has outlined short and mediumterm exploration targets as set out in table 2.

* Offtake** Company goal is for production to represent 3 to 5% of attributable target

RM Research anticipate that Pan Asia will be sharing in coal production of around 3 milliontonnes in calendar year 2012, with the potential to expand output to around 5 million tonnesper annum in CY 2014. To support this production profile, it will be necessary to reinvest thefinancial returns it should receive from the revenue agreements on the Ranrich Projects &other mines into resource definition drilling, project development studies and capitalexpenditure on its pipeline of coal projects. Alternative funding initiatives such as attractingmining and logistics experts and potential customers may assist in reducing futureshareholder dilution. The Company has a target for the delineation of mineral resources on itscoal projects. This target is to define total attributable resources of in excess of 100 milliontonnes by December 2012.

Whilst the production and resource targets outlined by Pan Asia are dependent on explorationsuccess that cannot be assured, the achievement of these goals would provide enormousupside to the Company’s valuation. At this stage, RM Research considers it premature toassign a target valuation to Pan Asia, given that the project acquisitions are not complete andexploration and project development activities are yet to be ramped up. Suffice to say, that aCompany with a thermal coal production profile of greater than 3 million tonnes per annumand a resource base of over 100 million tonnes, should command a market capitalisation ofseveral hundred million dollars.

CALENDAR YEAR 2012

Project Status Interest Project Target Attributable Target

NAD Production Financing & Offtake 4 Mt* ---

TCM (underground) Pre-Development 75% 114 Mt 85 Mt

TCM (open pit) Pre-Development 75% 3 Mt 2 Mt

SUB TOTAL – JORC Projects 121Mt 87 Mt

BCKP Exploration 50% Earn 50 Mt 25 Mt

Other Exploration 80% 10 Mt 8 Mt

SUB TOTAL - Post Exploration 60 Mt 33 Mt

TOTAL - Including Pipeline Opportunities 181Mt ** 120+ Mt **

TABLE 2: Coal Targets(source: Pan AsiaCorporation).

Pan Asia is targetingresources of in excess of200MT by late CY 2012


21 November 2011

PEER GROUP COMPARISONRM Research has conducted an analysis ofcoal companies listed on the ASX. We havelooked at the enterprise value (EV = marketcapitalisation plus net debt position) for agroup of five companies and the ratio of eachone’s EV to total mineral resource tonnage,measured and indicated resource tonnageand ore reserve tonnage. The average EV:total mineral resource is A$1.26 per tonne(Figure 5).

Based on Pan Asia’s current mineralresource position of 75% of 115Mt and theapplication of the peer group average, ashare price target of A$0.92 per share isderived (Figure 6). Discounting this 50% forits current pre feasibility stage providesan interim target of A$0.46 per share.

The average EV: measured and indicatedresource is A$1.99 per tonne, reflecting thehigher confidence levels of the resource basecompared to inferred resources.

RM Research anticipates a relatively high proportion of measured and indicated resources inPan Asia’s total mineral resource after completion of a series of infill drill programmes andthis is reflected in its current status of 62% of total resource in measured and indicated.

The average EV: reserve is A$6.89 per tonne.

Even a modest ore reserve medium-termtarget of 25Mt, which would be sufficient tosupport an attributable production profile of1.5Mtpa to Pan Asia over a life of >15 years,would support an EV of more than A$170m.This is a factor of 17 times greater than thecurrent market value of the Company (Figure7).

FIGURE 5: ASX Listedpeer comparisons -EV/Total Resourcetonnes (source: RMResearch internalmodelling).

FIGURE 6: ASX Listedpeer comparisons -EV/Total Measured +Indicated Resourcetonnes (source: RMResearch internalmodelling).

FIGURE 7: ASX Listedpeer comparisons -EV/Total Ore Reservetonnes (source: RMResearch internalmodelling).


21 November 2011

DIRECTORS AND MANAGEMENT

Domenic Martino Non-Executive ChairmanMr Martino is a Chartered Accountant and a former CEO of Deloitte Touche Tohmatsu(Australia). He specializes in corporate finance including mergers and acquisitions, initialpublic offerings and strategic opportunities. He has assisted many high profile companies in adiversified number of industries and is currently a Director of Cokal Limited (ASX: CKA); aDirector of Resourcehouse Limited; Chairman of Synergy Plus Limited (ASX: SNR); aDirector of AIM listed Gladstone Pacific Nickel Ltd; Chairman of ORH Limited (ASX: ORH)a mining services company; Chairman of Australasian Resources Limited (ASX: ARH)currently developing a billion tonne iron ore resource in the Pilbara; and a Director of CleanGlobal Energy Ltd (ASX: CGV), an underground coal gasification company. Mr Martino wasa founding Director and former Chairman of coal bed methane companies Blue EnergyLimited and Sydney Gas Limited (acquired by AGL Energy Limited, with a marketcapitalisation of around A$6b).

Alan Hopkins Chief Executive OfficerMr Hopkins brings over 20 years' experience serving as CEO in resource companies withinternational operations. This includes extensive experience with start-ups and turnaroundsituations managing through phases of exceptional growth. His previous positions includeserving as a founding Australian Executive of international mining engineering group EdwardL Bateman Pty Ltd, CEO of Carnegie Corporation Ltd, CEO of Moonstone DiamondCorporation Ltd as well as CFO of Grants Patch Mining Ltd.

Honardy Boentario Non-Executive DirectorMr Boentario is a highly experienced Indonesian business with in excess of 25 yearsoperational experience in the coal industry. He has strong networks in the region and he iscurrently the President Director of ECI, an active Indonesian coal producer with significantadvanced coal exploration programmes. His other roles include serving as technical adviser tothe board of MHU a JVCO with Australian coal group New Hope.

Luke Martino Non-Executive Director

Luke has over 20 years experience at partner and board level with major accounting firms andis a Director of several private and public companies. Luke has an entrepreneurial passion fornurturing businesses and specialises in corporate and growth business consulting. He hasgained significant experience and established credibility in the mining & resources, propertyand hospitality industries. Luke is also a Director of the Indian Ocean Group, Director ofNuEnergy Capital Limited, a coal bed methane company operating in Indonesia as well asthe Company Secretary for Victory West Moly Limited and Blackgold InternationalHoldings Limited. He is the former Chairman of Konekt Ltd, a former Director of SouthPacific Resources, a Canadian publicly listed company with mining projects in the Republicof Indonesia and a former Board Member of the Deloitte Australian practice.

Michael Pixley Non-Executive DirectorMr. Pixley has worked as a merchant banker with over 20 years experience in Asia and hasextensive networks and relationships that provide the Group with access to key personnel inthe government, corporate and private business sectors. Mr. Pixley has been a Director ofboth listed and unlisted companies in Australia and the United States. In addition, in 1992 hejoined a prominent Asian group with both listed and private companies having extensivebusiness interested throughout Asia, United States of America and Australia.

Domenic was formerlyCEO of Deloitte ToucheTohmatsu (Australia)

Alan has extensiveexperience withnumerous publiccompanies including thehighly successfulCarnegie Corporation

Mr Boentario is a highlyexperienced Indonesianbusinessman

Luke’s experienceincludes otherIndonesian focussedcompanies such as NuEnergy

Michael has over 20years as a merchantbanker in Asia


21 November 2011

BULLS AND BEARS

The Bulls Say Substantial exploration upside from deep pipeline of projects located in known coal

accumulations.

Short lead time to positive cash flow generation due to the revenue from an existingmining operation and several projects that could be delivered into production within six totwelve months.

Access to existing transport and coal processing infrastructure facilitates rapid projectdevelopment and a quick return on investment.

The predominantly scrip based acquisition of Indonesian coal projects aligns the interestsof the project vendors and in-country partners with those of the existing shareholders.

Pan Asia possesses a Board of Directors and Senior Management team capable ofadvancing its suite of projects from exploration to development and mining operations.

The Company continues to review the acquisition of several other Indonesian projectsand, with a network of partners with vast operating experience in the region, possessesthe skills and capacity to commercialise these new opportunities.

The Bears Say

Indonesia has a history of being a difficult operating environment for foreign companies.Recent changes to the foreign investment rules and regulations have secured morerobust project tenure and more desirable monetary policies.

It is likely that Pan Asia will require more funding in the near term, so that it can injectcapital into the production and near-term development coal projects. This may causedilution to existing shareholders although RM Research anticipates that alternativefunding arrangements such as project partnering and prepayment financing similar to thedeal struck with Noble Resources may reduce the likelihood of future dilution.

Thermal coal is seen as a less attractive long term solution to the world’s energyrequirements due to its relatively large carbon footprint. RM Research believes thatdemand for thermal coal is unlikely to diminish in the medium term. This is due to theintroduction of new clean coal burning technology and the necessity for a gradual phaseout of coal fired power generation due to the limited supply of alternative energy fuelssuch as crude oil, uranium and natural gas and long lead time to production.

CONCLUSIONRM Research believes that Pan Asia is starting to derive value from its portfolio ofIndonesian coal projects that should be able to deliver rapid growth in mineral resourceinventory and output. The flagship TCM project is already showing signs of hosting asignificant mineral resource of high quality thermal coal. The final feasibility study should becomplete within 6 months and it is likely to show that healthy generation of operating cash flowwithin a relatively short time frame is possible.

Although not without sovereign, project execution and financing risk Pan Asia has negatedthis risk by entering into marketing, product offtake, pre-financing and technical allianceagreements with reputable companies. RM Research envisages substantial upside fromcurrent share price levels and accordingly rates the Company as a Speculative Buy.

Coal projects should deliversignificantresource growth


21 November 2011

Registered OfficesPerthL2, 6 Kings Park RoadWest Perth WA 6005

Phone: +61 8 9321 3277Fax: +61 8 9321 8399

PO Box 154West Perth WA 6872

Email / [email protected]. rmresearch.com.au

RM Research Recommendation CategoriesCare has been taken to define the level of risk to return associated with a particular company.Our recommendation ranking system is as follows:

Buy Companies with ‘Buy’ recommendations have been cash flow positive for some time and have a moderate tolow risk profile. We expect these to outperform the broader market.

Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of thebroader market. These companies also carry a higher than normal level of risk.

Hold A sound well managed company that may achieve market performance or less, perhaps due to anovervalued share price, broader sector issues, or internal challenges.

Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative tothe market and see better opportunities elsewhere.

Disclaimer / DisclosureThis report was produced by RM Research Pty Ltd, which is a Corporate Aurthorised Representative of RM Corporate Finance Pty Ltd (Licence no. 315235). RM Researchreceived payment for the compilation and distribution of this report. RM Research Pty Ltd has made every effort to ensure that the information and material contained in thisreport is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information andmaterial and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, RM Research Pty Ltd does not acceptany liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposesonly and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by RM Research carry no guaranteewith respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware thatthese risks might result in loss of income and capital invested. Neither RM Research nor any of its associates guarantees the repayment of capital.WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particularinvestor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this documentwithout obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financialsituation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any)before making any decision.DISCLOSURE: RM Research Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in theinvestments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, RM Research Pty Ltd may have,within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates,employees, representatives or Authorised Representatives of RM Research Pty Ltd and RM Capital Pty Ltd may hold shares in Pan Asia.

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Pan Asia Corporation Limited

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