Page 1 Copyright © 2012 RM Research Please refer to important disclosures located at end of this report.

Corporate Restructure...Focus on TCM Pan Asia has recently restructured its projects to focus on its 75% controlled TCM

Coal Project. This is highly justified by recent exploration success that highlights the continuity of the coal seams contiguously to the north of the expanding coal resource at TCM.

The restructure freed up A$2.6 million in cash that was previously loaned to Ranrich Investments Limited allowing Pan Asia to dedicate cash and management resources to advancing the TCM Project to completion of Feasibility Study.

As part of this, Pan Asia exchanged its right to earn a 50% interest in the BCKP Project for a royalty of US$1 per tonne on all coal sold from the permit, limited to a total of US$15 million. This could represent an important source of future funding for the Company as it progresses its goal to be a major supplier of key resources into the expanding Asian markets.

Resource Inventory Growing

The TCM Project (which has also recently been granted “Clean & Clear” status by the Ministry of Mines and Energy) currently contains 128.8 million JORC tonnes of measured, indicated and inferred resources of high calorific value thermal coal. Significantly, the TCM Project has 50.3 million tonnes in the Measured category and another 38.1Mt in Indicated. The Feasibility Study is now advanced with detailed geotechnical assessment, coal seam gas analysis, civil engineering, mine scheduling, and capital and operating cost estimations close to finalisation.

Coal industry participant PT Kopex Mining Contractors (KMC) is conducting the Feasibility Study based on annual coal production of 1.5 million tpa from TCM. Stage 3 drilling, which consisted of 4 boreholes, not only highlighted the continuation of the coal seams but identified that the major coal seams (SU and SM seams) were nearer to surface than expected and that the parting between the seams was narrowing to the north. These are significant findings that have the potential to enhance project economics.

Thermal Coal Outlook Robust The outlook for thermal coal in the South East Asia/China region continues to be

very robust. Due to its proximity to the developing nations in Asia, Indonesia has a freight advantage over the Australian export market. This ensures that demand for the product remains strong, as long as coal quality is acceptable. TCM Project coal quality analysis thus far suggests that product will be highly sought after.

Price Catalyst

Completion of Feasibility Study at TCM-late June 2012.

Action and Recommendation

Speculative Buy. RM Research believes that Pan Asia’s flagship TCM Project has significant potential to increase resources and we have a price target of 81 cents based on peer analysis. The latest positive news from drilling to the north of the mineral resource suggests further growth in the scale of the project.

Pro-Forma Capital Structure

Sector Materials

Share Price (A$) 0.145

Fully Paid Ordinary Shares (m) 117.6

Opt (ex $0.20-$1.00, exp 12-15) (m) 17.2

Market Capitalisation (dil) (A$m) 17.1

Cash (A$m) 2.8

Directors & Management

Domenic Martino Non Exec Chairman

Alan Hopkins Chief Executive Officer

Luke Martino Non Exec Director

Michael Pixley Non Exec Director

Major Shareholders

HSBC Cust Noms (Aust) Ltd 5.5%

LJM Enterprises (WA) Pty Ltd 4.2%

Analyst

Guy Le Page +61 8 9488 0800

Share Price Performance

21 May 2012

ASX Code PZC

Speculative Buy Price target: 81 cents

Pan Asia Corporation Limited

Focus zeroes in on emerging TCM Project

Page 2 Copyright © 2012 RM Research Please refer to important disclosures located at end of this report.

21 May 2012

Immediately adjacent to PT Arutmin ATA mine

High calorific value thermal coal

6,200 kcal / kg (AR)

128Mt of JORC measured, indicated & inferred resource, with significant potential to increase target (target 200Mt+)

Haul road in (51kms to Batulicin

Barge Loading Terminal)

COMPANY BACKGROUND Pan Asia Corporation (“Pan Asia” or “the Company”) is an emerging supplier of energy resources into expanding Asian markets.

The Company’s strategy is to target mid-tier projects that it can add significant value to.

This involves Pan Asia undertaking drilling programmes to prospective areas to generate significant JORC tonnages. It then completes Feasibility Studies and ensures all titles/ approvals are obtained, so that the project is made ready for development partnerships/ offtake agreements.

INDONESIA – THERMAL COAL Pan Asia’s focus is on thermal coal in Kalimantan, Indonesia.

Its coal interests include:

1) A flagship pre development project (TCM – South). 2) High priority exploration (TCM North). 3) A pipeline of significant project opportunities.

Our view has always been that the jewel in the crown of the asset portfolio purchased from Innovation West was the pre-development project, TCM, which is now the main focus for management of the Company.

From seafood scraps to coal developer...

...with a focus on Indonesia

Portfolio has been refined to enhance quality and ensure alignment of interests

FIGURE 1: Indonesian Projects (source: Pan Asia Limited)

Project portfolio consists of producing mines, near –term developments and exploration assets

Energy for Asia

...with a focus on Indonesia

FIGURE 1: Indonesia –Kalimantan: #1 Thermal coal exporting region in the world (Pan Asia Corporation Limited)

Our view is still that TCM is the jewel in the crown

FIGURE 2: PT Arutmin ATA coal mine adjacent to TCM deposit (Source: Pan Asia Corporation Limited, ASX Presentation (28/03/2012)

PT Arutmin ATA coal mine adjacent to TCM

Close to Asian Markets

TCM: 75% interest (25% Local Partners) (3,440Ha)

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21 May 2012

TCM PROJECT

A Production and Operation IUP (licence) was granted for TCM in June 2010. This licence facilitates the commercial extraction of coal from the 3,440 hectare project area for a period of 15 years (renewable). This issuance of this license has allowed the Company to advance planning and discussions on commencing mining at TCM. A “clear and clean” status has already been granted by the Ministry of Mining and Energy Resources (9/5/2012) which means that the IUP does not overlap on any other concessions.

PT Kopex Mining Contractors (KOPEX) is nearing finalization of a full Feasibility Study into commencing underground operations at TCM, with a view to produce 1.5mtpa for at least 15 years.

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

A maiden resource statement for TCM was released in May 2010, with an indicated JORC-compliant resource of 19.7Mt with an additional 11.0Mt in inferred category. The phase 2 drilling programme resulted in the resource increasing to 53.2 million tonnes in total (a 73% increase), with 22.2Mt in Indicated category and the remaining 30.8Mt in Inferred category. This re-estimated resource resulted in a small decrease in coal quality with average calorific value of 6,566 kcal/kg (ADB) versus 6,682 previously; ash content rising from 12.09% to 13.52%; total moisture increasing from 4.64% to 6.41%; but sulphur content decreasing from 1.83% to 1.52%.

In October 2011 an additional 18 boreholes, bringing the total to 35, resulted in a further 115% increase in Resource to a total of 114.6Mt. Enhanced understanding of the complexity of the TCM deposit achieved through the current drill programme facilitated a maiden Measured Resource of 35.6Mt, as well as a 57% increase in Indicated Resource to 35.1Mt and a 42% increased in Inferred Resource to 43.9Mt.

In May 2012 a further 20 boreholes were added to the database, 4 of which were contiguous and to the north of the previous resource boundary. This resulted in a 12% increase in Total Mineral Resource to 128.8Mt, including a substantial lift in Measured Resource of 41% to 50.3Mt.

Equally, if not more, significant was that the 4 boreholes drilled to the north identified that the coal seams targeted for underground exploitation are shallower than expected and the parting between the coal seams narrows.

Further drilling is ongoing with another 6 to 10 boreholes now being drilled in a stage-4 drill programme testing the northern continuity of the coal seams. RM Research anticipates further encouraging exploration results to flow through to increased mineral resources. This should sustain a long-life coal mining operation that should underpin Pan Asia’s push into the ranks of coal production companies listed on the ASX.

Feasibility Study

Pan Asia, through its major contractor KOPEX, is close to finalizing the Feasibility Study on commencing underground mining at TCM.

Golder Rock Mechanics Technology, a subsidiary of Golder Associates, has concluded a detailed geotechnical study that has resulted in recommendations on underground mine design parameters. This study made conclusions on roadway design, panel and pillar widths and type and frequency of rock support which in turn will be inputs for KOPEX to derive operating cost estimates.

CRL Energy, a reputable New Zealand based research and consulting company, has issued a final Coal Seam Gas Content and Composition Analysis” report. It concluded that the methane levels in the coal seam gas extracted from samples were rated as “low to medium”. This has allowed KOPEX to design ventilation and gas drainage systems for the proposed underground mine.

The IUP facilitates commercial coal extraction for 15 years

Quality of coal from TCM

Measured resources increased by 41% to 50.3 Mt

Current JORC Resource is 128Mt

JORC now: Measured 50Mt Indicated 38Mt Inferred 40Mt TOTAL 128Mt

...Near completion

Methane levels in the coal seam have been rated as low to medium

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21 May 2012

A detailed civil engineering site survey has been conducted over the TCM license area. This has facilitated selection of localities for the coal handling and preparation plant, stockpiles and waste dumps, drainage, roads, offices, accommodation village and other necessary infrastructure.

All initial capital and operating cost estimates have already been received and reviewed. It is anticipated that start-up capital and pre-production costs will be in the region of US$190m.

A detailed life of mine (LOM) schedule and mine design is very close to being finalized. It is RM Research’s opinion that the recent positive borehole results outlining a northern extension of coal seams at shallower levels means that this design and schedule will require re-optimisation. Although this will undoubtedly cause some delay to project start-up it is likely to result in enhanced project economics.

Production Pipeline

RM Research forecast that Pan Asia will be entering the coal producer ranks within the next 12-24 months. We anticipate production from TCM of at least 1.5 million tonnes per annum, with the potential to expand output further by leveraging off the knowledge and experience of underground coal extraction garnered from the TCM experience and its relationship with KOPEX. To support this production profile, it will be necessary to raise significant amounts of additional funds for capital expenditure and pre-production costs. Alternative funding initiatives such as attracting mining and logistics experts and potential customers may assist in reducing future shareholder dilution.

The Company is targeting the delineation of a resource in excess of 200 million tonnes by December 2012, which will result in attributable resources for Pan Asia of more than 150 million tonnes.

We note that the production and resource targets outlined by Pan Asia are becoming less dependent on exploration success. We maintain our view that the achievement of these goals would provide enormous upside to the Company’s valuation. Indicatively, a Company with a thermal coal production profile of at least 1.5 million tonnes per annum and a resource base of over 150 million tonnes, should command a market capitalisation of several hundred million dollars.

ESTIMATED OF VALUE & PEER GROUP COMPARISON RM Research has conducted an analysis of coal companies listed on the ASX. Based on the closing share prices of 10 May 2012, we have looked at the enterprise value (EV = market capitalisation plus net debt position) for a group of four companies and the ratio of each one’s EV to total mineral resource tonnage, measured and indicated resource tonnage and ore reserve tonnage. The average EV: total

mineral resource is $0.93 per tonne.

Based on Pan Asia’s current mineral resource position of 75% of 129Mt and the application of the peer group average, a share price target of $0.81 per share is derived.

The average EV: measured and indicated resource among the same peer group is $1.60 per tonne, reflecting the higher confidence levels of the resource base compared to inferred resources.

Initial pre-production CAPEX has come in at approximately US$190 million

We are projecting sellable coal at a rate of 1.5 M tonnes per month, over a mine life of 15years +

RM Research are projecting attributable resources to Pan Asia in excess of 150Mt by late 2012

FIGURE 4: ASX Listed peer comparisons - EV/Total Resource tonnes (source: RM Research internal modelling).

RM Research is projecting a near term price target of 81 cents

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21 May 2012

0.00 5.00 10.00 15.00 20.00

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Pan Asia is starting to validate the faith that RM Research had in a high level of conversion to measured and indicated resources in Pan Asia’s total mineral resource after completion of a series of infill drill programmes and this is reflected in its current status of 69% of total resource in measured and indicated.

The average EV: reserve is A$9.90 per tonne.

Even a modest ore reserve medium-term target of 25Mt, which would be sufficient to support an attributable production profile of 1.5Mtpa to Pan Asia over a life of >15 years, would support an EV of more than A$165m. This is a factor of around 10 times greater than the current market value of the Company.

COAL MARKET OUTLOOK We have lowered our estimates for Thermal Coal over 2H 2012 on the back of forecast oversupply in global markets. Moving in to 2013 however, rising production costs in the United States and China are likely to partly offset supply increases.

Coal prices ex Indonesia are likely to come in around between US$100-US$107 per

tonne from recent prices approaching US$120/tonne (Figure 7).

In the face of weak demand, Trading volumes have also been relatively low in recent months mostly due to oversupply from Colombian, U.S., South African and Russian exporters. Coal demand in Europe in particular remains flat with increasing supplies being pushed into the Pacific coal market in turn generating regional oversupply.

Again moving into 2013 we see improving supply – demand balances with rising US and Chinese costs likely to put a floor on Thermal Coal prices around US$90/tonne. We also see potential for supply disruption with rising costs likely to see a number of shutdowns in China and US.

September-December Quarter prices are likely to fall in the region of US$95/tonne from recent levels around US$102.40. In CY 2013 RM Research considers prices will move towards US$110/tonne. In the face of softening Chinese internal demand, we anticipate that Indian imports will surpass China by 2H 2012. The increased projected import tonnages are also in response to severe domestic coal shortages.

FIGURE 5: ASX Listed peer comparisons - EV/Total Measured + Indicated Resource tonnes (source: RM Research internal modelling).

FIGURE 6: ASX Listed peer comparisons - EV/Total Ore Reserve tonnes (source: RM Research internal modelling).

FIGURE 7: Asian Coal Prices (source: Platts, Bloomberg, Citi Research & Analysis, 9 May 2012).

Thermal coal prices are projected to fall to a low of around US$95 this year before rising to US$110/tonne in CY 2013

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21 May 2012

CORPORATE The last major corporate event was the restructure of the Memorandum of Understanding with Ranrich Investments Limited (“RIL”) (29/2/2012) in respect to the BCKP IUP project. The parties agreed to acquire the interests of PZC in exchange for US4.50 million and a royalty of US$1.00 per tonne up to US$15 million. RIL representative Honardy Boentario also agreed to step down from the board on 7/3/2012. RIL are also to deliver approximately 220,000 tonnes of coal to PZC’s designated buyer. By way of background, RIL and PZC subsidiary Innovation West Pty Ltd (IW), entered into an MOU in 2010 for the financing of and investment in various coal projects. The repayment of the finance was based on RRI making contracted coal shipments to a designated buyer arranged by IW. Since entering into the original financing arrangement, RRI has struggled to provide the scheduled coal deliveries and as a result, PZC then restructured this and had the principal monies outstanding under the contract repaid.

DIRECTORS AND MANAGEMENT Domenic Martino NON EXECUTIVE CHAIRMAN

Mr Martino is a Chartered Accountant and a former CEO of Deloitte Touche Tohmatsu (Australia). He specializes in corporate finance including mergers and acquisitions, initial public offerings and strategic opportunities. He has assisted many high profile companies in a diversified number of industries and is currently Chairman of Synergy Plus Limited (ASX: SNR); a Director 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 Clean Global Energy Ltd (ASX: CGV), an underground coal gasification company. Mr Martino was a founding Director and former Chairman of coal bed methane companies Blue Energy Limited and Sydney Gas Limited (acquired by AGL Energy Limited, one of Australia’s major integrated companies with a market capitalisation of around A$6 billion).

Alan Hopkins CHIEF EXECUTIVE OFFICER Mr Hopkins brings over 20 years' experience serving as CEO in resource companies with international operations. This includes extensive experience with start-ups and turnaround situations managing through phases of exceptional growth. His previous positions include serving as a founding Australian Executive of international mining engineering group Edward L Bateman Pty Ltd, CEO of Carnegie Corporation Ltd, CEO of Moonstone Diamond Corporation Ltd as well as CFO of Grants Patch Mining Ltd.

Luke Martino NON EXECUTIVE DIRECTOR

Luke has over 20 years experience at partner and board level with major accounting firms and is a Director of several private and public companies. He has gained significant experience and established credibility in the mining & resources, property and hospitality industries. Luke is the Company Secretary of Victory West Moly Limited, and Sunbird Resources Limited. Luke is also a director of Westzone Enterprises Pty Ltd a property development company that recently completed a A$100 million shopping centre. He is the former Chairman of Konekt Ltd, former director of NuEnergy Limited and a former Director of South Pacific Resources Corporation, a Canadian publicly listed company with mining projects in the Republic of Indonesia. He is also a former Board Member of the Deloitte Australian practice. Luke holds a Bachelor of Commerce (UWA), is a fellow of the Institute of Chartered Accountants, a Member of the Australian Society of Certified Practicing Accountants and a Member of the Institute of Company Directors.

Michael Pixley NON EXECUTIVE DIRECTOR

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

The sale of PZC’s interest in the BCKP IUP has freed up US$4.50 million in cash and allowed the Company to focus on TCM

Domenic was formerly CEO of Deloitte Touche Tohmatsu

Alan has over 20 years experience including a period as CEO of Carnegie Corporation

Luke has extensive experience in mining, energy, property and hospitality

Extensive experience as a director of both listed and unlisted companies in Australia and US

Page 7 Copyright © 2012 RM Research Please refer to important disclosures located at end of this report.

21 May 2012

RISK ANALYSIS Sole Project Focus: PZC is very much focussed on TCM however RM Research

believes exploration conducted on this high-quality coal project provides plenty of exploration upside.

Exploration Risk: Follow up exploration at TCM may fail to outline commercially viable coal deposits on the project area. We believe this risk is very low at this stage.

Financial Position: The Company has limited cash reserves (around A$2.80 million) which may necessitate an equity raising within the next three to six months. It is likely that Pan Asia will require more funding in the near term, so that it can inject capital into the development of the TCM coal project. This may cause dilution to existing shareholders although RM Research anticipates that alternative funding arrangements such as project partnering and prepayment financing may reduce the likelihood of future dilution.

Commodity Risk: Thermal coal is seen as a less attractive long term solution to the world’s energy requirements due to its relatively large carbon footprint. RM Research believes that demand for thermal coal is unlikely to diminish in the medium term. This is due to the introduction of new clean coal burning technology and the necessity for a gradual phase out of coal fired power generation due to the limited supply of alternative energy fuels such as crude oil, uranium and natural gas and long lead time to production.

Market Risks: Further declines in equity markets may continue to put pressure on junior resource companies as investors switch out of “risk” into perceived safe haven investments such as cash, gold and counter cyclical equities. Our medium term view is that the risk premium has been eroded for many junior resource companies and we see near term upside.

Currency Risks: A strengthening Australian dollar (as funds flow back into riskier currencies) may make the price of copper and gold in local (Australian) currency terms less attractive. This could have negative influences on Australian copper miners however it is more relevant to producing companies.

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

Coal Quality: The quality of coal delivered is critical to maintaining healthy operating margins. The quality of the TCM Project’s thermal coal product is relatively high with good calorific values >6,500 kCal/kg on a air dried basis.

Infrastructure Risks: The transportation of coal to suitable loading facilities is critical and any delays could place financial pressure on the Company. We believe however that access to existing transport and coal processing infrastructure facilitates appears favourable for rapid project development and a quick return on investment.

CONCLUSION RM Research believes that Pan Asia is starting to derive value from its flagship TCM Project in Indonesia. The final feasibility study is due to be completed during the current quarter, although we are anticipating a re-optimisation after the recent excellent exploration results to the north of the current mineral resource.

Although not without sovereign, project execution and financing risk Pan Asia has negated this risk by engaging highly reputable and experience technical, marketing and financing partners/advisers. RM Research envisages substantial upside from current share price levels and accordingly rates the Company as a Speculative Buy with a near term price target of 81 cents.

Pan Asia is highly leveraged to the performance of TCM

The Company has limited cash reserves and may require additional capital in the short term

Recent market trends have seen a switch out of risk assets

Indonesia has proved a challenging investment and operating environment

The project is well placed adjacent to existing roads/coal processing infrastructure

Page 8 Copyright © 2012 RM Research Please refer to important disclosures located at end of this report.

21 May 2012

Registered Offices

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PO Box 154 West Perth WA 6872

Email / Website info@rmresearch.com.au www. rmresearch.com.au

RM Research Recommendation Categories Care 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 to low 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 the broader 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 an overvalued 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 to the market and see better opportunities elsewhere.

Disclaimer / Disclosure This report was produced by RM Research Pty Ltd, which is a Corporate Aurthorised Representative of RM Capital Pty Ltd (Licence no. 221938). RM Research received 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 this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material 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 accept any 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 purposes only 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 guarantee with 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 that these 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 particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation 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 the investments 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.