The coal reserves reported herein are typically high-volatile bituminous coals with the exception of the Kittanning A, B, C, D and Eagle horizons, which exhibit some mid-volatile characteristics. The primary coal-bearing formations on these properties are Carboniferous in age, being in the Pennsylvanian system, which includes the base of the Conemaugh Formation; the Allegheny Formation; the Kanawha Formation; and the New River Formation. The average mineable seam thickness for coal horizons in these formations ranges from 2.5 to 6.0 feet, with the exception of the Peerless seam at Leaseco where the minimum is 2.25 feet. Within the subject properties coal zones can locally exceed 9.8 feet where individual coal beds merge to form a single mineable unit. Structurally, the strata on the subject Property exhibit a regional northeast southwest strike and a regional northwestward dip of approximately one to four percent, averaging about three percent and are flat-lying. The seams are generally continuous and non-complex but may vary in thickness and even locally be absent. Furthermore, the seams are unaffected by tectonic deformation.

The Gauley Eagle underground mine also employs the room-and-pillar mining method to produce a semi-soft coking coal, which can be used in the steelmaking process or as a premium low-sulfur thermal coal.

Surface mine operations will continue to be conducted with a mobile equipment spread that uncovers coal from contour and point removal reserve areas. Surface mine production from selected coal seam splits is expected to be of satisfactory quality to allow direct shipment from the mining pits to customers. The effective recovery assigned to the surface mines is approximately 75 percent.

Major equipment includes a Hitachi Model 1900 hydraulic excavator (16-cubic yard capacity), three Caterpillar Model 777D off-highway trucks (100-ton capacity), two Drilltek Model 50-series overburden drills, and two Caterpillar D11R tractors.

Surface production totals 9.3 million tons at an average overburden to coal ratio of 12.6. Underground mining operations at Leaseco began with the development of the King Coal No. 1 Mine (Silo Mains Mine) in April 2006 with a contract mine operator.

The mines are expected to be developed with continuous miners using the room and pillar mining method. Recovery of coal pillars is not anticipated. If attempted, pillar recovery is expected to result in little, if any, change in productivity but may contribute to higher resource recovery and lower operating cost resulting from lower roof support cost. Principal prod ........

- subscription is required.