PEABODY - POLO RESOURCES MONGOLIAN COAL OPERATIONS

In May 2009, Polo entered into a 50-50 joint venture for its assets in Mongolia with Peabody Energy Corporation (NYSE: BTU), the world's largest private-sector coal company, empowered to manage and develop the joint venture projects.

MONGOLIA BACKGROUND

Mongolia is a landlocked country bordered by Russia to the north and China to the east, south and west. With an area of more than 1.5 million square kilometres (world’s seventh largest country) and a population of approximately 2.4 million people, Mongolia has one of the lowest population densities in the world. The landscape has several geographic features, including forest mountain ranges to the north, desert and low mountain areas to the south, high mountain ranges to the west and vast plains to the east. The climate is continental with hot summers and cold winters.

Mongolia’s population is relatively homogenous in terms of ethnicity, language and religion. It is also a young country with more than 60% of the population below the age of 30. Approximately one third of the Mongolian population lives in the capital city of Ulaanbaatar with a large portion of the remainder living as nomads throughout the country.

Mongolia has a very long history and is often associated with its most famous leader, Genghis Khan, who ruled during the 13th century. In 1921, Mongolia fell under the influence of the Soviet empire, which dominated the politics and economy of the country until 1990 when the country’s transition to democracy and a free market economic system began.

The Mongolian Constitution adopted in 1992 established an elected legislature and a directly elected President. The Prime Minister is nominated by and serves on behalf of the majority party in the parliament. The Constitution enshrines the concepts of democracy, freedom of speech, and judicial independence, among others.

The first multiparty elections were held in July of 1990 at which the Mongolian People's Revolutionary Party (the "MPRP") became the dominant political party. The MPRP was victorious again in the July 1992 elections but lost to the Democratic Coalition in the elections of 1996. The MPRP regained power in 2000 and remain in power now.

MONGOLIA MINING LAW

Mongolia possesses one of the most progressive mineral regimes in Asia. Introduced in 1995 and modified in 1997 and 2006, the Minerals Law of Mongolia provides a transparent licensing system that has served to encourage investment in the sector. The Law clearly establishes the state as having primary control of its mineral resources, a central premise of modern minerals legislation throughout the world.

The law allows any Mongolian citizen, foreign citizen or legal person to hold any number of mineral exploration licenses of up to 400,000 hectares each. An exploration license holder is afforded the exclusive right to conduct exploration for minerals within the boundaries for nine years (three years initially plus two extensions of three years each), the exclusive right to obtain a mining license for any part of the exploration license, and the right to transfer or pledge any part of the exploration license.

Mining license holders have the right to engage in mining of minerals within the license area for twenty years (with the right to extend for an additional two terms of 20 years), the right to sell mineral products internationally, the right to transfer or pledge all or part of the license, and the exclusive right to conduct exploration for minerals within the license area. A mining license holder must pay royalties to the government equal to 2.5% of the sale value of products sold (with the exception of alluvial gold on which the royalty is 7.5%). The much talked about windfall tax (68% tax on portion above gold price of US$500) is under review but is offset by low company tax (10% on first US$3m profit and 25% flat rate on remainder) and low wages tax (10% flat rate tax).