Dear sirs,

We would like to inform you that currently the Administration of the Magadan region carries out preparatory measures for the tendering process of brown coal deposit exploitation. There will be the tendering process of deposits` commercial development (Lankovskoe, Melkovodninskoe) in 4th quarter of 2006.

The total resource potential of deposit is about 2,8 billion ton. According to the Russian coal classification the technological rank of coal is referred to B1. According to the US classification it is “lignite” A”. According to the International classification (1975): the deposit of Lankovskoe: 1310; the deposit of Melkovodninskoe: 1410. New international classification is – Lankovskoe: 02-580-101080-XX03120, Melkovodninskoe: XX-6XX-101080-XXXX125.

Due to the coal composition this coal is of considerable value as feed stock for industrial processing. High moisture, humic acid saturation throughoutly (57%), low ash percentage, very high conversion level (liquefaction) above 90% - are the attribute of the coal.

Being highly-technological, the coal is simply subjected for making briquettes without using stickers. It can be effectively gasified, subjected to a thermal decomposition and hydrogenation, extracting and activation.

Brown coal deposit development and coal-processing plant construction requires financial expenditures equal to about 200 million US dollars. A pay-back period of expenditures will take 2 years. An estimated annual gross profit will be 500 million US dollars. The figures have been brought out on the basis of calculations made by the Moscow Institute for combustible fossils, providing a simple processing of the coal into an engine fuel.

One ton of the coal is equal to: 350 kg of fuel synthetic oil; about 1500 m3 of power gas; 550 kg briquettes of coal; about 70 kg of bitumen; 270 kg of humic acid.

The Magadan economic area regulations give significant preference to companies, dealing their business in Magadan region. Enterprises registered in the Magadan economic area, and investing in a realization of investments` projects, have a right of getting tax remissions and get exempted from customs when importing and exporting international goods. Foreign goods are imported in preferential conditions. Customs duty and other duties are not charged when the goods are removed outside of Russia which fully produced or exposed to sufficient processing.

The Administration of the Magadan region actively cooperates with investors and accompanies projects at regional and federal levels. This project is under the control of the governor Nikolai Dudov.

The Administration of the Magadan region is planning to hold a meeting in July-August of 2006 in Magadan, where the problems of brown coal deposit exploitation will be discussed.

Do not hesitate to contact us, if you have any questions.

Best regards,

Grebenyuk Sergei,
The head of the Administration of the Magadan special economic area
in Magadan region
Ponomarenko Ivan Ivanovich
The chief of the external economic relations department
The person in charge
Ph.: (41322)2-66-21, 2-32-17,
Fax: (41322) 2-32-17,