Energy Earth PCL : SEC warns investors to be cautious when using EARTH's disclosed information on the fair values of two coal mines in Indonesia

No. 77/2019

SEC warns investors to be cautious when using EARTH's disclosed information on the fair values of two coal mines in Indonesia

Bangkok, 27 June 2019 - This is in reference to the SEC Office's order imposed by virtue of Section 58(1) of the Securities and Exchange Act, for Energy Earth Public Company Limited (EARTH) to clarify and disclose information in the following matters: (1) the true existence and legal rights on the coal mines, and (2) the report on the re-assessment results of the fair values of the mining property rights over two coal mines in Indonesia, which EARTH had acquired from exchange of the company group's assets at an approximate value of 24 billion baht. In this regard, EARTH failed to proceed in material matters and the SEC had called for clarifications several times.* Later, EARTH hired two more Indonesian appraisers and disclosed the appropriate values of both coal mines at approximately

25.1 billion baht and 29 billion baht.

According to the investigation, the planner for EARTH at the time of the SEC order (EY Corporate Advisory Services Limited (EY)) had prepared and submitted the reports in accordance with the abovementioned order to EARTH. Part of the material matters in the reports involved: (1) the mining property rights in the coal mines where EARTH had Indonesian persons hold its shares on EARTH's behalf. In this regard, the legal advisor viewed that the agreement of proxy shareholding should have been voided because such action was not allowed by Indonesian Law, and (2) the fair values of both mines as cited in the assessment report was approximately 1.5 billion baht, considering that the sites were greenfield located in the jungle with transportation limitations, and thus requiring a large sum of capital. Moreover, the assessment report contained information on the value assessment of another mine that EARTH had acquired in 2015 at the price of 3.69 billion baht. Taking into consideration the investment value factor, the appraiser viewed that there was no economic value and gave zero fair value to the mine.

The two assessment reports from which EARTH had disclosed the fair values to replace the report produced by the hired EY included the value of coal not represented in the estimate amount of coal to be produced during the concession period in the mining property rights of EARTH. Besides, the reasonableness of the value assessment based on the hypothesis that the two mines could be operated

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