POSCAN’s parent company, POSCO is based in Seoul, South Korea and is the world’s third-largest steel producer by market value with a current market capitalization of US$32.6 billion. POSCO had crude steel production of 33.7 million metric tons in 2010 and sales for the 12 months ended March 31, totaled US$62.2 billion. POSCO’s Gwangyang Works is the largest steel mill in the world, with capacity of 19.5 Mt. The company has investments and operations across the globe, including in Korea, China, Japan, India, Indonesia, United States, Australia, Canada, Brazil, Vietnam and Thailand. It continues to expand its global operations towards a goal of achieving a total crude steel production capacity of 50 Mt.

Pursuant to the agreement, POSCAN will acquire a 20 percent interest in Mount Klappan, and based on current capital cost estimates, is anticipated to make total payments and cash contributions of C$181 million, including C$30 million in upfront funding upon closing.

Highlights of the transaction include:

• Formation of a JV to be owned 80 percent by Fortune and 20 percent by POSCAN to accelerate development of Mount Klappan by combining Fortune’s local development and operations expertise and POSCAN’s market knowledge and financial backing;

• At closing, POSCAN will provide C$30 million in upfront funding to Fortune Coal, C$20 million of which Fortune Coal will contribute directly to the JV;

• POSCAN will provide funding for 20 percent of the total development and capital cost of the project, which under current estimates will equal a total contribution of C$154 million to the JV;

• POSCAN will provide C$17.2 million in additional payments to Fortune Coal based on future milestones;

• POSCAN will fund 20% of operating costs and receive 20% of the product produced from the Project; and,

Fortune will serve as manager of the JV and will be compensated, on a recovery basis, for providing operational, technical and administrative support over the life of the mine.

Mount Klappan is one of world’s largest undeveloped deposits of metallurgical coal with measured resources of 107.9 Mt, indicated resources of 123.0 Mt, inferred Resources of 359.5 Mt and speculative resources of 2.2 billion metric tons.

Fortune also demonstrated the project’s robust economics in a definitive feasibility study (November 2010) of the Lost Fox deposit with run-of-mine coal reserves of 106.3 Mt, representing only 3.6 percent of the total resources. Among other study conclusions:

• $1.03 billion pre-tax net present value (8 percent) and 25.4 percent internal rate of return from Lost Fox DFS at a base case price of US$175/metric ton of 10 percent ash ultra-low volatile pulverized coal injection product;

• 3 Mt per annum planned initial production rate;

• Expansion potential via the mining of additional resources in the Lost Fox deposit and the adjacent Hobbit Broach, Nass and Summit deposits;

• Canadian National Railway collaboration to extend railway infrastructure to the mine site, providing a scalable transportation solution to the port of Prince Rupert;

• Reduced shipping times to Asia by exporting the coal products through the port of Prince Rupert, positioning Mount Klappan as a key supplier to the overseas steel industry;

• Ability to use Ridley Terminals to load efficient Cape-size vessels for ocean transport, and potentially share cargos and blend with other western Canadian coal producers; and,

• Advanced-stage project with C86 million of work already competed.

“We are extremely proud that Mount Klappan has attracted a world-class organization like Posco as a major investor and strategic partner,” Fortune President and CEO Robin Goad. “This transaction will allow for accelerated development of the project and is anticipated to provide 100 percent of required funding to complete more detailed engineering and design studies as well as permitting and stakeholder consultations. It is anticipated that Fortune will not be required to contribute any further funding until permitting is complete and prior to the commencement of construction. Additionally, our post-transaction levered after-tax NPV (8 percent) of Fortune’s 80 percent share of Mount Klappan is estimated at C$601 million at a $175/t PCI price, and represents only a fraction of the total resource.” Yong Keun Kim, president of POSCAN, said his company was very pleased to invest in the Mount Klappan Project, which it sees as one of the world’s premier coal development projects and a future key supplier of premium coal products to the global steel industry. “This transaction expands our presence in North America, which already includes investments in the Mount Hope Molybdenum Project and Elk Valley Coal,” Kim said.

Mount Klappan consists of coal exploration licenses 15,866 hectares (61.26 square miles) in northwest British Columbia. The property is located 150 kilometers (93 miles) northeast of the port of Stewart and 330 kilometers (207 miles) northeast of the port of Prince Rupert. The licenses straddle the BC Railway right-of-way and its partially constructed roadbed, 150 kilometers (93 miles) north of the current terminus of track at Minaret where CN is operating under a long-term lease. The 2010 DFS by Marston & Marston Inc. is based on an open pit mine and wash plant producing 3 Mt of PCI product per annum for the overseas steel industry with the ability to diversify production into other metallurgical coal products. The cost of upgrading and extending the railway infrastructure is included in the DFS.

Anthracite is a premium coal with the highest carbon and energy content of all coals, which together with other unique properties, allows for versatile usage in a number of important metallurgical, chemical, manufacturing, agriculture and thermal applications. The very low volatile (gas) content of anthracite makes it ideal for PCI, allowing for high injection rates to minimize consumption of coke and improve efficiency in steel manufacturing, and also for pelletizing and sintering in the steel industry. Coarse anthracite is used as a blend coal to replace coke, and also with hard coking coal to make metallurgical coke. Anthracite reductants are used in ferro-chrome, titanium and aluminum processing, and as charge carbon in electric-arc steel manufacturing. Anthracite is also gasified to make urea fertilizers used for agriculture and other chemicals. Carbon filters for water purification and carbon composite materials are commonly made from anthracite coal. Thermal uses include fuels for space heating, cooking and heating briquettes, kiln fuels to make cement and lime, and in thermal power plants to generate electricity. The rising cost of oil is making gasification and coal-to-oil liquefaction economically attractive to make synthetic fuels.

World annual production of anthracite is about 565 Mt. China produces some 85 percent of the world’s supply, but has been a net importer since 2004. Vietnam, the world’s second largest producer with 43 Mt of annual production, is curtailing exports in order to preserve its remaining reserves for its own domestic steel and energy requirements. Diminishing world supplies of metallurgical coals, combined with continued growth in the global steel industry, has contributed to a shortage of high quality metallurgical coals resulting in strong prices that are expected to prevail for the foreseeable future.

As part of the agreement, the JV partners have approved a program and budget focused on rapidly advancing Mount Klappan to production. The initial budget will focus on engaging with communities and building stakeholder support for the project, securing permits, and conducting more detailed engineering to support permitting and mine planning. POSCAN’s upfront contribution is expected to fund 100 percent of activities through to completion of permitting.

The funding required to construct the Lost Fox Mine and railway infrastructure is estimated at C$768 million, which would result in POSCAN’s total contribution to the JV being C$154 million, or 20 percent, and Fortune’s contribution being C$614 million, or 80 percent. Based on a financing scenario of 70 percent debt and 30 percent equity, Fortune’s equity requirement is anticipated to be C$184 million over the life of the construction phase, of which C$80 million is to be arranged by Dec. 31, 2015. Fortune plans to concurrently advance Mount Klappan and continue discussions with potential debt and equity providers, with the aim of announcing a fully financed, permitted project at the conclusion of its currently planned programs.

The JV parties plan to consider expansion options – expected either through increased production at Lost Fox or development of other Mount Klappan deposits – in due course. Fortune anticipates its proportionate share of funds for such expansions would be funded from Project cash flows.