Solvency
The solvency of the Company is the Companys ability to fulfill its short-term and long-term liabilities as reflected
by dividing total liabilities and the capital and also by dividing between total liabilities and total assets.
The ratio between the Companys total liabilities and total assets as of June 30, 2011 was 0.38x and as of December 31,
2010, 2009 and 2008 were 0.49x, 0.84x, 0.81x, respectively. While the ratio between total liabilities and equity as of
June 30, 2011 was 0.62x and as of December 31, 2010, 2009 and 2008 were 0.96x, 5.46x and 4.39x, respectively. The trend of
increasing equity solvency was primarily due to increase in net income and an increase in the Company’s paid capital in
current year.
6. Capital Expenditure
Historically, purchase of capital goods was done by utilizing the capital, internal cash and loans to related parties. By
considering significant increase in production volumes in the future, the Company realizes that a large number of funds are
required. Therefore, the Company intends to conduct Initial Public Offering, where most of the proceeds from the Public
Offering will be used the purchase the capital goods.
In purchasing capital goods in foreign currency, the Company uses natural hedge, considering that the Company has a more or
less balanced net open position in foreign currency. The Company therefore does not hedge the transaction for the
purchase of capital goods in foreign currency. To get new reserves and to support the significant increased
volume of production in the future, the Company has engaged in exploration
and development
and purchased
fixed assets
aggressively. The fixed assets purchases that have been conducted among others are port constructions, base camp,
infrastructure and mining machineries and equipments. From these aggressive exploration and development activities,
the Company has obtained new reserves in a significant amount. Based
on the
Independent Technical
Report of
PT SMG
Consultants on February 2011 and March 2011 and of PT Danmar Explorindo on February 2011, in accordance with the JORC
standard methodology, the Company and its subsidiaries have coal resources for more than 1.93 billion tons of thermal
coal, with approximately 849 million tons of coal reserves. Meanwhile, with the purchase of fixed assets, the Company has
prepared some facilities and infrastructures required to support increased production. Purchase of capital goods in the
future is needed to support further increase in the Company’s production volume significantly.
