Risk of illegal mining Risk associated with the local population in mining areas
residents and work accidents. These issues may cause protests which can disrupt business activities of the Company and its
subsidiaries. Failure to resolve the problems of local residents can cause negative impacts on financial condition,
results of operations and business prospects of the Company.
6. Risk of negligence to comply with applicable legislation in forestry and environmental sectors
Coal contains a variety of chemical elements, including sulfur, mercury, chlorine and other compounds, most of which
are released into the air during combustion. More stringent regulations in environment sector related to the emissions
from the power plant using coal fuel and other coal user industries, may increase the cost of using coal. This can
reduce the demand for coal as an energy source and cause negative impacts on coal sales volume and prices of the
Company and its subsidiaries, which in turn can negatively impact financial condition, results of operations and business
prospects of the Company. Indonesia and more than 16 other countries have signed
the United Nations Framework Convention on Climate Chance “UNFCC” in 1992 which had the purpose to limit or restrain
emissions of greenhouse gases like carbon dioxide. On December 1997, in Kyoto, Japan, the UNFCC signatories set the emission
target which was binding some developed countries the Kyoto
Protocol. The Kyoto Protocol was coming into force on February 16, 2005. Specific emissions targets may differ from
one country to another. The implementation of the Kyoto Protocol
or the
implementation of
other comprehensive
regulations focusing on greenhouse gas emissions, may lead to restrictions on the use of coal in the key markets of the
Company. Other efforts to reduce greenhouse gas emissions and initiatives from various countries to further promote use of
gas can also affect the use of coal as an energy source, which will ultimately have a negative impact on the financial
condition, results of operations and business prospects of the Company.
The Companys mining operations through its subsidiaries that include the use of water, OB disposal, waste drain
construction, coal stockpiling, OB stockpiling, and top soil and exhaust emissions from coal crushing and screening plant,
can cause negative impacts on the environment. The Company through its related subsidiaries has to comply with rules and
legislations in Indonesia and in specific region regarding safety, health and the environment. These regulations among
other things concern air and water pollution, waste disposal, cleaning mine area, quality and availability of groundwater,
protection of flora and fauna, and land reclamation after mining activities is completed. Costs associated with the
fulfillment of obligations in the environment sector will
increase operating costs and affect competitiveness of the Company and its subsidiaries. In addition, any violation,
liabilities occur or changes in legislation in the environment sector can cause huge costs and penalties for related
subsidiaries. Permits to conduct mining operations will be suspended if it is proved of serious mistake or permanent
damage to the environment. The impact of mining activities on the environment may be
greater than what had been anticipated earlier so that was why violation to applicable rules and legislations occurs. Any
material increased in environment compliance and recovery costs as a result of quite large environmental damage, could
adversely affect
the financial
condition, results
of operations and business prospects of the Company.