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.

7. Risk of labor actions and demonstration

The Company depends directly and indirectly on the work force with low costs. National and regional inflation affecting the rate of salarywages, will directly and indirectly increase the Companys operation costs so that it can reduce the value of salarywages. Labor activities and protests that occurred in Indonesia could disrupt operation activities of the Company, performance of suppliers or contractors and could adversely affect the financial condition of Indonesian companies in general, decrease stock prices at Indonesia Stock Exchange or other Stock Exchange and also suppress the rupiah exchange rate against other currencies. This condition could negatively impact the financial, operating results and business prospects of the Company. D RISKS ASSOCIATED WITH THE NATURE 1. Risk of accidents, weather changes and natural disasters that could cause negative impact on the operational performance of the Company and its subsidiaries Location of Indonesia which is on three convergence of Earths crustal plates, which are Eurasian continent plate, of India- Australia continent plate and the pacific ocean plate gives rise to a geological structure that has a wealth of mining potential which has been recognized worldwide. But Indonesian archipelago has worlds most active volcanic activity, which makes Indonesia is prone to seismic activity that could cause earthquakes and tsunamis. Those natural events could bring loss to the Company. The Company has implemented adequate safety standards in the implementation of mining operations. However, in the implementation of its business activities, there is still possibility of risks of occupational accidents, including the risk of fire, explosion, trade embargo, labor disputes, social and environmental problems, unanticipated geological