world’s coal
price, which
can fluctuate
significantly following
the production
capacity and
coal consumption
patterns of industries that use coal as the main fuel, weather conditions, distribution problems, availability of coal supply
from other
coal producers,
availability of
fuels and
alternative fuels,
the development
of technology
and employment factors.
Based on data from Bloomberg, in general the price of Free-On-Board FOB coal in international trade has increased
quite significantly by 354 within 10 years or in an average of more than 35 per year, from US 27.80 per ton in December
2000 to US 126.10 per ton in December 2010. Declining coal prices or world’s coal prices below the
overall production costs for a long period of time could negatively impact business operations, financial condition,
and the Companys business prospects.
2. Risk of increasing fuel price andor raw materials andor
supporting mining materials
Fuel is a significant part of the Companys operating costs
and fluctuation
in fuel
prices may
affect the
profitability of the Company. Based on the requirements in most contracts between subsidiaries and their respective
contractors, the increase in most of the raw materials’ price will be the responsibility of concerned company including the
increase in fuel price. The increase in fuel price will indirectly trigger the increase in coal sales price, which in
turn will also impact the volume of demand for coal supply. The increase in fuel prices in the future can cause an adverse
impact on the financial condition, operations results and business prospects of the Company, when it leads to a decline
volume of coal demand.
3. Risk of adjustment to the estimation of proven and probable coal reserves and limited coal reserves
Estimation of proved and probable reserves of coal set forth in this Prospectus is the statement of assessment based
on knowledge,
experience and
common industry
practice. Although the estimations are considered reasonable at the time
they were made, but they may change significantly when new information is available, where there is a risk that the coal
has quality, volume or stripping ratio different from or not as good as what has been estimated previously and the cost of
production is higher than that of the estimation. Adjustment of proven and probable coal reserves can influence the
development and mining operations plan of the Company and its subsidiaries, and may cause negative impacts on the financial
condition, results
of operations
and prospects
of the
Companys business. The amount of coal reserves in the territory of PKP2B and IUP of subsidiaries will decrease in
line with the Companys mining activities. The Companys
