COAL SALES AND MARKETING

million tons in the six-month period ended June 30, 2011. Meanwhile, the sales value was fluctuating following the selling price and the amount of coal sales. The coal sales volume data and historical sales value in the last 3 three years is as follows: Coal Sales Volume in Tons Sales Value in million Rupiah 2008 2009 2010 June 2011 2008 2009 2010 June 2011 BIB 1,247,110 1,214,951 837,237 1,291,834 447,387 518,920 280,248 510,858 KIM - 353,834 614,342 629,780 385,617 187,345 309,601 336,244 TKS - - - 34,702 - - - 13,602 Total 1,247,110 1,568,785 1,451,579 1,956,316 833,004 706,265 589,850 860,432 Source: The Company Note: the total figure is the sum from respective subsidiaries and does not constitute consolidated figures of the Companys sales The Company and its subsidiaries recorded a historical gross profit margin and net profit margin for 26.72 and 3.66 in 2010. These gross profit margin and net profit margin increased to become 32.63 and 13.24 in the six-month period ended June 30, 2011. The Company also operates a coal trading business, where the external coal spot purchases from various sources is made for resale. In future, this trading business is also intended for the purpose of mixing coal quality in order to get coal quality that suits the special needs of the customers who come from a variety of different market segment targets, either domestic or abroad. These trading activities were started in month of April 2010. The volume of coal trading during 2010 was 607 thousand tons. The export coal sales prices of the Company are determined by referring to Newcastle Global Coal Price Index. Requirements of payment and delivery of coal vary among the customers. The customers purchase coal from BIB in FOB free on board price basis. Meanwhile, for KIM and TKS, the coal sales-purchases were made at various price basis, among FOB, CNF cost and freight andor FOT free on truck.

3. BUSINESS PROSPECTS

Increased energy demand from China, India and other Asian countries due to rapid industrial development, urbanization and population growth is expected to led to strong growth in demand for thermal coal in the coming years. The study results Directorate General of Mineral and Coal Energy and Mineral Resources Ministry said that this year the needs of Chinas coal imports reached 180 million tons. Indian coal demand is estimated to reach 696 million tons over this fiscal year through March 2012, while the domestic supply is approximately only 554 million tons. In other words, there is insufficient coal supply in India for approximately 142 million tons. The power generation industries in India and China have started to use coal with capability to burn coal in calorie quality less than 5,000 kcalkg. The development of power plant industries that led to the demand for coal in medium and low calories quality, giving the potential for the coal assets owned by the Company which mostly have an average calorific value range between 5,200 kcalkg adb to 6,100 kcalkg adb to be produced in the long term to meet the Asian markets supply. In general, Indonesia has an additional advantage due to its strategic location, near to Asian customers. This strategic advantage leads to cheaper shipping cost compared with other coal producers from Australia and South Africa. In terms of price, the coal prices are divided into several categories that include bituminous, eco coal, low rank and super low rank. It is estimated that from year 2012 ahead, the price of bituminous type of coal from Indonesia is USD80ton, USD49ton for eco coal, USD44ton for low rank type, and USD41ton for super low rank type. Though it is predicted a decline in the coal prices from 2009 to 2012, but in the long run, the coal prices are expected to be stable.

4. COMPETITIVE ADVANTAGE

The Company and its subsidiaries have major competitive advantages as follow: