Regulations on Domestic Value-Added Minerals

n. Regulations on Domestic Value-Added Minerals

On February 6, 2012, Ministry of Energy and Mineral Resources (“MoEMR”) issued Regulation No. 7 of 2012 (”PerMen No. 7/2012”) on Increase in Value-add From Minerals through Mineral Processing and Refining. This regulation is an implementation regulation of GR No. 23.

Pursuant to GR No. 23/2010 and PerMen No. 7/2012, certain metal minerals, including nickel and gold, are regarded as mining commodities, the value of which can be increased through processing and/or refining activities. As such, nickel must be processed and/or refined within the country in accordance with the minimum threshold provided in PerMen No. 7/2012.

PerMen No. 7/2012 also regulates the prohibition for mining companies to export mineral ores since May 6, 2012 and for holders of operation and production mining rights who are already in the production stage before the effective date of PerMen No. 7/2012 to make adjustments regarding the minimum plan of processing and refinery.

On May 11, 2012, Regulation No. 11 Year 2012 (“PerMen No.11/2012”) was issued by the MoEMR to amend PerMen No. 7/2012. Under this PerMen No.11/2012, IUP and IUPK holders may export ore/raw materials after obtaining a recommendation from the MoEMR,

subject to certain requirements being fulfilled, and will be subject to Export Duty based on Export Benchmark Prices.

The Government of the Republic of Indonesia also issued a number of export duty regulations consisting of, among others, the Minister of Trade of the Republic of Indonesia Regulation No. 29/M-DAG/PER/5/2012 dated May 7, 2012 on Mineral Export Regulation, the Minister of Trade of the Republic of Indonesia Regulation No. 33/M-DAG/PER/5/2012 dated May 28, 2012 on Procedures to Stipulate Benchmark Prices of Mining Products which are Subject to Export Duty, the Minister of Trade of the Republic of Indonesia Regulation No. 34/M-DAG/PER/5/2012 dated May 28, 2012 on Stipulation of Benchmark Prices of Mining Products which are Subject to Export Duty, the Director General of Minerals and Coal Regulation No. 574.K/30/DJB/2012 dated May 11, 2012 on Procedures and Requirements for Mining Product Export Recommendation, and the Minister of Finance of the Republic of Indonesia Regulation No. 75/PMK.011/2012 dated May 16, 2012 on Stipulation of Export Products which are Subject to Export Duty and Tariff.

In accordance with the regulations mentioned above, the export of nickel and bauxite ore commodities of the Company during 2012 and 2013 was executed after the export approval letters have been obtained from the Minister of Trade of the Republic of Indonesia based on the recommendation provided by the Director General of Minerals and Coal.

33. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)

n. Regulations on Domestic Value-Added Minerals (continued)

On August 6, 2013, MoEMR issued Regulation No. 20 of 2013 ( “PerMen No. 20/2013”). This regulation reinforces the Government decision to ban the export of minerals which were not processed according to the minimum requirements under PerMen No. 20/2013.

On January 11, 2014, the Government issued GR No. 1/2014 as a second amendment to GR No. 23/2010. To implement GR No. 1/2014, on the same date, MoEMR issued Regulation No. 1 of 2014 ( “PerMen No. 1/2014”) to replace PerMen No. 7/2014 and PerMen No. 20/2013. Based on PerMen No 1/2014, unprocessed gold, nickel and bauxite are included in the category of minerals that cannot be exported starting from January 12, 2014.

In line with the regulations disclosed above, there have been no export sales of nickel ores since January 12, 2014.

On January 13, 2014, the Ministry of Trade issued Decree No. 04/M-DAG/PER/1/2014 regarding Export Stipulation of Processed and Refined Mining Products (“Decree No.

04/2014”). Decree No. 04/2014, which among other things stipulates that processed and refined mining products exporters including ferronickel, alumina, and gold should obtain

recognition as RE (“Registered Exporter”) of Mining Products. Based on the letter of the Ministry of Trade of the Republic of Indonesia No 4/DAGLU/ET-PPHPP/2/2014 dated

February 18, 2014 regarding Recognition As a Registered Exporter of Mining Products Processing and Refining Results ("ET-PPHPP"), the Company has obtained approval to export mining products of gold, silver, ferronickel, and chemical grade alumina.