In purchasing capital goods in foreign currency, the Company uses natural hedge, considering that the Company has a more or
less balanced net open position in foreign currency. The Company therefore does not hedge the transaction for the
purchase of capital goods in foreign currency. To get new reserves and to support the significant increased
volume of production in the future, the Company has engaged in exploration
and development
and purchased
fixed assets
aggressively. The fixed assets purchases that have been conducted among others are port constructions, base camp,
infrastructure and mining machineries and equipments. From these aggressive exploration and development activities,
the Company has obtained new reserves in a significant amount. Based
on the
Independent Technical
Report of
PT SMG
Consultants on February 2011 and March 2011 and of PT Danmar Explorindo on February 2011, in accordance with the JORC
standard methodology, the Company and its subsidiaries have coal resources for more than 1.93 billion tons of thermal
coal, with approximately 849 million tons of coal reserves. Meanwhile, with the purchase of fixed assets, the Company has
prepared some facilities and infrastructures required to support increased production. Purchase of capital goods in the
future is needed to support further increase in the Company’s production volume significantly.
7. Risk Management
To reduce the operational risks in achieving business goals, the
Company and
its subsidiaries
have implemented
a comprehensive risk management in each level of the companys
organizational structure. The risk management function within the company is conducted as below:
Board of Commissioners through the establishment of audit
committees
Board of Directors is in charge of implementing policies and internal controls for securing investments and assets
of the Company
Budgetary Control. To reduce the possibility of financial risk, the Company implements effective and efficient cost
management compared to budget. Payment for expenses andor expenditure budget of the company is conducted through
tender system, taking into account the financial and technical aspects.
Control and analysis of business to reduce the possibility
of business and investment risks, the Company formed Business Control and Analysis function.
VI. BUSINESS RISKS
Before investing in the Company’s shares, prospective investors
should consider
that the
Companys business
activities will depend on many external factors that are beyond the control of the Company. In addition, prospective
investors should also carefully consider various business risks described in this Prospectus. All risks, both those that
are known and unknown, can have an adverse impact on the business performance, financial performance andor value of
the Company’s shares. Should any of these risks occur, the Companys share price might decrease so that the investors may
face a potential loss on their investments. The Company only discloses the risks associated with
business activities and the Company’s industrial sector. Business risks faced by the Company in conducting
business activities include:
A RISKS ASSOCIATED WITH THE COMPANY’S PRODUCTION:
1. Risk of significant coal price fluctuation
Like most companies engaged in the mining industry, the revenues of the Company and its subsidiaries are greatly rely
on coal sales which determined by price of the coal. The prices of coal sold by the subsidiaries are determined by
numerous factors beyond the control of the Company such as
