BUSINESS PROSPECTS BUSINESS ACTIVITIES AND PROSPECTS OF THE COMPANY AND SUBSIDIARIES

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:  The Company has coal assets with quality that can be accepted by the market. The Companys coal quality have average caloric value range between 5,200 kcalkg adb to 6,100 kcalkg adb. The development of power plant industries that led to the demand for coal in medium and low calorie qualities, giving the potential for the Company’s coal assets to increase its market share either domestic or abroad.  The Company is a coal producer with the ability to produce coal in a relatively lower cost. Relatively lower stripping ratio and the proximity of the mines location to the port facilities, has made operation cost in the mining concessions of the Company is competitive.  The Company has a large amount of coal resources and reserves, i.e. 1.93 billion tons of thermal coal resources, with coal reserves approximately for 849 million tons. This substantial coal reserves could potentially provide a positive prospect for the operation performance and financial growth in the future for a considerable length period. The Company plans to increase coal production capacity from 2.0 million tons in 2010 to 6 million tons in 2011.  The Company is managed and operated by a management team experienced in the coal mining business. Majority of the senior management has experience in the mining field.