parties. Based on the Addendum dated March 24, 2011, the previous loan facility increased from initially amounted
to USD 22.6 million to become USD 100 million. The Company may pay back some or all of the principal debt before the
expiry of the loan period without fine or penalties. As of November 3, 2011, the balance of the Companys loan to DSS
amounted to USD 39.1 million. Funds used for the capital expenditure and coal mining
facilities and
infrastructure development
costs and
Subsidiaries’ working capital, will be provided by the Company
through the
mechanism of
increased equity
participation andor granting of loan. In the event that the funds provided in the form of loans
to the subsidiaries, then after repayment of loan the funds will be used by the Company for the Company’s
working capital which are, among others, for selling and purchasing of coal and other operational costs.
Details about the plan on use of the proceeds from the Initial Public Offering can be seen in Chapter II of this Prospectus.
5. Business Risks
In carrying out its business, the Company has some business risks. Business Risks that the Company faces have
been listed based on the weight of the impact of each risk to the Companys performance as follows:
A Risks associated with production activities:
- Risk of significant coal price fluctuation. - Risk of increasing fuel price andor raw materials andor
supporting mining materials. - Risk of adjustment to proven and probable coal reserves
estimation and limitation of available coal reserves. - Risk of subsidiaries’ dependence on mining and shipping
contractors. - Risk of subsidiaries’ dependence on major installations,
equipment, production facilities and other supporting facilities to carry out mining activities.
- Risk from ability of the Company and its subsidiaries to obtain
and provide
fuel, spare
parts, and
other operational supporting materials requirement.
- Risk from
changes in
regional or
global economic
conditions. - Risk from limited services and coal transportation routes.
- Risk of declining coal quality. - Risk of coal oversupply.
- Risk of failure or delay in the implementation of the Company’s strategy.
- Risk of mine reclamation and rehabilitation requirements.
B Risks associated with the management and shareholders of the Company
- Risk of the Company’s dependence on its subsidiaries. - Risk of the Company’s and its subsidiaries’ dependence on
key employees - Risk of liquidity of stock trading.
- Risk of stock price fluctuation. - Risk of possibility of no dividend payment.
- Risk of net asset value of shares offered in the Public Offering is lower than the Offering Price.
- Risk of equity securities. - Risk of changes on the use of the proceeds from this
public offering for different purposes from those stated in this prospectus and the possibility that the Company
could not use the proceeds from the Public Offering effectively.
- Risk that the buyer may be subject to restrictions on the rights of minority shareholders.
- Risk of the buyers rights to participate in the Public
Offering limited by the Company can be restricted. C Risks associated with the provision of legislation and
social environment in Indonesia:
- Risk of terminated or dismissed coal mining rights by the Government.
- Risk of new legislation enactment whether in the field of mining, environment, seaport, shipping, finance, forestry,
as well as in other fields or there might be an interpretation or implementation of such legislation which
can negatively impact business activities and licensing owned by the subsidiaries.
- Risk of dependence on the ability of subsidiaries to obtain, maintain and renew all licenses and approvals
required. - Risk of illegal mining.
- Risk associated with the local population in mining areas. - Risk of negligence to comply with applicable legislation
in the field of forestry and environment. -
Risk of labor actions and demonstration.
D Risks associated with the Nature
- Risk of accidents, weather changes and natural disasters that could cause negative impact on the operational
performance of the Company and its subsidiaries. - Risk
of differences
and estimation
of geological
conditions that could affect the coal production.
Each of the above risk will be addressed in detail in Chapter V of this Prospectus regarding the Business Risks.
6. Competitive Advantage
