Risk of mine reclamation and rehabilitation requirements

continue to be performed until the entire mining activities are completed in related concession areas. Since the commencement of mining operations, the Company through its related subsidiaries has to record the estimated reclamation and rehabilitation costs as a component of mining costs. These costs will increase in line with the expanded mining area. Based on PKP2B and IUP, associated subsidiaries are responsible to the Government for the reclamation and rehabilitation of all mining area within their concession territory. There is no certainty that the reclamation and rehabilitation works undertaken by associated subsidiaries, will be in accordance with standards established by the Government. When the result of reclamation and rehabilitation does not meet predetermined standard, it may result in requirement for continued reclamation and rehabilitation works. This may increase the Company’s operational costs which will cause significant negative impacts on the financial condition, results of operations and Companys business prospects. B RISKS ASSOCIATED WITH THE MANAGEMENT AND SHAREHOLDERS OF THE COMPANY 1. Risk of the Companys dependence on its subsidiaries Currently, the majority of the Company’s is gained from the subsidiaries’ business activities. Therefore, the Companys financial condition is highly dependent on financial performance and dividend policy of its subsidiaries. Disruption in business activities or changes in dividend policy by the subsidiaries or restriction of the subsidiaries’ ability to distribute dividends as a result of certain agreements, particularly the loan agreement, can affect the Companys financial condition.

2. Risk of the Company and its subsidiaries’ dependence on key employees

Coal mining is a labor intensive industry. In carrying out its business activities the Company requires supports of key personnel andor certain senior management, including members of the Board of Directors. In case the company loses a key employee andor senior management, it might adversely affect its financial condition, results of operations and the Companys business prospects. Meanwhile, it is quite difficult to get adequate replacement workers. This matter can materially inhibit the Companys operation activities and business growth.

3. Risk of stock trading liquidity

The Company has applied for listing of shares at the Indonesia Stock Exchange. There is no certainty whether the market for the shares can develop, or if it develops, another question is whether the shares may be liquid or not. Indonesia capital markets are relatively less liquid and more unstable, and have different reporting standards compared with the capital markets in developed countries. The prices in the Indonesia capital markets are usually more volatile than prices in capital markets in developed countries. Therefore, the Company does not predict whether the share market for the Company’s shares may develop and how the level of liquidity of the stock market is. Compared with a more liquid market, the sales and trading settlement at the Indonesia Stock Exchange might be delayed, therefore there is no certainty that a shareholder will be able to do the sale of shares at a price or at the time like in more liquid capital markets. Although the Companys application for listing of shares is approved, the Company’s shares cannot be listed at the Indonesia Stock Exchange for a maximum of three days after the expiration of the allotment for public offering. During that period, buyer of the shares will be exposed to stock price movements at the Stock Exchange without having the ability to sell the shares which have been purchased through the Indonesia Stock Exchange.

4. Risk of stock price fluctuation

Movement of domestic and international capital market, economic conditions, foreign exchange value and interest rate