Legal Issues Related to Mining Business Permits

j. Legal Issues Related to Mining Business Permits

Based on the Decision Letter (“SK”) No. 153 Year 2008 dated March 17, 2008 of the Head of t

he District of North Konawe, the area of the Company’s Exploitation Mining Authorisation for nickel mining at Tapunopaka and Bahubulu Island in Southeast Sulawesi was reduced from 6,213 hectares, which included Tapunopaka and Bahubulu, to 5,000 hectares only in Bahubulu. Based on this reduction, the Company estimated a loss in potential revenues from nickel ore of about 83.2 million tons (unaudited).

Based on the Legal Opinion from Soemadipradja & Taher Law Office dated August 11, 2008, regarding the withdrawal of the Mining Authorisation in Tapunopaka and Bahubulu Island, management believes that the Decision Letter of the Head of the District of North Konawe is against the prevailing law and, accordingly, the Company still has the right to conduct mining activities in those areas.

Since the issuance of this Decision Letter by the Head of the District of North Konawe, the Company has dealt with several legal proceedings related to this case, from the Kendari State Administrative Court up until the Supreme Court.

On August 15, 2013, the Company and the Head of the District of North Konawe signed the Deed of Settlement Agreement whereby both parties agreed to settle their disputes over this case. With the signing of this Deed of Settlement, both parties also agreed to solve dispute issues related to Mining Authorisation of Production in Tapunopaka and Bahubulu.

On August 26, 2013, the Head of the District of North Konawe issued Decision Letter No. 376 year 2013. With the issuance of this Decision Letter, the Company can continue its nickel mining activities in Tapunopaka and Bahubulu Island.

33. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)

j. Legal Issues Related to Mining Business Permits (continued)

Besides the dispute over the nickel mining areas at Tapunopaka and Bahubulu Island, the Company also has another disputed case with the Head of the District of North Konawe regarding the Decision Letter No. 86 Year 2012 issued by the Head of the District of North Konawe to revoke the Mining Authorisation of Production for the Mandiodo mining sub- district.

The Company has filed a suit against the Decision Letter No. 86 year 2012 of the Head of the District of North Konawe to Kendari State Administrative Court. In October 2013, the Kendari State Administrative Court decided in favour of the Company and decided to cancel the Decision Letter No. 86 year 2012 issued by the Head of the District of North Konawe.

The Head of the District of North Konawe appealed this decision to the Supreme Court. On July, 17 2014, the Supreme Court rejected the Head of the District of North Konawe’s appeal based on Decision Letter No. 225K/TUN/2014.

On December 8, 2014, the Head of the District of North Konawe issued SK No. 644 year 2014. With this SK, the Head of the District asked the Company to complete the relevant

documents of its mining permit and temporarily revoke the Company’s Mining Business Permits in Tapunopaka.

On January 9, 2015, the Company applied for a request for the reactivation of its IUP in Tapunopaka and submitted the requested documents. In February 2015, the Director General

of Minerals and Coal issued “14 th Announcement of IUP Reconciliation (Regional Evaluation)”. With this announcement, the Company’s Mining Business Permit in Tapunopaka

has been declared active again.