This document comprises a prospectus relating to Vallar PLC (the Company) prepared in accordance with the Prospectus Rules

of the Financial Services Authority (the FSA) made under section 73A of the Financial Services and Markets Act 2000 (the FSMA) and approved by the FSA under section 87A of the FSMA. This document has been filed with the FSA and made available to the public in accordance with Rule 3.2 of the Prospectus Rules. Applications have been made to the UK Listing Authority for the New Vallar Voting Ordinary Shares to be admitted to the standard listing segment of the Official List of the UK Listing Authority (the Official List) and to London Stock Exchange plc (the London Stock Exchange) and for the New Vallar Voting Ordinary Shares to be admitted to trading on the London Stock Exchanges main market for listed securities (together, Admission). It is expected that Bumi Resources Consideration Shares Admission will become effective, and that dealings in the Bumi Resources Voting Consideration Shares will commence in the week commencing 28 February 2011 at 8.00 a.m. on the relevant day. As noted in Admission and Listing beginning on page 61 of this document, this document is being issued in connection with the proposed admission to the Official List and to trading on the London Stock Exchanges main market for listed securities of a number of New Vallar Voting Ordinary Shares in addition to the Bumi Resources Voting Consideration Shares. Details of these additional New Vallar Voting Ordinary Shares are set out in Admission and Listing beginning on page 61 of this document. The Company will announce through a Regulatory Information Service the expected time and date that admission to the Official List and to trading on the London Stock Exchanges main market for listed securities will become effective and dealings in any such additional New Vallar Voting Ordinary Shares will commence. The Company and the Directors (whose names appear on page 72) accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and contains no omission likely to affect its import. THE WHOLE OF THE TEXT OF THIS DOCUMENT SHOULD BE READ. YOUR ATTENTION IS SPECIFICALLY DRAWN TO THE DISCUSSIONS OF CERTAIN RISKS AND OTHER FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN ORDINARY SHARES, AS SET OUT IN THE SECTION ENTITLED RISK FACTORS BEGINNING ON PAGE 12 OF THIS DOCUMENT.

Vallar PLC
(Incorporated in Jersey)

Application for admission of up to 202,358,218 Voting Ordinary Shares to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities
No actions have been taken to allow a public offering of Ordinary Shares under the applicable securities laws of any jurisdiction. Subject to certain exceptions, Ordinary Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen of any jurisdiction. This document does not constitute an offer of, or the solicitation of an offer to subscribe for or buy, any Ordinary Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction. The Ordinary Shares have not been, and will not be, registered under the US Securities Act of 1933 (the Securities Act), or the securities laws of any State or other jurisdiction of the United States or under applicable securities laws of Australia, Canada, Indonesia or Japan. The Company has not been and will not be registered under the US Investment Company Act of 1940 (the US Investment Company Act) in reliance on the exemption provided by Section 3(c)(7) thereof, and purchasers of Ordinary Shares will not be entitled to the benefits of that act. The Ordinary Shares in issue on the date of this document were offered outside the United States to persons who were non-US persons in offshore transactions within the meaning of and in accordance with the safe harbour from the registration requirements provided by Regulation S under the Securities Act. The Ordinary Shares in issue on the date of this document were offered within the United States or to US persons in

transactions exempt from the registration requirements of the Securities Act for transactions not involving a public offering and only to persons who were both qualified institutional buyers, as defined in Rule 144A under the Securities Act, and qualified purchasers, as defined in section 2(a)(51) of the US Investment Company Act. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY INVITATION OR AN OFFER TO BUY ANY SECURITY. NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW. The distribution of this document in or into other jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. A copy of this document has been delivered to the registrar of companies in accordance with Article 5 of the Companies (General Provisions) (Jersey) Order 2002, and the registrar has given, and has not withdrawn, consent to its circulation. The Jersey Financial Services Commission has given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey) Order 1958 to the issue of shares by Vallar, including the New Vallar Ordinary Shares. The Jersey Financial Services Commission is protected by the Control of Borrowing (Jersey) Law 1947 from any liability arising from the discharge of its functions under that law. It must be distinctly understood that, in giving these consents, neither the registrar of companies nor the Jersey Financial Services Commission takes any responsibility for the financial soundness of the Company or for the correctness of any statements made, or opinions expressed, with regard to it. It should be remembered that the price of Ordinary Shares and the income from them can go down as well as up. The Ordinary Shares are only suitable for acquisition by a person who: has a significantly substantial asset base such that would enable the person to sustain any loss that might be incurred as a result of acquiring Ordinary Shares; and is sufficiently financially sophisticated to be reasonably expected to know the risks involved in acquiring Ordinary Shares.

Neither the Companys activities nor the activities of any functionary of the Company are subject to all of the provisions of the Financial Services (Jersey) Law 1998. Purchasers of Ordinary Shares who are in any doubt about the contents of this document should consult their stockbroker, bank manager, solicitor, accountant or other financial adviser. J.P. Morgan plc is acting exclusively for the Company and no one else in connection with the Transactions. J.P. Morgan plc will not regard any other person (whether or not a recipient of this document) as a client in relation to the Transactions and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for the giving of advice in relation to the Transactions or any transaction, matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan plc by FSMA or the regulatory regime established thereunder, J.P. Morgan plc accepts no responsibility whatsoever for the contents of this document, including its accuracy or completeness or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Transactions. J.P. Morgan plc accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement.

ii

CONTENTS
SUMMARY RISK FACTORS ADMISSION AND LISTING CONSEQUENCES OF A STANDARD LISTING PRESENTATION OF FINANCIAL AND OTHER INFORMATION DIRECTORS, AGENTS, REGISTERED HEAD OFFICE AND ADVISERS EXPECTED TIMETABLE OF PRINCIPAL EVENTS PART I PART II PART III PART IV PART V PART VI PART VII PART VIII PART IX PART X PART XI PART XII PART XIII PART XIV THE ACQUISITION INDUSTRY OVERVIEW AND REGULATION INFORMATION ON VALLAR INFORMATION ON THE BUMI RESOURCES GROUP INFORMATION ON THE BERAU GROUP DIRECTORS AND CORPORATE GOVERNANCE OPERATING AND FINANCIAL REVIEW CAPITALISATION AND INDEBTEDNESS STATEMENT FINANCIAL INFORMATION UNAUDITED PRO FORMA FINANCIAL INFORMATION TAXATION ADDITIONAL INFORMATION DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS MINERAL EXPERTS REPORTS Page 1 12 61 63 64 72 73 74 80 95 100 150 174 180 231 234 388 396 399 512 540

iii

SUMMARY
THIS SUMMARY SHOULD BE READ AS AN INTRODUCTION TO THIS DOCUMENT. ANY DECISION TO INVEST IN THE ORDINARY SHARES SHOULD BE BASED ON CONSIDERATION OF THIS DOCUMENT AS A WHOLE. Civil liability attaches to those persons responsible for this summary, including any translation of this summary, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this document. Where a claim relating to the information contained in this document is brought before a court, the plaintiff might, under the national legislation of the EEA States, have to bear the costs of translating this document before legal proceedings are initiated. Overview of Vallar Vallars Voting Ordinary Shares were admitted to the standard listing segment of the Official List and to trading on the London Stock Exchange on 14 July 2010, simultaneously with which Vallar raised gross proceeds of 707 million through the Placing. Vallar is a holding company formed to acquire a single major company, business or asset with significant operations in the global metals, mining and resources sector. Following the review of a number of acquisition targets, Vallar agreed on 16 November 2010 to the Acquisition, which comprises the purchase of 25 per cent. of Bumi Resources and 75 per cent. of Berau. The consideration for the purchase is approximately US$3.0 billion* made up of a combination of cash and New Vallar Ordinary Shares. The Acquisition On 16 November 2010: (a) Bakrie & Brothers, Long Haul and Vallar entered into the Bumi Resources Share Purchase Agreement pursuant to which Vallar agreed to purchase 5,193,350,000 Bumi Resources Shares in consideration of the issue to the Bakrie Group of approximately 28.9 million New Vallar Voting Ordinary Shares and approximately 61.2 million new Suspended Voting Ordinary Shares, in each case issued at a value of 10.00 per new Vallar share; and Vallar, the Subsidiary and Mutiara entered into the Berau Share Purchase Agreement pursuant to which Vallar and the Subsidiary agreed to purchase in aggregate 26,175,000,000 Berau Shares at Rp.540 per Berau Share, in consideration of the payment of approximately US$739 million* in cash consideration for 35 per cent. of Berau and the issue to Mutiara of approximately 52.3 million New Vallar Ordinary Shares at a value of 10.00 per new Vallar share in consideration for 40 per cent. of Berau.

(b)

On 23 February 2011, Vallar, the Bakrie Group and UK Subco entered into an amendment deed to the Bumi Resources Share Purchase Agreement pursuant to which they agreed, amongst other things, that: (a) the Bumi Resources Shares to be acquired by Vallar would be acquired by Vallars subsidiary UK Subco; and (b) that, as set out in more detail below, due to some of the Bumi Resources Shares to be transferred to UK Subco being subject to a lock-up from trading on the IDX, UK Subco would provide an irrevocable undertaking to the IDX to comply with the lock-up in order to facilitate those shares being transferred at closing of the Bumi Resources Transaction. On 23 February 2011, Vallar, Vallar Holdings and Mutiara entered into an Amendment Deed to the Berau Share Purchase Agreement pursuant to which it was agreed that of the approximately 52.3 million New Vallar Ordinary Shares to be allotted and issued by Vallar at closing of the Berau Transaction, approximately 27.8 million would be allotted and issued to Mutiara in the form of New Vallar Voting Ordinary Shares and, in satisfaction of Mutiaras obligations under the Mutiara Share Transaction Agreement, approximately 24.5 million would be allotted and issued to Long Haul in the form of Suspended Voting Ordinary Shares. Vallar, Vallar Holding and Mutiara intend to further amend the Berau Share Purchase Agreement prior to closing of the Berau Transaction so that the acquisition of the Berau Shares is effected through UK Subco.

Exchange rates of US$1.00 = Rp.8,924.5 IDR and 1.00 = US$1.61515 have been used to determine the aggregate consideration price.

The Bumi Resources Transaction is expected to close in the week commencing 28 February 2011, and the Berau Transaction is expected to close on or around 8 April 2011. Other than the delivery of customary closing deliverables by the parties to the respective Transactions, there are no outstanding conditions to either of the Transactions. The Directors believe that the Acquisition provides significant benefits for stakeholders in each of Vallar, Bumi Resources and Berau through: maximising the potential of the largest coal producing assets in Indonesia; exposure to the Bumi Resources Group and the Berau Group, the largest and fifth largest Indonesian coal producers by production, respectively (total combined* production of approximately 78 million tonnes in 2010), with a significant resource base (total combined* estimated coal resources of approximately 12.6 billion tonnes) and a strong financial performance; the targeted creation of shareholder value through efficiency gains, shared marketing services and the creation of low-cost development opportunities within the Groups asset base; reviewing and re-organising the financial structure of the Group to lower funding costs and to provide capital for future expansion; the potential to conduct asset swaps and sales to create an attractive and streamlined asset base; and the creation of a strong Board and management team combining local expertise and international industry experience.

Unless the context otherwise requires, this document assumes that the Bumi Resources Transaction and the Berau Transaction have completed. In this document, unless otherwise provided, references to the Group are to the Vallar Group and the Berau Group and, other than in the sections of this document entitled Part VIII Capitalisation and Indebtedness Statement and paragraph 12 Working Capital in Part XII Additional Information, the Bumi Resources Group, in each case as constituted immediately following the closing of the Bumi Resources Transaction. References to the Vallar Group are to Vallar and its subsidiaries and subsidiary undertakings as constituted immediately prior to the closing of the Bumi Resources Transaction and excludes the Bumi Resources Group and the Berau Group. References to the Bumi Resources Group are to Bumi Resources and its subsidiaries and subsidiary undertakings. References to the Berau Group are to Berau and its subsidiaries and subsidiary undertakings. The Bumi Resources Group Overview The Bumi Resources Group is a leading natural resources group based in Indonesia, focusing primarily on the coal mining business. The Directors believe that the Bumi Resources Group is the largest thermal coal producer in Indonesia, with its total production accounting for approximately 21.8 per cent. of Indonesias total coal production in 2010 (according to statistics released in January 2011 by the MEMR) and the largest coal exporter in Indonesia, and has significant proved and probable reserves to meet increasing worldwide demand for coal. The Bumi Resources Group holds rights from the Indonesian Government to mine for coal in a concession area of approximately 90,960 hectares in East Kalimantan until 2021, which is operated by Bumi Resources subsidiary KPC, and in another concession area of approximately 70,153 hectares in South Kalimantan until 2019, which is operated by its subsidiary Arutmin. KPC and Arutmin have seven coal mines in commercial operation the Sangatta and Bengalon mines operated by KPC and the Senakin, Satui, Mulia, Asam Asam and Batalucin mines operated by Arutmin. In 2008, 2009 and the first nine months of 2010, KPC and Arutmin had total production of 52.1 million, 57.5 million and 44.4 million
* Aggregate of 100per cent. of the Bumi Resources Group and the Berau Group and includes production attributable to the interests of Tata and KTS in the IndoCoal Group Companies (the Third-Party Interests). In this Summary, the Bumi Resources Groups total production or sales includes production or sales attributable to the Third-Party Interests and attributable production or sales excludes production or sales attributable to the Third-Party Interests. All reserves data in relation to the Bumi Resources Group is shown on a total basis, which includes reserves attributable to the Third-Party Interests.

tonnes of coal, respectively, and attributable production of 33.4 million, 37.9 million and 29.6 million tonnes of coal, respectively. Under its current mine plans, the Bumi Resources Group intends to expand its annual total coal production capacity in 2011 to approximately 74.8 million tonnes from approximately 72.0 million tonnes in 2010. As of 31 March 2010, the proved and probable marketable reserves within concession areas operated by KPC totalled an estimated 1,422million tonnes (of which 765million tonnes were proved and the remaining 657million tonnes were probable). Within concession areas operated by Arutmin, the proved and probable marketable reserves totalled an estimated 469million tonnes as of 31 May 2010 (of which 278million tonnes were proved and the remaining 191million tonnes were probable). KPCs and Arutmins mines are located in close proximity to their coal shipping facilities on the Kalimantan coast and to their primary coal markets in Asia, which the Directors believe provides the Bumi Resources Group with competitive transportation cost advantages over other Indonesian producers with mines further inland and over principal competitors in Australia and South Africa. KPC and Arutmin export a substantial portion of the coal they produce to end-user power plants and steel plants and other industrial end-users, primarily in China, Japan, Taiwan, India and South Korea. While the Bumi Resources Group mines a substantial portion of the coal produced at its Sangatta mine through the mining contractors Thiess and Pama, it produces substantially all of the coal at its Senakin, Satui, Mulia, Asam Asam and Batulicin mines through the three mining contractors Darma Henwa, Thiess and Cipta Kridatama. KPC and Arutmin market and sell all of their coal to third-party customers through marketing agents. KPC and Arutmin exported approximately 88.9 per cent. of their total coal sales volumes during the first nine months of 2010. KPC and Arutmin sold approximately 80.2 per cent., 79.2 per cent. and 80.6 per cent. of their total coal sales volumes during 2008, 2009 and the first nine months of 2010, respectively, under coal supply agreements with terms of one year or longer, and the balance through spot market sales. As of 31 December 2010, KPC and Arutmin had contracted to sell 11.3 million tonnes of coal in 2011 at a weighted average price of US$90.57 per tonne. In June 2007, Bumi Resources divested 30.0 per cent. of its shares in the IndoCoal Group Companies to and entered into a joint venture regarding the IndoCoal Group Companies with Tata. Through its subsidiary BRM, Bumi Resources has interests in various non-coal mining businesses. BRM completed its initial public offering and listed on the IDX on 9 December 2010, with Bumi Resources continuing to own 81.4 per cent. of BRMs share capital. BRM owns an effective interest of 18.0 per cent. in NNT, the entity operating the Batu Hijau copper and gold mine located in Sumbawa, Indonesia. BRM also owns interests in two gold, silver and copper mining concessions in Sulawesi, Indonesia. Furthermore, BRM has a 60.0 per cent.-owned joint venture to study the feasibility of developing an iron ore mine in north-western Mauritania, and has a cooperation agreement with Trinity Business Corporation for the exploration of minerals in Liberia. The Bumi Resources Group also has an interest in the Dairi Project. In addition to non-coal minerals mining, the Bumi Resources Group has an interest in two explorationstage oil concessions in Yemen. Strengths The Bumi Resources Groups principal competitive strengths are the following: Significant production profile supported by substantial reserve base. Cost-efficient operating structure. Wide range of coal products and high-quality customer base. Diversified coal mining operations supported by experienced third-party contractors and marketing agents. Experienced management and operations team.

Strategy The main elements of the Bumi Resources Groups business strategy are the following: Diversify revenue stream by developing the Bumi Resources Groups non-coal minerals mining businesses through a self-financing BRM. Expand production capacity and diversify customer base. Increase reliance on owner-operated mining operations. Improve productivity and cost structure. Grow and expand the Bumi Resources Groups business operations through acquisitions, investments and joint ventures.

The Berau Group Overview Berau is a holding company that indirectly owns 90.0 per cent. of Berau Coal, the fifth largest coal producer in Indonesia in terms of production volume in the first eleven months of 2010 according to statistics released by the MEMR. Berau Coal engages in open-cut mining of coal in its concession area in East Kalimantan, where it holds coal mining rights until 26 April 2025. Berau Coal operates three mining areas in Lati, Binungan and Sambarata, where open cut coal reserves were estimated to be 346 million tonnes as of 31 December 2009, of which 146 million tonnes were proved and 200 million tonnes were probable. Berau Coals concession area of approximately 118,400 hectares also contains three other reserve locations, namely Kelay, Gurimbang and Punan. Berau Coal expects to commence commercial coal production in Gurimbang in 2012 and Kelay in 2013. Berau Coal supplies coal, both directly and through marketing agents, to customers in Indonesia, China, Hong Kong, India, Japan, South Korea, Taiwan, the Philippines and Thailand. Berau Coals customers are mainly utility companies and coal trading companies. In 2010, Berau Coal derived approximately 31 per cent. of its total revenue from domestic sales and approximately 69 per cent. of its total revenue from export sales. Berau Coal produces thermal coal at its three mining locations and blends the coal to adjust the overall quality grade of the coal, with calorific values ranging from 5,000 kcal/kg to 5,600 kcal/kg (on a gross as received basis) and appropriate levels of ash and sulphur for use in coal-fired power plants. In 2007, 2008, 2009 and 2010, Berau Coal produced 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes and 17.4 million tonnes of coal, respectively. As of 1 January 2011, 41.5 per cent. of Berau Coals budgeted sales of 20.0million tonnes in 2011 were contracted at an average price of US$70.2 per tonne and commitments for a further 40 per cent. of the 2011 budgeted sales had been received. Berau Coal subcontracts all of its mining, barging, drilling and blasting operations, which allows it to minimise capital expenditures and working capital requirements and focus on exploration, mine planning, supervision and sales and marketing. Berau Coal works closely with its two major mining contractors, BUMA and SIS, which undertake land clearing, overburden removal, coal excavation, hauling activities and road maintenance. Berau Coal uses multiple contractors for each of its other operations. Once the coal is mined, crushed and stockpiled, contractors barge the loads to a transhipment area at Muara Pantai in the Sulawesi sea located approximately 50 kilometres to 100 kilometres from the ports at Lati, Suaran and Sambarata. At Muara Pantai, higher energy coal from the Sambarata mine is blended with coal from the Lati or Binungan mines. On 19 August 2010, Berau completed its initial public offering and its shares were listed on the IDX. Strengths Berau Coals principal competitive strengths are the following: Sizable and long-standing operations with a consistent track record of production growth. Well-positioned to capture growth opportunities in thermal coal markets in Asia. Low-cost coal producer.

Strong customer relationships and a high-quality customer base. Experienced management team.

Strategy The main elements of Berau Coals business strategy are the following: Increase coal production at an accelerating rate by expanding infrastructure while managing costs. Increase coal reserves by using internally generated cash flows from existing mines to explore for new reserves and enhance exploration efforts. Maintain core customers in Berau Coals domestic and export markets and secure orders from long-term customers for the majority of Berau Coals production. Consider strategic alliances with companies serving the Indonesian mining sector. Continue to strengthen relationships with local communities through development and environmental rehabilitation programs.

Summary Pro Forma Financial Information The following pro forma financial information for the Group has been extracted without material adjustment from PartX Unaudited Pro Forma Financial Information.
As of and for the Nine Months Ended 30 September 2010 Bumi Unaudited Vallar Berau Resources Pro forma pro forma Group Group Group adjustments total (unaudited) (US$ in millions) Income Statement Data: Revenue Cost of sales Gross profit Operating profit/(loss) Share in net income of associates Net finance cost Profit/(loss) before taxation Taxation Profit/(loss) for the period attributable to owners of the parent Balance Sheet Data: Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Non-controlling interest Net assets attributable to Vallars shareholders (34) 2 (32) (30) 1,062 1,062 30 1,032 763 (502) 261 221 (59) 162 (94) 56 854 995 1,849 545 894 1,439 46 364 93 93 93 1,908 1,908 1,908 (61) (1) (62) (76) (800) 1,437 637 (46) 683 763 (502) 261 126 93 (58) 161 (94) 43 1,116 4,340 5,456 545 894 1,439 30 3,987

Summary Historical Financial Information The Bumi Resources Group The financial information below for the Bumi Resources Group represents 100 per cent. of the results, assets and liabilities of the Bumi Resources Group. However, in accordance with IAS 28 Investments in Associates, the Company will account for its 25.0 per cent. interest in Bumi Resources under the equity method in the Groups consolidated financial statements. Therefore, the Group will not consolidate the Bumi Resources Group in the Groups consolidated financial statements. Instead, the Group will, among other things, only record the Companys proportionate share of the net profit or loss of the Bumi

Resources Group and the Group will be entitled to receive any cash flows generated by the Bumi Resources Group only to the extent that they are distributed to the Company. The financial information below has been extracted without material adjustment from Part B: Bumi Resources in Part IX Financial Information, except for the EBITDA information, which has been calculated as set forth in Presentation of Financial and Other Information Non-IFRS Financial Measures. As of and for the Year Ended 31 December 2008 As of and for the Nine Months Ended 30 September 2009

2009

2010

(audited, except as indicated) (US$ in millions) Income Statement Data: Revenue Cost of sales Gross profit Operating profit Share in net income of associates Net finance cost Profit before taxation Taxation Profit for the period Balance Sheet Data: Total current assets Total non-current assets Total assets Total current liabilities Total equity attributable to owners of the parent Minority interest Total equity and liabilities 2,630 (1,536) 1,094 750 7 (60) 809 (466) 342 1,204 3,139 4,343 1,574 1,049 19 4,343 2,451 (1,582) 869 867 47 (343) 484 (146) 338 1,865 4,831 6,696 1,699 1,261 17 6,696 486 (2,107) 1,482 (139) 120 632

(unaudited)

1,772 (1,079) 693 530 30 (233) 226 (145) 81 1,474 3,880 5,354 1,445 1,025 19 5,354 336 (933) 565 (32) 227 566

2,097 (1,342) 755 801 145 (399) 704 (308) 396 2,571 5,459 8,030 2,046 1,590 41 8,030 96 543 463 19 134 550

Statement of Cash Flow Data: Net cash flows from operating activities 778 Net cash flows from investing activities (1,414) Net cash flows from financing activities 683 Net increase (decrease) in cash and cash equivalents 47 Cash and cash equivalents at end of the period 255 Other Financial Data: EBITDA (unaudited) 831

The Berau Group With effect from the date of taking control of Berau on the Bumi Resources Transaction Closing Date, the Berau Group will be consolidated by Vallar in its consolidated financial statements. The financial information below has been extracted without material adjustment from Part C: Berau in PartIX Financial Information, except for the EBITDA information, which has been calculated as set forth in Presentation of Financial and Other Information Non-IFRS Financial Measures EBITDA.
As of and for the As of and for the Year Ended Nine Months Ended 31 December 30 September 2007 2008 2009 2009 2010 (audited, except as indicated) (unaudited) (US$ in millions) Statement of Comprehensive Income Data: Revenue Cost of sales Gross profit Operating profit Net finance cost Profit before taxation Taxation Profit for the period Balance Sheet Data: Total current assets Total non-current assets Total assets Total current liabilities Equity attributable to owners of the parent Minority interest Total liabilities and equity Statement of Cash Flow Data: Net cash flows from operating activities Cash flows used in (from) investing activities Cash flows from (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at end of period Other Financial Data: EBITDA (unaudited) 377 (289) 88 74 (10) 64 (29) 35 631 (460) 171 143 (7) 136 (62) 74 371 409 780 348 59 83 780 102 9 (81) 30 124 118 800 (473) 327 295 (23) 272 (124) 148 574 (334) 240 229 (3) 226 (102) 124 551 445 996 711 127 139 996 159 11 (58) 112 236 172 763 (502) 261 221 (59) 162 (94) 68

248 373 621 241 20 48 621 60 11 (57) 14 94 61

615 990 1,605 1,055 385 34 1,605 245 (289) 225 181 305 230

854 995 1,849 545 364 46 1,849 149 (374) 275 50 355 236

Current Trading and Prospects The Bumi Resources Group The attributable volume of coal produced by the Bumi Resources Group during the last three months of 2010 was approximately 10.6 million tonnes, out of an estimated attributable production of 40.3 million tonnes for the full year 2010. The weighted average realised price per tonne of coal produced by the Bumi Resources Group over the last three months of 2010 was US$75.64. The Bumi Resources Groups cash production costs per tonne for the full year 2010 are expected to be higher than in 2009, due to increases in fuel and explosives costs and depreciation. The Berau Group Berau Coals coal production increased by 3.1 million tonnes in 2010 to 17.4 million, of which 5.1 million tonnes were produced in the last three months of 2010. Berau Coal achieved estimated sales volumes of 17.1 million tonnes in 2010, with an average estimated sales price of US$61.82 per tonne, which is a 9.0 per cent. increase compared to the average sales price in 2009. The Berau Group also experienced higher costs in 2010 compared to 2009, which resulted from an increase in the mining rate of Berau Coals largest contractor, an increase in the price of oil and, to a lesser degree, higher freight and handling costs.

The Board The Company has assembled a board of directors, the majority of whom are independent. The Board has extensive, complementary experience in the metals, mining and/or resources sectors. The Directors are: Indra Bakrie (Chairman) Nathaniel Rothschild (Co-Chairman) Ari Hudaya (Chief Executive Officer) Andrew Beckham (Chief Financial Officer) James Campbell (Non-Executive Director) Rosan Roeslani (Non-Executive Director) Sir Julian Horn-Smith (Deputy Chairman & Senior Independent Director) Lord Renwick (Independent Non-Executive Director) Steven Shapiro (Independent Non-Executive Director) Sir Graham Hearne, CBE (Independent Non-Executive Director) Wibowo Suseno Wirjawan (Independent Non-Executive Director) Amir Sambodo (Independent Non-Executive Director) Philip Yeo (Independent Non-Executive Director) Sony B. Harsono (Independent Non-Executive Director)

Corporate Governance The Company intends to observe best practice on corporate governance, and the Board has adopted the Model Code on a voluntary basis and is in compliance with the provisions of the UK Corporate Governance Code except that the Chairman, Indra Bakrie, was not independent on his appointment as a result of his interest in the Bakrie Group. The Directors intend to seek a Premium Listing for the Company on the Official List. Following such Premium Listing, the Company would comply with the continuing obligations contained within the Listing Rules for a company with a Premium Listing, including the Model Code and the UK Corporate Governance Code. Principal Shareholders At the Bumi Resources Transaction Closing Date, the Bakrie Group will hold approximately 28.9 million Voting Ordinary Shares and approximately 61.2 million Suspended Voting Ordinary Shares (constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 57.2 per cent. of the total issued ordinary share capital of the Company). At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), the Bakrie Group will hold approximately 40.8 million Voting Ordinary Shares and approximately 73.8 million Suspended Voting Ordinary Shares (constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 54.6 per cent. of the total issued ordinary share capital of the Company). The Suspended Voting Ordinary Shares will automatically convert into Voting Ordinary Shares in the event of further equity issues by Vallar, provided that following any conversion the Bakrie Groups holding of Voting Ordinary Shares does not exceed the maximum percentage permitted before the Bakrie Group would be required to make a mandatory offer for Vallar under Rule 9 of the City Code. At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), Mutiara is expected to hold approximately 27.8 million Voting Ordinary Shares (constituting approximately 20.4 per cent. of the voting rights in the Company and approximately 13.2 per cent. of the total issued ordinary share capital of the Company).

The Company has entered into the Bakrie Relationship Agreement to regulate the relationship between the Company and the Bakrie Group. The Bakrie Relationship Agreement includes provisions for the nomination for appointment of three Directors by the Bakrie Group, including the positions of Chairman, Chief Executive Officer and the Chief Financial Officer (subject to the Bakrie Group retaining control of 15 per cent. of the votes able to be cast at general meetings of the Company) and restrictions on the appointed Directors voting where there are conflicts of interest between the Group and the Bakrie Group or any of its Associates. The Company has also entered into the Mutiara Relationship Agreement to regulate the relationship between the Company and Mutiara. The Mutiara Relationship Agreement includes provisions for the nomination for appointment of one Non-Executive Director by Mutiara (subject to Mutiara retaining control of 15 per cent. of the votes able to be cast at general meetings of the Company) and restrictions on the appointed Director voting where there are conflicts of interest between the Group and Mutiara or any of its Associates. Risk Factors Risks Relating to the Groups Operations The cyclical and highly competitive nature of, and price fluctuations in, coal markets The Groups dependency on concessions, approvals, licences and land use rights, and the potential impact of legislative and regulatory developments The Groups dependency on a small number of customers The generation of a significant portion of the Groups coal production through contractors The Groups dependency on international marketing agents for its export coal sales The Groups dependency on key pieces of equipment The Groups expansion and exploration programs, including the financing thereof Illegal mining and conflicting mining permits issued by local governments The potential impact of changes in environmental legislation and regulation and difficulties in complying with such legislation The inability to produce sufficient amounts of coal to fulfil the Groups customers requirements The Groups dependency on key personnel Operational and infrastructure risks, inclement weather and natural disasters Uncertainties related to estimates of proved and probable coal reserves The Groups significant ongoing mine reclamation and rehabilitation obligations Costs of and disruptions in transportation, including fuel prices Value-added tax disputes with the Indonesian Government under the Groups CCOWs The Groups substantial indebtedness and debt-service obligation and restrictions in the Groups existing and future debt arrangements The Groups holding company structure Insurance risks Adverse effects from commodity hedging arrangements Adverse effects from appreciation in the Rupiah The Groups operations in countries with risks of security, enforcement of obligations, fraud, bribery and corruption The risk of the Indonesian Government requiring delivery of coal instead of cash payments

Risks Relating to the Operations of the Bumi Resources Group Risks associated with the Bakrie Group losing control of the Bumi Resources Group KPCs and Arutmins self-amended tax liability and the possibility of tax disputes Disagreements with the Groups strategic partner, Tata Operational difficulties from acquisitions or divestments The possibility of BRM being unable to successfully develop its non-coal mining operations as planned

Risks Relating to the Operations of the Berau Group The limited geographical scope of the Berau Groups operations The risk of Sojitz invalidating the guarantees and security interests provided by Berau Coal Insufficient inventories

Risks Relating to Indonesia Political and social instability and increasing regional autonomy The risk of terrorist activities The effect of macroeconomic conditions Downgrades of credit ratings of Indonesia and Indonesian companies The risk of an outbreak of contagious disease Labour activism Geological risks that could lead to social and economic unrest

Risks Relating to the Acquisition and Other Future Acquisitions The possibility of the Group failing to realise the anticipated benefits of the Acquisition and the risks associated with this Acquisition or any other future acquisitions The possibility of the Group failing to perform in line with expectations Change-of-control provisions in the Groups agreements

Risks Relating to the Companys Relationship with the Adviser and the Advisers Relationship with the Sub-Adviser The Companys dependency on the Adviser, the Sub-Adviser and the Founders Limitation of liability and indemnification of the Adviser and Sub-Adviser under the Advisory Agreement and Sub-Advisory Agreement The loss of key personnel of the Adviser and Sub-Adviser The risk of the arrangements among the Company, the Adviser and the Sub-Adviser containing terms that are less favourable to the Company than those which otherwise might have been obtained from unrelated parties The risk of a conflict of interest between the Company and the Founders, the Directors, the Adviser and/or the holders of the Founder Shares and the holders of the Founder Securities Risks relating to the terms of the Founder Shares and the Founder Securities

Risks Relating to Taxation Future changes to Indonesian tax legislation Material challenges to the historic tax position of the Bumi Resources Group and/or the Berau Group

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Proposed changes to the UKs controlled foreign companies taxation rules Subsequent changes to the Group structure for a Premium Listing

Risks Relating to the Ordinary Shares The risk of a Standard Listing of the Ordinary Shares affording shareholders a lower level of regulatory protection than a Premium Listing and the risk that the Company will be unable to transition to a Premium Listing Market price volatility of the Ordinary Shares The significant influence of the Principal Shareholders over the Company and potential conflicts between their interests and those of other shareholders Possible dilution of shareholdings through future issuances of Ordinary Shares Possible difficulties in reselling the Ordinary Shares in the United States and PFIC risks for US Shareholders The potential limited ability of Shareholders to bring actions or enforce judgements against the Company or the Directors, and against the Adviser or Sub-Adviser

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RISK FACTORS
An investment in the Ordinary Shares is subject to a number of risks. Prior to investing in the Ordinary Shares, purchasers of Ordinary Shares should consider carefully the factors and risks associated with any investment in the Ordinary Shares, the Groups business and the industry in which it operates, together with all other information contained in this document including, in particular, the risk factors described below. The following factors do not purport to be a complete list or explanation of all the risks involved in investing in the Ordinary Shares, and additional risks and uncertainties relating to the Group that are not currently known to the Company, or that it currently deems immaterial, may also have an adverse effect on the Groups business, financial condition and/or operating results. If this occurs, the price of the Ordinary Shares may decline and purchasers of Ordinary Shares could lose all or part of their investment. Purchasers of Ordinary Shares should consider carefully whether an investment in the Ordinary Shares is suitable for them in light of the information in this document and their particular circumstances. RISKS RELATING TO THE GROUPS OPERATIONS Coal prices are cyclical and subject to significant fluctuations, and any significant decline in the prices the Group receives for its coal could materially adversely affect its business, financial condition, results of operations and prospects The Groups results of operations are highly dependent upon the prices the Group receives for its coal. The world coal markets are sensitive to changes in coal mining capacity and output levels, patterns of demand and consumption of coal from the electricity generation industry (and other industries for which coal is a principal fuel) and changes in the world economy. The coal consumption patterns of the electricity-generation, steel and cement industries are affected by the demand for these products, local environmental and other governmental regulations, technological developments and the price and availability of competing coal and alternative fuel supplies. All of these factors may have a significant impact on selling prices for the Groups coal. Most of the Bumi Resources Groups coal supply agreements with terms of one year or more contain provisions that require the parties to adjust the sales prices on an annual basis. Berau Coals contract prices for coal shipped under its coal supply agreements are generally renegotiated and adjusted annually or on a shorter basis with reference to prevailing coal market prices, or are linked to coal price indices. Renegotiation or adjustment of the sales prices under coal supply agreements subjects the Group to price volatility over the lives of its coal supply agreements. Prices for all of the Groups coal products are based upon or affected by global coal prices, which tend to be highly cyclical and subject to significant fluctuations. Prices for coal products are also affected by a variety of other factors over which the Group has no control, including weather, distribution problems and labour disputes. Increases in global coal prices in recent years have been partly attributable to the sustained high levels of economic growth and development in China, India and other parts of Asia. During certain recent periods, high economic growth in China has led the Chinese government to restrict exports of coal, while permitting increased imports of coal, which contributed to higher global coal prices during those periods. In addition, distribution problems affecting Australias Newcastle and Dalrymple Bay coal ports and South Africas Richards Point coal port contributed to higher global coal prices between February and November 2008. Severe rainy weather in Queensland, Australia, and internal distribution problems in China and South Africa also contributed to higher global coal prices in the fourth quarter of 2007 and first quarter of 2008. The financial liquidity crisis, economic downturn and its aftermath in the United States, Europe and many other parts of the world between mid-2007 and mid-2009 generally dampened demand for fuel, including oil and coal. Oil prices dropped from a record high of US$145.29 per barrel (based on the price of WTI crude oil as quoted by Bloomberg) on 3 July 2008 to a low of US$31.41 per barrel on 22 December 2008. Coal prices likewise fell, though by a smaller percentage than oil, falling from a record high of US$192.50 per tonne (based on the free on board (FOB) price of steam coal quoted by McCloskey, for sales of 6,700 kcal/kg coal from Newcastle, Australia) on 4 July 2008 to a low of US$60.20 per tonne on 27 March 2009. However, in the third quarter of 2010 and into the first quarter of 2011, coal prices increased significantly due to increases in global demand. In addition, the rise in coal prices was also driven by recent floods in Queensland, Australia that affected current coal supplies, with a large number of Queenslands export coal mines affected by flooding or cut off from their export ports by disrupted railway links. The price of WTI crude oil was

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US$86.20 per barrel on 18 February 2011. The FOB price of steam coal quoted by McCloskey was US$120.75 per tonne on 11 February 2011. Global coal prices could be reduced from current levels by, among other factors, improved coal distribution and production in coal-producing countries, particularly in China, Australia and South Africa, a more severe or sustained economic downturn in China, India, Asia in general or globally or a change in Chinese government policy restricting coal exports. Any fluctuation in global coal prices will affect the Groups results of operations and cash flows. Extended or substantial price declines for the Groups coal products could also have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Coal markets are highly competitive and are affected by factors beyond the Groups control A substantial portion of the Groups sales of coal have been, and will continue to be, export sales. The Group competes with both domestic Indonesian coal producers and foreign coal producers for sales in the world coal markets. In particular, the Bumi Resources Group primarily competes with Australian and South African companies and the Berau Group primarily competes with Australian and Chinese companies. The Group also competes with other coal producers, primarily on the basis of price, coal quality, transportation cost and reliability of supply. Demand for the Groups coal by its principal customers is affected by the price of alternative energy sources, including nuclear energy, natural gas, oil and renewable energy sources, such as hydroelectric power. Generally, the competitiveness of the Groups coal products compared to those of its competitors and alternative fuel supplies is evaluated on a delivered cost per heating value unit basis. Factors that directly influence coal producers production costs include geological characteristics of their coal deposits (including seam thickness), strip ratios, depth of underground reserves (for underground mining companies), transportation costs and labour availability and cost. Because global coal prices are denominated in US dollars, the Groups competitors are also affected by the relative rates of exchange between the US dollar and their respective home currency. Further, many of the Groups Indonesian competitors are currently implementing expansion projects to increase their production capacity. The Groups inability to maintain its competitive position as a result of these or other factors could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. If the international coal industry experiences oversupply in the future, the Groups results of operations could be adversely affected During the past 20 years, a growing world coal market and increased demand for coal worldwide has attracted new investors to the coal industry, spurred the development of new mines and the expansion of existing mines in various countries, including Indonesia, China, Australia, South Africa and Colombia, and resulted in added production capacity throughout the industry worldwide. While these developments led to increased competition and lower coal prices before the beginning of 2003, increases in coal prices from the fourth quarter of 2003 until the third quarter of 2008 encouraged the development of expanded capacity by new and existing international coal producers. World coal prices declined from the third quarter of 2008 through the second half of 2009, but then stabilised and have been gradually increasing throughout 2010 and the beginning of 2011. However, any oversupply of coal in the world markets could reduce global coal prices in the future and the prices the Group receives for its coal sales under its coal supply agreements. The Group and other major coal producers, including other producers in Indonesia, are currently seeking and are expected to continue to seek to increase their coal production and capacity significantly, which may increase the risk of oversupply of coal in the Asian as well as the global market. As world coal prices are affected by the demand and supply of coal, any oversupply of coal in the Asian and global coal markets would likely lead to a decline of the prices at which the Group is able to sell its coal. In 2009 and 2010, coal prices of producers in the Asia Pacific region, including the Group, were heavily influenced by domestic Chinese coal prices and Chinas coal demand; the strengthening of the Australian dollar against the US dollar, which resulted in higher prices for coal produced in Australia; and longer than average rainy seasons in certain major coal-producing countries. According to the BP Statistical Review of World Energy published in June 2010, while global coal consumption was relatively stable in 2009, coal consumption in Europe and North America declined sharply due to a combination of recession and competitively priced natural gas. However, according to this source, overall global coal consumption was sustained in 2009 by a 7.4 per cent. growth in Asia Pacific and the Middle East, which was almost entirely attributable to the growth of coal demand in China. Any decline in Chinas coal demand as a result of a slowdown in its economic growth

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or other factors beyond the Groups control may lead to an oversupply of coal. An oversupply of coal could have a material adverse effect on the Groups business, financial condition, results of operations and prospects, including the success of the Groups planned expansion of coal production and capacity. The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects Indonesian Law No. 4 of 2009 on Mineral and Coal Mining (the 2009 Mining Law) came into effect on 12 January 2009. Some provisions of the 2009 Mining Law are inconsistent with the Groups coal mining concessions, licences and authorisations, which could materially adversely affect the Groups business. While existing contracts of work and mining licences and authorisations will continue to be valid until their expiry, the 2009 Mining Law is not clear as to which of its provisions require amendments to existing contracts to bring those contracts into conformity with the law. Following the enactment of the 2009 Mining Law, the MEMR notified all holders of existing coal contracts of work (CCOWs) of ten general provisions in the contracts that were deemed to be in conflict with the 2009 Mining Law and that the MEMR would be entering into negotiations with each of the holders of CCOWs to renegotiate those provisions to bring them into line with the new law. However, the MEMR did not set forth a specific timeframe for completing the renegotiations of those provisions. The MEMR is currently negotiating with holders of contracts of work, including entities within the Bumi Resources Group and the Berau Group, across all sectors of the Indonesian mining industry. If the Bumi Resources Group or the Berau Group were unable to reach agreement with the MEMR regarding the amended terms of any CCOWs, the matter would be referred to international arbitration in accordance with the terms of the CCOW. If the arbitral tribunal were to find in favour of the MEMR, the relevant CCOW would be amended in the manner requested by the MEMR, which could be adverse to the Groups interests. The Group may be required to align certain provisions of its contracts of work and IUPs for all of its major mining concessions in Indonesia with the 2009 Mining Laws provisions, including, for example, the required re-sizing of mining areas, a reduction in permitted production periods and acreage, and the prohibition on use of affiliated mining contractors. The Bumi Resources Group and the Berau Group have been discussing potential changes to their CCOWs and other contracts of work with the MEMR. While the MEMR has requested and proposed amendments to the provisions of the contracts of work, most of the Groups holders of contracts of work have not yet reached agreement with the MEMR regarding the amendments to their contracts of work. In accordance with the 2009 Mining Law, Berau Coal submitted a mine life activity plan for the remainder of its concession period under its CCOW to the MEMR in July 2009 for approval. Berau Coal is still in discussion with the MEMR regarding its views on Berau Coals mine life activity plan. If the MEMRs approval of Berau Coals mine life plan is not obtained, this could result in a reduction of Berau Coals concession area. There can be no assurance as to the extent to which Berau Coals concession area could be reduced. Some of the key provisions of the 2009 Mining Law include the following: the former contract of work system for foreign investment in mining projects was replaced by a system of mining licences; equal treatment for foreign and domestic investment in mining licences (except for limited priority for state-owned companies in strategic mining) was affirmed; limitations on the length of the exploration and production periods and the size of the exploration and production areas were imposed; mining can only be conducted in areas designated by the Indonesian Government as being eligible for mining; new minerals and coal mining licences are required to be awarded through a transparent tender process (similar to the Indonesian Governments existing licensing regime for oil and gas concessions); all licence holders are required to comply with environmental and mine closure obligations;

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licence holders are required to process the minerals they mine or extract within Indonesia, with existing holders of contracts of work that are producing minerals being given five years to comply with this requirement; mining operators should have mining plans for the entire concession area, failing which, such areas could be awarded to other operators; priority should be given to local mining service contractors; and mining services contracts between mining licence holders and their related parties are prohibited, subject to the approval of the MEMR and certain limited exceptions.

In addition, while the 2009 Mining Law provided a new general framework for the regulation of the mining industry in Indonesia, the implementation and administration of the 2009 Mining Law was subject to numerous new Indonesian governmental regulations. As of the date of this document, all four of the implementing regulations mandated by the 2009 Mining Law have been promulgated. On 30 September 2009, the MEMR promulgated Regulation No. 28 of 2009 on the Operation of Mineral and Coal Mining Services (Regulation 28/2009), which is an implementing regulation under the 2009 Mining Law. Regulation 28/2009 requires, among other things, that coal concession holders, rather than third-party mining service contractors, conduct certain mining activities in the coal-extraction process. While Regulation 28/2009 allows coal concession holders to continue to subcontract overburden removal (both with and without blasting) and the transport of overburden, as well as the transportation of coal from the mining area, to third-party contractors, the regulation requires coal concession holders to conduct all coal-digging, extraction and loading activities themselves. While new mining service contracts entered into after 30 September 2009 are required to immediately comply with the requirements of Regulation 28/2009, the regulation provides that all contracts between concession holders and their mining contractors existing on the effective date of the Regulation 28/2009 are grandfathered for a maximum period of three years, with holders and mining contractors being required to amend such contracts by 30 September 2012 to comply with Regulation 28/2009. As a result, all current operating agreements with mining contractors under which those mining contractors undertake coal-digging, extraction and loading activities and which expire on or after 30 September 2012 will be required to be amended before such time to the extent Regulation 28/2009 remains in force in its current form. There can be no assurance that the Group will be able to amend all of its operating agreements with its contractors to comply with Regulation 28/2009 by the 30 September 2012 deadline or at all. Furthermore, the Group will be required to ensure that all new operating agreements entered into with mining and other contractors do not contravene the 2009 Mining Law or its implementing regulations, including Regulation 28/2009. There can be no assurance that the Group will be able to enter into new contractual arrangements or amend its existing contractual arrangements with its mining contractors in a way which would minimise the impact of Regulation 28/2009 on the current scope of work performed by the mining contractors, or will be able to do so on terms similar to the Groups current contractual arrangements with its mining contractors. Both the Bumi Resources Group and the Berau Group expect that, if they are unable to enter into new arrangements with their existing or new mining contractors by 30 September 2012 in a way that meets the requirements of the Regulation 28/2009, they would undertake coal-digging, extraction and loading activities themselves, either by acquiring equity stakes in their existing or other mining contractors or purchasing the relevant equipment and hiring the relevant employees from their existing mining contractors. While these alternatives could increase the Groups operating costs, there is currently no expectation that any such increase would have a material adverse effect on the Groups results of operations. Nonetheless, there can be no assurance that the Bumi Resources Group and the Berau Group will be able to amend their existing operating agreements with their mining contractors in the manner required by Regulation 28/2009 or to undertake themselves the coal-digging, extraction and loading activities required to be performed directly by the Group under Regulation 28/2009 in a cost-effective manner. If the Bumi Resources Group or the Berau Group fail to do this in a cost-effective manner, this could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The 2009 Mining Law also provides for further Indonesian governmental regulations to implement domestic sales obligations as well as the pricing terms for such sales. In April 2010, the MEMR issued the decree setting forth the minimum percentage of domestic market sales obligations for 2010 that were required to be fulfilled by several coal mining companies. Under this decree, the minimum annual

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domestic market sales obligation for 2010 were 24.75 per cent. on a combined basis for KPC and Arutmin and 24.6 per cent. for Berau Coal. KPCs and Arutmins domestic market sales obligations for 2010 were significantly greater than the percentage of sales that these companies had historically made domestically. In August 2010, the MEMR issued the decree setting forth the minimum annual domestic sales obligations for 2011 at 24.17 per cent. on a combined basis for KPC and Arutmin and at 25 per cent. for Berau Coal. Berau Coal complied with its minimum annual domestic sales obligation for 2010. KPC and Arutmin attempted to comply with their annual domestic market sales obligation for 2010, and intend to comply with their annual domestic market sales obligation for 2011, by submitting bids for the sale of their coal in the Indonesian domestic markets when Indonesian coal end-users have undertaken tenders for coal purchases. However, none of KPCs and Arutmins bids has been accepted to date in these tenders. Based on discussions with Indonesian governmental officials, the Directors believe that KPC and Arutmin are, and will continue to be, in compliance with their annual domestic market sales obligations if these companies continue to offer to sell their coal to domestic Indonesian end-users through the tender process even though tenders sufficient to cover KPCs and Arutmins annual domestic market obligations were not accepted in 2010 and may not be accepted in 2011. Furthermore, the Directors believe that the Bumi Resources Groups existing sales contract with PLN will enable KPC and Arutmin to sell up to 26.0 per cent. of their budgeted sales volume for 2011 on the domestic market. It is uncertain to what extent further regulations will be implemented and applicable to the Group that could result in the Group having to increase the domestic proportion of its sales or will affect the prices at which the Group is able to sell its coal products in Indonesia. There is little precedent on the interpretation of the 2009 Mining Law and its implementing regulations. The legal uncertainty raised by the adoption and implementation of the 2009 Mining Law and Regulation 28/2009 has increased the risks, and may increase the costs, involved in the Groups mining operations. Additional implementing regulations that are expected to be issued by the Indonesian Government in the future may impose significant changes to the regulation of the Indonesian mining industry, which may be adverse to the Groups interests. In addition, a court or an administrative or regulatory body could in the future render interpretations of the 2009 Mining Law and its implementing regulations, including Regulation 28/2009 that differ from the Groups interpretation or could issue new or modified regulations, including modifications to Regulation 28/2009. The Groups compliance with the 2009 Mining Law and its implementing regulations may increase the Groups operating costs or otherwise impair its operations in the future, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups coal mining operations are dependent on its ability to obtain, maintain and renew licences and approvals and maintain its concessions from the Indonesian Government and other relevant governmental authorities The Groups business requires various licences and approvals from the Indonesian Government and regional governments. These licences include general corporate, mining, capital investment, manpower, environmental, land utilisation, export and import licences and other licences. These licences have various expiration dates running from six months to five years from their date of issue. The Group must renew all of its licences and approvals as they expire as well as obtain new licences and approvals when required. While the Directors believe that both the Bumi Resources Group and the Berau Group are currently in compliance with their existing licenses and approvals in all material respects, there can be no assurance that the central Indonesian Government or provincial, regional and local governments will issue or renew the licences or approvals the Group requires within its expected timeframe or at all. The Bumi Resources Groups most significant licences are its coal mining concessions granted by the Indonesian Government under first generation CCOWs with each of KPC and Arutmin. KPCs CCOW is scheduled to terminate in 2021, and Arutmins in 2019. In addition, Dairi Prima holds a mineral mining contract of work (covering, in part, zinc and lead mines) granted by the Indonesian Government. Fajar Sakti holds rights to coal concessions under KPs, and Pendopo Energi holds a third generation CCOW granted by the Indonesian Government for the mines it operates or is expected to operate. Berau Coals most significant licence is its coal mining concession granted by the Indonesian Government under a first generation CCOW currently covering 118,400 hectares in East Kalimantan and scheduled to expire in 2025.

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The Groups rights to mine coal and minerals in its concession areas depend on the continued validity of its coal and other mining contracts of work. The provisions of the Groups coal and other mining contracts of works subject the Group to various risks, including: if the Group fails to comply with its obligations under its coal and other mining contracts of work, the Indonesian Government may terminate them; third parties may challenge the validity of the Groups CCOWs and KPs. Coal mining operations in Indonesia are subject to a 1996 presidential decree which stipulates that all rights and obligations of PT Tambang Batubara Bukit Asam (Persero) Tbk., the counterparty to all CCOWs entered into prior to 1996, relating to cooperation agreements on coal mining operations (that existed prior to the effectiveness of the decree) are assigned to the MEMR. In the early part of this decade, Indonesian Government officials and others in Indonesia questioned the validity of mining contracts entered into by the Indonesian Government prior to October 1999. The 2009 Mining Law requires that existing contracts of work be amended to comply with that laws provisions. There can be no assurance that Indonesian governmental officials or others will not challenge the validity of the Groups mining rights for political or other reasons, that the Indonesian Government will not terminate the Groups mining rights through nationalisation of its operations or other means, that the Indonesian Government will not require significant alterations to the Groups existing CCOWs, mining agreements and other mining authorisations which are adverse to the Groups interests or that the Indonesian Government will otherwise continue to comply with the terms of the Groups CCOWs, mining agreements and other mining authorisations; and it may be difficult to enforce arbitral awards against the Indonesian Government in Indonesian courts. If the Group were to obtain an arbitral award from an international arbitration tribunal against the Indonesian Government relating to a dispute under any of the Groups CCOWs, the Group may face difficulties enforcing the award in Indonesia.

The Group depends on a small number of customers Each of the Bumi Resources Group and the Berau Group generates a substantial portion of its total coal sales from a small number of customers. During 2009 and the first nine months of 2010, the Bumi Resources Groups sales to its five largest customers comprised 27.1 per cent. and 26.2 per cent., respectively, of its total sales by volume. During 2009 and the first nine months of 2010, the Berau Groups sales to its three largest customers comprised 40.9 per cent. and 35.6 per cent., respectively, of its total sales. In the first nine months of 2010, the Berau Group generated 78 per cent. of its total revenues from its ten largest customers. The Groups coal supply agreements contain provisions that allow customers to suspend or terminate the agreements or seek an adjustment in the sales price or liquidated damages, if, depending on the agreement, one of the following events occurs: the Group is unable to deliver the volume and quality of coal specified; a change in law restricts or prohibits the customer from using coal with the specifications and characteristics of the coal to be delivered under the contract; there is a delay in the start-up date or shutdown of the electricity generation plant to which the coal sales relate; there is a termination of the fuel supply agreement, on-sale agreement or power purchase agreement to which the coal sales relate; or other events beyond the reasonable control of the affected party occur, including labour disputes, mechanical malfunctions and changes in government regulations.

Most of the Groups coal supply agreements contain provisions requiring the Group to deliver coal meeting certain quality specifications and characteristics, such as those relating to calorific value, moisture content, sulphur content, ash content, grindability and ash fusion temperature. The Groups failure to meet these specifications could result in economic penalties, including price adjustments, rejection of deliveries or termination of the contracts.

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The Groups inability to extend, renew or replace all or a substantial portion of its coal supply agreements with its largest customers on terms substantially equivalent to those contained in their existing agreements, including volume and pricing terms, could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. A significant portion of the Groups coal production is, and will continue to be, conducted through contractors The Group currently conducts a significant portion of its mining operations through mining contractors. The Bumi Resources Group uses the sub contractors Thiess, Pama, Cipta Kridatama and the Bumi Resources Group associated company Darma Henwa. Berau Coal uses sub-contractors for operations such as barging, stevedoring, coal quality analysis and transhipping and conducts certain of its mining operations through two mining contractors, BUMA and SIS. The Group has entered into long-term operating agreements with its mining contractors that set forth the contractors rights and obligations in undertaking mining operations in designated areas. Under these operating agreements, the contractor is responsible for providing substantially all plant, equipment, facilities, services, materials, supplies and labour and management required for the operation and maintenance of the designated mining pits. The Group is required to pay the contractor for its services according to a schedule of fixed charges per tonne of coal delivered for the relevant period. The Group works closely with its contractors to develop long-term mine plans for the amount of coal to be produced at the designated mining pits and monitors those plans from time to time. However, the contractor has ultimate responsibility for adhering to those plans and for mining the coal according to the agreed mining plan. The contractor employs substantially all of the employees who operate the mining areas under the contractors operational control. Production at the Groups mines could be disrupted by any significant failure by the Groups contractors to comply with their obligations under their operating agreements (whether as a result of financial or operational difficulties or otherwise) or any termination or significant breach of an operating agreements by a contractor. If any of the Groups operating agreements is terminated (for example, SIS has the right to terminate two mining contracts for Sambarata upon giving 90-days written notice to Berau Coal), mining operations at the affected mine could be disrupted for a significant period of time to allow the contractor to remove its equipment and a new contractor to install its equipment. The Group might not be able to find suitable replacement contractors within a reasonable period of time or at all, if any of the Groups contractors were to cease to perform their services or to terminate their operating agreements. In addition, the Bumi Resources Groups and the Berau Groups existing operating contracts with their mining services contractors may need to be amended to comply with the requirements of Regulation 28/2009. See The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects. In the past, the Group has had disputes with its contractors. For example, the Bumi Resources Group had a dispute between its subsidiary, Arutmin, and Thiess that led to proceedings in the Supreme Court of Queensland and the English High Court in London. In 2008 and 2009, Berau Coal and PT Mentari Bukit Makmur were in dispute in relation to the calculation of the fuel price adjustment under their mining contracts. As of 30 September 2010, Berau Coal had US$92.6 million in payables to PT Mentari Bukit Makmur, a portion of which represented the difference in calculation. Berau Coal and PT Mentari Bukit Makmur have fully reconciled the difference in the meantime. Any protracted dispute with the Groups contractors, any material labour dispute between these contractors and their employees or any major labour disputes by those employees against the Groups contractors could materially adversely affect the Groups operations and production, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. In addition, any significant increase in the fees payable by the Group to its contractors would increase the Groups mining costs and adversely affect its profitability. The Group is dependent on international marketing agents for its export coal sales and some of its marketing agency agreements are on an exclusive basis The Group markets and sells its coal through domestic and international marketing agents with which the Group has long-term marketing agreements. 18

The Bumi Resources Group markets and sells its coal from the Sangatta and Bengalon mines in Japan through Mitsubishi and outside Japan through a marketing affiliate of Glencore. The Bumi Resources Group will continue to market and sell its coal from the Senakin, Satui, Mulia, Asam Asam and Batulicin mines outside Indonesia through a marketing affiliate of BHP Billiton until November 2011, and thereafter, through a marketing affiliate of Glencore. Fajar Sakti also markets and sells coal from its Loa Ulung mine outside Indonesia through a marketing affiliate of Glencore. Glencore and BHP Billiton have affiliates that own and operate coal mines or act as international marketing agents for other coal producers for sales of coal products in the same markets in which the Bumi Resources Group sells its coal. Glencore or BHP Billiton may favour the interests of its affiliates operations and its other coal mining clients over the Bumi Resources Group in sales opportunities. In addition, Mitsubishi acts as an international buying agent for coal customers in Japan and an international marketing agent for other coal producers in Japan. Mitsubishi may favour the interests of its other clients over the Bumi Resources Groups interests. If any of the Bumi Resources Groups international marketing agents were to terminate or breach their marketing agreements, the Bumi Resources Group would be required to seek other marketing agents for its coal products or conduct its own marketing activities internally, which could disrupt the Bumi Resources Groups sales of coal and have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Following Beraus acquisition of Maple in September 2010, Maple appointed Noble Resources Pte Ltd (Noble) as its marketing advisor and agent for the sale of the Berau Groups coal throughout the world except in Indonesia, Japan and Malaysia. The Berau Group had already in 2009 assigned to Maple the right to market the groups coal outside of Japan. In relation to Japan, Sojitz Corporation (Sojitz) has been and continues to be the Berau Groups exclusive international marketing agent in Japan. As a result of Beraus acquisition of Maple, the Berau Group has been transitioning its marketing efforts away from historical use of third-party international marketing agents for various jurisdictions. The agreements with these agents have remaining terms ranging between several months to eight years. In addition to Sojitzs exclusive marketing rights for Japan, third-party agents have historically been responsible for export sales to customers in China, Hong Kong, India, Japan, the Philippines, South Korea, Thailand and Taiwan. These agents included Honson International Corporation (Honson) in Taiwan, NC Korea Co. (NuCo) in Korea and Kin Rich International Enterprises Ltd. (Kin Rich) in Hong Kong. Sales to customers under third-party marketing agency agreements comprised 52.1 per cent. and 49.6 per cent. of Berau Coals total revenues in 2009 and the nine months ended 30 September 2010, respectively. In December 2010, Berau Coal took measures to cease using Honson, NuCo and Kin Rich as marketing agents and sent notices of termination of their existing agency agreements. As a result of these termination notices, Berau Coal will either reach agreed terms for settlement of future liabilities owed to these agents under sales contracts that have already been executed, continue to pay those liabilities as they become due without involving the agents in future coal sales contracts or, through Maple, provide these agents with opportunities to act as marketing agents for third-party coal companies. The termination of the services previously provided by Honson, NuCo and Kin Rich could make Berau Coals marketing efforts less effective in the future than they have been in the past. The Group depends on key pieces of plant, equipment and machinery for the Groups coal mining operations The Groups coal mining operations depend on key pieces of plant, equipment and machinery. Key pieces of plant, equipment and machinery include: in relation to the Bumi Resources Group, excavators, bulldozers, graders and coal-hauling trucks, coal-crushing plants, coal-washing plants, coal shiploaders and shipping terminals at KPC and Arutmin, a single overland belt conveyor at KPC and barge-loading belt conveyors at Arutmin; and in relation to Berau Coal, loading jetties at the Lati, Suaran and Sambarata mining areas; the semi-submersible transhipper SST Berau, the floating jetty Princess Abby, the floating offshore transfer platform FOTP Derawan, crushers, conveyor belts and Genset electricity generators.

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The Bumi Resources Group transports all coal produced at the Sangatta mine from the coal crushing plant to the coal-shipping terminal by a single 13.2 kilometre overland belt conveyor. If this overland belt conveyor were to cease operating or reduce its operating level for any significant length of time for any reason, the Bumi Resources Group would be required to transport the coal at the Sangatta mine to its shipping terminal by truck, which would significantly reduce the rate of production and increase the production costs at the Sangatta mine. In addition, the Bumi Resources Group would not be able to transport coal from the mining areas at Sangatta to the coal shipping terminal as quickly as necessary to comply with coal delivery obligations under coal supply agreements for coal produced at this mine. If the coal shiploader were to cease operating for any significant length of time for any reason, the Bumi Resources Group would be unable to load coal onto the ships at the shipping terminal for the Sangatta mine for transport to customers of coal produced at this mine and, to continue shipping coal, the Bumi Resources Group would be required to tranship the coal at a lower loading and shipping rate. The Bumi Resources Group loads a substantial portion of its coal mined at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines onto ships through the North Pulau Laut coal terminal and a substantial portion of its coal mined at the Bengalon mine through the barge port facility owned by Mitratama, currently a 30.0 per cent. owned associate of Bumi Resources following of Bumi Resources recent divestment of 70.0 per cent. of its equity interest in the Mitratama. If the shiploader or shipping terminal at any of the Groups mines were to cease operating or were to reduce operating levels for any significant length of time, the Group would be unable to load coal from the relevant mines onto ships at the shipping terminal for transport to the Groups customers. As a result, the Group would need to increase the amount of coal the Group tranships directly from barges to its customers or their ships at lower loading and shipping rates. In addition, the Group has a number of contracts for the use of other logistics equipment that is material to the Groups operations. For example, the Bumi Resources Groups right to use Mitratamas barge port facility at the Bengalon mine and coal processing plant and the Sangatta mine is governed by rental agreements with Mitratama, which expire in April 2013. The floating jetty Princess Abby is operated by PT Mitra Swire CTM on behalf of Berau Coal pursuant to a rental agreement that expires in 2011. The SST Berau is owned and operated by Lati Transhippers Inc. and leased to Berau Coal pursuant to a rental agreement that expires in September 2015. If the counterparties to any of these rental agreements were to terminate or breach their agreements, or refuse to renew the terms of their agreements on their expiry, the Groups coal mining operations may be disrupted. Any significant damage to, failure of, or operational difficulties with components of the Groups coal chains could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group and its contractors face risks related to the Groups expansion programs The Group has significant plans for expansion. Under its current mine plans, the Bumi Resources Group intends to expand its annual coal production capacity at KPC and Arutmin to approximately 74.8 million tonnes in 2011 from approximately 72.0 million tonnes in 2010. Under the Berau Groups current mine plans, Berau Coal plans to increase its annual gross coal production from approximately 17.4 million tonnes in 2010 to 20.4 million tonnes in 2011 by increasing production at its existing mines. Berau Coal also plans to develop additional areas in its existing mines as well as in Gurimbang, Parapatan and Kelay in 2012 to 2014, with the aim of reaching 30.0 million tonnes of coal production by 2014. To enhance its coal chain and reduce operating costs, the Bumi Resources Group intends to procure additional equipment and additional infrastructure at its mines, including an on-site coal-fired power plant for its captive use at the Tanjung Bara coal terminal at the Sangatta mine, new coal chains from Melawan and Bendili Hill deposits to the Sangatta mine coal processing area and more facilities to boost Arutmins coal chains at the Satui, Mulia and Asam Asam mines. In addition, the Bumi Resources Group intends to expand the coal-chain handling capacity from the Sangatta coal processing area to the Tanjung Bara coal terminal and to upgrade the barge loading facilities and coal crushers at the Bengalon mine. The Bumi Resources Group may undertake the construction of infrastructure at its mines on its own and/or through third-party contractors, which would be responsible for the financing and construction of the relevant infrastructure at the mines. To increase its coal handling capacity, Berau Coal has increased its budgeted annual capital expenditures for maintenance and expansion, especially at the Lati mine. Berau Coals mining

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contractors are responsible for obtaining and installing any additional equipment and hiring any additional personnel required for them to increase their production capacity at the existing mines to comply with Berau Coals expansion plans and the contactors contractual obligations. Irrespective of whether the Group itself or third-party contractors undertake the Groups expansion activities, the Group must acquire the governmental permits and licences for its exploration activities and the production of coal. Further, to the extent a mine area belongs to the local communities, the Group must acquire the land rights from the local communities to conduct its exploration, mining and stockpiling activities in accordance with its expansion plans. If the mine area belongs to the department of forestry, state-owned companies or other third parties, then a borrow-use permit or land use agreement must be obtained or entered into prior to conducting the operations. The Group may not be able to successfully implement its expansion programs as a result of a number of factors affecting the Group or its mining contractors, including: the Group may encounter difficulties in contracting with additional contractors on acceptable terms or at all. In addition, existing and additional mining contractors may not be able to fulfil their obligations under their operating agreements. The failure of any one of the Groups contractors to fulfil its obligations under its operating agreement would require the Group to seek an alternative contractor or to undertake the expansion activities internally, thereby delaying and potentially increasing the costs of the Groups expansion programs; the equipment and machinery modified or installed in the Groups coal chains or other infrastructure may not perform according to specifications or to the Groups expectations; the Group or its contractors may experience difficulties in obtaining machinery, equipment and spare parts, particularly coal-hauling trucks, excavators and tires for such equipment, as well as materials such as explosives, required to increase production, due to capacity and supply constraints in the world steel and rubber markets and high global demand for those materials and other mining equipment; the Group or its contractors must obtain government permits, licences approvals and land rights under, and comply with applicable laws and regulations to proceed with the Groups expansion programs, including laws and regulations requiring environmental impact studies for the increasing production at mines. Any failure to receive such permits, licences and approvals within the Groups expected timeframe or at all could delay or disrupt the Groups expansion; the Group may generate insufficient cash flow from its operations and experience difficulties in obtaining additional financing to meet its planned capital expenditure requirements, which could require the Group to revise its planned expansion plans or otherwise seriously impede the Groups ability to complete its planned expansion within the expected time frame or at all; and unforeseen conditions or developments that arise during the Groups expansion programs could substantially delay the planned expansion, including adverse weather conditions (such as heavy rainfall and forest fires), land disputes with squatters in the Groups concession areas, difficulties negotiating with squatters to vacate these areas and equipment and machinery malfunctions once operations commence.

The Groups inability to expand its operations and production at its coal mines as planned could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups mining operations are dependent on its ability to obtain, maintain and renew land-use rights in forestry areas Pursuant to the Indonesian Law No. 41 of 1999 on Forestry as amended by Law No. 19 of 2004, which ratified the Indonesian Government Regulation in Lieu of Law No. 1 of 2004 (the Forestry Law), and related regulations, mining companies must obtain a borrow-use permit from the Indonesian Ministry of Forestry before conducting mining activities in production forest areas. A borrow-use permit is valid for 20 years from its issuance date and can be extended. If the land in question is managed by a state-owned company such as PT Inhutani (Persero) or PT Perkebunan Nusantara (Persero), a land use agreement should be entered into prior to the commencement of mining activities. If the Group

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conducts mining activities within production forest areas without a land-use agreement or borrow-use permit, the Group could be subject to a Rp.5.0 billion fine and members of the Groups management may be imprisoned for up to 13 years and four months. Berau Coal has obtained a borrow-use permit for 2,587 hectares of forestry in Binungan area in August 2009, effective until July 2027 and permits for coal exploration in Kelay area in December 2009 and June 2009, effective until December 2011 (Kelay 1) and August 2011 (Kelay 2). If the Group is unable to obtain, maintain or renew its borrow-use permit or land use agreements over the relevant mining area, the Group would be materially adversely affected. The Group or its contractors may need to incur substantial additional indebtedness or issue equity or equity-linked securities to finance the Groups expansion programs. The Group and its contractors ability to obtain such additional financing may be limited, which could delay or prevent the implementation of one or more of the Groups expansion and production ramp-up programs The Groups expansion plans include development of the Groups mine exploration and development projects and the expansion of production at the Groups existing mines. The Groups expansion plans will require significant capital outlays. The Group may undertake its expansion plans on its own or through third-party contractors, which will be responsible for the financing and construction of the relevant additional infrastructure at the Groups mines. To increase production at its mines, the Group and its contractors will be required to install new mining equipment and machinery and continuously upgrade and expand the Groups mining equipment and machinery. The Bumi Resources Group currently intends to fund its expansion plans in 2011 from cash on hand and cash generated internally from its existing mines as well as through its mining contractors, which have received financing commitments for their expansion activities in 2011. The Bumi Resources Group or its contractors may require more debt and equity funding to fund their expansion programs. The Bumi Resources Groups ability to increase production capacity from approximately 72.0 million tonnes in 2010 to approximately 74.8 million tonnes in 2011 under its current mine plan will depend, to a large extent, on the ability of Darma Henwa, the mining contractor at the Asam Asam mine, to refinance and increase its indebtedness, which it is currently negotiating with its creditors, in order to improve and expand its mining equipment and mobile fleet to ramp up production at the Asam Asam mine. In addition, the Bumi Resources Group may require further financial resources for the exploration and development activities of its newly acquired coal mines. The Bumi Resources Group incurred estimated capital expenditures of US$242.0 million in 2010 and plans to incur US$533.0 million in 2011. In addition, the Bumi Resources Group spent an estimated US$244.3 million in 2010 and currently plans to spend US$294.3 million in 2011 on finance leases. While the Berau Group intends to use cash on hand and cash generated internally from existing mines to fund its expansion plans, should available cash resources be insufficient, the Berau Group or its contractors may need to obtain debt or equity funding to be able to complete these expansion plans. In 2011, the Berau Group intends to spend US$131 million on property, plant and equipment and US$4 million on exploration and evaluation activities, compared to an estimated US$99 million and US$4 million, respectively, in 2010. The Groups and its contractors debt and equity requirements will depend on, among other factors, whether the Groups mine exploration and development activities and expansion projects are completed within budget, any further investments and/or acquisitions the Group may make, and the amount of cash flow from the Groups existing operations. If delays and cost overruns of the Groups expansion projects were significant, the additional funding the Group or its contractors would require could be substantial. The Groups raising of additional debt funding, if required, would entail additional risks. The Groups and its contractors ability to obtain required capital on acceptable terms is subject to a variety of uncertainties, including: limitations on the Group and its contractors ability to incur additional debt, including as a result of prospective lenders evaluations of the Groups and its contractors creditworthiness and pursuant to restrictions on incurrence of debt in existing and anticipated debt arrangements;

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investors and lenders perception of, and demand for, debt and equity securities of natural resources companies; conditions of the U.S., European, Asian (including Indonesian) and other capital markets in which the Group and its contractors may seek to raise funds; the Group and its contractors future results of operations, financial condition, cash flows and prospects; and economic, political and other conditions in Indonesia, the Asian region and globally in general.

If the Group and its contractors are not able to secure adequate financing, the Groups expansion programs may be disrupted and the Group may not be able to: complete the development of the Groups existing expansion projects in a timely manner or develop new projects; acquire the necessary mining and other rights or assets for the expansion projects; expand the Groups operations and increase its production at existing mines; or respond to competitive pressures or unanticipated funding requirements of the Groups expansion projects.

There can be no assurance that the necessary financing will be available in amounts or on terms acceptable to the Group or its contractors or at all. If the Group or its contractors fail to raise additional funds in such amounts and at such times as required, the Group may be forced to reduce its growth to a level that can be supported by the Group or its contractors cash flow and delay the development of the Groups mine exploration and development projects or the expansion programs at the Groups existing mines. The Groups inability to expand its operations and production at its coal mines as planned could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups coal mining operations have been adversely affected by illegal mining and conflicting mining permits issued by local governments Unauthorised extraction and removal of coal from mining concession areas is a common problem for several mine operators in Indonesia, including the Group. Illegal mining in Indonesia increased from 2003 to 2008 primarily due to increases in market prices for coal during that period, the decentralisation of the central Indonesian Governments authority and weakened control over regional activities under Indonesian regional autonomy laws and increased black-market demand for coal products. Mining company losses from illegal mining include reserve losses and the rehabilitation costs associated with illegally mined areas. Certain of the Groups operations have been affected by illegal mining by third parties. For example, the Bumi Resources Groups operations at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines have been adversely affected by illegal mining from unauthorised miners and from miners who have received permits to mine coal within the Bumi Resources Groups concession for these mines issued by local or regional governments in conflict with rights under the Arutmin CCOW with the central Indonesian Government. The Bumi Resources Group has brought these conflicting permits to the attention of officials at the MEMR, but the permits have not been revoked. While the Bumi Resources Group did not experience significant illegal mining activities at its mines in 2010, legal actions against several unauthorised miners are ongoing. In relation to the Berau Group, examples of conflicting permits include the Ministry of Forestrys issuance of a licence to PT Tanjung Redeb Hutani to use forest areas that overlapped with Berau Coals concession area under its CCOW. As a result, Berau Coal entered into a settlement agreement in 2007 with PT Tanjung Redeb Hutani pursuant to which Berau Coal paid PT Tanjung Redeb Hutani compensation of US$5.0 million and agreed to engage PT Tanjung Redeb Hutani as its mining contractor for the Gurimbang mine on an exclusive basis, subject to approval by the Indonesian Government, which denied its approval. An amendment to the settlement agreement is being discussed between Berau Coal and PT Tanjung Redeb Hutani and, once agreed between the parties, may require approval from the Indonesian Government.

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While the Directors believe that neither the Bumi Resources Group nor Berau Coal have any material disputes in relation to conflicting mining permits and concessions, there can be no assurance that illegal mining within the Groups concessions for its mines will not increase in the future or that the Group will be successful in invalidating permits issued by local or regional governments and evicting the holders from the Groups concessions. Any significant increase in illegal mining within the Groups concessions or the commencement of illegal mining or the issuance of additional permits that conflict with the Groups rights under its CCOWs or its KPs could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups coal mining operations create difficult and costly environmental challenges. Changes in environmental laws and regulations or their interpretation or implementation or unanticipated environmental effects from the Groups operations could require the Group to incur new or increased costs The Groups coal mining operations could adversely affect the environment as a result of, among other factors, the Groups water use, disposal of overburden, acid runoff from the Groups mining pits and emissions from its coal-crushing, screening and washing plants and, at KPC, its power plant. The Group is subject to Indonesian environmental and health and safety laws, regulations and other legal requirements enacted or adopted by the central Indonesian Government and regional governments. These laws govern the discharge of substances into the air and water, the management and disposal of hazardous substances and wastes, site cleanups, groundwater quality and availability, plant and wildlife protection and reclamation and restoration of mining properties after mining is completed. The costs associated with complying with these laws have had, and will continue to have, a significant impact on the Groups operating costs and competitive position. In addition, the Group could incur substantial costs as a result of violations of, or liabilities under, environmental and health and safety laws. An environmental law enacted by the Indonesian Government in October 2009 will require the Group to obtain additional environmental permits. However, the implementing regulations that are expected to set forth the procedures for obtaining those environmental permits have not yet been promulgated. The impact of the Groups operations on the environment may be materially greater than the Group currently anticipates or is allowed by Indonesian environmental laws and regulations. In addition, the requirements for compliance and remediation under existing Indonesian laws and regulations may be materially increased by new laws or regulations or changes in the interpretation or implementation of existing laws and regulations. Furthermore, as the Bumi Resources Group develops new mines and mining areas in countries outside Indonesia, such as in Mauritania and Liberia, the Bumi Resources Groups operations in those countries will become subject to the environmental laws, regulations and legal requirements of those countries, requiring the Group to expend financial resources to comply with those laws, regulations and legal requirements and exposing the Group to potential liability for noncompliance. Any material increase in environmental compliance and remediation costs or the occurrence of a major environmental accident at the Groups mines could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group may not be able to produce sufficient amounts of coal to fulfil its customers requirements, which could harm customer relationships The Group may not be able to produce sufficient amounts of coal to meet its customers demands or the amounts the Group is required to deliver under its coal supply agreements due to many factors, including labour disputes, equipment and machinery failures and other operational difficulties, difficulties in acquiring essential machinery, equipment and spare parts, inclement weather and variations in the quantity and quality of coal within the Groups coal seams. The Groups inability to satisfy its contractual obligations and its customers demands could result in customers initiating claims against the Group or otherwise harm the Groups relationships with its customers, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group is dependent on key personnel as well as the availability of qualified technical personnel The Group is dependent on certain key senior management employees, including members of the boards of Vallar, Bumi Resources and Berau. If the Group loses the services of any of its key management employees, the Group may have difficulties in finding, relocating and integrating adequate replacement personnel, which could seriously hamper the Groups operations and the growth

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of the Groups business. The Group is also dependent on attracting qualified technical employees to provide services in relation to certain of its coal and other mining operations, including in relation to the Groups expansion programs. Coal mining is a labour-intensive industry. As the Groups operations expand, the Groups future success will depend greatly on the Group and its mining contractors continued ability to attract and retain skilled and qualified personnel. With the increases in coal prices from 2003 to 2008 and the expansion of coal exploration efforts in Indonesia, the Indonesian coal industry has experienced, and continues to experience, a relatively high degree of worker mobility, which could potentially result in a bidding war between the Group and its competitors for qualified technical personnel. Even if the Group is able to attract, integrate and retain new qualified technical personnel, this may be achieved on uneconomic terms. Any failure by the Group to retain its current workforce or hire comparable personnel in the future could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups operations are subject to unexpected disruptions from operational and infrastructure risks, inclement weather and natural disasters The Groups mining operations are subject to events and operating conditions that could disrupt the production, loading and transportation of coal at or from the Groups mines. These events and conditions include: adverse weather and natural disasters, including heavy rains, floods, earthquakes and forest fires; hazards of maritime operations, such as piracy, capsizing, collision and adverse sea conditions; failure of contractors to obtain key machinery, equipment and spare parts; unexpected equipment failures and maintenance problems; failure to obtain key materials and supplies, such as explosives, fuel and spare parts; variations in coal seam thickness, the amount and type of rock and soil (overburden) overlying the coal seam and other discrepancies to the Groups geological models; delays or disruptions in the Groups coal chains, shipments of coal products or importation of equipment and spare parts, such as in July 2006 when some of Berau Coals customers requested a delay in their coal deliveries due to inclement weather at their ports; barging delays due to river congestion and limited rainfall causing shallow conditions along the key transport rivers; changes in geologic conditions and geotechnical instability of the highwall of the Groups mining pits; and protests by local communities against the Groups mining activities relating to environment and compensation claims, which have occurred in the past, such as in 2004 when protests barred Berau Coals mining contractors at Sambarata from conducting operations, resulting in work stoppages for over one month, and in 2007 when protests from the local community over the price to be paid for land acquisition prevented Berau Coals mining contractors at Sambaranta Block B1 from commencing mining operations during the trial production stage.

Mining activities, particularly underground mining (which BRMs operations will involve), are inherently risky and hazardous. The Group and its contractors have in the past experienced work-related casualties, such as an incident in July 2010 when one of the Bumi Resources Groups contractors employees was fatally injured in a collision at one of KPCs mines. Specific risks associated with the underground mining operations of Fajar Sakti include underground fires and explosions (including those caused by flammable gas), cave-ins or ground sinkage, discharges of gases or toxic chemicals, flooding, sinkhole formation and ground subsidence during underground drilling, removal and processing of coal. Injuries and deaths of workers at the mining operations of Fajar Sakti have occurred in the past and may occur in the future. In June 2009, a worker was killed and another was injured during a cave-in at the Bumi Resources Groups Loa Ulung mines. At NNT, in which Bumi Resourcess subsidiary BRM holds an effective 18.0 per cent. interest, one employee was fatally injured in January 2010 when the rubber-tire dozer he was operating was buried under debris. There can be no assurance that accidents will not occur at the Groups mines in the future.

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For sustained periods in recent years, rainfall levels at the Groups coal mining operations have been significantly higher than the historical average levels for the relevant periods. In one incident during June 2006, Arutmins mining operations were disrupted for two weeks after a river overflowed its banks and flooded the Satui mine. During mid-2008 and mid-2009, incidents of floods disrupted operations at the mines of KPC and Arutmin, with each lasting for up to two days. In the third quarter of 2010, operations at the mines of KPC and Arutmin were severely disrupted by continuous, unusually high levels of rainfall. In addition, Berau Coal experienced several interruptions to its operations in 2007 and 2008, particularly during the first half of 2008, due to the exceptionally heavy and prolonged periods of rainfall. As a result of these and other events and operating conditions, Berau Coal was unable to achieve its target production of 15.1 million tonnes in 2008. The Bumi Resources Group expects its non-coal mining operations, including its zinc and lead mining operations at the Dairi Project of Dairi Prima, to experience similar production risks and potential production disruptions when they begin commercial production in the future. Any disruption of the Groups operations due to any of the events or conditions described above or otherwise could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Proved and probable coal reserves are expressions of judgement based on knowledge, experience and industry practice, and any adjustments to estimated proved and probable coal reserves could adversely affect the Groups development and mining plans Estimates of proved and probable coal reserves are expressions of judgement based on knowledge, experience and industry practice. In determining the feasibility of developing and operating the Groups mines, the Group uses estimates of coal reserves and resources that are made by its internal personnel and that are generally reviewed annually by an independent mining consultant. Numerous uncertainties inherent in estimating quantities and the value of recoverable and marketable coal reserves exist, including many factors beyond the Groups control. As a result, estimates of reserves are, by their nature, uncertain. When calculating reserves estimates, the Group makes assumptions about: geological conditions; production from the mining area compared with production from other producing areas; the effects of regulations, including environmental, health and safety regulations and taxes; future coal prices; and future operating costs.

As a result, estimated coal reserves and resources may require revisions based upon actual production experience, operating costs, coal prices and other factors. Determinations of coal resources or reserves that appear valid when made may change significantly when new information becomes available. Actual facts may vary considerably from the assumptions the Group uses in estimating its reserves. For these reasons, the Groups actual recoverable and marketable reserves and its actual production, costs, revenues and expenditures relating to reserves may vary materially from its estimates. The Groups estimates may not accurately reflect its actual reserves or be indicative of future production, costs, revenues or expenditures. The Groups recovery rates will vary from time to time, which will increase or decrease the volumes of coal that the Group can sell from period to period. If the Group encounters coal seams or formations different from those predicted by past drilling, sampling and similar examinations and exploration activities, the Group may have to adjust its coal reserve amounts. Also, the Groups reserve amounts have been determined based on assumed coal prices and historical and assumed operating costs. Some of the Groups reserves may become unprofitable or uneconomic to develop if the long-term market price for coal decreases or the Groups operating costs and capital expenditure requirements increase. In addition, the Groups exploration activities may not result in the discovery of additional coal deposits that can be mined profitably or of coal products that meet the quality specifications in its coal supply agreements. Adjustments to proved and probable coal reserves could also affect the Groups development and mining plans and any significant reduction in the volumes and grades of the coal

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reserves the Group recovers from what those estimated could have a materially adverse effect on the Groups business, financial condition, results of operations and prospects. In addition, the Groups volume of production from its mine properties will decline as its reserves are depleted. The Groups business may be adversely affected if the Group is unable to acquire additional coal resources in its concession areas to convert into economically recoverable coal reserves or if the Group is unable to acquire additional coal resources and reserves The Groups existing coal reserves will decline as mining continues. Therefore, the Groups growth and long-term success will depend on the Groups ability to acquire additional coal resources within its exploration areas and to convert such coal resources into economically recoverable coal reserves. New coal resources may not be found or may not be economically recoverable, or the Indonesian Government may not approve the expansion of its mining operations. For example, Berau Coal estimates that all its coal reserves will be mined by the expiry of its CCOW in 2025. If the Group is unable to discover new coal resources or is unable to acquire additional coal resources and reserves, this could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Even if the Group discovers additional resources or acquires additional coal resources, this could take a number of years from the initial phases of drilling until exploitation is possible, during which time the economic viability of production may change depending on the price of coal, which is subject to significant volatility, and other factors, including fuel, labour, equipment and other operating costs, government regulations and exchange rate fluctuations. If a project proves not to be economically feasible by the time the Group is able to exploit it, the Group may incur substantial write-offs. As a result of any of the foregoing factors, the Group may not be able to discover any viable resources, may be unable to exploit any resources discovered or may not be able to recover all or any portion of the Groups investment in those exploration activities. The Groups exploration activities may not yield any commercially viable resources As part of its business strategy, the Group engages in exploration activities to develop and exploit coal, gold, silver, copper, iron ore, zinc, lead, oil and other mineral, metal and natural resources in the Groups concession areas where there is potential to enhance the Groups revenue growth, operations, cash flows and results of operations. The Group has incurred and is expected to continue to incur significant costs in undertaking these development and exploration activities. The Groups ability to successfully and profitably exploit its resources will depend on numerous factors, including the availability of feasible resources in the Groups concession areas, the Groups ability to successfully locate these resources, its ability to secure the financing and expertise to build the necessary infrastructure and to successfully extract these resources and social, political, economic, legal and regulatory factors prevailing in the markets where those resources may exist. As a result of any of these factors, the Group may not discover any viable resources, may be unable to exploit any resources discovered and may not be able to recover any or all of the Groups investment in those development and exploration activities, each of which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group has significant ongoing mine reclamation and rehabilitation obligations The Indonesian Government establishes operational, reclamation and closure standards for all aspects of surface mining. Based on the geological characteristics of its mines, the Group has developed mine reclamation and rehabilitation strategies. The long, narrow coal deposits of the Groups surface mines enable the Group to use topsoil from land clearing immediately to rehabilitate previously mined blocks. As the Group mines its deposits, the Group places overburden into the pit. As new areas for mining are disturbed, the Group records an expense for the estimated cost of the reclamation and rehabilitation activities (including reclamation and rehabilitation expenses for areas being mined by contract miners) and records a liability for the estimated future cash outlays for reclamation and rehabilitation. These expenses increase as the Group disturbs more areas for mining to increase coal production. The Group

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could incur losses from any illegal mining in its concession areas such as reserve losses and rehabilitation costs. Under the terms of the Bumi Resources Groups and Berau Groups operating agreements with their mining contractors, the mining contractors are responsible for the reclamation of mining areas under the contractors control. In addition, under the terms of the Bumi Resources Groups operating agreements with its mining contractors, its mining contractors are also responsible for the rehabilitation of mining areas under the contractors control. However, under the terms of their CCOWs and the applicable regulations, the members of the Bumi Resources Group that holds the CCOW and Berau Coal remain ultimately responsible to the Indonesian Government for the reclamation and rehabilitation of all areas mined within the Groups concession areas. Pursuant to MEMR Regulation No. 18 of 2008 concerning Reclamation and Mine Closure (MEMR Regulation 18), the Group must provide reclamation guarantees and closing of mine guarantees for the Groups mines in the form of a time deposit, bank guarantee or insurance annually. Pursuant to MEMR Regulation 18, the Group is required to submit mine closure plans and reclamation plans for its mining concessions to the MEMR. The Bumi Resources Group and the Berau Group submitted their mine closure plan and reclamation plans to the MEMR in 2010. These mine closure plans and the Bumi Resources Groups reclamation plans are being reviewed by the MEMR, while the Berau Groups reclamation plan has been approved by the MEMR. The Groups mine reclamation and rehabilitation liabilities could change significantly if actual costs vary from the Groups assumptions or if Indonesian regulations change. Any significant unanticipated increase in the Groups reclamation and rehabilitation costs could have material adverse effect on the Groups business, financial condition, results of operations and prospects. Fluctuations in transportation costs and disruptions in transportation could adversely affect the demand for the Groups coal and increase competition from coal producers in other parts of Asia and the world Transportation costs, which represent a significant portion of the Groups customers total cost of coal purchased, are a critical factor in customers purchasing decisions. Under the terms of most of the Groups coal supply agreements, customers are responsible for paying transportation costs. From mid-2005 until the third quarter of 2008, freight costs increased before beginning to drop in the fourth quarter of 2008. Though freight costs have since stabilised, they remain relatively high compared to historical levels. Increases in transportation costs could make coal a less competitive source of energy or could make the Groups coal less competitive than other sources of coal. The Group depends on ships to deliver coal to its customers. While the Groups customers typically arrange and pay for transportation of coal from the Groups coal shipping terminals to the point of use, disruption of these transportation services due of weather-related problems (particularly during January and February, historically the months with the heaviest rainfall in Indonesia), distribution problems, labour disputes, lock-outs or other events could temporarily restrict the Groups ability to supply coal to its customers or could result in demurrage claims by ship owners for loading delays. Significant decreases in transportation costs or the absence of disruptions in coal transportation systems could also result in increased competition from coal producers in other parts of Asia, Australia and South Africa. Decreases in overall transportation costs or freight rates and the availability of other modes of coal transportation from certain parts of the world may give the Groups competitors from other areas of the world a pricing advantage, depending on their proximity to the target market. Any of the foregoing factors could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Groups results of operations are subject to fuel price volatility The Groups results of operations are subject to fuel price volatility. For example, the Bumi Resources Group bears all fuel price risk on its contractors fuel supplies under contracts with its mining and barging contractors. Under the terms of the Berau Groups contracts with certain of its mining and barging contractors, the Berau Group bears a portion of any fuel price increase, although the terms of most of these contracts pass along some fuel price fluctuations to the contractors. Global oil prices increased significantly in 2007 and remained high in 2008 and, as a result, the Berau Groups production

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costs and its contractors operational costs attributable to fuel have increased. Primarily as a result of fuel price increases, the Berau Groups freight and handling costs increased from US$60 million in 2007 to US$100 million in 2008 and decreased to US$79 million in 2009 before increasing again to US$91 million in the first nine months of 2010. Fuel price may also increase as a result of a reduction in fuel price subsidy by the Indonesian Government. Beginning October 2009, the Berau Group ceased to reimburse SIS for its fuel costs and instead began purchasing fuel directly from PT Pertamina (Persero), Indonesias state-owned oil and gas company, and providing the purchased fuel to SIS. The Berau Group has entered into the same arrangement with BUMA with effect from 1 January 2010. These adjustments have increased the Berau Groups exposure to fluctuations in the price of fuel. Neither the Bumi Resources Group nor the Berau Group has hedged its fuel price risk. Any increases in the price of fuel would cause a corresponding increase in the Groups costs and if such costs are passed on to customers, affect the Groups competitiveness relative to competitors that engage in fuel hedging. Coal characteristics may make it difficult for coal users to comply with environmental standards related to coal combustion causing the Groups customers to switch to alternative fuels, which would adversely affect the Groups volume of sales Coal contains impurities, including sulphur, mercury, chlorine and other elements and compounds, many of which are released into the air when coal is burned. Stricter environmental regulations of emissions from coal-fired steam power generation plants and other industrial plants could increase the costs of using coal, thereby reducing demand for coal as a fuel source, the volume of the Groups coal sales and its coal sales prices. Stricter regulations could make coal a less attractive fuel alternative in the planning and building of electricity generation plants in the future, thereby reducing demand for coal, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Indonesia and more than 160 other nations are signatories to the 1992 Framework Convention on Global Climate Change, which is intended to limit or capture emissions of greenhouse gases, such as carbon dioxide. In December 1988, in Kyoto, Japan, the signatories to the convention established a potentially binding set of emissions targets for developed nations. The specific emissions targets vary from country to country. In December 2007, the signatories to the convention participated in the United Nations Climate Change Conference in Bali, Indonesia. At this conference, the participants agreed to the adoption of the Bali roadmap, which sets forth a negotiating process. This process is ongoing, with the view to concluding a post-2012 international agreement on climate change. The enactment of legislation on climate change or other laws relating to greenhouse gas emissions could have the effect of restricting the use of coal in the Groups primary markets. Other efforts to reduce emissions of greenhouse gases and initiatives in various countries to encourage the use of natural gas also may affect the use of coal as an energy source and could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government Prior to 1 January 2001, unprocessed coal was subject to value-added tax and therefore all input valueadded tax was offset against output value-added tax collected on coal sales. However, since 1 January 2001, unprocessed coal has not been subject to value-added tax in Indonesia. Thus, from 2001 onwards, KPC, Arutmin and Berau Coal have not received output value-added tax (including from exports) on their coal sales, against which they could offset (or credit) the input value-added tax they pay on imports and local purchase of materials, supplies and other goods. Under the terms of the KPC, Arutmin and Berau Coal CCOWs, the Indonesian Government has agreed to indemnify KPC, Arutmin and Berau Coal against all Indonesian taxes, duties, rentals and royalties levied by the Indonesian Government, other than those expressly imposed under those CCOWs. Value-added tax was not expressly imposed by the CCOWs. Although KPC, Arutmin and Berau Coal have claimed reimbursement under the abovedescribed indemnity from the Indonesian Government for the input value-added tax they have paid since 1 January 2001, the Indonesian tax authorities have rejected their claims. Accordingly, since 1 January 2001, KPC, Arutmin and Berau Coal have offset the input value-added tax they have paid against their royalty obligations due to the Indonesian Government under their respective CCOWs.

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Given the rights of KPC, Arutmin and Berau Coal under their CCOWs and a 2004 Supreme Court decision stating that the regulation imposing value-added tax on unprocessed coal is inconsistent with Indonesian law, the Directors believe KPC, Arutmin and Berau Coal are entitled to offset the input value-added tax refunds against their royalty obligations to the Indonesian Government. Nevertheless, in 2006, the Indonesian Government sent KPC, Arutmin and Berau Coal, as well as the other first generation coal mining companies in Indonesia, a letter suggesting that it is inappropriate to offset value-added taxes against their royalty obligations to the Indonesian Government. In July 2007, Berau Coal received a letter from the State Receivables Affairs Agency (Panitia Urusan Piutang Negara) demanding unpaid royalties due to the MEMR from 2001 to 2005. In connection with this letter, the Head of the State Receivables Affairs Agency issued a final notice of collection (surat paksa) ordering Berau Coal to pay the royalty liability of Rp.312.7 billion (US$36.3 million) and US$26.2 million by 11 September 2007, failing which the Indonesian Government would appropriate Berau Coals assets to the extent of the claimed amount. Other first generation coal mining companies, including KPC and Arutmin, also faced similar claims. KPC, Arutmin and Berau Coal and the other first generation coal mining companies challenged these decree letters, arguing that the various CCOWs explicitly indemnified them from present and future Indonesian taxes except those set forth in the respective CCOWs. Specifically, KPC and Arutmin filed lawsuits in the State Administrative Court of Jakarta on 12 September 2007, against the Head of the State Receivables Affairs Agency of the Ministry of Finance seeking a declaration that the payment decree letters from the agency are invalid. On 21 September 2007, the State Administrative Court of Jakarta granted KPCs and Arutmins petitions and ordered the State Receivables Affairs Agency to temporarily postpone enforcement of the payment decrees until the Court rendered a final decision on the matter. On 7 April 2008, the State Administrative Court of Jakarta issued its final decision granting KPCs and Arutmins petitions and ordering the State Receivables Affairs Agency to withdraw its payment decrees. On 17 April 2008, the State Receivables Affairs Agency appealed against both decisions to the State Administrative High Court, which upheld the decision of the State Administrative Court. On 10 September 2008, the Head of the State Receivables Affairs Agency, Ministry of Finance filed a request for cessation (or annulment) to the Supreme Court, which was declined with costs on 28 October 2008. While this decision is final and binding on all the parties to the dispute, the State Receivables Affairs Agency filed a petition to the Supreme Court of Indonesia to reconsider its decision. On 28 October 2008, the Supreme Court issued a final and binding decision rejecting the appeal of the State Receivables Affairs Agency and upholding the decision of the lower courts. Berau Coals petition was granted by the State Administrative Court of Jakarta in March 2008. In so doing, the court ordered the State Receivables Affairs Agency to permanently withdraw the final notice of collection. However, the Administrative Court did not rule on the issue of whether the Indonesian Government could pursue the collection of royalty payments Berau Coal offset against its value-added taxes. The State Receivables Affairs Agency appealed this decision to the State Administrative High Court, which granted a decision in favour of the State Receivables Affairs Agency. In January 2009, Berau Coal submitted a cessation (annulment) petition to Indonesias highest court, the Supreme Court. On 1 December 2010, Berau Coals legal counsel officially received, on behalf of Berau Coal, a Notification of Cessation Verdict dated 30 November 2010 concerning the notification and submission of Supreme Court Verdict No. 94 K/TUN/2009 dated 22 March 2010 (the Supreme Court Verdict), in effect confirming that the Supreme Court had denied Berau Coals cessation (annulment) petition, although the Supreme Courts detailed reasoning for its decision has not yet been published. On 12 January 2011, Berau Coal instructed its legal counsel to apply for judicial review (Peninjauan Kembali) and prepare a memorandum of judicial review (Peninjauan Kembali) to object to the Supreme Court Verdict, Juncto Verdict of Pengadilan Tinggi TUN DKI Jakarta (Jakarta State Administrative Appeals Court) No. 96/B/2008/PT TUN JKT dated 28 August 2008 and Juncto Verdict of Pengadilan Tata Usaha Negara Jakarta (Jakarta State Administrative Court) No 127/G/2007/PTUN.JKT dated 3 March 2008. The judicial review is being filed with the Supreme Court through the Secretariat of Jakarta State Administrative Court. In denying Berau Coals cessation (annulment) petition, the Supreme Court has effectively declared that the final notice of collection is valid and ordered Berau Coal to comply with the notice. The Supreme Courts decision is final, binding and enforceable as of the date the decision is formally delivered to the

30

defendant. Thereafter, the State Receivables Affairs Agency may enforce its final notice of collection requiring Berau Coal to pay the royalty liability of Rp.312.7 billion (US$36.3 million) and US$26.2 million. If (i) the State Receivables Affairs Agency decides to proceed with the final notice of collection, and (ii) Berau Coal does not comply with the final notice, the State Receivables Affairs Agency may seize Berau Coals assets and subsequently appropriate those assets against Berau Coals royalty liability. If Berau Coal (i) does not comply with the final collection notice or (ii) is deemed able to settle the debt but unwilling to do so, the Commission on State Claims may also impose debt imprisonment (paksa badan) for a maximum of 12 months against Berau Coals directors or commissioners. Berau Coals filing for judicial review of the Supreme Courts decision does not prohibit any enforcement actions. In July and August 2008, the Indonesian Government imposed a six-month travel ban on certain commissioners, directors and executive officers of KPC, Arutmin and one former director of Berau Coal who no longer held this office at the time the travel ban was issued, as well as certain commissioners, directors and executive officers of the other first generation coal mining companies, pending resolution of this issue. In September 2008, the Indonesian Government and all first generation coal mining companies, including KPC, Arutmin and Berau Coal, agreed that the provisions in these companies CCOWs shall prevail in their dispute in respect of the royalty payments that had been set off against value-added tax payments. The first generation coal mining companies agreed that they would pay the MEMR the royalty amounts, as set forth in their respective CCOWs, and the MEMR agreed that it would reimburse all first generation coal mining companies for their input value-added tax. Meanwhile, the Indonesian Government is evaluating whether KPC, Arutmin, Berau Coal and the other first generation coal mining companies should be liable to pay sales tax in respect of goods and services provided to them. Under the CCOWs, as well as other first generation CCOWs, sales tax on certain goods sold and certain services rendered to first generation coal mining companies, including KPC, Arutmin and Berau Coal, will not exceed 5.0 per cent. of the assessable value. KPC and Arutmin have not been paying sales tax and have not made any provision in their financial statements for unpaid sales taxes. As of 30 September 2010, Berau Coal had accrued approximately US$7.9 million in its accounts to provide for sales tax under the September 2008 agreement. As a demonstration of goodwill, the first generation coal mining companies (including those in the Bumi Resources Group and the Berau Group) paid an aggregate of Rp.600 billion to the Account of the Office of State Assets and Auction, Directorate General of State Assets, Department of Finance as a deposit to guarantee their royalty payments. KPCs and Arutmins share of this amount is Rp. 250 billion (approximately US$27.5 million) and Berau Coals share is Rp.90 billion (approximately US$10.0 million). As of 31 December 2010, KPC and Arutmin had offset an aggregate of approximately US$813.6 million and Berau Coal had offset the equivalent amount of approximately US$223.0 million in input valueadded tax against its respective government royalty obligations. From 1 April 2010, the amount of value-added tax that may be levied on goods sold to KPC, Arutmin and Berau Coal is imposed under a new value-added tax law which retains the treatment of unprocessed coal as a value-added tax exempt product. If the Indonesian Government requires KPC, Arutmin and Berau Coal to pay sales tax but set off the value-added tax reimbursement entitlements against such payments and KPC, Arutmin and Berau Coal, on the one hand, and the Indonesian Government, on the other hand, are unable to amicably resolve the dispute, they will be required to seek resolution of this issue through further litigation or arbitral proceedings under the respective CCOWs of KPC, Arutmin and Berau Coal. If KPC, Arutmin and Berau Coal were ultimately unable to prevail in their position, they would be obligated to pay the Indonesian Government sales tax and the aggregate amount of royalties they have offset from the Indonesian Government against their value-added tax refunds (without a corresponding refund of value-added taxes paid), which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Given that any final resolution of the value-added-tax dispute would impact not only Bumi Resources Group and the Berau Group but all first generation coal mining companies in Indonesia, the Directors believe that it is unlikely that the dispute will be settled, and that any payment of any tax arrears will be due, during the period covered by the working capital statement included in this document. In accordance with KPCs, Arutmins and Berau Coals CCOWs, 31

failure to pay royalties or other non-compliance could lead the Indonesian Government to terminate the CCOWs. The holding company structure of the Group means that the Companys ability to pay dividends is dependent on distributions received from its subsidiaries and its 25 per cent. interest in Bumi Resources The Groups results of operations and financial condition are entirely dependent on the trading performance of the Groups subsidiaries and companies in which the Group holds interests, including Bumi Resources. The Groups ability to pay dividends will depend upon the level of distributions, if any, received from the Groups operating subsidiaries and interests the Group holds (including its 25 per cent. interest in Bumi Resources), any amounts received on asset disposals and the level of cash balances. Certain of the Groups operating subsidiaries and entities in which the Group hold interests (including Bumi Resources) may, from time to time, be subject to restrictions on their ability to make distributions to the Company, including as a result of restrictive covenants contained in debt agreements and cash management and account administration arrangements, foreign exchange limitations and other regulatory restrictions and agreements with the other shareholders of such subsidiaries or associated companies (including Bumi Resources). There can be no assurance that such restrictions will not have a material adverse effect on the Groups results of operations or financial condition. The Group is highly leveraged. The Groups existing and future indebtedness could restrict the Groups financial and operational flexibility and adversely affect its financial condition The Group is highly leveraged and is permitted under its existing debt arrangements to incur additional debt, subject to certain limitations. The Groups leverage may have important consequences for Shareholders, including the following: the Group may be required to dedicate a substantial portion of its cash flows from operations to required payments of indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities; covenants in the Groups arrangements contain a number of financial, operating and other obligations that limit the Groups flexibility in planning for, or reacting to, changes in the Groups business and the industry in which the Group operates and limit the Groups ability to pursue its growth plans, including by limiting the ability of the Group to pay dividends, purchase capital shares, make investments or other types of restricted payments, issue or sell capital shares, sell assets (including capital shares of subsidiaries), create liens; enter into sale and leaseback transactions, enter into transactions with shareholders or affiliates, enter into agreements that restrict the ability to pay dividends or interest on intercompany loans, transfer assets or make intercompany loans and effect a consolidation or merger; the Group may be unable to obtain the additional financing necessary to fund its acquisitions of new businesses and projects; the Group may be more vulnerable than its competitors to the impact of economic downturns and adverse developments in its business; and the Group may be placed at a competitive disadvantage against less leveraged competitors.

Any of the above factors could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group, in the past, has experienced technical breaches and defaults of covenants contained in its loan agreements that have either been cured or waived. Any future defaults of covenants contained in certain of the Groups debt arrangements may lead to an event of default and an acceleration of repayment of indebtedness, and may lead to cross-defaults under the Groups other debt arrangements. Insurance may not be adequate to cover losses or liabilities that may arise The Group does not maintain insurance against some operational and infrastructure risks and natural disasters. For example, the Berau Group does not have insurance coverage for business interruption or acts or omissions of its contractors. Under the mining contracts, insurance against risks or loss to the

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operation is provided by the Bumi Resources Groups and the Berau Groups mining contractors for each of the relevant mining areas. However, some of the contractors may not carry adequate liability coverage. The Bumi Resources Groups and the Berau Groups insurance may not be adequate to cover all losses or liabilities that may arise. Also, insurance may only be available at premium levels that are prohibitively expensive. In addition, due to the enactment of the 2009 Mining Law, which will limit the scope of mining operations that can be performed by mining contractors, the Group may need to obtain additional insurance to cover such operations. Although terrorist acts have not in the past targeted the Indonesian mining industry or the assets of the Group and its customers, there can be no assurance that terrorists will not do so in the future. The Groups current insurance coverage does not include losses resulting from terrorist attacks. Any terrorist attack, including damage to the Groups or its customers infrastructure, could cause interruption to parts of the Groups business and materially and adversely affect the Groups business, financial condition, results of operations and prospects, as well as investors confidence in Indonesia. A significant uninsured or underinsured claim against the Group or the failure of the Groups insurers to pay claims could materially and adversely affect the Group. The Groups results of operations could be adversely affected by commodity hedging arrangements The Group may enter into coal price hedges pursuant to commodity hedging agreements. If the Group enters into such agreements, and if the market price of coal is higher than the price at which the Group sold its coal under a forward hedging agreement, the Group will not realise the profit it would have if it had sold its coal at the higher price. Appreciation in the value of the Rupiah may result in a changes to in the Groups gross profit or profit for the period The Rupiah has experienced and continues to experienced significant volatility against the US dollar. A strengthening of the Indonesian rupiah against the US dollar may expose the Group to an increased liability under the equity swap and capped call transactions that the Bumi Resources Group entered into in connection with the 9.25 per cent Convertible Bonds and the capped call swap and call option transactions the Bumi Resources Group entered into in October 2009, which in turn could result in a decrease in the Groups profit for the period. In addition, as the Bumi Resources Group and the Berau Group must translate their Rupiah-denominated assets and liabilities, including their Rupiahdenominated value-added tax liabilities to the Indonesian Government, into US dollars as of each balance sheet date in preparing their financial statements, changes in the value of the Rupiah against the US dollar can lead to adjustments to the Groups gross profit and profit for the period. Because certain of the Groups cash production costs are denominated in Indonesian Rupiah and a significant portion of the sales are priced in US dollars, weakening of the Indonesian Rupiah against the US dollar may cause the Groups gross profit to increase, whereas strengthening of the Indonesian Rupiah against the US dollar may cause its gross profit to decline. The Bumi Group and the Berau Group entities incorporated in Indonesia have not established a reserve for net income as required by applicable Indonesian law Under Law No. 40 of Limited Liability Companies (Law No. 40), an Indonesian limited liability company must establish a general reserve of at least 20per cent. of its total issued and fully paid capital from its net income each year it has positive retained earnings. While neither Bumi Resources nor Berau nor any of their respective subsidiaries incorporated in Indonesia have established such a reserve for net income in accordance with Law No. 40, Bumi Resources and Berau plan to establish such a reserve in 2011. No consequences are identified under Law No. 40 for failure to establish a general reserve; Law No. 40 also does not prescribe how much net income must be set aside each year. The Group does business in countries with inherent risks relating to security, enforcement of obligations, fraud, bribery and corruption The Groups businesses operate in Indonesia, Liberia, Mauritania and Yemen, and the Group also has significant coal supply contracts with companies in China, India, the Philippines and Thailand as well as Japan, South Korea and Taiwan. Doing business in international markets brings with it inherent risks associated with security of staff or property, enforcement of obligations, fraud, bribery and corruption. In certain jurisdictions, fraud, bribery and corruption are more common than in others. Indonesia as well

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as a number of other countries the Group currently operates in or does business with feature prominently on Transparency Internationals 2010 Corruption Perceptions Index. In particular, Indonesia ranks 110 out of 178 countries in Transparency Internationals Corruption Perceptions Index. In addition, the mining and oil industries have historically been shown to be vulnerable to corrupt or unethical practices. While Vallar maintains an anti-corruption policy and all executives of the Company have, or will by Completion have, certified that they have read and will comply with that policy and the Group also intends to implement other safeguards and programs across its business, including anti-corruption training programs, designed to prevent the occurrence of fraud, bribery and corruption, it may not be possible for the Group to detect or prevent every instance of fraud, bribery and corruption in every jurisdiction in which its employees, agents, subcontractors or joint venture partners are located. The Group may therefore be subject to civil and criminal penalties and to reputational damage. Instances of fraud, bribery and corruption, and violations of laws and regulations in the jurisdictions in which the Group operates could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Bumi Resources Group and Berau Coal are paying the Indonesian Government cash equal to 13.5 per cent. of the proceeds of coal sales instead of delivering coal. If the Indonesian Government chooses to require delivery of coal instead of cash, this could result in Berau Coal defaulting on its delivery requirements with other customers Under the terms of KPCs, Arutmins, Pendopo Energis and Berau Coals CCOWs and other agreements, the Indonesian Government is entitled 13.5 per cent. of the coal production of KPC, Arutmin, Pendopo Energi and Berau Coal. Rather than deliver coal to the Indonesian Government, these entities market and sell the Indonesian Governments coal entitlement to third parties on the Indonesian Governments behalf and pay the Indonesian Government the cash proceeds less charges for sales and marketing expenses and administrative fees. If the Indonesian Government chooses to require delivery of coal instead of the sales proceeds, this could result in KPC, Arutmin, Pendopo Energi and Berau Coal defaulting on their delivery requirements with their other customers, which could materially adversely affect the Groups business, financial condition, results of operations and prospects. In addition, both the Bumi Resources Group and Berau Coal are offsetting the input value-added tax they have paid against the cash proceeds being delivered to the Indonesian Government under their coal sales agreements. See KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government. RISKS RELATING TO THE OPERATIONS OF THE BUMI RESOURCES GROUP If the Bakrie Group ceases to be a controlling shareholder of the Company, this could, under certain circumstances, put the Company under an obligation to make a mandatory tender offer for the shares of Bumi Resources that the Company does not own. The Group may not be able to fund such a tender offer. The Group may also be unable to fund its redemption or repayment obligations if change-ofcontrol provisions under certain arrangements governing the Bumi Resources Groups debt were triggered by the Bakrie Groups loss of control of Bumi Resources. Under the regulations of BAPEPAM-LK, the Indonesian Capital Markets and Financial Institutions Supervisory Agency, within two business days following a Takeover (as defined below) of a company that is listed on the IDX, the acquirer of the target company must launch a mandatory tender offer for all the remaining shares of the company (public shares, not including shares of the majority shareholder and other controlling (at least 20 per cent.) shareholders, if any). Under BAPEPAM-LK Regulation No. IX.H.1 on Takeovers of Publicly Listed Companies (Regulation IX.H.1), a Takeover of a company listed on the IDX is any action that directly or indirectly causes changes to the controller of that company. The controller of a company listed on the IDX is the party or parties acting in concert who: own more than 50 per cent. of the public companys total paid-up capital of the company; or have the ability to determine, directly or indirectly, in whatsoever manner, the management and/or the policy of the public company.

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As a result of the public declaration of the Bakrie Group as set forth in certain public documents and announcements, including documents issued by Bumi Resources, the Bakrie Group is currently considered to have the ability to determine, directly or indirectly, the management and/or the policy of Bumi Resources and is, therefore, deemed to be a controller of Bumi Resources for the purposes of Regulation IX.H.1. The Directors understand that, for Indonesian takeover law purposes, the Bakrie Group will continue to be a controller of Bumi Resources upon Completion because of the Bakrie Groups shareholding in the Company coupled with the Bakrie Groups Board appointment rights. Upon Completion (and assuming that the Berau Transaction has closed), the Company will hold 25.0 per cent. of the total shares of Bumi Resources (assuming that the Bumi Resources Step-Up Transaction, if any, has not completed by such date) and the Bakrie Group will hold approximately 43.0 per cent. of the total shares (including Suspended Voting Ordinary Shares) of the Company and approximately 30.0 per cent. of the total voting rights in the Company. As a result, the Bakrie Groups shareholding will be sufficient to enable the Bakrie Group to block special shareholder resolutions put to shareholders of the Company and, depending on the shareholder turnout at the Companys general shareholder meetings, may be sufficient to enable the Bakrie Group to block ordinary resolutions. In addition, pursuant to the terms of the Bakrie Relationship Agreement, so long as the Bakrie Groups shareholding in the Company does not fall below 15 per cent., the Bakrie Group will have the right to nominate for appointment and propose for removal three Directors of the Board, including the Chairman, Chief Executive Officer and the Chief Financial Officer. As a result of the foregoing, upon Completion, the Directors understand that the Bakrie Group will be deemed to control a 25 per cent. voting interest in Bumi Resources indirectly through the Bakrie Groups control of the Company and its Board representation and together with its right to nominate for appointment the President Commissioner and President Director and a majority of the board of commissioners and directors of Bumi Resources will continue to be deemed to be the controller of Bumi Resources for the purposes of Regulation IX.H.1. Therefore, the Bumi Resources Transaction will not constitute a Takeover for the purposes of Regulation IX.H.1, with the result that the requirement under Indonesian law for the Company to make a tender offer for the shares of Bumi Resources held by other shareholders will not triggered. Were the Bakrie Group to cease to be a controller of Bumi Resources, either by virtue of the dilution or loss of the Bakrie Groups shareholding in the Company, the enforcement of the security granted over the Bakrie Groups shareholding pursuant to the Credit Suisse Facility as described in Part I The Acquisition or the loss of its rights of appointment to the Board or its right to nominate for appointment the President Commissioner and President Director and a majority of the board of commissioners and directors of Bumi Resources, or if BAPEPAM-LK were otherwise of the view that the Bakrie Group was no longer the controller of Bumi Resources, this could put the Company under an obligation to make a mandatory tender offer for the outstanding shares of Bumi Resources that are not held by the Company, particularly if the Bakrie Groups loss of control of the Company results in a new controlling shareholder of the Company and thereby a new controller of Bumi Resources. If a mandatory tender offer is triggered for the shares in Bumi Resources, a mandatory tender offer could also be triggered for the shares held by the public in BRM, an 81.4 per cent. owned subsidiary of Bumi Resources, which is listed on the IDX. There can be no assurance that the Group will have or be able to obtain sufficient funds to finance any mandatory tender offer for the shares of Bumi Resources held by public shareholders. Moreover, were the Bakrie Group to lose control of Bumi Resources, this could trigger change-ofcontrol put rights or mandatory prepayment obligations under certain of the Bumi Resources Groups financing arrangements. KPCs and Arutmins tax liability for related party transactions was queried by the tax office and, as a result, self amended. Tax disputes could still arise The Indonesian Director General of Taxes (the DGT) is authorised under Indonesias income tax law to assess and re-determine the amount of taxable income of a taxpayer, including in relation to affiliated transactions. KPC and Arutmin conduct a portion of their coal sales through IndoCoal Resources, an affiliated entity acting as KPCs and Arutmins international marketing agent under longterm supply agreements. Until 31 December 2008, the Bumi Resources Group determined the price of coal sold by KPC and Arutmin under the relevant long-term supply agreement in accordance with a formula for the fixed forward price agreed under that agreement. The fixed forward price formula was

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based on a report of expected future prices of coal prepared in 2005 by Barlow Jonker, an independent mine consultant. For a description of these long-term supply agreements and the fixed forward price, see paragraph 18 The Bumi Resources Groups Material Contracts Material Agreements of Part XII Additional Information. The Indonesian tax authorities have in the past indicated that they disagreed with the amount of taxes declared by KPC and Arutmin on the basis of coal pricing to IndoCoal Resources. As a result, KPC and Arutmin amended their tax returns in the second half of 2009 and Bumi Resources recorded additional tax expenses based on those amended tax returns. Although the Directors believe that the Bumi Resources Groups tax payments in the first nine months of 2010 have settled this issue for the tax years 2005 to 2008, there can be no assurance that the tax authorities will not increase KPCs and/or Arutmins taxable income further for those years. If this were to occur, it could materially adversely affect the Groups business, financial condition, results of operations and prospects. Tax disputes with the Indonesian Government could also lead to other adverse consequences for the Group. For example, in June 2010, Mr. Gayus Tambunan, a former Government tax official who is being investigated for embezzlement, bribery and money laundering charges, alleged that dozens of Indonesian companies made illegal payments to him in order to influence official tax decisions. Among his allegations, he claimed that Bumi Resources, KPC and Arutmin paid him an aggregate of US$3.0 million to settle tax disputes between those companies and the Indonesian Government. The National Police Criminal Investigation Directorate questioned some of the Bumi Resources Groups management and determined there was not sufficient evidence to file any charges against the Bumi Resources Group. However, the Indonesian Government is still investigating the claims of Mr. Tambunan and could choose to conduct further investigations or file charges against the Bumi Resources Group. If it were discovered that one of the Bumi Resources Groups employees had made an unauthorised payment, that employee, Bumi Resources and/or members of the Bumi Resources Groups management could be subject to sanctions under Indonesian law, including imprisonment and fines. The Bumi Resources Group has conducted an internal investigation and determined that the allegations are groundless and no such payments were made. The Bumi Resources Group has also retained a third-party consultant to review the Bumi Resources Groups procedures for cash payments and to recommend measures to improve such procedures. Although the Bumi Resources Group has payment authorisation procedures, a whistleblower policy and other systems that the Directors believe are sufficient to prevent bribery or similar illegal activities, the Bumi Resources Group does not, as at the date of this document, have a formal anti-bribery compliance program. However, as described in the section entitled The Group does business in countries with inherent risks relating to security, enforcement of obligations, fraud, bribery and corruption above in these Risk Factors, the Bumi Resources Group intends to implement other safeguards and programs across its business, including anti-corruption training programs, designed to prevent the occurrence of fraud, bribery and corruption. If the Bumi Resources Group or any of its employees are found to have committed bribery or similar illegal activities, the Bumi Resources Group could be subject to significant civil and criminal penalties or could otherwise be materially adversely affected. Moreover, allegations of such activities, even if untrue, could harm the Groups reputation or otherwise adversely affect the Group. The Bumi Resources Group may have disagreements with its strategic partner, Tata, that may adversely affect Bumi Resources business In connection with the Divestment, Bumi Resources and Tata entered into the IndoCoal Shareholders Agreement. The IndoCoal Shareholders Agreement requires the approval of a super-majority of the shareholders of the relevant IndoCoal Group Company for approval of certain material corporate or governance actions by that IndoCoal Group Company. In addition, approval of the holders of at least 75.0 per cent. of the shares in each IndoCoal Group Company is required for any change in the articles of association of that IndoCoal Group Company, any consolidation, merger, take over, bankruptcy or dissolution of that IndoCoal Group Company, any transaction in an amount that is greater than 10.0 per cent. of the revenues of that IndoCoal Group Company or 20.0 per cent. of the share capital of an IndoCoal Group Company and the declaration of any dividend or other distribution by that IndoCoal Group Company. Therefore, the approval of Tata is required before any IndoCoal Group Company undertakes any significant corporate or business activity. If there are disagreements between Tata and the Bumi Resources Group regarding the significant corporate or business activities of the IndoCoal Group Companies covered by the IndoCoal Shareholders Agreement, there can be no assurance that the Bumi Resources Group will able to resolve 36

those disagreements in a manner that will be in the best interests of the IndoCoal Group Companies or the Bumi Resources Group as a whole. In addition, if the Bumi Resources Group and Tata are unable to reach resolution on a disagreement under the IndoCoal Shareholders Agreement, the Bumi Resources Group may serve a notice on Tata requiring it to either sell the Bumi Resources Group all of its shares in the relevant IndoCoal Group Company or purchase all of the Bumi Resources Groups shares in that IndoCoal Group Company at the price stated in the notice, or Tata may serve a notice on the Bumi Resources Group requiring it to either sell Tata all of the Bumi Resources Groups shares in that IndoCoal Group Company or purchase all of its shares in that IndoCoal Group Company at the price stated in the notice. In such an event, there can be no assurance that either the Bumi Resources Group or Tata would have the financial resources necessary to make these share purchases required under the IndoCoal Shareholders Agreement. In addition to potential conflicts with Tata under the IndoCoal Shareholders Agreement, Tata may: have economic or business interests or goals that are inconsistent with those of the Bumi Resources Group; take actions contrary to the Bumi Resources Groups instructions, requests, policies or objectives; be unable or unwilling to fulfil its obligations; have financial difficulties; or have disputes with the Bumi Resources Groups as to Tatas responsibilities and obligations.

Any of these or other factors may materially adversely affect the ability of the IndoCoal Group Companies to undertake corporate or business activities the Bumi Resources Group may wish them to pursue or to take advantage of business opportunities presented to them, which may materially adversely affect the Groups business, financial condition, results of operations and prospects. The acquisition or divestment of companies or businesses could result in operating difficulties and other harmful consequences The Bumi Resources Group intends to expand its business operations in the long-term through strategic acquisitions or investments in other businesses. The Bumi Resources Groups expansion strategy may include future acquisitions of non-coal businesses in industries in which it has not operated in the past and divestment of non-core business. If the Bumi Resources Group decides to pursue strategic acquisitions or investments, the success of such acquisitions or investments will depend on the availability of suitable acquisition or investment candidates at an acceptable cost, the Bumi Resources Groups ability to compete effectively to attract and reach agreement with acquisition candidates on commercially reasonable terms, and the availability of financing to complete such acquisitions or investments. In addition, the anticipated benefits of the Bumi Resources Groups future acquisitions may not materialise. Future acquisitions could result in incurrence of debt, contingent liabilities or amortisation expenses, or write-offs of goodwill, any of which could harm the Groups financial condition. Future acquisitions could also divert managements time and focus from operating the Bumi Resources Groups business. In addition, integrating an acquired company, business or technology is risky and may result in unforeseen operating difficulties and expenditures associated with integrating employees from the acquired company into the Bumi Resources Groups organisation and integrating each companys accounting, management information, human resources and other administrative systems to permit effective management. The Bumi Resources Group may acquire businesses within Indonesia or in other countries or regions where the Bumi Resources Group will initially have no presence. Foreign acquisitions involve risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. The Bumi Resources Group may have to incur substantial expenditures and additional indebtedness to develop the acquired businesses, and the expenditures the Bumi Resources incurs to develop such businesses may exceed its sales from such businesses. The Bumi Resources Group could also lose part or all of its investments in acquired businesses if it fails to successfully develop those businesses into revenue generating units. At the same time, the Bumi Resources Group will continue to rationalise its lines of business, including divesting the Bumi Resources Groups non-core businesses. For example, the Bumi Resources Group recently sold 70.0 per cent. of its shares in Mitratama, which owns the port facilities

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of Bengalon and Asam Asam mines, and the coal processing plant at Bumi Resources Sangatta mine. As Bumi Resources no longer controls Mitratama, there can be no assurance that Mitratama will continue to observe its obligations under the rental agreements governing Bumi Resources use of those facilities. As with all publicly-listed companies in Indonesia, Bumi Resources is subject to regulatory oversight by governmental authorities, some of whom have wide investigative powers and the ability to impose sanctions and other penalties on the Bumi Resources Group and its management. Such governmental authorities have, in the past, conducted investigations into some of Bumi Resources acquisitions and required the Bumi Resources Group to change the terms of one of its acquisitions. See Other Coal Mining Operations BAPEPAM-LK Investigations in Part IV Information on the Bumi Resources Group. The Directors cannot guarantee that these or other Indonesian authorities will not do so with respect to the Bumi Resources Groups recent dispositions of shares of Gallo Oil, Enercorp and Mitratama or its future acquisitions and divestments. In December 2009, the Bumi Resources Group entered into agreements to sell 20.0 per cent. of its shares in Gallo Oil to Florenceville Financial Ltd (Florenceville). This sale has not been completed and is subject to various closing conditions, including approvals from the government of Yemen, which have recently been obtained. Florenceville has informed the Bumi Resources Group that due to the current political situation in Yemen, Florenceville is currently experiencing difficulties in securing financing for this transaction and has given its written commitment to use its best efforts to fully settle the outstanding share purchase price by 30 April 2011. On 31 March 2010, the Bumi Resources Group entered into a share sale and purchase agreement to sell 99.8 per cent. of the equity interest in Mitratama to PT Cahaya Pratama Lestari for US$120.0million. The share sale and purchase agreement was amended on 25 June 2010 to reduce the sale share to 70.0per cent. while increasing the sales price to US$190.0million. Subsequently, on 31 August 2010, the Bumi Resources Group terminated the share sale and purchase agreement with this purchaser and entered into a share sale and purchase agreement to sell the same 70.0per cent. stake in Mitratama to PT Nusantara Pratama Indah for the same purchase price. Bumi Resources received US$20million of the purchase price on 7 September 2010 and the remaining US$170 million in December 2010. The Gallo Oil and Mitratama share sale agreements provide for the termination of the sales under various circumstances, which in certain cases could require the Bumi Resources Group to refund the partial payments it has received from the purchasers. If any purchaser under the share sale agreements does not complete the payment of the consideration for the shares of Gallo Oil or Mitratama or pays later than the Bumi Resources Group expects or is required to do so under the relevant agreement, or terminates the agreement with or without cause, the Bumi Resources Group would need to record a reversal of the gains that the Bumi Resources Group has already recorded in its statement of income from that sale. Any of the foregoing could materially and adversely affect the Groups business, financial condition, results of operations and prospects. The Bumi Resources Group may be unable to successfully develop its gold, silver, copper, iron ore, zinc and lead mining operations as planned Currently, coal is the only mineral that the Bumi Resources Group mines and sells. One of the Bumi Resources Groups business strategies is to diversify its operations into the gold, silver, copper, iron ore, zinc and lead mining sectors and to develop these businesses as revenue generating units. In line with this business strategy, the Bumi Resources Group purchased two companies holding gold, silver and copper mining concessions, Gorontalo Minerals and Citra Palu Minerals, in 2005 and entered into a joint venture, Bumi Mauritania, in 2006 to study the feasibility of developing an iron ore mine in north western Mauritania. The Bumi Resources Group also completed the acquisition of Herald in December 2009, which holds, through Dairi Prima, a zinc and lead concession located in the Dairi regency of the Province of North Sumatra in Indonesia. In the fourth quarter of 2009 and the first six months of 2010, Bumi Resources subsidiary MDB purchased an effective 18.0 per cent. equity interest in NNT, a major copper and gold producer in Indonesia. The Bumi Resources Groups ability to successfully diversify its operations into other non-coal mining sectors at the Gorontalo Minerals, Citra Palu Minerals and the Bumi Mauritania concessions, the Dairi

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Project and other new non-coal concessions or mines the Bumi Resources Group may obtain or develop in the future is subject to the following risks: the Bumi Resources Group may not be able to obtain the Indonesian Government permits, licences and approvals necessary to proceed with the exploration, development and exploitation of the mineral and metal reserves at these concessions or mines; the amount of mineral or metal reserves the Bumi Resources Group expects at these concessions or mines may be significantly less than expected; the Bumi Resources Group or its contractors may not be able to obtain the machinery, equipment and spare parts required to conduct mining operations at these new concessions or mines; the Bumi Resources Group may not be able to develop the expertise required to successfully manage mining operations in sectors other than coal; the Bumi Resources Group may experience difficulties integrating its new concessions or mines with its current mining operations as expected; the Bumi Resources Group may not be able to complete the exploration, development and exploitation of the reserves at these concessions or mines within the anticipated time frame or budget or at all; the Bumi Resources Group may not be able to sell the minerals or metals mined at these new concessions or mines at profitable prices; unexpected changes may occur in regulatory environments, including potentially adverse changes in tax regulations, and political, social and economic instability may occur in the countries in which the Bumi Resources Group intends to conduct these new businesses; and other unforeseen conditions, developments or problems relating to these new concessions or mines may arise or occur which could distract the Bumi Resources Groups management from focusing on the Bumi Resources Groups operations, including the Bumi Resources Groups existing coal mining operations.

Bumi Resources recently reorganised its non-coal minerals mining assets under its then wholly owned subsidiary BRM and intends to fund the operations of these assets through independent financings by BRM and its subsidiaries. Following the reorganisation, BRM completed its initial public offering in December 2010, leaving Bumi Resources with an 81.4 per cent. stake. The Bumi Resources Group is considering various other funding alternatives for the BRM group. There can be no assurance that BRM and its subsidiaries will be able to finance the exploration, development and operations of their mining activities without credit support from Bumi Resources or subsidiaries of the Group outside the BRM group. The Group could also lose part or all of its investments in BRMs businesses if it fails to successfully develop them into revenue generating units. BRM will need substantial additional financing to build the infrastructure and to satisfy the other requirements necessary to develop its projects to the production phase. As a result, BRM, and in turn the Bumi Resources Group, may become even more highly leveraged than it currently is. BRMs ability to arrange adequate financing to develop these projects will depend, in part, upon factors outside BRMs control, such as the lending policies of its lenders, its ability to incur additional indebtedness under the terms of its existing indebtedness, as well as upon its business, financial condition, results of operations and prospects. There can be no assurance that BRM will be able to raise adequate financing, in time and on acceptable terms or at all, to fund development of BRMs projects into the production phase. Any of the above could have an adverse effect on the success of the Bumi Resources Groups growth strategy for its non-coal mining businesses and, consequently, adversely affect the Groups business, financial condition, results of operations and prospects. Divestiture of shares in NNT is subject to dispute BRM and its subsidiaries generate most of their net income and a significant part of their cash flows from dividends received from BRMs effective 18.0 per cent. investment in NNT.

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At the incorporation of NNT, Newmont held 80.0 per cent. of the shares in NNT and PT Pukuafu Indah (PI), an Indonesian entity, held the remainder. Under the terms of NNTs contract of work with the Indonesian Government, NNT is required to ensure that its foreign shareholders, NIL and NTMC, offer 31.0 per cent. of their shareholding in NNT for divestment to the Government and, if not accepted by the Government, to Indonesian nationals or companies owned by Indonesian nationals. This divestment of the 31 per cent. shareholding in NNT is to occur over a stipulated period of time and in respect of stipulated percentages of shares. In respect of the period from 2006 to 2009, a 24.0 per cent. shareholding in NNT was stipulated to be divested. As reported in Newmonts public filings with the US Securities and Exchange Commission (the SEC), Newmont and the Indonesian Government have in the past been locked in disputes relating to Newmonts divestiture of shares in NNT. BRM, through its 75.0 per cent.-owned subsidiary MDB, purchased from NIL and NTMC the 24.0 per cent. shareholding in NNT, giving BRM an 18.0 per cent. effective equity interest in NNT. NIL remains obligated to divest a further 7.0 per cent. shareholding in NNT in 2010. NIL has proposed a price for this shareholding to the Indonesian Government under its rights of first refusal contained in NNTs contract of work. The Government has not agreed to the proposed price and is in discussions with NIL to agree on a price. PI has claimed that it is entitled to the 24 per cent. shareholding sold to BRM as well as the additional 7.0 per cent. shareholding that is to be divested, on the basis of a purported right of first refusal arising under NNTs contract of work and other arrangements entered into with the NIL. NIL and NTMC, as well as NNT, have vigorously denied and rejected PIs claims. PI has commenced numerous proceedings in the Indonesian courts seeking to enforce these purported rights. On 30 December 2010, PI obtained a judgement from the South Jakarta District Court which, inter alia, held that PI was entitled to the divested shares, and that NIL and NTMC were required to transfer the 31.0 per cent. shareholding to PI. The judgement is not final and binding, and therefore not enforceable by PI. Under Indonesian law, a judgement does not become final and binding until all appeals have been exhausted, a process that may last up to four years. NIL and NTMC have filed appeals in respect of the judgement and are seeking other legal remedies. While the Directors believe that PIs claims are without merit, the final resolution of legal claims in Indonesia involves uncertainties and judicial decisions in Indonesia can be unpredictable. The Bumi Resources Group generated net income of US$145 million from its indirect interest in NNT in the nine months ended 30 September 2010 compared to the Bumi Resources Groups gross profit of US$755 million in that period. NNT is expected to make a continued contribution to the Bumi Resources Groups results of operations in the future. If the Bumi Resources Group were to lose its indirect interest in NNT, this would have a material adverse effect on the future results of operations of the Bumi Resources Group. RISKS RELATING TO THE OPERATIONS OF THE BERAU GROUP Berau Coal is subject to the risks inherent in conducting substantially all of its operations in a limited geographical area All of Berau Coals mining operations are located in East Kalimantan, Indonesia. This dependence on operations at a single location subjects the Group to a number of risks, including natural disaster and inclement weather in the area. Any significant operational or other difficulties in the mining, processing, storing, transporting or shipping of coal at or from Berau Coals concession area could reduce, disrupt or halt Berau Coals coal production, which could in turn materially adversely affect the Groups business, financial condition, results of operations and prospects. The rights of Sojitz as a minority shareholder of Berau Coal may entitle it to invalidate the guarantees and security interests Berau Coal provided in respect of the Berau Groups 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility, which would cause an event of default under the notes and the credit facility, or to seek other remedies which may adversely affect Berau Sojitz has objected to the issuance of the guarantees and the granting of security interests by Berau Coal for the benefit of holders of the 12.5% Guaranteed Senior Secured Notes that Berau issued on 8 July and 29 July 2010 and the lenders under the Berau Senior Secured Credit Facility. Sojitz may take

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actions resulting in the guarantees and security interests becoming void, causing an event of default under the notes and the credit facility and exposing Berau Coal and its shareholders to significant liability. Berau owns, through intermediate subsidiaries, a 90.0 per cent. equity interest in Berau Coal and Sojitz owns the remaining 10 per cent. If Berau is unable to avoid disputes with and claims by Sojitz, it could suffer material adverse effects. For example, Sojitz could seek remedies such as damages for losses suffered on its investment in Berau Coal, a requirement to repurchase Sojitzs interest in Berau Coal at fair value, or the avoidance of the guarantees and security granted by Berau Coal in favour of the notes and the credit facility, which would in turn result in events of default under those instruments. The Group could also be impaired in effecting future financings that require the grant of a guarantee and security by Berau Coal and in the Groups marketing efforts in which Sojitz is involved. In a recent letter to the Berau Group and communications from counsel for Sojitz to counsel for the Berau Group and counsel for the underwriters of the notes, Sojitz objected to the issuance of guarantees and the granting of security interests by Berau Coal in support of the Berau Groups obligations under the notes and the credit facility. Sojitz also indicated that it has been advised by local counsel that its rights as a minority shareholder under Indonesian law include consent rights with respect to Berau Coals participation in the issuance of the notes and the related transactions, and that it does not believe that the issuance of the guarantee and security provided by Berau Coal for the benefit of the notes is beneficial to Berau Coal or Sojitz. At Berau Coals 3 June 2010 shareholders meeting, Sojitz voted against the approval of Berau Coals participation in the issuance of the notes the Berau Group issued on 8 July 2010 and the related transactions, including the guarantees and security provided by Berau Coal. Sojitz has likewise voted against Berau Coals participation in the issuance of the additional notes that Berau issued on 29 July 2010 at Berau Coals shareholders meeting held on 29 July 2010 to approve these matters. Sojitz has sought to raise similar objections in the past. In 2006, Sojitz initially objected to the MEMR concerning the issuance of notes by Empire Capital, a finance subsidiary of Berau Coal. In response, the MEMR instructed Berau Coal not to conduct that financing. Sojitz subsequently withdrew its objection, and the MEMR then permitted Berau Coal to proceed with the transaction. In December 2009, Sojitz voted against Berau Coal providing a guarantee in respect of a credit facility that Empire Capital Resources Pte. Ltd. obtained and granting security interests over its assets to secure that facility. The transaction was completed based on the approval of the other shareholders of Berau Coal. Sojitz could argue that the guarantees and security being granted by Berau Coal for the benefit of the notes and the credit facility are detrimental to Berau Coal and, accordingly, detrimental to Sojitz as a shareholder. Sojitz could also claim that Berau Coal did not receive commensurate benefit in these transactions. Sojitz could sue Berau Coal for compensation if Sojitz suffers losses from the issuance of the guarantees and the granting of the security. Sojitz could also seek remedies including the rescission of the guarantees and the security interests or the repurchase of the shares of Berau Coal that it owns at a fair price. If a court granted Sojitzs request to rescind the guarantees or the security interests, the guarantees and the security interests would not be enforceable, which would result in an event of default under the notes and the Berau Senior Secured Credit Facility. If a court granted Sojitzs request to have its shares repurchased, Berau Coal may have to pay a significant amount of money to Sojitz and may not be permitted under the terms of the notes, the credit facility or other agreements to fund or finance such repurchase. Sojitz could also raise an objection to the issuance of the guarantees and the granting of the security interests by Berau Coal with the MEMR. The MEMR could require Berau Coal to rescind the guarantees and the security interests, which would render them unenforceable and result in an event of default under the notes and the credit facility. Even if the MEMR did not do so, it could impose other penalties or obligations that could materially and adversely affect Berau and the Group. In 1993, Sojitz and the other shareholders of Berau Coal at that time entered into a shareholders agreement concerning their ownership and control of Berau Coal. When Recapital acquired Berau in December 2009, the selling shareholders represented that the shareholders agreement was no longer in effect. While the Directors believe that the shareholders agreement is no longer in effect, Sojitz has asserted that it is still in effect. The Directors believe that Sojitz has limited rights under Indonesian law as a minority shareholder of Berau Coal. However, if the shareholders agreement is still in effect, Sojitz would have additional rights, including approval rights over Berau Coals work programs and budgets, a right of first refusal over any sale, transfer or assignment of shares of Berau Coal by any other 41

shareholder, the encumbrance of Berau Coals assets, long-term borrowings by Berau Coal, amendments of Berau Coals articles of association, and appointments of the president director and vice-president director of Berau Coal. To bridge the differences in positions between Berau and Sojitz on the validity and effectiveness of the 1993 shareholders agreement, Berau, on behalf of the shareholders of Berau Coal, has entered into negotiations with Sojitz in September 2010 in relation to the entry of a new shareholders agreement by the shareholders of Berau Coal and in relation to Sojitzs providing consent for Berau Coals granting of the guarantees and security interests for the benefit of the holders of the 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility. The principal agreements that have been discussed by Berau and Sojitz are a new shareholders agreement and other ancillary documents related to the new shareholders agreement. The negotiations are still on-going. If a new shareholders agreement is entered into in its currently envisaged form, Sojitz will consent to all existing financing and collateral arrangements, including refinancing arrangements, in return for a continuing fee (which is expected to be a percentage of the amount of outstanding debt); and Sojitz will retain an approval right for transactions outside the ordinary course of business (which are to be defined in the shareholders agreement), including the issuance of any new or additional debt outside the ordinary course of business. The new shareholders agreement is expected to be entered into by the end of March 2011. If the discussions between Berau and Sojitz do not result in an agreement between Sojitz and Berau and the 1993 shareholders agreement is considered to be in effect, this could significantly impair Beraus ability to operate Berau Coal efficiently. In addition, Sojitz could claim that Berau Coals granting of security interests to support the Berau Groups obligations under the 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility violates Sojitzs rights under the 1993 shareholders agreement and could (i)seek the remedies described above and (ii)file a legal claim that may cause a default under the 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility. Even if Sojitz does not raise any such claims, any actual or alleged rights of first refusal in respect of the sale, transfer or assignment of shares of Berau Coal could impair the ability of the common security agent to enforce the noteholders or lenders security interest over the shares of Berau Coal or impair Beraus ability to sell its shares of Berau Coal. The continued assertion by Sojitz of rights as a minority shareholder or pursuant to its purported shareholders agreement could prevent or delay the Group in effecting future financings or refinancings that would include guarantees and grants of security by Berau Coal, which will likely be required given that Berau is a holding company and Berau Coal will be its principal asset and operation for the foreseeable future. If the Berau Group is unable to raise such financings, or is unable to do so on a timely basis and on satisfactory terms, the Berau Group may not be able to finance the growth of its businesses or assure that Berau has adequate liquidity and capital resources. Any dispute with Sojitz could also lead to a reduction or cessation of their marketing efforts as one of Beraus international marketing agents, which in turn could adversely affect Beraus sales. RISKS RELATING TO INDONESIA Substantially all of the Groups operations and a substantial part of Groups assets are located in Indonesia. As a result, future political, economic and social conditions in Indonesia, as well as certain actions and policies the Indonesian Government may take or adopt, or omit from taking or adopting, could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. New laws, rules, regulations, decrees or promulgations by the Indonesian Government could adversely affect the Groups operations and business The Groups coal mining operations are regulated by the Indonesian Government primarily through the MEMR, as well as the Indonesian Ministry of Forestry, the State Ministry for Environmental Affairs and the Investments Coordinating Board. In addition, the regional governments where the Groups concession areas are located can implement regulations affecting the Group. Over the last 20 years, the Indonesian Government has promulgated many new laws, rules, regulations and decrees affecting the Indonesian mining industry generally and the Groups mining operations specifically. In some cases, these new laws and regulations have not been consistent with the terms of the Groups CCOWs, and the application of these changes has not been clear. For example, in October 42

2005, the Minister of Finance issued Minister of Finance Regulation No. 95/PMK.02/2005 regarding a 5.0 per cent. levy for coal exports in the future. This levy was revoked in October 2006 pursuant to the Supreme Court Decree No. 30/P.PTS/VIII/2006/07P/HUM/2006, and Department of Customs Decree No. SE-28/BC/2006. Subsequent to the revocation of this levy, the Indonesian Government refunded to the Group all amounts it had paid under this levy. In addition, in January 2009, the Indonesian Government adopted the 2009 Mining Law, and has issued implementing regulations to that new law. For a discussion of the risks associated with the 2009 Mining Law, see the paragraph above headed Risks Relating to the Groups Operations The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects. The Indonesian Government may also make decisions or declarations that are not consistent with the Groups rights under its various contracts of work or IUPs. For example, the Indonesian Ministry of Forestry has designated approximately one-half of the Bumi Resources Groups mining concession at Gorontolo Minerals as a protected forest, which effectively prohibits mining in those areas. Those areas were declared a protected forest by the Ministry of Forestry after the Gorontolo Minerals mining concession was granted by the MEMR. An investment law was signed into law by the President of Indonesia in April 2007 (the 2007 Investment Law), replacing the previous foreign investment law. The 2007 Investment Law is aimed at unifying regulations applying to both foreign and domestic investment in Indonesia. The 2007 Investment Law provides, among other things, for the possible termination of agreements and cooperation contracts between the Indonesian Government and a foreign investor, should the investor be found guilty of corporate crimes which have been determined by a final and binding court decision, including breach of taxation regulations. Since the Bumi Groups and Beraus CCOWs were issued in the form of a contract of work with the Indonesian Government, these termination provisions may be applicable to these CCOWs as well. In August 2007, Law Number 40 of Year 2007 (the 2007 Company Law) was signed into law by the President of Indonesia. The 2007 Company Law requires companies operating in the natural resource industries, including coal mining, to undertake a corporate social and environmental responsibility to itself, the local community in which it operates and the general public. This responsibility is defined as a commitment to take part in sustainable economic development in order to improve the quality of life and the environment for the benefit of the company itself, the local community and the general public. However, the specific types of activities which a company must undertake to comply with this obligation are not enumerated in the 2007 Company Law. These specific requirements may be included in the implementing regulations for the 2007 Company Law issued after the date of this document. Compliance with the requirements of the 2007 Company Law or its future implementing regulations may increase the Groups operating costs in the future. Although the implementing regulation for the 2007 Company Law has not been issued, the Group is continuing to assess the impact this law may have on its business and operations. An energy bill came into effect in Indonesia in August 2007 (the 2007 Energy Law). The 2007 Energy Law has become the umbrella law that is intended to provide guidance for the implementation of Indonesias Oil and Gas Law of 2001, Geothermal Law of 2003, Water Resources Law of 2004, Nuclear Power Law of 1997, Basic Mining Law of 1967 and Electricity Business Law of 1985 and is expected to provide guidance for the implementation of the 2009 Mining Law and a new electricity law that is currently under consideration by the Indonesian House of Representatives. The 2007 Energy Law imposes certain domestic market obligations and stipulates that business entities conducting activities in the field of energy are obligated to, among other things, empower the local community, preserve and maintain environmental conservation, facilitate research and energy development activities, facilitate education and training in the field of energy and participate in the conservation of national energy. The interpretation of mining laws and implementation of regional governance in Indonesia is uncertain and may adversely affect the Groups business, financial condition, results of operations and prospects Regional autonomy laws and regulations have changed the regulatory environment for mining companies in Indonesia by decentralising certain regulatory and other powers from the central Indonesian Government to regional governments, thereby creating uncertainty for mining companies.

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Prior to the enactment of the 2009 Mining Law in January 2009, these uncertainties included the validity, scope, interpretation and application of Law No. 11 of 1967 Regarding Basic Mining Regulations (the 1967 Mining Law) resulting from the implementation of the regional autonomy laws, a lack of implementing regulations on regional autonomy and a lack of government infrastructure with minerals sector experience at some regional government levels. Under the 1967 Mining Law, the authority to issue KPs was exercised by the regional governments. In certain cases, this decentralisation of the authority to grant mining licences led to multiple overlapping concessions and the imposition of additional mining royalties by regional governments (which is not permitted under central governmental regulations). Under the 2009 Mining Law, both foreign and domestic investors are entitled to receive IUPs, and the contract of work system was abolished for new mining projects. Under the 2009 Mining Law, the IUPs are expected to be issued by the regional or provincial government or central Government, depending on whether the proposed mining project crosses regency or provincial borders in the same way the current KP system is regulated. The 2009 Mining Law also grants the MEMR greater powers to sanction the regional and local governments for acting contrary to the central Indonesian Governments mining laws, regulations, rules and decrees. The MEMR has powers to suspend or revoke an IUP if it believes that the relevant regional or local government has not followed applicable central Indonesian governmental regulations (although the regional or local government has customary rights of appeal through the administrative courts of the central Indonesian Government). Despite the changes to the regulation of the Indonesian mining industry resulting from the enactment of the 2009 Mining Law, the Group cannot clearly ascertain the impact of the regional autonomy laws on the powers of the MEMR and the regional governments for the grant, renewal and extension of contracts of work and other mining licences and approvals and on the supervision of the Groups mining activities. Moreover, limited precedent or other guidance exists on the interpretation and implementation of the regional autonomy laws and regulations. Though the 2009 Mining Law sets forth the new framework for the regulation of the Indonesian mining industry, implementation of the 2009 Mining Law requires the issuance of new implementing regulations. It is uncertain whether such implementing regulations will provide sufficient clarity of the general principles set forth in the 2009 Mining Law and guidance to the MEMR and other governmental authorities to enforce the 2009 Mining Law. This uncertainty has increased the risks, and may increase the costs, involved in mining activities in Indonesia, including the Groups mining operations. The regional governments where the Groups concessions are located could adopt regulations or decrees, or interpret or implement the regional autonomy laws or regulations in a manner that conflicts with the Groups rights under its CCOWs and KPs or otherwise adversely affects the Groups operations. Any new regulations, and the interpretation and implementation of those new regulations, may differ materially from the legislative and regulatory framework of the 2009 Mining Law and its current interpretation and implementation. The Group may also face conflicting claims between the Indonesian Government and regional governments regarding jurisdiction over the Groups operations. The Group may face claims by regional governments, including, among others, claims for participating interests in the Groups coal mining operations, new or increased local taxes or the granting of additional conflicting concession rights. In fourteen instances, regional authorities have granted rights to third parties to mine within the Bumi Resources Groups mining concession for the Senakin, Satui, Mulia, Asam Asam and Batulicin mines. While the Directors believe that neither the Bumi Resources Group nor Berau Coal have any existing material disputes in relation to conflicting interpretations of laws and regulations of the type described above, any of the foregoing could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Political instability in Indonesia may adversely affect the economy, which in turn could have a material adverse effect on the Groups business, financial condition, results of operations and prospects Indonesia is a Republic with a President, a Vice President and a Parliamentary form of government. From its independence in 1945 until 1998, there were only two Presidents in Indonesia. At the end of the term of each of these Presidents, Indonesia experienced political instability and many cities in Indonesia, including Jakarta, experienced rioting, unrest and destruction of property. Political instability led to the resignation of then President Suharto in May 1998. Promptly thereafter, Vice President Baharuddin Jusuf Habibie was sworn in as President and called for reforms and

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parliamentary elections to be held in October 1999. Prior to and during the presidential and parliamentary elections, there was significant social unrest that resulted in additional rioting, unrest and destruction of property. Following the elections, the Peoples Consultative Assembly (Majelis Permusyawaratan Rakyat, or MPR), selected Abdurrahman Wahid as President and Megawati Sukarnoputri as Vice President. In February 2001, a committee of the Indonesian parliament, the Peoples Representative Council (Dewan Perwakilan Rakyat, or DPR), alleged that the then President Wahid was involved in instances of corruption. In July 2001, the MPR impeached Wahid and elected Megawati Sukarnoputri in his place. The first direct presidential elections in the history of Indonesia were held in Indonesia in July and September 2004. In the second round, the former coordinating minister for politics and security, Susilo Bambang Yudhoyono, defeated incumbent President Megawati Sukarnoputri. President Yudhoyono was inaugurated in October 2004. Upon taking office, President Yudhoyono appointed a new cabinet and announced plans to improve economic conditions. However, past political instability continued to have an adverse effect on investor confidence in the Indonesian economy during the first part of President Yudhoyonos term. President Yudhoyonos first term was scheduled to expire in October 2009, and, therefore, a new presidential election took place in July 2009. The presidential candidate President Yudhoyono and his vice-presidential running mate, Boediono, won approximately 61 per cent. of the popular vote to win a second term as President. In October 2009, President Yudhoyono was inaugurated for his second five-year term, which will expire in October 2014. In the parliamentary elections held in April 2009, President Yudhoyonos Democrat Party finished as the winner with 150 seats, polling approximately 21 per cent. of the total votes. The Democrat Partys two main rivals, the PDIP and Golkar, trailed with approximately 14 per cent. each of the total votes, winning 95 and 107 seats, respectively. Changes in the Indonesian Government and governmental policies may have a direct impact on the Groups business, financial condition, results of operations and prospects. In October 2005, the Indonesian Government raised the price of premium gasoline by 87.5 per cent. per litre, the price of regular gasoline and diesel fuel by 104.8 per cent. per litre, and the price of kerosene by 185.7 per cent. per litre, resulting in public demonstrations. In May 2008, the Indonesian Government raised the price of regular gasoline by 33.3 per cent. per litre, the price of diesel fuel by 27.9 per cent. per litre, and the price of kerosene by 27.9 per cent. per litre, also resulting in public demonstrations. Similar fuel subsidy cuts contributed to the political instability that led to the resignation of then President Suharto in 1998, which had adverse effects on businesses in Indonesia. There can be no assurance that any cuts in fuel subsidies in the future will not result in political and social instability. The Groups business may be affected by similar governmental actions including, but not limited to, changes in crude oil or natural gas policy, responses to war and terrorist acts, renegotiation or nullification of existing concessions and contracts, changes in tax laws, treaties or policies, the imposition of foreign exchange restrictions and responses to international developments. Political and related social developments in Indonesia have been unpredictable in the past, and there can be no assurance that social and civil disturbances will not occur in the future or that any such disturbances will not, directly or indirectly, have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Terrorist activities in Indonesia could destabilise the country, thereby adversely affecting the Groups businesses Since 2000, several bombing incidents directed against the Indonesian Government and public and commercial buildings frequented by foreigners have taken place in Indonesia. Most recently, in July 2009, two suicide bombers carried out bombings in the JW Marriott and the Ritz-Carlton hotels in Jakarta, killing nine people and injuring over 50 others. In August 2003, a bomb exploded at the JW Marriott Hotel in Jakarta killing at least 13 people and injuring 149 others. Attacks have also taken place at popular tourist spots in Bali in October 2002 and in October 2005 and in the eastern Indonesian town of Tentena on the island of Sulawesi in May 2005. There can be no assurance that further terrorist acts will not occur in the future. Terrorist acts could destabilise Indonesia and increase internal divisions within the Indonesian Government as it evaluates responses to that instability and unrest. Violent acts arising from, and leading to, instability and unrest have in the past had, and may continue to have, a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. 45

Domestic, regional or global economic changes or adverse business and financial developments affecting the Principal Shareholders may adversely affect the Groups businesses The economic crisis which affected Southeast Asia, including Indonesia, from mid-1997 was characterised in Indonesia by, among other effects, currency depreciation, negative economic growth, high interest rates, social unrest and extraordinary political developments. These conditions had a material adverse effect on Indonesian businesses. The economic crisis resulted in the failure of many Indonesian companies, through inability or otherwise, to repay their debts when due, including companies controlled by Bakrie & Brothers and members of the Bakrie family in Indonesia, both individually and through affiliates of Bakrie & Brothers (together with Bakrie & Brothers, the Bakrie Entities). Some Indonesian companies have not fully recovered from the Asian financial crisis, and some of those companies are still in the process of restructuring their debt obligations or are engaged in disputes arising from defaults under their debt obligations. This situation has been exacerbated by the current global economic downturn which began in 2008. Concerns about the financial health of the Bakrie Entities led to a sharp decline in the market prices of Bumi Resources shares listed on the IDX in the last quarter of 2008, and the IDX suspended trading in Bumi Resources shares for almost one month in October 2008. The Directors believe that the Bakrie Entities have completed debt restructurings of the companies controlled by them. Another economic downturn in Indonesia could lead to additional defaults by Indonesian borrowers and could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. A further loss of investor confidence in the financial systems of emerging and other markets, or other factors, may cause further increased volatility in the Indonesian financial markets and a slowdown in economic growth or negative economic growth in Indonesia. Any such increased volatility or slowdown or negative growth could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Downgrades of credit ratings of Indonesia and Indonesian companies, could adversely affect the Group and the market price of Bumi Resources and Beraus shares and, in turn, the Ordinary Shares In 1997, certain recognised statistical rating organisations downgraded Indonesias sovereign rating and the credit ratings of various credit instruments of the Indonesian Government and a large number of Indonesian banks and other companies. Even though the recent trend in Indonesian sovereign ratings has been positive, there can be no assurance that that statistical rating organisations will not downgrade the credit ratings of Indonesia or Indonesian companies in general. Any such downgrade could have an adverse impact on liquidity in the Indonesian financial markets, the ability of the Indonesian Government and Indonesian companies, including the Group, to raise additional financing and the interest rates and other commercial terms at which such additional financing is available to the Group, which could materially and adversely affect the Groups business, financial condition, results of operations and prospects, and the market price of Bumi Resources and Beraus shares and, in turn, the Companys shares. An outbreak of avian influenza caused by the H5N1 virus (avian flu), Severe Acute Respiratory Syndrome (SARS), Influenza A (H1N1) virus or another contagious disease may have an adverse effect on the economies of Asian countries and may adversely affect the Group During the last three years, large parts of Asia experienced unprecedented outbreaks of avian flu. As of 9 February 2011, the World Health Organisation (WHO) had confirmed a total of 307 fatalities in a total number of 520 cases of avian flu reported to the WHO, which only reports laboratory confirmed cases of avian flu. Of these, the Indonesian Ministry of Health reported to the WHO 141 fatalities in a total number of 171 cases of avian flu in Indonesia. In addition, the WHO announced in June 2006 that human-to-human transmission of avian flu had been confirmed in Sumatra, Indonesia. No fully effective avian flu vaccines have been developed and evidence that the H5N1 virus is evolving exists. An effective vaccine may not be discovered in time to protect against the potential avian flu pandemic. In 2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypical pneumonia, which seriously interrupted economic activity in the affected regions. In April 2009, Influenza A (H1N1), a highly contagious virus, was first detected in Mexico and, since then, an increasing number of cases of this infection have been reported throughout Asia and internationally. Up to 10 August 2010, when the WHO declared the Influenza A (H1N1) pandemic over, the WHO had confirmed over 18,000 fatalities across more than 200 countries.

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An outbreak of avian flu, SARS, Influenza A (H1N1) or another contagious disease or the measures taken by the governments of affected countries, including Indonesia, against such potential outbreaks, could seriously interrupt the Groups operations or the services or operations of its suppliers and customers, which could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The perception that an outbreak of avian flu, SARS, Influenza A (H1N1) or another contagious disease may occur again may also have an adverse effect on the economic conditions of countries in Asia, including Indonesia. Social instability and increasing regional autonomy in Indonesia could adversely affect the Groups business, financial condition, results of operations and prospects Indonesia has experienced frequent social and civil unrest arising from economic issues which has, on occasion, escalated into riots and violence. In June 2001, demonstrations and strikes affected at least 19 cities after the Indonesian Government mandated a 30 per cent. increase in fuel prices. Similar demonstrations occurred in January 2003 when the Indonesian Government tried to increase fuel prices, as well as electricity and telephone charges. In both instances, the Indonesian Government was forced to repeal, defer or substantially reduce such proposed increases. In March 2005 and May 2008, the Indonesian Government implemented increases in fuel prices of approximately 30 per cent. After those Indonesian Government-mandated increases in the domestic price of fuel, there were large street demonstrations by those opposed to the increases. Further, the Group has in the past experienced, and may in the future continue to experience, organised local opposition and petty vandalism relating to the Groups exploration and production activities at its mining concessions. Separatist movements and clashes between religious and ethnic groups have also resulted in social and civil unrest in parts of Indonesia. In the provinces of Aceh, Maluku and Papua (formerly Irian Jaya), there have been numerous clashes between supporters of those separatist movements and the Indonesian military. In the provinces of Maluku, Sulawesi and West Kalimantan, clashes between religious groups and ethnic groups have produced thousands of casualties and refugees over the past several years. The Indonesian Government has attempted to resolve problems in these troubled regions with limited success except in the province of Aceh in which an agreement between the Indonesian Government and the Aceh separatists was reached and peaceful local elections were held with some former separatists as candidates. In response to a rise in demands for and assertion of autonomy in local governments in Indonesia, the Indonesian Government has recently devolved some autonomy to local governments, allowing the imposition by such local governments of taxes and other charges on operators, notwithstanding the terms of production sharing arrangements which disallow such local taxes and charges. In addition, local governments have requested from operators working interests in production sharing arrangements. Social and civil conditions have had and could have a material adverse effect on the Groups business and an adverse impact on confidence in the Indonesian economy. There can be no assurance that social and civil disturbances will not occur in the future. Future disturbances could lead to further political and economic instability, increased internal divisions within the Indonesian Government and loss of confidence in the Indonesian economy and could adversely affect the Groups business, financial condition, results of operations and prospects. Labour activism could adversely affect the Group, its customers and contractors and Indonesian companies in general, which in turn could adversely affect the Groups business, financial condition, results of operations and prospects Laws permitting the formation of labour unions combined with weak economic conditions, have resulted, and may in the future result, in labour unrest and activism in Indonesia. In 2000, the Indonesian Government issued a labour regulation increasing the amount of severance, service and compensation payments payable to terminated employees. Employees who resign during a change of control of their employer are also entitled, under the regulation, to service and compensation payments, provided that such employees have worked for their employer for at least three years. A new labour law took effect on 25 March 2003 that permits employees to form unions without intervention from their employers. These labour laws and regulations may make it more difficult for businesses, including the Groups business, to maintain flexible labour policies. Furthermore, there can be no assurance that labour unrest and activism in Indonesia will not occur in the future, or that any such unrest or activism will not have a

47

material adverse effect on investment and confidence in, and the performance of the Indonesian economy, which, in turn, could materially and adversely affect the Groups business and its operations. Labour disputes have adversely affected the Groups coal mining operations in the past. For example, in May 2006, the Bumi Resources Groups operations at KPC were disrupted for three days by a labour dispute with certain mine workers regarding the amount of goodwill payments that would have been made to these workers if the Bumi Resources Group had completed a proposed divestment of all of its interests in KPC and Arutmin, which divestment was not completed. In August and September 2010, the Bumi Resources Group experienced a 23-day strike at the Bengalon mine by the employees of Darma Henwa over a dispute regarding payments of holiday bonuses, which caused the Bumi Resources Group an estimated loss in coal production of 560,000 tonnes that it could have otherwise achieved during this period. Berau Coal did not experience any significant labour disputes in 2010, nor has it to date in 2011. Any significant labour dispute, unrest, activism or action that the Group or its contractors experience could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. Indonesia is located in an earthquake zone and is subject to significant geological risk that could lead to social and economic unrest The Indonesian Archipelago is one of the most volcanically active regions in the world. Because it is located in the convergence zone of three major lithospheric plates, it is subject to significant seismic activity that can lead to destructive earthquakes and tsunamis, or tidal waves. In December 2004, an underwater earthquake off the coast of Sumatra released a tsunami that devastated coastal communities in Indonesia, Thailand, Sri Lanka and other countries. In Indonesia, more than 220,000 people died or were recorded as missing in the disaster. Aftershocks from the 2004 tsunami also claimed casualties, including on Nias Island and the nearby Simeuleu and the Banyak islands, where an aftershock measuring 8.7 on the Richter Scale left more than 140,000 people homeless and killed approximately 650 people in March 2005. In May 2006, an earthquake with a magnitude of 5.9 on the Richter Scale struck approximately 40 kilometres south of the Central Javanese city of Yogyakarta. More than 5,700 persons were killed and more than two million were displaced in the May 2006 earthquake. In July 2006, an underwater earthquake off the southern coast of Java triggered tsunami waves, causing damage to coastal areas. In March 2007, a major earthquake struck Western Sumatra and, in September 2007, a major earthquake struck Southern Sumatra causing significant damage. Most recently, in September 2009, an earthquake measuring 7.6 on the Richter Scale struck Western Sumatra, causing significant damage to the provincial capital of Padang and killing over 800 people. The Indonesian Government has had to expend significant amounts of resources on emergency aid and resettlement efforts. Most of these costs have been underwritten by foreign governments and international aid agencies. However, such aid may not continue to be forthcoming or delivered to recipients on a timely basis. If the Indonesian Government is unable to timely deliver foreign aid to affected communities, political and social unrest could result. Additionally, recovery and relief efforts could strain the Indonesian Governments finances and may adversely affect its ability to meet its obligations on its sovereign debt. Any such failure on the part of the Indonesian Government, or declaration by it of a moratorium on its sovereign debt, could potentially trigger an event of default under numerous private-sector borrowings, including other Groups borrowings, thereby materially and adversely affecting the Group. A significant earthquake or other geological disturbance in any of Indonesias more populated cities and financial centres could severely disrupt the Indonesian economy and undermine investor confidence or a significant earthquake or other geological disturbance at one or more of the Groups mining concessions could severely disrupt its mining operations, thereby materially and adversely affecting its business, financial condition, results of operations and prospects. RISKS RELATING TO THE ACQUISITION AND OTHER FUTURE ACQUISITIONS The Group may not realise the anticipated benefits of the Acquisition The significant benefits that the Directors believe the Acquisition will provide stakeholders in each of Vallar, Bumi Resources and Berau, including, through identified efficiency gains, shared marketing services, possible refinancing of the Bumi Resources Groups and the Berau Groups existing

48

borrowings and the creation of low-cost development opportunities within the Groups asset base, are based on the Directors assessment of information currently available and may not materialise. The Group may not realise any anticipated benefits of the Acquisition. There are risks associated with the Acquisition and Any Other Future Acquisitions The Acquisition has been and will continue to be a substantial challenge for the Directors. In particular, the operation of the two companies will require substantial management attention and other resources. The Acquisition involves certain risks, including: possible adverse effects on the Groups operating results; the unexpected losses of key personnel and customers; difficulties in integrating the financial and management standards, processes, procedures and controls of the two companies; challenges in managing the increased scope and complexity of the Groups operations; attempts by third parties to terminate or alter their contracts with the Bumi Resources Group or the Berau Group; conflicts between the interests of the Bumi Resources Group and the Berau Group; and mitigating contingent and/or actual liabilities.

Should the operation of the two companies require more time, management attention or other resources than is currently anticipated, the Group may not be able to achieve the joint benefits that form the foundation of the economic and strategic rationale of the Acquisition. The Groups reputation could be harmed by the failure to achieve the goals of the Acquisition. Any material problems or delays in the operation of the Bumi Resources Group or the Berau Group could have a material adverse effect on the Groups business, financial conditions, results of operations and prospects. In addition, a component of the Groups strategy is to continue to selectively pursue acquisitions of companies or assets in the global metals, mining and resources sector. The Groups ability to do so will depend upon a number of factors, including the Groups ability to identify acceptable acquisition candidates, consummate acquisitions on favourable terms, successfully integrate acquired companies or assets and obtain financing to support the Groups growth and many factors beyond the Groups control. If the Group is unable to successfully meet the challenges associated with one or more of its future acquisitions, this could have a material adverse effect on the Groups business, financial condition, results of operations and prospects. The Group may not perform in line with expectations If the results of operations of, and cash flows generated by, the Group are not in line with its expectations, a write-down may be required against the carrying value of the Groups investments in Bumi Resources and Berau or any future acquisitions. Such a write-down may affect the Groups business and may also reduce the Companys ability to generate distributable reserves by the extent of the write-down, and consequently its ability to pay dividends. The Acquisition will trigger change-of-control provisions under certain of the Bumi Resources Groups and the Berau Groups agreements. There can be no assurance that all agreements with change-ofcontrol provision have been identified for which the counterparties consent to Acquisition and/or the Bumi Resources Step-Up Transaction, if any, should be obtained. Counterparties may disagree with the Groups interpretation of change-of-control provisions The Bumi Resources Group and the Berau Group have a number of financing agreements and other agreements that contain change-of-control termination provisions. The Bumi Resources Transaction, the Berau Transaction and the Bumi Resources Step-Up Transaction, if any, will constitute a change-ofcontrol under certain of these agreements. While the Directors believe that the Bumi Resources Group and the Berau Group have identified those financing and other material agreements where the counterparties consents to the Bumi Resources Transaction should be obtained prior to the closing of the Bumi Resources Transaction and/or the Berau Transaction and/or the Bumi Resources Step-Up Transaction, if any, and have obtained the counterparties consent (other than in relation to agreements

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covering the publicly held debt for which a change-of-control offer is required to be made within a certain period of time following closing of the relevant transaction), there can be no assurance that the Bumi Resources Group and the Berau Group have identified all contracts (other than financing agreements) with change-of-control clauses. Further, a counterparty could disagree with the Bumi Resources Groups or the Berau Groups interpretation of the change-of-control provisions in an agreement with that counterparty and assert that the change-of-control clause was triggered by the Bumi Resources Transaction and/or the Berau Transaction and/or the Bumi Resources Step-Up Transaction, if any, triggering cancellation of, and/or penalty and repayment obligations under, the relevant agreement. RISKS RELATING TO THE COMPANYS RELATIONSHIP WITH THE ADVISER AND THE ADVISERS RELATIONSHIP WITH THE SUB-ADVISER It has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. Until the Advisory Agreement is terminated, the risks described below apply to the Companys relation with the Adviser and Sub-Adviser. Following Completion, these risks should cease to be relevant. The Company is highly dependent on the Adviser and the Sub-Adviser each of which is subject to its own operational risks, and there can be no assurance that the Company will have continued access to the Adviser or Sub-Adviser The Board supervises the Company and its business and it will depend on the Adviser to implement its strategy and to manage its daily operations and business. The Company has outsourced to the Adviser all of its operating functions, including identifying and assessing acquisition opportunities, designing the strategy to acquire the target, due diligence, and providing personnel and support staff to carry out those roles. The Adviser has, in turn, delegated the provision of many of its services to the Sub-Adviser. The Company has entered into the Advisory Agreement with the Adviser and the Adviser has entered into the Sub-Advisory Agreement with the Sub-Adviser on substantially similar terms. Such agreements may not be terminated by the parties prior to the Acquisition but following the Acquisition may be terminated on 12-months written notice (at which point the Company may still be highly dependent on the Adviser and (indirectly) on the Sub-Adviser). In addition, the agreements may also be terminated immediately by the Company (in the case of the Advisory Agreement) and the Adviser (in the case of the Sub-Advisory Agreement) by written notice upon the uncured material or uncured persistent breach of such agreements by the counterparty. If so terminated, the parties have agreed, if requested, to cooperate and take all reasonable steps to make an orderly transition to a new third-party adviser or sub-adviser. Furthermore, such agreements will terminate upon the insolvency of the Adviser or SubAdviser, respectively. The Company is not a party to the Sub-Advisory Agreement and therefore, as a general matter, it does not have any rights to enforce its terms. It has however been granted specific rights to enforce the Sub-Advisers referral obligation and its undertaking to procure that the Active Members comply with their exclusivity undertakings (as described herein for the Active Members) and their agreement to follow the Conflicts Procedures. Accordingly, the Company is, in part, dependent upon the Advisers discretion to monitor the Sub-Advisers performance under, and to enforce, the terms of the Sub-Advisory Agreement. For more information, see The Advisory Agreement and the Sub-Advisory Agreement in Part III Information on Vallar. It has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. If the Adviser or Sub-Adviser ceases to provide its services, there can be no guarantee that the Company would be able to find an adequate replacement on appropriate terms and failure to do so or termination of the Advisory Agreement or Sub-Advisory Agreement could have a material adverse effect on the Companys performance and prospects. The Adviser and Sub-Adviser will be subject to their own operational risks. The members of the Vallar Team who provide their services through the Adviser and the Sub-Adviser are few in number and their past investment activities have not been oriented exclusively within the metals, mining and resources sector as is the case for the Companys acquisition target. However, the Acquisition is a substantial transaction requiring the commitment of substantial resources, both in the structuring and execution phases as well as the operation of the Company post-Acquisition. The Adviser and the Sub-Adviser expect to rely on contracted advisers to provide these services in part. There is a risk that the Adviser 50

and the Sub-Adviser may not be able to provide these services, including for reasons such as the inability to motivate and retain, or recruit additional, personnel or interruptions to information technology or other systems. If the Adviser or Sub-Adviser are unable to provide services to the Company effectively, the Groups business, financial condition, results of operations and prospects could be materially adversely affected. Limitation of liability of the Adviser and Sub-Adviser may lead to the Company incurring more significant losses than would otherwise be the case Under the Advisory Agreement, claims against the Adviser by the Company are subject to a limitation on liability of 10,000,000 and under the Sub-Advisory Agreement, claims against the Sub-Adviser by the Adviser are subject to a limitation on liability of 1,000,000, in each case which may not fully cover all losses arising from such claims. Furthermore, there can be no guarantee that the Adviser or SubAdviser will maintain insurance on terms and conditions that entitle the Company (in the case of a claim against the Adviser) or the Adviser (in the case of a claim against the Sub-Adviser) to recover fully on any claim. Accordingly, in addition to any other consequences resulting from a claim against the Adviser or Sub-Adviser, the Company may experience losses, which could materially adversely affect the Groups business, financial condition, results of operations and prospects. The Company depends on key personnel of the Adviser and Sub-Adviser, and there can be no assurance that such personnel will continue to provide their services or that the Adviser will be able to retain suitably qualified personnel The Founders have agreed with the Adviser and the Company that the activities of the Adviser will be their principal business activity for so long as they serve as an Active Partner. Mr. Rothschild has agreed to serve as an Active Partner until Completion and may thereafter resign as an Active Partner (but he may retain an economic interest in the Adviser) on 12-months notice. Mr. Campbell has agreed to serve as an Active Partner until Completion and may thereafter resign on 12-months notice. Each Founder has agreed to serve as a Director of the Company until Completion and may thereafter resign on 12months notice. Each Founder has given an exclusivity undertaking to, among others, the Company and the Adviser to the effect that he will not (subject to certain exceptions (which may be substantial) described in more detail under the heading Founders Commitment in Part III Information on Vallar: (i) accept any executive office in any business similar to, or that competes with, the business of the Adviser or the Company; (ii) directly or indirectly, solicit any employee of the Adviser, or any senior employee of the Company or of any subsidiary of the Company, to become an employee, member, partner or have a substantial business role for the purpose of any new business or entity he may set up or a client of the Adviser to become a client of such business or entity; or (iii) undertake activities which may compete with the Company. Each Founders undertaking will apply during the time he serves as an Active Partner. The loss of the services of the Founders and their subsequent ability to compete with the Company may adversely affect the Companys prospects. There can be no assurance that the Adviser would be able to appoint qualified successors in the event of the loss of such personnel. Furthermore, the loss of members of the Vallar Team could impair the Companys ability to evaluate available opportunities or to devise and implement effective acquisition structures and operational strategies, either of which could have a material adverse effect on the Groups prospects. The Adviser has entered into the Sub-Advisory Agreement with the Sub-Adviser in which the SubAdviser has undertaken to commit sufficient and appropriate resources to perform the services under the Sub-Advisory Agreement. Each of Messrs. Daniel and Morris has agreed that the activities of the Sub-Adviser will be (in the case of Mr. Daniel) the matter to which he devotes the majority of his working time and (in the case of Mr. Morris) his principal business activity, in each case until he ceases to be an Active Member. For more information, see Part III Information on Vallar The Advisory Agreement and the Sub-Advisory Agreement. Each of Messrs. Daniel and Morris has given an exclusivity undertaking (as described herein for the Active Members) to the Sub-Adviser in substantially the same terms as that given by the Founders (subject to similar exceptions and save that the Sub-Adviser will have other clients, as discussed further below) and each has agreed to follow the Conflicts Procedures. The Sub-Adviser has agreed with the Adviser to use all reasonable endeavours to procure compliance by each Active Member with (and not to agree, without the consent of the Adviser, any amendment or waiver of) his undertakings and covenants.

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The Active Members exclusivity undertakings (as described herein) and agreement to follow the Conflicts Procedures may (subject to the Sub-Advisers legal duties and obligations) be amended or waived by the Sub-Adviser itself. Such a waiver, if given, might impact the ability of the Sub-Adviser to perform its obligations to the Adviser. The Sub-Adviser is not exclusive to the Adviser and it has (and intends to have) other clients. There is a risk that the need to service other clients may (notwithstanding the undertakings given in the Sub-Advisory Agreement) detract from the time and commitment that the Sub-Adviser devotes to fulfilling its obligations to the Adviser and consequently may negatively affect the capacity to fulfil those obligations. Indemnification under the Advisory Agreement and Sub-Advisory Agreement may lead the Adviser and the Sub-Adviser to assume greater risks when assessing acquisitions than would otherwise be the case Under the Advisory Agreement, the Company has agreed to indemnify each of the Adviser, the Founders, the Sub-Adviser and each of its and their respective partners, members, officers, employees and contractors designated by the Adviser or Sub-Adviser (at any time) as a beneficiary of the indemnity under the Advisory Agreement against all claims (and associated liabilities) arising in connection with the Advisory Agreement save for (i) claims arising from gross negligence, fraud, wilful misconduct, bad faith or reckless disregard or (ii) any liability of an indemnified party to income tax in respect of the advisory fee under the Advisory Agreement. Under the Sub-Advisory Agreement, the Adviser has agreed to indemnify the Sub-Adviser and its members, officers, employees and contractors designated by the Sub-Adviser (at any time) as a beneficiary of the indemnity under the Sub-Advisory Agreement against all claims (and associated liabilities) arising in connection with the Sub-Advisory Agreement save for claims arising from gross negligence, fraud, wilful misconduct, bad faith or reckless disregard. For further details please see paragraph 17.10 of Part XII Additional Information. For as long as the Founders and other members of the Vallar Team hold Ordinary Shares or rights to Ordinary Shares, the interests of the Founders and other members of the Vallar Team are aligned with those of holders and purchasers of Ordinary Shares but in theory the protection afforded by the indemnity arrangements could result in the Adviser, the Sub-Adviser, the Founders, certain members of the Vallar Team and certain associates of the Adviser tolerating greater risks when carrying out their duties pursuant to the Advisory Agreement or the Sub-Advisory Agreement (as the case may be) than otherwise would be the case, leading to potential issues over conflicts of interest. In addition, the indemnification arrangements may give rise to legal claims for indemnification that are adverse to the Group and the Shareholders. The arrangements among the Company, the Adviser and the Sub-Adviser were negotiated in the context of an affiliated relationship and may contain terms that are less favourable to the Company than those which otherwise might have been obtained from unrelated parties The Advisory Agreement and the Companys internal policies and procedures for dealing with the Adviser, and the Sub-Advisory Agreement and the Advisers internal policies and procedures for dealing with the Sub-Adviser, were negotiated in the context of the Companys and the Advisers formation and the Placing, by persons who were, at the time of negotiation, affiliates of the Adviser and one another. Because these arrangements were negotiated between related parties, their terms, including terms relating to the operating charge, contractual or fiduciary duties, conflicts of interest and the Advisers and Sub-Advisers ability to engage in outside activities, including activities that may compete with the Company and limitations on liability and indemnification, may be less favourable to the Company (notwithstanding the approval of the terms of the Advisory Agreement by the Independent Non-Executive Directors) or to the Adviser, as the case may be, than otherwise might have resulted if the negotiations had involved unrelated parties from the outset. It has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. The Founders may in the future undertake other activities which may reduce the time that they are able to spend on the Companys business Following the Acquisition and after the relevant Founder ceases to be an Active Partner, each Founder will be free to explore and engage in other business opportunities. This may have a consequential impact on the amount of time they spend on the Companys business. The loss of the Founders time and attention to the business of the Company could result in, in particular, its diminished access to

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potential acquisition opportunities (in the case of Mr. Rothschild) and to senior managerial and operational expertise (in the case of Mr. Campbell), either of which could have an adverse affect on the Companys business and prospects. In addition, each Founders referral obligation ceases to be in effect following the Acquisition and the lack of such obligation may also result in diminished access to potential acquisition opportunities for the Group. The Founders and the Adviser may enter into related party transactions with the Company that may give rise to a conflict of interest between the Company and the Founders, the Directors and/or the Adviser The Founders and the Adviser may in future enter into other agreements with the Company that are not currently under contemplation. While the Company will not enter into any related party transaction without Board approval, it is possible that entering into such an agreement might raise a conflict of interest between the Company and some or all of the Founders, the Directors and the Adviser. The holders of the Founder Shares and the holders of the Founder Securities may have interests that conflict with the interests of the Company, with the interests of the holders of the Ordinary Shares and/or, as the case may be, with their interests and duties as Directors Under the terms of the Subsidiarys articles of association, certain corporate actions of the Subsidiary which may be in the interest of the Company (or the holders of the Ordinary Shares) require the prior approval of the holders of 75.0 per cent. of the Founder Shares and of the Founder Securities (voting separately) in issue. Those actions include: the summary (voluntary) winding up of the Subsidiary (which would restrict the ability to wind up, or otherwise prolong the winding up of, the Company); and certain alterations to the share capital of the Subsidiary.

The requirement for (or refusal to give) any such aforementioned approval may give rise to a conflict between the interests of the holders of the Founder Shares and the Founder Securities and the interests and duties of the Founders as Directors and/or may prevent the Company from being able to take the corporate action or step in question, which may adversely affect the interests of the Company or of the holders of the Ordinary Shares. The rights of the holders of the Founder Shares and the holders of the Founder Securities to prevent any voluntary winding up of the Subsidiary fall away on or after the second anniversary of Admission in the event that the Acquisition has not been effected by then and the Company is to be wound up. RISKS RELATING TO THE TERMS OF THE FOUNDER SHARES AND THE FOUNDER SECURITIES The Company may be required to issue additional Ordinary Shares (and/or may elect to pay cash) pursuant to the terms of the Founder Shares and the Founder Securities, which may dilute the holdings of existing Ordinary Shareholders The terms of the Founder Shares and of the Founder Securities provide (inter alia) for the issue of Ordinary Shares in the Company upon any exchange of the Founder Shares and upon the exchange of the Founder Securities (in each case unless the Company elects to pay cash instead), in accordance with their respective terms. Please see Part I The Acquisition, Part III Information on Vallar and paragraphs 5.3 and 5.4 of Part XII Additional Information for further details of the terms of the Founder Shares and of the Founder Securities. The precise number of Ordinary Shares that will be required to be issued by the Company pursuant to the terms of the Founder Shares and of the Founder Securities cannot be ascertained at the date of this document and will depend on a variety of factors including: (a) (b) whether the Company elects to purchase the Founder Shares or Founder Securities for cash instead of exchanging them for Ordinary Shares; (in the case of the Founder Shares) the number of Ordinary Shares of the Company that would (at the time of any exchange of the Founder Shares) be in issue on a fully diluted basis; and

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(c)

(in the case of the Founder Securities) whether the Performance Condition is satisfied and (if it is) the market capitalisation of the Company at the time of any exchange of Founder Securities.

The issue of Ordinary Shares pursuant to the terms of the Founder Shares or the Founder Securities will reduce (by the applicable proportion) the percentage shareholdings of those Shareholders holding Ordinary Shares prior to such issue. The issue of Ordinary Shares pursuant to the terms of the Founder Shares or the Founder Securities (and/or any election by the Company to pay any cash sum pursuant to the terms of the Founder Shares or the Founder Securities), may reduce any net return derived by holders of Ordinary Shares from a shareholding in the Company compared to any such net return that might otherwise have been derived had the Company not been required to comply with its obligations in relation to the Founder Shares and/or the Founder Securities. RISKS RELATING TO TAXATION Future changes to Indonesian tax legislation may adversely impact taxation of the operating activities of the Bumi Resources Group and the Berau Group, reducing net returns to Shareholders The principal operating activities of the Bumi Resources Group and the Berau Group are undertaken in Indonesia. The Indonesian regulatory and tax environment is volatile and subject to change, particularly in relation to the mining sector where new tax legislation is currently being implemented. Taxation of the Indonesian operating activities of the Bumi Resources Group and the Berau Group is largely governed by terms within relevant CCOWs. However, it is possible that the arrangements under CCOWs may be overridden or adversely affected by future changes to Indonesian tax legislation, materially impacting the financial position of the Company and reducing net returns to Shareholders. The Indonesian tax authorities may successfully raise further material challenges to the historic tax position of the Bumi Resources Group and/or the Berau Group, reducing net returns to Shareholders Detailed information regarding existing tax disputes between (on the one hand) the Bumi Resources Group or the Berau Group and (on the other hand) the Indonesian tax authorities, is set out above. The Directors believe that the financial statements appropriately reflect their assessment of material tax exposures relating to existing tax disputes with the Indonesian tax authorities. However, it is possible that the Indonesian tax authorities may raise further material challenges to aspects of the historic tax positions of the Bumi Resources Group and/or the Berau Group. If such challenges are successful and give rise to new material tax exposures, the financial position of the Company may be adversely impacted, reducing net returns to Shareholders. Proposed changes to the UKs controlled foreign companies taxation rules may reduce net returns to Shareholders UK Subco (the entity acquiring Bumi Resources Shares and Berau Shares) is subject to the UK controlled foreign company (CFC) rules by virtue of being resident for tax purposes in the United Kingdom. In broad terms, the CFC rules can operate to subject UK tax resident companies (such as UK Subco) to UK tax on the profits of certain non-UK tax resident companies in which they have a direct or indirect interest. The CFC rules typically affect UK tax resident companies directly or indirectly holding (alone or with connected or associated persons) at least a 25.0 per cent. interest in a non-UK tax resident company where: (a) the non-UK tax resident company is ultimately controlled by UK tax resident persons; (b) the non-UK tax resident company is subject to a lower level of tax in its territory of residence; and (c) the conditions relevant to specific exemptions from the CFC rules are not satisfied. In the context of UK Subco, the principal operating activities of the Bumi Resources Group and the Berau Group are generally expected to fall within the existing exempt activities exemption from the CFC rules. However, the Company has sought and obtained written clearance from HM Revenue & Customs (HMRC) that the motive test exemption from the CFC rules is applicable to CFCs of UK Subco acquired as a consequence of the Acquisition. The exemption provided by HMRC broadly applies for an extended period of grace of two years from the end of the period in which the Acquisition takes place. On conclusion of the extended period of grace it will be necessary to evaluate the application of the CFC rules in force at that time to UK Subco, and specifically whether UK Subco will be subject to UK

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tax on profits of non-UK tax resident companies in which it holds a direct or indirect interest. In this context, it is noted that HMRC and HM Treasury published a joint discussion document (in November 2010) outlining proposed reform of the CFC rules. The joint discussion document indicates that legislation will be introduced in 2011 to deliver a package of interim improvements to the CFC rules, as a first step to full reform of the CFC rules in 2012. Draft legislation in respect of the interim improvements to the CFC rules was published in December 2010, however, there is currently no published draft legislation in respect of the full reform of the CFC rules. The UK Governments stated intention in relation to the interim improvements and full reform of the CFC rules is to make the CFC rules more competitive. As such, the Directors do not at present expect the interim improvements or full reform of the CFC rules to have a material adverse impact on the financial position of the Company. However, the effect of the interim improvements and full reform of the CFC rules will not be clear until the new legislation is published and enacted in its entirety. (Although the effect of the interim improvements will not be certain until the draft legislation has been enacted, as presently drafted the Directors would not expect them to be material to UK Subcos position.) The Company will continue to monitor developments in this regard and seek to mitigate any adverse UK tax implications which may arise. However, the possibility cannot be excluded that the reform of the CFC rules may have a material adverse impact on the financial position of the Company, reducing net returns to Shareholders. Future changes in tax legislation applicable to Group entities may reduce net returns to Shareholders The Group has entities incorporated and resident for tax purposes in various different territories, including (but not limited to) Indonesia, the UK and Jersey. The tax treatment of Group entities is subject to changes in tax legislation or practices in territories in which the Group entities are resident for tax purposes (including in particular Indonesia, the UK and Jersey). Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid. Any changes to tax legislation or practices in which the Group entities are resident for tax purposes may have a material adverse impact on the financial position of the Company, reducing net returns to Shareholders. Subsequent changes to the Group structure as a consequence of the intended transition to Premium Listing and FTSE indexation may give rise to adverse tax consequences for certain Shareholders As noted below, the Directors intend to seek a Premium Listing and FTSE indexation for the Company on the Official List shortly after Completion in April 2011. In order to satisfy the eligibility criteria for FTSE indexation, it may be necessary to implement certain changes to the Group structure. Such changes may include (but are not limited to) the replacement of the Company as Group parent company with a new UK incorporated company (which will become the company with a Premium Listing on the Official List). For further details, please see Admission and Listing. If such restructuring is required, Shareholders will cease to hold Ordinary Shares, and will instead hold ordinary shares in the new UK incorporated company. In such circumstances, the Directors expect the restructuring to be effected through a scheme of arrangement under Jersey law. It will be necessary for Shareholders to evaluate the tax implications applicable to any changes to the Group structure (including the treatment of the exchange of Ordinary Shares for ordinary shares in the new UK incorporated company and the possible consequence of holding ordinary shares in the new UK incorporated company rather than in the Company) by reference to their relevant circumstances and tax legislation applicable in their territory of tax residence. In this context, it is noted that certain territories should provide relief from taxation in respect of any exchange of Ordinary Shares in the Company for ordinary shares in the new UK incorporated company by Shareholders resident in that territory. However, it is possible that, for certain Shareholders, adverse tax consequences may arise as a consequence of such an exchange or other required changes to the Group structure on transition to Premium Listing on the Official List and FTSE indexation.

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RISKS RELATING TO THE ORDINARY SHARES The Standard Listing of the Ordinary Shares affords shareholders a lower level of regulatory protection than a Premium Listing A Standard Listing affords shareholders in the Company a lower level of regulatory protection than that afforded to investors in a company with a Premium Listing, which is subject to additional obligations under the Listing Rules. A Standard Listing will not permit the Company to gain a FTSE indexation, which may have an adverse affect on the valuation of the Ordinary Shares. Further details regarding the differences in the protections afforded by a Premium Listing as against a Standard Listing are set out in the section entitled Consequences of a Standard Listing. The Company may be unable to transition to a Premium Listing At or shortly after Completion in April 2011, the Directors intend to seek a Premium Listing for the Company on the Official List, subject to meeting the eligibility criteria contained in Chapter 6 of the Listing Rules. There can be no guarantee that the Company will meet such eligibility criteria or that a transition to a Premium Listing will be achieved. In addition there may be a delay, which could be significant, between Completion and the date upon which the Company is able to seek or achieve a Premium Listing. If the Company does not achieve a Premium Listing, the Company will not be obliged to comply with the higher standards of corporate governance or other requirements which it would be subject to upon achieving a Premium Listing and, for as long as the Company continues to have a Standard Listing, it will be required to continue to comply only with the lesser standards applicable to a company with a Standard Listing. In this situation, the Company could be operating a substantial business but would not need to comply with such higher standards. In addition, an inability to achieve a Premium Listing will prohibit the Company from gaining FTSE indexation and may have an adverse effect on the valuation of the Ordinary Shares. Further details regarding the differences in the protections afforded by a Premium Listing as against a Standard Listing are set out in the section entitled Consequences of a Standard Listing. The Principal Shareholders will have significant influence over the Company and/or their interests may differ from those of other Shareholders At the Bumi Resources Transaction Closing Date, the Bakrie Group will hold approximately 28.9 million Voting Ordinary Shares and approximately 61.2 million Suspended Voting Ordinary Shares (together constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 57.2 per cent. of the total issued ordinary share capital of the Company). At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), due to the issue of additional New Vallar Ordinary Shares by the Company in relation to the Berau Transaction and the resultant conversion to Voting Ordinary Shares of certain of the Suspended Voting Shares issued at the Bumi Resources Transaction Closing Date, the Bakrie Group will hold approximately 40.8 million Voting Ordinary Shares and approximately 73.8 million Suspended Voting Ordinary Shares (together constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 54.6 per cent. of the total issued ordinary share capital of the Company). The Suspended Voting Ordinary Shares will automatically convert into Voting Ordinary Shares in the event of further equity issues by the Company, provided that following conversion the Bakrie Groups holding of Voting Ordinary Shares does not exceed the Maximum Voting Percentage. At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), Mutiara will hold approximately 27.8 million Voting Ordinary Shares (constituting approximately 20.4 per cent. of the voting rights in the Company and approximately 13.2 per cent. of the total issued ordinary share capital of the Company). As a result, the Bakrie Group and Mutiara will possess sufficient voting power to have a significant influence over all matters requiring Shareholder approval. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Group, could deprive Shareholders of an opportunity to receive a premium for their Ordinary Shares as part of any sale of the

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Group and might affect the market price of the Ordinary Shares. In addition, pursuant to the terms of the Bakrie Relationship Agreement, so long as the Bakrie Groups shareholding in the Company does not fall below 15 per cent., the Bakrie Group will have the right to nominate for appointment and propose for removal three Directors, including the Chairman, Chief Executive Officer and the Chief Financial Officer. Pursuant to the terms of the Mutiara Relationship Agreement, so long as Mutiaras shareholding in the Company does not fall below 15 per cent., Mutiara will have the right to appoint and remove one Non-Executive Director. The interests of the Bakrie Group and Mutiara may not always be aligned with those of other Shareholders. In particular, the Bakrie Group and Mutiara may hold interests in, or may make acquisitions of, or investments in, other businesses that may be, or may become, competitors of the Group. Also, disputes may arise between the Principal Shareholders and other Shareholders regarding how to manage the Groups business, which could in turn delay or prevent the Group from achieving its objectives. The members of the Bakrie Group have entered into the Credit Suisse Facility in order to refinance certain of their debt facilities. Pursuant to the terms of the Credit Suisse Facility, the Bakrie Group have, among other things, granted the lenders a share pledge in the form of a mortgage over all of the Voting Ordinary Shares and Suspended Voting Ordinary Shares they will hold in the Company (including the Mutiara Share Transfer Shares, see further Part I The Acquisition). In the event that the Bakrie Group defaults on its obligations under the Credit Suisse Facility, the lenders thereunder may be entitled to enforce the share pledge and take control of the Bakrie Groups holding of shares in the Company. Assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date and no Founder Shares or Founder Securities have been exchanged for Ordinary Shares by such date, the lenders would acquire approximately 54.6 per cent. of the issued share capital of the Company which, due to the automatic conversion of the Suspended Voting Ordinary Shares into Voting Ordinary Shares upon their transfer to the lenders, would consist entirely of Voting Ordinary Shares. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of the Group, could deprive Shareholders of an opportunity to receive a premium for their Ordinary Shares as part of any sale of the Group and might affect the market price of the Ordinary Shares. Ordinary Shares in the Company may be subject to market price volatility and the market price of the Ordinary Shares in the Company may decline disproportionately in response to developments that are unrelated to the Companys operating performance The price of the Ordinary Shares could be subject to significant price and volume fluctuations that may be unrelated to the operating performance of the Group. The market price of the Ordinary Shares may, in addition to being affected by the Companys actual or forecast operating results, fluctuate significantly as a result of factors beyond the Companys control, including: the results of exploration, appraisal and development programs and production operations; changes in securities analysts recommendations or estimates of earnings or financial performance of the Company, its competitors or the industry, or the failure to meet expectations of securities analysts; fluctuations in the prices of coal and the other commodities sold by the Group, fluctuations in stock market prices and volumes; general market volatility; changes in laws, rules, regulations and taxes, applicable to the Group, its operations and operations in which the Group has interests; loss of key personnel, and involvement in litigation. In addition, stock markets have in the recent past experienced extreme price and volume fluctuations, which, as well as general economic and political conditions, could adversely affect the market price for the Ordinary Shares. The price of the Ordinary Shares may be volatile and fluctuate widely, depending on many factors, including: perceived prospects for the Groups business and operations and the coal and other commodity mining industries in general; differences between the Groups actual financial and operating results and those expected by investors and analysts; announcements by the Group of significant acquisitions, strategic alliances or joint ventures; changes in analysts recommendations or perceptions of the Company or Indonesia and affecting the coal mining industry generally in Indonesia and in the areas where Bumi Resources and Berau Coals coal mines are located;

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general economic conditions domestically, regionally and globally; changes in prices of equity securities of foreign (particularly Asian) and emerging market companies; changes to key personnel; involvement in litigation; and broad stock market price fluctuations.

The market price of the Ordinary Shares could be negatively affected by sales of substantial amounts of such shares in the public markets At the Bumi Resources Transaction Closing Date, the Bakrie Group will hold approximately 28.9 million Voting Ordinary Shares and approximately 61.2 million Suspended Voting Ordinary Shares (together constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 57.2 per cent. of the total issued ordinary share capital of the Company). At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), the Bakrie Group will hold approximately 40.8 million Voting Ordinary Shares and approximately 73.8 million Suspended Voting Ordinary Shares (together constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 54.6 per cent. of the total issued ordinary share capital of the Company). The Suspended Voting Ordinary Shares automatically convert into Voting Ordinary Shares on any transfer of such shares to a third party who is not an Affiliate of the transferor. At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up Transaction, if any, has not completed by such date), Mutiara will hold approximately 27.8 million Voting Ordinary Shares (constituting approximately 20.4 per cent. of the voting rights in the Company and approximately 13.2 per cent. of the total issued ordinary share capital of the Company). The Bakrie Group and Mutiara are not subject to any lock-up arrangements in respect of their holdings of Voting Ordinary Shares or (in the case of the Bakrie Group) Suspended Voting Ordinary Shares and may, therefore, sell Voting Ordinary Shares and/or Suspended Voting Ordinary Shares in the public or private market, and the Company may undertake a public or private offering of Ordinary Shares. There can be no assurance as to what effect, if any, future sales of Voting Ordinary Shares or Suspended Voting Ordinary Shares will have on the market price of the Ordinary Shares. If the Principal Shareholders were to sell Voting Ordinary Shares or Suspended Voting Ordinary Shares, or the Company were to issue and sell, a substantial number of Ordinary Shares in the public market, the market price of the Ordinary Shares could be adversely affected. Sales by the Companys Principal Shareholders also could make it more difficult for the Company to sell equity securities in the future at a time and price that it deems appropriate. There can be no assurance that such parties will not effect transactions in relation to their shares. The sale of a significant amount of Voting Ordinary Shares or Suspended Voting Ordinary Shares in the public market, or the perception that such sales may occur, could materially affect the market price of the Ordinary Shares and could also impede the Companys ability to raise capital through the issue of equity securities in the future. The issuance of additional Ordinary Shares in the Company in connection with future acquisitions, any share incentive or share option plan or otherwise may dilute all other shareholdings The Group may seek to raise financing to fund future acquisitions and other growth opportunities and may, for these and other purposes (for example, in connection with share incentive and share option plans), issue additional equity or convertible equity securities. As a result, the Companys then-existing Shareholders would suffer dilution in their percentage ownership and further dilution in their voting interest due to the conversion of Suspended Voting Ordinary Shares following any such issue. New equity securities could have rights, preference and privileges senior to those of existing holders of shares in the Company.

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Transfer restrictions for Shareholders in the United States may make it difficult to resell the Ordinary Shares or may have an adverse impact on the market price of the Ordinary Shares The Ordinary Shares have not been registered in the United States under the Securities Act or under any other applicable securities laws and are subject to restrictions on transfer contained in such laws. There are additional restrictions on the resale of Ordinary Shares by Shareholders who are in the United States and on the resale of Ordinary Shares by any Shareholders to any person who is in the United States. These restrictions will make it more difficult to resell the Ordinary Shares in many instances and this could have an adverse effect on the market value of the Ordinary Shares. There can be no assurance that Shareholders in the United States will be able to locate acceptable purchasers or obtain the required certifications to effect a sale. The ability of Shareholders to bring actions or enforce judgements against the Company or the Directors, and against the Adviser or Sub-Adviser, may be limited The ability of a Shareholder to bring an action against the Company may be limited under law. The Company is a limited liability company incorporated in Jersey. The rights of holders of Voting Ordinary Shares and Suspended Voting Ordinary Shares are governed by Jersey law and by the Articles. These rights may differ from the rights of shareholders in UK corporations. A Shareholder may not be able to enforce a judgement against some or all of the Directors and executive officers. Consequently, it may not be possible for a Shareholder to effect service of process upon the Directors and executive officers within the Shareholders country of residence or to enforce against the Directors and executive officers judgements of courts of the Shareholders country of residence based on civil liabilities under that countrys securities laws. There can be no assurance that a Shareholder will be able to enforce any judgements in civil and commercial matters or any judgements under the securities laws of countries other than Jersey against the Directors or executive officers who are residents of a country other than those in which judgement is made. In addition, the courts in Jersey, or elsewhere, may not impose civil liability on the Directors or executive officers in any original action based solely on foreign securities laws brought against the Company or the Directors in a court of competent jurisdiction in Jersey or another country. Jersey law limits the circumstances under which shareholders of companies may bring derivative actions, and, in most cases, only the Company can bring an action in respect of any wrongful act committed against it. Neither an individual shareholder nor any group of shareholders has any right of action in such circumstances. In addition, Jersey law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a US corporation. The ability of Shareholders to participate in rights offerings may be limited and Shareholders could therefore experience dilution of their holdings The Company may, from time to time, distribute rights to its shareholders, including rights to acquire securities. Subject to limited exceptions, the Company is required to offer pre-emptive rights to existing shareholders when issuing new shares. Compliance with securities laws or other regulatory provisions in some jurisdictions may prevent certain purchasers of Ordinary Shares from participating in any rights issuances and thereby result in dilution of their existing shareholdings. The pre-emptive rights of existing shareholders have also been disapplied in relation to the Acquisition. The Company is under no obligation to register the shares in any jurisdiction to permit foreign purchasers of Ordinary Shares to participate in any rights offerings the Company may undertake. Specifically, the Company will not distribute rights to Shareholders, and Shareholders will not be able to take up the rights, unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act, with respect to all holders of the Companys shares, or are registered under the Securities Act. There can be no assurance that the Company will be able to establish an exemption from registration under the Securities Act, and the Company is under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavour to have a registration statement declared effective under the Securities Act. Accordingly, holders of the Companys shares may be unable to participate in rights offerings and may experience dilution of their holdings as well as further dilution in their voting interest as a result due to the conversion of Suspended Voting Ordinary Shares following any such offering. In addition, if the rights that are not exercised or not distributed are not sold or if the sale is not lawful or reasonably practicable, the Company may allow the rights to lapse, in which case holders of the Companys shares would receive no value for these rights.

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The Company may be a passive foreign investment company for US federal income tax purposes and US shareholders could suffer adverse tax consequences For US federal income tax purposes, the Company may be a passive foreign investment company or PFIC. The Company currently expects that, provided the Transactions are completed as contemplated, the Company will qualify for a special rule for recently formed non-US corporations and, therefore, will not be a PFIC at any time from the date of its incorporation through 2012. However, the PFIC determination is a factual determination made annually, and a companys status can change depending, among other things, on changes in the composition and relative value of its gross receipts and assets, changes in its operations and changes and the market value of its stock. The Company therefore cannot assure a US shareholder that it will not be a PFIC in any year. If the Company were to be treated as a PFIC for any taxable year, such treatment could result in adverse US tax consequences to US investors. See paragraph 23 Certain Tax Disclosure for US Shareholders in Part XII Additional Information. If the Company were so classified, the Company may, but it is not obligated to, provide to US shareholders of Ordinary Shares the information that would be necessary in order for such persons to make a qualified electing fund or QEF election with respect to the Ordinary Shares for any year in which the Company is a PFIC.

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ADMISSION AND LISTING

Pursuant to this document, application is being made for admission to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities for a certain maximum number of New Vallar Voting Ordinary Shares to be issued for the purposes of, or in connection with, the Acquisition (the Up-to Shares). The Acquisition consists of the proposed acquisition of a 25per cent. holding in Bumi Resources and a 75per cent. holding in Berau in exchange for: approximately 90.1 million New Vallar Ordinary Shares (the Bumi Resources Consideration Shares), issued at a value of 10.00 per share, for 25per cent. of Bumi Resources from the Bakrie Group. Part of the Bumi Resources Consideration Shares will be in the form of Suspended Voting Ordinary Shares. Approximately 61.2 million of the New Vallar Ordinary Shares to be issued under the terms of the Bumi Resources Share Purchase Agreement will be issued in the form of Suspended Voting Ordinary Shares; and approximately US$739 million cash consideration for 35 per cent. of Berau and approximately 52.3million New Vallar Ordinary Shares (the Berau Consideration Shares), issued at a value of 10.00 per share, in consideration for 40 per cent. of Berau, from Mutiara. On account of the Mutiara Share Transaction Arrangements, approximately 24.5 million of such New Vallar Ordinary Shares (the Mutiara Share Transaction Shares) to be issued under the terms of the Berau Share Purchase Agreement will be issued to Long Haul in the form of Suspended Voting Ordinary Shares.

Vallar expects that it will seek to increase its holding in Bumi Resources over and above the 25per cent. it will acquire as part of the Bumi Resources Transaction. Vallar intends to achieve this by means of one or more potential transactions, whereby Vallar would issue New Vallar Voting Ordinary Shares in return for outstanding Bumi Resources Shares to increase its aggregate holding in Bumi Resources to not more than 51 per cent. of the issued ordinary share capital of Bumi Resources (the Bumi Resources Step-Up Transaction). The completion of any purchase of further Bumi Shares by Vallar in the Step-Up Transaction will be conditional upon the publication of a supplementary prospectus or a further prospectus containing, among other things, details of the purchase including its terms. Consequently, the number of shares constituting the Up-to Shares, which this document is being issued in connection with, is the sum of the following: approximately 28.9 million New Vallar Voting Ordinary Shares that will be allotted and issued to the Bakrie Group on the Bumi Resources Transaction Closing Date (the Bumi Resources Voting Consideration Shares) (see Part I The Acquisition); at least 27.8 million New Vallar Voting Ordinary Shares (being the Berau Consideration Shares other than the Mutiara Share Transaction Shares) that will be allotted and issued to Mutiara at completion of the Berau Transaction (the Berau Voting Consideration Shares) (see Part I The Acquisition); approximately 11.9 million New Vallar Voting Ordinary Shares, to be held by the Bakrie Group, which are expected to arise immediately following the issue of the Berau Consideration Shares as a result of the conversion of approximately 11.9 million Suspended Voting Ordinary Shares in accordance with their terms (see paragraph 4.6 Rights Attaching to the Suspended Voting Ordinary Shares Conversion at the Instance of Bakrie & Brothers or Long Haul (or any of their Affiliates) of Part XII Additional Information); up to a further 93.7 million New Vallar Voting Ordinary Shares that may be issued to Bumi Resources Shareholders in connection with the Bumi Resources Step-Up Transaction, if any (see The Bumi Resources Step-Up Transaction under Part I The Acquisition); and up to a further 40.1 million New Vallar Voting Ordinary Shares, to be held by the Bakrie Group, which would arise as a result of the conversion of up to a maximum of 40.1 million Suspended Voting Ordinary Shares in accordance with their terms (see paragraph 4.6 Rights Attaching to the Suspended Voting Ordinary SharesConversion at the Instance of Bakrie & Brothers or Long Haul (or any of its Affiliates) of Part XII Additional Information) following the issue of up to 61

a maximum of 93.7 million New Vallar Voting Ordinary Shares in connection with the Bumi Resources Step-Up Transaction, if any. Accordingly, applications have been made to the UK Listing Authority and to the London Stock Exchange for up to 202,358,218 New Vallar Voting Ordinary Shares (being the maximum number of New Vallar Voting Ordinary Shares that would be allotted and issued by the Company or arise if all of the above-noted transactions occur) to be admitted to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities. If the Berau Transaction does not close in accordance with the terms of the Berau Share Purchase Agreement, the Berau Consideration Shares will not be issued and the 11,902,640 Suspended Voting Ordinary Shares to be held by the Bakrie Group noted above will not convert into 11,902,640 New Vallar Voting Ordinary Shares until a later date and this document will cease to be valid in respect of those shares. In addition, admission to the UK Listing Authority and to the London Stock Exchange will not be sought using this document for any New Vallar Voting Ordinary Shares issued or arising on conversion of Suspended Voting Ordinary Shares after 5.00 p.m. (London time) on 12 April 2011 (or such later time and/or date (not being later than 5.00 p.m. (London time) on 30 April 2011) as the Company may notify by announcement through a Regulatory Information Service) and this document will cease to be valid in respect of any New Vallar Voting Ordinary Shares issued or arising on conversion of Suspended Voting Ordinary Shares after such time and date (as extended where relevant). Shortly after the closing of the Berau Transaction in April 2011, the Directors intend to seek (a) a Premium Listing for the Company on the Official List, subject to meeting the eligibility criteria contained in Chapter 6 of the Listing Rules; and (b)FTSE indexation for the Company. Under the FTSE Ground Rules for the Management of the UK Series of the FTSE Actuaries Share Indices, a company that is not incorporated in the UK must meet certain conditions in order to be considered eligible for inclusion in, for example, the FTSE 100 or the FTSE 250. One of these conditions is that the company must have a free float of not less than 50 per cent. Following the closing of the Berau Transaction, the free float of the Company is unlikely to exceed 50 per cent. Accordingly, in order to secure FTSE indexation it will be necessary to establish a UK incorporated company as the ultimate holding company of the Group (New Holdco). This would most likely be achieved through a scheme of arrangement or other analogous proceeding in Jersey. In the event that prior to the closing of the Berau Transaction, New Holdco is inserted as the ultimate holding company of the Group, this document will cease to be valid in respect of any shares that at that time have not been admitted to the Official List, any shares to be issued to Mutiara in connection with the Berau Transaction or to Bumi Resources Shareholders in connection with the Bumi Resources Step-Up Transaction, if any, will be shares in the capital of New Holdco and any shares arising on conversion of Suspended Voting Ordinary Shares (or their equivalent in New Holdco) will be shares in the capital of New Holdco. A future prospectus will need to be prepared by the Company and approved by the UK Listing Authority in relation to the admission of New Holdcos voting ordinary shares to the premium listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities.

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CONSEQUENCES OF A STANDARD LISTING

APPLICATION HAS BEEN MADE FOR THE NEW VALLAR VOTING ORDINARY SHARES TO BE ADMITTED TO THE STANDARD LISTING SEGMENT OF THE OFFICIAL LIST. A STANDARD LISTING AFFORDS PURCHASERS OF ORDINARY SHARES IN THE COMPANY A LOWER LEVEL OF REGULATORY PROTECTION THAN THAT AFFORDED TO INVESTORS IN COMPANIES WHOSE SECURITIES ARE ADMITTED TO THE PREMIUM LISTING SEGMENT OF THE OFFICIAL LIST, WHICH ARE SUBJECT TO ADDITIONAL OBLIGATIONS UNDER THE LISTING RULES. IT SHOULD BE NOTED THAT THE UK LISTING AUTHORITY WILL NOT HAVE THE AUTHORITY TO (AND WILL NOT) MONITOR THE COMPANYS COMPLIANCE WITH ANY OF THE LISTING RULES AND/OR ANY PROVISION OF THE MODEL CODE OR THOSE ASPECTS OF THE DISCLOSURE AND TRANSPARENCY RULES WHICH THE COMPANY HAS INDICATED HEREIN THAT IT INTENDS TO COMPLY WITH ON A VOLUNTARY BASIS, NOR TO IMPOSE SANCTIONS IN RESPECT OF ANY FAILURE BY THE COMPANY TO SO COMPLY. The Ordinary Shares in issue at the date of this document have been, and the New Vallar Voting Ordinary Shares will be, admitted to listing on the Official List pursuant to Chapter 14 of the Listing Rules, which sets out the requirements for Standard Listings. The Company intends to comply with the Listing Principles set out in Chapter 7 of the Listing Rules notwithstanding that they only apply to companies which obtain a Premium Listing on the Official List. The Company is not, however, formally subject to such Listing Principles and will not be required to comply with them by the UK Listing Authority. In addition, while the Company has a Standard Listing, it is not required to comply with the provisions of, among other things: Chapter 8 of the Listing Rules regarding the appointment of a listing sponsor to guide the Company in understanding and meeting its responsibilities under the Listing Rules in connection with certain matters; Chapter 10 of the Listing Rules relating to significant transactions which requires Shareholder consent for certain acquisitions; Chapter 11 of the Listing Rules regarding related party transactions. Nevertheless, the Company will not enter into any transaction which would constitute a related party transaction as defined in Chapter 11 of the Listing Rules without the specific prior approval of the Conflicts Committee; Chapter 12 of the Listing Rules regarding purchases by the Company of its Ordinary Shares. However, shareholder authority is required in order for a company to buy back its shares under Part 11 of the Jersey Companies Law and the Company has adopted a policy consistent with the provisions of Listing Rules 12.4.1 and 12.4.2, whereby: (i) the Board intends to seek Shareholder authority annually to purchase in the market up to 10 per cent. of the Ordinary Shares in issue from time to time; (ii) unless a tender offer is made to all holders of Ordinary Shares, the maximum price to be paid per Ordinary Share pursuant to any such purchase must not be more than the higher of: (a) 105 per cent. of the average of the middle market quotations for an Ordinary Share taken from the London Stock Exchanges main market for listed securities for the five Business Days before the purchase is made; and (b) the higher of the price of the last independent trade and the highest current independent bid at the time of purchase; and (iii) any purchase by the Company of 15 per cent. or more of its Ordinary Shares at the date of the proposed offer (excluding Ordinary Shares held in treasury) will be effected by way of a tender offer to all Shareholders; and Chapter 13 of the Listing Rules regarding the form and content of circulars to be sent to Shareholders.

Shortly after the closing of the Berau Transaction in April 2011 the Directors intend to seek a Premium Listing for the Company on the Official List, subject to meeting the eligibility criteria contained in Chapter 6 of the Listing Rules. If such a transition were possible (and there can be no guarantee that it would be) and the Company moved to a Premium Listing, the various Listing Rules highlighted above as rules with which the Company is not required to comply would become mandatory and the Company would comply with the continuing obligations contained within the Listing Rules (and the Disclosure and Transparency Rules) in the same manner as any other company with a Premium Listing.

63

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In deciding whether or not to invest in the Ordinary Shares, purchasers of Ordinary Shares should rely only on their own examination of the Group and or the financial and other information contained in this document. No person has been authorised to give any information or make any representations other than as contained in this document and, if given or made, such information or representations must not be relied on as having been authorised by the Company or the Directors. Without prejudice to the Companys obligations under the FSMA, the Prospectus Rules, the Listing Rules and the Disclosure and Transparency Rules, neither the delivery of this document nor any subscription made under this document shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information contained herein is correct as at any time after its date. Unless the context otherwise requires, this document assumes that the Bumi Resources Transaction and the Berau Transaction have completed. In this document, unless otherwise provided, references to the Group are to the Vallar Group and the Berau Group and, other than in the sections of this document entitled Part VIII Capitalisation and Indebtedness Statement and paragraph 12 Working Capital in Part XII Additional Information, the Bumi Resources Group, in each case as constituted immediately following the closing of the Bumi Resources Transaction. References to the Vallar Group are to Vallar and its subsidiaries and subsidiary undertakings as constituted immediately prior to the closing of the Bumi Resources Transaction and excludes the Bumi Resources Group and the Berau Group. Details of the Acquisition are set out in Part I The Acquisition. Purchasers of Ordinary Shares must not treat the contents of this document or any subsequent communications from the Company or any of their respective affiliates, officers, directors, employees or agents as advice relating to legal, taxation, accounting, regulatory, investment or any other matters. This document does not constitute, and may not be used for the purposes of, an offer to sell or an invitation or the solicitation of an offer or invitation to subscribe for or buy, any Ordinary Shares by any person in any jurisdiction. The Ordinary Shares have not been and will not be registered under the Securities Act, or under any relevant securities laws of any State or other jurisdiction in the United States, or under the applicable securities laws of Australia, Canada, Indonesia or Japan. Presentation of Financial Information The financial information presented in this document includes: audited historical financial information for the Vallar Group for the period ended 30September 2010; audited historical financial information for the Bumi Resources Group for the years ended 31 December 2008 and 2009; unaudited historical financial information for the Bumi Resources Group for the nine months ended 30September 2009 and 2010; audited historical financial information for the Berau Group for the years ended 31December 2007, 2008 and 2009; and unaudited historical financial information for the Berau Group for the nine months ended 30September 2009 and 2010,

in each case, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union (IFRS). Unless otherwise indicated, the financial information presented in this document has been prepared in accordance with IFRS. With effect from the Bumi Resources Transaction Closing Date, Vallar will reflect the Acquisition in the Groups consolidated financial statements prepared in accordance with IFRS. In accordance with IAS 28 Investments in Associates, Vallar will account for its 25 per cent. interest in Bumi Resources under the equity method in the Groups consolidated financial statements, as Vallar will 64

have significant influence but not control or joint control of Bumi Resources. Therefore, Vallar will initially recognise its investment in Bumi Resources at cost as a non-current asset and the carrying amount will subsequently be increased or decreased to recognise Vallars share of the net profit or loss of the Bumi Resources Group after the date of acquisition. Vallars share of the net profit or loss of Bumi Resources will be recognised under the line item Share in net income of associates in the Groups consolidated income statement. Similarly, Vallars share of gains and losses recognised in the statement of comprehensive income of Bumi Resources will be specifically identified in the Groups consolidated statement of comprehensive income under Share of income from associates. Any distributions received by Vallar from Bumi Resources will reduce the carrying amount of Vallars investment in Bumi Resources. After application of the equity method, including the recognition of any losses incurred by Bumi Resources, Vallar will apply the requirements of IAS 36 Impairment of Assets to determine whether it is necessary to recognise any additional impairment loss with respect to Vallars net investment in the equity of the Bumi Resources Group and any associated goodwill. In addition, any loans between Vallar and the Bumi Resources Group will be assessed for impairment under IAS 39 Financial Instruments Recognition and Measurement. Vallar will consolidate Berau in the Groups consolidated financial statements with effect from the Bumi Resources Transaction Closing Date, the date on which Berau will become a subsidiary undertaking of Vallar, even though the New Vallar Ordinary Shares that are being issued in relation to the acquisition of 40 per cent. of Berau will be issued to Mutiara only on completion of the transfer of title to, and registered ownership in, the Berau Shares to the Vallar Group following expiry of the BCE Lock-Up on or around 8 April 2011. Vallar and Mutiara have agreed to the immediate termination, on the Bumi Resources Transaction Closing Date, of Mutiaras board appointment and removal rights in relation to Berau (as discussed in more detail under Overview in PartI The Acquisition), at which time, Vallar will acquire control of Berau (and its subsidiary undertakings) under IAS 27 Consolidated and Separate Financial Statements and thereby consolidate Berau (and its subsidiary undertakings) from that date. The acquisition of Berau will be accounted for in the Groups consolidated financial statements using the purchase method as required by IFRS 3 Business Combinations. The net assets of Berau will be adjusted to fair value at the date when control of Berau passes to Vallar. The excess of the costs of acquisition over the fair value of the assets and liabilities of Berau will be recorded as goodwill. In connection with the publication of this document, Bumi Resources and the Berau have prepared their first consolidated financial information in accordance with IFRS. Historically they both have reported their consolidated financial statements in accordance with Indonesian GAAP to meet the requirements of the IDXand will continue to do so as well asreporting to Vallar in accordance with IFRS to enable Vallar to comply with its reporting obligations as a company listed on the London Stock Exchange. To meet its financial reporting requirements as a result of the Acquisition, Vallar is planning to implement a number of measures aimed at strengtheningthe internal controls and financial reporting processes of Vallar, Bumi Resources and Berau, including seeking to address the issues referred to in risk disclosures previouslypublished by Bumi Resources and Berau. Pro forma financial information In this document, any reference to pro forma financial information is to information which has been extracted without material adjustment from the unaudited pro forma financial information set out in Part X Unaudited Pro Forma Financial Information. The unaudited pro forma information set out in Part X Unaudited Pro Forma Financial Information is based on: the audited historical consolidated income statement of the Vallar Group for the six months ended 30 September 2010, and the historical consolidated statement of net assets of the Vallar Group as at 30 September 2010; the unaudited historical consolidated income statements of the Bumi Resources Group for the nine months ended 30 September 2010, and the historical consolidated statement of net assets of the Bumi Resources Group as at 30 September 2010; and the unaudited historical consolidated statement of comprehensive income of the Berau Group for the nine months ended 30 September 2010, and the historical consolidated statement of net assets of the Berau Group as at 30 September 2010. 65

The unaudited pro forma balance sheet includes certain adjustments as described in Part X Unaudited Pro Forma Financial Information. However, the unaudited pro forma financial information is not necessarily indicative of what the financial position of the Group would have been had the Acquisition occurred, in the case of the effect on the net assets of Vallar, on 30 September 2010, and, in the case of the effect on the income statement of the Vallar Group, on 1 January 2010. The unaudited pro forma financial information is for illustrative purposes only. Because of its nature, the pro forma financial information addresses a hypothetical situation and, therefore, does not represent the Groups actual financial position. Future results of operations may differ materially from those presented in the pro forma information due to various factors. Non-IFRS Financial Measures The financial information in this document includes the presentation of certain financial measures that are not recognised or defined by IFRS, including consolidated EBITDA, EBITDA, cash costs (as defined below) and total sales. These measures have, been included for the reasons described below. EBITDA The Bumi Resources Group and the Berau Group calculate consolidated EBITDA (to the extent such items are applicable to the Bumi Resources Group or the Berau Group) by adding depreciation and amortisation, foreign exchange losses, net finance costs, impairment losses, fair value losses on derivative financial instruments, income tax expenses and certain other expenses to, and subtracting gain on sale of investments, share in net income of associates, fair value gains on derivative financial instruments, foreign exchange gains, income tax benefit and certain other income from, profit for the period as calculated under IFRS. EBITDA is calculated by subtracting minority interest in net income of subsidiaries. Consolidated EBITDA and EBITDA are not a standard measure under IFRS. Consolidated EBITDA and EBITDA have been calculated by adding together or subtracting figures that are extracted without material adjustment either from the income statements that appear in Part IX Financial Information or in the notes thereto. Management use consolidated EBITDA and EBITDA in addition to profit for the period as a measurement in evaluating the Bumi Resources Groups and the Berau Groups respective performance because net income includes many accounting items associated with capital expenditures, such as depreciation, as well as non-operating items, such as interest income, interest expense, foreign exchange gains and losses, loss on retirement of fixed assets, write-off of deferred financing costs and certain other expenses. These accounting items may vary between companies depending on the method of accounting adopted by each company. In addition, consolidated EBITDA and EBITDA as presented in this document may be calculated differently from the definitions of consolidated EBITDA and/or EBITDA in the financing arrangements of the Bumi Resources Group and the Berau Group. Purchasers of Ordinary Shares should not consider the Bumi Resources Groups and Berau Groups definitions of consolidated EBITDA and EBITDA in isolation or construe them as an alternative to income before income tax, or as an indicator of operating performance or any other standard measure under IFRS.

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The following table reconciles the Bumi Resources Groups profit for the period under IFRS to the Bumi Resources Groups definitions of consolidated EBITDA and EBITDA for the periods indicated: Year Ended 31 December Nine Months Ended 30 September 2009

2008

2009

2010

Profit for the period Adjustments: Depreciation and amortisation Gain on sale of investments Loss (gain) on foreign exchange net Share in net income of associates Net finance cost Impairment loss Fair value (gain)/loss on derivative financial instruments Other expenses/(income) net Income tax expense Consolidated EBITDA Minority interest in net income of consolidated subsidiaries EBITDA

342 58 (10) 29 (7) 60 3 (111) 1 466 831

(unaudited) (US$ in millions) 338 81 86 (335) (14) (47) 343 87 38 146 62 (11) (14) (30) 233 101 (1) 145 566

396 81 (247) (33) (145) 399 (157) (28) 308 574

642

(10)

(24)

The following table reconciles the Berau Groups net income under IFRS to the Berau Groups definition of consolidated EBITDA and EBITDA for the periods indicated:
Nine Months Ended Year Ended 31 December 30 September 2007 2008 2009 2009 2010 (unaudited) (US$ in millions) 35 74 148 124 68 7 (2) 10 (1) 29 78 (17) 61 7 4 7 (1) 62 153 (35) 118 7 (2) 23 (2) 124 298 (68) 230 6 (7) 3 102 228 (56) 172 23 3 59 1 94 248 (12) 236

831

632

566

550

Profit for the period Adjustments: Depreciation and amortisation Loss (gain) on foreign exchange net Net finance cost Other expenses/(income) net Income tax expense Consolidated EBITDA Minority interest in net income of consolidated subsidiaries EBITDA

Cash Costs Cash costs are a non-IFRS financial measure. The cash production cost per tonne of coal conveyed of KPC and Arutmin is calculated based on the total consolidated production costs, including decreases in coal inventories but excluding depreciation and amortisation, divided by the consolidated production volumes of coal (which represents the amount of coal conveyed) of KPC and Arutmin. This measure represents the unit production cost for crushed run-of-mine (ROM) coal delivered to the port stockpiles of KPC and Arutmin or loaded on ships at the ports of KPC and Arutmin. The cash production cost per tonne of coal mined at KPC and Arutmin is calculated based on the total consolidated mining costs, excluding depreciation and amortisation, at KPC and Arutmin divided by

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the consolidated volumes of coal mined at KPC and Arutmin. This measure represents the unit mining cost for coal delivered to the ROM stockpiles of KPC and Arutmin. Berau calculates cash cost of sale per tonne by adding mining costs, freight and handling costs, royalties paid to the Indonesian Government, coal processing and other production costs, restoration costs and increases or decreases in coal inventories, and dividing by sales volumes for the periods presented. Although depreciation and amortisation are added to Beraus costs of goods sold, this is not included in cash cost of sale per tonne. Cash costs are presented in this document because the Directors believe they provide a measure for comparing the Groups operational performance against that of its peer group. Cash costs are not recognised or defined by IFRS and should not be considered in isolation or as an alternative to cost of sales, any other measure of financial performance presented in accordance with IFRS or any measure of liquidity such as cash flows from operating activities. Cash costs are calculated differently among coal companies. Accordingly, the cash costs presented in this document may not be comparable to cash cost amounts disclosed by other mining companies and by themselves do not necessarily provide a basis for a comparison of the Group with other coal mining companies. Total Sales The use of total sales in relation to the Bumi Resources Group is not a standard IFRS measure. See Sales. Currencies In this document, references to RP., IRD, Indonesian rupiah, Indonesian Rupiah or Rupiah are to the lawful currency of Indonesian; references to pounds sterling, , pence or p are to the lawful currency of the United Kingdom; and references to US dollars, dollars, US$, cents or c are to the lawful currency of the United States. The Company currently prepares its financial statements in pounds sterling. Both the Bumi Resources Group and the Berau Group prepare their financial statements in US dollars. For reporting periods ending on or after the Bumi Resources Transaction Closing Date, the Group will prepare its financial statements in US dollars. Solely for convenience, certain amounts denominated in Indonesian Rupiahs in this document have been translated into US dollars at specified rates. Unless otherwise indicated, US dollar-equivalent information for amounts in Indonesian Rupiah is based on the exchange rate of the Bank of Indonesia, the Central Bank of Indonesia, for 30 September 2010, which was Rp.9,003 = US$1.00. The basis of translation of foreign currency transactions and amounts in the financial information set out in Part IX Financial Information is described in that Part IX. Coal Reserve and Coal Resource Reporting Basis of Preparation Runge has reviewed the reserves and resources statements compiled by the Group and has stated the reserves and resources as set out in Part XIV Mineral Experts Reports to be in compliance with the Prospectus Rules and European Securities Markets Authority (formerly known as the Committee of European Securities Regulators (CESR)) recommendations and in accordance with the criteria for internationally recognised reserve and resource categories as included in the 2004 JORC Code. In this document, all reserve and resource estimates initially prepared by the Group (other than the coal reserves set forth in the columns under the heading Estimated 2010 Coal Reserves in Coal Reserves in Part V Information on the Berau Group) have been substantiated by evidence obtained from Runges site visits and observation and are supported by details of drilling results, analyses and other evidence and take account of all relevant information supplied by the Groups management. Mineral resources are based on mineral occurrences quantified on the basis of geological data and an assumed break-even strip ratio, and are divided into measured, indicated and inferred categories reflecting decreasing confidence in geological continuity. No allowances are included for dilution and losses during mining, but the reporting of resource estimates carries the implication that there are reasonable prospects for eventual economic exploitation. Measured and indicated resources may 68

therefore be viewed as the estimation stage prior to the application of more stringent economic criteria for reserve definition, such as a rigorously defined break-even strip ratio and mine design outlines, along with allowances for dilution and losses during mining. It is common practice, for example, for companies to include in the resources category material with a reasonable expectation of being converted to reserves, but for which either the detailed mine planning work has not been undertaken or for which an improvement in economic conditions or exploitation efficiencies would be required to enable the company to exploit the resources economically. An inferred resource is that part of a mineral resource for which tonnage can be estimated with a low level of confidence. This categorisation is inferred from geological evidence and assumed, but not verified, geological continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability. Coal reserves (as defined by the 2004 JORC Code) are designated as proved and probable, and are derived from the corresponding measured and indicated resource estimates by including allowances for dilution and losses during mining. It is an explicitly stated further requirement that other modifying economic, mining, metallurgical, marketing, legal, environmental, social and governmental factors also be taken into account. The measured and indicated mineral resources can be reported as either being inclusive of those mineral resources modified to produce the coal reserves or additional to the coal reserves. In this document, measured and indicated resources are stated inclusive of reserves but with no allowance for loss or dilution. Inferred resources are stated on an exclusive basis. This document, including Part XIV Mineral Experts Reports, uses the terms measured, indicated and inferred resources. The SEC does not recognize these terms. Inferred resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will ever be upgraded to a higher category. Under SEC rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. It should not be assumed that all or any part of measured or indicated resources will ever be converted into reserves or that all or any part of an inferred resource exists or is economically or legally mineable. Production In this document, production in relation to the Bumi Resources Group has been measured in two ways: Total production or total mine production. Total production or total mine production is equal to the total production from a particular mine or operation for the relevant period regardless of ownership of that mine or that operation. Therefore, total production includes sales attributable to the interests of Tata and KTS in the IndoCoal Group Companies, including Arutmin and KPC. Attributable production. Attributable production is total or total mine production less production attributable to the interests of joint venture partners, including the interests of Tata and KTS in the IndoCoal Group Companies. Therefore, attributable production includes only 70 per cent. of Arutmins and 65 per cent. of KPCs production.

Sales In this document, sales in relation to the Bumi Resources Group have been measured in two ways: Total sales. Total sales are equal to the total sales from a particular mine or operation for the relevant period regardless of ownership of that mine or that operation. Therefore, total sales includes sales attributable to the interests of Tata and KTS in the IndoCoal Group Companies, including Arutmin and KPC. Attributable sales. Attributable sales are total sales less sales attributable to the interests of joint venture partners, including the interests of Tata and KTS in the IndoCoal Group Companies. Therefore, attributable sales include only 70 per cent. of Arutmins and 65 per cent. of KPCs sales.

The use of total sales in relation to the Bumi Resources Group is not a standard IFRS measure. Rounding Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row

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in tables contained in this document may not conform exactly with the total figure given for that column or row. Investment Considerations In making an investment decision, purchasers of Ordinary Shares must rely on their own examination of the Company and this document, including the merits and risks involved. The contents of this document are not to be construed as advice relating to legal, financial, taxation, investment decisions or any other matter. Purchasers of Ordinary Shares should inform themselves as to: the legal requirements within their own countries for the purchase, holding, transfer or other disposal of the Ordinary Shares; any foreign exchange restrictions applicable to the purchase, holding, transfer or other disposal of the Ordinary Shares which they might encounter; and the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer or other disposal of the Ordinary Shares. Purchasers of Ordinary Shares must rely upon their own representatives, including their own legal advisers and accountants, as to legal, tax, investment or any other related matters concerning the Company and an investment therein.

This document should be read in its entirety before purchasing any Ordinary Shares. All Shareholders are entitled to the benefit of, are bound by, and are deemed to have notice of, the provisions of the Articles of Association of the Company, which purchasers of Ordinary Shares should review. Forward-Looking Statements This document contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include statements relating to: the Groups plans, targets, objectives or goals, including those related to its coal mining, production, operations and sales; estimation and classification of the Groups coal reserves; future and budgeted capital expenditures and investments in general and expected production capacity of facilities to be constructed or acquired as part of the Groups capital expenditure plans; expected results of the Groups exploration, development, production and other related capital expenditures and investments; anticipated demand and selling prices for coal and power; environmental compliance and remediation; and future economic performance.

This document also contains forward-looking statements regarding the Acquisition, including the expected benefits of the Acquisition. The words anticipate, believe, could, estimate, expect, intend, may, plan, seek, will, would and similar expressions, as they relate to the Group, are intended to identify a number of these forward-looking statements. These forward-looking statements reflect the Groups current view with respect to future events and are not a guarantee of future performance. Purchasers of Ordinary Shares should be aware that a number of important factors could cause the Groups actual results to differ materially from the plans, objectives, expectations, estimates, projections and intentions expressed in such forward-looking statements. These factors include the important list of factors discussed under Risk Factors. This list of factors is not exhaustive. When relying on forward-looking statements, purchasers of Ordinary Shares should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Group operates. These forward-looking statements speak only as of the date on which they are made. Accordingly, the Company and the Directors expressly disclaim any obligation or undertaking to update any of the forward-looking statements contained in this document

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to reflect any change in the Directors expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules. The Company does not make any representation, warranty or prediction that the results anticipated by forward-looking statements will be achieved, and these forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Accordingly, purchasers of Ordinary Shares should not place undue reliance on any forward-looking statements. In addition, the expectations of the Groups management with respect to mining natural resources, whether conducted by any of the Groups subsidiaries or any of its contractors or suppliers, are also subject to risks arising from the inherent difficulty of predicting the presence, yield or quality of natural resource reserves, as well as unknown or unforeseen difficulties in extracting, transporting and processing any natural resources found or doing so on an economic basis. The Groups ability to maintain and grow its revenues, net income and cash flows depends upon continued capital expenditure, whether by the Group or by its contractors. In addition, the Groups capital expenditure and investment plans are subject to a number of risks, contingencies and other factors, such as coal and other metal and mineral prices, market demand and acquisition opportunities, some of which are beyond the Groups control. The Group adjusts its capital expenditure and investment budgets periodically, based on factors the Groups management deem relevant. The Groups ability to obtain adequate financing to satisfy its capital expenditure and investment budget and debt-service requirements may be limited by those factors discussed under Risk Factors. The Group may make additional capital expenditures and investments as opportunities or needs arise. The Group may increase, reduce or suspend its planned capital expenditures or investments or change the timing and use of capital expenditures from what is currently planned in response to market conditions, production trends or for other reasons. For the foregoing reasons, the Groups actual future capital expenditures and investments are likely to be different from its current budgeted capital expenditure and investment amounts, and those differences may be significant. Market Data Where information contained in this document has been sourced from a third party, the Company and the Directors confirm that such information has been accurately reproduced and, so far as they are aware and have been able to ascertain from information published by third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Share Data All descriptions of share numbers and percentages in relation to Vallars shares in this document are before any issue of shares under the Share Matching Award. No Incorporation of Website The contents of the Companys website (or Bumi Resources, Beraus or any other website) do not form part of this document. Definitions and Technical Terms A list of defined terms and technical terms used in this document are set out in Part XV Definitions and Glossary of Technical Termsof this document. Governing Law Unless otherwise stated, statements made in this document with respect to legal matters in force in England and Wales or Jersey, as the case may be, are based on the law and practice currently in force in England and Wales, and Jersey respectively and for company law, the law and practice currently in force in Jersey, and are subject to changes therein.

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DIRECTORS, AGENTS, REGISTERED HEAD OFFICE AND ADVISERS

Directors Indra Bakrie (Chairman) Nathaniel Rothschild (Co-Chairman) Ari Hudaya (Chief Executive Officer) Andrew Beckham (Chief Financial Officer) James Campbell (Non-Executive Director) Rosan Roeslani (Non-Executive Director) Sir Julian Horn-Smith (Deputy Chairman & Senior Independent Director) Lord Renwick (Independent Non-Executive Director) Steven Shapiro (Independent Non-Executive Director) Sir Graham Hearne, CBE (Independent Non-Executive Director) Wibowo Suseno Wirjawan (Independent Non-Executive Director) Amir Sambodo (Independent Non-Executive Director) Philip Yeo (Independent Non-Executive Director) Sony B. Harsono (Independent Non-Executive Director) Capita Secretaries Limited 12 Castle Street St. Helier Jersey JE2 3RT Channel Islands 12 Castle Street St. Helier Jersey JE2 3RT Channel Islands PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Capita Registrars (Jersey) Limited 12 Castle Street St. Helier Jersey JE2 3RT Channel Islands Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS Mourant Ozannes 22 Grenville Street St. Helier Jersey JE4 8PX Channel Islands J.P. Morgan plc 125 London Wall London EC2Y 5AJ

Company Secretary

Registered Office

Auditors and Reporting Accountants for the Company Registrar

Legal advisers to the Company as to English law Legal advisers to the Company as to Jersey law

Financial adviser

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EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The dates below are indicative only and are subject to change. Event Publication of Prospectus Bumi Resources Transaction Closing Date Cancellation and readmission of listing of Voting Ordinary Shares Bumi Resources Consideration Shares Admission Closing of the Berau Transaction Berau Voting Consideration Shares admitted to listing and trading Conversion of some of the Suspended Voting Ordinary Shares held by the Bakrie Group into Voting Ordinary Shares and the admission of such Voting Ordinary Shares to listing and trading
Note:

Date 24 February 2011 Week commencing 28 February 2011 Week commencing 28 February 2011 Week commencing 28 February 2011 On or around 8 April 2011 On or around 8 April 2011

The Company will announce through a Regulatory Information Service the time and date that the admission of the Bumi Resources Consideration Shares to the Official List and to trading on the London Stock Exchanges main market for listed securities will become effective and dealings in those Voting Ordinary Shares will commence. In addition, the Company will announce through a Regulatory Information Service the admission of each additional tranche of Voting Ordinary Shares.

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PART I THE ACQUISITION

Overview On 16 November 2010: (a) Vallar and the Bakrie Group entered into the Bumi Resources Share Purchase Agreement in relation to the Bumi Resources Transaction, pursuant to which Vallar agreed to purchase an aggregate of 5,193,350,000 Bumi Resources Shares (representing 25 per cent. of the issued ordinary share capital of Bumi Resources) in consideration of the issue to the Bakrie Group of approximately 28.9 million Voting Ordinary Shares and approximately 61.2 million new Suspended Voting Ordinary Shares (in each case issued at a value of 10.00 per share); and Vallar, the Subsidiary and Mutiara entered into the Berau Share Purchase Agreement in relation to the Berau Transaction, pursuant to which Vallar and the Subsidiary agreed to purchase an aggregate of 26,175,000,000 Berau Shares (representing 75 per cent. of the issued ordinary share capital of Berau) at Rp.540 per Berau Share, in consideration of the payment of approximately US$739 million* in cash consideration for 35 per cent. of Berau and the issue to Mutiara of approximately 52.3 million New Vallar Ordinary Shares (issued at a value of 10.00 per share) in consideration for 40 per cent. of Berau.

(b)

On 23 February 2011, Vallar, the Bakrie Group and UK Subco entered into an amendment deed to the Bumi Resources Share Purchase Agreement pursuant to which they agreed, amongst other things, that: (a) the Bumi Resources Shares to be acquired by Vallar would be acquired by Vallars subsidiary, UK Subco; and (b) that, as set out in more detail below, due to some of the Bumi Resources Shares to be transferred to UK Subco being subject to a lock-up from trading on the IDX, UK Subco would provide an irrevocable undertaking to the IDX to comply with the lock-up in order to facilitate those shares being transferred at closing of the Bumi Resources Transaction. On 23 February 2011, Vallar, Vallar Holdings and Mutiara entered into an Amendment Deed to the Berau Share Purchase Agreement pursuant to which it was agreed that of the approximately 52.3 million New Vallar Ordinary Shares to be allotted and issued by Vallar at closing of the Berau Transaction, approximately 27.8 million would be allotted and issued to Mutiara in the form of New Vallar Voting Ordinary Shares and, in satisfaction of Mutiaras obligations under the Mutiara Share Transaction Agreement, approximately 24.5 million would be allotted and issued to Long Haul in the form of Suspended Voting Ordinary Shares. Vallar, Vallar Holding and Mutiara intend to further amend the Berau Share Purchase Agreement prior to closing of the Berau Transaction so that the acquisition of the Berau Shares is effected through UK Subco. At the Bumi Resources Transaction Closing Date, the Bakrie Group will hold approximately 28.9 million Voting Ordinary Shares and approximately 61.2 million Suspended Voting Ordinary Shares (constituting approximately 29.9 per cent. of the voting rights in the Company and approximately 57.2 per cent, of the total issued ordinary share capital of the Company). At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up transaction, if any, has not completed by such date), due to the issue of additional New Vallar Ordinary Shares by the Company in relation to the Berau Transaction, the Bakrie Group will hold approximately 40.8 million Voting Ordinary Shares and approximately 73.8 million Suspended Voting Ordinary Shares (constituting not more than 29.9 per cent, of the voting shares in the Company and approximately 54.6 per cent, of the total issued ordinary share capital of the Company). The Suspended Voting Ordinary Shares will automatically convert into Voting Ordinary Shares in the event of further equity issues by Vallar, provided that following any conversion the Bakrie Groups holding of Voting Ordinary Shares does not exceed the maximum percentage permitted before the Bakrie Group would be required to make a mandatory offer for Vallar under Rule 9 of the City Code. At the date of Completion (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming the Bumi Resources Step-Up transaction, if any, has not completed by such date), Mutiara is expected to hold approximately 27.8 million Voting Ordinary Shares constituting approximately 20.4 per cent. of the voting rights in the Company and approximately 13.2 per cent. of the total issued ordinary shares of the Company).
* Exchange rates of US$1.00 = Rp. 8,924.5 and 1.00 = US$1.61515 have been used to determine the aggregate consideration price.

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The Bumi Resources Transaction is expected to complete on the Bumi Resources Transaction Closing Date, and the Berau Transaction is expected to close on or around 8 April 2011 following the release of the BCE Lock-Up. Other than the delivery of customary closing deliverables by the parties to the respective Transactions, there are no outstanding conditions to either of the Transactions. Further details of the terms of the Bumi Resources Share Purchase Agreement and the Berau Share Purchase Agreement (including details of amendments made since signing) are set out in paragraph 17.1 and 17.2 of Part XII Additional Information. Berau Transaction Of the US$739 million cash consideration Vallar agreed to pay for 35 per cent. of Berau, approximately US$639 million was paid to Mutiara on 18 November 2010, with the balance of US$100 million to be released to Bumi Resources from an escrow arrangement upon completion of the Bumi Resources Transaction. Of the first instalment of US$639 million, US$334.0 million was used by Mutiara to repay its loan facility with Credit Suisse and the balance was paid to an account of Mutiara. The second instalment of US$100 million will repay part of a loan that is owed by Mutiara to Bumi Resources. Mutiara and Long Haul entered into an agreement (the Mutiara Share Transaction Agreement) on 23 February 2011 pursuant to which it was agreed that Mutiara would transfer (or procure the direct issue and allotment by Vallar) to Long Haul and Long Haul would acquire approximately 24.5 million of the New Vallar Ordinary Shares to be allotted and issued by Vallar (in the form of Suspended Voting Ordinary Shares) upon closing of the Berau Transaction (the Mutiara Share Transaction Shares). As noted above, Vallar has agreed to allot and issue such shares directly to Long Haul upon completion of the Berau Transaction. The Berau Consideration Shares that are being issued pursuant to the Berau Share Purchase Agreement will be issued following the release of the BCE Lock-Up at the same time as Mutiara transfers title to, and registered ownership of, the Berau Shares to UK Subco. The BCE Lock-Up restricts Mutiara from transferring title to, and registered ownership of, any of the Berau Shares until after the lock-up expires on 7 April 2011. However, on 18 November 2010, pending the release of the BCE LockUp, Mutiara, among other things: irrevocably appointed both Vallar and the Subsidiary as its attorney to exercise all rights, powers and privileges attaching to the Berau Shares or otherwise capable of being exercised by Mutiara as the registered holder of the Berau Shares including the right to attend and vote at general meetings; assigned and transferred to Vallar and the Subsidiary all of its right, interest and title to any and all dividends (which for these purposes includes, without limitation, returns of capital or any other distribution by Berau of its profits, retained earnings or capital to its shareholders, in any case whether payable in cash or in kind) paid or payable to it by Berau after 18 November 2010; pledged the Berau Shares to Vallar and the Subsidiary in order to secure its obligations under the Berau Share Purchase Agreement to transfer title and registered ownership of the Berau Shares to the Vallar Group; and irrevocably appointed both Vallar and the Subsidiary as its attorney to execute a deed of transfer and to do all such other things as may be necessary or required (including, without limitation, appearing before a notary or any government official and executing any other document, letter or instruction as may be necessary) in order to effect the transfer of the Berau Shares to the Vallar Group.

Notwithstanding the fact that Vallar and the Subsidiary are currently permitted to exercise the rights described above that attach to the Berau Shares, in order not to trigger a change-of-control provision in the Berau Senior Secured Credit Facility, Vallar agreed under the Mutiara Relationship Agreement that, until 7 April 2011 or such earlier date as may be agreed by Vallar and Mutiara, Mutiara would be entitled to nominate for appointment to the board of directors of Berau such number of directors as from time to time will constitute a majority in number of the board and to propose for removal from office any such persons so appointed and nominate for appointment other persons in those persons places. Berau has since received a written waiver from the requisite number of lenders under the Berau Senior Secured Credit Facility of any prepayment obligation arising under the Berau Senior Secured Credit Facility (the Lender Waiver) that would have arisen as a result of the Berau Transaction and,

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accordingly, Vallar and Mutiara have agreed that simultaneous with the closing of the Bumi Resources Transaction, Vallar and Mutiara will agree that Mutiaras appointment/removal rights in relation to the Berau board will be terminated. Upon the termination of these rights, Vallar will obtain control of Berau and its subsidiary undertakings for accounting purposes. At this point, Vallars control of Berau will be, from both an operational and financial perspective, by means of the economic and voting interest that Mutiara has granted to Vallar and the Subsidiary through the arrangements noted above, rather than any direct holding of the Berau Shares by Vallar or any member of the Vallar Group. Therefore, with effect from the Bumi Resources Transaction Closing Date, Berau and its subsidiary undertakings will be treated as subsidiary undertakings of Vallar and consolidated in Vallars consolidated financial statements. Bumi Resources Transaction After signing of the Bumi Resources Share Purchase Agreement, the Company was informed by the Bakrie Group that 587,630,948 of the Bumi Resources Shares to be transferred to the Company pursuant to such agreement (amounting to approximately 2.8 per cent of the issued Bumi Resources Shares) are subject to a lock-up from trading on the IDX until 6 October 2011. In order to obtain the consent of the IDX to the transfer of these shares to the Company at closing of the Bumi Resources Transaction, the Company has given an irrevocable undertaking to the IDX that it will comply with the lock-up arrangements and ensure that the shares are not sold or traded until the expiry of the above mentioned lock-up period on 6 October 2011. Mandatory Cash Offer for Remaining Share Capital of Berau Closing of the Berau Transaction in April 2011 will trigger a mandatory cash offer (MCO) for the remaining issued share capital of Berau. The MCO will be made on the same terms as the Companys acquisition of Berau Shares under the Berau Transaction, i.e. at Rp.540 per share. Mutiara has undertaken not to accept the MCO in respect of those Berau Shares (amounting to approximately 15.3 per cent. of the issued share capital of Berau) that it will continue to own following the closing of the Berau Transaction. The MCO will be triggered upon transfer of the registered ownership in the Berau Shares to the Company and the Subsidiary (through UK Subco) by Mutiara on closing of the Berau Transaction, which is expected to take place on or around 8 April 2011 after expiry of the BCE Lock-Up. The maximum number of Berau Shares that the Vallar Group may acquire under the MCO is 3,400,000,500 amounting to approximately 9.7 per cent. of the existing issued share capital of Berau. Suspended Voting Ordinary Shares Due to the size of the interest the Bakrie Group will have in the Company upon the closing of the Bumi Resources Transaction (as well as upon Completion), the Bakrie Group has agreed that part of the consideration it receives under the Bumi Resources Share Purchase Agreement will be in the form of Suspended Voting Ordinary Shares in order to ensure that the Bakrie Groups aggregate holding of New Vallar Voting Ordinary Shares will not exceed the Maximum Voting Percentage. In addition, the Mutiara Share Transaction Shares which are to be issued under the terms of the Berau Share Purchase Agreement and the Mutiara Share Transaction Arrangements to the Bakrie Group will be issued as Suspended Voting Ordinary Shares. The Suspended Voting Ordinary Shares will automatically convert into Voting Ordinary Shares in the event of further equity issues by the Company (for example, pursuant to the Bumi Resources Step-Up Transaction), provided that following conversion the Bakrie Groups holding of Voting Ordinary Shares does not exceed the Maximum Voting Percentage. Additional Undertakings of the Bakrie Group Under the terms of the Bumi Resources Share Purchase Agreement, the Bakrie Group has agreed to pay US$150 million to the Company if the Bumi Resources Transaction fails to close in accordance with its terms as a result of the Bakrie Groups default. Of this US$150 million, US$100 million is held in an escrow account with J.P. Morgan Chase Bank. Further details of the escrow arrangements are set out in paragraph 17.3 of Part XII Additional Information. The Bumi Resources Step-Up Transaction Subject to market conditions, applicable laws and regulations, Vallar is considering one or more potential transactions with Bumi Resources Shareholders, on terms to be confirmed, pursuant to which

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Vallar would issue New Vallar Voting Ordinary Shares in return for Bumi Resources Shares, which when aggregated with the Bumi Resources Shares acquired by the Group pursuant to the Bumi Resources Transaction will represent not more than 51 per cent. of the issued ordinary share capital of Bumi Resources. The completion of any purchase of further Bumi Shares by Vallar in the Step-Up Transaction will be conditional upon the publication of a supplementary prospectus or a further prospectus containing, among other things, details of the purchase including its terms. Financial Adviser J.P. Morgan plc acted as financial adviser to the Company in relation to the Acquisition and provided fairness opinions. Premium Listing At or shortly after the closing of the Berau Transaction in April 2011, the Directors intend to seek a Premium Listing for the Company (which will include the businesses acquired in the Acquisition) on the Official List. Rationale for the Acquisition The Acquisition is in line with Vallars stated objectives at the time of its initial public offering in July 2010, namely to acquire stable producing assets that require a capital injection and operational expertise to grow. The Directors believe that the Acquisition provides significant benefits identified for stakeholders in each of Vallar, Bumi Resources and Berau through: maximising the potential of the largest coal producing assets in Indonesia, the worlds largest sea-borne thermal coal-exporting nation, and located in the strategically important coal province of Kalimantan, Indonesia. To do this, management intends to deliver the strong organic growth profile from the Bumi Resources Groups and the Berau Groups current operations and projects; exposure to the Bumi Resources Group and the Berau Group, the largest of and fifth largest Indonesian coal producers by production, respectively (total combined* production of approximately 78 million tonnes in 2010), with a significant resource base (total combined* estimated coal resources of approximately 12.6 billion tonnes according to the Mineral Experts Reports prepared by Runge and set out in Part XIV Mineral Experts Reports) and a strong financial performance; the targeted creation of shareholder value through identified efficiency gains, shared marketing services, possible refinancing of the Bumi Resources Groups and the Berau Groups existing borrowings and the creation of low-cost development opportunities within the Groups asset base; reviewing and re-organising the financial structure of the Group to lower funding costs and to provide capital for future expansion; the potential to conduct asset swaps and sales to create an attractive and streamlined asset base within the Group and also thereby simplify the structure of what is a complex and diverse group of companies; and the creation of a strong Board and management team combining local expertise and international industry experience.

As a result of the Acquisition, the Group expects to benefit in coming years from: the Groups exposure to the fast-growing domestic energy demand in Indonesia; Indonesias close proximity to growing thermal coal demand from other Asian economies, primarily China and India; and access to reduced costs of capital through a London listing.

*Aggregate of 100 per cent. of the Bumi Resources Group and the Berau Group and includes production attributable to the interests of Tata and KT5 in the IndoCoal Group of Companies.

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Principal Shareholders Following completion of the Acquisition, the approximate holdings of Ordinary Shares in the Company are expected to be as follows (taking into account the effect of the Mutiara Share Transaction Arrangements and assuming that the Bumi Resources Step-Up Transaction, if any, has not completed by such date): Voting Ordinary Shares(1) 29.9% 20.4% 49.6% Suspended Voting Ordinary Shares(1)(2) 100% 0% 0% Total Ordinary Shares(1) 54.6%(4) 13.2% 32.1%

Bakrie Group Mutiara Other shareholders(3)

Notes:

(1) Assuming that no Founder Shares and no Founder Securities have been exchanged for Ordinary Shares. For further details, see Effect of the Acquisition on the Founder Shares and the Founder Securities below and Part XII Additional Information. (2) The Suspended Voting Ordinary Shares automatically convert into Voting Ordinary Shares in the event of further equity issues by the Company provided that following conversion the Bakrie Groups holding of Voting Ordinary Shares does not exceed 29.9 per cent. of the total number of issued Voting Ordinary Shares. (3) See paragraphs 8 and 9 of Part XII Additional Information for further information on Director and Founder shareholdings. (4) The Bakrie Groups shareholding in the Company is subject to a share pledge in the form of a mortgage pursuant to the terms of the Credit Suisse Facility. See The Principal Shareholders will have significant influence over the Company and/or their interests may differ from those of other Shareholders in Risk Factors for further details.

The Company has entered into the Bakrie Relationship Agreement to regulate the relationship between the Company and the Bakrie Group. The Bakrie Relationship Agreement includes provisions for the nomination for appointment of three Directors by the Bakrie Group, including the position of Chairman, Chief Executive Officer and Chief Financial Officer (subject to the Bakrie Group retaining control of 15 per cent. of the votes able to be cast at general meetings of the Company) and restrictions on the appointed Director voting where there are conflicts of interest between the Group and the Bakrie Group or any of its Associates. Further details of the Bakrie Relationship Agreement are set out in paragraph 17.4 of Part XII Additional Information. The Company has also entered into the Mutiara Relationship Agreement to regulate the relationship between the Company and Mutiara. The Mutiara Relationship Agreement includes provisions for the nomination for appointment of one Non-Executive Director by Mutiara (subject to Mutiara retaining control of 15 per cent. of the votes able to be cast at general meetings of the Company) and restrictions on the appointed Director voting where there are conflicts of interest between the Group and Mutiara or any of its Associates. Further details of the Mutiara Relationship Agreement are set out in paragraph 17.5 of Part XII Additional Information. Effect of the Acquisition on the Founder Shares and the Founder Securities Following completion of the Acquisition: the Founder Shares are expected to be capable of exchange for Ordinary Shares up to and including the last Business Day of the sixth month following the month in which the Acquisition completes; and subject to the satisfaction of the Performance Condition, the holders of the Founder Securities will have the right to require the Company to acquire the Founder Securities in exchange for the issue to the holders of the Founder Securities of Ordinary Shares. The Founder Securities exchange right may not be exercised after the fourth anniversary of the completion of the Acquisition.

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Following any exercise of exchange rights by the holders of Founder Shares or by a holder of Founder Securities: the number of Ordinary Shares required to be issued by the Company will be calculated at the time of exchange in accordance with the Articles of Association of the Subsidiary; and the Company will have the option to pay a cash equivalent to the holder(s) of such Founder Shares or Founder Securities, as the case may be, instead of issuing Ordinary Shares.

As noted in Part III Information on Vallar and paragraphs 5.3 and 5.4 of Part XII Additional Information, the Founder Shares and the Founder Securities were issued to incentivise the Limited Partners* to ensure that the Company completed an acquisition of a substantial company, business or asset (which in turn would allow them to realise the value of their interests in the Founder Shares) and that, following completion of such an acquisition, shareholder value would be created through the satisfaction of the Performance Condition (which in turn would allow them to realise the value of their interests in the Founder Securities). In connection with the Acquisition and also in order to provide an incentive to the management of Vallar, Bumi Resources and Berau to ensure that following completion of the Acquisition shareholder value is created through the satisfaction of the Performance Condition, the Limited Partners have agreed with Long Haul that (subject to closing of the Bumi Resources Transaction and the Berau Transaction) on any exercise of exchange rights attaching to the Founder Shares or Founder Securities (and subject to the Company not having exercised its right to pay a cash equivalent to the holders of the Founder Shares or the Founder Securities, as the case may be, instead of issuing Ordinary Shares): Long Haul (or any Affiliate(s) nominated by Long Haul) will be entitled to 40 per cent. of the Excess Shares and 40 per cent. of the Total C Exchange Right Shares; and such members of the management of Vallar (or its advisers or sub-advisers), Bumi Resources and Berau (if any) as may be determined by Vallar Capital GP Limited (the general partner of Vallar Capital) may be entitled to up to 20 per cent. of the Excess Shares and/or up to 20 per cent. of the Total C Exchange Right Shares (with the intention that any entitlement of such members of management will be subject to determination by Vallar Capital GP Limited and will also be subject to vesting criteria to be determined by Vallar Capital GP Limited).

If, following any exercise of exchange rights by the holders of Founder Shares or by a holder of Founder Securities, the Company exercises its right to pay a cash equivalent to the holders of the Founder Shares or the Founder Securities, as the case may be, instead of issuing Ordinary Shares, the Limited Partners have agreed with Long Haul that Long Haul and such members of management (if any) referred to above will instead be entitled to the relevant cash amounts instead of the Ordinary Shares to which they would otherwise be entitled. As the number of Ordinary Shares that the Company would issue on exchange of the Founder Shares and on exchange of the Founder Securities will depend on a variety of factors, including in the case of the Founder Securities the satisfaction of the Performance Condition, it is not possible to say whether, and if so how many, Ordinary Shares the Founders, Long Haul and/or the members of the management of Vallar (or its advisers or sub-advisers), Bumi Resources and Berau may be or become entitled to. Accordingly, the Company will make an announcement through a Regulatory Information Service when, and if, the Founder Shares and the Founder Securities, respectively, are exchanged for Ordinary Shares confirming the number of Ordinary Shares that are issued upon exchange to the Founders, Long Haul and any such members of management respectively. See Part III Information on Vallar for background on the Founder Shares and the Founder Securities.

* A portion of the interests listed in relation to Mr. Rothschild and Mr. Daniel are interests held as potential beneficiaries under family discretionary trusts.

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PART II INDUSTRY OVERVIEW AND REGULATION

INDUSTRY OVERVIEW Background Coal is primarily used in electricity generation and in steel production. Coal was the fastest growing fuel in the world from 2000 to 2009, with consumption growing at a compound annual growth rate (CAGR) of 3.8 per cent., according to the BP Statistical Review of World Energy for June 2010. In contrast, global natural gas consumption and global oil consumption grew at a CAGR of 2.2 per cent. and 1.0 per cent. respectively during the same period, according to the BP Statistical Review of World Energy for June 2010. Coal provides approximately 41 per cent. of the worlds electricity, according to a report published by the World Coal Institute in 2009. Coals popularity as an energy source can be attributed to several factors: coal is cheaper than oil and natural gas and provides greater reliability of supply than wind or hydropower. Coal is also easy and safe to store and convenient to transport by land and water. In addition, global coal reserves are estimated to be sufficient to meet global coal demand for at least the next century. According to data reported in the BP Statistical Review of World Energy for June 2010, global coal consumption accounted for 29.4 per cent. of the worlds primary energy consumption in 2009, the highest since 1970. Coal represented approximately 51.9 per cent. of primary energy consumption in the Asia-Pacific region in 2009, according to data reported in the BP Statistical Review of World Energy for June 2010. The Asia-Pacific region is the largest market for coal, accounting for 65.6 per cent. of the global coal consumption in 2009. Coal consumption in Asia Pacific grew significantly faster than all other regions in the world at a CAGR of 7.9 per cent. from 2000 to 2009. During the same period, coal consumption decreased at an average annual rate of 1.5 per cent. in North America and increased at an average annual rate of 2.0 per cent. and 2.7 per cent. in Africa and the Middle East respectively. Global coal consumption
2000 North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific Total 607 20 526 7 90 1,087 2,338 2001 593 19 519 8 90 1,120 2,349 2002 591 18 519 9 93 1,174 2,403 2003 2004 2005 2006 (million tonnes oil equivalent) 605 20 534 9 98 1,330 2,595 603 21 528 9 104 1,500 2,764 615 21 514 9 101 1,644 2,904 606 21 527 9 103 1,774 3,039 2007 615 23 528 9 106 1,903 3,184 2008 602 24 517 9 111 2,023 3,287 2009 531 23 456 9 107 2,152 3,278

Source: BP Statistical Review of World Energy for June 2010

Coal characteristics Coal is characterised by its use as either steam coal or metallurgical coal. Steam coal, also referred to as steaming coal or thermal coal, is used by electricity generators and by industrial facilities to produce steam, electricity or both. Metallurgical coal is usually refined into coking coal principally used to produce coke, which is used as a reductant in blast furnaces for the production of steel. There are four types of coal by geological composition: lignite, sub-bituminous, bituminous and anthracite. The Group only mines bituminous and sub-bituminous coal. Each has characteristics that make it more or less suitable for different uses. Energy content and sulphur content are the most important coal characteristics and help to determine the best use of particular types of coal, as well as being used to determine the price of different qualities of coal. Energy content The energy content of coal is commonly measured by the heat released on complete combustion in air or oxygen, expressed as the amount of heat (measured in kilocalories) per unit weight of coal (measured in kilograms) or kcal/kg. Bituminous coal is a soft black coal with an energy content 80

generally higher and a moisture content generally lower than sub-bituminous coal. Bituminous coal is used for utility and industrial steam purposes; it is the coal-type most often used for electricity generation. It also includes metallurgical coal, which is used in steel production. Sub-bituminous coal is a black coal most commonly used by electricity generators and some industrial consumers. Generally, coal with higher energy content commands a premium. Sulphur content Coal combustion produces sulphur dioxide, the amount of which varies depending on the chemical composition and the concentration of sulphur in the coal. Low-sulphur coal is coal with a sulphur content of 1.0 per cent. or less by weight. Sub-bituminous coal typically has a lower sulphur content than bituminous coal. Coal with lower sulphur content is considered to be of a higher quality as electricity generators worldwide have increasingly become subject to various regulatory restrictions intended to reduce sulphur dioxide emissions. However, higher-sulphur coal can be burned by electricity plants equipped with sulphur-reduction technology, which employs a scrubbing process to reduce sulphur dioxide emissions. Other characteristics Ash is the inorganic residue remaining after the combustion of coal. As with sulphur content, ash content varies from seam to seam. Ash content is an important characteristic of coal because electricitygenerating plants must handle and dispose of ash following combustion. Coal with lower ash content is considered to be of a higher quality. The moisture content of coal varies according to the type of coal, the region where it is mined and the location of coal within a seam. In general, high moisture content decreases the energy content and increases the weight of the coal, thereby making it more expensive to transport. Moisture content in coal, as sold, can range from approximately 5.0 per cent. to 30.0 per cent. of the coals weight. Coal with lower moisture content is considered to be of a higher quality. Mining methods Coal is mined using surface and underground methods. The most appropriate mining technique is determined by coal seam characteristics such as location and recoverable reserve base. Drill hole data is used initially to define the size, depth and quality of the coal reserve area before committing to a specific extraction method. It is generally easier to mine coal seams that are thick and located close to the surface than thin underground seams. Typically, coal mining operations begin at the part of the coal seam that is easiest and most economical to mine (the part with the lowest strip ratio). As a seam is mined, it becomes more difficult and expensive to mine because the seam either becomes thinner or intrudes more deeply into the earth, requiring removal of more material over the seam, known as the overburden, resulting in a higher strip ratio. Once the raw coal is mined, it is often crushed, sized and washed in preparation plants where the product consistency and energy content are improved. This process involves crushing the coal to the required size, removing impurities and, where necessary, blending it with other coal to match customer specifications. Surface mining Surface mining techniques generally are used when the coal seam is less than 80 metres below the surface, although operations of up to 250 metres below the surface have been carried out economically. During surface mining operations, topsoil and rock overburden are removed to expose the coal and facilitate its extraction, following which the overburden is generally replaced in the excavation. Heavy duty mechanical excavators are used for the removal of overburden and coal, which is sometimes fractured by blasting to assist the digging process. In a surface mine the coal is extracted from a seam that is relatively close to the surface of the ground by removing the soil or rock that lies on top of the coal deposit. There are two main types of surface mining: strip mining and open pit mining.

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Strip mining allows miners to dig down into a coal seam and expose it while piling the overburden alongside or backfilling it into the hole. If piles of overburden accumulate alongside, they must be carefully monitored as they are susceptible to slides or movement due to settling and heavy rain. Though these piles may be quite large, strip mines are not very deep and the digging moves in horizontal patterns following the coal seam. This snake-like motion of digging may tear up many hectares of land but, as all material except the coal is kept piled alongside, it can be filled back in after the coal has been removed. Strip mining is favoured in areas where coal seams are close to the surface. Open pit mining is the second type of surface mining and is similar to strip mining. Strip mines are usually in use for a short time, but pit mines may continue to extract coal for many years. A pit mine is much larger and deeper and is usually stationary, unlike a strip mine. Pit mines are favoured where a very thick seam is reachable from the surface. Thick seams reveal more coal in one area, so the pit mine has no need to follow a seam. The pit gets deeper as coal is removed and, in order to prevent the sides from caving in, it must also get wider. Pit mines may start quite small but can grow to cover a few kilometres after years of mining. The Group uses open pit mining in all of its coal-mining operations. Underground mining Underground mining operations are used when the coal seam is too deep to permit surface mining, or where there are surface ownership or environmental restrictions. Access to the coal seam is achieved either through an inclined roadway when the coal seam is relatively shallow, or by a vertical shaft for deeper mines. There are two principal methods of underground mechanised coal mining: room-andpillar and longwall. In the room-and-pillar method, the coal is cut in a series of parallel roads and cross-cuts called rooms leaving columns or pillars of coal to support the roof. The coal is cut using machines called continuous miners, which excavate a square-shaped roadway and gather the coal from within the coal seam and deliver it to a second machine called a shuttle car which takes the coal to a belt conveyor system for transportation to the surface. As soon as the coal has been gathered, the roof over the excavated area is reinforced for support. The longwall method of mining involves the sequential and complete removal of rectangular shaped panels of coal. The extraction panels are first created by excavating a pair of parallel tunnels called gateroads, spaced 150 to 250 metres apart. When the gateroads have been driven their planned distance, for example 1,000 to 2,500 metres, they are joined together by a cross-cut at right angles in order to block out the panel. This cross-cut forms the new coal face, or longwall, from which the technique derives its name. Due to the geological nature of their mines, Berau Coal currently does not use underground mining methods at any its mines. Bumi Resources does not use underground mining methods at KPC or Arutmin. However, Bumi Resources is currently studying the feasibility of developing underground mines at its existing deposits at the Satui mine of Arutmin. Fajar Sakti, on the other hand, employs underground mining methods. Coal prices The price of coal is primarily influenced by prevailing supply and demand and market outlook. In addition, different qualities of thermal coal have different energy content, sulphur content and ash content, affecting the price of internationally traded coal. Ocean freight costs also influence coal demand, with coal suppliers closer to end-user being preferred. The pricing of coal is complex since the price of a shipment of coal is based on the coal type (for instance, steam, coking or metallurgical), net calorific value and the content level of impurities, such as sulphur and ash. Additionally, the cost of transportation accounts for a large proportion of the delivered price of coal. Coal is chiefly sold under long-term contracts that set the price of coal over the term of the contract, usually with an escalator based on inflation. There is a well-established world spot market for coal that is the source for most quoted spot prices. The FOB price of steam coal in international trade, as quoted by McCloskey, increased from US$26.80 per tonne on 29 September 2000 to US$120.75 per tonne on 11 February 2011. Coal prices have historically been lower than oil and gas prices. The following chart shows changes in the FOB price of steam coal, as quoted by Bloomberg, for sales of 6,700 kcal/kg coal from Newcastle, Australia in the period from 1 September 2000 to 31 December 2010.

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200

150

US$/tonne

100

50

0
June 2007 Jan 2008 June 2008 Jan 2009 June 2009 Jan 2010 June 2010 Jan 2011 CLSPAUNE Index

Source: Bloomberg

Thermal export coal market trends From 2005 through 2009, thermal coal exports and imports grew at an average CAGR of 4.2 per cent., according to data reported by the AME Group, a global firm of independent economists in the metal and mineral industries. Geographically, the largest growth in imports has been in Asia, with imports increasing from 310.2 million tonnes in 2005 to 428.0 million tonnes in 2009, according to the AME Group. The following tables set forth the volume of imports and exports of thermal coal by region for the periods indicated: Global thermal coal imports 2005 Asia China Taiwan India Japan South Korea Malaysia Other Asia Europe European Union Other Europe Other Total imports Annual increase Annual increase (percentage)
Source: ABARE

300.7 18.2 56.8 18.2 114.3 56.2 10.0 27.0 202.6 165.5 37.0 76.4 578.0

27.6 5.0% 57.2 9.9% 61.3 9.7% 7.5 1.1%

2006 2007 2008 2009 (millions of tonnes, except percentage) 332.5 378.1 388.0 452.2 33.6 41.4 35.4 92.1 57.5 61.3 60.3 59.4 24.0 30.7 34.0 54.0 117.8 128.3 128.2 117.0 59.6 65.8 75.5 80.5 11.3 15.8 16.6 16.1 28.7 34.9 37.9 33.1 207.7 230.5 222.5 211.4 180.9 188.3 184.6 175.1 26.8 42.2 37.9 36.3 95.0 87.9 93.5 73.7 635.2 696.5 704.0 737.3 33.3 4.7%

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Global thermal coal exports

2005 107.6 65.7 54.6 123.3 63.6 71.9 19.1 72.2 578.0

Australia China Colombia Indonesia Russian Federation South Africa United States Other Total exports Annual increase Annual increase (percentage)
Source: ABARE

27.6 5.0% 57.2 9.9% 61.3 9.7% 7.5 1.1%

2006 2007 2008 2009 (millions of tonnes, except percentages) 111.6 112.2 126.4 139.1 58.9 50.7 42.7 21.5 59.7 67.2 73.6 63.4 170.0 190.7 193.0 235.5 77.0 85.2 85.8 91.7 67.7 65.8 61.3 66.0 19.9 24.2 35.1 19.4 70.4 100.5 86.1 101.8 635.2 696.5 704.0 737.3

33.3 4.7%

According to data published by ABARE, Indonesia supplied 32.4 per cent. of internationally traded thermal coal and ranked as the worlds largest thermal coal exporting country in 2009. One of the factors accounting for the strong performance of Indonesia in the thermal coal export market is the lower freight cost for coal from Indonesia to other key Asian demand markets in China, India, Japan, Korea, Taiwan and Thailand compared to coal from other major coal producing countries that are located farther away from these demand markets, including Australia, Columbia and South Africa. Coal industry in Indonesia Indonesian coal is generally low in ash and sulphur, but possesses high moisture content. The majority of Indonesias coal resources are located in Sumatra and Kalimantan, with higher quality coal mined in Kalimantan. According to the BP Statistical Review of World Energy for June 2010, approximately 252.2 million tonnes of coal were produced in Indonesia in 2009, an increase of 65.2 per cent. compared to Indonesias total coal production of 152.7 million tonnes in 2005. The following table sets forth the number of tonnes produced in Indonesia for the periods indicated: Production (millions of tonnes) 2005 152.7 2006 193.8 2007 216.9 2008 229.0 2009 252.2
Source: BP Statistical Review of World Energy

The coal export industry in Indonesia is based on contracts of work granted by the Indonesian Government, a system first introduced to attract foreign investment. Major foreign investors in Indonesia initially included international mining companies such as Rio Tinto, BHP Billiton and BP. The six largest coal mining companies in Indonesia accounted for approximately 66.1 per cent. of total Indonesian coal production in 2009. The following table sets forth details of the largest coal mining companies and their percentage shares of coal production in Indonesia in 2009: Share of Production Production (millions of tonnes) KPC/Arutmin 57.5 22.8% PT Adaro Indonesia 40.6 16.1% PT Kideco Jaya Agung 24.7 9.8% Berau Coal 14.3 5.7% PT Indominco Mandiri 12.4 4.9% Others 102.7 40.1% Total 226.2 100.0%
Source: Directorate General of Mineral, Coal and Geothermal at the MEMR

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REGULATION OF THE INDONESIAN COAL MINING INDUSTRY Mining Laws and Regulations On 12 January 2009, the President of the Republic of Indonesia ratified Law No. 4 of 2009 on Mineral and Coal Mining (the 2009 Mining Law), which replaced Law No. 11 of 1967 on basic mining provisions. Under the 2009 Mining Law, no new CCOWs or KPs (each a concession) will be issued by the Indonesian Government. New investors who have successfully tendered for concessions in the mining sector will be granted an IUP, which may be issued by the MEMR or a regional or provincial government, depending on the geographic coverage of the mine and its infrastructure. Mining areas declared by the Indonesian Government to be areas of national strategic interest (or state reserve areas) are covered by a special mining business licence (Izin Usaha Pertambangan Khusus or an IUPK). IUPKs may be issued with respect to minerals such as coal, copper, lead, gold, iron, nickel and bauxite. An IUPK can only be issued directly by the Indonesian Government, regardless of the geographic coverage of the proposed mining area. The Indonesian Government is required to first offer an IUPK for the development of these mining areas to certain state-owned companies or enterprises, before offering such IUPK to private sector investors through a tender process. Under the 2009 Mining Law, the central Indonesian Government, after coordinating with the regional or provincial government, is required to initially determine the area and boundaries to which a mining area business licence (Wilayah Izin Usaha Pertambangan or a WIUP) will apply, which is then put out to tender by the relevant issuing authority. A WIUP may be granted to a mining company through a tender process (for coal and metallic minerals) or an application (for non-metallic minerals and rocks). After a WIUP has been granted to the winner of a tender, and upon fulfilment of the applicable regulatory requirements, an IUP will be issued. The tender process is a departure from previous mining regulatory regimes in Indonesia, which had provided for the direct grant of a KP by the relevant issuing authority upon application by the potential investor. In the event that minerals other than the ones to which an issued IUP relates to are discovered, the relevant Indonesian Governmental authority may issue further IUPs for those minerals to other parties on application, if the original IUP holder declares that it does not have any intention to mine such minerals. Under the previous mining regulatory regime, the Indonesian Government generally required that KPs could not be held by Indonesian entities having foreign ownership or management. Under the 2009 Mining Law, both IUPs and IUPKs can be held by Indonesian legal entities (which may be either domestically-owned Indonesian companies or foreign-owned Indonesian companies). This change in the Indonesian Governments investment policy under the 2009 Mining Law is consistent with the approach taken by the Indonesian Government that there are no restrictions on foreign investment in the mining sector in the current Negative List on Investment. However, the 2009 Mining Law requires IUP and IUPK holders with foreign ownership to implement a divestment program after five years of production, requiring that domestic shareholders hold at least 20.0 per cent. ownership in the entities, in order to encourage greater domestic investment in the sector. On 1 February 2010, the Indonesian Government promulgated Regulation 23 of 2010 concerning the Implementation of Mineral and Coal Mining Business Activities (Government Regulation 23). Government Regulation 23 requires foreign shareholders of an IUP and IUPK holder to divest their shares after five years as of commencement of production period, so that at least 20.0 per cent. of the shares are owned and maintained by an Indonesian entity. The Indonesian Government and the local government have the first priority to purchase the shares, followed by any state-owned company and any regional government-owned company through an auction. If any of the Indonesian Government, local government, state-owned company or regional government-owned company is not interested in purchasing the divested shares, it will be offered to Indonesian entities through an auction.

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The following table sets out certain material terms relating to IUPs for coal and metallic minerals: Exploration maximum of seven years: one year for general survey, two years for initial exploration (extendable up to four years) and two years for feasibility studies maximum exploration area: 25,000 hectares maximum of eight years: one year for general survey, three years for initial exploration (extendable up to five years) and one year for feasibility studies (extendable up to two years) maximum exploration area: 50,000 hectares Production Operation maximum of 20 years initially (including a two-year construction period), but extendable twice for 10 years per extension maximum production area: 15,000 hectares

Coal

Metals

maximum of 20 years initially (including a two-year construction period) but extendable twice with 10 years for each extension maximum production area: 25,000 hectares

A holder of an IUP/IUPK will be required to pay production royalties to the Indonesian Government as stipulated in implementing regulations. Currently, a range of royalties apply with respect to different types of coal and mineral mining, and it is expected that such an arrangement will continue under the 2009 Mining Law. However, for mines located in state reserve areas, an additional royalty amounting to 10.0 per cent. of net profit from the mine will be payable, comprising 4.0 per cent. to be paid to the Indonesian Government, and 6.0 per cent. to be shared between the provincial and regional governments in whose jurisdictions the mine is located. In furtherance of the Indonesian Governments intention to protect and promote national and local mining companies, the 2009 Mining Law requires coal and other minerals mined within Indonesia to be processed domestically and by domestic mining services companies. In particular, the Indonesian Mining Law encourages mining companies to use domestic mining services companies for certain mining activities, processing and smelting. However, while foreign mining services companies are permitted to operate in Indonesia, priority is required to be given to domestic mining services companies. In practice this means that a mining company intending to engage a foreign-invested mining services company must first demonstrate that no domestic mining services companies are available to be engaged that could reasonably be expected to carry out the work. The 2009 Mining Law states that all concessions for coal and other minerals and metals currently in existence and issued under the previous mining regulations will continue to be valid until their expiry. However, the 2009 Mining Law further states that the contract terms of those contracts of work must be modified within one year following the adoption of the 2009 Mining Law, to bring them into conformity with the obligations of mining rights holders under the 2009 Mining Law. The 2009 Mining Law expressly states that the provisions of these existing contracts of work related to state revenue, including royalty and tax payments, will not be amended. Despite this provision, in a meeting held by the MEMR on 16 June 2009 with various concession holders, the MEMR proposed, among other things, to amend the provisions in such concessions relating to operation periods, royalties and dead rents and area size. These proposed amendments are still being discussed between the MEMR and various concession holders, including the Bumi Resources Group and the Berau Group. Although the 2009 Mining Law is silent on the treatment of KPs, Government Regulation 23 stipulates that all existing KPs will continue to be valid until expiry, but such KPs shall be converted into IUP or IPR within three months from the enactment of Government Regulation 23 on 30 April 2010. As of the date of this document, the Indonesian Government has issued all four of the implementing regulations mandated by 2009 Mining Law: Government Regulation No. 22 of 2010 on the Determination of Mining Areas dated 1 February 2010 (Government Regulation 22) Government Regulation 22 regulates the procedures to determine the mining operational area (Wilayah Usaha Pertambangan or WUP), special mining operation area (Wilayah Usaha Pertambangan Khusus or WUPK) and peoples mining area (Wilayah Pertambangan Rakyat or 86

WPR). The determination of these mining areas is at the sole discretion of the Indonesian Government, and in the case of the WUPK, prior approval from the House of Representatives (Dewan Perwakilan Rakyat) is required. Government Regulation 23 Government Regulation 23 states the procedure for obtaining IUP, IUPK and IPR, which may only be obtained by a company after it has acquired a WIUP (mining business licence area) or a special mining business licence area (Wilayah Izin Usaha Pertambangan Khusus or WIUPK). A WIUP or WIUPK can only be acquired through an auction held by a committee established by the Indonesian Government (i.e. the MEMR, the governor or the regent/major, depending on the location of WIUP/WIUPK). In the case of a WIUPK, first priority is given to a state-owned company or a local government-owned company. If none of these entities are interested, the WIUPK will be offered to coal mining companies through an auction. Government Regulation 23 provides that the holder of an IUP that exports its produced mineral and/or coal must refer to the benchmark prices to be determined by the MEMR based on market mechanism and/or in accordance with international market prices. In addition, Government Regulation 23 also provides that a holder of an IUP and an IUPK must prioritise domestic needs for coal. The holder of an IUP and an IUPK may export its coal only after the domestic needs of coal have been fulfilled. Further details on the procedures of prioritisation coal for domestic needs are regulated in a ministerial regulation. Prior to the issuance of Government Regulation 23, Ministerial Regulation No. 34 of 2009 regarding Privatisation of Domestic Mineral and Coal Supplies (MEMR Regulation 34) was issued by the MEMR. MEMR Regulation 34 requires producers of coal and minerals in Indonesia to allocate a portion of their annual production output to the domestic Indonesian market and establishes specific domestic market obligations (DMOs) for coal and mineral producers. Material provisions of MEMR Regulation 34 include: Tonnage (1) Coal producers are obligated to prioritise supply of the domestic market; (2) certain coal producers are required to meet a minimum percentage of coal sales to the domestic market (with such percentage being set by the MEMR from time to time), with coal companies to which the DMO minimum percentage applies being specified in an attachment to the MEMRs decree, which is issued on an annual basis; (3) if a coal companys DMO is not met in one year, the unmet obligation accumulates to the following year; (4) the minimum percentage of domestic coal sales applicable to the specified coal producing companies as set by the MEMR for 2010 was 24.75 per cent. of total production; and (5) the minimum percentage of domestic coal sales for specified companies for 2011 has been set at 24.17 per cent. Price The price of coal allocated for the domestic market shall refer to benchmark coal prices, which are based on international indexes. The Indonesian Director General of Mineral and Coal uses the following international indexes to determine the coal benchmark price for thermal coal and coking coal: the Newcastle Export Index, the Indonesian Coal Index, the GlobalNEWC and the Platts Index. Generally, the benchmark coal prices are determined by averaging on a monthly basis the price of coal in these four indexes on the basis of a 25 per cent. weighting for each index. Annual Work Program and Budget MEMR Regulation 34 provides that each coal company must include in its annual work program and budget the minimum percentage of its production proposed to be made available for domestic market obligation sales. Buy-in Coal producers may buy coal from other sources to satisfy their domestic market obligation. On-selling prohibition MEMR Regulation 34 prohibits domestic purchasers from exporting their purchased coal.

Failure to adhere to the terms of MEMR Regulation 34 may result in sanctions, including the reduction of coal production by up to 50 per cent. of permitted production.

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Government Regulation No. 55 of 2010 on the Development and Monitoring of Mineral and Coal Mining Business Activities dated 5 July 2010 (Government Regulation 55) Government Regulation 55 stipulates the standard and guidance on development and monitoring of the implementation of mining business management and the implementation of mining business activities performed by the holder of an IUP, IPR or IUPK. The development and monitoring are, carried out by the minister, governor or regent/mayor in accordance with their authority.

Government regulation No. 78 of 2010 on Reclamation and Post-Mining (Government Regulation 78) The Indonesian Government enacted Government Regulation 78 as the fourth implementing regulation mandated by the 2009 Mining Law. Government Regulation 78 essentially requires IUP/IUPK holders to submit a five-year reclamation plan, which may be renewed once it has expired for a subsequent five-year period. Government Regulation 78 requires each IUP/IUPK holder to provide a reclamation and mine closure guarantee in accordance with the Reclamation and Mine-Closure Budget Plan that has been approved by the relevant government authority (i.e., MEMR, the relevant governor or regent/mayor). The guarantee can be in the form of a joint account, a term deposit, a bank guarantee or an accounting reserve. Government Regulation 78 also requires a mining company to adjust its existing reclamation or post-mining plan at the latest by three months from the issuance date of Government Regulation 78 (that is, 20 March 2011).

Mining Services Regulations The regulation of general mining services is governed under the 2009 Mining Law and the Regulation of the Minister of Energy and Mineral Resources No. 28 of 2009 (MEMR Regulation 28), which was implemented on 30 September 2009, on the operation of mineral and coal mining services. Based on these laws and regulations, a company which intends to provide general mining services (a mining services company) must first obtain a business licence or a registered statement letter (surat keterangan terdaftaer) from the Indonesian Government or regional or provincial government depending on the mining services companys working area. These licences are generally issued for a period of three years and are renewable upon application. Mining services companies may be engaged or appointed to perform mining business activities for concession holders (comprising holders who are granted concessions under previous mining regulations and IUP/IUPK holders under the 2009 Mining Law.) The 2009 Mining Law provides that concession holders are responsible and will be held liable for all activities conducted by mining services companies engaged by them, and imposes certain restrictions on concession holders and mining services companies. Similar to the 2009 Mining Law, MEMR Regulation 28 also prohibits mining concession holders from using their subsidiaries and/or affiliates to carry out mining operations in their mining concession areas, unless the MEMR through the Directorate General approves of such arrangement. The MEMR approval can only be granted when unaffiliated mining services companies are unavailable to the mining company or there is no mining services company classified as interested or capable based on certain criteria as stipulated under MEMR Regulation 28. In addition, IUP or IUPK holders are required to engage local mining services companies and/or national mining services companies. Mining services companies that are partially or completely owned by foreign entities and/or foreigner and non-Indonesian companies may only be engaged to provide mining services in situations where no local and/or national mining services companies are technically and/or financially able to provide such services. MEMR Regulation 28 also provides that, a mining services company has the obligation to prioritise both local contractors and human resources in supporting their activities. MEMR Regulation 28 is an implementing regulation under the 2009 Mining Law and requires, among other things, that coal concession holders, rather than third-party mining service contractors, conduct

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certain mining activities in the coal extraction process. While MEMR Regulation 28 allows coal concession holders to continue to contract overburden removal (with or without blasting) and the transport of overburden, as well as the transaction of coal from the mining area, to third-party contractors, it requires coal concession holders to conduct all coal digging, extraction and loading themselves. MEMR Regulation 28 further states that all contractual arrangements between concession holders and mining contractors existing on the effective date of the regulation are grandfathered for a maximum period of three years. However, at the end of that three year period on 30 September 2012, concession holders and mining contractors are required to have amended their contracts to comply with the regulation. New mining service contracts entered into after 30 September 2009 are required to immediately comply with the requirements of MEMR Regulation 28. Accordingly, all of KPCs, Arutmins and Berau Coals current operating agreements with its mining contractors under which those mining contractors undertake coal digging, extraction and loading activities at their mining activities and which expire on or after 30 September 2012 will be required to be amended before such time if MEMR Regulation 28 remains in force as promulgated. For the risks associated with the 2009 Mining Law and MEMR Regulation 28, see Risks Relating to the Groups Operations The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects in Risk Factors. Regional Government Law Indonesia is divided into provinces, which are further subdivided into regencies and municipalities. The regencies and municipalities within a province are autonomous in most of their activities and, therefore, are not subservient to the province. In 1999, the Indonesian Government adopted Law No. 22 of 1999 (Law No. 22), which transferred and delegated to the regional governments certain powers that had previously been exercised by the Indonesian Government. On 15 October 2004, the Indonesian Government enacted Law No. 32 of 2004 concerning the Regional Government, as amended by Government Regulation in Lieu of Law No. 3 of 2005 and reaffirmed by Law No. 8 of 2005 and further amended by Law No. 12 of 2008 (Law No. 32), which replaced Law No. 22 and, as was the case with Law No. 22, substantially changed the legal and regulatory framework of the mining industry in Indonesia. Law No. 32 requires that regional governments maintain fair and harmonious relationships with the Indonesian Government and other regional governments when discharging their governmental affairs, including in connection with the utilisation of natural and other resources. The governmental affairs affected include matters such as (i) authority and responsibility for, and utilisation, maintenance and control of the impact on, cultivation and conservation of natural and other resources, (ii) profit sharing from the utilisation of natural and other resources and (iii) environmental harmonisation, space arrangement plans and land rehabilitation. Government Regulation No. 38 of 2007 on the Division of Government Affairs among the Government, Provincial Government and Regency/Municipality Government (Government Regulation 38) is the implementing regulation for Law No. 32. Government Regulation 38 stipulates that energy and mineral resources affairs are divided among the governmental levels of the central, provincial and regional governments. The regency and municipal government may choose to manage or not to manage energy and mineral resources affairs if they think that such management may significantly increase their community welfare. Forestry Regulation Law No. 41 of 1999 concerning Forestry, as amended by Law No. 19 of 2004, which ratifies Government Regulation in Lieu of Law No. 1 of 2004 (the Forestry Law) provides that open pit mining operations cannot be conducted within protected forests. Notwithstanding this general prohibition, a number of licences and contracts for open pit mining in forest areas that existed prior to the enactment of the Forestry Law remain valid. Significant areas of Indonesia have been classified as protected forests. The Indonesian Ministry of Forestry had designated approximately one-half of the Bumi Resources Groups mining concession at Gorontolo Minerals as a protected forest, which effectively prohibited mining in those areas. Those areas were declared a protected forest by the Ministry of Forestry after the Gorontolo Minerals mining concession was granted by the MEMR. Recently, the Indonesian Ministry of Forestry reclassified the Bumi Resources Groups mining concession at Gorontalo Minerals as a

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commercially producing forest in accordance with the applicable Indonesian forestry regulations. The Bumi Resources Groups other concession areas, and part of Berau Coals concession areas fall within commercially producing forests. As a result, the Bumi Resources Group and Berau Coal require borrowuse permits for their mining operations in those areas. Based on the Forestry Law, the use of forest areas for mining purposes is required to be conducted based on a borrow and use licence (izin pinjam pakai) issued by the Ministry of Forestry. In addition, based on Decree of Minister of Forestry No. P.43/Menhut-II/2008, the borrow and use licence may be granted for a maximum period of twenty years and may be renewed. Such licence can be revoked by the Minister of Forestry in the event of any violation of prevailing laws and regulation. Pursuant to Government Regulation No. 76 of 2008 on Forest Rehabilitation and Reclamation and Regulation of the Minister of Forestry No. P.60/MENHUT-II/2009 dated 17 September 2009 regarding Guidelines for Assessment of Forest Reclamation, a mining and energy company whose mining activities are conducted within forest areas is required to commence reclamation of its mining areas after mining and rehabilitation of such areas into forested areas, at its own expense. The Bumi Resources Group and Berau Coal must each submit a report concerning the progress of reclamation and rehabilitation activities to these Indonesian Government agencies every quarter. Under the Ministry of Forestry decree, the mining company remains responsible for the reclaimed forest from the end of reclamation period of the mine until the forest area is returned to the Minister of Forestry or any other relevant government authorities, which include a maintenance period of three years. Some of the Bumi Resources Groups non-coal minerals mining businesses are undertaking activities in areas recently declared as a protected forests by the Indonesian Ministry of Forestry. Exploration and mining in these areas requires a special permit from the Indonesian Ministry of Forestry. Companies of the Bumi Resources Group having activities that are not related to forestry in protected forest areas are obligated to pay an annual forestry fee ranging from Rp.1.2 million to Rp.3.0 million per hectare to the Indonesian Government pursuant to the Indonesian Government's regulation no. 2 dated 4 February 2008. Environmental Regulation Environmental protection in Indonesia is governed by various laws, regulations and decrees, including the following: Law No. 32 of 2009 regarding Environmental Protection and Management (the New Environmental Law); Government Regulation No. 27 of 1999 regarding Environmental Impact Analysis (analisa mengenai dampak lingkungan) (the AMDAL Regulation); Government Regulation No. 78 of 2010 regarding Reclamation and Post-Mining (GR 78); Regulation of the State Minister of Environmental Affairs No. 11 of 2006, regarding Businesses and/or Action Plans which must be Completed with AMDAL; Decree of the Minister of Energy and Mineral Resources No. 1453K/29/MEM/2000 dated 3 November 2000, concerning the Technical Guidelines with respect to the Organisation or Government Duty in the Field of General Mining (Decree 1453); Regulation of the Minister of Energy and Mineral Resources No. 18 of 2008 regarding Reclamation and Mine Closing (MEMR Regulation 18); Decree of the Minister of Energy and Mineral Resources No. 1457K/28/MEM/2000 dated 3 November 2000, concerning the Technical Guidelines for Environmental Management in the Field of Mines and Energy (Decree 1457); and Decree of the Minister of Mines and Energy No. 1211.K/008/M.PE/1995 dated 17 July 1995, regarding Prevention and Management of Destruction and Pollution of the Environment in General Mining Activities.

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The New Environmental Law, which was enacted on 3 October 2009 to replace Law No. 23 of 1997 regarding Environmental Management, and introduces several material changes to the previous environmental laws, including: companies that are required to obtain an AMDAL, an environment management efforts report (upaya pengelolaan lingkungan or UKL) or an environmental monitoring efforts report (upaya pemantauan lingkungan or UPL) are also required to obtain a new permit, known as the Environmental Permit (Izin Lingkungan). The Environmental Permit is a pre-requisite to obtaining the relevant business licences and if the Environmental Permit is revoked, the business licences granted will be cancelled. The procedures for the application, approval and granting of an Environmental Permit will be set forth in implementing regulations yet to be issued. The New Environmental Law requires that all existing environmental permits must be integrated into the Environmental Permit within one year of the enactment of this law. The Group intends to apply for such Environmental Permits when the implementing regulations stipulating how those permits are to be obtained have been promulgated; an environmental audit is required to undertaken by: (i) (ii) businesses that are required to, but have not prepared, an AMDAL; businesses in high-risk sectors, i.e. businesses and/or activities that could seriously impact human health and the environment in the event of an accident and/or emergency condition, such as petrochemical plants, oil and gas plant and nuclear power plant; or companies found to be not in compliance with the applicable environmental laws and regulations;

(iii)

holders of an Environmental Permit are required to provide an environmental guarantee by designated state owned-banks in order to ensure recovery of environmental functions; a business with a potential substantial environmental impact is required to conduct an environmental risk analysis; waste disposal activities cannot be undertaken without a licence for such purpose and such activities may only be conducted in specified locations determined by the Minister of Environmental Affairs; the imposition of (i) obligations to put in place remedial and preventative measures; and (ii) sanctions, such as the obligation to rehabilitate tailings areas, the imposition of substantial criminal penalties and fines, and the revocation of approvals, to remedy or prevent pollution caused by certain activities; and sanctions imposed on persons who pollute or damage the environment can range from one to 15 years of imprisonment and can also include fines ranging from Rp.500 million to Rp.15 billion. The imprisonment terms and the amount of fines will be increased by one-third if a criminal offense is conducted by a company. A fine may also be imposed in lieu of performing an obligation to rehabilitate damaged areas.

The above matters will be further regulated by a number of regulations, which, as of the date of this document, have not been issued. In the interim, the implementing regulation of Law 23/1997 will remain in force to the extent that it is not contradictory to the New Environmental Law. These laws generally provide, among others, that mining companies must have facilities and bear the costs and expenses of reclamation and rehabilitation of concession areas, and shall prevent and minimise environmental pollution and destruction resulting from mining activities. Bumi Resources, KPC, Arutmin, Berau and Berau Coal have complied with these laws, regulations and decrees in all material respects. Mining companies whose operations have a significant environmental or social impact must create and maintain an AMDAL document, which consists of the following documents: an analysis known as Terms of Reference on Environmental Impact Analysis (Kerangka Acuan Analisis Dampak Lingkungan);

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an environmental impact analysis (analisis dampak lingkungan); an environmental management plan (rencana pengelolaan lingkungan); and an environmental monitoring plan (rencana permantauan lingkungan).

Technical guidelines for the preparation of these documents are set out in Decree 1457. Under Decree 1457, regional governments are responsible for monitoring the implementation of environmental regulations and the issuance of AMDAL approvals. Holders of coal concessions are required to provide to the relevant regional government an Annual Environmental Management and Monitoring Plan (Rencana Tahunan Pengelolaan dan Pemantauan Lingkungan) at the beginning of the exploitation or production stage. Under GR No. 78 and MEMR Regulation 18, holders are also required to provide a reclamation plan and a mining closure plan as well as a reclamation and mining closure guarantee, to be approved by the authorities in the form of a time deposit bank guarantee, or an insurance or accounting reserve. Decree 1453 sets out the procedures for the preparation of these environmental management plans and for the deposit of such guarantee. In addition to the AMDAL requirements, mining companies are also required to appoint a chief mining technical officer (kepala teknik tambang), who is required to directly manage the prevention of environmental damage and pollution issues caused by mining activities, and submit a regular report to the Head of Mine Inspection and Implementation (Kepala Pelaksana Inspeksi Tambang) and the Head of Regional Mine Inspection and Implementation (Kepala Pelaksana Inspeksi Tambang Wilayah). An annual environmental management plan (rencana tahunan pengelolaan lingkungan) and an annual environmental monitoring plan (rencana tahunan pemantauan lingkungan) are also required to be submitted to the Head of Mine Inspection and Implementation. Under applicable Indonesian environmental laws and regulations, each concession holder is responsible for complying with Indonesian environmental regulations relating to, in particular, reclamation and recovery of mining concession sites. Other material environmental regulations and requirements applicable to concession holders and that the Group is required to comply with under the terms of its operating agreements are as follows: Wastewater Disposal Government Regulation No. 82 of 2001, concerning Water Quality Management and Water Pollution Control, requires reports to be submitted by concession holders detailing their disposal of wastewater and compliance with applicable regulations. Such reports are to be submitted on a quarterly basis to the relevant mayor or regent, with a copy provided to the Minister of Environmental Affairs. The Decision of the Minister of Environmental Affairs No. 113 of 2003 concerning the Standard Quality for Coal Mining Business and/or Activities, requires mining companies to process their wastewater from mining and processing activities in accordance with mandated quality standards set out therein, and to manage water that is affected by mining activities by way of sedimentation pools. Mining companies are also required to monitor surface water quality where wastewater from the sedimentation pools or wastewater treatment facilities is discharged into streams and rivers, and to comply with any additional requirements stipulated in their respective concessions or licences. Analysis of wastewater and daily flow rates must be submitted on a quarterly basis to the regent or mayor, with copies to the provincial governor and to the Minister of Environmental Affairs. Hazardous and Toxic Substances Government Regulation No. 18 of 1999, as amended by Government Regulation No. 85 of 1999 regarding Management of Hazardous and Toxic Waste Materials and Government Regulation No. 74 of 2001 regarding Management of Hazardous or Toxic Materials (Bahan Berbahaya dan Beracun), regulates the management of certain stipulated materials and waste. Flammable, poisonous or infectious waste from mining operations is subject to this regulation unless it can be proven scientifically by the applicant that it falls outside the categories set forth in the regulation. This regulation requires a company using the specified materials, or which produces waste which is specified in the regulation, to obtain a licence in order to store, collect, utilise, process and accumulate such waste. This licence may be revoked and the holder may be required to cease operations in the event of violation.

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In addition, Decree of the Head of Regional Environmental Impact Controlling Agency (Badan Pengendalian Dampak Lingkungan Daerah) No. 255 of 1996 concerning the Procedure on the Storing and Collecting of Used Lubricant Oil provides, among others, that an entity which collects used oil for further use or processing must comply with certain requirements as set out in the decree, including obtaining a licence, ensuring that buildings used for the storage of such lubricants comply with the specifications set out in the decree, establishing procedures on the collection and distribution of used oil and submitting quarterly periodic reports with respect to these activities. Environmental Permits The New Environmental Law which was enacted on 3 October 2009 introduced a new permit the Environmental Permit (Ijin Lingkungan). Under the New Environmental Law, a company which is obliged to obtain an AMDAL or a UKL/UPL is also obliged to obtain an Environmental Permit. The Environmental Permit is one of the provisions required to obtain a business licence. The procedure for the application, approval and grant of an environmental permit will be provided in the implementing regulations. The New Environmental Law requires that all licences regarding environmental management issued by the Indonesian Government must be integrated to an environmental permit within one year after the enactment of the New Environmental Law. The Group has not obtained this Environmental Permit given that the implementing regulations that will set forth the procedures for obtaining Environmental Permits have not been promulgated and there is no clarity as to when such regulations will be enacted. The Group expects to comply with the requirements of this new law when the implementing regulations stipulating how such Environmental Permits are to be obtained have been promulgated by the Ministry of Environmental Affairs. However, the Bumi Resources Group has already obtained all AMDAL approvals for planned production increases in Satui and Karuh, the East Senakin area development, Asam Asam and the Mulia area development. Explosives Explosives usage in Indonesia for mining purposes is regulated by Decree of Minister of Mining and Energy No. 555.K/26/M.PE/1995 on General Mining Occupational Safety and Health and Regulation of Head of National Police of the Republic of Indonesia No. 2 of 2008 on Supervision, Control and Safety of Commercial Explosive Materials (the Explosive Regulations). Based on the Explosive Regulations, an end-user is defined as a company or institution having the right to use explosive material for the purpose of general mining, oil and gas exploration and exploitation activities, or private users engaged in non-mining businesses. Under the Explosive Regulations, an end-user is required to be a registered business entity which has obtained a transportation permit to transport, store and use explosives between designated delivery points and the relevant mining location, and hold a mining licence. In addition, such a registered business entity shall also, among others, engage a licensed technical and explosives expert. The Group is also subject to other Indonesian regulations, including regulations regarding the use of groundwater, technical guidelines to control air pollution from immovable sources, usage and operation of a private-use harbour and internal power generation. Bumi Resources, KPC, Arutmin, Berau and Berau Coal have complied with these regulations in all material respects. Foreign Investment Limitations Direct foreign investments in Indonesia are generally governed by Law No. 25 of 2007, (the 2007 Investment Law) and its implementing regulations. All matters relating to direct investments are overseen by the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal, or BKPM). BKPM has issued implementing regulations for the 2007 Investment Law pertaining to guidelines and procedures for filing applications for foreign investment and the approval of foreign investment. Not all sectors of foreign investment, however, are governed by the 2007 Investment Law and under the authority of BKPM. A number of sectors (such as banking, financial institutions, insurance, mining, and oil and gas) are wholly or partly subject to separate regulatory regimes. An important feature of the 2007 Investment Law is the Indonesian Governments guarantee that it will not nationalise a foreign investment or revoke rights to control a foreign investment, except where it is declared by law to be in the national interest to do so and then only upon payment of mutually agreeable compensation determined in accordance with principles of international law. This guarantee is accompanied by assurances that the foreign investor will have the authority to appoint the

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management of the foreign investment company and the right to repatriate capital in the form of, among others, after-tax profits, income of expatriate manpower and sales of fixed assets. Most business sectors (including mining) are open to foreign direct investment, except certain sectors specifically determined by the Indonesian Government. In Indonesia, a foreign investor has to undertake its foreign investment through an Indonesian legal entity under the Investment Law (perusahaan penanaman modal asing or PMA Company). PMA Companies established to undertake mining activities require foreign investment licences issued by BKPM in coordination with the Directorate General of Geology and Mineral Resources. For coal mining activities, a PMA Company that has been granted an IUP can be either a joint venture company between foreign investors and Indonesian entities or be completely foreign-owned. After five years of production, foreign ownership in a PMA Company which holds an IUP must be divested, so that at least 20.0 per cent. of the shares of that PMA Company is owned by domestic investors. For more information, see the section headed Mining Laws and Regulations in this Part II. Each of KPC and Arutmin is subject to similar obligations to offer its shares to Indonesian participants pursuant to the terms of its CCOW. Based on each of the KPC and Arutmin CCOWs, this offer must not be less than 51.0 per cent. of its shares by the end of the tenth year of commercial operation of KPC or Arutmin, as the case may be. Each of KPC and Arutmin has fulfilled its obligation relating thereto. Other Regulations Related to Mining Operations Other relevant regulations applicable to mining operations in Indonesia include regulations regarding the use of groundwater and technical guidelines to control air pollution from immovable sources. Companies that propose to explore, drill and acquire groundwater for their operations are required to comply with provisions of Decree of MEMR No. 1451K/10/MEM/2000, which includes, among other things, requirements to obtain licences to explore, drill and acquire groundwater. Failure to comply can lead to the suspension or revocation of the relevant licence or permits. Mining operations are also subject to Indonesian Government regulations on the following matters: usage and operation of a harbour for internal use for barge loading facilities; usage and operation of an airport, located in the concession area, for internal use; power generation for internal use; radio concessions for telecommunications for internal use; storage and usage of explosive materials; and special ports.

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PART III INFORMATION ON VALLAR

Introduction The Company is a holding company that was formed in March 2010 to acquire a major company, business or asset that has significant operations in the global metals, mining and resources sector. The Company raised proceeds of 693.4 million, net of the exercise of the Repurchase Option, through the Placing. The Board is responsible for the Companys objectives and business strategy and its overall supervision. As at the date of this document, the Company has outsourced most of its operating functions, including the identification and assessment of acquisition opportunities, the structuring and execution of the Acquisition and definition and execution of the strategy for the acquired company or business, to the Adviser. The Adviser, in turn, has delegated some of those outsourced operating functions to the SubAdviser. The Vallar Team provide their services through the Adviser and the Sub-Adviser. See below for further details of these outsourced arrangements. However, it has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. The Founders, the Adviser and the Sub-Adviser The Founders The Founders (being Mr. Rothschild and Mr. Campbell) provide their experience in an advisory capacity through the Adviser. Further details of Messrs Rothschild and Campbells experience can be found in Part VI The Directors and Corporate Governance. Founders Commitment Both of the Founders have undertaken to the Adviser and the Company, among others, that the activities of the Adviser will be their principal business activity and will remain so for so long as they serve as an Active Partner. Mr. Rothschild has agreed to serve as an Active Partner until Completion and may thereafter withdraw as an Active Partner (but he may retain an economic interest in the Adviser) on 12 months notice. Mr. Campbell has agreed to serve as an Active Partner until Completion and may thereafter withdraw as an Active Partner on 12 months notice. In each case, Messrs. Rothschild and Campbell shall remain Active Partners for the duration of their 12 month notice period. Each Founder has given an exclusivity undertaking (the Founders Exclusivity Undertaking) to the effect that he will not (subject to certain exceptions, described below): (i) (ii) accept any executive office in any business similar to, or that competes with, the business of the Adviser or the Company; directly or indirectly, solicit any employee of the Adviser, or any senior employee of the Company or of any subsidiary of the Company, to become an employee, member, partner or have a substantial business role for the purpose of any new business or entity he may set up or a client of the Adviser to become a client of such business or entity; or undertake activities which may compete with the Company.

(iii)

The principal exceptions to such Founders Exclusivity Undertakings are (a) making or advising on investments of less than 50 million each or without restriction after Completion; (b) continuing existing executive, non-executive, advisory or consultancy roles disclosed in this document; (c) accepting future appointments to non-executive positions where approved by the Board; (d) accepting appointments in relation to personal or family investments or trusts; and (e) in the case of Mr. Rothschild, investments made by or through Mr. Rothschilds private office or the Rothschild family office.

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Each Founders Exclusivity Undertaking will apply during the time he serves as an Active Partner. These undertakings have been given by the Founders to the Adviser and the Company in the Founders Exclusivity Deeds. Founder Incentives The Limited Partners hold Ordinary Shares on the same terms as other Shareholders and have also been incentivised through the Founder Incentives: (1) to ensure that the Company completes the Acquisition (through which they can realise the value of their holding in the Founder Shares); and (2) to ensure that the Acquisition provides the opportunity for, and the achievement of, growth of the Company following the Acquisition and to return value for holders of Ordinary Shares (in order to achieve the targets through which the Founders and certain members of the Vallar Team can realise the value of their holding in the Founder Securities). See Effect of the Acquisition on the Founder Shares and the Founder Securities in Part I The Acquisition and Founder Securities below in this Part III Information on Vallar. The Limited Partners will hold their Founder Incentives and some of their Ordinary Shares through investment vehicles and, in turn, through Vallar Capital. On any resolution for a voluntary winding up of the Company on or after the second anniversary of Placing Admission, in the event that the Acquisition has not been effected by then, Vallar Capital has undertaken to vote any Ordinary Shares held by it in proportion (for and against such resolution(s)) to the Ordinary Shares voted by Shareholders (disregarding the Ordinary Shares held or beneficially owned by the Founders, other members of the Vallar Team, any other members of Vallar Capital and their respective affiliates). The Founders have agreed (i) to vote any Ordinary Shares held by them in the same manner, (ii) to procure that entities controlled by them vote any Ordinary Shares held by such entities in the same manner and (iii) in respect of other entities not controlled by them, but which hold Ordinary Shares to which they are or may be beneficially entitled, to notify the persons controlling the votes on such Ordinary Shares, that they wish such Ordinary Shares to be voted in the same manner. Founder Shares The Founder Shares are B ordinary shares in the Subsidiary. Following Completion, the Founder Shares will (i) be capable of exchange for such number of Ordinary Shares as represents (following the issue of Ordinary Shares as a result of such exchange) the Applicable Percentage of the issued Ordinary Share capital of the Company on a fully diluted basis or (ii) be capable of purchase by the Company at its option for cash at an amount equal to the sum of (a) the Applicable Percentage of the market capitalisation of the Company (such market capitalisation being taken as the average market capitalisation for the five Business Days prior to the relevant exchange date) and (b) the Applicable Percentage of the subscription monies the Company would be entitled to receive in respect of the issue of those Ordinary Shares that would be issued to arrive at a fully diluted basis. The Founder Shares may be exchanged no later than the last Business Day of the sixth month following the month in which the Acquisition is completed. The Founder Shares are not transferable without the prior consent of the Company, save for transfers to other members of Vallar Capital, any of the Founders, or a family member or family trust. The Founder Shares do not carry any dividend rights and do not carry voting rights except in respect of the winding up of the Subsidiary if made prior to the time (after the second anniversary of Placing Admission) at which it is determined that no Acquisition will be made, certain alterations to the share capital of the Subsidiary and any variation or abrogation of class rights. For information about the effect of the Acquisition on the Founder Shares, see Effect of the Acquisition on the Founder Shares and the Founder Securities in Part I The Acquisition. Founder Securities The Founder Securities are C ordinary shares in the Subsidiary. Subject to Completion and the satisfaction of the Performance Condition, the holders of the Founder Securities have the right to require the Company to acquire the Founder Securities in exchange for the issue to the holders of the Founder Securities of such number of Ordinary Shares as have a market value (at the date of issue) equal to 15 per cent. of the difference between (1) the market capitalisation (determined by reference to the volume weighted average price of the Ordinary Shares traded on the main market of the London Stock Exchange) of the Company at the exchange date (plus the aggregate value created for those parties with 96

outstanding options or convertible securities (over or in respect of Ordinary Shares) which have an exercise (or subscription or conversion) price of less than the volume weighted average price for an Ordinary Share at the exchange date) and (2) a deemed market capitalisation of the Company which is the product of the number of Ordinary Shares in issue at that time and the Placing Price, appropriately adjusted for any matters such as subsequent consolidation or subdivision of the Ordinary Shares. Following any exercise by a holder of the Founder Securities of its exchange rights, the Company will have the option to pay a cash equivalent to the holder of such Founder Securities, instead of issuing Ordinary Shares. The Founder Securities exchange right may not be exercised after the fourth anniversary of Completion. The Founder Incentives grant their holders certain rights in relation to the Subsidiary. See paragraphs 5.3 and 5.4, of Part XII Additional Information for further details regarding the rights associated with the Founder Shares and the Founder Securities. For information about the effect of the Acquisition on the Founder Securities, see Effect of the Acquisition on the Founder Shares and the Founder Securities in Part I The Acquisition. Holding of Founders Shares and Securities As at the date of this document, Founder Shares and the Founder Securities are held by Vallar Capital for the benefit of its members (whether directly or indirectly), including Messrs. Rothschild and Campbell (both of whom are Directors of the Company) and Messrs. Daniel and Morris (both of whom are members of the Vallar Team). The Advisory Agreement and the Sub-Advisory Agreement The Company has retained the Adviser by entering into the Advisory Agreement with the Adviser, pursuant to which it will provide services to the Company including: (i) researching and sourcing potential acquisitions for the Company; (ii) assisting with the due diligence for, structuring of and completion of the acquisition contemplated in the Vallar IPO prospectus; and (iii) assessing the Companys funding requirements. In addition, the Adviser will assist in procuring the provision to the Company (at the Companys expense) of other services required to assist the Company in operating as a listed company including: (i) involvement in the reorganisation of any company or business acquired by the Company; (ii) assisting with the ongoing management and operation of that company or business; (iii) assisting with the Companys financial reporting including preparation of external financial reports, internal management information and reporting to the Board on related financial controls and procedures; and (iv) assisting with administrative services such as cash management and treasury services. After having identified the interests in Bumi Resources and Berau to be acquired by the Company, the Adviser is also responsible to the Board for advising on (and implementing at the Boards direction): the business plan for the acquired business and the strategy for the acquired business going forward; the operational improvements and efficiencies in the acquired company or business; the capital review and any capital restructuring of the acquired business going forward; and the suitable compensation and incentivisation of the business personnel, in order to retain key personnel.

The Sub-Adviser has entered into the Sub-Advisory Agreement with the Adviser pursuant to which services to be provided by the Adviser to the Company under the Advisory Agreement may be delegated to the Sub-Adviser as the Adviser deems appropriate. Pursuant to the Advisory Agreement with the Company, the Adviser makes available to the Company expertise (which will include that of the Founders) and, pursuant to the Sub-Advisory Agreement with the Adviser, the Sub-Adviser makes available the expertise and experience of certain other members of the Vallar Team to advise and assist the Board in seeking to deliver shareholder value through structuring the Acquisition on good terms, operational improvements, organic growth, executing further acquisitions, business plans and any capital restructuring in each case, subject to the terms of such agreements. In addition, the Company may take advice from additional advisers in relation to any matter, including in relation to the Acquisition.

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Exclusivity and Referral Obligation of the Adviser Under the Advisory Agreement, the Adviser provides its services exclusively to the Company. Prior to the Company completing an acquisition as contemplated in the Vallar IPO prospectus, the Adviser is required to refer to the Company all potential transactions of which it is and/or becomes aware that fall within the Companys acquisition criteria. The referral obligations do not apply to: a transaction (or potential transaction) of which the Adviser or either of the Founders becomes aware which falls within an exception to the Founders Exclusivity Undertaking; or a transaction (or potential transaction) of which it or either of the Founders becomes aware in circumstances where the Conflicts Procedures permit non-disclosure or non-referral.

A more detailed summary of the Advisory Agreement (including a description of the Conflicts Procedures) and the Sub-Advisory Agreement are set out in paragraph 17 of Part XII Additional Information Vallars Material Contracts. Details of the Founders commitments to the Adviser and the Company (including the exceptions to the Founders Exclusivity Undertaking), are set out above in this Part III Information on Vallar. The Advisers and Sub-Advisers fees and expenses Under the Advisory Agreement, which is described in paragraph 17.10 of Part XII Additional Information Vallars Material Contracts, the Adviser receives an annual fee of 5,000,000 or 0.5 per cent. of the average Monthly Market Capitalisation of the Company for the year in question (whichever is higher), subject to a maximum of 10,000,000, plus in each case any applicable VAT, payable in advance in two six-monthly instalments. Under the Sub-Advisory Agreement, the Adviser has agreed to pay the Sub-Adviser (out of the Advisers own annual fee) a monthly fee of 75,000 plus any applicable VAT, and to reimburse the Sub-Adviser for certain expenses. The Sub-Advisers fees are also paid in advance, in two six-monthly instalments from the Adviser. Following Placing Admission, the Adviser also paid the Sub-Adviser a one off transaction fee of 300,000. This was reimbursed to the Adviser by the Company. The Company reimburses the Adviser for all third-party costs and expenses of the Adviser and the SubAdviser reasonably and properly incurred in fulfilling their duties, including due diligence costs and professional fees incurred in relation to the Acquisition (and any aborted acquisition) as well as any other transactions, subject to the Boards prior approval (or subsequent ratification) of any such costs reasonably and properly incurred by the Adviser in respect of a potential acquisition which exceed 500,000. The Adviser has agreed to reimburse all third-party expenses incurred by the Sub-Adviser acting on behalf of the Adviser on the same basis as the arrangements between the Adviser and the Company. Accordingly, all third-party fees and expenses of the Sub-Adviser reasonably and properly incurred on behalf of the Adviser or the Company may be reimbursable by the Company under the Advisory Agreement. As a result, the Company has, subject to such limits, borne the full costs of third-party due diligence (including professional adviser fees and expenses) in relation to the Acquisition. The day-to-day running costs and expenses of the Adviser and the Sub-Adviser are not reimbursable by the Company to the Adviser, nor are such costs reimbursable by the Adviser to the Sub-Adviser. The Adviser and Sub-Adviser The Adviser is a Jersey limited partnership. The Adviser provides the agreed services exclusively to the Company. The members of the Adviser are NR Investments Limited and Simcocks Pensions Limited (as trustee of the Campbell Family International Personal Pension Scheme), being investment vehicles of the Founders, and the General Partner. The Founders are the directors of the General Partner. The Adviser is managed by the General Partner. The Adviser is not required to be registered to conduct its business in relation to the Company and the Subsidiary under the Financial Services (Jersey) Law 1998. The Sub-Adviser is a limited liability partnership incorporated in England and Wales and authorised and regulated by the FSA. The Sub-Adviser has and intends to continue to have clients other than the Adviser. The members of the Sub-Adviser are Tom Daniel, Daren Morris and 31SJP Services Limited (which is a corporate partner in the Sub-Adviser and is wholly owned by Mr. Daniel). Messrs. Daniel and Morris provide their services to the Adviser (and in turn to the Company) through the Sub-Adviser.

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Expected Termination of the Advisory Agreement It has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. Accordingly, the risks set out in Risks Relating to the Companys Relationship with the Adviser and the Advisers Relationship with the Sub-Adviser in Risk Factors should cease to be relevant following Completion. Technical Advisers Tony Redman, Consultant and Technical Adviser, aged 61 Tony Redman has worked in the mining industry for nearly 40 years. As former group technical director of Anglo American plc, Mr. Redman has extensive experience across the commodity portfolio of coal, base metals, iron ore, platinum, gold, diamonds and industrial minerals. He joined Anglo American in 1970 and worked in both Base Metals and Gold Divisions before joining Amcoal in 1979. Mr. Redman was appointed Managing Director of Johannesburg-listed Amcoal in 1996 and became CEO in 1998 and Chairman in 2002. During his time with AngloCoal, working alongside James Campbell, Mr. Redman oversaw significant international expansion of the business both through organic and acquired growth. In 2005, he became Group Technical Director of Anglo American plc, sitting on the Chief Executives Committee, Investment Committee, Executive Committee and Safety and Sustainable Development Committee. Mr. Redman retired from Anglo American in May 2009. Mr. Redman was recently a non-executive director of LSE-listed Aricom plc, a Russian mining company, and remains a non-executive director of Australian Stock Exchange-listed coal producer Riversdale Mining Company. Mr. Redman has a BSc in Mining and an MSc in Mineral Production Management from Imperial College London. Mr. Redman sits on the Health, Safety and Environment Committee, for further details of which see Part VI Directors and Corporate Governance. Environmental Health and Safety Policy The Company is committed to ensuring environmental and social sustainability, in line with Indonesian Law (2007 Company Law) and international standards and recognised best practice. The Company will develop an environmental, health and safety policy (the EHS Policy) that reflects international standards and best practice, including but not limited to, the IFC Performance Standard and the ICMM Sustainable Development Framework. The Company has established a Health, Safety and Environment Committee that will be responsible for developing and regularly reviewing the EHS Policy to ensure it reflects best practice and examining whether the Companys EHS Policy reflects the Companys current priorities, plans and targets and whether asset integrity, major hazard risk management and other health, safety and environmental management systems have been effectively reported to the Board. The Health, Safety and Environment Committee will normally meet not less than three times a year. For more information on the Health, Safety and Environment Committee see Part VI Directors and Corporate Governance.

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PART IV INFORMATION ON THE BUMI RESOURCES GROUP

In this Part IV Information on the Bumi Resources Group, production and sales are shown on a total and attributable basis: Total production and sales are equal to the total production or sales, respectively, from a particular mine or operation for the relevant period regardless of ownership of that mine or that operation. Therefore, total production and sales include the interests of Tata and KTS in the IndoCoal Group Companies, including Arutmin and KPC. The use of total sales in relation to the Bumi Resources Group is not a standard IFRS measure. Attributable production and sales are total production or sales less production or sales, respectively, attributable to the interests of joint venture partners, including the interests of Tata and KTS in the IndoCoal Group Companies. Therefore, attributable production and sales include only 70per cent. of Arutmins and 65per cent. of KPCs production and sales.

All reserves and resources data in this Part IV Information on the Bumi Resources Group is shown on a total basis, which includes reserves and resources attributable to the Tata and KTS Interests. Overview The Bumi Resources Group is a leading natural resources group based in Indonesia, focusing primarily on the coal mining business. Bumi Resources was established in 1973 and became a public company through its initial public offering in 1990 by virtue of the decree from the Minister of Finance of the Republic of Indonesia No. SI-117/SHM/MK.10/1990. In 1997, Bumi Resources entered the oil and gas business. In 2001, Bumi Resources expanded into the coal mining business with its acquisition of a controlling interest in Arutmin, followed by its acquisition of KPC in 2003. The following chart describes the Bumi Resources Groups current corporate structure:(1)
BUMI RESOURCES
Coal Companies Non-Coal Mining Companies 81.4%(2) BRM

70%

70%

100%

100%

100%

70%

100%

100%

99.9% Indocoal Kalsel Indocoal Kaltim Sangatta Holdings Kalimantan Coal Sitrade Coal Forerunner

Citra Palu Minerals gold (in exploration stage) Gorontalo Minerals gold, silver & copper (in exploration stage) Bumi Mauritania iron ore (in exploration stage) Herald Resources zinc & lead (in construction stage) Bumi Japan marketing services Konblo Bumi Diamonds & gold (in exploration stage) Newmount Nusa Tengarra gold (associated company)

Bumi Investment
9.5% Effective - 85% Pendopo Energi Batubara coal (in exploration stage) KPC Effective - 50% Fajar Sakti coal (production stage) Arutmin 9.5% 32.4% 13.6% 70%

80%

99.9%

IndoCoal Resources

100%

100%

Effective - 29%

Darma Henwa contract mining 80%(3)

Other Companies Gallo Oil Jersey (in exploration stage)

94%(3)

24%(5) 20% WestSide Corporation - coal bed methane

Effective - 30%(4)

Mitratama Perkasa infrastructure development

Notes: (1) The chart above does not include all of the subsidiaries and associated companies within the Bumi Resources Group, such as Bumi Capital, the issuer of the 12% Guaranteed Senior Secured Notes, Enercoal, the issuer of the Enercoal Convertible Bonds, and certain intermediate holding companies.

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(2) Following conversion of the mandatorily convertible bonds on 9 March 2011. See BRM IPO in this Part IV Information on the Bumi Resources Group. (3) The Bumi Resources Group will hold 80.0 per cent. of Gallo Oil following completion of the sale of 20.0 per cent. of its shares under the terms of a share sale and purchase agreement dated 28 December 2009. (4) The minority shareholders have an option to increase their shareholding to 20.0 per cent. (5) Held through MDB, of which the Bumi Resources Group owns 75.0 per cent., and through BRMs wholly owned subsidiary Multi Capital. The 25.0 per cent. minority interest in MDB is held by PT Daerah Maju Bersaing, the shares of which are owned by three Indonesian regional and local governments located at or near NNTs Batu Hijau copper and gold mine (namely, Kabupaten Sumbawa Barat, Propinsi Nusa Tenggara Barat and Kabupaten Sumbawa).

Coal Mining Business The Directors believe that the Bumi Resources Group is the largest thermal coal producer in Indonesia, producing approximately 21.8 per cent. of Indonesias total coal production in 2010 according to statistics released in January 2011 by the MEMR, and the largest coal exporter in Indonesia. The Bumi Resources Groups subsidiaries, KPC and Arutmin, which are its primary coal companies, engage in the surface open cut mining of high quality coal from mines in Indonesia. The Bumi Resources Group holds rights from the Indonesian Government to mine for coal in a concession area of approximately 90,960 hectares in East Kalimantan until 2021, which is operated by KPC, and in another concession area of approximately 70,153 hectares in South Kalimantan until 2019, which is operated by Arutmin. Under the terms of the concessions from the Indonesian Government for KPC and Arutmin, the Indonesian Government is entitled to 13.5 per cent. of coal production by KPC and Arutmin. However, instead of payments in kind, KPC and Arutmin have been paying a cash equivalent of 12.8 per cent. of their coal production to the Indonesian Government as a royalty in order to allow for the set-off of specified selling costs. KPC and Arutmin have seven primary mines in commercial operation: the Sangatta and Bengalon mines operated by KPC and the Senakin, Satui, Mulia, Asam Asam and Batulicin mines operated by Arutmin. Through the Bumi Resources Group, the Group has significant proved and probable reserves to meet increasing worldwide demand for coal. In 2008, 2009 and 2010, KPC and Arutmin had total production of 52.1 million, 57.5 million and 60.4 million tonnes of coal at their mines. In the first nine months of 2010, KPC and Arutmin had total production of 44.4 million tonnes of coal, compared to 41.0 million tonnes in the first nine months of 2009. The Directors expect the Bumi Resources Group to expand its annual total coal production capacity at KPC and Arutmin to approximately 74.8 million tonnes in 2011 from approximately 72.0 million tonnes in 2010. The Bumi Resources Group mines a substantial portion of the coal produced at the Sangatta mine through two mining contractors, Thiess and Pama, with the remainder mined through its own operations. The Bumi Resources Group produces coal at the Bengalon site through its mining contractor, Darma Henwa, which is an associated company of the Bumi Resources Group. The Bumi Resources Group produces substantially all of the coal at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines through three mining contractors, Thiess, Darma Henwa and Cipta Kridatama, with the remainder mined through arrangements with smaller local mining contractors. KPCs and Arutmins mines are located in close proximity to their coal shipping facilities on the Kalimantan coast, which the Directors believe provides KPC and Arutmin with competitive transportation cost advantages over other Indonesian producers with mines further inland. This proximity of KPCs and Arutmins mines to their shipping facilities and to their primary coal markets in Asia reduces the cost of transporting its coal, thereby providing the Bumi Resources Group with a competitive advantage over its principal competitors in Australia and South Africa. KPC and Arutmin export a substantial portion of the coal they produce to end-user power plants, steel plants and other industrial end users, primarily in Japan, China, Taiwan, India, Europe and South Korea. The Directors believe that KPCs and Arutmins well-established reputation and economies of scale attract large customers from the power generation and other industries. KPC and Arutmin market and sell all of their seven brands of coal to third-party customers through marketing agents. KPC markets and sells coal produced at the Sangatta and Bengalon mines outside Japan through a marketing affiliate of Glencore and within Japan through Mitsubishi. Arutmin markets and sells coal produced at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines outside Indonesia through a marketing affiliate of BHP Billiton and in Indonesia through Enercorp.

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Each of KPC and Arutmin is a party to a long-term supply agreement with its coal marketing and sales subsidiary, IndoCoal Resources. Under each long-term supply agreement, each of KPC and Arutmin has agreed to sell coal to IndoCoal Resources in accordance with IndoCoal Resources obligations to supply coal under coal supply agreements with third-party customers. In addition to the sales made to IndoCoal Resources under these long-term coal supply agreements, KPC and Arutmin also sell coal to third-party customers directly. All of KPCs and Arutmins export sales to their customers and all domestic sales by KPC to Freeport and Paiton within Indonesia are priced, invoiced and paid in US dollars. KPCs and Arutmins other domestic sales to their customers within Indonesia, which comprised around 0.1 per cent. of their total sales in each of 2008, 2009, 2010, the first nine months of 2009 and the first nine months of 2010 are priced, invoiced and paid in Indonesian Rupiah, but are generally based on US dollar-denominated prices. KPC and Arutmin sold approximately 80.2 per cent., 79.2 per cent. and 80.6 per cent. of their total coal sales volumes during 2008, 2009, and the first nine months of 2010, respectively, under coal supply agreements with terms of one year or longer, and the balance through spot market sales. For the years ended 31 December 2008 and 2009 and the first nine months of 2010 the Bumi Resources Groups total revenue was US$2,630 million, US$2,451 million and US$2,097 million respectively, and its profit for the period was US$342 million, US$338 million and US$396 million, respectively. Non-Coal Mining Businesses Overview In addition to coal mining, the Bumi Resources Group has, through its 81.4 per cent. owned subsidiary, BRM, interests in various non-coal minerals mining businesses. BRM owns indirectly 24.0 per cent. of the shares in NNT (representing an 18.0 per cent. effective equity interest), through its wholly owned subsidiary, Multi Capital and its 75.0 per cent. owned subsidiary, MDB. NNT operates the Batu Hijau copper and gold mine, which is located in Sumbawa, Indonesia. BRM also owns interests in two gold, silver and copper mining concessions in Sulawesi, Indonesia, through its subsidiaries, Gorontalo Minerals and Citra Palu Minerals. BRM has a 60.0 per cent. owned joint venture through Bumi Mauritania, to study the feasibility of developing an iron ore mine in north-western Mauritania, Africa and has a cooperation agreement with Trinity Business Corporation, a Liberian company, for the exploration for minerals in Liberia, Africa. Through BRMs subsidiary, Herald, the Bumi Resources Group also has an interest in the Dairi Project, which is a zinc and lead concession located in the Dairi Regency of the Province of North Sumatra in Indonesia held by Heralds subsidiary, Dairi Prima. As the intermediate holding company within the Bumi Resources Group for all non-coal minerals mining related businesses, the Directors expect BRM to directly undertake the funding of the exploration, development and production of these non-coal minerals mining businesses, independent of the rest of the Bumi Resources Group. In addition to non-coal minerals mining, the Bumi Resources Group has an interest in two exploration stage oil concessions in Yemen through its subsidiary, Gallo Oil. Reorganisation of Bumi Resources Non-Coal Minerals Mining Businesses In the second half of 2009 and the first half 2010, the Bumi Resources Group reorganised its shareholdings in subsidiaries and equity interests in associated companies that are engaged in noncoal minerals mining businesses by transferring them to BRM. The Bumi Resources Group purchased BRM in July 2009 from a third party for purposes of this reorganisation. As a result of this reorganisation, BRM now owns Citra Palu Minerals, Multi Capital (through which the Bumi Resources Group has a 75.0 per cent. interest in MDB, which holds a 24.0 per cent. equity interest in NNT), International Minerals Company LLC (through which the Bumi Resources Group holds Gorontalo Minerals), Calipso (through which the Bumi Resources Group holds Herald and an interest in Dairi Prima) and Lemington Investment Pte Ltd (through which the Bumi Resources Group holds interests in Bumi Mauritania and Konblo Bumi). BRM also owns Bumi Japan, a marketing company that is engaged in the sales and marketing of non-ferrous minerals.

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BRM IPO On 9 December 2010, BRM completed its initial public offering of 3.3 billion primary shares (equivalent to approximately 18.6 per cent. of BRMs post-offering issued and outstanding share capital) at an offer price of Rp.635 per share (the BRM IPO Price) through a public offering in the Republic of Indonesia and to eligible foreign investors. In respect of the offering, Danatama and Nomura Indonesia acted as joint underwriters for BRM with full commitment. Simultaneously with the BRM IPO, BRM has issued and allotted 2.2 billion series I warrants to its new shareholders whereby each exercising BRM shareholder holding three BRM shares received two series I warrants. Each series I warrant entitles the warrant holder to buy one BRM share at Rp.700 per BRM share or at a 10.2 per cent. premium to the BRM IPO Price. Warrant holders will be able to exercise their rights starting from 2 June 2011 until 30 November 2012. By 9 March 2011 at the latest, Bumi Resources, as holder of mandatory convertible bonds, will convert the bonds into BRM shares at a price 5.0 per cent. above the BRM IPO price per share. As a result, Bumi Resources will hold 81.4 per cent. of BRMs share capital following the conversion of the mandatory convertible bonds. Recent Divestments of Non-Core Businesses In the fourth quarter of 2009 and in the first half of 2010, the Bumi Resources Group entered into agreements to sell some of its interests in companies that do not form part of its core coal and noncoal minerals mining businesses. On 28 December 2009, the Bumi Resources Group entered into a share sale and purchase agreement to sell 20.0 per cent. of Gallo Oil to Florenceville for US$290 million. The Bumi Resources Group has obtained the requisite regulatory approvals in Yemen for the completion of this sale. The US$290 million purchase consideration for this divestment is expected to be paid in full to the Bumi Resources Group by the end of April 2011. The Bumi Resources Group will then own 80.0 per cent. of the shares of Gallo Oil. On 30 December 2009, the Bumi Resources Group entered into a share sale and purchase agreement to sell the remaining shares it owns, constituting 50.0 per cent. of the total equity interest, in Enercorp to Thionville Financier Ltd. for US$90 million. The Bumi Resources Group has received the full consideration for this share sale. On 31 March 2010, the Bumi Resources Group entered into a share sale and purchase agreement to sell 99.8 per cent. of the equity interest in Mitratama to PT Cahaya Pratama Lestari for US$120.0 million. The share sale and purchase agreement was amended on 25 June 2010 to reduce the sale share to 70.0 per cent. while increasing the sales price to US$190.0 million. Subsequently, on 31 August 2010, the Bumi Resources Group terminated the share sale and purchase agreement with this purchaser and, on 31 August 2010, entered into a share sale and purchase agreement to sell the same 70.0 per cent. stake in Mitratama to PT Nusantara Pratama Indah for the same purchase price. The Bumi Resources Group received US$20 million of the purchase price on 7 September 2010 and the remainder in December 2010. The Bumi Resources Group has decided to divest its interests in these non-core businesses to enable it to increase managements focus on implementing business strategies with respect to its core businesses of coal and non-coal mining, as the Bumi Resources Group continues its efforts to expand production, increase productivity and reduce costs. The Bumi Resources Group used the proceeds from the sale of these assets to repay short-term borrowings and other indebtedness to reduce its debt leverage. History Bumi Resources was established in 1973 under the name PT Bumi Modern Tbk. as a domestic investment company (PMDN) engaging in the hotel and tourism industries. Bumi Resources became a public company through its initial public offering in 1990 by virtue of the decree from the Minister of Finance of the Republic of Indonesia No. SI-117/SHM/MK.10/1990 and Bumi Resources listed its shares on the Jakarta and Surabaya Stock Exchanges on 30 July 1990.

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Since its inception, Bumi Resources has expanded through a combination of acquisitions and completed a number of major transactions, including: 2000 Acquisition of a 97.5 per cent. interest in Gallo Oil, which holds a 50.0 per cent. working interest in Block R-2 and a 100.0 per cent. interest in Block 13, in Yemen. 2001 Acquisition of an 80.0 per cent. interest in Arutmin, one of the largest coal producers in Indonesia, which owns mining rights under the Arutmin CCOW. 2003 Acquisition of a 100.0 per cent. interest in KPC, one of the largest coal producers and largest coal exporters in Indonesia, which owns mining rights under the KPC CCOW. 2004 Acquisition of the remaining 20.0 per cent. interest in Arutmin, resulting in Arutmin becoming a wholly owned subsidiary of Bumi Resources. 2005 Completion of divestment of a 5.0 per cent. interest in KPC to PT Kutai Timur Energi, a company owned by the government of the East Kutai Regency in Indonesia. Completion of securitisation of export coal receivables of KPC, Arutmin and IndoCoal Resources through the issue by IndoCoal Exports of Series 2005-1 Notes backed by receivables under the IndoCoal Securitisation Program, raising US$600.0 million. Acquisition of Citra Palu Minerals and Gorontalo Minerals. 2006 Refinancing of Series 2005-1 Notes through the issuance of Series 2006-1 Notes, increasing the amount of notes issued under the IndoCoal Securitisation Program to US$800.0 million. Refinancing of Series 2006-1 Notes through the issuance of Series 2006-2 Notes, increasing the amount of notes issued under the IndoCoal Securitisation Program to US$900.0 million. 2007 Acquisition of 27.5 per cent. equity interest in WestSide in Australia. Divestment of 30.0 per cent. of the shares in each of the IndoCoal Group Companies to Tata. Repayment of the Series 2006-2 Notes and termination of the IndoCoal Securitisation Program. Issuance of US$300.0 million in zero coupon guaranteed convertible bonds due June 2012 and US$150.0 million in Zero Coupon Convertible Bonds due October 2012 by Enercoal, guaranteed by, and exchangeable into ordinary shares of, Bumi Resources. 2008 Acquisition of 84.2 per cent. of Herald. 2009 Acquisition of 84.6 per cent. in Pendopo Energi and 50.0 per cent. in Fajar Sakti and an effective interest of 44.0 per cent. (diluted to 28.8 per cent. in January 2010) in Darma Henwa. Issuance of US$375 million 9.25% Convertible Bonds due August 2014 and US$300 million 5.0 per cent. convertible bonds due November 2016 by Enercoal, which are guaranteed by, and exchangeable into ordinary shares of, Bumi Resources. Incurrence of US$1.9 billion loan from Country Forest Limited on 1 October 2009, used to repay most of its then outstanding indebtedness and complete payment of the outstanding consideration for interests in Pendopo Energi, Fajar Sakti and Darma Henwa. Issuance of US$300 million 12% Guaranteed Senior Secured Notes due 2016 by Bumi Capital, which are guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors. Acquisition of an effective interest of 12.75 per cent. in NNT and the remaining 15.8 per cent. of Herald. Agreements to divest remaining equity interests in Enercorp and 20.0 per cent. interest in Gallo Oil. 2010 Successful acquisition of an additional effective interest of 7 per cent. in NNT. Reorganisation of its non-coal minerals assets under BRM. Issuance of 1,369.4 million ordinary shares of Bumi Resources and listing on the IDX. Divestment of 70.0 per cent. interest in Mitratama. Redemption of the full outstanding balance of the Zero Coupon Convertible Bonds and partial redemption of the 5% Convertible Bonds issued by Enercoal.

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Refinancing of indebtedness with the net proceeds received from the issuance of US$700 million 10.75% Guaranteed Senior Secured Notes and Bumi Resources non-preemptive share issue. BRMs IPO and listing of BRMs shares on the IDX. Competitive Strengths The principal competitive strengths of the Bumi Resources Group include: Significant production profile supported by substantial reserve base The Directors believe that the Bumi Resources Group is the largest thermal coal producer in Indonesia, with its total production accounting for approximately 21.8 per cent. of Indonesias total coal production in 2010 according to statistics released in January 2011 by the MEMR, the largest coal exporter in Indonesia and was one of the largest thermal coal exporters globally in 2010. During 2010, the Bumi Resources Groups primary coal companies, KPC and Arutmin, had total production of 60.4 million tonnes of coal, a substantial portion of which was exported to Japan, China, Taiwan, India, Europe and South Korea. The Bumi Resources Group is able to capitalise on its size and scale to realise economies of scale in mining and transportation costs, as well as pricing terms. The Bumi Resources Groups production profile is supported by a reserve base with a long remaining reserve life. As of 31 March 2010, the proved and probable marketable reserves within concession areas operated by KPC totalled an estimated 1,422 million tonnes (of which 765 million tonnes were proved and the remaining 657 million tonnes were probable). Within concession areas operated by Arutmin, the proved and probable marketable reserves totalled an estimated 469 million tonnes as of 31 May 2010 (of which 278million tonnes were proved and the remaining 191million tonnes were probable). The proved and probable marketable reserves of KPC and Arutmin have decreased since mid-2008, due, in part, to their mining and production activities since the dates when the previous reserve figures were determined, plus some additional overall depletions associated with pit redesigns and resource reclassifications and adjusted resource boundaries applied to the reserve estimates. However, a large portion of the Bumi Resources Groups concession area at KPC has not yet been explored. Cost-efficient operating structure The Bumi Resources Groups key mining operations are located in close proximity to coal shipping facilities on the Kalimantan coast, which the Directors believe provides the Bumi Resources Group with a competitive transportation cost advantage over other Indonesian producers with mines further inland. This proximity to shipping facilities and to the Bumi Resources Groups primary coal markets in Asia reduces the cost of transporting Bumi Resources coal, thereby providing the Bumi Resources Group with a cost advantage over competitors in Australia and South Africa. In addition, the Directors believe that the Bumi Resources Group has lower labour and handling costs than many of its competitors due to the Bumi Resources Groups owned and operated transport equipment and leased processing facilities and dedicated ports. The Directors believe that the Bumi Resources Group is therefore able to enjoy significant cost competitiveness attributable to its cost-efficient operations, providing greater control over coal delivery processes and costs. Wide range of coal products and high-quality customer base The Bumi Resources Group markets a variety of coal grades, and is one of the few Indonesian coal producers that produces high quality, low moisture bituminous coal. The Bumi Resources Group produces differing grades of high quality bituminous coal with high calorific value and relatively low moisture and ash and sulphur content. The Bumi Resources Group also produces a single grade of subbituminous coal with lower calorific value and low ash and sulphur content. The diverse quality of the Bumi Resources Groups reserves and proximity of its mines to each other provide the Bumi Resources Group with an advantage in cost-efficient blending of various coal products to enhance realised value per tonne and the ability to customise products to customer specifications. In addition, the customers of the Bumi Resources Group are primarily large utilities and industrial users in Asia with a strong credit profile, with many of its largest customers in 2010 enjoying an investment grade credit rating. As a result, the Directors believe that the Bumi Resources Group faces low counterparty risk of default on its coal sales contracts. The Directors believe the Bumi Resources Group has consistently been able to maintain close business relationships with its key customers for over a decade.

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Diversified coal mining operations supported by experienced third-party contractors and marketing agents The diversity of the operating coal mines of the Bumi Resources Group and coal qualities within its concession areas facilitates blending and provides the Bumi Resources Group with the flexibility to meet a variety of product specifications. In addition, the majority of the Bumi Resources Groups coal mining operations and sales are conducted by third-party mining contractors and domestic and international marketing agents. The Directors believe that diversification of relationships among several production contractors and the operation of owner-operated mines at KPC mitigates event or nonperformance risks specific to individual mines and operators of the Bumi Resources Group. Coal mining operations at KPC and Arutmin are supported by long-term arrangements with third-party mining contractors, namely Thiess, Pama and Cipta Kridatama and the Bumi Resources Groups associated contractor, Darma Henwa, as well as long-term marketing agreements with international marketing agents, namely Glencore, Mitsubishi and, until November 2011, BHP Billiton. Experienced management and operations team Many of the Bumi Resources Groups existing management and operations personnel for its coal mining business were employed by the former owners of KPC and Arutmin, namely BP, Rio Tinto and BHP Billiton. When the Bumi Resources Group acquired KPC in 2003 and Arutmin in 2001 from their former owners, the Bumi Resources Group retained many of the existing key management and operations personnel. As a result, the Directors believe that the Bumi Resources Group has retained the standards and policies developed while KPC and Arutmin were controlled by their former owners, resulting in the Bumi Resources Groups continued adherence to international standards for its operations, financial management and environmental compliance. In addition to the Bumi Resources Groups retention of former management, the Bumi Resources Group has also hired new key management personnel, including mining operations managers and mining support managers, each with experience and expertise in the coal mining industry. The Directors believe that hiring of new managers has provided the Bumi Resources Group with new perspectives on how to increase production and sales operations and manage operations more efficiently. Business Strategy Diversify revenue stream by developing the Bumi Resources Groups non-coal minerals mining businesses through a self-financing BRM The Bumi Resources Group intends to diversify its business operations from a reliance on coal mining in the long-term. In line with this strategy, the Bumi Resources Group has acquired, and entered into joint ventures with, other businesses to expand its operations into non-coal minerals and metals, such as zinc, lead, iron ore, copper, silver and gold, and oil and gas. In 2005, the Bumi Resources Group purchased interests in two gold, silver and copper mining concessions through the acquisitions of Gorontalo Minerals and Citra Palu Minerals, and in 2006, entered into a joint venture to assess iron ore mining opportunities in Mauritania. In addition, the Bumi Resources Group has entered into a joint venture with a Liberian partner to assess mineral exploration opportunities in Liberia and acquired Herald, which owns an interest in a zinc and lead concession in North Sumatra, Indonesia. In relation to oil and gas, the Bumi Resources Group plans to continue its exploration activities by drilling exploratory and appraisal wells in its two oil concessions in Yemen. More recently, in late 2009 and early 2010, the Bumi Resources Group increased MDBs shareholding in NNT to 24.0 per cent. (corresponding to an 18.0 per cent. effective interest). NNT owns and operates the Batu Hijau gold and copper mine in Sumbawa, Indonesia. The Bumi Resources Group recently undertook a reorganisation of its mining businesses to rationalise its lines of business between coal-mining and non-coal mining. As part of this reorganisation, in early 2010, the Bumi Resources Group transferred all of its holdings in its non-coal minerals mining assets to its then wholly owned subsidiary, BRM. The Bumi Resources Group intends to develop non-coal minerals assets into viable businesses to diversify revenue stream and enhance its profitability. Due to the capital intensive nature of pre-mine exploration and development activities, BRM is, following its initial public offering in December 2010, expected to continue to independently undertake its own funding to explore, develop and operate in non-coal minerals mining businesses in the future.

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Expand production capacity and diversify customer base The Bumi Resources Group intends to expand its annual total coal production volume to approximately 74.8 million tonnes in 2011. The Bumi Resources Group expects to achieve this production target through the installation of new equipment and machinery under its expansion program, primarily at KPC. The Bumi Resources Group intends to build overland belt conveyors closer to its operational pits at KPC and Arutmin, which the Bumi Resources Group expects will improve its coal chains capacities and reduce its dependence on trucks to transport coal over long distances. The Bumi Resources Group has plans to further boost its coal chains at KPC and Arutmin by constructing more coal crushers, stacker-reclaimers, stockpile facilities, shiploaders and port facilities, as well as by upgrading its mining and support equipment. The Bumi Resources Group intends to work closely with its mining contractors at KPC and Arutmin to increase the level of coal production at some of their mines by expanding production from existing mine sites as well as continuously identifying new mine sites for the production of coal. In addition, the Bumi Resources Group plans to continue to take steps to improve production and productivity by streamlining the loading and decreasing the cycle time of coal hauling trucks. In December 2008, the Bumi Resources Group acquired an interest in Fajar Sakti, an Indonesian coal mining company which holds rights to mine for coal in three mining concession areas in Kutai Kertanegara, East Kalimantan. In January 2009, the Bumi Resources Group acquired Pendopo Energi, an Indonesian coal mining company which holds rights to mine for coal in two concession areas located in Muara Enim, South Sumatra. The Bumi Resources Group intends to increase production at Fajar Sakti and begin commercial production at Pendopo Energi over the next few years, which is expected to add to the Bumi Resources Groups overall annual coal production. In line with the Bumi Resources Groups production expansion initiatives, the Bumi Resources Group intends to continue to expand and diversify its customer base, and has identified, and will continue to identify, new customers for incremental coal volumes, such as Indonesian power producers and selected Chinese, Indian, Japanese and South Korean energy and utility companies. Increase reliance on owner-operated mining operations The Bumi Resources Group intends to increase its reliance on owner-operated mining operations, in particular, through its expansion program. The Directors believe that expanding the mining activities of the Bumi Resources Group through owner-operated mining operations will significantly improve productivity and reduce operating cost. Towards the end of 2006, the Bumi Resources Group embarked on a program of adding to and modernising the machinery and equipment it uses in its owner-operated mining operations and entered into a number of equipment leases for new machinery and equipment such as excavators, coal hauling trucks, dump trucks, loaders, drill rigs, graders and bulldozers. The Bumi Resources Group intends to continue its efforts to modernise and expand its fleet of owneroperated equipment and machinery. In addition, the Bumi Resources Group also plans to continue to develop infrastructure such as ports, conveyor belts, coal crushing plants and power plants, either on its own or in cooperation with third parties, which will support its expansion program. The Directors believe that the Bumi Resources Group has achieved a level of proficiency through its operations experience sufficient to operate its mines more efficiently and productively than third-party mining contractors may be able to. A greater reliance on owner-operated mining operations will also serve to mitigate performance risks specific to third-party mining contractors. In addition, a mining services regulation in Indonesia will require the Bumi Resources Group to carry out certain coal extraction activities (but not overburden removal) itself by 30 September 2012, rather than using third-party mining contractors for that part of its coal mining operations. Improve productivity and cost structure The Bumi Resources Group intends to improve its operations by increasing productivity and reducing costs. To increase productivity, the Bumi Resources Group intends to (i) improve productivity of its own overburden removal fleet; (ii) maximise productivity and improve throughput of its coal chains and shiploaders; and (iii) engage mining contractors to increase equipment productivity within its fleets of excavators, bulldozers, graders and coal hauling trucks. For example, the Bumi Resources Group recently completed the upgrade of the shiploader at the Sangatta mines Tanjung Bara coal terminal, which the Bumi Resources Group expects will significantly improve the throughput of the Sangatta coal chain. The Bumi Resources Group intends to further enhance the capacity of its coal chain at KPC by upgrading its barge loading facilities and coal crushers at its Bengalon mine and by installing a duplicate overland belt conveyor from its Sangatta mines coal crushing plant to the Tanjung Bara coal terminal. At its Arutmin operations, the Bumi Resources Group is planning to install overland belt conveyors, build additional coal processing plants and install additional barge port capacity to increase 107

throughput. To reduce costs, the Bumi Resources Group intends to (i) increase existing conveyor belt utilisation, as well as install new overland belt conveyers at KPC and Arutmin, to reduce diesel fuel consumption for its trucking operations; (ii) install a 54MW (3x18MW) coal-fired power plant at KPC to reduce diesel fuel consumed by its existing generating units; and (iii) negotiate more favourable terms in the fuel supply contracts with its fuel suppliers, as well as renegotiate selected terms and conditions of its mining operating agreements with its mining contractors. Grow and expand the Bumi Resources Groups business operations through acquisitions, investments and joint ventures Where suitable opportunities arise, the Bumi Resources Group intends to acquire or invest in companies or assets in the natural resources and mineral extractive industries, primarily in Indonesia and elsewhere in the Asia Pacific region, that the Bumi Resources Group believes will enhance its revenue growth, operations and profitability. The Bumi Resources Group continues to evaluate potential acquisitions of, and strategic investments in, producers of high calorific value and low sulphur coal with a primary geographic focus in Indonesia and a secondary geographic focus in countries outside Indonesia where the Bumi Resources Group believes that it has competitive advantages. The Bumi Resources Group has developed an internal set of investment criteria which include selecting investments of a strategic nature which are complementary to its existing operations, particularly those which include expanding its presence in the Indonesian coal mining sector. In line with this strategy, the Bumi Resources Group has acquired an effective 50.0 per cent. interest in Fajar Sakti, which produces the Kutai brand of coal and owns two greenfield coal mining projects with reserves of potentially high calorific value and low sulphur content coal. Coal Mining Business The Bumi Resources Groups coal mining business is primarily carried out by its subsidiaries, KPC and Arutmin, with most of its coal sales being made through coal marketing and sales subsidiary, IndoCoal Resources. The Bumi Resources Group currently holds rights to two primary coal mining concessions under CCOWs in Indonesia: one held by KPC and one held by Arutmin. In addition, between December 2008 and January 2009, the Bumi Resources Group acquired an interest in Fajar Sakti and Pendopo Energi. Fajar Sakti holds rights under KPs to mine for coal in three mining concession areas, one of which is currently in operation production. Pendopo Energi holds rights under a CCOW to mine for coal in one mining concession area which has not yet begun commercial operations and production. KPC and Arutmin Mining Concessions In 1982, KPC entered into the KPC CCOW with the Indonesian Government, which granted KPC a 30-year concession for the operation and production of coal in East Kalimantan, effective in 1991 when KPC began commercial operations of its first mine. KPCs original concession area totalled approximately 790,000 hectares. The KPC CCOW is scheduled to terminate on 31 December 2021. In 1987, after preliminary exploration of the original concession area, KPC relinquished mining rights over 593,900 hectares, or 75.1 per cent., of its original concession area with subsequent further relinquishments in the 1990s. KPCs current concession area totals approximately 90,960 hectares. As of 30 June 2010, KPC had explored approximately half of the total remaining concession area. Under the terms of the KPC CCOW, KPC may request an enlargement of the concession area if it discovers coal deposits that extend outside its concession area. In 1981, Arutmin entered into the Arutmin CCOW with the Indonesian Government. The Indonesian Government granted a 30-year concession for the production of coal from approximately 1.26 million hectares located in South Kalimantan, Indonesia, effective in 1989 when Arutmin began commercial operation of its first mine. The Arutmin CCOW is scheduled to terminate on 1 October 2019. In November 1990, Arutmin relinquished mining rights over 1.19 million hectares, or 94.4 per cent., of its original concession area. The Bumi Resources Groups current concession area at Arutmin totals approximately 70,153 hectares. As of 30 June 2010, Arutmin had explored the total remaining concession area. Under the terms of the Arutmin CCOW, Arutmin may request an enlargement of its concession area if it discovers coal deposits that extend outside its concession area.

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Primary Coal Mines The Bumi Resources Group operates seven primary mines: the Sangatta and Bengalon mines at KPC and the Senakin, Satui, Mulia, Asam Asam and Batulicin mines at Arutmin. The following table sets forth the Bumi Resources Groups total and attributable production volumes at these mines for the periods indicated.

2008 2009 2009 (unaudited) (millions of tonnes) 2010 Year Ended 31 December Nine Months Ended 30 September

Total production volumes Sangatta Bengalon Senakin Satui Mulia Asam Asam Batulicin

31.5 6.0 3.7 3.9 3.8 2.1 1.9

Year Ended 31 December 2008 2009

33.4 4.8 4.4 5.0 3.8 7.3 2.5

24.4 3.5 3.1 3.3 2.5 2.4 1.8

26.0 3.2 3.4 3.4 3.0 3.6 1.8

2009 (unaudited) (millions of tonnes) 2010

Nine Months Ended 30 September

Attributable production volumes Sangatta Bengalon Senakin Satui Mulia Asam Asam Batulicin

19.7 3.9 2.1 3.2 2.7 1.5 1.3

21.7 3.1 3.1 3.5 2.6 2.5 1.8

15.9 2.2 2.2 2.2 1.8 1.7 1.3

16.9 2.1 2.4 2.4 2.1 2.5 1.3

Sangatta Mine The Sangatta mine is located near the town of Sangatta, Kalimantan. The Sangatta mine has two distinct coal deposits: the Sangatta deposit and the Melawan deposit, and eight mining pits in operation. The Sangatta deposit produces bituminous coal, and the Melawan deposit produces sub-bituminous coal. The Directors believe that the Sangatta mine is one of the largest excavator and truck open cut surface mines in the world. As measured by tonnes of overburden removed and coal mined at a single site, the Directors believe that the Sangatta mine is the single largest thermal coal operation in Indonesia and one of the single largest thermal coal operations in the world. As of 31 March 2010, the proved and probable marketable reserves within the Sangatta mine area totalled an estimated 1,202million tonnes (of which 564million tonnes were proved and the remaining 638million tonnes were probable). The measured open cut coal resources (inclusive of coal reserves) within the operating Sangatta mining area totalled approximately 1,795million tonnes as of 31 March 2010. The coal deposits located at the Sangatta mine occur in the Balikpapan formation within the Kutai Basin of East Kalimantan. The deposits are located approximately 20.0 kilometres from the East Kalimantan coast in low rainforest and were formed under geological conditions resulting in largely uncontaminated organic deposits that were converted into thick, clean coal seams containing unusually low levels of ash. KPC commenced operations at the Sangatta mine in January 1992. KPC extracts the coal from mining pits using excavators, bulldozers, graders and other heavy equipment. Coal hauling trucks then transport the coal to the coal crushing plant owned by Mitratama which is located at the Sangatta mine, marking the beginning of the coal chain for the Sangatta mine for the movement of the coal from the coal preparation and processing area to the coal shipping terminal for the Sangatta mine on the East Kalimantan coast. The coal chain of the Bumi Resources Group at the Sangatta mine has three distinct stages:

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the coal preparation area, consisting of a ROM coal stockpile, a coal crushing and screening plant and a coal washing plant; a 13.2 kilometre overland belt conveyor to transport the coal from the coal preparation plants to the coal shipping terminal; and a coal shipping terminal, consisting of a stacker, a stacker-reclaimer, a shiploader and port stockpile facilities.

The ability of the Bumi Resources Group to produce, process and transport coal at the Sangatta mine is limited by the capacity of the coal chain, which in turn is limited by the individual equipment with the lowest handling capacity, currently the shiploader. In 1992, the Bumi Resources Group had a coal production level of 7.3 million tonnes at the Sangatta mine. Since 1992, KPC has expanded the annual coal handling capacity of its coal chain, primarily through modifications and improvements to the overland belt conveyor. Bengalon Mine In 1986, KPC identified approximately 60 coal seams at the Bengalon site at a location approximately 35.0 kilometres north of the Sangatta mine. KPC began further exploration of the Bengalon site in 1991. As of 31 March 2010, the proved and probable marketable reserves within the Bengalon mine totalled an estimated 220million tonnes (of which 201million tonnes were proved and 19million tonnes were probable). The measured open cut coal resources (inclusive of coal reserves) within the operating Bengalon mining area totalled approximately 540million tonnes as of 31 March 2010. Although KPC undertook a mine feasibility study of the Bengalon site in 1996, the former owners of KPC decided to defer Bengalons development due to reduced demand for coal from Indonesian power producers after the onset of the Asian financial crisis in 1997. In early 2004, after the acquisition of KPC by Bumi Resources, the Bumi Resources Group undertook new feasibility studies to confirm the Bengalon sites suitability for open pit, truck-and-shovel mining. KPCs Bengalon mine development project involved commencement of mining operations, the development of a coal haulage road from the mining pit to a barge port and construction and operation of a barge port on the Kalimantan coast. The first phase began in May 2004 with its appointment of Darma Henwa to develop the Bengalon mine and to construct a coal haulage road. After beginning operations in late 2004, Darma Henwa temporarily suspended operations in late 2004 when its then Australian parent company announced financial and operational difficulties and was placed into receivership by its creditors. After being acquired by new shareholders from its previous Australian parent company in May 2005, Darma Henwa resumed mining operations at the Bengalon mine. The second phase of the Bengalon expansion project involved the construction of a barge port facility on the Kalimantan coast approximately 20.0 kilometres from the Bengalon mine. In December 2004, KPC appointed Mitratama as its contractor to build the barge loading facility and appointed Inacia to operate the port facility and barges for loading coal onto customers ships. In late 2005, construction of the coal processing and barging facility was completed. The coal processing and barging facility at the Bengalon mine has an annual handling capacity of approximately 8.0 million tonnes of coal. On 13 December 2006, Mitratama became its wholly owned subsidiary when Bumi Resources exercised a purchase option held by it to acquire all of the shares of Mitratama. In 2010, the Bumi Resources Group sold 70.0 per cent. of its equity interest in Mitratama. Senakin Mine Arutmin commenced production at the Senakin mine in 1989. The Senakin mine lies in the Tanjung Formation and the coal seam follows an anticline stretching approximately 40.0 kilometres from north to south, mining parallel to the southeast coast of Kalimantan approximately 14.0 kilometres inland. The Senakin mine comprises four distinct coal deposits: the Sangsang and Sepapah deposits on the west side of the anticline, and the North Senakin and the East Senakin deposits on the east side. Arutmin has completed mining at the Sepapah, Sangsang and North Senakin deposits, and is currently operating two mining pits at the East Senakin deposit. The Senakin mine produces a bituminous coal with high calorific value. As of 31 May 2010, the proved and probable marketable reserves within the Senakin mine totalled an estimated 30 million tonnes (of which 26 million tonnes were proved and

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4 million tonnes were probable). The measured open cut coal resources (inclusive of coal reserves) within the operating Senakin mining area totalled approximately 87million tonnes as of 31 May 2010. Satui Mine Arutmin commenced production at the Satui mine in 1991. The Satui mine lies south and west of the Senakin mine within the Tanjung Formation on the south-eastern slopes of the Meratus mountain range. The Satui seam stretches approximately 40.0 kilometres from north-east to south-west, running parallel to the south-eastern coast of Kalimantan, approximately 20.0 kilometres inland. The Satui mine comprises three deposits: the Karuh, Satui-Kintap and Bukitbaru deposits. As of 31 May 2010, the proved and probable marketable reserves within the Satui mine totalled an estimated 72million tonnes (of which 64million tonnes were proved and 8million tonnes were probable). The measured open cut coal resources (inclusive of coal reserves) within the operating Satui mining area totalled approximately 150million tonnes as of 31 May 2010. The Satui mine produces bituminous coal, which is crushed at facilities adjacent to the Muara Satui barge port located near the Satui mine, separated and stockpiled according to quality and then blended prior to barge loading. Mulia Mine Arutmin commenced production at the Mulia mine in 1999. The Bumi Resources Group markets the cleaner burning sub-bituminous coal produced at the Mulia mine under the brand name Ecocoal. The Mulia mine runs parallel to the Satui mine within the Tanjung Formation on the south-eastern slopes of the Meratus mountain range. The Mulia seam stretches approximately 40.0 kilometres from north-east to south-west, running parallel to the south-eastern Kalimantan coast, approximately 15.0 kilometres inland. As of 31 May 2010, the proved and probable marketable reserves within the West Mulia and East Mulia mines totalled approximately 196million tonnes in the aggregate (of which 104million tonnes were proved and 92million tonnes were probable). The Mulia mine comprises two deposits: the Mulia and Jumbang deposits. The Mulia mine shares the same coal chain and the Muara Satui barge port with the operations at the Asam Asam and Satui mines. Coal from the Mulia mine is crushed at facilities adjacent to the Muara Satui barge port, but, due to its specifications and low ash content does not require washing before loading. Asam Asam Mine Arutmin commenced production at the Asam Asam mine in 2004. The Bumi Resources Group markets the cleaner burning sub-bituminous coal produced at the Asam Asam mine under the brand name Ecocoal. The Asam Asam mine runs parallel to the Satui mine within the Tanjung Formation on the south-eastern slopes of the Meratus mountain range. The Asam Asam seam stretches approximately 47.0 kilometres from south-west to north-east, running parallel to the south-eastern Kalimantan coast, approximately 10.0 kilometres inland. As of 31 May 2010, the proved and probable marketable reserves within the Asam Asam mine totalled an estimated 114million tonnes (of which 64million tonnes were proved and 50million tonnes were probable). The measured open cut coal resources (inclusive of coal reserves) within the operating Asam Asam mining area totalled approximately 92million tonnes as of 31 May 2010. The Asam Asam mine has one coal deposit. The Asam Asam mine shares the same coal chain and the Muara Satui barge port with the operations at the Mulia and Satui mines. Coal from the Asam Asam mine is crushed at facilities adjacent to the Muara Satui barge port, but, due to its specifications and low ash content does not require washing before loading. Batulicin Mine The Bumi Resources Group commenced production at the Batulicin mine in 2003. The Batulicin mine lies between the Senakin mine and the Satui Mulia and Asam Asam mines within the Tanjung Formation, approximately 10.0 to 55.0 kilometres inland from the Kalimantan coast. The Batulicin mine comprises five deposits: the Ata, Mereh, Mangkalapi, Saring and Sarongga deposits. Coal produced at the Batulicin mine is transported by truck from the operating pits to the Batulicin barge port for shipment to the North Pulau Laut coal terminal. The Batulicin mine produces bituminous coal. As of 31 May 2010, the proved and probable marketable reserves within the Batulicin mine totalled an estimated 17million tonnes (of which 10million tonnes were proved and the remaining 7million tonnes were probable). Like Senakin and Satui coals, Batulicin coal is separated and stockpiled according to quality and then blended prior to barge loading.

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Coal Chains at the Senakin, Satui, Mulia, Asam Asam and Batulicin Mines At the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, all contractors at Arutmin extract coal from mining pits using excavators, bulldozers, graders and other heavy equipment. Following extraction, coal hauling trucks transport the coal approximately 25.0 to 55.0 kilometres to the mines coal crushing plant, which marks the beginning of the coal chain for the movement of the coal from the coal preparation and processing areas for these mines to the coal shipping terminal for those mines, the North Pulau Laut coal terminal, on Pulau Laut island off the South Kalimantan coast. The Bumi Resources Group operates four coal chains for those mines: two for the Senakin mine, one shared by the Satui, Mulia and Asam Asam mines and one for the Batulicin mine. Each coal chain has three distinct stages: a coal preparation area with a coal crushing and screening plant and a coal washing plant, which are located near each mines barge ports to enhance the efficiency of the coal preparation process; a system of custom-built, self-discharging barges to transport the coal from the coal preparation plants along the South Kalimantan coast to the North Pulau Laut coal terminal; and the North Pulau Laut coal terminal, consisting of a stacker, a stacker-reclaimer, a shiploader and port facilities.

The North Pulau Laut coal terminal, commissioned in early 1994, is an open seaport designed to process approximately 12.0 million tonnes of coal per year. The terminal can accommodate cape size vessels of up to 140,000 dead weight tonnes in size and approximately 170 ships (each with average dead weight tonne capacity of 70,000) and 1,600 barges (each with average dead weight tonne capacity of 75,000) per year. Coal from the Senakin, Satui, Mulia, Asam Asam and Batulicin mines is barged to the coal terminal and either loaded directly onto outbound ships or stored at the stockpile yard. Operation of its own coal terminal for these mines has provided the Bumi Resources Group with continuous access to a terminal facility for exporting coal. To supplement its dedicated port facilities, the Bumi Resources Group has access to coal shipping terminals located at Pulau Laut island to load its coal offshore or to ship it directly to its customers using barges. At the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, the ability of the Bumi Resources Group to produce, process and transport coal is limited by the capacity of the four coal chains. The combined handling capacity of the coal crushing plants for its coal chains at these mines currently limits its total annual handling capacity at these mines to approximately 20.0 million tonnes of coal production. Principal Coal Products KPC and Arutmin produce both bituminous coal and sub-bituminous coal. Bituminous coal has high calorific value and is primarily used by customers in the electricity generation and steel industries in developed countries due to its cleaner burning characteristics relative to certain lower grades of coal and high energy content. Sub-bituminous coal has a lower calorific value than bituminous coal and is used primarily by electricity generation plants in less developed countries due to its lower cost as compared to bituminous coal. Approximately 62 per cent., 56 per cent., 56.2 per cent. and 48.7 per cent. of its total production at KPC and Arutmin in 2008, 2009, the first nine months of 2009 and the first nine months of 2010, respectively, comprised bituminous coal, with the remainder being subbituminous coal. KPC and Arutmin market their bituminous coal under the brand names Prima coal, Pinang coal, Senakin coal, Satui coal and Batulicin coal and their sub-bituminous coal under the brand names Melawan coal and Ecocoal. Arutmin introduced Senakin coal in 1989, Satui coal in 1991, Prima coal and Pinang coal in 1992, Ecocoal in 1999 and Melawan coal and Batulicin coal in 2003.

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The following table sets forth the benchmark marketing specifications of the main coal products of KPC and Arutmin as determined on an air-dried basis:
Bituminous Coal Products Senakin 6,700 11.0 4.5 12.0 41.5 42.0 1.2 40 Sub-bituminous Coal Products 5,700 23.0 18.0 2.5 38.5 41.5 0.2 45

Quality Parameter

Prima

Pinang 6,300 17.0 13.0 6.0 39.0 45.5 0.5 46 Satui 6,650 11.0 6.0 10.0 42.0 42.0 1.2 40

Batulicin(1) 6,600 9.0 4.5 12.0 43.0 40.5 1.4 40

Melawan

Ecocoal 5,000 35.0 23.0 3.9 38.0 35.1 0.3 70

Calorific value (kcal/kg) 7,100 Total moisture (gar basis) 10.0 Inherent moisture (%) 5.0 Ash (%) 4.0 Volatile matter (%) 39.0 Fixed carbon (%) 49.0 Total sulfur (%) 0.6 Hardgrove grindability index (ASTM) 48
Note:

(1) The Bumi Resources Group markets Batulicin coal under the various Arutmin brand names. See Coal Blending Strategy.

Bituminous Coal Products Prima Coal Prima coal is a highly volatile bituminous coal mined primarily from the Sangatta deposit in mining pits located near the Pinang Dome. High temperatures and pressure near the Pinang Dome yielded coal with lower moisture and, consequently, higher heat content. Prima coal is one of the highest quality internationally traded thermal coals with high calorific value, very low ash, moderate sulphur content and relatively low total moisture. Pinang Coal Pinang coal is a bituminous coal mined from seams in the Sangatta deposit located a greater distance from the Pinang Dome than the Prima coal seams. Pinang coal is contained in seams generally higher in the stratigraphic sequence than Prima coal and has similar properties to Prima coal, but with higher moisture and lower energy. The Bumi Resources Group currently markets Pinang coal under the name Pinang 5000 NAR. The Bumi Resources Group also blends Prima coal and Melawan coal to produce coal with substantially similar characteristics to Pinang coal, which the Bumi Resources Group sells under the Pinang brand. Coal from the Bengalon mine is a mixture of bituminous and sub-bituminous coal with a calorific value higher than Melawan coal, but lower than Prima and Pinang coals. Coal from the Bengalon mine has relatively high moisture, ash and sulphur contents compared to its other coal products. The Bumi Resources Group began marketing coal from the Bengalon mine as Pinang coal in June 2005. The Bumi Resources Group currently markets about six coal products under the Pinang brand. Senakin Coal Senakin coal is a bituminous coal characterised by a high calorific value, a moderate ash content and low moisture and sulphur content. The Bumi Resources Group washes most Senakin coal to lower its ash content to approximately 12.0 per cent. Prior to 2004, the Bumi Resources Group sold five varieties of Senakin coal differentiated by varying ash and sulphur contents. However, in an effort to rationalise and homogenise its product lines the Bumi Resources Group now limits its sales of Senakin coal to a single set of quality parameters. Satui Coal Satui coal is a bituminous coal characterised by a high calorific value and low ash, moisture and sulphur content. The Satui coal can be sold unwashed due to its low ash content. Prior to 2005, the Bumi Resources Group sold three varieties of Satui coal, each with different ash and sulphur contents. The Bumi Resources Group now limits sales of Satui coal to one specification under the brand name Satui 10. Batulicin Coal Batulicin coal has a high calorific value, moderate ash content, low moisture content and moderate-tohigh sulphur content. The Bumi Resources Group blends coal produced from the Ata, Mereh, Mangkalapi, Saring and Sarongga deposits at the Batulicin barge port to produce Batulicin coal which 113

Bumi Resources markets under various Arutmin brand names. The Bumi Resources Group currently sells Batulicin coal under six ranges of specifications Arutmin 6250 coal, Arutmin 5700 coal, Arutmin 5900 coal, Arutmin 6100 coal, Arutmin 6500 coal and Arutmin 5000 coal. Sub-bituminous Coal Products Melawan Coal Melawan coal is a sub-bituminous coal mined from the same seams as Pinang coal. The Bumi Resources Group mines Melawan coal from the Melawan deposit at the Sangatta mine in mining pits located further from the Pinang Dome than the Sangatta deposit. As a sub-bituminous coal, Melawan coal has a lower energy content than either Prima coal or Pinang coal, but burns cleaner, with significantly lower ash and sulphur content than either Prima or Pinang coal. Given its low sulphur content, the Bumi Resources Group markets Melawan in the international coal markets as an environmentally friendly coal. The Bumi Resources Group currently sells two coal products under the Melawan brand. Ecocoal Ecocoal is a sub-bituminous coal characterised by a low calorific value and a high moisture content, but very low ash and sulphur content. Although Ecocoal has a lower energy content, its ash and sulphur contents are extremely low, making it a cleaner-burning coal. Due to its low ash and sulphur content, the Bumi Resources Group markets Ecocoal as a more environmentally friendly coal in the domestic coal market. Although Ecocoal generates less heat than bituminous coal, it is cheaper than bituminous coal on a cost per kilocalorie energy basis. The Bumi Resources Groups total net sales volumes of Ecocoal have increased from 0.3 million tonnes in 2002 to 3.7 million tonnes in 2007, primarily due to growing demand in Asia for cleaner-burning and more environmentally friendly coal. On 15 December 2006, a consortium comprising Arutmin and Darma Henwa entered into a memorandum of understanding with PLN for the sale of a significant amount of Ecocoal to 13 coal fired steam power generation plants owned by PLN for a period of 20 years, subject to entering into binding sales contracts with this customer. This consortium has entered into ten long-term coal supply agreements for the supply of a total of 7.4 million tonnes of Ecocoal to ten coal-fired steam power generation plants owned by PLN for a period of 20 years, in connection with the memorandum of understanding with PLN. Coal Blending Strategy The Bumi Resources Group blends its various grades of coal during processing to produce coal with the specifications requested by individual customers and to take advantage of the price differential between the premium the Bumi Resources Group receives for its higher quality bituminous coal products and the discount typically applied to its lower-quality sub-bituminous coal. The Bumi Resources Group formulates its blending strategy on an annual basis as part of its marketing plans according to several factors, including customer demand by product, existing commitments by coal grade, its current mine plans and the differential between the premium for bituminous coal and the discount for sub-bituminous coal in the global coal markets. Therefore, the actual specifications of its coal sold to its individual customers typically vary from the marketing specifications of its coal products noted in the tables above describing the characteristics of its coal products due to the precise quality parameters ordered by the specific customer. At the Sangatta mine, the Bumi Resources Group blends Prima coal with Melawan coal to produce Pinang coal. Although the Bumi Resources Group blends its coal at the Sangatta mine to its customers specifications, it markets its coal under one of those three brand names. The Bumi Resources Group historically marketed various types of each of its coals produced at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, such as Satui 8, Satui 10 and Satui 13, with the number referring to the ash content. However, in an effort to rationalise its coal products from its mines, the Bumi Resources Group has reduced the number of coal products it sells under each coal brand name. The Bumi Resources Group currently markets nine coal products from these mines, under the brand names Senakin 12 Medium Sulphur coal, Ecocoal, Satui 10 coal, Arutmin 6250 coal, Arutmin 5700 coal, Arutmin 5900 coal, Arutmin 6100 coal, Arutmin 6500 coal and Arutmin 5000 coal. Because of the wider range of individual coal products for its customers for coal produced at these mines, the Bumi Resources Group does not blend its coal as frequently at these mines as it does at the Sangatta mine.

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Coal Production and Sales The following tables set forth the Bumi Resources Groups total and attributable coal production, total and attributable coal sales, weighted average realised price per tonne, cash production cost for each tonne conveyed, cash production cost for each tonne mined and average strip ratio for the periods indicated:
Nine Months Ended Year Ended 31 December 30 September 2008 2009 2010 2009 2010 AttriAttriAttriAttriAttriTotal butable Total butable Total butable Total butable Total butable (unaudited) Coal production (million tonnes) Coal sales (million tonnes) 52.1 51.5 33.4 34.3 57.5 58.1 37.9 38.7 60.4 60.5 40.3 40.3 41.0 41.0 27.3 27.3 44.4 44.6 29.6 29.8

Year Ended 31 December

Nine Months Ended 30 September 2009

2008

2009

2010

(unaudited) Operating and other Financial Data: Weighted average realised prices (US$ per tonne of sales)(1) Cash production cost for coal conveyed (US$ per tonne of coal production)(2) Cash production cost for coal mined (US$ per tonne of coal mined)(3) Average strip ratio(4)
Notes: (1) The weighted average realised prices per tonne of sales of coal by the IndoCoal Group Companies is calculated by dividing the consolidated sales for the coal products of KPC and Arutmin by the consolidated sales volumes for the coal products of KPC and Arutmin for the periods presented. These weighted average realised prices fluctuate based upon changes in the product mix of the sales of the coal products of KPC and Arutmin. (2) The cash production cost per tonne of coal conveyed of KPC and Arutmin is calculated based on the total consolidated production costs, including decreases in coal inventories but excluding depreciation and amortisation, divided by the consolidated production volumes of coal (which represents the amount of coal conveyed) of KPC and Arutmin. This measure represents the unit production cost for crushed run-of-mine (ROM) coal delivered to the port stockpiles of KPC and Arutmin or loaded on ships at the ports of KPC and Arutmin. (3) The cash production cost per tonne of coal mined at KPC and Arutmin is calculated based on the total consolidated mining costs, excluding depreciation and amortisation, at KPC and Arutmin divided by the consolidated volumes of coal mined at KPC and Arutmin. This measure represents the unit mining cost for coal delivered to the ROM stockpiles of KPC and Arutmin. (4) The strip ratio is the number of banked cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal.

73.33 32.53 33.11 9.39

62.90 30.64 28.07 10.43

61.23 30.30 15.80 11.06

69.28 32.17 42.80 10.76

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The following tables set forth its total and attributable production volumes, total and attributable sales volumes, total and attributable sales, and average realised prices for KPC and Arutmin by type of coal product for the periods indicated:

Total production volumes: Prima coal Pinang coal Senakin coal Satui coal Batulicin coal Bengalon Melawan coal Ecocoal Total production volumes 2008 2009 (unaudited) (thousands of tonnes, except percentages) 2009 2010 Year Ended 31 December Nine Months Ended 30 September

1,375.8 2.6% 1,005.6 1.7% 837.5 1.7% 352.6 0.8% 18,674.9 35.9% 14,267.1 24.8% 10,538.7 21.5% 11,578.7 26.1% 3,033.2 5.8% 4,436.4 7.7% 3,077.6 6.3% 3,477.0 7.8% 4,751.0 9.1% 5,033.6 8.8% 3,290.6 6.7% 3,364.6 7.6% 1,993.4 3.8% 2,506.4 4.4% 1,786.4 3.6% 1,783.5 4.0% 5,985.1 11.5% 4,786.5 8.32% 3,477.6 7.1% 3,247.5 7.3% 10,290.0 19.8% 18,130.8 31.5% 13,056.9 26.6% 14,053.4 31.6% 5,958.1 11.4% 7,322.1 12.7% 4,908.1 26.6% 6,582.5 14.8%

2008 2009 (unaudited) (thousands of tonnes, except percentages) 2009 2010 Year Ended 31 December Nine Months Ended 30 September

52,061.5

100.0% 57,488.6

100.0% 40,973.3

100.0% 44,410.1

100.0%

Total sales volumes: Prima coal Pinang coal(1)(2) Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Total sales volumes

487.0 0.9% 485.1 0.8% 336.4 0.8% 279.3 0.6% 23,512.0 45.6% 21,805.3 37.5% 15,625.7 38.1% 16,398.7 36.7% 3,074.9 6.0% 4,383.3 7.6% 2,996.2 7.3% 3,793.7 8.5% 4,745.9 9.2% 5,127.2 8.8% 3,407.3 8.3% 3,312.9 7.4% 1,957.6 3.8% 2,519.2 4.3% 1,806.8 4.4% 1,878.0 4.2% 11,773.0 22.9% 16,466.0 28.4% 11,967.9 29.2% 12,495.8 28.0% 5,957.1 11.6% 7,293.9 12.6% 4,839.4 11.8% 6,517.7 14.6% 51,507.5 100.0% 58,080.0 100.0% 40,979.7 100.0% 44,676.0 100.0%

Year Ended 31 December 2008 2009 Nine Months Ended 30 September 2010 2009 (unaudited) (US$ million, except percentages)

Total sales: Prima coal Pinang coal(1)(2) Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Total sales revenue

56.2 1.5% 30.9 0.9% 40.4 1.6% 26.9 0.9% 2,109.8 56.1% 1,584.4 44.1% 1,095.7 42.2% 1,356.4 43.8% 292.9 7.8% 333.3 9.3% 234.8 9.1% 324.4 10.5% 352.1 9.4% 361.4 10.1% 255.9 9.9% 235.2 7.6% 161.8 4.3% 172.0 4.8% 126.5 4.9% 145.5 4.7% 595.8 15.8% 829.2 23.1% 659.0 25.4% 740.7 23.9% 191.8 5.1% 277.9 7.7% 181.8 7.0% 265.9 8.6% 3,760.5 100.0% 3,589.1 100.0% 2,594.2 100.0% 3,095.0 100.0%

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Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (unaudited) (thousands of tonnes, except percentages)

Attributable production volume: Prima coal Pinang coal Senakin coal Satui coal Batulicin coal Bengalon Melawan coal Ecocoal Total attributable production

894.3 12,138.7 2,123.2 2,123.2 1,395.4 3,890.3 6,688.5 4,170.7 33,424.4

2.7% 36.3% 6.4% 6.4% 4.2% 11.6% 20.0% 12.5% 100.0%

653.6 9,273.6 3,105.5 3,105.5 1,754.5 3,111.2 11,785.0 5,125.5 37,914.4

1.7% 24.5% 8.2% 8.2% 4.6% 8.2% 31.1% 13.5% 100.0%

544.4 6,850.1 2,154.3 2,303.4 1,250.5 2,260.4 8,487.0 3,435.6 27,285.8

2.0% 25.1% 7.9% 8.4% 4.6% 8.3% 31.1% 12.6% 100.0%

229.2 7,526.2 2,412.9 2,355.2 1,248.5 2,111.0 9,134.7 4,607.8 29,625.5

0.8% 25.4% 8.1% 7.9% 4.2% 7.1% 30.8% 15.6% 100.0%

Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (unaudited) (thousands of tonnes, except percentages)

Attributable sales volume: Prima coal Pinang coal Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Total attributable sales volume

316.6 15,282.8 2,152.4 3,322.1 1,370.3 7,652.5 4,170.0 34,266.7

Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (unaudited) (US$ million, except percentages)

0.9% 44.6% 6.3% 9.7% 4.0% 22.3% 12.2% 100.0%

315.3 14,173.4 3,068.3 3,589.1 1,763.4 10,702.9 5,105.7 38,718.2

0.8% 36.6% 7.9% 9.3% 4.6% 27.6% 13.2% 100.0%

218.7 10,156.7 2,097.3 2,385.1 1,264.8 7,779.1 3,387.6 27,289.3

0.8% 37.2% 7.7% 8.7% 4.6% 28.5% 12.4% 100.0%

181.5 10,659.2 2,655.6 2,319.0 1,314.6 8,122.3 4,562.4 29,814.5

0.6% 35.8% 8.9% 7.8% 4.4% 27.2% 15.3% 100.0%

Attributable sales: Prima coal Pinang coal Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Total attributable sales

38.1 1.5% 20.1 0.8% 26.3 1.5% 17.5 0.8% 1,404.1 55.4% 1,029.9 43.1% 712.2 41.3% 881.7 42.8% 205.1 8.2% 233.3 9.8% 164.4 9.5% 227.1 11.0% 246.5 9.8% 253.0 10.6% 179.2 10.4% 164.7 8.0% 113.3 4.5% 120.4 5.0% 88.5 5.1% 101.9 4.9% 391.5 15.5% 539.0 22.5% 428.4 24.8% 481.4 23.4% 134.3 5.3% 194.5 8.1% 127.3 7.4% 186.1 9.0% 2,532.9 100.0% 2,390.1 100.0% 1,726.2 100.0% 2,060.3 100.0%

2008 Year Ended 31 December

2009

Nine Months Ended 30 September

2009

2010

(unaudited) (US$) Attributable average realised prices(1) Prima coal Pinang coal(2)(3) Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Weighted average realised price 133.78 90.06 95.27 74.20 82.66 50.61 32.20 73.33 63.68 72.66 76.04 70.48 68.28 50.36 38.10 62.90 120.06 70.12 78.38 75.11 70.00 55.07 37.57 63.30 96.39 82.71 85.50 71.01 77.49 59.27 40.80 69.28

Notes: (1) The Bumi Resources Group calculates KPCs and Arutmins average realised prices by coal product by dividing their sales (less freight and insurance costs for CIF and C&F sales) for that product by their sales volumes for that product for the period presented. The Bumi Resources Group calculates KPCs and Arutmins weighted average realised price by dividing their total sales (less freight and insurance costs for CIF and C&F sales) for coal sales by their total sales volumes for the period presented. (2) Includes sales of coal from its Bengalon mine which is marketed and sold under the Pinang coal brand name.

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(3) Includes sales of Prima coal and Melawan coal blended to meet Pinang coal specifications.

Expansion Programs The Bumi Resources Group has expanded total coal production at KPC and Arutmin from approximately 52.2 million tonnes in 2008 to approximately 60.4 million tonnes in 2010. Attributable coal production at KPC and Arutmin was expanded from approximately 33.4 million tonnes in 2008 to approximately 37.9 million tonnes in 2009 and from approximately 27.3 million tonnes in the nine months ended 30 September 2009 to approximately 29.6 million tonnes in the first nine months of 2010. The Bumi Resources Group plans to expand its annual total coal production capacity significantly to approximately 74.8 million tonnes in 2011. However, there can be no assurance that the Bumi Resources Group will achieve its production capacity targets in 2011 or its long-term production capacity targets. Further, although the Directors believe these expansion programs are in the best interest of the Bumi Resources Group, there can be no assurance that the Bumi Resources Group will achieve all of its objectives for undertaking them. The Bumi Resources Group plans to increase its annual total coal production at KPC and Arutmin, in part by increasing mining through its contract miners. Under its operating agreements, the Bumi Resources Groups mining contractors provide substantially all labour, supplies, materials, equipment and other capital expenditures necessary for the planned increases in mining activities as agreed in the mine plans. The Bumi Resources Group also plans to increase its coal chain capacities at KPC and Arutmin to boost annual coal production, and it has commenced several projects at KPC and Arutmin to achieve this purpose. The Bumi Resources Group further expects that upon completion of some of these projects, its production costs will be reduced. These expansion programs will require significant capital outlay. The Bumi Resources Group may undertake the projects on its own or through third-party contractors, who will be responsible for the financing and construction of additional infrastructure at its mines. The Bumi Resources Group is expected to incur substantial capital expenditures in undertaking the expansion of its coal chain capacity and intends to fund its expansion programs through various financing methods, including cash flow from operations or commercial bank debt financing. If the Bumi Resources Group decides to undertake these projects through third parties, it intends to do so through vendor financing or award projects on a build, own, operate and transfer, or BOOT, or other project financing basis. KPC Expansion Programs KPC is planning to increase its annual throughput capacity from approximately 42.0 million tonnes at the end of 2010 to approximately 53.0 million tonnes by the end of 2011. Under its current expansion plans, the Bumi Resources Group intends to increase KPCs annual throughput capacity to approximately 68.0 million tonnes per annum by the end of 2013. KPC intends to achieve these production goals by stepping up its owner-operated mining activities, as well as expanding the capacity of its coal chains, especially at the Sangatta mine. The infrastructure and facilities to be built in connection with its capacity expansion programs at KPC, when eventually completed, are expected to reduce the Bumi Resources Groups production costs per tonne of coal. An overview of its expansion programs at KPC is set out in the following paragraphs. Procurement of Mining and Support Equipment, and the Construction of Mine Equipment Workshops and Facilities The Bumi Resources Group is undertaking a project to procure more mining and mining support equipment and machinery at KPC, including more trucks, excavators, bulldozers, cranes and compactors for its mobile fleet, in line with its goal to increase the production of coal at the Sangatta and Bengalon mines. The Directors believe this new equipment and machinery will facilitate and support the anticipated increase in its owner-operated mining activities at these two mines. The Bumi Resources Group has received tenders for this expansion project from various equipment suppliers, and has issued purchase orders to Komatsu, Hitachi and United Tractors for the supply of the required equipment. The equipment is expected to be progressively delivered to the Bumi Resources Group by these suppliers in accordance with delivery schedules through the end of 2011 (with the possibility of extending the final delivery to the end of 2012). The estimated cost of this equipment expansion project is approximately US$1.0 billion, of which the Bumi Resources Group has incurred approximately

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US$18.6 million as of 30 September 2010, and it intends to enter into finance leases with the relevant contractors and explore other financing options to meet the cost of this project. The Bumi Resources Group also intends to construct mine workshops and other associated facilities at the Sangatta mine site. The new, improved workshops and related facilities at KPC are expected to reduce the Bumi Resources Groups costs related to the maintenance and repairs of its owner-operated mining equipment. KPC has completed feasibility studies, including evaluating site options, and is currently in the process of preparing to open tenders for this project. KPC has also procured some materials, such as steel and foundation slabs, in anticipation of the commencement of construction works for the new workshops. This project is expected to cost approximately US$151.0 million and to be undertaken in two phases through the end of 2012. In the first phase, KPC is expected to build approximately 22 maintenance and repair bays at its Mentari site and six maintenance and repair bays at Pit J. The second phase is expected to involve the construction of 44 maintenance and repair bays at the Inul site. Upgrade of Captive Power Projects The Bumi Resources Groups current power generation facilities comprise two units of 5MW coal-fired power generators and three units of 2.3MW diesel powered generators. The Bumi Resources Group has awarded the construction of an on-site coal-fired power plant for its captive use, with a capacity of up to 54MW (3x18MW) at the Sangatta mine site to a special purpose company jointly owned by Bakrie & Brothers and Tata. This joint venture is in the process of securing financing for this power plant project and appointing contractors for the supply of various equipment and machinery and the provision of construction services, for the remainder of the project works for this power plant. The first two units of this power plant are expected to be completed by the first quarter of 2012 and the remaining one unit to be completed by the second quarter of 2012. Upon the completion of this coal-fired power plant, KPC is expected to have sufficient power capacity to support its own production expansion. The power the Bumi Resources Group will buy from this on-site coal-fired power plant is expected to be less costly than its current diesel power plant. These lower power costs are expected to reduce the overall operating costs for KPCs coal chain. The total construction costs of the coal-fired power plant are estimated to be approximately US$94.5 million, which will be funded by the Bakrie-Tata joint venture. Construction of Coal Chains from Melawan and Bendili Hill Deposits to the Sangatta Coal Processing Area The Bumi Resources Group plans to increase the annual handling capacity of KPCs coal chain to an estimated 53.0 million tonnes by the end of 2011. The first stage of this expansion involved the upgrading of the shiploader, which had the lowest handling capacity in the Sangatta coal chain. The Bumi Resources Group completed this project in the second quarter of 2010 and KPCs shiploader currently has a handling capacity of 7,500 tonnes per hour (approximately 40 million tonnes per annum accounting for anticipated downtime necessary for routine maintenance). The Bumi Resources Group has conducted feasibility studies and has tendered for the construction of a coal crusher and a nine-kilometre overland belt conveyor at KPC from the Melawan deposit in the west to the existing Sangatta overland belt conveyor. The Bumi Resources Group expects that the new coal crusher and overland belt conveyor will have a nominal handling capacity of 4,000 tonnes per hour (or approximately 20.0 to 25.0 million tonnes per annum accounting for anticipated downtime necessary for routine maintenance). Under its current plans, the Bumi Resources Group is expected to complete construction of the new coal crusher at, and the overland belt conveyor from, the Melawan deposit by the second quarter of 2012. If the Bumi Resources Group completes construction of the new overland belt conveyor, this is expected to reduce coal transportation costs per tonne of coal for Melawan coal since the conveyor will replace the use of coal hauling trucks to transport the coal from the Melawan mining area to the start of the Sangatta overland belt conveyor, thereby reducing fuel costs and truck maintenance and spare parts costs. The Bumi Resources Group is also conducting feasibility studies and expects to tender for the construction of another coal crusher and an approximately 11 kilometre overland belt conveyor from the Inul mining area in the north to the start of the Sangatta overland belt conveyor, which is expected to have a nominal handling capacity of 2,500 to 5,000 tonnes per hour (or approximately 30 to 35 million tonnes per annum, accounting for anticipated downtime necessary for routine maintenance). Under current plans, the northern overland belt conveyor and the Inul coal crusher are expected to be completed by the end of 2013. The total construction costs of the Melawan and Inul coal crushers and overland belt conveyors are expected to

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be approximately US$250.0 million and will be constructed and funded by third parties to whom the Bumi Resources Group awards these projects on a BOO, basis or build, operate and own, and various other financing options which KPC intends to explore. Expansion of Coal Chain Handling Capacity from the Sangatta Coal Processing Area to the Tanjung Bara Coal Terminal As part of its plans to increase coal handling throughput capacity at KPCs Tanjung Bara coal terminal, KPC has invited tenders from potential contractors for the proposed construction of the following: a new duplicate overland belt conveyor that would run parallel to KPCs existing overland belt conveyor from its Sangatta coal processing area to its coal terminal stockpile; a second coal terminal stockpile facility with a new stacker and stacker-reclaimer, similar to its existing coal terminal coal stockpile facility; a new conveyor belt to transfer coal between its proposed second coal terminal stockpile facility and its existing barge loading facility; and a new row of coal terminal stockpile areas and a new conveyor belt to transfer coal between KPCs existing and future coal terminal stockpile facility and a new, related pier, dock and shiploader.

The Bumi Resources Group intends to carry out the construction of KPCs expansion of its Sangatta coal chain in two stages. In the first stage of construction, the Bumi Resources Group intends to construct a duplicate overland belt conveyor from Sangattas coal crushing plant to the Tanjung Bera coal terminal. KPC awarded the construction of the duplicate overland belt conveyor at Sangatta to PT Roberts Schaefer Soros Indonesia in May 2010, and PT Roberts & Schaefer Soros Indonesia are expected to complete this project by the second quarter of 2012. The Bumi Resources Group and PT Roberts Schaefer Soros Indonesia have ensured the funding of this project through a third-party contractor. The Bumi Resources Group also plans to construct the second coal terminal stockpile facility alongside the existing stockpile facility to increase KPCs coal storage capacity as it boosts production and handling capacity at the Sangatta mine. Coal from this second stockpile facility is expected to be fed to KPCs existing barge loading facility, through a new conveyor belt to be constructed by the third quarter of 2011. In the second stage of construction, KPC intends to construct a second shiploader. KPC, together with its consultants, is currently undertaking a concept study on the proposed construction of this second shiploader, which is expected to have a handling capacity of 7,500 tonnes per hour (or 30 to 40 million tonnes per annum accounting for anticipated downtime necessary for routine maintenance). KPC is expected to commission and complete its construction by the end of 2013. KPC also intends to construct a new row of coal stockpile areas at the second coal terminal stockpile and build a new conveyor belt to transport coal from its existing stockpile and the new stockpile to the second shiploader for loading onto ships. KPC is currently evaluating the tenders for each of these projects. KPC expects the entire expansion project for its coal chain at Sangatta to cost approximately US$718.8 million, which it intends to either fund through internally generated cash flows or award these projects to third parties, who will be responsible for the construction and funding of these projects. Upgrade of Lubuk Tutung Terminal Facilities at the Bengalon mine KPC intends to upgrade its coal crushers and coal loading facilities at the Bengalon mine, which mainly involves the replacement of drives, pulleys and chutes. The upgraded facilities are expected to increase KPCs handling capacity at the Bengalon mine to 12 million tonnes per annum. KPC has completed the evaluation of this project and has requested and received tenders from third parties. It is now in the process of evaluating the tenders and expects to award the project by the end of February 2011. KPC is expected to fund this project from internally generated cash flows. The targeted completion date for this project is the third quarter of 2011. Arutmin Expansion Programs Cooperation with Mining Contractors and Other Third Parties in Exploration and Mining Activities In February 2007, Arutmin entered into the Wahana MOU with WBM, which has rights to a coal mining concession adjacent to Arutmins concession area. Under the Wahana MOU, Arutmin and WBM have agreed to cooperate jointly to exploit coal reserves along a common lease boundary that the Arutmin and WBM concessions share near the Satui mine. The Wahana MOU contemplates the development of

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a mine plan for the exploitation of coal seams that pass through the Satui mine, across the common boundary and into the WBM concession to maximise recovery of the reserves from these coal seams. The Wahana MOU anticipates the negotiation and formalisation of agreements providing for the excavation of overburden from WBMs concession areas into the Arutmin concession area, which would reduce the strip ratio in the Satui mine area, making the coal reserves in these mining areas more economical for Arutmin to mine. On 24 August 2007, Arutmin and WBM entered into the WBM Road Use Agreement. The WBM Road Use Agreement permits WBM to operate its coal haulage trucks, trucks and light vehicles temporarily along the Sumpol Haul Road, which Arutmin has rights to use. Under the WBM Road Use Agreement, WBM is required to pay Arutmin road maintenance fees calculated based on the payload weight of the trucks using the road. The WBM Road Use Agreement provides for a term of 18 months from the date notified by WBM as the commencement date. On 24 August 2007, Arutmin and WBM further entered into the WBM Haul Road Construction Agreement. Under the WBM Haul Road Construction Agreement, Arutmin has agreed to allow WBM to construct its haul roads along agreed alignments to its port over part of Arutmins concession near the Mulia and Asam Asam mines and provide unimpeded access to operate and transport coal along such haul roads. WBM agreed to only commence construction of such haul roads after Arutmin has completed its mining at the open pits where the parties have agreed the road would be constructed. Further, Arutmin and WBM have agreed to consider and evaluate the possibility of constructing coal belt conveyors instead of haul roads, and to share information on the outcome of their respective evaluations. This agreement will remain effective until the expiry or revocation of the Arutmin CCOW, WBMs work agreement for coal with the Indonesian Government, or its earlier termination in accordance with the terms therein. In December 2007, Arutmin and WBM entered into an agreement for the mining of coal along the common boundary between the Arutmin and WBM concession areas under which Arutmin has agreed to develop a fiveyear mine plan with WBM for overburden removal and coal mining along this boundary. Under this agreement, any coal mined from the other partys concession area shall be delivered to that other partys nearest ROM stockyard or another agreed location although each party will be responsible for the costs of overburden removal and coal mining on its side of the common boundary. This agreement will remain effective until the expiry or revocation of the Arutmin CCOW, WBMs work agreement for coal with the Indonesian Government, or its earlier termination in accordance with the terms therein. Expansion of Operations at the Satui, Mulia, Asam Asam, Batulicin and Senakin Mines Arutmin is undertaking the construction of more facilities to boost its coal chains at the Satui, Mulia and Asam Asam mines. There are three ongoing expansion projects at Asam Asam, West Mulia and East Mulia, respectively. These projects involve the construction of port facilities (including barge loading facilities and port stockyards), overland belt conveyors (including ROM coal stockyards) and coal processing plants at each of these mines. The implementation of the projects in each of these mines is in various stages. The construction of its port facilities at Arutmin was undertaken through Mitratama, who holds the port permits and the Bumi Resources Group intends for this arrangement to continue notwithstanding that it will no longer control Mitratama subsequent to the completion of the sale of 70.0 per cent. of its interests in Mitratama. The Asam Asam port was completed in the second half of 2009 and ownership of this facility has transferred to Mitratama. The Bumi Resources Group has entered into a rental agreement with Mitratama to govern the terms of its use of the Asam Asam port. The port project at West Mulia was completed in 2010. The Bumi Resources Group is in the process of evaluating tenders received for its coal processing plants and overland belt conveyors at Asam Asam and West Mulia and an overland belt conveyor project at East Mulia-Satui. In addition, the Bumi Resources Group is also conducting studies and has invited tenders from potential contractors for the supply and construction of a continuous barge unloader at its North Pulau Laut coal terminal. The Bumi Resources Group is expected to achieve a total production of approximately 23.0 million tonnes per annum at Arutmin with the development of the port, coal crusher and overland belt conveyor at Asam Asam. Upon completion of the overland belt conveyor at Asam Asam, Arutmin could reduce its coal transportation costs per tonne of Ecocoal, as the overland conveyor belt would reduce Arutmins dependence on coal hauling trucks, which are costlier due to fuel, maintenance, and spare parts costs. Upon completion of the projects at Asam Asam and West Mulia, the Bumi Resources Group is expected to increase the annual throughput of Arutmins coal chain to approximately 30.0 million tonnes per annum. The Directors estimate that the Bumi Resources Groups expansion programs at Asam Asam relating to the construction of the overland belt conveyor and the coal processing plant will cost approximately US$55.0 million. The Bumi Resources Group funded the construction of the Asam Asam

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port through internally generated cash flows, and intends to explore various financing options to fund the ongoing projects at Asam Asam. The estimated cost of Arutmins expansion programs at West Mulia is approximately US$66.5 million. Arutmin intends to explore various financing options to fund these projects. Arutmin also intends to build a coal washing plant and a preparation plant at the site of the Mereh deposit at its Batulicin mine. Arutmin is currently in the process of preparing the specifications of the washing plant and identifying potential contractors to undertake the construction of the plant. Arutmin is also studying data collected in previous studies on washability, and reviewing the possibility of relocating the coal washing plant at its Senakin mine to the Mereh deposit. The Directors expect that the new coal washing plant and preparation site at the Mereh deposit will increase the combined coal handling capacity of Arutmins mines to approximately 34.0 million tonnes per annum. The Directors further estimate that the Mereh washing plant will cost approximately US$19.0 million, and the Bumi Resources Group intends to explore various financing options to fund this project. Arutmin also has plans to boost the capacity of the coal chain at its Senakin mine, which includes the possible construction of a new coal handling port near the Senakin mine. As Arutmin is in the process of ramping up production of its mining pits at the North Senakin area, it may consider procuring new portable washing plants at that area in the next two years. The Directors believe the availability of a washing plant at North Senakin would increase Arutmins rate of coal production and reduce its production costs per tonne of coal, as coal mined from the operating pits is transported using trucks to the washing plants. Further, as part of its plan to increase production, Arutmin is studying the prospects of mining the underground coal deposits at Senakin. Arutmin has commenced pre-feasibility studies on underground mining at Senakin. The Directors expect that a new coal washing plant at North Senakin will, together with the new washing plant and preparation site to be constructed at the Mereh deposit, increase the annual coal handling capacity of Arutmins mines to approximately 34.0 million tonnes per annum. The Directors further estimate that Arutmins Senakin coal chain expansion will cost approximately US$30.0 million, and Arutmin intends to explore various financing options to fund this project. Proved and Probable Reserves As of 31 March 2010, the measured open cut coal resources (inclusive of coal reserves) of the mines at KPC (operating and dump areas) totalled approximately 3,007million tonnes while the marketable coal reserves were approximately 1,422 million tonnes (of which 765 million tonnes were proved and the remaining 657million tonnes were probable). As of 31 May 2010, the measured open cut coal resources (inclusive of coal reserves) of the mines at Arutmin totalled approximately 553million tonnes while the marketable coal reserves were approximately 469 million tonnes (of which 278 million tonnes were proved and the remaining 191 million tonnes were probable). Runge has reviewed and certified the above estimates. The tables below set forth the proved and probable marketable open cut coal reserves by mine at KPC and Arutmin. KPC marketable open cut coal reserves as of 31 March 2010
Proved Probable Total CV CV Quantity % Ash kCal/kg % Su TM Quantity % Ash kCal/kg % Su TM Quantity (Mt) (ar) (ar) (ar) % (ar) (Mt) (ar) (ar) (ar) % (ar) (Mt)

Project Area

Sangatta Melawan North Pinang Subtotal-Sangatta Bengalon Total

119 266 179 564 201

6.2 4.8 7.4 5.9 7.1

6,559 5,424 5,073 5,553 5,425

0.76 0.47 0.34 0.49 0.91

10.0 20.3 20.9 18.3 19.3

0 44 594 638 19

8.6 3.8 6.9 6.7 6.7

6,302 5,475 4,940 4,977 5,367

0.59 0.56 0.48 0.49 0.95

10.9 20.0 23.7 23.4 19.9

120 310 773 1,202 220

765 657 1,422

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Arutmin marketable open cut coal reserves as of 31 May 2010

Proved Probable Specific *Specific Specific *Specific Energy Energy Energy Energy Quantity Ash (%) Sulphur (kcal/kg) (kcal/kg) Quantity Ash (%) Sulphur (kcal/kg) (kcal/kg) (Mt) adb (%) adb adb gar (Mt) adb (%) adb adb gar

Deposit

Senakin Satui Batulicin Asam Asam West Mulia East Mulia Sarongga Sub Total (Mt) Total (Mt)

26 64 10 64 71 33 9

12 11 11 3 4 5 6

1.1 0.7 1.1 0.2 0.2 0.1 0.1

6,700 6,670 6,600 4,900 5,000 5,000 4,450

6,543 6,478 6,423 4,202 3,995 4,176 3,479

4 8 7 50 76 16 28

12 11 12 4 4 5 9

1.3 0.7 0.8 0.2 0.2 0.1 0.1

6,700 6,560 6,550 4,900 5,000 5,000 4,100

6,543 6,371 6,375 4,202 3,995 4,176 3,206

278

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Its coal reserves are sensitive to the cost and revenue assumptions the Bumi Resources Group uses in determining them. The revenue assumptions underlying the coal reserve estimates of KPC and Arutmin are based, in part, on an assumed coal sales price of US$75.56 per tonne for a calorific value of 6,322 kcal/kg coal product with a graduated adjustment based on energy content with a higher or lower weighting factor for higher or lower energy coal, respectively. Owner-Operated Mining The Bumi Resources Group conducts a portion of its mining operations at the Sangatta mine using its own equipment, materials, supplies and labour. In 2008, 2009 and 2010, through owner-operated mining activities at KPC, the Bumi Resources Group mined approximately 12.7 million tonnes (or approximately 24.0 per cent.), 14.2 million tonnes (or approximately 22.5 per cent.), and approximately 14.8 million tonnes (or approximately 24.6 per cent.) respectively, of the annual total production of KPC. The Bumi Resources Group intends to increase its reliance on owner-operated mining operations going forward, and in particular with respect to its expansion program. The Directors believe that expanding the mining activities of the Bumi Resources Group through owner-operated operations will significantly improve productivity and reduce the Bumi Resources Groups operating costs. The Directors believe that the Bumi Resources Group has achieved a level of proficiency through its operations experience sufficient to operate its mines more efficiently and productively than third-party mining contractors may be able to. A greater reliance on owner-operated mining operations will also serve to mitigate performance risks specific to third-party mining contractors. Contract Mining Contract miners perform a significant portion of its coal mining operations at KPCs Sangatta mine and substantially all of its coal mining operations at KPCs Bengalon mine and Arutmins Senakin, Satui, Mulia, Asam Asam and Batulicin mines. Under contract mining arrangements, the contractor assumes total operational responsibility for mining at the site and for transporting the coal to the beginning of the coal chain for a fee based upon the actual amount of coal delivered and the extraction costs incurred. Historically, the Bumi Resources Group has contracted a substantial portion of its mining operations at KPCs Sangatta mine and substantially all of its mining operations at Arutmins Senakin, Satui, and Mulia mines to Thiess. Thiess is a subsidiary of Thiess Contractors Pty Ltd, one of the largest mining and mineral processing companies in Australia and Southeast Asia. In 2008, Thiess mined approximately 26.2 million tonnes, or approximately 49.6 per cent. of the total coal production of KPC and Arutmin. In 2009, the Bumi Resources Group mined approximately 28.2 million tonnes, or approximately 44.9 per cent. of the total coal production of KPC and Arutmin, through Thiess. In the nine months ended 30 September 2010, the Bumi Resources Group had mined 19.0 million tonnes, or approximately 31.6 per cent. of the total coal production of KPC and Arutmin, through Thiess. The Bumi Resources Group mines a portion of its coal from KPCs Sangatta mine through Pama. In 2008, Bumi Resources mined approximately 5.7 million tonnes, or approximately 10.8 per cent. of the total production of KPC, through Pama. In 2009, Pama mined approximately 8.5 million tonnes, or

469

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approximately 14.8 per cent. of the total coal production of KPC and Arutmin. In 2010, KPC mined 9.9 million tonnes, or approximately 25.2 per cent. of the total production of KPC, through Pama. The Bumi Resources Group has contracted substantially all of its mining production at Arutmins Batulicin mine to Cipta Kridatama. In 2008, 2009 and the nine months ended 30 September 2010, Cipta Kridatama produced 1.6 million tonnes, 2.8 million tonnes and 2.1 million tonnes of coal for Arutmin, or approximately 3.2 per cent., 3.0 per cent., 4.5 per cent. and 3.4 per cent. of the total coal production of KPC and Arutmin, respectively. The Bumi Resources Group mines all of its coal at KPCs Bengalon mine and a portion of its coal at Arutmins Asam Asam mine through Darma Henwa. In 2008, 2009 and 2010, Darma Henwa produced 6.0 million tonnes, 6.0 million tonnes and 6.6 million tonnes of coal, which represented 11.3 per cent., 9.5 per cent., and 11.0 per cent. of the total coal production of KPC and Arutmin in those periods, respectively. The Bumi Resources Group has applied to the Indonesian Government for a waiver of the condition under the 2009 Mining Law which prohibits mining services contracts between mining licence holders and their related parties to allow Darma Henwa to continue to provide these services to KPC and Arutmin. The balance of KPCs and Arutmins coal not produced through its owner-operated mining activities operations or the operations of its four contractors, Thiess, Pama, Cipta Kridatama and Darma Henwa, was produced by small local contractors. In 2008, coal produced by these small contractors and cooperatives amounted to 0.7 million tonnes, or 1.3 per cent. of the total coal production of KPC and Arutmin during this period. In 2009, coal produced by these small contractors and cooperatives amounted to 3.1 million tonnes, or 4.9 per cent. of the coal production of KPC and Arutmin during this period. In 2010, coal produced by small local contractors amounted to 2.0 million tonnes or 3.3 per cent. of the total coal production of KPC and Arutmin during the period. Illegal Mining and Overlapping Mining Concessions Illegal mining has been a common problem for mining companies in Indonesia. Illegal mining increased in the late 1990s and the first few years of the last decade due primarily to several factors, including poor economic conditions in Indonesia following the Asian financial crisis, the decentralisation of the central Indonesian Governments authority, weakened control over regional activities under the regional autonomy law and increased black-market demand for coal products. Mining company losses from illegal mining include reserve losses and increased rehabilitation costs for illegally mined areas due, in part, to the improper and crude mining techniques commonly employed by illegal miners. Although the Bumi Resources Group has not experienced illegal mining operations at KPCs Sangatta and Bengalon mining areas, Arutmins operations at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines have, in the past, been adversely affected by illegal mining from unauthorised miners and from miners who have received permits to mine coal within its concession for these mines issued by local or regional governments. Illegal mining and overlapping mining concessions of unauthorised miners have, in the past, increased production costs of mining coal in Arutmins concession area. Unauthorised miners have disturbed concession areas while leaving the burden of carrying out the requisite reclamation and rehabilitation measures to Arutmin. These unauthorised miners have furthermore extracted the coal most accessible to the land surface with the lowest strip ratio, increasing Arutmins costs for coal extraction in the remaining areas. Illegal mining has also required Arutmin to alter its mine plans for the concession areas affected, thus triggering additional incidental costs, especially in respect of road maintenance and rehabilitation measures. In an effort to mitigate the risk of illegal mining, the Bumi Resources Group had, in the past, entered into mining partnership programs with a military cooperative and a local police cooperative. These partnership programs have been terminated and the Bumi Resources Group no longer purchases coal from these cooperatives. In addition to illegal mining activities by unauthorised miners, the Bumi Resources Group is aware of seven instances of miners holding permits issued by the relevant local governments purporting to authorise the permit holder to mine coal within its concession area for the Senakin, Satui, Mulia, Asam Asam and Batulicin mines. Because the KPC and Arutmin CCOWs with the Indonesian Government grant them the exclusive right to mine coal in their concession areas, the Bumi Resources Group believes these local permits are unauthorised. The Bumi Resources Group has sought the assistance of the MEMR to invalidate those locally issued permits and prevent the holders from illegally mining coal from its concession for these mining areas. See Risks Relating to the Groups Operations The Groups coal mining operations have been adversely affected by illegal mining and conflicting mining permits 124

issued by local governments in Risk Factors. The Bumi Resources Group did not experience any significant illegal mining activities at its mines in 2010. However, the Bumi Resources Group continues to undertake efforts to defend Arutmins concessions against illegal mining. As of the date of this document, legal actions against several unauthorised miners holding overlapping mining concessions are still ongoing. Exploration Activities The Bumi Resources Group currently conducts coal exploration activities within its mining concessions. At the Sangatta mine, the Bumi Resources Group is exploring potential new coal deposits in the areas north and east of the Pinang Dome, and, at the Satui and Senakin mines, it is studying the feasibility of mining underground coal deposits. Bumi Resources uses a variety of geological methods to explore for coal, including field mapping, regional modelling, surface geophysics and drilling. When Bumi Resources locates a promising area for development, it drills exploration bores to delineate the structure, volume and quality of the deposit. The Directors believe exploratory drilling, when combined with downhole geophysical logging, is the most reliable method for determining the stratigraphic characteristics of a deposit at a given point. The Bumi Resources Group undertakes exploration drilling to ensure adequate levels of geological confidence in its known coal resources and reserves to enable mining planning at an appropriate level of detail. Its exploratory drilling depends on the timing of the planned mining and its need to augment its existing resources and reserves by exploring for potential coal deposits in other areas within its concessions. The Bumi Resources Group revised its mine plans in 2009 at the Sangatta and Bengalon mines to increase its coal production. Consistent with changes in its mine plans, it added exploration drilling capacity to upgrade the level of geological confidence of its reserves to support its planned expansion. The Bumi Resources Group has also added exploration drilling capacity to upgrade the level of geological confidence of its reserves at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines. The Bumi Resources Group has conducted preliminary feasibility studies to assess the economic viability of underground coal deposits at the Sarjuna site at the Satui mine. However, the Bumi Resources Group has determined that development of an underground mine at the Sarjuna site is not feasible at this point in time. While the Bumi Resources Group may decide to develop an underground mine at this site in the future, it believes that some of the reserves originally categorised as underground reserves may be mined by open cut methods as part of its arrangements with WBM. There can be no assurance that current or future exploration activities of the Bumi Resources Group will result in the expansion or replacement of its current coal production with new proved and probable reserves or that if new resources or reserves are located, that such coal can be mined at an economically reasonable cost. Coal Mine Planning; Coal Processing and Transport The following discussion describes how the Bumi Resources Group plans and conducts its coal mining operations, and processes, prepares and transports its coal through its coal chains. In line with its production expansion initiatives, the Bumi Resources Group is undertaking expansion activities at KPC and Arutmin to enhance the capacity of its coal chains. Mine Planning The Bumi Resources Group prepares mine plans for the exploration of, and operations in, each pit to regulate coal production. It formulates mine plans to determine the level of coal to produce each year by analysing variables such as historical operating costs, historical average global coal prices in world markets, anticipated customer demand and expected strip ratios for mining. These mine plans address the location of the highwall for the mining pit and the areas for, and coordination of, disposal of overburden during the mining process and reclamation and rehabilitation of mined areas. Under these mine plans, the Bumi Resources Group determines the amount of each type of coal product to be produced during the period covered by the mine plan. Although its mine plans cover a period of five years, the Bumi Resources Group monitors and updates the plans from time to time based upon changing or unanticipated circumstances at the mine, including differences between the mine plan and the actual strip ratio, the configuration of the coal seam, equipment failures and malfunctions,

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operating costs and weather conditions. When the Bumi Resources Group faces higher than expected strip ratios, it is required to deploy more mining equipment to remove the additional overburden to access the coal. When preparing its mine plan for the Sangatta mine, the Bumi Resources Group closely coordinates its owner mining operations with its contract miners and the contract mining operations of each contractor with the other contractors operating at Sangatta. When preparing its other mine plans, the Bumi Resources Group coordinates the mining operations of its various mining contractors with each other. Coordinated preparation of its mine plans includes consultation and planning of expected coal production from each of its pits and the use of the coal chain to move coal products from the coal preparation and processing area to its coal shipping terminals. After management approval, its mine plans are provided to the relevant internal marketing department to formulate, in close consultation with the relevant international marketing agent, a marketing plan for the anticipated coal production. The marketing plan is prepared using variables such as expectations of changes in world prices for coal and customer demand for each brand of coal to be produced, including the possibility of blending certain grades of coal products to meet specific customer demand. Mining Techniques The Bumi Resources Group and its mining contractors conduct mining operations at its mines by conventional truck-and-shovel open pit methods using auxiliary equipment, such as excavators, bulldozers and graders. The Bumi Resources Groups mines generally operate 24 hours per day, 360 days per year. The Bumi Resources Groups miners at the Sangatta mine, through its owner-operated mining operations, work in three shifts of eight hours per day, while the miners employed by its mining contractors at its mines work two shifts of 12 hours per day. Overburden and coal are removed in sequence according to a detailed mine plan designed to ensure final product quality parameters can be met. The Bumi Resources Group operates eight open pits at the Sangatta mine, one pit at the Bengalon site, and eight open pits at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines. After the coal is extracted from the ground it is transported by coal hauling trucks to a coal crushing plant located in its coal preparation and processing areas, which marks the start of its coal chains. Sangatta Coal Chain Coal Preparation and Processing The Bumi Resources Groups coal at the Sangatta mine is delivered to the coal crushing plant where it is crushed and, if necessary, screened and washed at the coal washing plant and placed on the overland belt conveyor for transportation to the shipping terminal. The Bumi Resources Groups coal at Sangatta is crushed in five identical double-roll single-pass roll crushers. Four of the single-pass crushers are designated for clean coal (coal relatively free from soil impurities), while one is designed to handle dirty coal (coal with soil impurities). Three of the single-pass crushers have a capacity of 1,100 tonnes per hour, one has a capacity of 600 tonnes per hour and the coal crusher for dirty coal has a capacity of 250 tonnes per hour. The Bumi Resources Groups single-pass crushers at Sangatta are calibrated to crush coal to the size of 50 millimetres. Dirty coal is further processed at its coal washing plant at the Sangatta mine. At the washing plant, the crushed dirty coal is sized and split into two streams for coarse and fine particles. The washed coal product is dewatered by means of centrifuges while the fine coal is further treated in the spirals before dewatering in a high-frequency vibrating screen. Both washed coal products are routed to join the clean coal stacking conveyor line to a circular stockpile. The Bumi Resources Groups coal washing plant at Sangatta can treat up to 1.5 million tonnes of dirty coal per annum to produce one million tonnes per annum of coal to Prima and Pinang coal specifications. Approximately 3.1 per cent., 2.9 per cent. and 3.2 per cent. of its total coal production at the Sangatta mine in 2008, 2009 and the first nine months of 2010, respectively, was washed. All coal from the single-pass crushers is stored in stockpiles categorised by grade of coal. Underneath these stockpiles, a product reclaim conveyor enables coal to be reclaimed from the stockpiles at rates according to quality and quantity requirements. The reclaimed coal is conveyed to a surge bin and then to the overland belt conveyor. At this stage, the Bumi Resources Group may blend Melawan coal with Prima coal to achieve coal having marketing specifications similar to Pinang coal.

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Overland Belt Conveyor Transport Its coal at the Sangatta mine is transported from stockpiles adjacent to the coal preparation area to the shipping terminal on the Kalimantan coast by a 13.2 kilometre single-stage, covered overland belt conveyor, with a nominal handling capacity of 4,000 tonnes per hour (or approximately 30.0 million tonnes per annum accounting for anticipated downtime necessary for routine maintenance). The coals journey from the coal preparation area to the shipping terminal takes less than 30 minutes, passing over ridges and stretches of low lying ground. The Bumi Resources Groups overland belt conveyor at the Sangatta mine is protected by drift switches that stop the conveyor in the event of the overland belt conveyor drifting beyond specified parameters. A continuous levelling and alignment process is carried out to adjust any settlement. Coal Shipping Terminal Operations At the coal shipping terminal at Sangatta, coal is either stacked or directly routed through the stockyard to the shiploaders. A stacker and a stacker-reclaimer deliver coal to the stockpile. The stacker-reclaimer and two stationary reclaimers retrieve the coal for loading on ships. The Bumi Resources Groups stacker for the Sangatta mine has a capacity of 2,900 tonnes per hour and each stationary reclaimer has a capacity of 3,000 tonnes per hour. The stacker-reclaimer can stack at 1,500 tonnes per hour and has a reclaim capacity of 2,500 tonnes per hour. The Bumi Resources Groups reclaimer and overland conveyor together feed the shiploading conveyor leading to the shiploader to load ships. Its shiploading conveyor can currently load ships at a rate of 7,500 tonnes per hour. Coal Sampling The sampling of its coal at the Sangatta mine is carried out by an automatic sampler situated at the beginning of the shiploading conveyor. This facility is operated by SGS, a subsidiary of SGS S.A., an independent international inspection, testing, verification and certification company. Once the coal has been certified by SGS and KPC has confirmed the coal characteristics in the ship comply with the coal supply agreements specifications, the coal is shipped to the customer. For some CIF shipments, customers may conduct tests on the coal upon arrival. If these tests reflect a difference in the characteristics of the coal, a price adjustment for the difference may be applied pursuant to the supply contract. Bengalon Coal Chain ROM coal produced at the Bengalon mine is hauled by its contractors trucks a distance of approximately 20 km to a barge loading facility, where shuttle barges transport the coal to a transloader located offshore. The coal is then processed in a similar manner as the processing of coal from the Sangatta mine. Senakin, Satui, Mulia, Asam Asam and Batulicin Coal Chains Senakin Coal Chains The Senakin mine has two coal chains. Coal is transported by truck from the operating pits to the coal washing plant, where it is washed, and then transported to the coal crushing plant at the Sembilang and Tawar 2 barge ports, where it is crushed. Coal produced at the Senakin mine is transported to, and processed at the jig plant and the dense media plant to reduce ash content and raise the calorific value of coal. In 2008, 2009 and 2010, all of its coal production at Senakin was washed. The jig plant has a production capacity of 3.0 million tonnes of washed product per annum and the dense media plant has a capacity of 1.5 million tonnes of washed product per annum. The washed coal from the jig plant and the dense media plant is hauled to the product load out at Sembilang and Air Tawar 2, respectively. Both Sembilang and Air Tawar 2 product load out systems are equipped with a load out conveyor belt, a stockpiling capacity of 700 tonnes per hour and a barge-loading capacity of 1,500 tonnes per hour. After loading, the barges ship the coal approximately 40 kilometres to the North Pulau Laut Coal Terminal or tranship the coal to where offshore customers ships are anchored. Satui, Mulia and Asam Asam Coal Chains Coal is transported from the Satui and Mulia resources by truck from the operating pits and delivered to the coal crushing plant at the Muara Satui barge port. At the Muara Satui barge port, coal from its Satui, Mulia and Asam Asam mines is crushed in three crushers: one with a handling capacity of 1,000 tonnes per hour to crush bituminous coal from the Satui mine, another with a handling capacity

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of 750 tonnes per hour to crush sub-bituminous Ecocoal from the Mulia resources and another with a handling capacity of 475 tonnes per hour to crush sub-bituminous Ecocoal from the Satui and Mulia resources. All of its crushers at the Muara Satui crushing plant are calibrated to crush coal to the size of 50 millimetres. All coal from the crushers at the Muara Satui port is homogenised in stockpiles based upon coal grade. Underneath these stockpiles, four product reclaimer conveyors enable coal to be reclaimed from the stockpiles at rates according to quality and quantity requirements. The reclaimed coal is conveyed and then loaded directly onto barges at the Muara Satui port. The Muara Satui port is equipped with two in-loading systems with an aggregate stockpiling capacity of 1,750 tonnes per hour, and one load out conveyor belt with a barge loading capacity of 3,000 tonnes per hour. The Bumi Resources Group has plans to add a second load out conveyor belt at the Muara Satui Port. Coal from the Asam Asam resources is transported by truck from the operating pits and delivered to the coal crushing plant at the Asam Asam barge port. The coal is then crushed in a similar manner as the crushing of coal from the Satui and Mulia mines. The Asam Asam port is equipped with two in-loading systems with an aggregate stockpiling capacity of 1,750 tonnes per hour, and two load out conveyor belts with a barge loading capacity of 6,000 tonnes per hour. After loading at Asam Asam, the barges ship the coal directly to power stations in Indonesia or the coal is transhipped from the barges to larger ships using floating cranes and gear and grab ships. Batulicin Coal Chain The Batulicin mine has one coal chain. Coal is transported by truck from the operating pits and delivered to the coal crushing plant at the Batulicin barge port. Upon arrival at the Batulicin barge port, coal from the Batulicin mine is crushed in two crushers, each of which has a capacity of 250 tonnes per hour. Two mobile front-end loaders reclaim coal at a rate of 400 tonnes per hour. The Batulicin port is equipped with one load out conveyor belt, a stockpiling capacity of 100,000 tonnes and a barge loading capacity of 400 tonnes per hour. After loading, the barges ship the coal approximately 30 kilometres to the North Pulau Laut coal terminal or tranship the coal to where offshore customers ships are anchored. Coal Shipping Terminal Operations at the North Pulau Laut Coal Terminal Upon arrival at the North Pulau Laut coal terminal, coal is either stored at the stockpile yard or directly routed through the stockyard to the shiploader for loading. The North Pulau Laut coal terminal is designed to handle up to 140,000 dead weight tonnes cape size vessels and has a capacity of approximately 12 million tonnes of capacity per annum (or approximately 170 ships) average dead weight tonne capacity of 70,000 and 1,600 barges (with an average dead weight tonne capacity of 75,000 per annum). If its production at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines exceeds the handling capacity of the North Pulau Laut coal terminal, the Bumi Resources Group can also ship its coal from these mines using the other coal shipping terminal located at Pulau Laut island, load it offshore or ship it directly to its customers using barges. Coal Sampling The sampling of its coal at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines is carried out by an automatic sampler situated at the start of the shiploading conveyor operated by PT Geoservices (Geoservices), an independent international inspection, testing, verification and certification company. After the coal is certified by Geoservices and Arutmin has confirmed that the characteristics of the coal in the ship comply with the coal supply agreements specifications, the coal is shipped to the customer. For some CIF shipments, customers may conduct tests on the coal upon arrival. If these tests reflect a difference in the characteristics of the coal, a price adjustment for the difference may be applied pursuant to the supply contract. The Bumi Resources Group owns and operates all stages of its coal chains at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, including the North Pulau Laut coal terminal, but excluding the barges and floating cranes, which are leased. Effect of Weather and Forest Fires The mining operations of the Bumi Resources Group are affected by changes in weather conditions, particularly heavy rains and forest fires. Kalimantan, where its mining operations are located, has a rainy season, which usually occurs from October to April. During the rainy season, its concession areas

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typically experience heavy rains and occasional flooding. In one incident during June 2006, Arutmins mining operations were disrupted for two weeks after a river overflowed its banks and flooded the Satui mine. During mid-2008 and mid-2009, incidents of floods disrupted its operations at KPC and Arutmin, each lasting for up to two days. Heavy rains also affect its operations by increasing truck cycle times, reducing the efficiency of equipment and at times stopping coal mining, production, processing and transport. The production of the Bumi Resources Group decreases approximately 10.0 per cent. to 20.0 per cent. during the rainy season. The Bumi Resources Group attempts to mitigate the effects of the rainy season by increasing production during the dry season and ensuring that its coal stockpiles are adequately filled during the dry season to provide sufficient supplies of coal to satisfy customers demands during the rainy season. For many sustained periods in recent years, rainfall levels at its coal mining operations were significantly higher than the historical average rainfall levels for those months. The Bumi Resources Groups operations have been severely affected by the unusually high levels of rainfalls in the third quarter of 2010, as a result of which its actual coal production to date at both KPC and Arutmin has been below its targeted production and the Bumi Resources Group has been utilising its coal inventories to fulfil its obligations under contracted coal sales. In addition to heavy rainfall, forest fires occasionally affect its operations. Although forest fires have not directly affected the forests within its concession areas, in the past, nearby forest fires have caused high levels of smoke in its mining areas, thereby adversely affecting its mining activities and the performance of the miners. Marketing and Sales Marketing The Bumi Resources Group has entered into long-term, exclusive marketing agreements for its export coal sales under which it pays commissions to its international marketing agents for their services. The Bumi Resources Group markets coal from some of its mines in the Indonesian markets through Enercorp, a company formerly associated with the Bumi Resources Group. These arrangements provide the Bumi Resources Group with access to both international and domestic coal marketing networks and information regarding global, regional and local trends in coal production, supply, demand and pricing. The Bumi Resources Group has several marketing arrangements with various marketing affiliates of Glencore. In October 2003, the Bumi Resources Group entered into a 12-year marketing agreement with Glencore, through its wholly owned subsidiary, Glencore Mauritius, under which the Bumi Resources Group appointed Glencore Mauritius as its exclusive marketing agent worldwide, except for Japan, for coal produced from the Sangatta and Bengalon mines. In June 2010, KPC entered into a marketing agreement with Glencore Avalino, an affiliate of Glencore, in connection with the exclusive right to market coal produced from the Sangatta and Bengalon mines worldwide, except Japan, from the expiry of the marketing agreement with Glencore Mauritius until the expiry of the KPC CCOW. KPC has also entered into a termination agreement with Glencore Mauritius, which will be effective in October 2015, in connection with its appointment of Glencore Avalino. In January 2004, the Bumi Resources Group entered into an exclusive marketing agreement with Mitsubishi for coal marketing in Japan for coal produced from the Sangatta and Bengalon mines. This agreement has an initial term of 12 years. As of 31 January 2011, Glencore was one of the Bumi Resources Groups largest shareholders. According to the records of the Indonesian Central Securities Depository, as of 31 January 2011 Glencore held 4.99 per cent. of the total outstanding Bumi Resources Shares. In October 2001, the Bumi Resources Group entered into a five-year marketing agreement with BHP Marketing, for 75.0 per cent. of all coal exports produced from the Senakin, Satui and Mulia mines, up to a maximum quantity of 11 million tonnes, and 65.0 per cent. of any coal produced from the Senakin, Satui or Mulia mines above the 11 million tonne quantity. BHP Marketing currently holds marketing rights to market coal produced from these mines under a marketing agreement dated July 2005, which will expire in November 2011. Arutmin will not renew this agreement with BHP Marketing. In June 2010, Arutmin entered into a marketing agreement with Glencore Mehrano, an affiliate of Glencore, under which Arutmin appointed Glencore Mehrano as its exclusive worldwide marketing agent, except Indonesia, for all coal products produced from Arutmins mines. This appointment will take effect from 30 November 2011 upon the expiry of the current marketing agreement with BHP Marketing, until the expiry of the Arutmin CCOW.

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Enercorp acts as the Bumi Resources Groups exclusive marketing services agent for domestic coal sales produced from the Senakin, Satui, Mulia and Asam Asam and Batulicin mines. The Bumi Resources Group has increased its marketing efforts through Enercorp for Ecocoal at the Mulia and Asam Asam mines to domestic customers. Through Enercorp, the Bumi Resources Group is in discussions with several large potential customers of Ecocoal, including some large Indonesian electricity generating companies for new sales contracts. The Bumi Resources Group has entered into a memorandum of understanding for the sale of a significant amount of sub-bituminous coal to PLN. The Bumi Resources Group has entered into ten long term coal supply agreements under this memorandum of understanding with PLN for the supply of 7.40 million tonnes of Ecocoal. In 2008, 2009 and the first nine months of 2010, the total export sales of KPC and Arutmin represented 90.0 per cent., 90.3 per cent. and 88.9 per cent., respectively, of their total coal sales volumes. KPC and Arutmin exported approximately 84.9 per cent., 91.2 per cent. and 91.7 per cent. of their total coal sales volumes to customers located in Asia in 2008, 2009 and the first nine months of 2010, respectively. KPCs and Arutmins domestic sales within Indonesia represented approximately 10.0 per cent., 9.7 per cent. and approximately 11.1 per cent. of their total sales volumes in 2008, 2009 and the first nine months of 2010, respectively. Coal Supply Agreements; Pricing and Payment Terms KPC and Arutmin sold approximately 80.2 per cent., 79.2 per cent. and 80.6 per cent. of their total coal sales volumes in 2008, 2009 and the first nine months of 2010, respectively, under coal supply agreements with terms of one year or more. As of 30 September 2010, the coal supply agreements of KPC and Arutmin had remaining terms ranging from one to 12 years. KPC and Arutmin sold the balance of their sales volumes in the spot markets. The Bumi Resources Groups marketing agents inform KPC, Arutmin and its coal marketing and sales subsidiary, IndoCoal Resources, of potential customers that are interested in entering into coal supply agreements, and the Bumi Resources Group, through KPC, Arutmin and IndoCoal Resources, negotiates with the potential customers as to the specific terms of the coal supply agreement, including the term of the agreement, the volume of coal to be sold, the quality and specifications of the coal (including calorific value and moisture, ash and sulphur contents), the sales price, the point and date of delivery and other matters. The Bumi Resources Group makes the final decision to enter into the coal supply agreement. The Bumi Resources Group enters into most of its coal supply agreements as a signatory party. However, for sales made through BHP Billiton, the Bumi Resources Group has granted a power of attorney to BHP Billiton to negotiate and enter into coal supply agreements on its behalf in accordance with the terms of the marketing plans which are agreed annually. A majority of its coal supply agreements include the following provisions: the quantity to be delivered each year, normally with an option for the buyer to request additional quantities at certain times; the sales price, normally pre-determined for a twelve-month period, with prices for subsequent periods subject to negotiation; product specifications (including calorific value and moisture, ash and sulphur content); provisions for adjustment of the sales price for discrepancies or variations from agreed quality specifications; and shipping procedures.

The Bumi Resources Group often negotiates the sales prices under its coal supply agreements by reference to global coal indices, notably the NEWC 6,322 Index. The global coal indices apply to contracted and spot sales. The average selling prices of the Bumi Resources Group are typically below the NEWC 6,322 Index as the average calorific values of the coal products sold are usually lower than 6,322 and prices are flexed accordingly. The prices the Bumi Resources Group charges for its coal depend, in part, on the term of the agreement, volumes purchased, coal quality and other specifications (including the calorific value and moisture, ash and sulphur content), customer relationships, arrangements for freight and insurance and the customers location. In some cases, when the price adjustment for a particular year has not yet been agreed, the Bumi Resources Group will continue to ship coal at the prior years price and adjust the price retroactively after reaching an agreement with the customer.

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Payment and delivery terms under its long-term supply agreements vary among customers and include FOB, C&F or CIF terms. Payments under their contracts are made by wire transfer or by drafts backed by letters of credit. For most customers, either form of payment carries an obligation to pay within five to ten business days upon passage of title to the customer. A small portion of its coal supply agreements carry payment terms between seven and 45 business days. The Bumi Resources Groups contracts with European and American customers often have longer payment periods, due to longer shipping periods, than the payment terms granted to Asian customers. Under the KPC and Arutmin CCOWs, title to the coal remains with the Indonesian Government until delivery of the coal to the vessel. Depending on the specific contract and subject to the terms of the KPC and Arutmin CCOWs, title passes to the customer when the coal has passed over the ships rail, upon the completion of loading and trimming (spreading the coal evenly in the ships hold), at the point of delivery to the customer or upon receipt by the customer of the shipping documents. The Bumi Resources Groups coal supply agreements include an early termination clause for force majeure events, a change in law that does not permit the customer to continue to use the specified grade of coal, a failure of the customer to commence commercial operations and certain other circumstances. However, early termination of its sales contracts has been rare. The Bumi Resources Group also sells its coal under spot contracts, which are coal supply agreements that are shorter than one-year. The Bumi Resources Groups marketing agents inform the Bumi Resources Group of potential customers seeking tenders for spot contracts. The Bumi Resources Group submits a tender price and the marketing agent informs it of whether the potential customer has accepted the tendered price. The Bumi Resources Group makes the final decision on whether to accept the spot contract and the price at which the Bumi Resources Group sells the coal. All of KPCs and Arutmins export sales (and their domestic sales within Indonesia to Freeport and Paiton) are priced, invoiced and paid in US dollars through wire transfer or letters of credit. KPCs and Arutmins domestic sales within Indonesia, excluding their domestic sales to Freeport and Paiton, are priced, invoiced and paid in Rupiah, but are generally based on US dollar-denominated prices. The customers of the Bumi Resources Group typically enter into coal supply agreements to secure reliable sources of coal, while the Bumi Resources Group seeks stability in its sources of revenue. The Directors believe coal end-users in Taiwan, Hong Kong, Japan, South Korea, Malaysia and other parts of Asia prefer to enter into coal supply agreements to secure supply given their dependency on imported fuels and raw materials. Historically, the Bumi Resources Groups commitments to supply coal under coal supply agreements in any year cover a substantial portion of its expected production for the following year. Customers Major electricity generating companies and industrial users of coal, which include cement and steel mills, in Asia comprise the principal customers for its coal. The Bumi Resources Group has contracts with large electricity generating companies and industrial users located primarily in Taiwan, Japan, Hong Kong, Malaysia, Italy and the United States. The Directors believe that the Bumi Resources Group has a competitive advantage in the Asian coal markets given its close proximity to these markets compared to coal companies in other coal exporting countries, such as Australia and South Africa.

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The following table sets forth the customer base of KPC and Arutmin in terms of the total coal sales volumes of KPC and Arutmin by geographic location and industry for the periods indicated:
Year Ended 31 December 2008 2009 (unaudited) (in thousands of tonnes, except percentages) Geographic location: China Japan Taiwan South Korea Indonesia Hong Kong India Philippines Malaysia Thailand Other Asian countries Total Asia 1,567.5 13,402.3 5,941.2 2,779.4 5,174.3 3,653.0 6,272.6 1,055.7 1,957.5 1,716.2 215.3 43,734.9 3.0% 26.0% 11.5% 5.4% 10.0% 7.1% 12.20% 2.0% 3.8% 3.3% 0.4% 84.9% 12,920.0 11,884.1 5,647.4 4,521.6 5,625.7 2,278.0 5,544.3 1,021.9 2,097.4 824.2 628.5 52,992.8 22.2% 20.5% 9.7% 7.8% 9.7% 3.9% 9.5% 1.8% 3.6% 1.4% 1.1% 91.2% Nine months ended 30 September 2010

11,381.9 9,271.4 2,859.9 1,967.5 4,956.3 1,623.7 2,465.5 2,379.6 3,026.1 958.0 40,889.9

25.5% 20.8% 6.4% 4.4% 11.1% 3.6% 5.5% 5.3% 6.8% 2.1% % 91.2%

Year Ended 31 December 2008 2009 (unaudited) (in thousands of tonnes, except percentages) Europe 7,342.5 14.3% 4,862.7 8.4% 3,703.4 North and South America 430.4 0.8% 116.4 0.2% Other countries 0.0% 108.1 0.2% 80.0 Total 51,507.8 100.0% 58,080.0 100.0% 44,676.0 Industry: Power plants and utilities 43,894.0 Other industries 7,613.8 Total 51,507.8

Nine months ended 30 September 2010

8.3% % 0.2% 100.0%

85.2% 14.8% 100.0%

46,653.4 11,426.6 58,080.0

80.3% 19.7% 100.0%

38,034.2 6,641.8 44,676.0

85.1% 14.9% 100.0%

In 2008, 2009 and for the first nine months of 2010, KPCs and Arutmins five largest customers (by sales volume) accounted for 33.2 per cent., 27.1 per cent. and 26.2 per cent., respectively, of their total coal sales volumes during the relevant period. Competition The international coal markets are highly competitive. The Bumi Resources Groups principal competitors in Asia include large coal producers from Australia, South Africa and China, including Rio Tinto, BHP Billiton, Anglo American, Xstrata and large state-owned companies in China. The Directors believe that the Bumi Resources Group has competitive advantages over its Australian and South African competitors when selling its coal products to its primary customers in Asia given its proximity to these customers, the proximity of its coal mines to the coast of Kalimantan, its owner-operated shipping terminals and the relatively lower transportation costs to ship its products to the Asian markets. The Bumi Resources Group competes against other Indonesian producers, including PT Adaro Indonesia, PT Kideco Jaya Agung, Berau Coal and PT Indominco Mandiri for sales of coal. The Directors believe that the Bumi Resources Group has competitive advantages over other Indonesian coal producers given the proximity of its mining areas and operations to its shipping terminals, which lowers inland transportation costs of coal from its mines to its shipping terminals.

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The primary competitors of the Bumi Resources Group for European sales are South African coal producers, such as Xstrata, Anglo American and BHP Billiton. The Bumi Resources Group competes with its South African competitors primarily on the basis of price. Glencore, one of the Bumi Resources Groups international marketing agents, has a 36.0 per cent. shareholding in Xstrata. BHP Billiton is the parent company of BHP Billiton Marketing AG, which is one of the Bumi Resources Groups international marketing agents. Glencore and BHP Billiton compete with the Bumi Resources Group for the sale of coal products and may favour the sale of their affiliates coal products over the Bumi Resources Group. The global coal markets, and, in particular, Asian coal markets are expected to become increasingly competitive as a number of new mines and processing facilities, particularly in Australia, are developed. In addition, a number of factors beyond the Groups control affect the markets in which the Bumi Resources Group sells its coal. Worker Health and Safety Standards The Bumi Resources Group seeks to minimise the risk of accidents, injuries and illness to its employees and its contractors employees by improving health and safety standards and closely monitoring its operations. The Bumi Resources Group has implemented a comprehensive management system for the safe operation of its mines, which includes safety management plans, rules, codes of practice, manuals and procedures with which its employees and its contractors employees are required to comply. The Bumi Resources Group actively seeks to enhance awareness on the importance of health and safety standards through a series of campaigns and various training programs and activities that KPC and Arutmin undertook. The Bumi Resources Group also conducts internal safety audits on a monthly and quarterly basis through its safety department to ensure that its employees and contractors comply with this system. The MEMR also reviews its audits and conducts its own independent reviews of its health and safety efforts. The Bumi Resources Group has received awards from the Indonesian Government for health and safety measures at its mines. In addition, the Bumi Resources Group has established medical emergency and fire response teams at the site of its mines. The Directors believe the emphasis of the Bumi Resources Group on worker health and safety is demonstrated by the relatively low level of worker accidents at its mines. During 2009, there were a total of 32 lost time injuries and 1 fatality at KPC. The lost time injury frequency rate for 2009 was 0.56 which was the reversal of a long term downward trend in KPCs lost time injury frequency rate statistic since 1996. As at July 2010, there were 11 lost time injuries and 1 fatality at KPC. At Arutmin, during 2009, the rolling 12-month average of the lost time injuries frequency rate was 0.17 in January, peaked at 0.28 in March and was 0.24 in December. During 2010, Arutmin recorded three lost time injuries and no fatalities across the Arutmin operations. Environmental Matters The Bumi Resources Groups operations are subject to Indonesian laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. The KNLH is the Indonesian Government agency responsible for implementing the Indonesian Governments environmental regulations and policies, in the field of environmental impact controls, and local government agencies supervise its mining operations. KNLH reports directly to the President of Indonesia and coordinates its activities with various Indonesian Government agencies, including the MEMR. The Bumi Resources Group is committed to achieving high standards of environmental management of its coal mines. The Bumi Resources Group has implemented an environmental management system in accordance with the Indonesian Governments Environmental Monitoring Plan and formulated post-mining recovery and rehabilitation plans to satisfy land designation, function and layout stipulated by the Indonesian Government. The Bumi Resources Group uses its environmental management plan to control acid mine drainage, sediment control in runoff water from mining areas, management of hydrocarbons and waste products. The Bumi Resources Group also hires independent environmental specialists to conduct bi-annual environmental audits to monitor compliance with environmental standards and identify opportunities for improvement. Environmental Auditing The Bumi Resources Group subjects its mining operations to periodic internal and external environmental audits. Its environmental and rehabilitation departments conduct internal audits, and the MEMR and local governmental agencies conduct external environmental audits. Environmental teams from each mining pit, who also cross-audit other mining pits within the concession area, conduct annual 133

internal audits jointly with its mining contractors. In addition, the Bumi Resources Groups mining contractors conduct independent internal audits and are required under their operating agreements to report any environmental incidents to the Bumi Resources Group. The latter also conducts random audit inspections and internal audits of its contractors operations approximately every six months. SGS performed an audit on KPC and Arutmin in connection with environmental management standard ISO 14001 accreditation for its mines and ports. In 2009, SGS confirmed the ISO 14001 accreditation of its operations at KPC and for the North pulau Lau coal terminal at Arutmin. Mine Reclamation and Rehabilitation; Mine Closure Although under its operating agreements, the Bumi Resources Groups mining contractors are responsible for mine rehabilitation in the areas they mine, the Bumi Resources Group retains ultimate legal responsibility for mine closure and rehabilitation of all areas mined under the KPC and Arutmin CCOWs with the Indonesian Government. The Bumi Resources Group has developed comprehensive mine reclamation and rehabilitation strategies for its mines. The Bumi Resources Group uses a contemporaneous mining and rehabilitation system that, the Directors believe, is efficient and environmentally friendly. Under this system, topsoil is stripped and stockpiled. When overburden is stripped, the initial mining soil is dumped out of the pit while subsequent soil is dumped into the pit. Erosion control systems, perimeter drains and water-settling ponds are installed to intercept and treat water discharged from the mining site. Topsoil is placed back on the in-pit overburden, which has been graded and contoured. The topsoil is mulched, seeded with grass and fertilised, and revegetated primarily with acacia and albizia trees. The mine and rehabilitation planning is undertaken monthly, reviewed quarterly and accompanied by detailed maps, schedules and budgets. Under normal circumstances this system allows the Bumi Resources Group to mine an area, restore it within two years and plant trees three to four years later. The geological characteristics of each of the Bumi Resources Groups mines are taken into account in developing and implementing these strategies. For instance, the long, narrow coal deposits of the Sangatta mine permit the majority of the topsoil from land clearing to be used in the rehabilitation of previously mined blocks. Most of the overburden is placed into mined out areas of the pit as mining progresses. As reclaimed areas reach their design profile, they are graded, topsoil is spread on the surface and rapidly growing trees are planted. At KPC, the Bumi Resources Group plants a variety of fruit and rainforest trees at the reclaimed site. In 2009, KPC deployed a hydro-seeder to spray the areas to be reclaimed with a mixture of seeds, fertiliser, mulsa, adhesive and compost, to develop stable reclaimed areas and prevent soil erosion. At Arutmin, the Bumi Resources Group recontours and works with the local communities to revegetate the mined areas with a variety of fruit trees. As of 31 December 2010, the Bumi Resources Group had restored 4,009 hectares of land at the Sangatta and Bengalon mines since their commencement of operations. The Bumi Resources Group has a tree nursery located at the Sangatta mine (which produces 500,000 seedlings annually). The Bumi Resources Group also has an on-site laboratory that monitors the level of hydrocarbons and waste released at the Sangatta mine and maintains these levels within the parameters set by the Indonesian Governments Environmental Monitoring Plan. As of 31 December 2010, the Bumi Resources Group had restored over 4,126 hectares of land at its Senakin, Satui, Mulia, Asam Asam and Batulicin mines since their commencement of operations. Wildlife Donations and Environmental Awards The Bumi Resources Group has made numerous donations to wildlife protection and conservation organisations and its environmental management performance has been recognised with several awards. In 2009, for its environmental compliance, KPC received, a Gold Certificate for Sangatta for the tenth consecutive time and a Green Certificate for Bengalon, from the governor of East Kalimantan and a Green rating from the Ministry of Environment. Arutmin received a Blue (minus) Certificate for its operations at each of the Satui and Batulicin mines, and a Green Certificate for Senakin, from the governor of East Kalimantan. KPC was awarded the Best Mining Company by Tambang Award in April 2008. The Bumi Resources Group makes contributions to the Kutai National Park and the Wanariset Orangutan Rehabilitation Center located near the Sangatta mine. The Bumi Resources Group supports the Indonesian Government-industry joint initiative known as The Friends of Kutai, which provides management advice and funding for the conservation of the Kutai National Park.

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Social and Community Welfare Programs The Bumi Resources Group actively promotes programs intended to enhance the health, education and economic well-being of the communities located near its mines. The Bumi Resources Group works with local non-governmental organisations to develop farming and fishing industries, which provide economic independence to the local communities near their mines. The Bumi Resources Group also supports infrastructure programs, including building roads, schools, mosques, clinics and water facilities near its mines and supports a number of medical programs for the eradication of tropical diseases, such as malaria and dengue fever. Through its education programs, the Bumi Resources Group also provides scholarships to deserving students from the communities near its mines. Legal Proceedings and Disputes Save as described below, neither Bumi Resources nor any other member of the Bumi Resources Group is or has been engaged in nor, so far as the Company is aware, has pending or threatened, any governmental, legal or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a significant effect on Bumi Resources and/or the Bumi Resources Groups financial position or profitability and, upon Completion, the Group and/or the Groups financial condition or profitability. Value-Added Taxes and Royalty Obligations Dispute with the Indonesian Government KPC and Arutmin are involved in a legal dispute with the Indonesian State Receivables Affairs Agency regarding whether KPC and Arutmin may offset input value-added tax refunds against their royalty obligations to the Indonesian Government under KPCs and Arutmins CCOWs. For information about this dispute, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. KPC Forestry Permit Dispute with East Kutai Regency On 16 March 1987, KPC and Porodisa, a company which holds a timber concession on part of KPCs mining concession area, entered into a joint agreement under auspices of the East Kalimantan Government. Under this agreement, KPC and Porodisa stipulated that both parties agree to give each other rights to conduct their operations on land covered by both concessions. On 2 June 1990, KPC obtained a forestry permit issued by the regional head of the Bureau of Forestry of the East Kalimantan Government on behalf of the Indonesian Ministry of Forestry and with the approval of the East Kalimantan Government. Under this forestry permit, KPC is permitted to mine in those areas of its concession which had been designated as protected forest by the Indonesian Government. On 15 March 2001, the Ministry of Forestry issued Decree no. 79/Kpts-Ii/2001 which resized the forest area in East Kalimantan as a result of which the areas of KPCs coal mining concession which were previously designed as forest were now non-forest areas. In June 2002, in response to KPCs proposal for the expansion of its forestry licences, the Ministry of Forestry in its letter to the MEMR stated that the additional forest areas requested by KPC for expansion of its operation areas were also non-forest areas. The Ministry of Forestry also stated in this letter that, because KPCs concession area is no longer a forest, regulation of the forests in those areas fell under the authority of the regional government. Since issuance of this letter of the Ministry of Forestry in 2002, the District Forestry Office of the East Kutai Regency has conducted assessments in the forestry area each time KPC performed its land clearing activities. The District Forestry Office also required KPC to pay forestry fees related to its land clearing activities. On 11 July 2008, the acting Regent of East Kutai issued a letter which ordered KPC to cease its mining operations, claiming that KPC had violated the Forestry Law by operating in a forest area without a proper licence. In the first week of August 2008, rangers from the District Forestry Office of the East Kutai Regency and police blocked KPC and its contractors from mining parts of the Melawan, Pelikan, Belut, Beruang and Khayal mining pits. In the second week of August 2008, East Kutai Regency rangers and police blocked the coal hauling road for Bengalon mining pit. On 21 August 2008, the blockade in KPCs Bengalon mine hauling road was lifted by the rangers. KPC negotiated with representatives of the East Kutai Regency, the Ministry of Forestry and the MEMR to resolve this dispute and, on 3

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September 2008, the rangers from the Ministry of Forestry and the East Kutai Regency lifted the blockage and KPC resumed normal operations at those mining pits. The Directors believe that KPC possesses all central, regional and local government permits, including forestry permits, necessary to legally authorise it to mine in these disputed areas and is working to reach a long-term resolution of this dispute expeditiously. Disputes Over Land Rights and Illegal Mining Permits Although the Bumi Resources Group has rights granted by the Indonesian Government to mine coal within its concession areas, it occasionally faces land claims from squatters. Although the Directors believe such claims to be meritless, to avoid protracted disputes, the Bumi Resources Group typically negotiates with these squatters to vacate the relevant concession area by paying a nominal fee. In addition, the Bumi Resources Group is aware of instances of miners holding permits issued by the relevant local governments purporting to authorise the permit holder to mine coal within its concession areas. Because the KPC and Arutmin CCOWs with the Indonesian Government grant the Bumi Resources Group the exclusive right to mine coal in its concession areas, the Directors believe that these local permits are unauthorised. The Bumi Resources Group has sought the assistance of the MEMR to invalidate those locally issued permits and prevent the holders from illegally mining coal from its mining concessions. The Bumi Resources Group did not experience significant illegal mining activities at its mines in 2010. However, legal actions against several unauthorised mines are still ongoing. For example, on 9 June 2009, Arutmin filed two lawsuits in the State Administrative Court of Banjarmasin against the decrees issued by the Regent of the Tanah Bumbu District granting PT Anzawara and CV Putra the right to mine in an area covered by Arutmins CCOW. On 3 November 2009, the State Administrative Court issued two decisions approving Arutmins claim and terminating the mining rights of PT Anzawara and CV Putra. Subsequently, PT Anzawara and CV Putra filed appeals to the High Administrative Court. On 17 March 2010, the High Administrative Court confirmed the decisions of the State Administrative Court in favour of Arutmin against CV Putra, while also issuing a decision in favour of PT Anzawara on 30 March 2010. The applications of appeal at the Supreme Court for each of the decisions were filed, respectively, by CV Putra and Arutmin. As of the date of this document, the cases are still in the process of being examined by the Supreme Court. Thiess Arutmin Arbitration On 25 September 2007, Thiess commenced proceedings against Arutmin in the Supreme Court of Queensland with regards to several disputes arising under the operating agreement dated 19 May 2000 (as amended). These disputes related to, among other matters, Thiess claim in respect of work performed at the Senakin mining site and overheads claim for work performed at the Senakin and Satui mining sites. During the course of this dispute, Arutmin took steps to withhold monthly payments to Thiess under the Cash Distribution Agreement. Thiess commenced proceedings in the English High Court in London, seeking an order requiring Arutmin to make payments in respect of the disputed amounts under the operating agreement into a dispute account maintained with Standard Chartered Bank, Singapore Branch. On 9 February 2009, Arutmin and Thiess entered into a deed of settlement, under which the parties agreed to the suspension and subsequent withdrawals from and discontinuance of the proceedings and the full and final settlement of all claims, without admission by any of the parties as to the substantive merits of the proceedings. This dispute was settled in the second half of 2009 when Arutmin made full payment under this deed of settlement. Thiess KPC Arbitration On 28 March 2008, Thiess summoned KPC to compensate Thiess for additional costs incurred since July 2007 and costs that would continue to be incurred until a revised pricing was put in place. Thiess claimed that the relevant escalation formula for the contractual mining service fee charged to KPC no longer reflected the actual increase of Thiess operating costs and hence had to be revised with effect from July 2007. The Directors believe that the mining service fee rate payable to Thiess is still above other comparable mining contractors rates. As of 30 September 2010, the amount in dispute between KPC and Thiess was approximately US$37.7 million. As of the date of this document, KPC and Thiess had commenced arbitration proceedings.

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PT Pukuafu Indah Judgement At the incorporation of NNT, Newmont held 80.0 per cent. of the shares in NNT and PI held the remainder. Under the terms of NNTs contract of work with the Indonesian Government, NNT is required to ensure that its foreign shareholders, NIL and NTMC, offer 31.0 per cent. of their shareholding in NNT for divestment to the Government and, if not accepted by the Government, to Indonesian nationals or companies owned by Indonesian nationals. This divestment of the 31.0 per cent. shareholding in NNT is to occur over a stipulated period of time and in respect of stipulated percentages of shares. In respect of the period from 2006 to 2009, a 24.0 per cent. shareholding in NNT was stipulated to be divested. As reported in Newmonts public filings with the SEC, Newmont and the Indonesian Government have in the past been locked in disputes relating to Newmonts divestiture of shares in NNT. BRM, through its 75.0 per cent.-owned subsidiary MDB, purchased from NIL and NTMC the 24.0 per cent. shareholding in NNT, giving BRM an 18.0 per cent. effective indirect equity interest in NNT. NIL remained obligated to divest a further 7.0 per cent. shareholding in NNT in 2010. NIL has proposed a price for this shareholding to the Government under its rights of first refusal contained in NNTs contract of work. The Government has not agreed to the proposed price and is in discussions with NIL to agree on a price. PI has claimed that it is entitled to the 24.0 per cent. shareholding sold to BRM as well as the additional 7.0 per cent. shareholding that is to be divested, on the basis of a purported right of first refusal arising under NNTs contract of work and other arrangements entered into with the NIL. NIL and NTMC, as well as NNT, have vigorously denied and rejected PIs claims. PI has commenced numerous proceedings in the Indonesian courts seeking to enforce these purported rights. On 30 December 2010, PI obtained a judgement from the South Jakarta District Court which, inter alia, held that PI was entitled to the divested shares, and that NIL and NTMC were required to transfer the 31.0 per cent. shareholding to PI. The judgement is not final and binding, and therefore not enforceable by PI. Under Indonesian law, a judgement does not become final and binding until all appeals have been exhausted, a process that may last up to four years. NIL and NTMC have filed appeals in respect of the judgement and are seeking other legal remedies. Employees and Labour The Bumi Resources Group had an average headcount of 6,315, 6,997 and 7,870 (73 of whom were expatriates) as of 31 December 2008 and 2009 and 30 September 2010, respectively. The total workforce of the mining contractors that the Bumi Resources Group used as of 30 September 2010 was approximately 13,538 personnel. The Bumi Resources Groups mine managers are Indonesian nationals (except one) trained through the miners mentoring program and, generally, have extensive experience in coal mining. The Bumi Resources Groups contract employees provide services such as mining (for those employed by Thiess, Pama, Cipta Kridatama and Darma Henwa), catering, medical, personnel transport, laboratory analysis and maintenance activities. The Directors believe that the relationship of the Bumi Resources Group with its employees is good. Recruitment and Training The Bumi Resources Group gives priority to the recruitment and training of employees from the local communities near its mines through its apprenticeship training programs. The Bumi Resources Groups continued focus on the transfer of skills, staff development and leadership training is designed to contribute to a pool of talented employees necessary to fill future vacancies. Labour Unions As of 30 September 2010, substantially all of its Indonesian employees were members of one of five separate labour unions. On 28 May 2009, Arutmin entered into a collective labour agreement with a union whilst KPC had already entered into a collective labour agreement with five unions on 22 May 2009. Both collective labour agreements are valid for the period of approximately two years, i.e. until May and June 2011, respectively. These collective labour agreements cover terms of employment, including setting forth its rights and obligations with respect to the labour union, working relations, working hours, payroll, employee development and competency, occupational safety and health, employees welfare, social allowances, employees code of conduct and mechanisms for handling 137

disputes. Under the terms of the collective labour agreement for the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, the Bumi Resources Group and the labour unions have agreed to strengthen working relationships within the companys work areas and to settle disputes amicably. Employee Benefit Programs The Bumi Resources Group maintains a defined employee benefit pension plan that covers substantially all of its employees. Under this pension plan, the Bumi Resources Group and its employees contribute 4.0 per cent. and 2.4 per cent., respectively, of the employees salary to the plan. The plan provides for benefits to be paid to eligible employees at retirement based primarily upon years of service and remuneration upon retirement. The Bumi Resources Group funds its plans through contributions that are sufficient to meet the minimum requirements under Indonesian law. Pension benefits are denominated primarily in Indonesia Rupiah. In addition, its employees are covered by the Indonesian Government-sponsored social security insurance fund, Jamsostek (which involves an employee contribution of 2.0 per cent. of the employees base salary and a company contribution of 3.7 per cent. of the employees base salary). Labour Disputes The Bumi Resources Group and its contractors have experienced labour disputes at its mines, usually involving issues over worker social security insurance, bonus payments and the employees skill rating system. These labour disputes have usually been resolved within days of their start, with no prolonged effects on its operations. Resolution of labour disputes usually follows formalised procedures. Labour actions typically do not occur unless a deadlock is reached in discussions to resolve labour disputes. When labour actions do occur, they are usually pre-announced and peaceful, without violence or destruction of property. The Bumi Resources Group or its contractors sometimes request assistance from Indonesian Government mediators, but generally only if the disagreements with labour persist for an extended period. In August and September 2010, the Bumi Resources Group experienced a 23-day strike at the Bengalon mine by the employees of Darma Henwa over a dispute regarding payments of holiday bonuses, which is estimated to have caused a loss in coal production of 560,000 tonnes the Bumi Resources Group could have achieved during this period. There can be no assurance that the Bumi Resources Group or its contractors will not experience labour disputes or actions in the future which will materially and adversely affect its mining operations. Insurance The Bumi Resources Group maintains the following insurance coverage at KPC and Arutmin through policies issued by Indonesian insurers: comprehensive general liability, which includes public liability coverage with liability limits of US$50.0 million, product liability coverage with liability limits of US$50.0 million, employers liability coverage with liability limits of US$10.0 million, and automobile liability coverage with liability limits of US$10.0 million and minor construction work with liability limits of US$10.0 million; business interruption insurance and industrial risks, which includes coverage of property damage, plant and machinery breakdowns and business interruption with a total aggregate limit of US$700.0 million for KPC and Arutmin (US$400.0 million of which is coverage for Arutmin); stock throughput and marine cargo insurance, with varying liability limits depending on the type of vessel or the location; and terminal operator liability, which includes terminal operators, stevedores and wharfingers coverage and charterers liability coverage.

A substantial portion of its insurance coverage has been reinsured by international insurers. Bumi Resources insurance policies do not cover liability or damage arising from acts of war or terrorism and contains other customary exclusions from coverage. Under the terms of its operating agreements with its mining contractors, they are responsible for their own employees and they and their employees must also be covered by appropriate insurance and must provide periodic evidence of such coverage.

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Property and Equipment Under the terms of the KPC and Arutmin CCOWs, all of the property, plant and equipment KPC and Arutmin purchase for their operations within their concession areas become the property of the Indonesian Government when those assets arrive at the Indonesian port of import or are purchased domestically. However, they retain the exclusive right to use the property, plant and equipment for their mining operations. KPC purchased most of the fixed assets located at the Sangatta mine, including the overland belt conveyor, the coal crushing plant, the coal washing plant, the power plant and the coal shipping terminal. The Bumi Resources Group also purchased or leased all of the machinery and equipment it uses for its owner-operated mining activities at the Sangatta mine. Arutmin has purchased most of the fixed assets located at coal processing areas and barge ports for its Senakin, Satui, Mulia, Asam Asam and Batulicin mines, including the coal crushing plants, the coal washing plants and the barge loading facilities, and the North Pulau Laut coal terminal. Under the terms of the KPC and Arutmin CCOWs, KPC and Arutmin, respectively, are responsible for the maintenance of all property, plant and equipment they use at their concessions for their useful life. KPC has entered into maintenance agreements with Komatsu, Liebherr France S.A.S., PT Trakindo Utama, United Tractors and Hitachi for the maintenance of the equipment supplied by them for KPCs owner operations at the Sangatta mine. These maintenance contracts typically require KPC to pay monthly fixed and variable service fees, which cover replacement of spare parts, and the supplier is responsible for the maintenance of the equipment supplied by it. Arutmin owns and operates its offices and barge ports at the Senakin, Satui, Mulia, Asam Asam and Batulicin mines, while other equipment at these mines is maintained by its mining contractors operating at these mines. Its contractors retain title to all property, machinery and equipment they purchase to conduct their contract mining operations for the Bumi Resources Group, and are also responsible for the maintenance and replacement of that property, machinery and equipment. Divestment On 30 March 2007, Bumi Resources entered into an agreement for the sale and purchase of shares in KPC, Arutmin, Indocoal Kaltim, Indocoal Kalsel and IndoCoal Resources (the Sale and Purchase Agreement) with Tata, which provided for the sale by Bumi Resources, and the purchase by Tata, of 30.0 per cent. of the outstanding shares of each of the IndoCoal Group Companies, for a total consideration of US$1.1 billion plus certain adjustments described below (the Divestment). In connection with the Sale and Purchase Agreement, Bumi Resources also entered into the IndoCoal Shareholders Agreement with Tata. On 30 March 2007, as part of the Divestment transaction documents, KPC also entered into the longterm Tata Coal Sales Agreement. Bumi Resources completed the closing of the Divestment on 26 June 2007 (the Divestment Completion Date). Upon closing of the Divestment, Bumi Resources received net proceeds of approximately US$1,132.7 million from the sale of the shares of the IndoCoal Group Companies to Tata (after payment and allocation of expenses related to the Divestment). Under the terms of the Sale and Purchase Agreement, Bumi Resources was required to use a portion of the proceeds from the Divestment to redeem and repay all of the then outstanding Series 2006-2 Notes issued under the IndoCoal Securitisation Program. In accordance with this obligation and obligations under the terms of the Series 2006-2 Notes, Bumi Resources used US$740.2 million of the net proceeds from the Divestment and US$41.4 million in the debt service reserve account for the Series 2006-2 Notes to repay all of the outstanding Series 2006-2 Notes under the IndoCoal Securitisation Program. Upon the closing of the Divestment and repayment of the Series 2006-2 Notes, the Bumi Resources Group terminated the IndoCoal Securitisation Program and the related IndoCoal Securitisation Transaction Documents. Upon termination of the IndoCoal Securitisation Transaction Documents, Bumi Resources, Tata, BNY Mellon and Standard Chartered Bank, Singapore Branch, entered into the Cash Distribution Agreement to replace the terminated CAMA and to implement certain cash management and account administration arrangements in relation to the revenues of the IndoCoal Group Companies. As a result of the Divestment, on the Divestment Completion Date, the provisions of the IndoCoal Shareholders Agreement and the Tata Coal Sales Agreement came into force and, on 27 June 2007, the new boards of directors of KPC and Arutmin including representatives of Tata were constituted as required by the terms of the IndoCoal Shareholders Agreement.

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Other Coal Mining Operations In line with its strategy to expand its coal operations and production capabilities, the Bumi Resources Group acquired an interest in Fajar Sakti and Pendopo Energi and an equity interest in Darma Henwa, between December 2008 and January 2009. Fajar Sakti The Bumi Resources Group acquired a 50.0 per cent. effective interest in Fajar Sakti when it acquired 50.0 per cent. of the shares of Leap-Forward (which indirectly owns 99.9 per cent. of the shares of Fajar Sakti) in 2008. Fajar Sakti holds rights to mine for coal in three mining concession areas: Loa Ulung, Desa Gunung Sari and Desa Buluk Sen, all of which are located in Kutai Kertanegara, East Kalimantan, Indonesia. These three concession areas comprise approximately 9,053.5 hectares. Currently, only the Loa Ulung mine site is in production. The Directors believe Fajar Sakti is one of the few companies in Indonesia which is engaged in underground coal mining. Loa Ulung Mine Fajar Sakti holds rights under a KP from the local government for the Loa Ulung mine. This KP is valid until June 2018. The Loa Ulung concession area is 984.5 hectares. As of August 2009, the Loa Ulung mine had approximately 11.0 million tonnes of proved coal reserves. Fajar Sakti employs open pit mining as well as underground mining at Loa Ulung. In 2008, 2009 and 2010, Fajar Sakti produced 0.5 million, 0.4 million and 0.2 million gross tonnes of coal at its Loa Ulung mine, respectively. The Loa Ulung mine produces coal under the brand name Kutai coal, which has an average calorific value of approximately 6,538 kcal/kg. The following table sets forth the benchmark marketing specifications of the bituminous Kutai coal produced at the Loa Ulung mine determined on an air-dried basis: Quality Parameter Calorific value (kcal/kg) Total moisture gar basis (per cent.) Inherent moisture (per cent.) (approximation) Ash (per cent.) Volatile matter (per cent.) Fixed carbon (per cent.) (approximation) Total sulphur (per cent.) Hardgrove grindability index (ASTM) 6,500 to 6,700 13 8 8.0 38 to 42 44 0.8 to 1.3 Min 40

Fajar Sakti is required to pay the Indonesian Government a royalty of 6.0 per cent. to 7.0 per cent. for coal produced at Loa Ulung. Under the KP for the Loa Ulung mine, Fajar Sakti is required to pay dead rent, exploitation rent, a local government levy of US$0.50/tonne of coal and a placement fee on a reclamation guarantee. The local government has the right to cancel this KP if Fajar Sakti ceases mining activities at the mine. Fajar Sakti employs two methods of mining at the Loa Ulung mine. The first method is underground mining, which is used when the coal seam is too deep to permit surface mining, or where there are surface ownership or environmental restrictions. Underground mining is employed for coal reserves to a depth of 60 to 180 metres and access to the coal seam is achieved either through an inclined roadway when the coal seam is relatively shallow or by a vertical shaft for deeper mines. The second method is surface open pit mining, which is performed on coal surfaces up to 30 metres in depth. The coal is processed using a triple roll crusher which has a capacity of 100 tonnes per hour and a jaw crusher which has a capacity of 80 tonnes per hour. This process is required to produce a standard size of 50 mm of coal or any other size specified by the customer. Fajar Sakti has coal loading facilities which have a capacity of 500 tonnes per hour consisting of belt conveyors and two mooring docks in the Mahakam river. The coal is then loaded on to a 270 to 320 foot barge and towed by a tugboat directly to domestic customers or transhipped in open sea off Samarinda, East Kalimantan onto ships for customers in overseas markets. Fajar Saktis mining operations are affected by changes in weather conditions in particular, heavy rain and forest fires. During the rainy season, its concession areas

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typically experience heavy rain and occasional flooding, during which its production may decrease by approximately 10.0 per cent. to 20.0 per cent. Fajar Sakti has received a blue environmental rating from the provincial government of East Kalimantan, which indicates strong adherence to environmental and sustainable operations. Fajar Sakti has its own property, plant, machinery and equipment to support its operations. The trucks and other heavy equipment required for its operations are supplied by Bharat Earth Movers Limited of India and United Tractors, PT Alun and PT Intracopenta of Indonesia. In addition, Japan Coal and Energy Center provides advisory services for underground mining technology. Fajar Sakti currently sells all of its coal to a marketing affiliate of Glencore for export. Desa Gunung Sari Mine Guruh Putra holds a KP for the Desa Gunung Sari mining concession in Tabang, East Kalimantan, Indonesia. This KP is valid until 2027. The Desa Gunung Sari mine covers an area of 4,008 hectares and is currently under development. As of 28 February 2010, the Desa Gunung Sari mine, which contains sub-bituminous coal, had proved and probable recoverable reserves and proved and probable marketable reserves of 90.1 million tonnes. The Bumi Resources Group intends to employ open pit mining at the Desa Gunung Sari mine, using standard truck and excavator methods, which are common in Indonesia. Under this method, waste material such as overburden will be hauled to dump sites near the pits, while coal will be hauled approximately 4.0 kilometres from pit and placed in a ROM stockyard near port where it will be crushed to and placed in a nearby clean coal stockyard. The crushed coal will be loaded to small barges at a barge loading facility to be transported approximately 400.0 km to a transhipment point at Muara Jawa where it will be loaded to bulk carrier vessels. The following table sets forth the estimated benchmark marketing specifications of the sub-bituminous coal at the Desa Gunung Sari mine determined on an air-dried basis: Quality Parameter Calorific value (kcal/kg) Total moisture gar basis (per cent.) Inherent moisture (per cent.) (approximation) Ash (per cent.) (approximation) Volatile matter (per cent.) Fixed carbon (per cent.) (approximation) Total sulphur (per cent.) Hardgrove grindability index (ASTM)

5,058 40.9 18.2 7.4 38.1 36 0.2 Min 45

Under the KP, Guruh Putra is required to pay dead rent, exploitation rent, a local government levy of US$0.50/tonne and placement fees on a reclamation guarantee. The local government has the right to cancel the KP for the Desa Gunung Sari concession if Guruh Putra does not comply with the conditions under its KP. On 16 May 2006, Fajar Sakti entered into a cooperation agreement with three individuals (collectively, the GPB Shareholders). Under the terms of this cooperation agreement, upon the commercial operation of the Desa Gunung Sari mine, the coal production from this mine and the profits of Guruh Putra will be shared between Fajar Sakti and the GPB Shareholders on a 95.0 per cent. and 5.0 per cent. basis, respectively. This cooperation agreement also provides for matters such as the sharing of costs associated with the exploration and mining activities basis of the Desa Gunung Sari mine and the repayment by the GPB Shareholders of the sums advanced to them by Fajar Sakti. Desa Buluk Sen Mine Ade Putera, a wholly owned subsidiary of Fajar Sakti, holds the KP for the Desa Buluk Sen mining concession in Tabang, East Kalimantan, Indonesia. This KP is valid until January 2028. The Desa Buluk Sen mine covers an area of 4,061 hectares and is currently under development. As of 28 February 2010, the Desa Buluk Sen mine, which contains sub-bituminous coal, had proved and probable recoverable reserves and proved and probable marketable reserves of 179.1 million tonnes. The Bumi Resources Group intends to employ open pit mining at the Desa Buluk Sen mine as part of the operations of the Desa Gunung Sari mine.

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The following table sets forth the estimated benchmark marketing specifications of the sub-bituminous coal at the Desa Buluk Sen mine determined on an air-dried basis: Quality Parameter Calorific value (kcal/kg) Total moisture gar basis (per cent.) Inherent moisture (per cent.) (approximation) Ash (per cent.) (approximation) Volatile matter (per cent.) Fixed carbon (per cent.) (approximation) Total sulphur (per cent.) Hardgrove grindability index (ASTM)

5,100 to 5,600 38 18.0 5.0 38 to 42 37 0.2 to 0.5 Min 45

Under the KP, Ade Putera is required to pay dead rent, exploitation rent, a local government levy of US$0.50/tonne and placement fees on reclamation guarantee. The local government has the right to cancel the KP if Ade Putera does not comply with the conditions under its KP. Pendopo Energi Pendopo Energi holds rights under the Pendopo Energi CCOW, which is a third generation CCOW. Pendopo Energi entered into the CCOW with the Indonesian Government in 1997 to mine for coal in South Sumatra, Indonesia. The current concession area comprises approximately 17,840 hectares. The Pendopo Energi CCOW expires 30 years after the commencement of Pendopo Energis mining operations, which occurred on 5 May 2009, or 5 May 2039. The initial concession area under the Pendopo Energi CCOW covered approximately 97,330 hectares. On 20 November 1998, Pendopo Energi relinquished 24,330 hectares, or 25.0 per cent. of the initial concession area, to the Indonesian Government. In 2004, Pendopo Energi relinquished a further 55,160 hectares to the Indonesian Government. Under the terms of the Pendopo Energi CCOW, the Indonesian Government is entitled to 13.5 per cent. of the production of Pendopo Energi. The coal mines being developed by Pendopo Energi consist of two blocks the Sigoyang and Benuang blocks. These blocks are situated at a distance of approximately 140 kilometres from the Indonesian city of Palembang in South Sumatra. These mines contain lignite coal which is a coal low in calorific value (approximately 2,288 kcal/kg on a gar basis) with 60.0 per cent. moisture, 6.0 per cent. ash and 0.13 per cent. sulphur content. Pendopo Energis concessions are currently in the development stage. According to the Pendopo Coal Reserve Statement prepared by RMMC, the Sigoyang block had estimated proved and probable coal reserves and marketable reserves of approximately 145 million tonnes and 542 million tonnes, respectively, as of 19 August 2008. The Pendopo Energi concession areas can be accessed from the city of Palembang through a provincial road, a railway network and transport on the Lematang and Musi rivers. Pendopo Energi has recently received the approval from the Indonesian Government to commence operations at the Sigoyang block. Pendopo Energi is still carrying out development activities at the Benuang block. Pendopo Energi intends to carry out integrated mining at its mining blocks. It is also considering the feasibility of building a mine-mouth power plant, coal gasification plant and coal liquefaction plant, developing coal bed methane operations and producing upgraded brown coal at its mine site. Darma Henwa Darma Henwa is an Indonesian company engaged in contract mining with a diversified portfolio of mine operating agreements, including exclusive operating agreements to mine at the Bengalon mine operated by KPC and the Mulia and Asam Asam mines operated by Arutmin. The Bumi Resources Group acquired a 44.0 per cent. equity interest in Darma Henwa in December 2008. The Bumi Resources Groups effective interest in Darma Henwa was diluted to 28.8 per cent. as Zurich Assets, through which the Bumi Resources Group holds Darma Henwa, did not participate in Darma Henwas rights issue in the first quarter of 2010. Darma Henwa provides contracting expertise in heavy equipment, bulk earthworks, general mining, construction, civil engineering and plant maintenance. Darma Henwa also owns a controlling interest in Prove, an investment company which owns subsidiaries which are engaged in coal marketing, integrated mining services development and power generations. Prove is listed on the IDX. Darma Henwa also owns 11.0 per cent. of the equity 142

share capital of PCL, which owns 95.0 per cent. of the equity share capital of Pendopo Energi. Although the Bumi Resources Group does not intend to integrate Darma Henwas operations into the Bumi Resources Groups business, the Directors believe its acquisition of Darma Henwa will improve operational synergies and efficiencies between its operating mines and Darma Henwa. Darma Henwas customer base is concentrated in the coal mining sector in Indonesia. The largest customer of Darma Henwa is KPC. Transactions relating to revenue from KPC represented 71.3 per cent. and 65.4 per cent. of Darma Henwas total revenue for 2009 and the first nine months of 2010. Darma Henwas revenue from its contracts with Arutmin has increased since Bumi Resources Group began increasing production at the Asam Asam mine. Revenue from Arutmin constituted 6.4 per cent. and 14.0 per cent. of Darma Henwas total revenue for 2009 and the first nine months of 2010. On 26 January 2007, Coal Vista, a wholly owned subsidiary of Darma Henwa, entered into a marketing advisory agreement with Glencore Mauritius to provide certain marketing services to Glencore Mauritius in relation to the obligations of Glencore Mauritius under the Glencore marketing agreement with KPC. These services include performing (on behalf of Glencore Mauritius) the services required to be performed by Glencore Mauritius, arranging meetings between potential customers and the representatives of Glencore Mauritius and arranging sales to the designated customers under the Glencore marketing agreement. Under the terms of this marketing advisory agreement, Glencore Mauritius is required to pay to Coal Vista 3.0 per cent. of the net sales value of products sold under sales contracts to domestic customers and 2.0 per cent. of the net sales value of products sold under any other sales contracts. Coal Vista also entered into a consulting services deed dated 29 January 2007 with Pama to provide consulting and other services in relation to the performance by Pama of its obligations under the Bendili operating agreement for mining services with KPC, including making available personnel for providing services such as preparation of its monthly and annual budgets, long-term business plans, geological surveying, development drilling and interpretation and occupational health, safety, environment and community relations related services. The consulting fee payable under this agreement is calculated as, in each month, an amount equal to actual or stipulated overburden removed pursuant to the Bendili operating agreement for mining services multiplied by US$0.26. Darma Henwa owns and operates a range of equipment for mine excavation, mine hauling and mine support with approximately over 210 units. As of 31 December 2010, Darma Henwa employed approximately 1,635 employees in its operations. Under an undertaking agreement dated 23 December 2008 among BRI and Quest Corporation, who holds 20.0 per cent. of the shares in Zurich Assets, Bumi Resources agreed that Quest Corporation will have the right to control the voting power of the Darma Henwa shares held by Zurich Assets. BAPEPAM-LK Investigation In February 2009, BAPEPAM-LK announced an investigation into the acquisitions of Pendopo Energi and Fajar Sakti and the effective minority interest of the Bumi Resources Group in Darma Henwa. The purpose of its investigation was to investigate the purchase price the Bumi Resources Group agreed to pay for each of these share acquisitions and to determine whether these purchases constituted related party transactions or material transactions under prevailing Indonesian capital markets laws and BAPEPAM-LK regulations which would require shareholder approval and, in the case of a related party transaction, minority shareholder approval. BAPEPAM-LK appointed an independent auditor, MAPPI, to carry out an independent appraisal of the fair value of the shares the Bumi Resources Group acquired. In June 2009, BAPEPAM-LK determined that its acquisitions of the shares of PCL and Zurich Assets were made at fair value, based on the findings of MAPPI. However, BAPEPAM-LK determined that the Bumi Resources Group paid more than fair value for the shares of Leap-Forward for its acquisition of Fajar Sakti. As a result of this determination, the Bumi Resources Group re-negotiated the terms of its purchase of the LeapForward shares. Under the amended share purchase agreement, the Bumi Resources Group agreed to pay a lower purchase price for less Leap-Forward shares. The Bumi Resources Group has been informed by BAPEPAM-LK that it has closed its investigations into these acquisitions. In addition, the Bumi Resources Group has obtained an opinion of an independent Indonesian counsel that these acquisitions were not related party transactions under Indonesian law and prevailing BAPEPAM-LK regulations.

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Other Businesses Non-Coal Minerals Mining Businesses Reorganisation of its Non-Coal Minerals Mining Assets BRM In the second half of 2009 and the first half of 2010, the Bumi Resources Group reorganised its shareholding in subsidiaries and equity interests in associate companies that are engaged in non-coal minerals mining businesses by transferring them to its then wholly owned subsidiary, BRM. The Bumi Resources Group purchased BRM in July 2009 from an unrelated third-party for purposes of this reorganisation. As a result of this reorganisation, BRM now owns Citra Palu Minerals, Multi Capital (through which the Bumi Resources Group has an 18.0 per cent. effective interest in NNT), International Minerals Company LLC (through which the Bumi Resources Group holds Gorontalo Minerals), Calipso (through which the Bumi Resources Group holds Herald and an interest in Dairi Prima) and Lemington Investment Pte Ltd (through which the Bumi Resources Group holds interests in Bumi Mauritania and Konblo Bumi). BRM also owns Bumi Japan Co. Ltd., a marketing company that is engaged in the sales and marketing of non ferrous minerals and energy. BRM is now the intermediate holding company within the Bumi Resources Group for all of its non-coal minerals mining-related businesses. Funding of the exploration, development and production costs for those businesses are undertaken directly through BRM and its subsidiaries. The current funding requirements of the BRM group are met through intercompany advances from Bumi Resources and were met through the US$150.0 million Bright Ventures Facility that Calipso incurred on 26 May 2010. This loan was fully repaid in December 2010 in connection with the BRM IPO. In connection with the restructuring of the BRM group, on 30 December 2009, BRM issued to Bumi Resources a number of promissory notes, in exchange for various intercompany loans Bumi Resources had extended to BRMs subsidiaries. The promissory notes, which were convertible into the shares of BRM, had a term of one year. On 24 February 2010, the indebtedness under these notes was extinguished in exchange for equity shares in BRM. As of the date of this document, none of BRMs non-coal minerals mining concessions have commenced commercial operations and production. There can be no assurance that the exploration, development and construction programs of BRM at its various non-coal minerals mining concessions will be successful, or that BRM will be able to develop economically viable mines at those concessions. The Directors expect Bumi Mauritania to begin operations in 2011 while Herald Resources and Koublo Bumi are expected to begin operations in early 2012, albeit on a lesser scale. Multi Daerah Bersaing 24.0 per cent. Interest in PT Newmont Nusa Tenggara The Bumi Resources Group assisted MDB in financing its purchase of the NNT shares under a facility agreement dated 16 November 2009, under which the Bumi Resources Group, as lender, made available to MDB, as borrower, up to US$850 million in financing. Each loan under this facility agreement is scheduled to mature on 16 November 2014. Interest is payable each year, beginning one year from the date each loan is drawn, at the rate of 12.0 per cent. per annum. On 16 November 2009, MDB drew down part of this facility to finance the purchase of the first 10.0 per cent. of the NNT shares. The Bumi Resources Group used the net proceeds of the 12%. Guaranteed Senior Secured Notes, together with available cash on hand, to make these funds available to MDB. Bumi Resources Group used part of the net proceeds of the 5 per cent. Convertible Bonds and other indebtedness it incurred from third-party creditors to provide funds to MDB for its acquisition of the remaining 24.0 per cent. of the NNT shares. In March 2010, MDB entered into the 2010 MDB-CS Facility to refinance certain indebtedness Bumi Resources incurred to fund this acquisition. As of 30 December 2010, the amortised cost of loans outstanding under the 2010 MDB-CS Facility was US$305 million. On 23 June 2010, Bumi Resources entered into a conditional sale and purchase of receivables agreement with BRM, under which BRM purchased Bumi Resources receivables. Bumi Resources has agreed to accept an issuance by BRM of a mandatory convertible note in principal amount of Rp.4,959.0 billion on 15 November 2010. On 21 October 2010, the conditional sale and purchase of receivables agreement was amended to make the transfer of receivables to BRM subject to further conditions, including BRM obtaining the approval of its shareholders for the issuance of the mandatory convertible note and the initial public offering of its shares, Bumi Resources and BRM obtaining other corporate approvals and the subscription of the mandatory convertible note being executed. The conversion date of the convertible note into conversion shares of BRM will occur only once three months after the date of the listing of BRMs shares, i.e. on 9 March 2011, and the conversion price will be at 5 per cent. above the BRM IPO Price. 144

Herald Resources Dairi Project (Dairi Prima) Herald is an Australian company engaged in mineral exploration and development, which was listed on the Australian Stock Exchange. The Bumi Resources Group acquired a majority interest in Herald in July 2008, through Calipso, to diversify its business. In December 2009, after acquiring 98.4 per cent. of Herald, the Bumi Resources Group completed the compulsory acquisition of all Herald shares not already owned by the Bumi Resources Group and de-listed Herald from the Australian Stock Exchange. Heralds operations comprise the evaluation and development of minerals, such as zinc, lead, silver and gold, and associated investments, predominately within Indonesia and Australia. Herald owns interests in several mineral projects, but its main asset is an 80.0 per cent. interest in the Dairi Project, which is a zinc and lead concession located in the Dairi Regency of the Province of North Sumatra in Indonesia. The Directors believe the Dairi Project potentially contains one of the highest grade sulphide zinc and lead deposits in the world. The rights to explore and develop the Dairi Project are held by Dairi Prima under a seventh generation mining contract of work granted by the Indonesian Government. Dairi Prima is owned through the Dairi Joint Venture between Herald and its Indonesian partner, Antam. Herald and Antam hold 80.0 per cent. and 20.0 per cent., respectively, of the shares in the Dairi Joint Venture. The Dairi Project concession term is granted for an initial period of 30 years after production commences. In October 2010, Dairi Prima received a decision letter from the Ministry of Forestry of the Republic Indonesia that granted Dairi Prima a land-use permit to undertake exploration of gold and other supplemental minerals in a protected forest (kawasan hutang lindung dan hutan produksi terbatas) in Dairi and Pakpak Bharat, North Sumatera province, with on area of approximately 23,000 hectares. The Bumi Resources Group expects production at the Dairi Project to commence two years from the start of production, targeting 115,000 tonnes of zinc and 60,000 tonnes of lead per annum. BRM intends to develop and commercially produce from the Anjing Hitam iron ore deposit before developing other deposits within the concession. BRM has budgeted approximately US$156.2 million for construction and to bring the mine to production, which it has partially raised from its initial public offering in December 2010. BRM also expects to incur some expenditure for the drilling and exploration of the Lae Jehe deposit, although BRM does not intend to develop this deposit until the seventh year after the Anjing Hitam commences commercial production. In addition to the Dairi Project, Herald holds equity interests in several other gold and base metals projects, all of which are currently in the exploration phase of development. As of 30 September 2010, the Bumi Resources Group had recognised US$546.1 million in exploration costs in relation to the Dairi Project. Gorontalo Minerals Concession BRM owns an 80.0 per cent. interest in Gorontalo Minerals through International Minerals Company. Gorontalo Minerals has rights to a 36,070 hectare mining concession, divided in two blocks, in northern Sulawesi. Based on exploration activities to date, four copper and gold systems and five gold, silver and copper systems have been identified at the concession. The Bumi Resources Group is working on advanced exploration and feasibility studies for the development of a mine at the Gorontalo Minerals concession. Approximately one-half of the Gorontalo Minerals concession has been designated as a protected forest by the Indonesian Ministry of Forestry, after the mining concession was granted. This prohibited the Bumi Resources Group from mining in those areas. In the meantime, the Bumi Resources Group has obtained a permit from the Indonesian Ministry of Forestry to start exploration and feasibility studies. Based on this permit, Gorontalo Minerals is furthermore entitled to start exploration at the mine sites of Cabang Kiri and Sungai Hak. The Bumi Resources Group intends to continue the drilling and exploration program at the Gorontalo Minerals concession into 2011 and continue work on its feasibility study for this project. It has hired a consultant to assess the environmental impact of this project. Citra Palu Minerals Concession The Bumi Resources Group purchased Citra Palu in December 2005 from Newcrest. Citra Palu has rights to a 95,496 hectare mining concession, divided into multiple blocks, in central Sulawesi. Under the terms of the agreement under which the Bumi Resources Group purchased Citra Palu, the Bumi Resources Group is required to pay Newcrest a 2.0 per cent. royalty on gold produced in the concession area.

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The Citra Palu concession area is in the preliminary exploration stages. Exploration activities have indicated the presence of a number of gold systems at the concession, including the Poboya area where the principal drilling program has taken place. As the Poboya area is a protected forest, the Bumi Resources Group will not be able to conduct mining activities in the area without further approvals. Currently, Citra Palu is in the process of obtaining special exploration permits from the Indonesian Ministry of Forestry. The Bumi Resources Group will continue its efforts to obtain the requisite permit for Citra Palu in order to be able to continue its drilling and exploration program, conduct feasibility studies, estimate the gold reserves and, if the mine proves to be economically feasible, develop a mine plan for the concession. The Bumi Resources Group spent approximately US$7.8 million in 2008, US$6.5 million in 2009 and US$3.0 million in 2010 and based on current estimates, BRM expects to spend US$14.0 million in 2011 to continue work on the feasibility studies and exploration program for the Citra Palu project. As of 30 September 2010, the Bumi Resources Group had recognised US$24.8 million in exploration costs in relation to the Citra Palu project. Mineral Exploration Activities in Mauritania BRM owns 60.0 per cent. in the joint venture company Bumi Mauritania, which was established to study the feasibility of developing an iron ore mine in Mauritania, Africa. Bumi Mauritania holds four iron ore leases the Sfariat-Zednes area and the Tamagot, Tamagot West and Tamagot South areas from the Mauritanian government to conducted survey work at these sites. The Bumi Resources Group is assessing the extent of investment and funding necessary to explore and develop the Sfariat-Zednes area and the Tamagot areas. In addition, the Bumi Resources Group has three permit applications awaiting government approval for gold, diamond and phosphate exploration in south eastern Mauritania, although the Bumi Resources Group may have difficulty developing one of the Tamagot prospects, as another party owns the exploration rights for gold in that area. The Bumi Resources Group spent US$10 million in 2009 and US$5 million in the first nine months of 2010 and based on current estimates, BRM expects to spend US$30.0 million in 2011 for feasibility studies, drilling and other exploration costs at the Bumi Mauritania concession areas. As of 30 September 2010, the Bumi Resources Group had recognised US$181 million in exploration costs in relation to the Bumi Mauritania project. Exploration Activities in Liberia BRM owns 94.1 per cent. of Konblo Bumi, which was established in November 2007 in Liberia. Konblo Bumi holds seven exploration licences to explore for gold, diamonds and base metals. Two of these licences were awarded in 2008 while five were awarded in January 2010. The licences are for three years, each with two-year extensions, subject to Konblo Bumi being in compliance with its obligations. The areas for which the licences have been granted are located along the borders of Liberia and Sierra Leone and cover a total area of 3,610 square kilometres. These projects are at early stages of exploration and Konblo Bumi intends to undertake active exploration programs on these projects in 2010. BRM expects to spend approximately US$30.0 million in 2011 for exploration activities with Trinity Business Corporation. As of September 30, 2010, the Bumi Resources Group had recognised US$16 million in exploration costs in relation to the Liberia project. Oil and Gas Business Through its subsidiary Gallo Oil, the Bumi Resources Group currently operates in two oil concessions in Yemen; namely, Block R2 (East Al Maber) and Block 13 (Al Armah), wholly focused on exploration activity. On 28 December 2009, the Bumi Resources Group entered into a share sale and purchase agreement to sell 20.0 per cent. of Gallo Oil to Florenceville for US$290 million. The Bumi Resources Group has obtained the requisite regulatory approvals in Yemen for the completion of this sale, which the Directors expect will occur at the end of April 2011. Florenceville has committed to bear 20 per cent. of Gallo Oils working capital with effect from the signing of the share sale and purchase agreement. Upon the completion of this divestment, the full amount of the purchase price will become payable to the Bumi Resources Group. It will then own 80.0 per cent. of the shares of Gallo Oil. The Bumi Resources Group expects to spend approximately US$33.0 million in 2011 for oil exploration activities. As of 30 September 2010, Bumi Resources had recognised US$362 million in exploration costs in relation to oil and gas exploration in Yemen.

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Al Armah (Block 13) The Al Armah contract covers an area of approximately 7,417 square kilometres on the eastern part of the Hadramaut area which was part of the concession granted to Petrleo Brasileiro S.A., the Brazilian oil company, that had been returned to the government of Yemen in 1987. Gallo Oil operates and holds a 100.0 per cent. equity interest of the Al Armah block. The Bumi Resources Group is in the process of acquiring seismic data covering 520 square kilometres to confirm the feasibility of drilling for oil. In 2008, the Bumi Resources Group drilled one exploration well and encountered gas with high pressure and high temperature. However, further drilling and evaluation is required to determine the quantity and feasibility of gas production from this well, which is currently under progress. East Al Maber (Block R2) The East Al Maber contract area covers approximately 2,139 square kilometres. Gallo Oil holds a 50.0 per cent. equity interest in and operates the East Al Maber block. Seismic interpretations have indicated the presence of at least eight drillable prospects. The Bumi Resources Group has drilled six exploration wells, four of which showed hydrocarbon potential. Production tests at this prospect have demonstrated that there is oil accumulation in this location although some of these wells do not contain a sufficient amount of hydrocarbon to make drilling commercially feasible. Gallo Oil intends to continue exploring for oil in other locations in 2011. Other Business Activities Interest in Australian Coal Seam Gas Company The Bumi Resources Group currently owns a 20.2 per cent. equity interest in WestSide, an Australian new generation energy company seeking to develop and exploit coal seam gas resources from north eastern Australia for industrial and other customers within Australia. WestSides focus is on developing commercial gas production from areas where gas has been demonstrated to exist rather than to operate as an exploration company. WestSide has been listed on the Australian Stock Exchange since January 2007. The Bumi Resources Group purchased this investment in WestSide to develop a strategic partnership with WestSide management for the development and exploitation of coal seam gas resources at its mines and to gain access to the technology and expertise necessary to exploit those gas resources. On 11 May 2007, KPC and Bumi Resources signed a heads of agreement with WestSide for the development and exploitation of coal seam gas resources at the KPC concession. On 3 September 2007, Arutmin and Bumi Resources signed a similar heads of agreement with WestSide. In February 2008, the Bumi Resources Group and WestSide established Seamgas as the project company for the WestSide project. The Bumi Resources Group has determined a large quantity of coal bed methane at the KPC mine sites. It intends to use any coal seam gas resources extracted at its coal mining concessions for its internal operations, including operation of its onsite power plants. The Bumi Resources Group and WestSide are currently in discussions with BP MIGAS, the Indonesian stateowned oil and gas regulatory authority, with respect to the extraction of the methane. The Bumi Resources Group expects to achieve significant cost savings by using coal bed methane to power its on-site power plants instead of diesel or coal. Pending its discussions with BP MIGAS, The Bumi Resources Group does not intend to incur significant costs in this project. There can be no assurance that the coal seam gas drilling activities at KPCs and Arutmins mines will be successful, that the Bumi Resources Group will be able to obtain the required approvals to extract and develop economically viable coal seam gas mines, or that the Bumi Resources Group will be able to realise the anticipated benefits of developing and exploiting coal seam gas resources. US$300.0 Million Loan to Mutiara On 2 November 2009, the Bumi Resources Group entered into a US$300.0 million loan agreement with Mutiara, under which the Bumi Resources Group agreed to grant the Mutiara Loan to Mutiara in connection with the acquisition by Mutiara of an indirect 90.0 per cent. interest in Berau Coal. Mutiara is a 99.6 per cent.-owned subsidiary of Recapital. The Mutiara Loan is unsecured and matures on the fifth business day of November 2015. The Bumi Resources Group has the right to require the repayment of the Mutiara Loan (together with accrued interest and other amounts due and payable) within three months of a written notice to Mutiara in an event of default. Interest on this loan accrues at the rate of 12.0 per cent. per annum and is payable 147

quarterly in arrears on the last business day of March, June, September and December of each year. In addition, when the loan is prepaid in full, Mutiara must pay a premium such that the Bumi Resources Group receives an internal rate of return of 19.0 per cent. In the second and third quarter of 2010, the Bumi Resources Group agreed to the partial prepayment by Mutiara of this loan. As of the date of this document, the outstanding principal amount under this loan is US$221.6 million. Mutiara has agreed to use the US$100million remaining balance of the cash consideration to be received under the Berau Share Purchase Agreement at the completion of the Berau Resources Transaction to repay part of the Mutiara Loan. See Overview in Part I The Acquisition. Under the terms of the Mutiara Loan, Mutiara agreed to procure that Berau Coal grant to the Bumi Resources Group rights to market coal that was not subject to Berau Coals then-existing marketing agreements. Subsequent to Mutiaras acquisition of Berau Coal, the Bumi Resources Group entered into negotiations with Maple, which holds the worldwide (excluding Japan) marketing rights to market the coal products of Berau Coal not falling within the scope of the existing marketing agreements, under an agreement dated 30 December 2009. The Bumi Resources Group has entered into a subagency agreement with Maple under which Maple appointed it as their sub-agent with respect to all rights that Maple holds under its marketing agreement with Berau Coal. As of the date of this document, the Bumi Resources Group has agreed with the coal marketing committee of Berau Coal to appoint Noble Resources Pte Ltd. Dispositions of Non-Core Businesses In the fourth quarter of 2009 and in the first half of 2010, the Bumi Resources Group entered into three agreements for the dispositions of certain of its non-core businesses. The Bumi Resources Group has decided to divest its interests in these non-core businesses to enable the Bumi Resources Group to increase its managements focus on implementing its business strategies with respect to its core business of coal and non-coal mining, as the Bumi Resources Group continues its efforts to expand production, increase productivity and reduce costs. Enercorp In 2003, the Bumi Resources Group acquired a 60.0 per cent. ownership interest in Enercorp, which was responsible for the marketing of coal produced by its Senakin, Satui, Mulia, Asam Asam and Batulicin mines in the Indonesian domestic market. In addition to marketing some of its coal in the domestic market, Enercorp may also market coal from other non-related producers. The purpose of this acquisition was to consolidate its energy and resource marketing efforts as well as to establish a trading house to gain access to the domestic market. Enercorps coal buyers are coal user industries consisting of cement companies and power plants, as well as other middle and large scale industrial companies involved in chemicals, mining and textiles, among other coal buyers. On 29 December 2006, the Bumi Resources Group sold 10.0 per cent. of its equity interest in Enercorp to Prove, a subsidiary of Darma Henwa, for cash consideration of US$0.4 million based on the book value of Enercorp, thereby reducing its shareholding in Enercorp to 50.0 per cent. On 30 December 2009, the Bumi Resources Group entered into a share sale and purchase agreement to sell all of the remaining shares it owns, comprising 50.0 per cent. of the equity interest in, Enercorp to Thionville Financier Ltd. for US$90 million. The Bumi Resources Group has received the full consideration for this share sale. Mitratama On 13 December 2006, the Bumi Resources Group purchased all of the shares of Mitratama, an Indonesian company, for a nominal amount, based on certain arrangements set out in the technical services agreement dated 20 December 2004 among the Bumi Resources Group, PT Dian Bahari Sejati and PT Amerasia International related to the operations of Mitratama. The Bumi Resources Group acquired Mitratama in order to secure access to the Bengalon port for the shipment of the Bumi Resources Groups coal produced at its Bengalon mine. In April 2008, Bumi Resources transferred the ownership of the coal crushing, handling and storage facility at KPCs Sangatta mine to Mitratama. The Bumi Resources Group has undertaken the development of port facilities at its Arutmin mines through Mitratama. The Asam Asam port was completed in the second half of 2009 and ownership of this facility has transferred to Mitratama. On 31 March 2010, the Bumi Resources Group entered into a share sale and purchase agreement to sell 99.8 per cent. of the shares that the Bumi Resources Group owned in Mitratama to PT Cahaya Pratama Lestari for US$120.0 million. The share sale and purchase agreement was amended on 25 June

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2010 to reduce the sale share to 70.0 per cent. while increasing the sales price to US$190.0 million. Subsequently, on 31 August 2010, the Bumi Resources Group terminated this agreement and entered into a share purchase agreement with PT Nusantara Pratama Indah, for the sale of the same 70.0 per cent. of the shares of Mitratama on the same economic terms. The Bumi Resources Group received the full consideration for this share sale in December 2010. Notwithstanding the disposal of the Bumi Resources Groups majority stake in Mitratama, the Bumi Resources Group intends to continue to undertake the development of port facilities at its mines through Mitratama, which holds the necessary port permits. The Bumi Resources Groups rights to use the ports and facilities owned by Mitratama are governed under long-term rental agreements. For a description of these agreements, see Rental Agreements with Mitratama under Paragraph 18 The Bumi Resources Groups Material Agreements of Part XII Additional Information.

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PART V INFORMATION ON THE BERAU GROUP

Corporate History Upon Completion, Berau will be 75.0 per cent. owned by Vallar. Berau was established in September 2005 as a limited liability company incorporated in Indonesia and is currently 90.257 per cent. owned by Recapital, with the remaining shares in Berau owned by public and minority shareholders. Recapital acquired a 99.0 per cent. interest in Berau from Messrs. Rizal Risjad (65.0 per cent.), Handy Purnomo Soetedjo (20.0 per cent.) and Garibaldi Thohir (15.0 per cent.) in December 2009. Through intermediary holding companies, Berau owns 90.0 per cent. of Berau Coal. Sojitz, a Japanese corporation, directly owns the remaining 10.0 per cent. of Berau Coal. Berau Coal was established in 1983 to survey, explore, develop and mine coal and to transport, store, market, sell and export coal in the area that was to become its concession area. In 1983, Berau Coal entered into a CCOW with PT Perusahaan Negara Tambang Batubara (PNTB), a state-owned company that had the authority to perform coal mining operations. PNTBs rights and obligations were subsequently transferred to PT Perusahaan Negara Tambang Batubara. In 1997, the CCOW was further amended to transfer PT Perusahaan Negara Tambang Batubaras rights and obligations to the Indonesian Government. Pursuant to the CCOW, Berau Coal obtained a permit to conduct coal mining operations in a concession area covering 487,217 hectares in East Kalimantan, Indonesia. After conducting mining feasibility studies, Berau Coal voluntarily relinquished parts of the concession area, leaving it with a 118,400-hectare concession area for coal mining. Under the CCOW, Berau Coal is obligated to explore and exploit coal resources in its concession area. Berau Coal was granted an exclusive right to mine in six exploration areas: Lati, Binungan, Sambarata, Kelay, Gurimbang and Punan. As of 31 March 2010, Berau Coal has only used approximately 5,196 hectares of its concession area for mining activities. On 19 August 2010, Berau completed its initial public offering and its shares were listed on the IDX. Organisational Structure Beraus organisational structure is set forth in the chart below:
PT Berau Coal Energy Tbk (100%) Berau Capital Resources Pte. Ltd (Singapore) (100%) (99.9%) Seacoast Offshore Inc (British Virgin Islands) (100%) Maple Holdings Ltd (Labuan) Winchester Investment Holdings Plc (Seychelles) (99.99%) Aries Investments Limited (Malta)

(0.01%)

PT Armadian Tritunggal (12.8%) (87.2%)

Sojitz Corporation (Japan) (10%) (51%)

Rognar Holdings BV (The Netherlands)

(39%)

PT Berau Coal (100%) Empire Capital (Singapore)

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Overview Berau is a holding company with a 90.0 per cent. interest in Berau Coal, the fifth largest coal producer in Indonesia in terms of production volume in the first eleven months of 2010, according to statistics released by the MEMR. Berau Coal is engaged in the business of open-cut mining of coal from its concession area in East Kalimantan, Indonesia, where it holds coal mining rights until 26 April 2025. Berau Coal currently operates three active mining areas in Lati, Binungan and Sambarata, where open cut coal reserves were estimated to be 346 million tonnes as of 31 December 2009, of which 146 million tonnes are of the proved category and 200 million tonnes are of the probable category. Berau Coals concession area of approximately 118,400 hectares also contains three other reserve locations, namely Kelay, Gurimbang and Punan. Berau Coal supplies coal, both directly and through marketing agents, exclusively to Asian markets, including Indonesia. Its customers are mainly utility companies and coal trading companies that purchase coal from it for resale. In recent years, Berau Coal has derived approximately 40 per cent. of its total sales revenues from domestic sales and approximately 60 per cent. of its total sales revenues from international sales. Berau Coal exports to customers in China, Hong Kong, India, Japan, South Korea, Taiwan, the Philippines and Thailand. In the nine months ended 30 September 2010 and the year ended 31 December 2010, approximately 66 per cent. and 69 per cent. of the Berau Groups total revenues were from export sales to these customers, respectively. Berau Coal produces thermal coal at its three mining locations and blends them in order to adjust the overall quality grade of the coal. It markets the coal under four brand names Mahoni, Mahoni-B, Agathis and Sungkai, with calorific values ranging from 5,000 kcal/kg to 5,600 kcal/kg (on a gross as received basis) and appropriate levels of ash and sulphur for use in coal-fired power plants in Indonesia and many other Asian countries. In 2007, 2008, 2009 and 2010, Berau Coal produced 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes and 17.4 million tonnes of coal, respectively. As of 1 January 2011, 41.5 per cent. of Berau Coals budgeted sales of 20.0 million tonnes in 2011 were contracted at an average price of US$70.2/tonne (based on an international price index assumption at US$100.0/tonne) and commitments for a further 40 per cent. of the 2011 budgeted sales had been received. Berau Coal began producing coal commercially from the Lati and Binungan mines in 1995 and the Sambarata mine in 2001. Lati is the largest of its three active mining areas and accounted for approximately 56.8 per cent. of its production as of 30 September 2010. Sambarata has the highest quality coal of all three mining areas in terms of calorific value. The three mining areas are similar in their operations but are independent, with their own separate coal terminals and barge lines. Berau Coal expects to commence commercial coal production in Gurimbang in 2012 and Kelay in 2013. Berau Coal subcontracts all of its mining, barging and drilling and blasting operations, which allows it to minimise capital expenditures and working capital requirements and focus on exploration, mine planning, supervision and sales and marketing. Berau Coal works closely with its two major contractors, BUMA and SIS, each of which undertakes land clearing, overburden removal, coal excavation, hauling activities and road maintenance. Regulation 28/2009 requires that coal concession holders conduct coal-digging, extraction and loading activities themselves rather than through subcontractors but allows mining contractors to perform overburden removal and the transport of overburden and coal. Therefore, Berau Coal may be required to amend its existing mining agreements with mining contractors under which those mining contractors undertake coal-digging, extraction and loading activities prior to 30 September 2012 to the extent that Regulation 28/2009 remains in force in its current form. Berau Coal uses multiple contractors for each of its other operations, such as barging, coal quality analysis and transhipping. Once the coal is mined, crushed and stockpiled, contractors barge the loads to a transhipment area at Muara Pantai in the Sulawesi sea located approximately 50 kilometres to 100 kilometres from the ports at Lati, Suaran and Sambarata. Higher energy coal from the Sambarata mine is blended at Muara Pantai with coal from the Lati or Binungan mines, depending on the quality grade requirements of the shipment. In December 2009, Recapital acquired approximately a 99.0 per cent. interest in Berau. Recapital has brought to Berau Coal new members for its board of commissioners, as well as a new President Director and a new Finance Director, while maintaining the existing personnel at the operational level with an aim to improve production levels, increase exploration activities and expand Berau Coals infrastructure. Actions taken since the acquisition include the revision of expense policies that have been 151

implemented, to add discipline to how Berau Coal uses financial resources, negotiates and approves contracts, and manages department level budgets. Competitive Strengths Berau Coals principal competitive strengths are the following: Sizable and long-standing operations with a consistent track record of production growth Berau Coal was established in 1983, and its CCOW gives it a right to mine coal for a 30-year commercial production stage within its concession area through 26 April 2025. Berau Coal was the fifth largest coal producer in Indonesia in terms of production volume in the first eleven months of 2010, according to statistics released by the MEMR, with production levels of 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes and 12.23 million tonnes of coal in 2007, 2008, 2009 and the nine months ended 30 September 2010, respectively. Between 2007 and 2009, Berau Coal increased its coal production at a compound annual growth rate of 10.1 per cent. mainly due to the growing demand for its coal, which was in line with the increased overall global demand for coal, and significant operational advantages of its mines, including its supporting logistics infrastructure. Well-positioned to capture growth opportunities in thermal coal markets in Asia Global thermal coal demand has been driven by industrial growth, with the growth in electricity consumption contributing to the demand for coal-fired power generation, particularly in China, India and elsewhere in Southeast Asia, including in Indonesia. According to data reported by ABARE, Asia is the worlds largest importer of internationally traded thermal coal, with 61.3 per cent. of worldwide import demand in 2009. Asia is also the worlds largest exporter of internationally traded thermal coal, with 34.6 per cent. of worldwide export supply in 2009. Global thermal coal demand has historically been driven by coal-fired power generation. According to the BP Statistical Review of World Energy for June 2010, coal has been the fastest growing in the world from 2002 to 2008, with the exception of the hydroelectric power consumption growth which was higher than the coal in 2008. Although all fuels (except hydroelectric power) experienced a consumption decrease in 2009, coal experienced the lowest decrease. Coal provides approximately 41 per cent. of the worlds electricity, according to a report published by the World Coal Institute in 2009. The Directors believe that Berau Coal is well-positioned to capitalise on the growing global demand for thermal coal due to its significant reserves of thermal coal and its planned increase in its production levels. As of 31 December 2009, Berau Coals open cut coal reserves were estimated to be 346 million tonnes, of which 146 million tonnes are of the proved category and 200 million tonnes are of the probable category. In addition, coal produced by Berau Coal contains comparable levels of ash, sulphur and other trace materials of other coal traded in the global markets and produces relatively low levels of nitrogen during combustion. The sulphur level of its coal is close to 0.9 per cent. which is comparable to competing coal from Australia and China. Low-cost coal producer Due to its location, Indonesian coal producers are well-positioned to supply comparable quality coal at a freight cost advantage to its competitors in the region. According to data published by ABARE, an Australian government economic research agency, Indonesia supplied 27.4 per cent. of internationally traded thermal coal and ranked as the worlds largest thermal coal exporting country in 2009. Being an Indonesian coal producer, Berau Coal has a geographical advantage as it is located in close proximity to China, India, Japan and other key Asian coal importers and is therefore able to supply coal to these markets at lower freight costs compared to other coal producers in Australia and South Africa. Berau Coals operating strategy and the characteristics and location of its mines enable it to produce coal at attractive cash cost levels. For example, Berau Coals mines generally have seams of coal located close to the earths surface, thereby making it less costly to extract. In addition, the three mines that Berau Coal operates are in close proximity to the Segah and Berau rivers and the Sulawesi sea, thereby enabling it to transport coal to the ports by trucks and to the transhipment point using barges. This allows Berau Coal to benefit from lower costs of transportation in its operations. Berau Coals close proximity to multiple ports and barging facilities compared to its competitors and its effective control of the supply chain from coal extraction to ship-loading have resulted in significant supply chain flexibility and production efficiencies.

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Strong customer relationships and a high-quality customer base Berau Coal has established strong positions in the markets for its products with a long history of relationship with its top ten customers averaging more than seven years. As of 1 January 2011, Berau Coal had already contracted 47.9 per cent. of its budgeted sales of 20.0 million tonnes for 2011 at an assumed average price of approximately US$71.0/tonne and had received commitments in respect of a further 40 per cent. of the budgeted 2011 sales volume which will be priced at a later date. Berau Coal is well positioned as a supplier of coal products for established utility companies both in Indonesia and other Asian countries. As of 30 September 2010, Berau Coal had 24 customers located in China, Hong Kong, India, Indonesia, Japan, South Korea, Taiwan, Thailand and the Philippines. 63 per cent., 58 per cent., 62 per cent. and 66 per cent. of Berau Coals total revenues were from exports sales to customers in Asia in 2007, 2008, 2009 and the nine months ended 30 September 2010, respectively. Most of Berau Coals coal exports are sold, both directly and indirectly through marketing agents, to utility companies, and the rest are sold through trading companies. Because Berau Coal supplies coal to customers located in diverse geographic locations, it has been able to diversify the sources of its revenue stream and reduce country and region specific macro-economic risks. The Directors believe that Berau Coals products are well suited to the needs of domestic customers and hence receive significant domestic demand. Berau Coal derived 37 per cent., 42 per cent., 38 per cent. and 34 per cent. of its total revenue from domestic customers in 2007, 2008, 2009 and the nine months ended 30 September 2010, respectively. The Directors believe that the significant domestic sales would help mitigate risks from the imposition of any new laws requiring Indonesian coal producers to sell a higher percentage of their production in the domestic market. Experienced management team Berau Coals management team has demonstrated a successful track record of expanding its operations and increasing sales revenues, and has built Berau Coals mining and exploration business to its current status as the fifth largest coal producer in Indonesia by production volume over the first eleven months of 2010, according to statistics released by the MEMR. Berau Coals senior management is able to draw on its years of experience in the coal industry to improve its products and sales. Berau Coals team also has long-standing relationships with many of its major customers and third-party contractors. Strategy The main elements of Berau Coals business strategy are the following: Increase coal production at an accelerating rate by expanding infrastructure while managing costs Berau Coal has steadily increased production, with annual production levels of 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes and 17.4 million tonnes of coal in 2007, 2008, 2009 and 2010, respectively. It has also been able to expand its production capacity while keeping costs low. In 2007, Berau Coal completed the most recent phase of the expansion of its mining and logistics operations and increased its capacity to process, handle and transport coal, or production capacity, to 16.5 million tonnes per annum by upgrading its crushers at the Lati and Binungan coal handling facilities to increase their speed. In 2008, Berau Coal further increased its production capacity to 20.0 million tonnes per annum by further increasing the speed of the existing crushers and by re-assembling and activating a previously unutilised crusher that had been dismantled at the Binungan coal handling facilities. Berau Coal plans to increase its production to 30.0 million tonnes per annum by 2014. Berau Coal plans to enhance its collaborative relationships with its mining, transportation and barging contractors to achieve scheduled production targets and reduce costs. By using contract mining services, Berau Coal benefits from its contractors experience and know-how, encourages cost competition among its contractors and reduces the need to fund significant capital expenditures. Berau Coal will seek to continue to increase production levels and reduce production costs, including through greater use of its handling and coal crushing facilities and increasing output from its contractors. To reach its target of 30.0 million tonnes of coal per annum by 2014, Berau Coal has planned total capital expenditures of US$106.3 million in 2011 and US$304.9 million between 2012 and 2014 to expand its infrastructure to support such a production level. As of 31 December 2010, Berau Coals mining infrastructure supported a production capacity of approximately 22.0 million tonnes of coal per

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annum. While such capacity is sufficient to support its target production of approximately 20.4 million tonnes in 2011, Berau Coal has planned capital expenditures of approximately US$106.3 million in 2011 to increase its production capacity to 24.0 million tonnes per annum by the end of 2011 in order to support additional coal production at its existing mines. These capital expenditures are expected to be made for operational improvements, including the upgrading of existing coal handling facilities such as its barge loaders and crushers at the Lati coal handling facilities, and the construction of additional infrastructure, including a new stockpile and a new crushing line which Berau Coal expects to complete by the end of May 2011. Berau Coal furthermore has planned capital expenditures for 2011 of approximately US$11.4 million for land improvement measures, US$21.9 million for routine operating investments and US$37.7 million for exploration and development activities. Berau Coal expects to work closely with its mining contractors to ensure that its production capacity will be increased in line with its plans to expand production levels at its existing mines and to begin commercial operations at the Gurimbang and Kelay mines by 2012 and 2013, respectively, and to continue exploration activities in other parts of Kelay. Increase coal reserves by using internally generated cash flows from existing mines to explore for new reserves and enhance exploration efforts Berau Coal also intends to use cash generated internally from existing mines to fund intensive exploration efforts and mine development activities in its concession area and develop new mines. Berau Coal intends to intensify exploration activities in its existing mines and other areas in its concession area. Currently, Berau Coal has commenced exploration activities in the eastern area of Sambarata Block B, and new seams in Binungan Block 7, Binungan Block Parapatan and Binungan Block 8. In addition, Berau Coal has commenced exploration activities at new seams in the northern part of the Lati mine and Binungan Block 9 in July 2009 and plans to commence exploration of Sambarata Block B and Block C in 2011. Berau Coal is targeting to complete all exploration activities of its concession area by the end of 2012 as this is expected to enable it to plan its mining operations more efficiently to achieve its target production and to achieve high sustainable coal production volumes and growth. Further, it is planning to commence commercial coal production in Gurimbang and Kelay in 2012 and 2013, respectively. Maintain core customers in Berau Coals domestic and export markets and secure orders from long-term customers for the majority of Berau Coals production Berau Coal has strong relationships with its existing customers, particularly well-established independent power producers and PLN, Indonesias state-owned utility company. Berau Coal aims to identify and target customers who will benefit most from its products advantages to achieve a strategic mix of long-term and short-term contracts generally with fixed-priced structures with a good balance between customers in the domestic and export markets. Berau Coal reviews the cost and revenue structures of each of its customers, taking into account the customers procurement policy, logistics management and sensitivity to coal price. Its management and dedicated sales team also focuses on customers whom it believes have good prospects for generating growth and profitability, such as existing customers whose purchases from Berau Coal represent only a small percentage of the customers total requirements. Berau Coal intends to build on existing relationships with long-term customers such that orders from long-term customers form the basis for the majority of Berau Coals production. Consider strategic alliances with companies serving the Indonesian mining sector Berau Coal intends to consider strategic alliances with mining services companies and enhance its collaboration with marketing agents such as Maple to improve access to quality customers and to increase its scale of operations and cost efficiency. Berau Coal may also collaborate with other mining companies to improve its product portfolio by blending coal to adjust the overall heating values and sulphur levels to meet the needs of its customers. Continue to strengthen relationships with local communities through development and environmental rehabilitation programs Berau Coal operates in an area that covers 118,400 hectares, with villages located near the mines and the haul roads to the ports at Lati and Suaran. For the sustainability and long-term success of its operations, Berau Coal believes that it is important to maintain strong relationships with and benefit

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local communities. Berau Coal has and will continue to work towards fostering community ties through development programs focusing on health, education and technical assistance as well as job creation for these communities as it believes that these efforts are integral to the stability and development of its business and operations. Berau Coal has implemented a number of programs as part of its Community Development Programs and has encouraged its mining contractors to contribute to the programs. In 2000, Berau Coal established a trust called Yayasan Dharma Bhakti Berau Coal in order to help develop local communities more effectively in conjunction with local governments. The main goal of the trust is to implement community development programs in cooperation with the local communities and work together to formulate and implement plans to conserve the environment while helping the local communities in their development projects and business initiatives. Concession Area Berau Coals concession area covers approximately 118,400 hectares in the Berau Regency of East Kalimantan Province, Indonesia, approximately 300 kilometres north of the provincial capital of Samarinda. It surrounds Tanjung Redeb, the principal town in the Berau Regency. Parts of the concession area are production forest areas where open-cut mining is not permitted unless a borrowuse agreement is entered into with the Ministry of Forestry of Indonesia. The entire Kelay mine, and Binungan Block 7 are located on such production forest areas. Berau Coal has obtained the exploration permits for these mines as well as the borrow-use permit for Binungan Block 7, and plans to apply for the in-principle borrow-use licence in respect of the Kelay mine as it currently expects to commence mining activities in parts of these production forest areas in the next three to four years. The Berau Regency had an estimated population of approximately 185,000 people in 2009. The Kelay, Segah and Berau rivers are the major rivers in the area and are navigable to the furthest inland points of the concession area. A highway also connects Tanjung Redeb to other major cities. The following map illustrates the coal deposits located in Berau Coals concession area as of 31 December 2010:

Lati
N

Sambarata

10

20

KILOMETRES

Sambarata B1 Punan Lati Port

Sambarata Port

Tanjung Redeb

Gurimbang

Binungan Block 1-7 Suaran Port

Transhipment Area

Binungan Block 8-10

LEGEND
Transhipment Road Rivers Town Coal Boundary PT Berau Coal Concession Area

Coal Reserves Berau Coals coal is contained in separate coal deposits at Lati, Binungan, Sambarata, Kelay, Gurimbang and Punan. As of 31 December 2009, there were estimated coal reserves of 346 million tonnes in Lati, Binungan and Sambarata, of which 146 million tonnes are of the proved category and 155

200 million tonnes are of the probable category. The following tables set forth the open cut coal reserves, coal resources and the average calorific value of coal produced at each of the mines operated by Berau Coal for the periods indicated(1): 2009 Open Cut Coal Reserves 2010 Production Estimated 2010 Coal Reserves

Lati Binungan Sambarata Total

(in million tonnes) (in million tonnes) Proved Probable 59 92 10.4 52 91 4.2 35 18 2.8

(in million tonnes) Proved Probable 49 92 48 91 32 18

146

200

17.4

129

200.00

Area Block Lati Seams PQRT Seams A to O Sambarata Block A Block BC Block B1 Binungan Parapatan Blocks 1-2 Blocks 3-4 Blocks 5-6 Blocks 7 West Blocks 7 East Blocks 8 (Kelay) Total/Weighted Average
Note:

2009 Open Cut Coal Resources Summary by Block and Average Calorific Value Average Coal Reserves (million tonnes) CV kcal/kg Measured Indicated Inferred Total (gar) 103 33 2 50 29 35 19 6 6 13 32 0 327 97 89 1 54 35 38 22 3 10 22 70 248 690 63 71 0 69 4 21 21 1 0 1 19 126 396 263 193 3 173 68 94 62 10 16 36 121 374 1,413 5,069 5,104 6,009 5,973 5,476 5,412 5,921 5,781 5,434 5,403 5,199 4,801 5,224

(1) All data in the tables above is according to the Mineral Experts Report prepared by Runge and set out in Part XIV Mineral Experts Reports, except for the data set forth under the column 2010 Production.

Exploration Berau Coal conducts exploration activities at its existing mines on an ongoing basis. To support its planned production growth, Berau Coal intends to continue exploration activities in its existing mines and has begun exploring other areas in its concession area for additional coal reserves. Berau Coal has commenced exploration activities at the eastern area of Sambarata Block B, new seams in Binungan Block 7, Binungan Block Parapatan and Binungan Block 8. In addition, Berau Coal has commenced exploration activities at new seams in the northern part of the Lati mine and Binungan Block 9 in July 2009 and plans to commence exploration of Sambarata Block B and Block C in 2011. Berau Coal is targeting to complete all exploration activities of its concession area by the end of 2012 as it believes that it will be able to plan its mining operations more efficiently to achieve its target production if it has a complete knowledge of the coal reserves in its concession area. In order to do this, Berau Coal has increased the manpower and drilling equipment used in exploration activities and has engaged an additional drilling contractor. Berau Coals exploration activities include data collection, geological modelling and financial evaluation.

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Data collection is the process of identifying the location, layout and quality of a coal deposit. It is based on field mapping, which is a survey of surface features, and borehole drilling, the depth of which varies between deposits depending on the depth and configuration of the coal seams. Field mapping and borehole drilling are typically supplemented by a geophysical survey. Geological modelling is the process of transferring the data from each observation point into a threedimensional representation of the coal seam. This is required to estimate the quantity of the coal in a particular seam and impacts Berau Coals selection of a mining method. The geological model also provides coal quality data. Berau Coal commissioned Runge to prepare an independent estimate of its open-cut coal resources and reserves at each of its mines, which complies with the reporting guidelines of the 2004 JORC Code. Runge classified the resources at each mine as measured, indicated and inferred, reflecting their level of confidence in the data. This data was then translated into proved and probable reserves which is defined as coal that can be economically mined. For all of Berau Coals mines, data collection and geological modelling is ongoing to improve its level of confidence in its reserves. To determine whether the commencement of mining is economically viable at a particular area, Berau conducts a financial evaluation. This evaluation considers coal price, demand for the product, capital investment, mining, processing and transportation costs and defines the shape and size of the excavation. This is done by using manual pit designs and the Mincom MineScape pit design software. Berau Coal engages third-party contractors for the provision of drilling services for its exploration activities. Drilling activities have commenced at the eastern area of Sambarata Block B, new seams in Binungan Block 7, Binungan Block Parapatan, Binungan Blocks 8 and 9. New seams at the northern part of the Lati mine have also been explored and drilling activities commenced in July 2009. Berau Coal has also engaged a third-party contractor to conduct geophysical logging at the exploration areas. In 2007, 2008, 2009 and the nine months ended 30 September 2010, Berau Coal incurred US$nil, US$2.0 million, US$2.0 million and US$2.0 million, respectively, in exploration and evaluation capital expenditures. Berau Coal has budgeted capital expenditures relating to exploration and evaluation activities of approximately US$38.0 million in 2011. Coal Products and Production Berau Coal produces thermal coal with calorific value between 5,000 kcal/kg to 6,170 kcal/kg on an as received basis with low ash and sulphur levels close to 0.9 per cent. Such low sulphur level is comparable to competing coals from Australia and China. The coal is suitable for use as a base load fuel for domestic utility companies and as a blending coal for major export utility customers. Berau Coal markets several different types of coal which target different market segments domestically and abroad. Coal from the Lati mine has a low calorific value between 5,000 kcal/kg to 5,200 kcal/kg. Coal from the Binungan mine has a medium calorific value between 5,200 kcal/kg to 5,900 kcal/kg. To achieve different levels of coal quality specifications, Berau Coal blends coals from the three locations in order to adjust the overall heating values and sulphur levels, which in turn enhances the overall competitiveness of Lati and Binungan coal in the Asian coal market. Coal from the Sambarata mine has a higher calorific value (between 5,400 kcal/kg to 6,170 kcal/kg) than the Lati and Binungan coal and is used for blending to increase the calorific value of the Lati and Binungan coal. Binungan coal has lower sulphur levels than coal from the Lati and Sambarata mines and is used for blending to lower the sulphur level of Lati coal. Berau Coal markets its coal products under four brand names Mahoni, Mahoni-B, Agathis and Sungkai in order to indicate the quality grade rather than the source mines. Mahoni and Mahoni-B are appropriate as blending coals for utilities in the North Asian utility markets. Agathis and Sungkai coal attract substantial demand from Indonesian coal-fired utilities as well as utility companies in China, India and Thailand. Most of the coal Berau Coal sells is under the Agathis and Sungkai brand names.

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The following table sets forth the typical marketing coal specifications for each brand of coal Berau Coal produces and blends according to the Mineral Experts Report prepared by Runge and set out in Part XIV Mineral Experts Reports: Coal Data Proximate Analysis Total moisture (%) (gar)(1) Inherent moisture (%) (ad)(2) Calorific value (kcal/kg) (gar)(1) Calorific value (kcal/kg) (ad)(2) Ash content (%) (ad)(2) Total sulfur (%) (ad)(2) Volatile matter (%) (ad)(2) Fixed carbon (%) (ad)(2) Grindability (HGI)(3) Ash fusion temperature (reducing) Initial deformation (C) Softening (C) Hemispherical (C) Fluid/flow (C)
Notes: (1) gar: gross as received basis. (2) ad: air dried basis. (3) HGI: Hardgrove Grindability Index. The HGI was developed to determine the relative difficulty of reducing various coals to a particle size required for efficient combustion in pulverised coal boiler furnaces. In general, the higher the HGI value, the more readily the coal can be reduced to smaller particle sizes.

Mahoni 18.0 13.5 5,600 5,900 5.1 0.70 39.3 42.1 45.0 1,150 1,180 1,230 1,280

Mahoni-B 22.5 16.0 5,300 5,740 4.5 0.87 38.5 41.0 45.0 1,100 1,130 1,170 1,210

Agathis 26.0 18.0 5,100 5,650 4.8 0.89 38.2 39.0 46.0 1,080 1,140 1,190 1,230

Sungkai 26.0 18.0 5,000 5,500 5.0 0.99 38.0 39.0 47.0 1,050 1,110 1,125 1,150

The table below sets forth Berau Coals sales for each brand of coal for the periods indicated: Nine Months Ended 30 September 2010

Year Ended 31 December

2007 6.9 0.9 0.8 3.5

2008

Agathis Mahoni Mahoni B Sungkai Total

(million tonnes) 7.0 6.4 1.0 0.3 1.0 1.1 5.0 6.3

2009

4.1 0.4 1.0 7.2

The table below sets forth Berau Coals coal production for each of its mine areas for the periods indicated: Year Ended 31 December

2007 7.2 3.3 1.3

12.1

14.0

14.1

12.7

2008

Lati Binungan Sambarata Total

(million tonnes) 7.6 4.0 1.5 13.1

2009 8.1 4.3 1.9

2010 10.4 4.2 2.8

11.8

14.3

17.4

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The following table sets forth Berau Coals production volume, sales volume, average selling price per tonne, cash cost per tonne and average strip ratio for the periods indicated: Year Ended 31 December 2007 2008 2009 2010 Production volume (million tonnes) Sales volume (million tonnes) Average selling price per tonne (US$ per tonne of sales)(1) Cash cost per tonne (US$)(2) Average actual strip ratio(3)
Notes: (1) Average selling price per tonne is calculated by dividing sales by sales volume for the period presented. (2) Cash cost per tonne is calculated by adding mining costs, freight and handling costs, royalties paid to the Indonesian Government, coal processing and other production costs, restoration costs and increases or decreases in coal inventories, and dividing by sales volumes for the periods presented. Although depreciation and amortisation are added to Beraus costs of goods sold, this is not included in cash costs per tonne. (3) The strip ratio is the number of bank cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal.

11.8 12.1

13.1 13.0

14.3 14.1

17.4 17.1

31.86 23.81 7.83

48.54 34.88 8.06

55.0 31.30 8.65

59.6 35.8 8.2

Mine Operation and Logistics All of Berau Coals coal is currently mined at the Lati, Binungan and Sambarata deposits which feature a large number of coal seams. The coal seams are of variable thickness and seam splitting is common. Typical seam thicknesses are in the range of 1.0 metre to 3.0 metres. Coal is mined from the three deposits using open-cut mining methods with primary overburden stripping and coal mining being handled by hydraulic excavators and trucks. Mine Planning With information collected through its exploration activities, Berau Coal prepares mine plans in relation to further exploration and operation of each pit within its mines. Berau Coal begins with a conceptual life-of-mine plan and determines the potential production profiles for a particular mine throughout its life. With a view on production levels within the short to mid-term, Berau Coal then begins discussions with its mining contractors to agree on optimal fleet sizes and annual production levels necessary to reach a certain production profile. Berau Coal also accounts for surface features such as topography, position of rivers and creeks, local villages and associated infrastructure, and begins planning for rehabilitation of disturbed areas. As more exploration data is collected, the geological model is revised, which necessitates revisions to mine plans. Mine plans for 12-month periods are prepared by Berau Coal in cooperation with its mining contractors on an ongoing basis alongside three-month and monthly rolling mine plans which are intended to capture differences in the anticipated strip ratio, the configuration of the coal seam, equipment failures and malfunctions, changes in operating costs and weather conditions. Excavating Coal In its natural state, the land in Berau Coals mining concession area is covered with primary and secondary rainforest. To get to the coal seam, the land has to be cleared of rainforest. The marketable timber is recovered and all other vegetation is pushed into piles by bulldozers. Top soil is then removed and transported directly to reclamation areas or stockpiled until required. To shatter the overburden layer, drilling, blasting and dozer ripping are performed to fragment the layer. Waste is then removed using typical hydraulic shovel and truck configuration. Waste is typically removed to a level slightly above the coal seam. Once the coal is exposed, it is mined using hydraulic backhoe and transported by rear dump trucks. Coal is dumped directly into either a crusher surge bin hopper or delivered to a stockpile. This is then transported to the crushing plants located at Binungan or the Lati or Sambarata ports. In common with other Indonesian coal producers, Berau Coal has adopted an operating strategy of contracting out all of its mining activities with a view to maximising efficiency while minimising costs. The majority of Berau Coals mining activities are conducted by two mining contractors, BUMA and SIS. 159

From 2010, Berau Coal has also engaged PT Ricobana Abadi, PT Madhani Talatah Nusantara and PT Riung Mitra Lestari as its mining contractors. These mining contractors supply all mining and transportation equipment and the personnel required to operate and maintain the equipment. Other related activities, such as stevedoring, coal quality analysis and barging are also outsourced to other contractors. Regulation 28/2009 requires that coal concession holders conduct digging, extraction and loading activities themselves rather than through subcontractors but allows mining contracts to perform overburden removal and the transport of overburden and coal. Therefore, Berau Coal may be required to amend its existing mining agreements with mining contractors under which those mining contractors undertake coal-digging, extraction and loading activities prior to 30 September 2012 to the extent that Regulation 28/2009 remains in force in its current form. The coal mining process is similar for the Lati, Binungan and Sambarata mines. However, the process is more efficient for the Lati mine due to its parallel seam structure, making its stripping ratio the lowest among the three mines. Strip ratios, which is a measure of the amount of overburden that needs to be dug or removed in order to extract a quantity of coal, at the Binungan mine, except Block 7, and at the Sambarata mine are slightly higher due to their more inclined seam structures. A higher strip ratio is a result of operators having to dig longer and deeper to extract the same quantity of coal. Different equipment and procedures have to be adopted depending on the angle of the seam structure, which also affects the strip ratios and mining costs. Higher strip ratios are general indicators of high mining costs. The illustrations below generally demonstrate the impact that the incline of a seam has on the mining process: Illustration of a mine with a parallel seam structure

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Illustration of a mine with a more inclined seam structure

Berau Coals mine operations can be impacted by adverse weather conditions, particularly during the rainy season between October and March when heavy rains can slow down overburden removal and reduce coal production volumes. Berau Coals mine planning function anticipates and adjusts production levels to take into account such weather-related delays. Contract Mining The removal of overburden and coal mining is largely undertaken by Berau Coals two major contractors, BUMA and SIS. Berau Coals contractors carry out mining operations based on instructions given by Berau Coal in accordance with its mining plans. Berau Coal works very closely with its contractors, specifying details such as the capacity of equipment to be used, and conducting daily, weekly and monthly meetings with the contractors, including monthly safety checks. All mining support operations are performed by the contractors while supervised by Berau Coals personnel. These include fleet maintenance, equipment repairs and haul road maintenance. In the past, Berau Coals contractors have generally been able to maintain an effective fleet or mobilise additional equipment as necessary. Berau Coal has entered into term contracts with its mining contractors, with prices fixed for total tonnage of coal produced and for other services, such as overburden removal. Prices per tonne of coal produced are generally fixed based on the location and terrain of the mine, the estimated strip ratio, the distances that the coal and overburden are to be transported and other factors affecting the mining contractors operating costs except fuel costs. While Berau Coal has agreed a zero cost inflation adjustment for 2011 with SIS, negotiations with BUMA, which is seeking a 5.0 per cent. inflationary adjustment, are ongoing. In the past, Berau Coals contracts with its mining contractors generally provided for the mining contractors fuel costs to be passed on to Berau Coal with a fixed formula for calculating adjustments to the fuel costs. However, in October 2009, Berau Coal changed its arrangement with SIS and currently purchases fuel directly from PT Pertamina (Persero) and provides such fuel to SIS. Berau Coal entered into the same arrangement with BUMA with effect from 1 January 2010. In addition, Berau Coals contracts with SIS for Binungan Blocks 1 to 4, Pit H3, Pit H4 and Sambarata Block A provide for a reduction of 5 per cent. of the contract price in the event that the production output is less than 95 per cent. of its targets or, if the production output exceeds such targets. Subject to Berau Coals consent, Berau Coal will pay a bonus to SIS equal to the excess production multiplied by 105 per cent. of the contract price. Further, Berau Coals contracts with SIS provide that liquidated damages equal to 125 per cent. of the contract price are payable by SIS in the event of coal losses due to poor mining practices or spillages. Berau Coals contractors usually invoice for completion of mining operations on a monthly basis and Berau Coal generally pays its contractors within 30 to 75 days of such invoices. 60 per cent. of the fees paid to the mining contractors are paid in US dollars, with the remaining 40 per cent. being paid in Rupiah.

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Berau Coals contracts with its mining contractors may generally be terminated by either party in the event of an insolvency or a force majeure event persisting for more than a month. In addition, Berau Coal is entitled to terminate the contract with notice if the mining contractor fails to (i) achieve certain key performance requirements such as the achievement of target coal quantities and qualities, and overburden removal on a monthly and annual basis; (ii) perform material obligations under the mining contract; or (iii) comply with applicable law. In addition, Berau Coals agreement with SIS relating to the Sambarata mine may be terminated by Berau Coal with 60 days written notice and by SIS with 90 days written notice. While Berau Coal may be able to find other contractors if any of these contracts are terminated, mining operations at that mine will be disrupted for a period of at least one year to allow the contractor to remove its equipment and the new contractor to install its equipment. The following table sets forth Berau Coals contracts with its two major mining contractors for the provision of coal mining operations, coal haulage and road maintenance, and the expiration dates of each contract: Contractor BUMA BUMA BUMA BUMA SIS SIS SIS SIS
Note: * Contract in the process of being extended until:

Area Binungan coal-processing plant and Suran coal terminal Lati mine Binungan mineBlock 7 Binungan mine to Suaran port Binungan mineBlocks 1 to 4 Binungan minePit H4 Sambarata mineBlock A Sambarata mineBlock B1

Expiration Date 31 December 2012 31 December 2018 31 December 2018 31 December 2018 *31 December 2015 *31 December 2013 31 December 2011 14 July 2012

Berau Coal typically selects its mining contractors through direct negotiations with existing contractors or by way of a competitive open tender, with potential contractors submitting their bids based on the requirements specified by Berau Coal. Berau Coal selects its mining contractors after considering various factors such as price, equipment, experience and previous track record in its mining operations. BUMA is the principal mining contractor for the Lati mine and Binungan Block 7. Berau Coal started contracting its mining operations at the Lati mine in 1998 to PT Mentari Bukit Makmur, which then transferred the mining contract to its affiliated company, BUMA, with effect from 1 January 2007. The Binungan mine has more inclined seam structures and higher strip ratios than the Lati mine, making mining more difficult. Berau Coals management has worked closely with BUMA, including its subsidiaries, in the strategic planning of its mine operations for over ten years. BUMA performs the entire mining process for Berau Coal, which includes land clearing, top soil and overburden removal, coal mining, coal hauling, road maintenance and equipment mobilisation. In addition, Berau Coal has entered into a coal haulage and road maintenance contract with BUMA for the maintenance of the hauling road between the Binungan mine and Suaran port that commenced on 1 January 2003 and will expire in December 2018. BUMAs other customers include major mining companies in Indonesia, such as PT Adaro Indonesia, KPC and PT Kideco Jaya Agung. SIS is the principal mining contractor for the mining operations at the Binungan Blocks 1 to 4, Pit H4 and the Sambarata Blocks A and B1. Like BUMA, SIS performs the entire mining process at the mines it operates. Berau Coal started contracting its mining operations at the Binungan mine in 1999 and at the Sambarata mine in 2004 to PT Dianlia Setyamukti, which subsequently transferred the mining contracts to its affiliated company, SIS. SIS other customers include major mining companies such as PT Interex Sacra Raya and PT Adaro Indonesia. Following Recapitals acquisition of its interest in Berau, Berau Coal has made a deliberate effort to diversify its mining contractor base and had released new tenders for the opening of three new mine pits as part of its plan to achieve increased production levels. This will reduce Berau Coals reliance on just two mining contractors. Berau Coal has awarded contracts to three mining contractors: PT Ricobana Abadi, PT Madhani Talatah Nusantara and PT Riung Mitra Lestari. The table below sets forth Berau Coals contracts with these mining contractors: Contractor PT. Kartika Samudra Adijaya PT. Kartika Samudra Adijaya PT. Trada Tug & Barge Area Lati/Suaran port to Muara Pantai Sambarata port to Muara Pantai Lati/Suaran port to Muara Pantai 162 Expiration Date 31 December 2013 31 December 2013 31 December 2013

Coal Hauling, Processing and Delivery Berau Coal provides two delivery alternatives for its coal: delivery through the transhipment point at Muara Pantai where barge unloading and vessel loading services are carried out in open water, or direct barging to customers from its Lati, Suaran and Sambarata ports. Coal from the Lati mine is transported by front end loaders and trucks operated by BUMA from the pits at the mine to the Lati coal handling facilities located at the Lati port on the Berau river approximately 15 kilometres away. The Lati coal handling facilities comprise of ROM coal handling and stockpiles, crushed coal handling and stockpiles and barge loading facilities. Coal is received into a 100-tonne hopper/feeder and conveyed to a 200,000-tonne stockpile via an overhead skyline conveyor tripper system for placement on discreet stockpiles. The coal is then reclaimed from the stockpiles via two underground feeders, conveyed overland, and transferred to the barge loader at the Lati port. The reclaimed coal is sampled by an automatic, mechanical sampling system installed ahead of the barge loader before being loaded onto barges to be transported down the Berau river to the offshore transhipment point at Muara Pantai in the Sulawesi sea which is located approximately 75 kilometres from the Lati port. The Lati coal handling facilities have a crushing and stockpiling capacity of 10.2 million tonnes per annum and a barge loading capacity of 10.5 million tonnes per annum. The Lati port has a berthing capacity for 7,500-tonne barges. Its barge loader has a loading capacity of 1,500 tonnes per hour. The Lati coal handling facilities are maintained and operated by Berau Coals personnel. Coal from the Binungan mine is also transported by front end loaders and trucks operated by BUMA and SIS from the pits at the mine to the Binungan coal handling facilities located approximately ten kilometres away. The Binungan coal handling facilities comprise ROM coal handling and stockpiles, crushed coal handling and stockpiles, and truck loading facilities and have a crushing, stockpiling and truck loading capacity of 5.25 million tonnes per annum. There, the coal is crushed and then transported approximately 30 kilometres by trucks to the Suaran coal handling facilities located at the Suaran port on the Berau river. The Suaran coal handling facilities cover an area of approximately 40 hectares and comprise processed product coal inloading and stockpiling, stockpiled product coal reclaiming and barge loading with a coal crushing, stockpiling and barge loading capacity of 10.5 million tonnes per annum. Coal at the Suaran coal handling facilities goes through a process similar to that at the Lati coal handling facilities. The offshore transhipment point at Muara Pantai is located approximately 50 kilometres away from the Suaran port. The Suaran port has a berthing capacity for 10,000 tonne barges with mean low tide water depth in excess of 11 metres. Its barge loader has a loading capacity of 1,500 tonnes per hour. The Suaran coal handling facilities are maintained and operated by Berau Coals personnel. Coal from the Sambarata mine is transported by front end loaders and trucks operated by SIS from the pits at the mine to the Sambarata coal handling facilities located at the Sambarata port on the Segah river approximately five kilometres away. The Sambarata coal handling facilities comprise ROM coal handling and stockpiles, crushed coal handling and stockpiling, and barge loading facilities. The Sambarata coal handling facilities have a coal crushing and stockpiling capacity of 3.5 million tonnes per annum and a barge loading capacity of 7.0 million tonnes per annum. There, the coal is crushed and loaded onto barges to be transported down the Segah and Berau rivers to the offshore transhipment point at Muara Pantai located approximately 100 kilometres away from the Sambarata port. The Sambarata port has a berthing capacity for smaller 5,000-tonne barges. Berau Coal is planning to increase its barge inloading, barge loading and trucking loading capacities at the Suaran coal handling facilities by 2012 so that it will be able to receive up to 70 per cent. of the coal barged from the Sambarata mines to the Suaran port where it will be loaded onto larger barges and barged to the transhipment point, instead of barging the coal from the Sambarata port directly to the transhipment point, as well inload trucked ROM coal production from the Binungan coal handling facilities and the Kelay mine. The Sambarata coal handling facilities are maintained and operated by Berau Coals personnel. Due to its width and depth, the Berau river provides a reliable route for the transportation of coal shipments and the delivery of heavy equipment to Berau Coals concession area. At the Muara Pantai transhipment location, barges are unloaded onto geared bulk carriers, floating crane loading non-geared vessels, a semi-submersible transhipper or a floating offshore transfer platform. Coal is loaded directly from the barges onto ships using geared bulk carriers at a loading rate of approximately

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12,000 tonnes per day. In the case of non-geared vessels, the coal is transferred from the barges using the semi-submersible transhipper, SST Berau, and a floating crane, the Princess Abby. The SST Berau transfers the coal from the barge onto the ship using small dozers to push the coal onto an elevating conveyor system whereas the floating crane does so by using cranes and grabs. The SST Beraus designed loading rate is 20,000 tonnes per day and it is designed to load large ocean bulk carriers including capesize vessels between 100,000 dwt and to 150,000 dwt. The SST Berau is owned and operated by Lati Transhippers Inc. and leased to Berau Coal pursuant to a lease which expires in September 2015. The Princess Abby has a designed loading rate of 18,000 tonnes per day and is designed to load large ocean bulk carriers up to 150,000 dwt. The Princess Abby is operated by PT Mitra Swire CTM on behalf of Berau Coal pursuant to a lease that expires in 31 December 2011. In addition, Berau Coal has entered into an agreement to lease a floating offshore transfer platform, the FOTP Derawan, from FOTP Transshippers Inc., which was novated to PT Lintas Wahana Indonesia on 27 May 2009, for a term of ten years commencing from 30 July 2009. The FOTP Derawan was delivered in June 2009. The FOTP Derawans designed loading rate is 24,000 tonnes per day and it is designed to load large ocean bulk carriers including capesize vessels between 100,000 dwt and 150,000 dwt. At the transhipment point at Muara Pantai, the high energy coal from the Sambarata mine is used for blending with coal from the Lati or Binungan mines, depending on the quality grade requirements of the shipment, before delivery to Berau Coals customers. Berau Coal contracts out some of its operations such as barging, stevedoring, coal quality analysis and transhipping to third-party contractors. PT Kartika Samudra Adijaya (KSA) and PT Trada Tug and Barge (Trada) are its principal barging contractors under term contracts of five years. As of 31 December 2010, the remaining terms of the barging contracts are approximately three years. KSA has a dedicated fleet of 18 barges with capacities ranging from 5,000 tonnes to 8,000 tonnes. Trada has a dedicated fleet of ten barges, each with a capacity of 8,000 tonnes. Accordingly, Berau Coal maintains a fleet of 28 sets of tug and barges with varying horsepower. Larger barges are used at the deeper Suaran port and the Lati port while smaller barges are used to navigate the shallower waters at the Sambarata port as barging is sometimes tidally restricted at a river bend near Sukan and larger barges must wait for tides to create navigable depth. Berau Coal has also entered into contracts with PT Arpeni Pratama Ocean Line Tbk., PT Andhika Lines and PT Jaya Samudra Karunia Shipping for the transhipment of coal from Muara Pantai to its customers nominated port of discharge. As of 31 December 2010, these contracts have remaining terms of approximately three years. In addition, Berau Coal had contracts with its contractors, PT Tirta Sarana Borneo, PT Dharma Lautan Nusantara, PT Budi Harta Lestari and PT Aneka Cahaya Karunia for the provision of stevedoring services at the transhipment point at Muara Pantai. Although these contracts expired on 31 December 2010, all contractors are continuing to provide their contractual services to Berau Coal until the currently ongoing renewal process has been completed. Berau Coals shipping department plans on extending and reviewing, respectively, the contracts with the contractors listed above. Berau Coal also contracts with BUMA, PT Roda Teknik, and PT Sentra Baruna Hijau for the rental of heavy equipment required for stockpiling and other transportation activities. Quality Control The quality control process occurs during all stages of Berau Coals mining and logistics operations to ensure that the product delivered to its customers satisfies the minimum quality requirements specified in its sales contracts. This process primarily starts with the geological modelling and the detailed scheduling included in the various mine plans. Quality control begins during exploration drilling where coal samples taken from the cores of boreholes are analysed to assess the quality of such coal. The next phase of quality control is during production coal quality drilling. During this stage, the in situ coal quality of a particular coal block or seam is confirmed for consistency. Coal from different blocks or seams and separate pits is then scheduled and mined in accordance with the detailed mine plan in order to meet marketing requirements. The coal is separately stockpiled according to its quality classification and additional testing is conducted on samples from each stockpile to ensure consistency.

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During the barge loading stage, coal loaded on each barge is sampled and analysed by an independent laboratory, operated by either PT Geoservices or PT Sucofindo, before the barge is sent to the transhipment point or to the customers vessels. In the process of loading coal on vessels, coal samples are again taken before the vessels leave the port and coal quality is certified by an independent laboratory. Since it commenced commercial operations in 1995, Berau Coal has not experienced any occasion when coal it delivered was rejected by a customer. Reclamation Reclamation is part of the ongoing mining activities and Berau Coal carries out the reclamation process on the previous digging area while mining in other areas. The revegetation is done by Berau Coal, using local resources. Pursuant to MEMR Regulation 18, Berau Coal must also provide a reclamation and closing of mines guarantee. Expansion Plan and Growth Strategy Berau Coal has increased its annual gross coal production from 14.3 million tonnes in 2009 to approximately 17.4 million tonnes in 2010. In 2011, Berau Coal plans to increase its annual gross coal production to approximately 20.4 million tonnes by commencing operations at new areas within its existing mines, such as Parapatan. Berau Coal also intends to further increase its production by developing additional areas in its existing mines as well as in Gurimbang and Kelay in 2012 and 2013, respectively so as to achieve coal production of approximately 30.0 million tonnes by 2014. As of 31 December 2010, Berau Coals mining infrastructure supported a production capacity of approximately 22.0 million tonnes of coal per annum. It intends to upgrade and expand its coal mining infrastructure and coal handling facilities to support its planned increase in production levels. Berau Coal had estimated capital expenditures of approximately US$56.2 million in 2010, and has planned capital expenditures of approximately US$106.3 million in 2011 to maintain its existing facilities and operations as well as to upgrade, construct, acquire and explore new infrastructure or equipment to increase its production capacity to approximately 24.0 million tonnes per annum by the end of 2011 in order to support additional coal production expected from its existing mines. Capital expenditures of approximately US$104.5million, US$117.6million and US$82.8million are planned in 2012, 2013 and 2014, respectively, for project investments, land improvement, equipment and routine operating investments, exploration and development to increase Berau Coals production capacity to approximately 30.0million tonnes by 2014. These capital expenditures include: Lati coal handling facilities upgrading of existing coal handling facilities such as barge loaders and the construction of additional infrastructure, including a new stockpile and a new crushing line which Berau Coal expects to complete by the end of May 2011, upgrading of the Lati coal hauling road in 2012 where approximately 10 kilometres will be hard surfaced for all weather utilisation and also dredging along 1 kilometre of the Berau River to increase capacity of barges. With the expansions and upgrading expected at the Lati coal handling facilities by December 2011, the coal crushing and stockpiling capacity is expected to increase from the current 14.2 million tonnes per annum to approximately 18.9 million tonnes per annum and the barge loading capacity is expected to increase from the current 13.1 million tonnes per annum to approximately 21.0 million tonnes per annum; Suaran coal handling facilities upgrading of existing coal handling facilities such as its barge loading conveyor which Berau Coal expects to complete by 2012 and its coal receiving and stockyard facility, and the construction of additional infrastructure such as a new barge inloading facility and a new coal receiving, stockyard and stacking facility from barge inloading and the construction of a new crushing plant, stockpile, conveyor line and new hauling road of approximately 20 kilometres that connects to the existing hauling road of Binungan to support the new pit at Kelay Block 1 which is scheduled to open in 2013. With the expansion and upgrading expected at the Suaran coal handling facilities, the inloading capacity is expected to increase from currently 6.3 million tonnes per annum to approximately 9.4 million tonnes per annum while the barge loading capacity is expected to increase from currently 7.8 million tonnes per annum to approximately 10.5 million tonnes per annum. The truck loading capacity has already been increased to approximately 9.4million tonnes per annum in 2010;

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Sambarata coal handling facilities upgrading of existing crushers and barge loading conveyor and the construction of additional infrastructure such as a new coal receival and stockpiling facility, all of which were completed in 2010. With the expansion and upgrading at the Sambarata port, coal crushing and stockpiling capacity has increased from the current 2.5 million tonnes per annum to approximately 3.7 million tonnes per annum and the barge loading capacity has increased from 3.4 million tonnes per annum to approximately 5.1 million tonnes per annum. With the construction of additional infrastructure, the coal crushing and stockpiling capacity has increased from 3.7 million tonnes per annum to approximately 6.2 million tonnes per annum; and Gurimbang coal handling facilities to support the new block in Gurimbang that is scheduled to open in 2013, construction of new infrastructure such as a coal preparation plant consisting of crusher, stockpile, stacking facility, reclaim system, a new port and barge loading system.

Further, Berau Coal expects additional coal production from Binungan mines to be barged from Suaran port directly to customers or to the transhipment area beginning in 2011, particularly with the commencement of mining at Binungan Blocks 1 and 2 expected by 2013 and Parapatan expected for 2011. Currently, as the Sambarata port has berthing capacity only for smaller 5,000-tonne barges, coal from the Sambarata mine is loaded onto these smaller barges and transported approximately 100 kilometres to the transhipment point at Muara Pantai. As production is expected to increase at Sambarata, Berau Coal intends to barge up to 60.0 per cent. of the coal from Sambarata to Suaran port where it can be loaded onto larger barges and transported to the transhipment point, thereby shortening delivery time and lowering transportation costs. In order to support this plan, Berau Coal intends to build new stockpiles and a new unloading facility at the Suaran coal handling facilities. In order to accommodate the additional coal production expected from its Binungan and Sambarata mines, Berau Coal plans to upgrade its existing coal handling facilities at the Suaran port in 2011 and to construct a new loading facility and increase its stockpile capacity to 400,000 tonnes to further increase its coal handling capacity at the Suaran port to approximately 21.0 million tonnes per annum by the end of 2013. Among its plans for expansion is also the construction of an additional haul road and bridge in 2011 to transport coal from the new pit at Block Parapatan to the Binungan coal handling facilities for processing. Prior to the completion of such construction, barges will be used to transport coal from the pit at Block Parapatan to the Binungan mine. Berau Coal expects to work closely with its mining contractors to ensure that its production capacity will be increased in line with its targeted increased production levels. Sales and Marketing Berau Coals strategy for sales and marketing is diversification with a focus on selling different grades of coal to specific markets. Prior to commencing a business relationship with a potential customer, Berau Coal examines the potential customer and assesses its creditworthiness. If the potential customer satisfactorily meets Berau Coals credit criteria, a trial shipment is sent to such potential customer to ensure that its coal products comply with the customers product specifications. Since the implementation of a new regulation in Indonesia which requires all sales to export markets to be on letter of credit terms, from 1 April 2009, all of Berau Coals sales contracts with its international customers have been on letter of credit terms. In addition, other than PLN and its affiliates, from 2009, most of Berau Coals sales contracts with its domestic customers have also been on letter of credit terms. This reduces Berau Coals exposure to credit risk. As of 30 September 2010, Berau Coal had outstanding trade and other accounts receivable of US$136 million. Berau Coal has not experienced a payment default by any of its customers to date. In the first nine months of 2010, Berau Coal derived 34 per cent. of its total revenue domestically and derived the remaining 66 per cent. of its total revenue from export sales to customers elsewhere in Asia. Berau Coal uses two methods to sell its coal: direct sales to customers, including coal trading companies that buy coal products from Berau Coal for resale to their own customers; and sales to customers through marketing agents who receive commissions based on the tonnage of coal sold by Berau Coal to the customer.

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A portion of Berau Coals product is sold through marketing agents. Berau Coals agreements with its international marketing agents have terms ranging from several months to eight years. Berau Coal has historically relied on these agents for its export coal sales to customers in China, Hong Kong, India, South Korea, the Philippines, Taiwan, Thailand and Japan. Sales to customers under these marketing agreements comprised 52.1 per cent. and 49.6 per cent. of Berau Coals total revenues in 2009 and the nine months ended 30 September 2010, respectively. Pursuant to the standard terms of these agreements, the marketing agents are required to use their best efforts to promote, market and seek orders for Berau Coals coal, maintain good relations with customers, and keep Berau Coal informed of any developments in marketing. The marketing agency agreements have similar fee structures and the marketing agents receive commissions of between 1.0 per cent. to 4.0 per cent. of the FOB price based on the tonnage of coal that is actually delivered to and accepted by the customers and fully paid for at Berau Coals invoice price. Until December 2010, Berau Coals five export marketing agents included Kin Rich, Sojitz, NuCo., Honson and Maple. All of Berau Coals marketing agency agreements have historically not been on an exclusive basis with respect to a particular customer or group of customers, except for Sojitz. Berau Coals agreement with Sojitz is on an exclusive basis for Japan. In 2009, Berau Coal assigned to Maple the right to market its coal outside of Japan. Following Beraus acquisition of Maple in August 2010, Maple appointed Noble as its marketing advisor and agent for the sale of Beraus coal throughout the world except for Indonesia, Japan and Malaysia. As a result, Berau has been transitioning its marketing efforts away from international marketing agents. For example, in December 2010, Berau Coal decided to cease using Kin Rich, NuCo. and Honson as marketing agents and terminated its existing agency agreements with immediate effect. As a result of these termination notices, Berau Coal will either reach agreed terms for settlement of future liabilities owed to these agents under sales contracts that have already been executed, continue to pay those liabilities as they become due without involving the agents in future coal sales contracts or, through Maple, provide these agents with opportunities to act as marketing agents for third-party coal companies. To maximise its resources and provide a consistently broad range of products, Berau Coal has adopted a single mine marketing concept. This concept allows Berau Coal to be recognised in the market under the different brand names of its coal, which indicate quality grade rather than source mines. Accordingly, Berau Coal has introduced its unique brand names Mahoni, Mahoni-B, Agathis and Sungkai. Each brand of coal has distinctive features that differentiate itself by inherent moisture, ash content, volatile matter, fixed carbon, total moisture, total sulphur and gross calorific value. The Mahoni brand is considered a premium brand compared to Agathis and Sungkai because it has a higher calorific value and a slightly higher price. Coal Supply Agreements; Pricing and Payment Terms The majority of Berau Coals coal supply agreements, as measured by volume of coal supplied, are for one year or longer. As of 31 December 2010, Berau Coals coal supply agreements had remaining terms ranging from approximately one month to seven years. Many of Berau Coals coal supply agreements specify a quantity of coal that must be delivered each year and include an option for the customer to request for a 10 per cent. to 20 per cent. increase or decrease in the agreed contractual quantities or additional shipments of coal. Most of Berau Coals coal supply agreements allow an independent inspection agency to inspect, sample and test coal prior to delivery to Berau Coals customers to ensure that the coal complies with contract specifications. Most agreements also provide for price adjustments where the coal supplied does not comply with contract specifications. Prices are generally negotiated at the time the agreement is entered into, with reference to certain international indices, such as Newcastle Index, the ACR Asian Index and the Barlow Jonker Index, and adjusted taking into account various other factors, such as the heat and energy value of the coal sold, potential boiler efficiency, ash, sulphur and nitrogen levels, handling costs, freight differentials and payment terms. The prices are further negotiated or adjusted annually or after shorter periods. All of Berau Coals export sales are invoiced and paid in US dollars, and Berau Coals domestic sales are invoiced and paid in Rupiah based on US dollar-denominated prices. Payments are made by wire transfers or letters of credit from reputable financial institutions. PLN-related domestic customers have

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terms requiring payment within 15 to 60 days. A number of Berau Coals coal supply agreements also require Berau Coal to provide a performance bond. Almost all of Berau Coals export sales and the majority of its domestic sales are made on FOB terms, meaning that insurance and freight are arranged by the customer, while the balance of Berau Coals sales are made on CIF terms, meaning that insurance and freight are arranged by Berau Coal on behalf of the customer. Berau Coal seeks to maximise its FOB sales and minimise CIF sales as it is of the view that its customers are better able to manage their own insurance and freight costs. For its CIF term sales, the price of insurance and freight in CIF term sales are built into Berau Coals selling price to its customers. Berau Coals coal supply agreements generally permit early termination based on force majeure, which includes events such as natural disasters, war, acts of government, riots and accidents of navigation. A number of Berau Coals coal supply agreements also contain liquidated damages provisions for delays and quality shortages, and the agreements typically contain demurrage provisions requiring Berau Coal to pay certain penalties in the event of any delay in loading vessels with coal. Customer Base As of 31 December 2010, Berau Coal had 24 customers, all of whom were located in China, Hong Kong, India, Indonesia, Japan, South Korea, Taiwan, the Philippines and Thailand. Berau Coals ten largest customers represented approximately 87.7 per cent., 87.9 per cent., 82.5 per cent. and 86.1 per cent. of its total revenues in 2007, 2008, 2009 and the nine months ended 30 September 2010, respectively. The following tables sets forth Berau Coals ten largest customers in terms of revenues for the periods indicated and the nine months ended 30 September 2010: Year Ended 31 December 2007 Customer Country Revenues Percentage of Total Revenues (US$ in millions) (%) 1. Customer 1 Indonesia 59.8 15.9 2. Customer 2 Indonesia 49.8 13.2 3. Customer 3 Taiwan 44.8 11.9 4. Customer 4 Hong Kong 37.2 9.9 5. Customer 5 Indonesia 31.6 8.4 6. Customer 6(1) China 30.7 8.1 7. Customer 7(1) India 21.9 5.8 8. Customer 8 South Korea 20.4 5.4 9. Customer 9 South Korea 17.4 4.6 Thailand 17.1 4.5 10. Customer 10(1) Total 330.7 87.7% Year Ended 31 December 2008 Revenues Percentage of Total Revenues (US$ in millions) (%) 128.1 20.3 89.5 14.2 82.9 13.1 53.3 8.4 44.6 7.1 36.9 5.8 35.5 5.6 29.4 4.7 29.3 4.6 25.4 4.0 555.0 87.9%

Customer 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Customer 1 Customer 2 Customer 3 Customer 4(1) Customer 5(1) Customer 6 Customer 7 Customer 8 Customer 9(1) Customer 10 Total

Country Indonesia Indonesia Taiwan India China South Korea South Korea Indonesia Thailand Japan

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Customer 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Customer 1 Customer 2 Customer 3 Customer 4(1) Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Total

Country Indonesia Indonesia Taiwan India Korea Indonesia Korea Korea China China

Year Ended 31 December 2009 Revenues Percentage of Total Revenues (US$ in millions) (%) 145.8 18.2% 95.7 12.0% 85.8 10.7% 78.3 9.8% 65.5 8.2% 51.7 6.5% 47.1 5.9% 38.9 4.9% 27.4 3.4% 23.7 3.0% 659.9 82.5% Nine Months Ended 30 September 2010 Revenues Percentage of Total Revenues (US$ in millions) (%) 139.8 18.3% 68.6 9.0% 63.3 8.3% 61.0 8.0% 51.9 6.8% 50.9 6.7% 48.8 6.4% 39.9 5.2% 39.7 5.2% 32.7 4.3% 596.6 78.1%

Customer 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Total
Note: (1) Coal trading companies.

Country Indonesia Indonesia China Taiwan South Korea India China South Korea China Korea

The following table sets forth Berau Coals gross sales revenues by country for the periods indicated: Year Ended 31 December 2007 2008 2009 Total Total Total Country Revenues % Revenues % Revenues % (US$ in millions, except percentages)
China Hong Kong India Indonesia Japan South Korea Taiwan Thailand Total US$30 36 42 139 9 49 52 20 US$377 8% 10% 11% 37% 2% 13% 14% 5% 100% US$45 15 53 258 45 90 83 42 US$631 7% 2% 8% 42% 7% 14% 13% 7% 100% US$94 18 81 312 28 152 85 30 US$800 11% 2% 10% 39% 4% 19% 11% 4% 100%

Nine Months Ended 30 September 2010 Total Revenues % (unaudited)

US$213 15 53 257 23 139 60 3 US$763 28% 2% 7% 34% 3% 18% 8% 0% 100%

Competition Berau Coal competes in the domestic and international coal markets with other coal producers. Competition is primarily based on coal quality, price, reliability of delivery and the ability to supply coal as and when required by customers. The Directors believe that Berau Coal has strong competitive advantages over its competitors derived from its product portfolio, consistent product quality, reliable delivery, cost efficient coal transportation and shipping from its three mines to its customers, strong

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relationships with its mining contractors and a proven track record of supplying quality coal to its customers. The Directors believe that Berau Coal holds a competitive advantage over its Australian and South African competitors when selling coal to customers in Asia given its relative geographic proximity to such customers and relatively low cost of production. Berau Coal competes with a significant number of large Indonesian coal producers, including KPC, PT Adaro Indonesia, PT Kideco Jaya Agung, Arutmin and PT Indominco Mandiri and other large coal producers from Australia, South Africa and China, such as Rio Tinto, BHP Billiton, Anglo American, Xstrata, Shenhua Coal Trading Co. and China National Coal Industry Import and Export (Group) Corporation. Berau Coal also faces competition in all markets in which it operates from providers of alternative sources of energy to coal, most significantly natural gas. Property, Plant and Equipment Pursuant to its CCOW, all property, plant and equipment Berau Coal purchases becomes the property of the Indonesian Government at the time the asset is imported or when purchased domestically. Berau Coal does, however, retain exclusive rights to use any such assets in its mining operations for the shorter of their useful lives or for the remaining term of the CCOW. Berau Coals contractors retain title to all property, machinery and equipment that they purchase and use in the process of providing services to Berau Coal. The contractors are also responsible for the maintenance and replacement of any such assets. Berau Coals mining, transportation and barging contractors provide all necessary equipment to undertake mining operations. Such equipment is not affected by the provision of the CCOW that transfers ownership of assets to the Indonesian Government; assets Berau Coals contractors purchase remain their property. Notwithstanding the effect of the CCOW, Berau Coal has developed significant infrastructure within its concession area and the Suaran coal handling facilities. As of 30 September 2010, the book value of Berau Coals total net fixed assets is approximately US$48.2 million. Berau Coal also remains responsible, under the terms of the CCOW, for the maintenance of all property, plant and equipment used in its operations. Berau Coals two mining contractors are contractually responsible for maintenance of the hauling road, with each contractor allocated a portion and barge loading of the road that is used for the coal from the mine it is operating. Berau Coals personnel maintain and operate the Suaran coal handling facilities. Safety and Environmental Matters Berau Coal applies international standards of industrial health and safety. Berau Coals mining contractors are required to comply with such safety standards. Berau Coal has not experienced any serious accidents or fatalities in its mining operations since 2003 except for one fatality resulting from an accident between two trucks along the haul road leading to the Lati mine in 2008. In 2008, Berau Coal was awarded both the International Standards Organisation (ISO) 14001 and Occupational Health and Safety Assessment Series (OHSAS) 18001 certifications, which are internationally recognised environmental and occupational health and safety management systems certifications. Berau Coal complies with Indonesian environmental standards. Berau Coal engages service companies from local cooperatives to reclaim mined land. As part of community programs, Berau Coal hands back reclaimed land to the local communities for ongoing development. Post-reclamation uses for land include planting of commercial crops, creating fish farms and developing recreational areas. Berau Coal closely monitors and treats water run-off from disturbed areas in settlement ponds before it is used to develop irrigated areas for more intensive farming. In addition, Berau Coal attempts to keep disturbed areas to a minimum. Berau Coal plans out-of-pit waste dumps, with the waste being deposited in mounds up to six metres high. The final dump forms are contoured, covered with topsoil and planted with various fast-growing local grasses and trees. Berau Coal implements rehabilitation of the land in consultation with the Department of Energy and Mineral Resources of Indonesia which, in turn, consults with the local government. Waste management principally involves the disposal of used oils, grease and other hydrocarbon products from equipment maintenance and overhaul workshops. Each of Berau Coals workshops contains drainage systems for holding waste oils before disposal. Waste oils are disposed of through government-licenced disposal companies.

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Berau Coal monitors air quality by undertaking continuous air monitoring in its concession area and at intervals along the haul roads to the Lati, Suaran and Sambarata ports to ensure that dust levels comply with international standards and to minimise impact on local communities. In addition, Berau Coal has engaged a contractor to surface the haul roads from Binungan mine to the Suaran port with chip seal to reduce the amount of dust produced. Coal dust is controlled by fixed water sprays placed at intervals around the coal stockpiles. Water runoff from stock piles is channeled through a drainage system to settling ponds for settlement of all solids, including coal dust. Berau Coal closely monitors water released from these settling ponds. Berau Coal must prepare and submit a quarterly report on environmental performance to the Indonesian Government. The MEMR, in conjunction with the Indonesian Environmental Ministry, oversees Berau Coals compliance with environmental laws and regulations in Indonesia. Berau Coal has, in general, complied with relevant environmental laws and regulations and no significant environmental incident has been noted. The Indonesian Government introduced an environmental evaluation program of selected companies in 2002, referred to as PROPER. The Indonesian Government selects some, but not all, sites for annual evaluation for the PROPER Report. Beraus mines at Lati, Binungan and Sambarata received a Green Rating (indicating satisfactory environmental controls and standards) in the 2008 PROPER Report. Employees As a holding company, substantially all of Beraus employees work at Berau Coal. Berau Coal had 509, 564, 656 and 689 employees as at 31 December 2007, 2008 and 2009 and 30 September 2010, respectively. The following table sets forth the number of employees of Berau Coal as of 30 September 2010: As of 30 September 2010 11 285 60 190 8 45 90 689

Board of directors and assistants to board of directors Operations Finance and administration Corporate support Sales and marketing Transportation and sales administration Human resources and general administration Total

The Berau Groups employees are located in East Kalimantan and Jakarta. Berau Coals employees regularly attend various in-house training programs. Berau Coals commitment to training helps better position employees for promotions and helps to maintain high employee retention rates. Berau Coals employee compensation packages include sponsored health coverage, accident insurance and enrolment in the government-sponsored pension scheme. There are no pending labour disputes. Approximately 50 per cent. of Berau Coals employees have established the Labour Union of Chemistry Energy and Mining of Berau Coal, which has entered into a collective labour agreement with Berau Coal. The Directors believe that Berau Coal has strong relations with its employees and union. Under Indonesian labour laws, employees have a right to a minimum wage, thirteen months of salary per year and a maximum working week of 40 hours. The total workforce of the mining contractors that Berau Coal used as of 30 September 2010 was approximately 5,084 personnel. Insurance Berau Coal maintains insurance coverage for its employees and board of directors.

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The insurance coverage for Berau Coal includes the following insurance policies issued by Indonesian insurers: comprehensive certain heavy equipment insurance for third-party liability as well as for loss, damage, destruction or breakage caused by, among other things, labour dispute and earthquake; marine cargo insurance for its coal delivery; vehicle insurance for vehicles owned by Berau Coal; and life and group personal accidents insurance for all of Berau Coals employees and directors.

The insurance policies arranged by Berau Coal do not cover liability or damage arising from acts of war and other customary exclusions from coverage. Under Berau Coals operating agreements with its mining contractors, the contractors are responsible for their own employees and they and their employees must also be covered by appropriate insurance including insurance for property and vehicles, loss and damage and third-party claims. Neither Berau Coal nor its contractors carry any business interruption coverage. Community Development Programs Berau Coal operates in an area that covers 118,400 hectares with villages located near the mines and haul roads leading to the ports. Berau Coal is sensitive to the needs of these local communities and it aims to minimise the adverse impact such activities may have on them. For the sustainability and longterm success of its operations, the Directors believe that it is important to maintain strong relationships with and benefit local communities. Berau Coal actively supports programs to enhance the health, education, social and economic wellbeing of these communities. A proactive community development program is in place providing schooling, employment, health services, produce farming, electricity and water supplies, religious institutions and other needs. In 2000, Berau Coal established a trust called the Yayasan Dharma Bhakti Berau Coal to help develop local communities more effectively with local governments. The main goal of the trust is to implement community rehabilitation programs in cooperation with local communities and work together with the local governments to formulate and implement plans to conserve the environment while helping the local communities in their development projects and business initiatives. For example, the trust works with local non-governmental organisations to develop farming and fishing industries, which provide economic independence to the local communities. The trust also supports infrastructure programs, including building roads, bridges, schools, health clinics, water and electricity facilities and mosques and churches near its mines and supports a number of medical programs for the eradication of tropical diseases, such as malaria and dengue fever. Through its education programs, the trust also provides scholarships to deserving students and teachers from the local communities and schools. Berau Coal intends to continue fostering community ties through development programs focusing on health, education and technical assistance as well as job creation for these communities as it believes that these efforts are integral to the stability and development of its business. Legal Proceedings and Disputes Save as described below, neither Berau nor any other member of the Berau Group is or has been engaged in nor, so far as the Company is aware, has pending or threatened, any governmental, legal or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a significant effect on Berau and/or the Berau Groups financial position or profitability and, upon Completion, the Group and/or the Groups financial condition or profitability. Fuel Price Adjustment Dispute with PT Mentari Bukit Makmur In 2008 and 2009, Berau Coal and PT Mentari Bukit Makmur had a difference in calculation of the fuel price adjustment in their mining contracts. As of 30 September 2010, Berau had US$92.6 million in payables to PT Mentari Bukit Makmur, a portion of which represented the difference in calculation. Berau Coal and PT Mentari Bukit Makmur have reached a settlement on a final reconciliation of such

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portion in the meantime. This settlement, which is subject to contract, will be paid in 36 monthly instalments. Value-Added Taxes and Royalty Payments Dispute with the Indonesian Government For information about this dispute, including the Supreme Courts recent denial of Beraus cessation petition, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. Montelena/Armadian Settlement On 18 May 2010, a writ of summons issued out of the High Court of Singapore by Montelena Capital Limited (Montelena) named Armadian, an intermediate holding company in the Berau Group that directly owns 51.0 per cent. of Berau Coal, as a defendant in connection with an option agreement that Armadian entered into in June 2004. Armadian and Montelena entered into a settlement agreement with respect to this matter on 30 June 2010. In accordance with the settlement agreement, on 23 July 2010 Armadian paid US$20 million to Montelena as full and final settlement of Montelenas claims against Armadian in connection with the option agreement. Following such payment, on 26 July 2010, Montelena issued a notice of discontinuance that it had discontinued its legal action against Armadian related to these claims.

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PART VI DIRECTORS AND CORPORATE GOVERNANCE

The Company The Company was incorporated in Jersey on 31 March 2010. The Directors The Directors are listed below. Indra Bakrie, Chairman, aged 56 Mr. Bakrie is the Chairman of the Company, and brings a wealth of corporate experience. Over the past 20 years, he has helped steward numerous businesses in diverse sectors such as Plantations, Oil and Gas Exploration and Trading, Real Estate, and Infrastructure to success. He has recently been instrumental in nurturing and unlocking value within the Bakrie Group of companies by listing different subsidiaries and increasing the market capitalisation of those subsidiaries to in excess of US$7 billion. The Directors believe Mr Bakries appointment will retain the local Indonesian identity of the combined group and provide strategic guidance in the transitioning of the separate businesses to a single London-listed major coal producer. Mr Bakrie was born on 26 April 1954, and since 1985 has been associated with companies within the Bakrie Group. Mr Bakrie graduated from the University of Southern California in 1976 with a major in Business Administration. The Honourable Nathaniel Rothschild, Co-Chairman, aged 39 Mr. Rothschild is a Founder and the Co-Chairman of the Company. Mr. Rothschild is Chairman of JNR Limited, an investment advisory business primarily focused on emerging markets and the metals, mining and resources sector. Mr. Rothschild has co-founded and led companies in the fields of money management and investment, and currently serves as Co-Chairman and Co-Founder of Attara Capital LP (the successor manager to the Atticus European Fund). From 1996 to 2009, Mr. Rothschild held various leadership roles at Atticus Capital LP, most recently Co-Chairman. Atticus was one of the largest hedge funds in the world in 2007, in terms of assets under management. Mr. Rothschild is currently Chairman of the International Advisory Board of UC Rusal plc, the Hong Kong listed aluminium producer, and Co-Chairman of EN+ Group Limited, a privately held company which owns a controlling interest in UC Rusal plc. Mr. Rothschild is a non-executive director of Barrick Gold Corporation, the worlds largest gold company. Mr. Rothschild is an advisory trustee of the Yad Hanadiv Foundation and a member of the Belfer Centers International Council at the John F. Kennedy School of Government at Harvard University and the International Advisory Council of the Brookings Institution. He holds an MA in history from Oxford University. Ari Hudaya, Chief Executive Officer, aged 51 In addition to being the Chief Executive Officer of the Company, Mr. Hudaya is the President Director of Bumi Resources and has held this position since 2001. He graduated from Institut Teknologi Bandung in Mechanical Engineering in 1983. He has also held the positions of President Commissioner of each of Arutmin, KPC, Indocoal Kalsel and Indocoal Kaltim since 2007. He currently holds the position of President Director of Enercorp and is a Director of each of IndoCoal Resources, Kalimantan Coal and Sangatta Holdings. From 2003 to 2007, he was President Director of KPC and from 2001 to 2007, he was President Director of Arutmin. In addition, he has held the position of President Commissioner of PT Energi Mega Persada Tbk. since 2007, Commissioner of each of PT Citrasaudara Abadi, PT Puri Diamond Pratama, PT Elang Perkasa Pratama, PT Elang Parama Sakti and PT Villa Del Sol since 1997, President Commissioner of each of PT Graha Andasentra Propertindo and PT Sanggraha since 1998 and Commissioner of PT Bakrie Nirwana Resort since 2007. James Campbell, Non-Executive Director, aged 61 Mr. Campbell is a Founder of the Company. Mr. Campbell has 35 years experience in both operational management and in the execution of significant acquisitions and investments in the global metals, mining and resources industry. From 2001 to 2008, Mr. Campbell was Chairman of Australian listed

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nickel producer Minara Resources, where he steered the business through a successful restructuring. Prior to this, Mr. Campbell had a long and successful career with Anglo American in a variety of operational roles and board appointments. Mr. Campbells achievements included leading the internationalisation of Anglo Americans coal activities with investments in Australia, Colombia and Venezuela and representing Anglo American in its internal separation from De Beers prior to Anglo American plcs flotation on the London Stock Exchange. During his career with the Anglo American group Mr. Campbell was managing director of De Beers Industrial Diamond Division, chairman of AngloCoal, chairman of AngloBase, an executive director of Anglo American plc, a director of AngloGold, AngloPlatinum, Richards Bay Coal Terminal Company and of De Beers Centenary. He is currently a non-executive director of Highveld Steel and Vanadium, having recently retired from the boards of Evraz Holdings S.A. and Ferrous Resources Ltd. Mr. Campbell holds a BSc in Physics and Mathematics from Queens University Belfast. He enrolled in a doctoral degree program at the University of Cambridge in 1972. After two years he determined that there was insufficient data available in his selected area to complete his doctorate and transferred to the engineering department to complete a BA in Engineering Management and subsequently received an MA from the University of Cambridge in Engineering Management. Until the end of 2001, Mr. Campbell had represented that he was a holder of a doctorate, but he has not used or accepted the use of the title since then. Andrew Beckham, Chief Financial Officer, aged 43 In addition to being the Chief Financial Officer of the Company, Mr. Beckham is a Director of Bumi Resources, a position he has held since June 2010. He is also the Chief Financial Officer of Bumi Resources and has held this position since December 2006. Mr. Beckham joined Bumi Resources in December 2001. Mr. Beckham graduated from Portsmouth University with an Honours Degree in Economics. After working in the United Kingdom for 10 years, he moved to Australia and worked for Allianz and Exxon Mobil. In February 2000, Mr. Beckham moved to Indonesia and worked for BHP Billiton as a consultant at Arutmin. In December 2001, he became Finance Manager for Arutmin. With Bumi Resources acquisition of KPC in 2003, Mr. Beckham was appointed Manager of Business Development at KPC. In January 2005, he joined Bumi Resources as Vice President, before becoming Chief Financial Officer in December 2006. In 2009, Mr. Beckham was admitted into the Australian Institute of Company Directors. Mr. Beckham is also currently a director of Herald Resources, a company listed on the Australian Securities Exchange until December 2009. Rosan Roeslani, Non-Executive Director, aged 42 Mr. Roeslani was appointed to the board of directors of Berau in July 2010. He serves as President Director of Recapital. Mr. Roeslani served as President Commissioner of Recapital Securities from 2002 to 2003 and served as President Commissioner and the Investment Committee of Recapital Asset Management from 2002 to 2003. He serves as Commissioner of PT Mahaka Media. He serves as Board of Commissioners in several companies, namely PT Lativi Mediakarya (tvOne), PT Lupita Amanda, PT Saratoga Investama Sedaya, Mitra Global Telekomunikasi Indonesia, Sriboga Raturaya and Kemang Jaya Raya. He was appointed as Commissioner of PT Abdi Bangsa Tbk in 2008. He served as Commissioner of Bank BTPN from 2006 to 2007, the Commissioner of KPC from 2003 to 2007, the Commissioner of Arutmin from 2001 to 2007 and Head of Monitoring Committee of Capitalic Finance Tbk from 2003 to 2005. He received a Master of Business Administration degree from Antwerp European University for International Business Management and Communication and Public Relations. Sir Julian Horn-Smith, Deputy Chairman & Senior Independent Director, aged 62 Sir Julian is the Deputy Chairman and Senior Independent Director of the Company. Sir Julian has spent more than 25 years in the telecommunications sector, after joining Vodafone Group at its foundation. He held a number of senior and general management posts with Vodafone from 1984 to 2006, including as Group Chief Operating Officer from 2001 and then as deputy CEO from 2005. Sir Julian was considered to be the principal architect of the firms international strategy. He was closely involved with many of Vodafones major transactions including the formation of Vodafone AirTouch in 1999 and the acquisition of Mannesmann in 2000 to create the worlds largest mobile telecommunications company. Prior to his time at Vodafone, Sir Julian previously held positions in Philips from 1978 to 1982 and Mars GB from 1982 to 1984. Sir Julian currently acts as a senior adviser to UBS Investment Bank and CVC Capital Partners, and is a member of the board of directors of De La Rue plc and Lloyds Banking Group plc. Sir Julian is also the pro vice-chancellor of the University of Bath and holds a BSc in Economics and an MSc in Business Administration and Finance.

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Lord Renwick, Independent Non-Executive Director, aged 73 Lord Renwick has had a diplomatic career spanning over 30 years, including serving as British Ambassador to South Africa from 1987 to 1991 and to the US from 1991 to 1995. Lord Renwick is currently Vice-Chairman of Investment Banking at J.P. Morgan Europe and Vice Chairman of J.P. Morgan Cazenove. He is also Chairman of Fluor Limited, a director of Compagnie Financiere Richemont AG and Kazakhmys plc and deputy Chairman of Fleming Family & Partners. Lord Renwick has also previously served as a director of, amongst others, BHP Billiton plc, Harmony Gold Mining Company Limited, British Airways plc, Fluor Corporation and SABMiller plc. He holds an MA in History from Cambridge University. Steven Shapiro, Independent Non-Executive Director, aged 58 Mr. Shapiro served as Executive Vice President and Chief Financial Officer of Burlington Resources Inc. from October 2000 to April 2006. During his tenure at Burlington Resources, Inc., Mr. Shapiro also served as a member of the board of directors and a member of the office of Chairman. Mr. Shapiro is a member of the board of directors of Barrick Gold Corporation and El Paso Corporation. During his career Mr. Shapiro has served as Senior Vice President, Chief Financial Officer and a director at Vastar Resources, Inc. and spent 16 years in various roles of increasing responsibility with Atlantic Richfield Company (ARCO). Mr. Shapiro is a trustee of the Houston Museum of Natural Science. He holds a B.S. in Industrial Economics from Union College and an MBA from the Harvard University Graduate School of Business. Sir Graham Hearne, CBE, Independent Non-Executive Director, aged 73 Sir Graham retired in 2002 as Chairman of Enterprise Oil plc, a London Stock Exchange and NYSE listed oil and gas exploration and production company, where he had held that position since 1991, previously serving as Chief Executive from 1984 to 1991. Sir Graham currently serves as Chairman of Catlin Group Limited, an insurance company and Braemar Shipping Services Group plc. Sir Graham is a non-executive director at Rowan Companies Inc., a drilling company. Sir Graham qualified as a solicitor in England and Wales in 1959 and practised law in England and the US from 1959 to 1967, following which he joined as an executive of the Industrial Reorganisation Corporation and then as an executive director of NM Rothschild & Sons Limited. He was subsequently appointed Finance Director of Courtaulds plc and then as Chief Executive of two publicly listed oil and gas companies. He has variously served as a director of a number of public and private companies including Gallaher Group plc, Wellcome plc, Reckitt & Colman plc and Novar plc. Sir Graham was appointed a Commander of the Order of the British Empire in 1990 and a Knight Bachelor in 1998 for services to the oil industry. Wibowo Suseno Wirjawan, Independent Non-Executive Director, aged 50 Mr. Wirjawan is currently Deputy Chairman of Financial Control BP Migas, the Upstream Oil and Gas Supervision Body of the Republic of Indonesia. He graduated from the School of Accountancy, University of Padjadjaran Bandung, Indonesia. Mr. Wirjawan spent his initial professional life with commercial bank, Bank Niaga in Los Angeles, California then moved to Bank PDFCI, a governmentowned investment bank in Jakarta focussing on infrastructure development projects. In 2000 he was appointed as CEO of Hutchison Ports Indonesia to supervise its operations in Indonesia until 2005, and is currently Vice President Commissioner of Jakarta International Container Terminal, a Hutchison operated container terminal in Jakarta. Amir Sambodo, Independent Non-Executive Director, aged 51 Mr. Sambodo is currently President Director of PT Tuban Petrochemicals Industries, one of the biggest Petrochemical producers in Indonesia, President Commissioner and founder of PT Teknopreneur Indonesia, the first Indonesian business technology magazine and President Commissioner of PT Tekno Ventura, venture capital for start up technology company.Prior to this, Mr. Sambodo has held President Commissioner in PT Krakatau Steel, and has held several posts within the Indonesian Government. From 1999-2000 Mr. Sambodo was an Adviser to the Chairman of IBRA (Indonesian Bank Restructuring Agency). In 2001 he was Acting Deputy Minister for Corporate Restructuring and from 2002-2004 Mr. Sambodo was an Adviser to the Minister of Research and Technology. Currently Special Adviser to the Coordinating Minister for Economic Affairs, Mr. Sambodo holds a Bachelor of Science degree in Mechanical Engineering from the Bandung Institute of Technology and post-graduate studies in Business Management from Monash University in Australia.

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Philip Yeo, Independent Non-Executive Director, aged 64 Philip Yeo is Special Adviser for Economic Development (Prime Ministers Office) assisting the Prime Ministers Office in establishing new economic links with foreign governments who value Singapores development experience, and provide strategic inputs to establish strategic partnerships and open up opportunities with other fast-growing economies. Also Chairman of SPRING Singapore currently, he guides the government development agency with the mission of enabling and growing Local Enterprises. Mr. Yeo was Chairman of the Economic Development Board (EDB) from 1986 to 2000 and then Co-Chairman till 2006. He was Chairman of the Agency for Science, Technology and Research (A*STAR) from 2001 to 2007 and then Senior Adviser for Science and Technology to 2009. Mr. Yeo is a member of the United Nations Committee of Experts in Public Administration (CEPA), established by the Economic and Social Council (ECOSOC) from 2010-2013 for the promotion and development of public administration and governance among Member States, in connection with the United Nations Development Agenda. Mr. Yeo holds a Bachelor of Applied Science (Industrial Engineering) 1970 and an honorary Doctorate of Engineering 1997 from the University of Toronto, Canada, a Master of Science (Systems Engineering) 1974 from the then University of Singapore and a Masters in Business Administration 1976 from Harvard University. In 2006, Mr. Yeo received the honorary degree of Doctor of Medicine from Karolinska Institutet, Sweden, in recognition of his efforts in building and developing Singapores medical research and education. In November 2007, Mr. Yeo was awarded the Doctor of Science degree by Imperial College London UK for being one of Singapores true pioneers of economic development in harnessing Singapores skills in industries such as semiconductors, aerospace, specialty chemicals and biomedical sciences. Sony B. Harsono, Independent Non-Executive Director, aged 59 Mr. Harsono has been a professional business adviser for over 30 years and is one of the leading advisers on structuring and tax issues in Indonesia. He spent most of his career working for major international accounting firms, including a 3 year secondment in Melbourne, Australia before setting up his own business advisory practice. He was Chairman of one of the Big Four accounting firms in Indonesia, after which he was CEO of Harsono Hadibroto Consulting. Mr. Harsono is now CEO of Harsono Hermanto Strategic Consulting. During his career Mr. Harsono has gained in-depth knowledge of the commercial aspects of doing business in Indonesia including financial, accounting, regulatory, and tax issues. His expertise includes corporate restructuring, transfer pricing issues, taxation on crossborder transactions, and project formation and planning. He specialises in servicing major Japanese, US and European corporations. Mr. Harsono has extensive knowledge of business structuring and taxation issues in a number of industries, in particular upstream oil and gas, as well as mining and energy. Mr. Harsono has excellent relationships with high-level government officials as well as prominent members of various international chambers of commerce and business communities. He is currently Chairman of the Indonesia-Japan Economic Committee of the Indonesian Chamber of Commerce (KADIN). Sony is also a member of the Board of Advisers to the United States-Indonesia Society (USINDO). Independence of the Board Nathaniel Rothschild and James Campbell are also Founders. Indra Bakrie, Ari Hudaya and Andrew Beckham have been appointed to the Board by the Bakrie Group pursuant to the Bakrie Relationship Agreement and Rosan Roeslani has been appointed to the Board by Mutiara pursuant to the Mutiara Relationship Agreement. The Independent Directors (Sir Julian Horn-Smith, Lord Renwick, Steven Shapiro, Sir Graham Hearne, Wibowo Suseno Wirjawan, Amir Sambodo, Philip Yeo and Sony B. Harsono) will have a voting majority over such Founders, shareholder nominated directors and the other non-independent directors. Going forward, the Company will always ensure that Independent Non-Executive Directors retain the majority voting rights on the Board. Directors Fees Each of the Non-Executive Directors is entitled to receive a fee from the Company at a rate to be determined by the Board in accordance with the Articles (see paragraph 5.2(g) Directors Interests of Part XII Additional Information). The current level of fees for each of the Directors is set out in paragraph 11 of Part XII Additional Information. Such fees are distinct from fees paid to the Adviser and Sub-Adviser (which are detailed in Part III Information on Vallar The Advisers and Sub-Advisers fees and expenses). All the Directors are entitled to be reimbursed by the Company for travel, hotel

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and other expenses incurred by them in the course of their directors duties relating to the Company. Further details of the Directors Letters of Appointment and Service Agreements are set out in Part XII Additional Information. Strategic decisions Members and responsibility The Directors are responsible for the Companys objective and business strategy and its overall supervision. Acquisitions, divestments and other strategic decisions will all be considered and determined by the Board. The Board will provide leadership within a framework of prudent and effective controls. The Board will set the corporate governance values of the Company and will have overall responsibility for setting the Companys strategic aims, defining the business plan and strategy, managing the financial and operational resources of the Company and reviewing the performance of the officers and management of the Companys business. The Acquisition was approved by the Board, including by the majority of the Independent NonExecutive Directors and is unanimously supported by all of the Independent Non-Executive Directors. No Shareholder approval is required or has been sought by the Company in relation to the making of the Acquisition. Frequency of meetings The Board will hold meetings at least four times a year. Corporate Governance General The Company intends to observe the requirements of the UK Corporate Governance Code. The UK Corporate Governance Code was published by the UK Financial Reporting Council in May 2010 to replace the Combined Code, and applies to financial years beginning on or after 29 June 2010. Therefore the new UK Corporate Governance Code applies to the Company for its financial year beginning on 1 January 2011 and the Company will observe the new codes requirements as applicable. As at the date of this document, the Company is in compliance with the UK Corporate Governance Code, save that the Chairman, Indra Bakrie, was not independent, within the criteria of Code Provision B.1.1, on the date of his appointment as a result of his interest in the Bakrie Group. As envisaged by the UK Corporate Governance Code, the Board has established three committees: the audit and risk committee, the nominations committee and the remuneration committee. The Board has also established two further committees the conflicts committee and the health, safety and environment committee. Audit and Risk Committee The Audit and Risk Committee, which comprises Lord Renwick (as chairman), Sir Graham Hearne, Steven Shapiro, Wibowo Suseno Wirjawan and Sony B. Harsono, will be responsible, amongst other things, for making recommendations to the Board on the appointment of auditors and the audit fee, monitoring and reviewing the integrity of the Companys financial statements and any formal announcements on the Companys financial performance as well as reports from the Companys auditors on those financial statements. In addition, the Audit and Risk Committee will review the Companys internal financial control and risk management systems to assist the Board in fulfilling its responsibilities relating to the effectiveness of those systems, including an evaluation of the capabilities of such systems in light of the expected requirements for any specific acquisition target. The Audit and Risk Committee will meet at least four times a year, or more frequently if required. Nominations Committee The Nominations Committee, which comprises Sir Julian Horn-Smith (as chairman), Philip Yeo, Lord Renwick, Amir Sambodo and Wibowo Suseno Wirjawan, will be responsible for assisting the Board in determining the composition and make up of the Board. It is also responsible for periodically reviewing the Boards structure and identifying potential candidates to be appointed as Directors, as 178

the need may arise. The Nominations Committee also determines succession plans for both Executive Directors and Non-Executive Directors, in particular the Chairman and Chief Executive, and reviews annually the time required from Non-Executive Directors. The Nomination Committee will meet at least twice a year and whenever necessary to fulfil its responsibilities. Remuneration Committee The Remuneration Committee, which comprises Sir Graham Hearne (as chairman), Sir Julian Horn-Smith, Amir Sambodo and Wibowo Suseno Wirjawan will be responsible for recommending what policy the Company should adopt on executive remuneration, determining the levels of remuneration for each of the Executive Directors and recommending and monitoring the remuneration of members of senior management (as relevant). The Remuneration Committee will also generate an annual remuneration report to be approved by the members of the Company at the annual general meeting. The Remuneration Committee will normally meet not less than twice a year. Conflicts Committee The Conflicts Committee, which comprises Steven Shapiro (as chairman), Lord Renwick, Philip Yeo, Sony B. Harsono and Wibowo Suseno Wirjawan, will consist of Independent, Non-Executive Directors and be responsible for resolving conflicts concerning the Directors, including but not limited to potential conflicts arising from personal investment activities, other professional activities (such as directorships with third parties) and related party transactions involving the Company, any Director or senior executive. Any significant related party transactions will be referred to the Conflicts Committee. The Conflicts Committee will meet on an ad hoc basis as frequently as required. Health, Safety and Environment Committee The Health, Safety and Environment Committee comprises Amir Sambodo (as chairman), Philip Yeo, Sony B. Harsono and Tony Redman as a technical advisor. The key purpose of the committee is based upon the Leadership Actions for Directors and Board Members Guidance issued by the Institute of Directors and the CBI in 2007 and specifically enhanced in order to make reference to the management of asset integrity and major hazard risk management. It is responsible for developing and regularly reviewing the EHS Policy including examining whether the EHS Policy reflects the Companys current priorities, plans and targets and whether asset integrity, major hazard risk management and other health, safety and environmental management systems have been effectively reported to the Board. Operational managers responsible for the implementation of the EHS Policy on site will report as requested to the committee. The Health, Safety and Environment Committee will normally meet not less than three times a year. Model Code As at the date of this document, the Board has voluntarily adopted the Model Code for directors dealings contained in the Listing Rules of the UK Listing Authority. The Board will be responsible for taking all proper and reasonable steps to ensure compliance with the Model Code by the Directors. Compliance with the Model Code is being undertaken on a voluntary basis. As the Model Code only applies to companies with a Premium Listing, the FSA will not have the authority to (and will not) monitor the Companys voluntary compliance with the Model Code, nor to impose sanctions in respect of any failure by the Company to so comply. Premium Listing The Directors intend to seek a Premium Listing for the Company on the Official List. Following such a Premium Listing, the Company would comply with the continuing obligations contained within the Listing Rules in the same manner as any other company with a Premium Listing. Anti-bribery Vallar maintains an anti-corruption policy and all executives of the Company have, or will by Completion have, certified that they have read and will comply with that policy and the Group also intends to implement other safeguards and programs across its business, including anti-corruption training programs, designed to prevent the occurrence of fraud, bribery and corruption.

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PART VII OPERATING AND FINANCIAL REVIEW

Part A: Matters Relevant to the Vallar Accounts Going Forward Basis of Presentation For information about how Vallar will reflect the Acquisition in the Groups consolidated financial statements prepared in accordance with IFRS, see Presentation of Financial and Other Information Presentation of Financial Information. Critical Accounting Judgements The preparation of the Bumi Resources Groups and the Berau Groups consolidated financial statements requires, and the preparation of the Groups consolidated financial statements will require, the use of estimates and assumptions to determine the value of assets and liabilities, and contingent assets and liabilities at the statement of financial position date, and revenues and expenses reported during the period. Due to uncertainties inherent in the estimation process, management regularly revises its estimates in light of currently available information. Final outcomes could differ from those estimates. The main estimates used in preparing Bumi Resources Groups and the Berau Groups consolidated financial statements, which will also be used in preparing the Groups consolidated financial statements, are presented below. Measurement of the Fair Value of Assets Acquired and Liabilities Assumed Certain assumptions are used to measure the fair value of assets acquired and liabilities assumed, most notably on the recent business combinations of (i) in relation to the Bumi Resources Group, Herald, PCL and Pendopo Coal Ltd and (ii) in relation to the Berau Group, Winchester Investment Holdings PLC (Winchester) and Aries Investment Limited (Aries). These estimations include values assigned to the estimated future coal or minerals prices, the market outlook for the measurement of future cash flows, and the applicable discount rate. These assumptions reflect managements best estimates at the date of the acquisition. These assumptions are also expected to be used in relation to the fair value of assets acquired and liabilities assumed in the Acquisition. Determination of Coal Reserve Estimates Except for the Bumi Resources Groups coal reserves in the Loa Ulung mine operated by Fajar Sakti, the Bumi Resources Group and the Berau Group report their coal reserves in accordance with the 2004 JORC Code, prepared and published by the JORC. Under the 2004 JORC Code, the term coal resource refers to a concentration or occurrence of coal of intrinsic economic interest in or on the Earths crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a coal resource are known, estimated or interpreted from specific geological evidence and knowledge. Coal resources are subdivided, in order of increasing geological confidence, into inferred, indicated and measured categories. The term coal reserve is defined in the 2004 JORC Code as the economically mineable part of a measured and/or indicated coal resource. Coal reserves are subdivided in order of increasing confidence into probable coal reserves and proved coal reserves. Reserves, and for certain mines, other mineral resources, determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine stripping ratios and for forecasting the timing of the payment of close-down and restoration costs and clean-up costs. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction within the term of the CCOW or licence.

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There are numerous uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in changes to reserve estimates. Recoverable Amount of Property, Plant and Equipment and Intangible Assets The recoverable amount of goodwill, other intangible assets and property, plant and equipment is based on estimates and assumptions regarding in particular the expected market outlook and future cash flows associated with the assets. Estimated future cash flows include estimates of future costs to produce proven and probable reserves, future commodity prices and discount rates. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in adjustments to the impairment expenses already booked. Provision for Environmental Rehabilitation Parameters having a significant influence on the amount of provisions relating to environmental rehabilitation include the timing of expenditure and the discount rate applied to cash flows, as well as the actual level of expenditure. These parameters are based on information and estimates available to management at the current time. The amounts required to be provided for environmental remediation are also subject to ongoing regulatory change in Indonesia, subsequent to the issuance of the 2009 Mining Law. As the Government of Indonesias implementation of new requirements becomes clearer, there may be a need to revise estimates for the environmental rehabilitation provision. As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in ore reserves or production rates. As a result there could be significant adjustments to the provision for close-down and restoration and environmental clean up, which would affect future financial results. Capitalisation and Deferral of Stripping Costs Stripping costs incurred during the production stage of operations are deferred when the actual stripping ratio for a specific period exceeds the expected stripping ratio over the life of the mine or pit (the life of mine ratio). Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the current period ratio falls below the life of mine ratio. The life of mine ratio is based on proved and probable reserves of the mine and is also highly dependent on the design of the mine and on the technical and economical parameters assumed over the life of the mine. Management regularly reviews the life of mine ratios. Part B: Operating and Financial Review of the Bumi Resources Group Purchasers of Ordinary Shares should read the following discussion and analysis of the Bumi Resources Groups financial condition and results of operations in conjunction with the Bumi Resources Groups consolidated financial statements and the related notes included in Part IX Financial Information. In general, the financial results discussed below relate to the Bumi Resources Groups consolidated financial data. This discussion contains forward-looking statements that reflect the Directors current views with respect to future events and financial performance. The Bumi Resources Groups actual results may differ materially from those anticipated in these forward-looking statements as a result of factors such as those set forth under Risk Factors and elsewhere in this document. See Presentation of Financial and Other Information Forward-Looking Statements. The Bumi Resources Groups consolidated financial statements are reported in US dollars and have been prepared in accordance with IFRS. The discussion below is of the Bumi Resources Groups financial results and condition on a consolidated basis. However, as discussed above under Part A Matters Relevant to the Vallar Accounts Going Forward Basis of Presentation of this Part VII Operating and Financial Review, in accordance with IAS 28 Investments in Associates, the Company will account for its 25 per cent. interest in Bumi Resources under the equity method in the Groups consolidated financial statements. Therefore, the

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Group will not consolidate the Bumi Resources Groups consolidated financial statements in the Groups consolidated financial statements. Instead, the Group will, among other things, only record the Companys proportionate share of the net profit or loss of Bumi Resources in the Groups consolidated income statement and the Group will be entitled to receive any cash flows generated by the Bumi Resources only to the extent that they are distributed to the Company. Any such dividends will be received only in proportion to the Companys 25 per cent. interest in Bumi Resources. Certain of the Bumi Resources Groups debt instruments also place limitations on the amount of such dividends. See paragraph 18 The Bumi Resources Groups Material Contracts Financing Arrangements in Part XII Additional Information. In this Part B, production and sales are shown on a total and attributable basis: Total production and sales are equal to the total production or sales, respectively, from a particular mine or operation for the relevant period regardless of ownership of that mine or that operation. Therefore, total production and sales include the interests of Tata and KTS in the IndoCoal Group Companies, including Arutmin and KPC. Attributable production and sales are total production or sales less production or sales, respectively, attributable to the interests of joint venture partners, including the interests of Tata and KTS in the IndoCoal Group Companies. Therefore, attributable production and sales include only 70per cent. of Arutmins and 65per cent. of KPCs production and sales.

Overview The Bumi Resources Group derives substantially all of its revenue from the sale of coal. The Directors believe that the Bumi Resources Group is the largest thermal coal producer in Indonesia, producing approximately 21.8 per cent. of Indonesias total coal production in 2010 on a gross basis (according to statistics released by the MEMR in January 2011), and the largest coal exporter in Indonesia. Through KPC and Arutmin, the Bumi Resources Group has rights under two 30-year concessions from the Indonesian Government until 2019 and 2021, respectively, to mine coal within concession areas in Kalimantan. Under the terms of the KPC and Arutmin CCOWs, the Indonesian Government is entitled to 13.5 per cent. of the Bumi Resources Groups coal production. On an attributable basis, in 2008, 2009, the first nine months of 2009 and the first nine months of 2010, KPC and Arutmin produced 33.4 million tonnes, 37.9 million tonnes, 27.3 million tonnes and 29.6 million tonnes of coal, respectively, a substantial portion of which they exported to their primary customers in Asia. All of KPCs and Arutmins export coal sales are priced, invoiced and paid in US dollars and a substantial portion of its cost of sales and operating expenses are denominated and payable in US dollars, or are based on US dollar-denominated prices. For the years ended 31 December 2008 and 2009, the first nine months of 2009 and the first nine months of 2010, the Bumi Resources Groups total revenue was US$2,630 million, US$2,451 million, US$1,772 million and US$2,097 million, respectively. For the years ended 31 December 2008 and 2009, the first nine months of 2009 and the first nine months of 2010, the Bumi Resources Groups profit for the period was US$342 million, US$338 million, US$81 million and US$396 million, respectively. A number of developments since 30 September 2010 have affected the Bumi Resources Groups financial condition, cash flows, debt leverage, liquidity and capital resources and are expected to continue to affect its financial condition, cash flows, debt leverage, liquidity and capital resources through the end of 2010. For a discussion of these developments, see Liquidity and Capital Resources Developments in the Bumi Resources Groups Liquidity and Capital Resources Position Since 30 September 2010 in this Part VII Operating and Financial Review. Factors Affecting the Bumi Resources Groups Business and Results of Operations The Bumi Resources Groups business and historical financial condition and results of operations have been affected by a number of important factors, some of which the Directors believe will continue to affect the Bumi Resources Groups financial condition and results of operations in the future. Production and Expansion The Bumi Resources Groups sales revenue is based primarily on the amount and prices of coal the group produces and sells within each period. The Bumi Resources Groups coal production volumes are based primarily on the performance of its mining contractors and, at KPC, owner-operated mining activities, and is limited by the coal handling capacities of the Bumi Resources Groups coal chains. 182

KPC and Arutmin increased their total production of coal from 52.1 million tonnes in 2008 to an estimated 60.4 million tonnes in 2010 and their attributable production of coal from 33.4 million tonnes in 2008 to an estimated 40.3 million tonnes in 2010. The Bumi Resources Group achieved these production increases through increased mining by mining contractors, expansion of its owner operations at KPC, the ramping up and expansion of mining at the Bengalon mine and enhancements to the groups coal chains, particularly at the Sangatta mine. The Bumi Resources Group plans to significantly expand the production of coal at KPC and Arutmin over the next few years. Under its current mine plans, the Bumi Resources Group intends to expand annual total coal production capacity at KPC and Arutmin to approximately 81.0 million tonnes in 2011. For a description of the expansion program for KPC and Arutmin, see Coal Mining Business Expansion Programs in Part IV Information on the Bumi Resources Group. Global Coal Price Fluctuations Fluctuations in global coal prices have affected, and will continue to affect, the Bumi Resources Groups results of operations and cash flows from operating activities. Prices for the Bumi Resources Groups coal are based on global coal prices, which tend to be highly cyclical and subject to significant fluctuations. As coal is a commodity product, global coal prices depend principally on the supply and demand dynamics of the world coal export markets. These markets are highly competitive and are sensitive to changes in mining output (including the opening and closing of new mines, the discovery of new deposits and the expansion of operations at existing mines), disruptions in coal distribution (such as severe rainy weather in Queensland, Australia, power shortages in South Africa and severe weather in China), the demands of coal end-users (such as electricity generation plants and industrial facilities), and global economic changes, all of which affect the Bumi Resources Groups selling prices and, therefore, its results of operations and cash flows. In addition, increases in global coal prices may encourage the development of expanded capacity by other coal producers. A surplus of available coal supplies would reduce global coal prices and the prices the Bumi Resources Group receives for its coal sales to customers under new coal supply agreements and in spot sales. Coal prices steadily increased from the fourth quarter of 2003 until the third quarter of 2008. However, after showing significant decreases from the third quarter of 2008 through the second half of 2009, coal prices stabilised and have been gradually increasing throughout 2010 and the beginning of 2011. In the second half of 2009 and the first nine months of 2010, prices of coal produced in the Asia Pacific region, including the Bumi Resources Groups coal products, were heavily influenced by domestic Chinese coal prices and Chinas coal demand, which generally increased during these periods. In 2008 and 2009, the weighted average realised price per tonne of coal for all coal products produced by KPC and Arutmin was US$73.33 and US$62.90, respectively. In the first nine months of 2010, the weighted average realised price per tonne of coal for all coal products produced by KPC and Arutmin was US$69.28, compared to US$63.30 in the first nine months of 2009. Any slowdown in the coal demand of China would likely adversely affect the Bumi Resources Groups coal prices and, therefore, its revenue. The Bumi Resources Group has attempted to mitigate its exposure to fluctuations in global coal prices through coal supply agreements with its customers under which the group fixes the prices paid by customers for twelve-month periods. The Bumi Resources Groups policy has been to enter into coal supply agreements for a substantial portion of the groups anticipated coal production. As of 31 December 2010, KPC and Arutmin had contracted to sell 11.3 million tonnes of coal in 2011 at a weighted average price of US$90.57 per tonne. The Bumi Resources Group has typically entered into price adjustment agreements with its customers in the first quarter of each year. In 2008, 2009 and the first nine months of 2010, approximately 80.2 per cent., 79.2 per cent. and 80.6 per cent., respectively, of the coal sales volumes of KPC and Arutmin were based on coal supply agreements with terms of one year or more, with the remainder made in spot sales. Although the Directors believe that these coal supply agreements have provided greater stability and predictability to the Bumi Resources Groups revenue streams and cash flows from operating activities, its sales made under their long-term coal supply agreements have in the past been, and in the future may be, made below prevailing market prices at the time of the sale. Due to the Bumi Resources Groups policy of setting prices for twelve-month periods under its coal supply agreements, changes in its sales revenue and weighted average realised prices generally lag increases or decreases in global coal price fluctuations across periods.

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Changes in Gross Profit Margins and Operating Margins A substantial portion of its cost of sales and operating expenses for coal operations are variable at a fixed rate per tonne based on the amount of coal the Bumi Resources Group produces, rather than based on its coal selling prices. As a result, the Bumi Resources Groups gross profit margins and operating margins are dependent upon the coal sales prices the Bumi Resources Group receives and fuel costs, which are affected by global fuel prices, during the relevant periods, and can fluctuate significantly from period to period. For the years ended 31 December 2008 and 2009, the first nine months of 2009 and the first nine months of 2010, the Bumi Resources Groups gross profit margins were 41.6 per cent., 35.5 per cent., 39.1 per cent. and 36.0 per cent. respectively, and its operating margins were 28.5 per cent., 35.4 per cent., 29.9 per cent. and 36.5 per cent., respectively. Changes in Product Mix; Weighted Average Realised Prices The Bumi Resources Groups product mix and weighted average realised prices have been, and will continue to be, affected by its blending strategy. The Bumi Resources Group blends various grades of coal during processing in order to meet its customers specifications and to take advantage of price differentials between the premium typically received for higher-quality, higher-priced bituminous coal products and the discount typically applied to lower-quality, lower-priced sub-bituminous coal products. The Bumi Resources Group formulates its blending strategies annually as part of its marketing plans, taking into account customer demand for its various coal products, its commitments for various grades of coal based on existing commitments, its current mine plans, the expected costs to produce its various coal products in future periods based, in part, on factors such as the anticipated strip ratio, and the differential between the premium for bituminous coal and the discount for sub-bituminous coal in the global coal markets. The Bumi Resources Group can increase its profit margins for lower-quality, lower-priced sub-bituminous coal products by blending them with higherquality, higher-priced bituminous coal products. The Bumi Resources Group blends Melawan coal, which currently requires relatively lower production cost, with Prima coal, which currently requires relatively higher production cost, to produce and sell higher quantities of the resulting blend, Pinang grade coal, thereby increasing the Bumi Resources Groups profit margin on its coal products. Over the last five years, the Bumi Resources Group increased its blending of Prima coal with Melawan coal to produce Pinang grade coal to satisfy higher demand for Pinang grade coal and minimise the pricing discount applied to sales of lower-grade Melawan coal. Due to the Bumi Resources Groups blending of Prima and Melawan coals in different ratios to make various qualities of Pinang coal in line with contract requirements, production of Prima coal and Melawan coal increased during these periods compared to prior periods, but sales volumes of Prima coal declined and sales volumes of Melawan coal did not increase proportionately. The Bumi Resources Groups weighted average realised prices have fluctuated, and will continue to fluctuate, due to changes in the product mix among the Bumi Resources Groups coal brands, in addition to fluctuations in global coal prices. The Bumi Resources Group expects that, as production increases and sales of lower-priced sub-bituminous coal namely, Melawan coal at KPC and Ecocoal at Arutmin, and sales of sub-bituminous coals represent a larger percentage of total coal sales volumes, the Bumi Resources Groups weighted average realised prices will be lower. The Bumi Resources Group is in discussions with several large potential customers of Ecocoal, including some large Indonesian electricity generating companies for new sales contracts. In addition, on 15 December 2006, a consortium comprising Arutmin and Darma Henwa entered into a memorandum of understanding with PLN for the sale of a significant amount of Ecocoal to 13 coal-fired steam power generation plants owned by PLN for a period of 20 years, subject to entering into binding sales contracts with this customer. As of 30 September 2010, in connection with this memorandum of understanding with PLN, the consortium had entered into ten long-term coal supply agreements for the supply of a total of 7.4 million tonnes of Ecocoal to ten coal-fired steam power generation plants owned by PLN for a period of 20 years. As a result of these sales contracts with PLN, the Bumi Resources Group expects to substantially increase its production and sale of Ecocoal. Substantial sales of lowerpriced Ecocoal will cause its weighted average realised prices for future periods to be lower than if a higher proportion of its sales were from higher-quality, higher-priced bituminous coals. Treatment of Coal Sales for the Indonesian Government Under the terms of the Bumi Resources Groups CCOWs, the Indonesian Government is entitled to 13.5 per cent. of the coal production of KPC, Arutmin and Pendopo Energi. Rather than deliver coal to the Indonesian Government, KPC and Arutmin market and sell the Indonesian Governments coal 184

entitlement on the Indonesian Governments behalf and pay the Indonesian Government the cash proceeds less certain charges. Fajar Sakti is required to pay the Indonesian Government a royalty of 6 to 7 per cent. of the total production of the Loa Ulung mine. Pendopo Energi intends to enter into arrangements with the Indonesian Government similar to those between the Indonesian Government and KPC and Arutmin when Pendopo Energi commences the sale of coal. In the Bumi Resources Groups financial statements, sales include the proceeds of the sales of the Indonesian Governments entitlement, and the cash payments made by KPC and Arutmin to the Indonesian Government, being 13.5 per cent. of the proceeds derived from the final sale of coal, less charges for expenses and administrative fees, is included in its cost of sales. The Bumi Resources Group sets off KPCs and Arutmins unreimbursed value-added tax payments, for which they are entitled to be indemnified under their CCOWs, against their cash payments to the Indonesian Government. However, the value-added tax recoverable and the royalty payable are presented gross in the Bumi Resources Groups consolidated balance sheets to reflect the amounts recoverable from different government departments. For a discussion of the risks associated with this offsetting, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government and Risks Relating to the Groups Operations The Bumi Resources Group and Berau Coal are paying the Indonesian Government cash equal to 13.5 per cent. of the proceeds of coal sales instead of delivering coal. If the Indonesian Government chooses to require delivery of coal instead of cash, this could result in Berau Coal defaulting on its delivery requirements with other customers in Risk Factors. Trends in Mining Strip Ratios The Bumi Resources Groups costs of coal production, particularly the fees charged by its contractor miners, are affected by the strip ratios, its contract miners and, at KPC, its own operations face in extracting coal from the mine pits. A strip ratio is the number of banked cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal. Higher strip ratios require mining contractors and the Bumi Resources Group in its owner operations to remove higher amounts of overburden to access coal for mining, resulting in higher production costs. As the Bumi Resources Group mines new areas, its strip ratios will vary depending on the geological characteristics of the coal seams mined. Where possible, the Bumi Resources Group mines at higher strip ratios when global coal prices increase in order to maximise the recoveries from its coal reserves. The average strip ratio for all of the mines of KPC and Arutmin has increased in recent periods to take advantage of higher global coal prices, particularly at the Sangatta, Senakin and Satui mines, as they have mined coal in new areas at these mines with higher strip ratios that require the removal of more overburden and therefore higher production costs. Increased rainfall compared to historical norms have also contributed to the increases in the average strip ratio of KPC and Arutmin in the recent periods. During periods of flooding, mining operations are focused on removing more overburden at the top of the mine, because the run-off of rain to the bottom of the pit prevents the extraction of coal. This increases average strip ratios. For the years ended 31 December 2008 and 2009, the first nine months of 2009 and the first nine months of 2010, the average strip ratio at the mines operated by KPC and Arutmin were 9.39, 10.43, 11.06 and 10.76, respectively. While the Bumi Resources Group expects that the average strip ratios of KPC and Arutmin will increase in the near term as they undertake development of new areas in their mines to expand their coal production, the average strip ratio over the remaining term of the Bumi Resources Groups concessions at KPC and Arutmin is expected to decrease. If average strip ratio were to increase in the future, the Bumi Resources Group would face increasing coal production expenses, primarily higher contractor fees and higher production expenses in its owner operations. Mining Contractor Expenses The Bumi Resources Group conducts a substantial portion of its mining operations through contract mining operators. Because the Bumi Resources Groups mining contractors are responsible for providing substantially all of the equipment, machinery, supplies and labour and an agreed portion of the plant necessary to mine the designated pits, the Bumi Resources Group is not required to make significant capital expenditures for those operations and, given that the Bumi Resources Group generally only pays its contractors based on the amount of coal delivered (with the accounts payables related to such payments being of a longer term than accounts receivables related to customers), is not expected to require significant working capital for future production expansion in those mining areas. The Bumi Resources Groups contractor fees are based, in part, on the strip ratio for areas mined by its contractors during the period. These fees generally increase as the contractors produce coal in mining 185

areas experiencing higher strip ratios. As a result, the Bumi Resources Groups cost of sales attributable to mining contractors, as a percentage of its total cost of sales, have fluctuated and will continue to fluctuate, in part, based on the strip ratios experienced by its mining contractors to mine coal in areas under their control. Payments to mining and other contractors constitute a significant portion of the Bumi Resources Groups cost of sales. Given the Bumi Resources Groups expected decrease in its use of contract mining companies and other contractors due to greater emphasis on its owner operations in its expansion programs going forward, the Bumi Resources Groups cost of sales attributable to mining and other contractors, as a percentage of total cost of sales, are expected to decrease in future periods, while its cost of sales attributable to its own mining activities, as a percentage of total cost of sales, are expected to increase. Furthermore, due to the 2009 Mining Law and its implementing regulations, the Bumi Resources Group may be required to amend its existing mining agreements with mining contractors under which those mining contractors undertake coal-digging, extraction and loading activities prior to 30 September 2012 to the extent that Regulation 28/2009 remains in force in its current form. For a discussion of the risks associated with 2009 Mining Law, see Risks Relating to the Groups Operations The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects. For a discussion of the risks associated with the Groups dependency on contractors, see Risk Factors Risks Relating to the Groups Operations A significant portion of the Groups coal production is, and will continue to be, conducted through contractors in Risk Factors. Cost of Fuel and Explosives Fuel costs comprise a significant portion of the Bumi Resources Groups non-contractor expenses. Under its operating agreements with its contractors, the Bumi Resources Group has agreed to supply fuel to its mining contractors at a fixed price. As a result, the Bumi Resources Group has assumed the risk of price increases. Similar to other Indonesian coal-mining companies, the Bumi Resources Group purchases its fuel requirements from Pertamina, Indonesias state-owned petroleum supply company, or elsewhere at global oil market prices. Fuel costs, which began to drop after the third quarter of 2008 due to the decreases in world oil prices, have been increasing since the third quarter of 2009. Any new significant increases in the price of fuel would cause a corresponding increase in the Bumi Resources Groups production costs in future periods. Furthermore, as the Bumi Resources Group increases its production under the expansion programs, its fuel requirements and costs are expected to likewise increase. The Bumi Resources Group has not historically and does not currently hedge its exposure to fuel price risk or the corresponding coal price increase that generally track fuel price increases. Costs of explosives also comprise a significant portion of the Bumi Resources Groups non-contractor expenses. Due to a worldwide shortage of explosives, global prices for explosives and the Bumi Resources Groups costs for explosives have increased since the second quarter of 2004. The prices of explosives declined significantly during the global financial crisis from mid-2008 to early 2009, but have since stabilised and generally increased in the first nine months of 2010. Any further significant increases in the price of explosives would cause a corresponding increase in the Bumi Resources Groups production costs in future periods. The Bumi Resources Group is implementing a number of projects that are expected to reduce its fuel costs in relation to the transport of coal as well as truck maintenance and spare parts costs, including the construction of a coal crusher and a nine-kilometre overland belt conveyor at KPC from the Melawan deposit in the west to the existing Sangatta overland belt conveyor and the construction of another coal crusher and an approximately 11-kilometre overland belt conveyor from the Inul mining area in the north to the start of the Sangatta overland belt conveyor. For information about these projects, see Coal Mining Business Expansion Projects in Part IV Information on the Bumi Resources Group. Cost Related to Mining Equipment, Machinery and Spare Parts The Bumi Resources Groups contract miners are responsible for obtaining all of the equipment and machinery necessary to mine the areas under their operational control. The Bumi Resources Group, however, conducts a substantial portion of its own mining activities at the Sangatta mine at KPC by operating its own fleet of mining equipment and machinery and coal chain. The Bumi Resources Group

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also operates its own port at the North Pulau Laut coal terminal at Arutmin. In late 2004 and early 2005, the Bumi Resources Group embarked on a program to modernise, replace and expand its mobile mining equipment fleet, including excavators, bulldozers and coal hauling trucks. Rather than purchasing this new mining equipment, due to the limitations on capital expenditures contained in its then existing financing arrangements, the Bumi Resources Group entered into a number of operating leases with equipment suppliers. In addition, the Bumi Resources Group has upgraded some of the machinery in its coal chain at the Sangatta mine. From late 2003 to 2008, due to a worldwide shortage of steel and rubber (used for tyres), prices for mining equipment, machinery and related spare parts, and rental payments for operating leases of that equipment and machinery, increased significantly. Since the Bumi Resources Group entered into these operating leases in early 2005, the relative costs for entering into these new equipment and machinery leases have been comparatively higher than historical costs for similar equipment. As a result, the Bumi Resources Groups production costs attributable to its owner-operations increased from 2006 onwards as rental payments for this new equipment and machinery were made. While global prices for rubber declined in 2008, they have been increasing since the beginning of 2009. While steel prices have declined from their highs in 2008, some traders and analysts suggest that steel prices could spike to record levels if Australias recent heavy rains continued to disrupt coking coal supplies, forcing steelmakers to cut production. For example, global steel prices increased a third between the middle of November 2010 and the middle of January 2011. If a worldwide shortage of steel and rubber reoccurs leading to increases in global steel and rubber prices, the cost of replacing or adding equipment and machinery to the Bumi Resources Groups operations and the cost of spare parts, particularly tyres, could increase, thereby increasing its costs of coal production. Sales and Freight Expenses The Bumi Resources Group sells coal to its customers under FOB, CIF, C&F and other shipping and payment terms depending on the coal supply agreement. For sales on an FOB basis, the customer is responsible for the payment of the freight and insurance expenses related to the shipment and Bumi Resources record the sales amount net of all freight and insurance costs. For sales on CIF or C&F terms, the Bumi Resources Group includes the cost of freight and insurance, as the case may be, in the sales amount the group records for determining its sales and records the freight and insurance costs as selling, marketing and other operating expenses. As a result of the inclusion of freight and insurance costs in the coal sales price for CIF and C&F sales, any increase in the percentage of CIF and C&F sales the Bumi Resources Group makes in the future will lead to an increase in sales revenue and a corresponding increase in the freight costs and insurance costs, included in the groups selling, marketing and other operating expenses. However, because the Bumi Resources Group pays marketing commissions on the sales price of its coal, any percentage increase in CIF and C&F sales will result in higher marketing commissions, and the commission attributable to that portion of the sales price resulting from the freight and insurance costs are an additional expense for the group. The Bumi Resources Groups policy is to minimise its CIF and C&F sales to the extent it is able, subject to its customers requests. Marketing Commissions The Bumi Resources Group markets its export sales of coal through international marketing agents. Under the terms of the agreements with international marketing agents, the Bumi Resources Group is obligated to pay its marketing agents a marketing commission based on the net sales value or total sales proceeds (which includes freight and insurance for sales made on a CIF or C&F basis) on each sale. The Bumi Resources Group pays a marketing commission of 5.0 per cent. on the net sales value on each sale of KPCs coal made through Glencore Mauritius and Mitsubishi and 4.0 per cent. of the sales proceeds on each sale of Arutmins coal made through BHP Billiton or through Enercorp. Upon the expiry of KPCs marketing agreement with Glencore Mauritius in October 2015 and the expiry of Arutmins marketing agreement with BHP Marketing in November 2011, under new marketing agreements the Bumi Resources Group has entered into with affiliates of Glencore, the Bumi Resources Group will pay a marketing commission of 2.5 per cent. with respect to the marketing services currently provided by Glencore Mauritius to KPC and by BHP Marketing to Arutmin. Since the marketing commissions Bumi Resources pays are based on the net sales value or total sales proceeds (which include freight and insurance), any increase in the Bumi Resources Groups CIF and C&F sales will result in an increase in marketing commissions paid. The Bumi Resources Groups policy is to minimise its CIF and C&F sales to the extent it is able, subject to its customers requests, to reduce the commissions paid to its marketing agents. 187

Fair Value Adjustments of Derivative Instruments Embedded derivatives, including early redemption and prepayment options within debt instruments, have been identified by the Bumi Resources Group and recognised at fair value in the Bumi Resources Groups consolidated financial statements prepared in accordance with IFRS and included in Part IX Financial Information. Under the Bumi Groups previously published consolidated financial statements prepared under Indonesian GAAP, the Bumi Resources Group was not required to recognise these embedded derivatives. In the Bumi Resources Groups consolidated financial statements prepared in accordance with IFRS, derivatives are classified as trading investments and do not qualify for hedge accounting. Derivatives are classified as current assets or liabilities and include both stand alone derivatives and derivatives embedded in other contracts that have been accounted for separately. Derivative liabilities represent the fair value of embedded derivatives in convertible bonds issued by the Bumi Resources Group. The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets at which these are carried in the balance sheet. For information on the Groups derivative liabilities and assets, including the principal derivatives entered into by the Bumi Resources Group as of 31 December 2009, see Note 19 to the Bumi Resources Groups IFRS Consolidated Financial Information at 31 December 2009 and 2008 included in Part IX Financial Information. For a comparison of the carrying amount with the fair value of derivative instruments held by the Group as of 31 December 2009, see Note 19(b) to the Bumi Resources Groups IFRS Consolidated Financial Information at 31 December 2009 and 2008 included in Part IX Financial Information. Incurrence of Indebtedness for the Advance of the Bukit Mutiara Loan and the Purchase of MDBs 24.0 per cent, Interest in NNT and the Refinancing of Part of the Bumi Resources Groups Indebtedness in the Third Quarter of 2010 From November 2009 to March 2010, the Bumi Resources Group incurred additional indebtedness of approximately US$1,200.0 million to fund two series of transactions undertaken during this period. First, on 2 November 2009, the Bumi Resources Group entered into a US$300 million loan agreement with Mutiara, under which it agreed to grant a loan facility in the principal amount of up to US$300 million (the Mutiara Loan) to Mutiara in connection with the acquisition by Mutiara of an indirect 90.0 per cent. interest in Berau Coal. The amortised cost of this loan as at 30 September 2010 was US$249 million. Second, through Bumi Resources 75 per cent.-owned subsidiary MDB, the Bumi Resources Group entered into two sale and purchase agreements to purchase an indirect interest of 24.0 per cent., resulting in an effective interest of 18.0 per cent., in NNT for consideration in the amount of US$884 million. This acquisition completed in November 2009. See Other Business Activities US$300.0 Million Loan to Mutiara and Other Businesses Non-Coal Minerals Mining Businesses Multi Daerah Bersaing 24.0 per cent. Interest in PT Newmont Nusa Tenggara in Part IV Information on the Bumi Resources Group. The indebtedness the Bumi Resources Group incurred to finance these two transactions included all or a portion of the indebtedness Bumi Resources incurred under the US$300.0 Million CS Facility, the 12% Guaranteed Senior Secured Notes, the 5 per cent. Convertible Bonds, the US$150.0 Million JPMorgan Chase Facility, and short-term loans that were refinanced through the incurrence of the 2010 MDB-CS Facility. The Bumi Resources Group used the net proceeds of this indebtedness to fund the Bukit Mutiara Loan and the purchase of MDBs 24.0 per cent. interest in NNT, in the form of equity contribution in Green Resources and advances to MDB under the facility agreement between Bumi Resources and MDB dated 16 November 2009. The incurrence of this indebtedness has contributed to the substantial increase of the Bumi Resources Groups interest expense and finance charges in the first half 2010. For information about Bumi Resources Groups repayment and refinancing of indebtedness in the third quarter of 2010, see Developments in the Bumi Resources Groups Liquidity and Capital Resources Position since 30 September 2010. Mutiara has agreed to use the US$100 million remaining balance of the cash consideration to be received under the Berau Share Purchase Agreement at the completion of the Berau Resources Transaction to repay part of the Bukit Mutiara Loan. See Overview in Part I The Acquisition.

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IndoCoal Shareholders Agreement The Bumi Resources Group investments in the IndoCoal Group Companies pursuant to the IndoCoal Shareholders Agreement between Bumi Resources and Tata as joint venture partners meet the definition of jointly controlled entities under IAS 31 Interests in Joint Venture. As a result, the IndoCoal Group Companies are recorded under the Bumi Resources Groups consolidated financial statements prepared in accordance with IFRS and included in Part IX Financial Information of this document using the proportionate consolidation method. Under the proportionate consolidation method, Bumi Resources recognises in the Bumi Resources Groups consolidated financial statements prepared in accordance with IFRS the Bumi Resources Groups share of the joint assets of the IndoCoal Group Companies, any liabilities that the Bumi Resources Group incurs directly and its share of any liabilities incurred jointly with the Tata and KTS, income from the sale or use of the Bumi Resources Groups share of the output of the IndoCoal Companies, its share of expenses incurred by the IndoCoal Companies and expenses incurred directly in respect of its interest in the joint venture with Tata. Under the Bumi Resources Groups previously published financial statements under Indonesian GAAP, the IndoCoal Group Companies were treated as subsidiaries. For more information about the IndoCoal Shareholders Agreement, see paragraph 18 The Bumi Resources Groups Material Contracts Agreements Between the Bumi Resources Group Members and Tata IndoCoal Shareholders Agreement in Part XII Additional Information. Therefore, the IndoCoal Companies were fully consolidated in the Bumi Resources Groups consolidated financial statements prepared in accordance with Indonesian GAAP, with the interest of Tata, as the minority shareholder in the IndoCoal Group Companies, and KTS being presented under Minority interests in net assets of consolidated subsidiaries in the Bumi Resources Groups consolidated balance sheet prepared in accordance with Indonesian GAAP and under Minority interests in net income or loss of consolidated subsidiaries in the Bumi Resources Groups consolidated financial statements prepared in accordance with Indonesian GAAP. Segment Data The Bumi Resources Group operates in three core business segments: Coal, Minerals and Others. The Coal Mining segment consists of the exploration, development, mining, delivering and marketing of coal as well as mine contracting and infrastructure related to mining. The Minerals segment consists of BRM and its activities in the exploration and mining of minerals including copper, gold, lead, zinc, iron ore and other minerals. The Others segment consists of the parent company, Bumi Resources, other holding companies, together with oil and gas, and coal seam gas mining activities. The Group has also derived an insignificant amount of sales revenue from the Others segment, including the share of marketing and management fees billed to joint ventures and not eliminated in consolidation. During 2008, 2009 and the nine months ended 30 September 2009 and 2010, the Bumi Resources Group derived all of its revenue from and incurred all of its cost of sales in the Coal segment. The following table sets forth the Bumi Resources Groups total assets for its three business segments as of the dates indicated:

As of 31 December 2008

As of 30 September 2009

2009

2010

(audited) (US$ in millions) Total assets: Coal Minerals Others Total Assets 3,228 493 622 4,348 1,150 1,198

(unaudited)

4,343

6,696

3,613 772 969

5,354

3,853 2,153 2,024

8,030

The Bumi Resources Groups Results of Operations Sales The Bumi Resources Groups sales of coal is measured on a total and attributable basis. Total sales are equal to the total sales from a particular mine or operation for the relevant period regardless of ownership of that mine or operation, including the proceeds of the Bumi Resources Groups sales of coal representing the Indonesian governments entitlement, net of quality claims and customer

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rejections which, historically, have been insignificant. Attributable sales reflect total sales less sales of coal attributable the interests of joint venture partners, including the interests of Tata in the IndoCoal Group Companies. The tables below set forth information about KPCs and Arutmins attributable sales and average realised prices by type of coal product for the periods indicated. KPC produces Prima coal and Pinang coal whereas Arutmin produces the other types of coal set forth in the tables below: Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (unaudited) (US$ in millions, except percentages) Attributable sales: Prima coal Pinang coal(1) Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Total sales 38.1 1,404.1 205.1 246.5 113.3 391.5 134.3 2,532.9 1.5% 20.1 55.4% 1,029.9 8.1% 233.3 9.7% 253.0 4.5% 120.4 15.5% 539.0 5.3% 194.5 100.0% 2,390.1 0.8% 43.1% 9.8% 10.6% 5.0% 22.5% 8.1% 100.0% 26.3 712.2 164.4 179.2 88.5 428.4 127.3 1,726.2 1.5% 41.3% 9.5% 10.4% 5.1% 24.8% 7.4% 100.0% 17.5 881.7 227.1 164.7 101.9 481.4 186.1 2,060.3 0.8% 42.8% 11.0% 8.0% 4.9% 23.4% 9.0% 100.0%

Year Ended Nine Months Ended 31 December 30 September 2008 2009 2009 2010 (unaudited) (in US$) 133.78 90.06 95.27 74.20 82.66 50.61 32.20 73.33 63.68 72.66 76.04 70.48 68.28 50.36 38.10 62.90 120.06 70.12 78.38 75.11 70.00 55.07 37.57 63.30 96.39 82.71 85.50 71.01 77.49 59.27 40.80 69.28

Average realised prices(2) Prima coal Pinang coal(1) Senakin coal Satui coal Batulicin coal Melawan coal Ecocoal Weighted average realised price

Notes: (1) Includes sales of Prima coal and Melawan coal blended to meet Pinang coal specifications. (2) The Bumi Resources Group calculates KPCs and Arutmins average realised prices by coal product by dividing their sales (less freight and insurance costs for CIF and C&F sales) for that product by their sales volumes for that product for the period presented. The Bumi Resources Group calculate weighted average realised price by dividing their total sales (less freight and insurance costs for CIF and C&F sales) for coal sales by their total sales volumes for the period presented.

Cost of Sales The Bumi Resources Groups cost of sales for coal comprises its production costs adjusted for increases and decreases in coal inventories and the costs related to the Indonesian Governments entitlement of coal. The Bumi Resources Groups coal production costs include: stripping and mining costs, which are the expenses directly attributable to removing the coal from the mining pits, including wages for its mine workers, fuel costs for heavy equipment and machinery and the fuel costs for the equipment and machinery used by its mining contractors under the terms of their operating agreements, costs for explosives, mine reclamation and rehabilitation expenses, mining equipment and machinery lease expenses, geological survey and mine exploration and planning costs and contract mining fees; coal processing and other production costs, which are costs directly attributable to preparing the coal for sale at its coal crushing and washing plants and transporting the coal to its coal shipping terminals through its coal chains (such as fuel and employee salaries), operating lease payments

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for coal processing equipment and miscellaneous costs related to the Bumi Resources Groups support divisions, such as health and safety, equipment maintenance and environmental; and royalties fees are royalties paid to the Indonesian Government. See Factors affecting the Berau Groups Business and Results of Operation Royalties Paid to the Indonesian Government. depreciation and amortisation deductions related to the depreciation of the Bumi Resources Groups fixed assets and amortisation of mine properties and deferred stripping costs.

The Bumi Resources Groups cost of goods sold reflect the difference in the carrying value of coal inventories at the start of the financial period against the carrying value of coal inventories at the end of the financial period. The Bumi Resources Group values its coal inventory on an average cost basis. The Bumi Resources Groups stripping and mining costs (including contract mining fees) increase as the strip ratios of the groups mining operations increase. Higher strip ratios require the Bumi Resources Group or its mining contractors to remove higher amounts of overburden to access coal for mining, resulting in stripping costs being deferred to the extent the stripping ratio exceeds the life-of-mine stripping ratio. As the Bumi Resources Group disturbs new areas for mining, the group records an expense for the estimated cost of mine reclamation and rehabilitation and record a liability for the estimated future cash outlays for reclamation and rehabilitation. The Bumi Resources Group reduce this liability for reclamation and rehabilitation by the amount of cash used to undertake this reclamation and rehabilitation work when that work is carried out. The Bumi Resources Group expects reclamation and rehabilitation costs to increase significantly as it disturbs new mining areas to increase coal production under its current expansion programs. Under the terms of the Bumi Resources Groups contract mining agreements, its mining contractors are responsible for the reclamation and rehabilitation of all areas they are responsible to mine. However, the Bumi Resources Group remains ultimately responsible to the Indonesian Government for mine reclamation and rehabilitation in its concession areas under the terms of the groups CCOWs and KPs. The Bumi Resources Group has not made provisions for mine closure costs in its consolidated financial statements, as the lives of the Bumi Resources Groups mines are longer than the term of the related contracts of work. Until such time as renewals of the contracts of work are probable and extend to the end of the mine life, the Bumi Resources Group does not expect to record provisions for mine closure costs. The following table shows the breakdown of the Bumi Resources Groups cost of sales and each item as a percentage of total cost of sales for the periods:
Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions, except percentages) Stripping and mining costs 1,105 71.9% 1,088 68.8% 739 68.5% 855 63.7% Coal processing 203 13.2% 150 9.5% 84 7.8% 136 10.2% Royalties and exploitation fees 211 13.7% 296 18.7% 213 19.8% 254 18.9% Depreciation and amortisation expenses 45 2.9% 66 4.2% 47 4.3% 60 4.5% Exploration and development cost 5 0.3% 4 0.3% 5 0.4% 2 0.1% Total production costs 1,569 102.1% 1,604 101.5% 1,087 100.8% 1,307 97.4% Decrease (increase) in coal inventories (33) (2.1%) (22) (1.5%) (8) (0.8%) 35 2.6% Total cost of sales 1,536 100% 1,582 100% 1,079 100% 1,342 100%

Operating Expense The two most significant components of the Bumi Resources Groups operating expenses are general and administrative expenses and distribution and marketing expenses. The Bumi Resources Groups general and administrative expenses include: salaries and wages;

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professional fees; accommodation, which includes costs associated for maintaining guest houses at mine sites for on site visits by company officers, employees and guests; depreciation; amortisation of deferred pre-production development costs; and other general and administrative expenses, such as insurance premiums, travel expenses, advertisements, donations, communications and public relations, entertainment and shared administration fees.

The Bumi Resources Groups distribution and marketing expenses include: financial commissions and expenses, which include marketing commissions paid to its marketing agents, other selling commissions and other marketing logistics expenses attributable to its internal marketing, sales and logistics department, including managing the loading of ships at the shipping terminal; freight, dispatch and demurrage expenses, which include expenses incurred on CIF and C&F sales and the net amount of dispatch (the credits the Bumi Resources Group receives from shipping companies for loading its products on their ships at the groups terminal earlier than the agreed loading schedule) and demurrage (the penalties the Bumi Resources Group pays shipping companies for delays in loading its products according to the agreed loading schedule); and other distribution and marketing expenses.

The following table shows the breakdown of the Bumi Resources Groups general and administrative expenses and distribution and marketing expenses for the periods indicated: Year Ended Nine Months Ended 31 December 30 September 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions) General and administrative expenses: Salaries and wages Professional fees Accommodation Depreciation and amortisation Others Total general and administrative expenses Distribution and marketing: Commissions Dispatch and demurrage Marketing expenses Freight Others Total distribution and marketing expenses 15 13 9 13 11 61 148 29 27 55 1 260 18 16 10 20 67 131 118 11 22 30 1 182 11 8 6 15 18 58 86 5 16 23 1 131 16 24 9 18 35 103 96 21 23 18 1 159

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Results of Operations The following table shows the breakdown of the Bumi Resources Groups results of operations and each item as a percentage of its total revenue for the periods indicated:
Year Ended Nine Months Ended 31 December 30 September 2008 2009 2009 2010 (audited) (unaudited) (US$ inmillions) 2,630 100% 2,451 100% 1,772 100% 2,097 100% (1,536) (58.4)% (1,582) (64.5)% (1,079) (60.9)% (1,342) (64.0)% 1,094 41.6% 869 35.5% 693 39.1% 755 36.0% (61) (260) 10 (2.3)% (9.9)% 0.4% (131) (182) 335 (5.3)% (7.4)% 13.7% (58) (131) 11 (3.3)% (7.4)% 0.6% (103) (159) 247 (4.9)% (7.6)% 11.8% 1.6% 1.3% 38.2% 6.9% 45.1% 2.4% (21.4)%

Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses Gain on sale of investments Gain/(loss) on foreign exchange Impairment charges Other income/(expenses) Operating profit Share in net income of associates Profit before finance items and taxation Finance income Finance cost Fair value (losses)/gains on derivative financial instruments Profit before taxation Taxation Profit for the period Profit attributable to: Owners of the parent Minority interest

(29) (1.1)% 14 0.6% 14 (3) (0.1)% (1) (0.0)% (38) (1.6)% 1 750 28.5% 867 35.4% 530 7 757 2 (62) 0.3% 47 28.8% 0.1% (2.4)% 914 9 (352) 1.9% 30 37.3% 0.4% (14.4)% 560 3 (236)

0.8% 33 0.1% 28 29.9% 801 1.7% 145 31.6% 0.2% (13.3)% 946 50 (449)

111 4.2% (87) (3.5)% (101) (5.7)% 157 7.5% 809 30.8% 484 19.7% 226 12.8% 704 33.6% (466) (17.7)% (146) (6.0)% (145) (8.2)% (308) (14.7%) 342 13.0% 338 13.8% 81 4.6% 396 18.9% 342 328 10 81 372 24

The following table sets forth the Bumi Resources Groups attributable coal production as well as total and attributable coal sales for the periods indicated: Year Ended 31 December Nine Months Ended 30 September 2009 27.3 27.3

2008 33.4 34.3

2009

2010 29.6 29.8

Attributable coal production (million tonnes) Attributable coal sales (million tonnes)

(unaudited) 37.9 38.7

The following table sets forth the Bumi Resources Groups weighted average realised price per tonne, cash production cost for each tonne conveyed, cash production cost for each tonne mined and average strip ratio for the periods indicated: Year Ended 31 December Nine Months Ended 30 September 2009

2008

2009

2010

(unaudited) Operating and other Financial Data: Weighted average realised prices (US$ per tonne of sales)(1) Cash production cost for coal conveyed (US$ per tonne of coal production)(2) Cash production cost for coal mined (US$ per tonne of coal mined)(3) Average strip ratio(4) 73.33 32.53 33.11 9.39 193 62.90 30.64 28.07 10.43 61.23 30.30 15.80 11.06 69.28 32.17 42.80 10.76

Notes: (1) The weighted average realised prices per tonne of sales of coal by the IndoCoal Group Companies is calculated by dividing the consolidated sales for the coal products of KPC and Arutmin by the consolidated sales volumes for the coal products of KPC and Arutmin for the periods presented. These weighted average realised prices fluctuate based upon changes in the product mix of the sales of the coal products of KPC and Arutmin. (2) The cash production cost per tonne of coal conveyed of KPC and Arutmin is calculated based on the total consolidated production costs, including decreases in coal inventories but excluding depreciation and amortisation, divided by the consolidated production volumes of coal (which represents the amount of coal conveyed) of KPC and Arutmin. This measure represents the unit production cost for crushed run-of-mine (ROM) coal delivered to the port stockpiles of KPC and Arutmin or loaded on ships at the ports of KPC and Arutmin. (3) The cash production cost per tonne of coal mined at KPC and Arutmin is calculated based on the total consolidated mining costs, excluding depreciation and amortisation, at KPC and Arutmin divided by the consolidated volumes of coal mined at KPC and Arutmin. This measure represents the unit mining cost for coal delivered to the ROM stockpiles of KPC and Arutmin. (4) The strip ratio is the number of banked cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal.

First Nine Months of 2010 Compared to First Nine Months of 2009 Revenue The Bumi Resources Groups revenue increased 18.3 per cent. to US$2,097 million in the first nine months of 2010 from US$1,772 million in the first nine months of 2009, primarily as a result of an increase in the weighted average realised price for the groups coal, from US$61.23 per tonne in the first nine months of 2009 to US$69.28 per tonne in the first nine months of 2010, and an increase in attributable sales volumes of the groups coal, from 27.3 million tonnes in the first nine months of 2009 to 29.8 million tonnes in the first nine months of 2010. The Bumi Resources Groups weighted average realised sales price per tonne of coal increased in the first nine months of 2010 as compared to the first nine months of 2009 because of the higher prices at which coal sales were made under new contracts the group negotiated and entered into at the end of the first quarter of 2010. Under these agreements, the Bumi Resources Group negotiates the price for the deliveries each year on an annual basis around the end of the first quarter by reference to the globalCoal Newcastle Index, the API-4 Index or the Japan-Australia JFY Contract Price Index. The prices the Bumi Resources Group obtained for its coal under these new contracts in the second quarter of 2010 were generally higher than the prices of the groups coal deliveries during the first quarter of 2010, and this increased the weighted average realised sales price per tonne of the groups coal for the entire first nine months of 2010. The Bumi Resources Groups sales volumes increased in the first nine months of 2010 compared to the first nine months of 2009 as a result of higher coal production at KPC and Arutmin in the first nine months of 2010 compared to the first nine months of 2009. On an attributable basis, in the first nine months of 2010, the Bumi Resources Group produced 29.63 million tonnes of coal, compared to 27.3 million tonnes in the first nine months of 2009. The Bumi Resources Group also used a portion of its coal inventories in the first nine months of 2010 to satisfy customer sales during that period. The Bumi Resources Groups operations are located in Kalimantan which has a rainy season which typically occurs from October to April. In both the first nine months of 2009 and the first nine months of 2010, the Bumi Resources Groups coal mining operations at KPC and Arutmin were adversely affected by unusually high rainfall levels. For the entire first nine months of 2009 and some months in the first nine months of 2010, in particular the third quarter of 2010, rainfall levels at the Bumi Resources Groups coal mining operations in Kalimantan were higher than the historical average rainfall levels for those months. Cost of Sales The Bumi Resources Groups cost of sales increased 24.4 per cent. to US$1,342 million in the first nine months of 2010 from US$1,079 million in the first nine months of 2009. Its cost of sales, as a percentage of revenues increased to 64.0 per cent. in the first nine months of 2010 from 60.9 per cent. in the first nine months of 2009. The Bumi Resources Groups total production costs increased 20.2 per cent. from the first nine months of 2009 to the first nine months of 2010 due to increases in stripping and mining costs, coal processing costs and depreciation and amortisation. The Bumi Resources Groups stripping and mining costs

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increased 15.7 per cent., from US$739 million in the first nine months of 2009 to US$855 million in the first nine months of 2010, primarily due to an increase in fuel and lubricant costs, as well as an increase in fees payable to the Bumi Resources Groups mining contractors, including a settlement payment to Thiess by Arutmin to settle overhaul claims by Thiess against Arutmin at the Senakin and Satui mines. For a description of the dispute between Thiess and Arutmin and the settlement of the dispute, see Legal Proceedings and Disputes Thiess Arutmin Arbitration in Part IV Information on the Bumi Resources Group. The Bumi Resources Groups coal processing costs increased 61.9 per cent., from US$84 million in the first nine months of 2009 to US$136 million in the first nine months of 2010, mainly as a result of reallocation of certain barging costs to coal processing costs. The Bumi Resources Groups depreciation and amortisation expenses increased 27.7 per cent., from US$47 million in the first nine months of 2009 to US$60 million in the first nine months of 2010. In addition, as of 30 September 2010, the Bumi Resources Group had recorded actual stripping costs of US$384 million as deferred stripping costs, compared to US$322 million as of 30 September 2009. The Bumi Resources Group will expense these deferred stripping costs as production costs in periods when the actual stripping ratio for the mining areas where these costs were incurred is significantly lower than the planned average stripping ratio. Gross Profit The Bumi Resources Groups gross profit increased 8.9 per cent. to US$755 million in the first nine months of 2010 compared to US$693 million in the first nine months of 2009. As a percentage of revenue, gross profit decreased to 36.0 per cent. in the first nine months of 2010 from 39.1 per cent. in the first nine months of 2009. General and Administrative Expenses The Bumi Resources Groups general and administrative expenses increased 77.6 per cent., from US$58 million in the first nine months of 2009 to US$103 million in the first nine months of 2010, primarily as a result of higher professional fees and an increase in other general and administrative expenses. This increase was also attributable to higher salaries and wages of the Bumi Resources Groups administrative staff, accommodation expenses and increased depreciation and amortisation. Distribution and Marketing Expenses The Bumi Resources Groups distribution and marketing expenses increased 21.4 per cent., from US$131 million in the first nine months of 2009 to US$159 million in the first nine months of 2010, primarily as a result of higher coal prices and increased production. Gain on Sale of Investments In the first nine months of 2010, the Bumi Resources Group recorded US$247 million in gain on the sale of a 70.0per cent. equity interest in Mitratama to PT Nusantara Pratama Indah pursuant to a share sale and purchase agreement. The Bumi Resources Group recorded US$11 million in gain on sale of investments in the first nine months of 2009. Gain/(Loss) on Foreign Exchange The Bumi Resources Group recorded foreign exchange gains of US$14 million and US$33 million in the first nine months of 2009 and 2010, respectively. The foreign exchange gains in the first nine months of 2010 was due to the appreciation of the Indonesian Rupiah against the US dollar and the effect of the translation of the amount of value-added tax recoverable (which is denominated in Rupiah) and other Rupiah-denominated assets and liabilities into US dollars for preparation of the Bumi Resources Groups consolidated financial statements. In addition, a substantial portion of the foreign exchange gain in the first nine months of 2010 resulted from the effects of foreign currency translations of an intercompany loan of approximately US$850.0 million from Bumi Resources to Bumi Resources subsidiary MDB, which, as part of the reorganisation of BRM and its subsidiaries, Bumi Resources transferred as a direct subsidiary of Bumi Resources to a direct subsidiary of BRM, and an indirect subsidiary of Bumi Resources, in the half of 2010. Since this intercompany loan is denominated in US dollars, when the financial statements of MDB are consolidated into the financial statements of MDBs holding company, BRM, the US dollar amount of this intercompany loan is translated into Indonesian Rupiah, the currency in which the consolidated financial statements of BRM are stated. When the Indonesian Rupiah amount of this intercompany loan (as stated in the BRM financial statements) is 195

translated back into US dollars when the financial statements of BRM are consolidated into the financial statements of the Bumi Resources Group, a foreign exchange gain or loss is recorded, depending on the fluctuation of the value of the US dollar against the Indonesian Rupiah. As the Indonesian Rupiah appreciated against the US dollar in the first nine months of 2010, the Bumi Resources Group recorded a foreign exchange gain when the Indonesian Rupiah amount of this intercompany loan was translated back into US dollars in the Bumi Resources Groups consolidated financial statements at the holding company level. As of 30 September 2010, the outstanding principal amount of this intercompany loan was US$547.7million. On 23 June 2010, Bumi Resources entered into a conditional sale and purchase of receivables agreement with BRM, pursuant to which BRM purchased Bumi Resources receivables under this intercompany loan. The consideration was repaid by BRM through the issuance by BRM of a mandatory convertible note in the principal amount of Rp.4,959.0 billion to Bumi Resources on 15 November 2010. This mandatory convertible note converted into equity shares of BRM when BRM was listed on the IDX in December 2010. As a result, gains or loss resulting from the foreign exchange translations of this intercompany loan are no longer expected to have a recurring effect on the Bumi Resources Groups statement of income for subsequent financial periods. Other Income/(Expenses) The Bumi Resources Group recorded other income of US$28 million in the first nine months of 2010 and US$1 million in the first nine months of 2010. Operating Profit The Bumi Resources Groups operating income increased 51.1 per cent. to US$801 million in the first nine months of 2010 from US$530 million in the first nine months of 2009. As a percentage of revenue, operating income increased to 38.2 per cent. in the first nine months of 2010 from 29.9 per cent. in the first nine months of 2009. Share in Net Income of Associates In the first nine months of 2009, the Bumi Resources Group recorded US$30 million in share in net income of associates resulting from the groups proportionate share of the net income of Enercorp and Darwa Henwa. In the first nine months of 2010, the Bumi Resources Group recorded US$145 million resulting from its proportionate share of the net income of Zurich Assets International Ltd (Zurich Assets) (which then owned an effective interest of 44.0 per cent. of the outstanding shares of Darma Henwa) and NNT, which are associated companies of the Bumi Resources Group. In the first nine months of 2010, Enercorp was no longer an associated company of the Bumi Resources Group. Finance Income The Bumi Resources Groups finance income increased to US$50 million in the first nine months of 2010 from US$3 million in the first nine months of 2009. The Bumi Resources Groups finance income increased from the first nine months of 2009 to the first nine months of 2010 primarily due to interest payable by Mutiara on the Mutiara Loan that Bumi Resources made to Mutiara in December 2009 to finance a portion of the acquisition price for Berau Coal and related companies. Finance Cost The Bumi Resources Groups finance cost increased in the first nine months of 2010, from US$236 million in the first nine months of 2009 to US$449 million in the first nine months of 2010, primarily due to a higher overall level of borrowing in the first nine months of 2010 compared to the first nine months of 2009. In the second half of 2009 and the first nine months of 2010, the Bumi Resources Group incurred a substantial amount of indebtedness under (i) the 2009 US$50.0 Million CS Facility, the 2009 US$200.0 Million CS Facility and the US$30.0 Million TAEL Facility, all of which were repaid with the proceeds of the Bumi Resources-CFL Loan on 1 October 2009, (ii) the US$300 Million CS Facility, (iii) the 12% Guaranteed Senior Secured Notes issued in November 2009, (iv) the 9.25 per cent. Convertible Bonds issued in August 2009 and 5per cent. Convertible Bonds issued in November 2009 (the 5 per cent. Convertible Bonds were redeemed in October 2010 and January 2011), (v) the US$75.0 Million UBS Facility, which Bumi Resources has since repaid, (vi) the US$80.0 Million RZB Facility, (vii) the US$100.0 Million CS Facility (January 2010) and the US$100.0 Million CS Facility (November 2009), which Bumi Resources has since repaid, (viii) the US$200.0 Million DB Facility, (ix) the US$150.0 Million JPMorgan Chase Facility, (x) a portion of the 2010 MDB-CS Facility, (xi) the US$150.0 Million Bright Ventures Facility, which was repaid following the BRM IPO in December 2010, and (xii) US$73 million drawn down on 28 September 2010 under the US$100.0 CS Standby Credit Facility, which was repaid in 196

full in October 2010. Interest expense related to many of these loans incurred since the end of the first nine months of 2009 was reflected in the first nine months of 2010. In addition, interest expense increased in the first nine months of 2010, in part, due to higher average interest rates applicable to the Bumi Resources Groups borrowings resulting from higher margins required by lenders on new borrowings. The Bumi Resources Group incurred finance costs that were capitalised in the amount of US$19million and US$87million in the first nine months of 2009 and 2010, respectively, largely related to additional financing arrangements entered into during those periods. In addition, the Bumi Resources Group incurred costs of US$95 million in the first nine months of 2009 to buy an equity option to cover the difference between the 12 per cent. interest paid on the Bumi Resources-CFL Loan and the 19 per cent. internal rate of return agreed to be earned on the principle upon repayment when each of the three tranches of the Bumi Resources-CFL Loan matures. Fair Value Gain/(Loss) on Derivative Financial Instruments Derivatives are classified as trading investments and do not qualify for hedging instruments. Derivatives are classified as current assets or liabilities and include both stand alone derivatives and derivatives embedded in other contracts that have been accounted for separately. Derivative liabilities represent the fair value of embedded derivatives in convertible bonds issued by the Bumi Resources Group. Fair value changes in derivative financial instruments are recognised in the income statement. The Bumi Resources Group recorded a fair value gain on financial derivatives transactions of US$157 million in the first nine months of 2010, largely related to the value attributed to embedded derivatives related to the prepayment option in the Bumi Resources-CFL Loan, which was entered into in September 2009 and a realised gain on fair value adjustment of certain derivative transactions Bumi Resources entered into in connection with the issuance of the 9.25% Convertible Bonds in August 2009 and the 5per cent. Convertible Bonds in November 2009, and an equity swap transaction in October 2009. In the first nine months of 2009, the Bumi Resources Group recorded a loss of US$101 million, which represented an unrealised loss on fair value adjustment of certain derivative transactions Bumi Resources entered into in connection with the issuance of the 9.25% Convertible Bonds in August 2009 and the 5per cent. Convertible Bonds and the October 2009 equity swap transaction. For a discussion of these derivative transactions, see Note 19 to the Bumi Resources Groups Consolidated Financial Information at 31 December 2008 and 2009 included in Part IX Financial Information. Profit Before Taxation The Bumi Resources Groups profit before income tax expenses in the first nine months of 2010 was US$704 million, compared to US$226 million in the first nine months of 2009, an increase of 211.5 per cent. As a percentage of revenue, the Bumi Resources Groups income before income tax expenses increased to 33.6 per cent. in the first nine months of 2010 from 12.8 per cent. in the first nine months of 2009. Taxation The Bumi Resources Group recorded income tax expenses of US$308 million in the first nine months of 2010, of which US$284 million was a current tax expense offset by a deferred tax benefit of US$24 million, compared to income tax expenses of US$145 million in the first nine months of 2009, of which US$110 million was a current tax benefit and US$35 million was a deferred tax expense. The Bumi Resources Groups effective income tax rate for the first nine months of 2010 was 43.8 per cent., compared to 64.2 per cent. for the first nine months of 2009. Profit for the Period The Bumi Resources Groups profit for the period was US$396 million in the first nine months of 2010, compared to US$81 million in the first nine months of 2009, an increase of 388.9 per cent. As a percentage of revenue, the Bumi Resources Groups profit for the period increased to 18.9 per cent. in the first nine months of 2010 from 4.6 per cent. in the first nine months of 2009. 2009 Compared to 2008 Revenue The Bumi Resources Groups revenue decreased 6.8 per cent. to US$2,451 million in 2009 from US$2,630 million in 2008, primarily as a result of a decrease in the weighted average realised price for the Bumi Resources Groups coal, from US$73.33 per tonne in 2008 to US$62.90 per tonne in 2009, in

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spite of an increase in attributable sales volumes of the groups coal at KPC and Arutmin, from 34.3 thousand tonnes in 2008 to 38.7 thousand tonnes in 2009. The Bumi Resources Groups weighted average realised sales price per tonne of coal decreased in 2009 as compared to 2008 because of the lower prices at which coal sales were made in 2009, which were contracted during the first quarter of 2009 under the groups long-term supply agreements. Under these agreements, the Bumi Resources Group negotiates the price for the deliveries each year on an annual basis around the end of the first quarter by reference to the global Coal Newcastle Index, the API-4 Index or the Japan-Australia JFY Contract Price Index. The prices contracted in 2008 were significantly higher as a result of higher global coal prices in 2008. However, the prices negotiated in 2009 are lower because of the fall in the global coal prices in the fourth quarter of 2008. The Bumi Resources Groups attributable sales volumes increased in 2009 compared to 2008 as a result of higher coal production at KPC and Arutmin in 2009 compared to 2008. On an attributable basis, in 2009, the Bumi Resources Group produced 37.9 million tonnes of coal, compared to 33.4 million tonnes in 2008. In both 2008 and 2009, the Bumi Resources Groups coal mining operations at KPC and Arutmin were adversely affected by unusually high rainfall levels. The Bumi Resources Groups operations are located in Kalimantan which has a rainy season which typically occurs from October to April. For 2008 and 2009, rainfall levels at its coal mining operations in Kalimantan were higher than the historical average rainfall levels for those months. Cost of Sales The Bumi Resources Groups cost of sales increased 3.0 per cent. to US$1,582 million in 2009 from US$1,536 million in 2008. Cost of sales, as a percentage of revenues, increased to 64.5 per cent. in 2009 from 58.4 per cent. in 2008. The Bumi Resources Groups overall production costs increased 2.2 per cent. from US$1,569 million in 2008 to US$1,604 million in 2009 due to an increase in royalties fees and depreciation and amortisation expenses. The Bumi Resources Groups stripping and mining costs decreased 1.5 per cent., from US$1,105 million in 2008 to US$1,088 million in 2009. The Bumi Resources Groups coal processing costs decreased 26.1 per cent., from US$203 million in 2008 to US$150 million in 2009, mainly as a result of lower costs due, in part, to cost saving initiatives. The Bumi Resources Groups royalties fees increased 40.3 per cent., from US$211 million in 2008 to US$296 million in 2009. The Bumi Resources Groups depreciation and amortisation expenses increased from US$45 million in 2008 to US$66 million, or 46.7 per cent., in 2009. In addition, as of 31 December 2009, the Bumi Resources Group had recorded actual stripping costs of US$268million as deferred stripping costs, compared to US$190 million as of 31 December 2008. The Bumi Resources Group will expense these deferred stripping costs as production costs in periods when the actual stripping ratio for the mining areas where these costs were incurred is lower than the planned average stripping ratio. Gross Profit The Bumi Resources Groups gross profit decreased 20.6 per cent. to US$869 million in 2009 compared to US$1,094 million in 2008. As a percentage of revenue, the Bumi Resources Groups gross profit decreased to 35.5 per cent. in 2009 from 41.6 per cent. in 2008. General and Administrative Expenses The Bumi Resources Groups general and administrative expenses increased 114.8 per cent., from US$61 million in 2008 to US$131 million in 2009, primarily as a result of an increase in other general and administrative expenses as a result of higher technical services fees, equipment maintenance costs and other related costs. This increase was also attributable to an increase in depreciation and amortisation, higher wages and salaries, professional fees and accommodation expenses in 2009. Distribution and Marketing Expenses The Bumi Resources Groups distribution and marketing expenses decreased from US$260million in 2008 to US$182 million in 2009 due to a 20.0 per cent decrease in marketing commissions and expenses, from US$175 million in 2008 to US$140 million in 2009, a 51.2 per cent decrease in freight, dispatch and demurrage, from US$84 million in 2008 to US$41 million in 2009. Marketing commissions

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and expenses decreased in 2009 due to lower sales revenue and freight expenses decreased due to lower international freight rates. Other selling expenses remained stable at US$1 million at 2008 to 2009. Gain on Sale of Investments In 2009, the Bumi Resources Group recorded US$335 million in gains, including the sale of Bumi Resources remaining 50.0 per cent. equity interest in Enercorp to Thionville Financier Ltd. on 30 December 2009 for aggregate consideration of US$90.0million (recognising a gain of US$40million) and the agreed sale of Bumi Resources 20.0 per cent. equity interest in Gallo Oil to Florenceville on 28 December 2009 for US$290 million (recognising a gain of US$283 million). These gains reflect the difference between the selling price of the relevant equity interest and the carrying value of the investment on the Bumi Resources Groups balance sheet. The Bumi Resources Group recognised a gain of US$10million on the sale of investments in 2008. Gain/(Loss) on Foreign Exchange In 2008, the Bumi Resources Group recorded a foreign exchange loss of US$29 million, whereas in 2009 the group recorded a foreign exchange gain of US$14 million. The Bumi Resources Group recorded a foreign exchange gain in 2009 due to the appreciation of the Indonesian Rupiah against the US dollar and the effect of the translation of the amount of value-added tax recoverable (which is denominated in Rupiah) and other Rupiah-denominated assets and liabilities into US dollars for preparation of the Bumi Resources Groups consolidated financial statements. Impairment Charges The Bumi Resources Group incurred impairment charges of US$3 million in 2008 related to due diligence costs on various ongoing projects. Due to the nature of these costs, they may not be capitalised under IFRS. Therefore, provisions for the costs were made, resulting in impairment charges in 2008. Other Income/(Expenses) The Bumi Resources Group recorded other expenses of US$38 million in 2009, compared to other expenses of US$1 million in 2008. Most of the Bumi Resources Groups other expenses in 2009 related to a Thiess contract settlement payment, an interest penalty for a late tax payment and other nonoperational transactions, which were partially offset by gain on the sale of short-term investments during this period. Operating Profit The Bumi Resources Groups operating profit increased 15.6 per cent. to US$867 million in 2009 from US$750 million in 2008. As a percentage of revenue, the Bumi Resources Groups operating profit increased to 35.4 per cent. in 2009 from 28.5 per cent. in 2008. Share in Net Income of Associates In 2008, the Bumi Resources Group recorded US$7 million in other income resulting from the Bumi Resources Groups proportionate share of the net income of Enercorp, which was an associated company of the Bumi Resources Group in 2008. In 2009, the Bumi Resources Group recorded US$47 million resulting from its proportionate share of the net income of the associated companies NNT, which was acquired in November 2009, and Enercorp. Finance Income The Bumi Resources Groups finance revenue increased to US$9million in 2009 from US$2million in 2008 primarily due to an increase in placements of bank deposits. Finance Cost The Bumi Resources Groups finance cost increased substantially in 2009, from US$62million in 2008 to US$352million in 2009, primarily due to a higher overall level of borrowing in 2009 compared to 2008. In late 2008, the Bumi Resources Group incurred a substantial amount of indebtedness under the Bumi Resources-CS Loans, the US$30.0 Million TAEL Facility, the 55 million and CA$63 million ICICI Bank

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Facility and the MTN Program, all of which were repaid with the proceeds of the Bumi Resources-CFL Loan on 1 October 2009. In 2009, the Bumi Resources Group incurred additional indebtedness under the 9.25% Convertible Bonds, the Bumi Resources-CFL Loan, the US$300 million CS Facility, the 12% Guaranteed Senior Secured Notes, the 5per cent. Convertible Bonds, US$80.0 million RZB Facility and the US$100 million CS Facility (November 2009). Interest expense related to many of these loans and other debt instruments was reflected in 2009. In addition, interest expense increased, in part, due to higher average interest rates applicable to the Bumi Resources Groups borrowings resulting from higher margins required by lenders on its new borrowings. In 2009, Bumi Resources also incurred debt restructuring costs of US$155 million related to the repayment of loans and capitalised borrowing costs of US$49million in 2009. Fair Value Gains/(Losses) on Derivative Financial Instruments Derivatives are classified as trading investments and do not qualify for hedging instruments. Derivatives are classified as current assets or liabilities and include both stand alone derivatives and derivatives embedded in other contracts that have been accounted for separately. Derivative liabilities represent the fair value of embedded derivatives in convertible bonds issued by the Bumi Resources Group. Fair value changes in derivative financial instruments are recognised in the income statement. The fair value of these derivatives, marked to market, was reduced by US$87 million as of 31 December 2009 in accordance with IFRS, and the Bumi Resources Group recorded this US$87 million as a Fair value loss on financial derivatives in the consolidated income statement for the year ended 31 December 2009. There was a corresponding gain of US$111 million on these derivatives for the year ended 31 December 2008. Profit Before Taxation The Bumi Resources Groups profit before income tax in 2009 was US$484 million, compared to US$809 million in 2008, a decrease of 40.2 per cent. As a percentage of revenue, The Bumi Resources Groups profit before income tax expenses decreased to 19.7 per cent. in 2009 from 30.8 per cent. in 2008. Taxation The Bumi Resources Group recorded income tax expenses of US$146 million in 2009, of which US$189 million was a current tax expense and US$43 million was a deferred tax benefit, compared to income tax expenses of US$466 million in 2008, all of which were current tax expenses. The Bumi Resources Groups effective income tax rate for 2009 was 30.2 per cent., compared to an effective income tax rate or 57.6 per cent. in 2008. In 2009, the Bumi Resources Group recorded an expense of US$25.9 million in relation to interest charges and penalties and administrative fines for late payment of corporate income taxes for tax year 2008 by KPC and Arutmin. In January 2010, KPC and Arutmin obtained approval from the Indonesian Directorate General of Tax to settle the payments on an instalment basis during 2010. Profit for the Year The Bumi Resources Groups profit for the year was US$338 million in 2009, compared to US$342 million in 2008, a decrease of 1.2 per cent. As a percentage of revenue, the Bumi Resources Groups profit for the year increased to 13.8 per cent. in 2009 from 13.0 per cent. in 2008. Liquidity and Capital Resources The Bumi Resources Groups principal sources of liquidity have been cash from operations, long-term and short-term borrowings and convertible and high yield bond and medium-term note issuances, and its principal uses of cash have been to fund operating expenses, debt service obligations, capital expenditures and payment of dividends.

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Net Cash Flows The following table sets forth information regarding the Bumi Resources Groups statement of cash flows for the periods presented: Year Ended Nine Months Ended 31 December 30 September

2008

2009

2009

2010

(audited) (US$ in millions) Cash flows from operating activities Cash received from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flows from operating activities 2,602 (1,655) (85) 862 (84) 778 2,441 (1,370) (236) 835 (349) 486

(unaudited)

1,733 (1,029) (190) 514 (178) 336

2,059 (1,494) (167) 398 (302) 96

Cash flows from investing activities Additions to exploration and evaluation assets Purchases of property, plant and equipment Purchases of other non-current assets Payment on deferred stripping costs Acquisition of subsidiaries Acquisition of associates Proceeds from sale of associates Acquisition of AFS financial assets Proceeds from sale of AFS financial assets Premiums paid in respect of derivative financial instruments Payment on settlement of derivative financial instruments Interest received Dividend received Net cash flows from investing activities Cash flows from financing activities Proceeds from borrowings Proceeds from convertible bonds Repayment of borrowings Loan to PT Bukit Mutiara Payment of finance lease liability Buy-back of Bumi shares Payments to related parties Debt issue costs paid Interest paid Dividends paid Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Exchange (losses)/gains on cash and cash equivalents Cash and cash equivalents at the end of the period

(329) (193) (33) (91) (542) (45) (183) 2

(60) (317) (233) (132) (285) (811) (16) 84 (286) (52) 1

(50) (204) (260) (132) (130) (24) 84 (166) (52) 1

(38) (78) (146) (115) (2) (229) 45 (113) 14 119

(1,414) 1,187 (110) (35) (158) (24) (46) (37) (94) 683 47 208

(2,107)

(993)

(543)

2,971 675 (1,439) (250) (54) (14) (238) (72) (97) 1,482 (139) 255

1,814 366 (1,183) (36) (3) (216) (80) (97) 565 (32) 225

1,098 (42) (210) (34) (30) (11) (246) (59) 466 19 120

(5)

255

120

227

134

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Net Cash Flows From Operating Activities Net cash from operating activities consists of cash received from customers, which is offset by cash payments to the Bumi Resources Groups suppliers and employees as well as royalty paid to the Indonesian Government and income tax payments. In the first nine months of 2010, the Bumi Resources Groups net cash flows from operating activities were US$96 million, consisting of cash received from customers of US$2,059 million, which was offset by payments to the Bumi Resources Groups suppliers and employees of US$1,494 million, royalties paid to the Indonesian Government of US$167 million and income tax payments of US$302 million. The Bumi Resources Groups cash received from customers increased in the first nine months of 2010 compared to the first nine months of 2009 as a result of higher weighted average realised prices for the Bumi Resources Groups coal during the period and higher sales volumes. Payments to the Bumi Resources Groups suppliers and employees increased in the first nine months of 2010 compared to the first nine months of 2009 due to higher contractor fees as a result of increased stripping and mining activities, higher per-unit fuel prices and the annual pay raise of the groups employees. The Bumi Resources Group made tax payments in the first nine months of 2010 in relation to the tax year 2009 and withholding tax for the current year and to clear tax payment arrears for the tax year 2008 with respect to the deemed dividend that Bumi Resources was required to recognise on the 2007 net income of Kalimantan Coal and Sangatta Holdings. In the first nine months of 2009, the Bumi Resources Groups net cash flows from operating activities were US$336 million, consisting of cash received from customers of US$1,733 million, which was partially offset by payments to the Bumi Resources Groups suppliers and employees of US$1,029 million, royalties paid to the Indonesian Government of US$190 million and income tax payments of US$178 million. The Bumi Resources Groups tax payments in the first nine months of 2009 related to additional payments of corporate income taxes for KPC and Arutmin for the tax years 2007 and 2008. These tax payments were made in connection with the then proposed revisions to KPCs and Arutmins annual tax returns for 2007 and 2008 required by the Indonesian tax authorities. See Note 34 to the Bumi Resources Groups IFRS Consolidated Financial Information at 31 December 2009 and 2008 included in Part IX Financial Information. In 2009, the Bumi Resources Groups net cash flows from operating activities were US$486 million, consisting of cash received from customers of US$2,441 million, partially offset by payments to the Bumi Resources Groups suppliers and employees of US$1,370 million, royalties paid to the Indonesian Government of US$236 million and income tax payments of US$349 million. Payments to the Bumi Resources Groups suppliers, employees and others increased significantly in 2009 compared to 2008 largely due to the effect of higher coal production, which was partially offset by lower fuel costs due to lower per-unit fuel costs. The Bumi Resources Group made tax payments in 2009 for additional payments of corporate income taxes for 2007 and 2008 for KPC and Arutmin. The tax payments in 2009 were made in connection with the then-proposed revisions to KPCs and Arutmins annual tax returns for those years required by the Indonesian tax authorities. In 2008, the Bumi Resources Groups net cash flows from operating activities were US$778 million, consisting of cash received from customers of US$2,602 million, which was partially offset by payments to the Bumi Resources Groups suppliers and employees of US$1,655 million, royalties paid to the Indonesian Government of US$85 million and income tax payments of US$84 million. Net Cash Flows from Investing Activities In the first nine months of 2010, the Bumi Resources Groups net cash flows used in investing activities were US$543 million. The Bumi Resources Group used cash of US$38 million for additions to exploration and evaluation assets; US$78 million for additions to property, plant and equipment through capital expenditures and net acquisition of fixed assets related to the expansion programs at KPC and Arutmin; US$146 million for purchases of other non-current assets; US$115 million for payments on deferred stripping; US$229 million for the acquisition of shares of NNT; and US$113 million for the placement of deposits (available-for-sale financial assets) with Recapital Asset Management as a precautionary measure to protect against any potential negative impact on operating cash flows were there to be a material production stoppage at the Bumi Resources Groups coal mines. See Financial Resources. In addition, the Bumi Resources Group also received US$119 million in dividends from its investment in NNT and US$45 million in cash proceeds from the sale of Enercorp.

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In the first nine months of 2009, the Bumi Resources Groups net cash flows used in investing activities were US$993 million. The Bumi Resources Group used cash of US$50 million for additions to exploration and evaluation assets; US$204 million for additions to property, plant and equipment through capital expenditures and net acquisition of fixed assets related to the expansion programs at KPC and Arutmin; US$260 million for purchases of other non-current assets; US$132 million for payments on deferred stripping; US$154 million for acquisitions of shares of Pendopo Coal Ltd (PCL) (which owns Pendopo Energi), Leap-Forward (which owns Fajar Sakti) and Zurich Assets (which then had an effective interest of 40.0 per cent. in Darma Henwa); US$166 million for investments in derivative transactions with Credit Suisse International related to the issuance of the 9.25% Convertible Bonds in August 2009; US$52 million for the payment of premiums in respect of these derivatives; and US$52 million in payments on the settlement of derivative transactions. In addition, the Bumi Resources Group received cash of US$84 million in the first nine months of 2009 in relation to withdrawals (available-for-sale financial assets) from Recapital Asset Management. In 2009, the Bumi Resources Groups net cash flows used in investing activities were US$2,107 million. The Bumi Resources Group used cash of US$60 million for additions to exploration and evaluation assets; US$317 million for additions to property, plant and equipment through capital expenditures and net acquisition of fixed assets related to the expansion programs at KPC and Arutmin; US$233 million for purchases of other non-current assets; US$132 million for payments on deferred stripping; US$285 million for acquisitions of shares of PCL (which owns Pendopo Energi), Leap-Forward (which owns Fajar Sakti) and shares of Herald (which has an effective interest of 80 per cent. in Dairi Prima); US$811 million for the acquisition of shares of NNT; US$286 million for investments in derivative transactions with Credit Suisse International related to the issuance of the 9.25% Convertible Bonds in August 2009 and the capped call transaction and call option related to Bumi Resources shares in October 2009; US$286 million for the payment of premiums in respect of these derivatives; and US$52 million in payments on the settlement of derivative transactions. In addition, the Bumi Resources Group received cash of US$84 million in 2009 in relation to net withdrawals (available-for-sale financial assets) from Recapital Asset Management. In 2008, the Bumi Resources Groups net cash flows used in investing activities were of US$1,414 million. The Bumi Resources Group used cash of US$329 million for additions to exploration and evaluation assets; US$193 million for additions to property, plant and equipment through capital expenditures and net acquisition of fixed assets, US$33 million for purchases of other non-current assets; US$91 million for payments on deferred stripping; and US$542 million for acquisitions of shares of Herald and US$183 million for the placement of deposits (available-for-sale financial assets). Net Cash Provided From Financing Activities In the first nine months of 2010, the Bumi Resources Groups net cash flows from financing activities totalled US$466 million. During the first nine months of 2010, the Bumi Resources Group received cash proceeds from borrowings of US$1,098 million, which were partially offset by cash outflows for of US$246 million for interest payments, US$210 million for the repayment of borrowings, US$42 million for the cash settlement of Zero Coupon Convertible Bonds and 5 per cent. Convertible Bonds, US$59 million for dividends to Bumi Resources shareholders, US$34 million for financing lease payments, US$30 million for rent payments to related parties and US$11 million in debt issue costs. In 2009, the Bumi Resources Groups net cash flows from financing activities totalled US$1,482 million. During 2009, the Bumi Resources Group received cash proceeds of US$2,971 million from borrowings and US$675 million from the issuance of the 9.25% Convertible Bonds and the 5% Convertible Bonds, which were partially offset by US$1,439 million for the repayment of borrowings, US$250 million for financing provided to Mutiara under the Mutiara Loan, US$238 million for debt issue costs, US$97 million for dividend payments to Bumi Resources shareholders, US$72 million for interest payments, US$54 million for financing lease payments and US$14 million for payments to related parties. The net proceeds from borrowings in 2009 resulted primarily from the incurrence of indebtedness under the Bumi Resources-CFL Loan, which was partially offset by repayment of the Bumi Resources-CS Loans and other financing arrangements in 2009. In 2008, the Bumi Resources Groups net cash flows from financing activities totalled US$683 million. During 2008, the Bumi Resources Group received proceeds of US$1,187 million from borrowings, which were partially offset by cash outflows of US$158 million for buy-backs of shares of Bumi Resources on the IDX, US$110 million for the repayment of borrowings, US$94 million used for the payment of

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dividends, US$46 million for debt issue costs, US$37 million for interest payments, US$35 million for the payment of financing leases and US$24 million for payments to related parties. Developments in the Bumi Resources Groups Liquidity and Capital Resources Position Since 30 September 2010 Since the date of the Bumi Resources Groups latest balance sheet, 30 September 2010, a number of developments have occurred which have affected, or are expected to affect, the Bumi Resources Groups financial condition, cash flows, debt leverage, liquidity and capital resources. These are described below. (1) On 1 October 2010, the Group redeemed in full the US$95million outstanding principal amount of Zero Coupon Convertible Bonds at a total redemption price of US$119.4 million and repurchased 5 per cent. Convertible Bonds in the principal amount of US$49.6 million at a redemption price of US$49.4 million. On 4 October 2010, Bumi Resources received net proceeds in the amount of US$360.0 million from its non-preemptive share issue of 1,369,400,000 ordinary shares at an issue price of RP.2,366 per share (the 2010 Non-Preemptive Share Issuance). On 6 October 2010, the Bumi Resources Group received net proceeds in the amount of US$680 million from the issuance of US$700 million principal amount of Guaranteed Senior Secured Notes. The Bumi Resources Group used the net proceeds from the 2010 Non-Preemptive Share Issuance and the notes offering to: prepay in full the outstanding principal amount of US$150.0million, plus accrued interest thereon and any break costs and other prepayment penalties, under the US$150.0 Million JCS Facility (January 2010); prepay in full the outstanding principal amount of US$73.0million, plus accrued interest and thereon and any break costs and other prepayment penalties, under the US$100.0 Million CS Standby Credit Facility; pay the aggregate US$292.1 million redemption price (100.77 per cent. of the principal amount) of 5 per cent. Convertible Bonds in the principal amount of US$289.9 million that were tendered for mandatory redemption during the first bondholder put option period from September 27, 2010 to November 5, 2010; prepay in full the outstanding principal amount of US$80.0million, plus accrued interest thereon and any break costs and other prepayment penalties, under the US$80.0 Million RZB Facility; and prepay in full the outstanding principal amount of US$300.0million, plus accrued interest thereon and any break costs and other prepayment penalties, under the US$300.0 Million CS Facility.

(2)

(3)

In December 2010, the Bumi Resources Group received net proceeds of US$220 million from BRMs initial public offering. The Bumi Resources Group used part of the net proceeds to prepay in full, in December 2010, the outstanding principal amount of US$150.0 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the US$150.0 Million Bright Ventures Facility. In addition in December 2010, the Bumi Resources Group received the last instalment in the amount of US$170 million on the sale of Mitratama. On 21 October 2010, Bumi Resources Japan Co. Ltd (BRJ), a subsidiary of BRM, drew down $21 million under the Nomura Loan to fund certain expenses relating to the initial public offering of BRM and capital expenditure and working capital requirements of BRM. On 25 January 2011, the Bumi Resources Group completed its clean-up call for, and mandatorily redeemed, the remaining outstanding principal amount of US$7 million of 5 per cent. Convertible Bonds. In January and February 2011, the Bumi Resources Group received the remaining payments in the aggregate amount of US$50 million in relation to the sale of 50.0 per cent. of Enercorp.

(4) (5)

(6)

(7)

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Debt and Finance Lease Obligations The following table provides an overview of the Bumi Resources Groups borrowings, net of amortised finance costs, as at the dates indicated: At 31 December At 30 September

2008

2009

2009

2010

(audited) Bank borrowings Convertible bonds Finance lease liabilities Non-current Bank borrowings Finance lease liabilities Current Total borrowings 1,029 106 45

(unaudited) (US$ in millions) 1,992 1,593 2,710 1,048 467 1,023 123 102 100

1,180 100 31 131

3,163 409 60 469

2,162 20 54 74

3,833 656 64 720

For information on Bumis total and net debt position as of 30 November 2010, see Part B: The Bumi Resources Group in Part VII Capitalisation and Indebtedness Statement. For an overview of the terms and conditions of the Bumi Resources Groups borrowings as at 31 December 2009, see Note 22 to the Bumi Resources Groups Consolidated Financial Information at 31 December 2008 and 2009 included in Part IX Financial Information. For more detailed information about the financial and other covenants contained in the Bumi Resources Groups current financing arrangements, see paragraph 18 The Bumi Resources Groups Material Agreements Financing Arrangements of Part XII Additional Information. The Bumi Resources Group expects to incur a significant amount of capital lease obligations to complete its expansion programs, primarily at the operations of KPC and Arutmin. The Bumi Resources Group has plans to build additional facilities and upgrade existing facilities, such as shiploaders, overland belt conveyors, coal crushers and stockpile yards to increase the capacity of the groups coal chain at its mines to increase throughput. Additionally, the Bumi Resources Group intends to expand its equipment and machinery, such as excavators, coal hauling trucks, dump trucks, loaders, drill rigs, graders and bulldozers, to increase the coal output of groups operating pits. For a further discussion on the Bumi Resources Groups expansion programs, see Coal Mining Business Expansion Programs in Part IV Information on the Bumi Resources Group. Financial Resources As of 30 September 2010, the Bumi Resources Groups cash and cash equivalents amounted to US$134 million, compared to US$120 million as of 31 December 2009 and US$255 million as of 31 December 2008. These cash and cash equivalent amounts included, among other items, cash amounts related to amounts on deposit in bank accounts maintained under the Cash Distribution Agreement and used to make payments in accordance with the terms of the Cash Distribution Agreement or with banks in support of bank guarantees for performance bonds of Bumi Resources subsidiaries. For a description of the Cash Distribution Agreement, see Part XII Additional Information The Bumi Resources Groups Material Contracts Agreements among the Bumi Resources Group Members Cash Distribution Agreement. Under Available-for-sale financial assets, as of 30 September 2010, the Bumi Resources Group also had short-term investments of US$227 million, compared to US$215 million as of 31 December 2009. These short-term investments related to amounts invested in discretionary funds the Bumi Resources Group established with PT Recapital Asset Management (Recapital Asset Management), as a precautionary measure to protect against any potential negative impact on operating cash flows were there to be a material production stoppage at the Bumi Resources Groups coal mines while the amount as of 30 September 2010 also included US$150.0 million from the US$150.0 Million Bright Ventures Facility placed by Herald with PT Henan Putihrai Asset Management (HPAM), to fund the start up costs related to the Dairi project when the necessary forestry permit is received. At the time the Bumi Resources Group expected to receive the necessary forestry permit imminently. However, when BRMs subsidiary Calipso did not receive the forestry permit within the timeframe expected, Calipso drew down the

1,311

3,632

2,236

4,553

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US$150.0 Million Bright Ventures Facility and deposited the proceeds of the US$150.0 Million Bright Ventures Facility with HPAM pending receipt of the permit. The US$150.0 Million Bright Ventures Facility was repaid in December 2010 in connection with the BRM IPO. As of 30 September 2010, the balance of the funds the Bumi Resources Group had on deposit with HPAM was US$115.8 million. The discretionary funds with Recapital Asset Management were deposited pursuant to a discretionary fund contract entered into on 27 August 2008 initially for a period of six months under which the Bumi Resources Group granted Recapital Asset Management, as an investment manager, the right to manage up to US$350.0 million of the Bumi Resources Groups funds. Through a series of amendments, the Bumi Resources Group extended the term of this agreement until 27 August 2011. Since the funds formation in 2008, the Bumi Resources Group has made partial redemptions of this fund in the aggregate amount of US$83.7 million. On 2 September 2009, the Bumi Resources Group and Recapital Asset Management entered into a second discretionary fund contract for a period of six months under which the Bumi Resources Group granted Recapital Asset Management the right to manage up to US$50.0 million of the Bumi Resources Groups funds. On 23 February 2010, the Bumi Resources Group extended the term of this agreement until 2 March 2011. Since the funds formation in 2009, the Bumi Resources Group has made partial redemptions of this fund in the aggregate amount of US$37.0 million. Other Financial Information The following table sets forth the Bumi Resources Groups consolidated EBITDA and EBITDA for the periods indicated: Year Ended Nine Months Ended 31 December 30 September

2008

2009

2009

2010

Consolidated EBITDA(1) Minority interest in net income of consolidated subsidiaries EBITDA

(1)

831

(unaudited) (US$ in millions) 642

566

574

(10)

Note: (1) Consolidated EBITDA and EBITDA is not a standard measure under IFRS. For information about the Bumi Resources Groups calculation and presentation of EBITDA, see Presentation of Financial and Other Information Non-IFRS Financial Measures EBITDA.

831

632

(24)

566

550

Capital Expenditures, Exploration and Evaluation Expenditures and Finance Leases The table below sets forth the Bumi Resources Groups capital expenditures, exploration and evaluation expenditures and finance lease payments by major subsidiaries. The amounts set forth for 2010 are estimated incurred expenditures and payments, whereas the amounts set forth for 2011 are budgeted.
(estimated)

Year Ending 31 December

2010

(unaudited) (US$ in millions, except percentages) 20.7% 3.3% 21.5% 45.5% 54.5% 96.0 26.0 167.0 289.0 244.0 533.0

(budgeted)

2011

Capital Expenditures: KPC Arutmin Other Total Coal BRM Group Total Capital Expenditures

50.0 8.0 52.0 110.0 132.0

18.0% 4.9% 31.3% 54.2% 45.8%

242.0

100.0%

100.0%

206

 (estimated)

Year Ending 31 December

2010

(unaudited) (US$ in millions, except percentages) 29.8% 243.8

(budgeted)

2011

Exploration and Evaluation Expenditures: KPC Arutmin Fajar Sakti Pendopo BRM Group Total Explorationn and Evaluation Expenditures

132.3

29.5%

2010

132.3

29.8%

2011

243.8

29.5%

(estimated) (budgeted)

Year Ending 31 December

(unaudited) (US$ in millions, except percentages) 55.1% 55.1% 294.3 294.3

Finance Leases: KPC Arutmin Fajar Sakti Pendopo BRM Group Total Finance Leases Total Capital Expenditures, Exploration and Evaluation Expenditures and Finance Leases

244.3 244.3

35.6%

35.6%

The majority of the Bumi Resources Groups capital expenditures in 2010 were made to purchase mining machinery and equipment, including coal hauling trucks and excavators, for use in its owner operations at KPCs Sangatta mine.

443.4

100.0%

826.6

100.0%

The Bumi Resources Group plans to incur approximately US$532.0 million in capital expenditures in 2011. The Bumi Resources Group plans to incur approximately US$96 million at KPC to develop the infrastructure at the Sangatta and Bengalon mines, primarily on an upgrade of the Sangatta coal terminal, replacement of worn out or obsolete property, machinery and equipment and infrastructure development and approximately US$26 million at Arutmin to build new port facilities and coal chains at the Mulia and Satui mines. The Bumi Resources Group is currently exploring the possibility of entering into arrangements with infrastructure development companies and mining service contractors under which those companies would develop, build, finance and complete the construction and installation of the coal production, processing and transportation machinery, equipment and infrastructure necessary to complete the Bumi Resources Groups proposed expansion programs and the Bumi Resources Group would enter into rental or service agreements with those companies under which the group would pay those companies rental or other service fees for use of this machinery, equipment and infrastructure in the groups operations. To the extent the Bumi Resources Group is able to enter into these arrangements with infrastructure development companies or mining service contractors, the group would no longer undertake these infrastructure projects itself or be responsible for arranging or securing the financing necessary to complete these projects, and the estimates of the Bumi Resources Groups future planned capital expenditures set forth in this document would be reduced.

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Exploration and Evaluation Expenditures In the first nine months of 2010, the Bumi Resources Group incurred approximately US$38 million in exploration and evaluation expenditures related to the Bumi Resources Groups greenfield mining projects at Herald, Bumi Resources Mauritania, Pendopo Energi, Gorontalo Minerals, Citra Palu, Gallo Oil and Konblo. This amount was US$60 million in 2009 and US$329 million in 2008. The Bumi Resources Group plans to incur approximately US$243.8 million in exploration and evaluation expenditures in 2011. The Bumi Resources Group plans to incur all of such expenditure at the operations of its non-coal minerals mining businesses under Bumi Resources Minerals. Funding of Planned Capital Expenditures The Bumi Resources Group currently intends to fund its expansion plans in 2011 from cash on hand and cash generated internally from its existing mines as well as through its mining contractors, which have received financing commitments for their expansion activities in 2011. In addition, the Bumi Resources Group intends to look to third parties to fund its expansion in infrastructure wherever possible in return for Bumi Resources commitment to enter into operating leases or rental contracts for the infrastructure. See Capital Expenditures, Exploration and Evaluation Expenditures and Finance Leases. Contractual Obligations and Commitments Contractual Commitments For certain information about the Bumi Resources Groups contractual obligations and commitments as of 31 December 2009, see Notes 22 and 36 to the Bumi Resources Groups IFRS Consolidated Financial Information at 31 December 2009 and 2008 included in Part IX Financial Information. Operating Lease Obligations for New Equipment and Machinery In the fourth quarter of 2004 and the first half of 2005, the Bumi Resources Group embarked upon a program of modernising the machinery and equipment the group uses in its owner operations at the Sangatta mine by entering into a number of equipment leases for new machinery and equipment. In connection with this program, the Bumi Resources Group entered into a number of operating leases for equipment and machinery such as excavators, coal hauling trucks, dump trucks, loaders, drill rigs, graders and bulldozers. The Bumi Resources Group expect that, by the end of 2010, most of the groups existing operating leases would have expired or be terminated. Since 2008, the Bumi Resources Group has adopted a policy to finance its mobile fleet by entering into finance leases, which the Directors believe is more cost efficient than operating leases. However, the Bumi Resources Group expect to enter into operating leases for the use of infrastructure and other facilities, such as barge ports, overland belt conveyors and captive power plants, which are not owned by KPC or Arutmin at the site of their mines. Post-Employment Benefit Obligations The Bumi Resources Group has incurred pension obligations under its defined benefit pension plans for substantially all of the groups employees. The Bumi Resources Groups defined benefit pension plans are funded through contributions the group makes to them. The Directors believes that the pension benefits to which the Bumi Resources Groups employees are entitled under these pension plans exceed the minimum requirements set forth under Indonesian laws governing pension plans. The Bumi Resources Groups pension expenses for 2008 and 2009 were US$5 million and US$12 million, respectively. As of 31 December 2008 and 31 December 2009, the present value of accumulated benefit obligations exceeded the fair value of the plans assets by US$25 million and US$16 million, respectively. For a discussion of the Bumi Resources Groups employee benefit obligations, see Note 23 to the Bumi Resources Groups Consolidated Financial Information at 31 December 2008 and 2009 included in Part IX Financial Information. Taxes Under the terms of the KPC and Arutmin CCOWs, at the Bumi Resources Groups coal mining operations of KPC and Arutmin, KPC and Arutmin are permitted to use accelerated depreciation on the property, plant and equipment the group purchase within any of the first four years of the life of the asset. The Bumi Resources Group can use this accelerated depreciation in addition to units-ofproduction depreciation of the same asset. The rates of accelerated depreciation permitted under the

208

KPC and Arutmin CCOWs are 10.0 per cent. of the cost of any building and 25.0 per cent. of the cost of any other depreciable asset. In addition KPC and Arutmin have been granted investment allowances under their CCOWs. These investment allowances permit them to deduct an additional 20.0 per cent. of the value of depreciable assets upon purchase. Under the KPC and Arutmin CCOWs, tax losses at KPCs and Arutmins coal mining operations can be carried forward for up to four years after the tax loss was incurred. The Bumi Resources Group did not have any tax loss carry-forwards in respect of its coal mining operations as of 30 September 2010 or 31 December 2009. Actual and Effective Corporate Tax Rates Under the Indonesian corporate tax system, each Indonesian company within the Bumi Resources Group is taxed individually and the Bumi Resources Group is not permitted to consolidate the taxable profits and tax loss carryforwards of the companies on a group level. Under the terms of the KPC and Arutmin CCOWs, KPCs and Arutmins corporate tax rate was 45.0 per cent. in 2009, the first nine months of 2009 and the first nine months of 2010. Their effective corporate tax rates during these periods were 30.1 per cent., 63.9 per cent. and 43.7 per cent., respectively. The difference between their effective corporate tax rate and the maximum corporate tax rate set forth under the KPC and Arutmin CCOWs is due to temporary differences in calculating their taxable income under those CCOWs compared to calculations of income tax expenses under Indonesian GAAP. The Bumi Resources Group did not have any tax loss carryforwards at the Bumi Resources holding company level as of 30 September 2010 or 31 December 2009. Tax Payments The Bumi Resources Group made cash payments for corporate income taxes, including assessments for prior year taxes, of US$84 million in 2008, US$349 million in 2009, US$178 million in the first nine months of 2009, and US$302 million in the first nine months of 2010. The amounts the Bumi Resources Group records in its cash flow statement for any fiscal period as tax payments differ from the amounts the Bumi Resources Group records in its statement of income for tax expenses in the same fiscal period since the amounts recorded in its cash flow statements relate to cash payments of outstanding tax assessments and prepaid taxes for the current and prior fiscal periods, whereas the amounts recorded in its statement of income relate to accrued tax liabilities in the fiscal period covered by the relevant statement of income. Most of the Bumi Resources Groups cash payments for taxes in 2008, 2009, the first nine months of 2009 and the first nine months of 2010 recorded in the cash flow statements for those periods related to outstanding tax payments in relation to prior tax years. In 2009, the Bumi Resources Groups cash tax payments were substantially higher at US$349 million due to outlays related to additional payments of corporate income taxes for 2005, 2006 and 2007 and payment of 2008 corporate income taxes for KPC and Arutmin. These tax payments were made in connection with the revision of KPCs and Arutmins annual tax returns for those prior years in connection with preliminary tax examinations conducted by the Indonesian tax authorities. Based upon advice from its tax advisers, the Bumi Resources Group agreed to pay the disputed tax amounts to the Indonesian tax authorities and to contest those tax assessments in by appropriate proceedings, such as proceedings in, and appeals to, the Indonesian courts. In proceedings before the South District Jakarta Court, KPC and Arutmin filed pre-trial arguments against allegations of underpayment of corporate income taxes. These arguments were rejected. Claims for Tax Refunds Claims for tax refunds consist of claims based on the tax assessments letters issued by the Indonesian Director General of Tax, which have been partially settled by the Bumi Resources Group through the process of objection and appeal, and overpayments of corporate income taxes. The Bumi Resources Groups claims for tax refunds amounted to US$46 million, US$10 million and US$63 million as of 31 December 2008 and 2009 and 30 September 2010, respectively. Deferred Income Taxes The Bumi Resources Group recognises deferred income tax assets and liabilities relating to temporary differences between the accounting and tax treatment of certain expenses. These temporary differences relate principally to depreciation of fixed assets and amortisation of deferred charges and the impact of recognising mine properties on the acquisition of businesses.

209

Recoverability of Value-Added Tax Receivable KPG and Arutmin are involved in a legal dispute with the Indonesian State Receivables Affairs Agency regarding whether KPC and Arutmin may offset input value-added tax refunds against their royalty obligations to the Indonesian Government under KPCs and Arutmins CCOWs. For information about this dispute, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. Market Risk Disclosures The Bumi Resources Groups market risk relates principally to fluctuations in commodity prices, foreign exchange rates and, to a lesser extent, interest rates. For information about the Bumi Resources Groups treasury policies, see Note 5 to the Bumi Resources Groups Consolidated Financial Information at 31 December 2008 and 2009 included in Part IX Financial Information. Effects of Inflation Indonesia had an annual inflation rate of 5.3 per cent. in the first nine months of 2010 (on an annualised basis), 2.8 per cent. in 2009 and 11.1 per cent. in 2008, according to Indonesian Government figures. The Bumi Resources Group does not consider inflation in Indonesia, where substantially all of its operations are currently located, to have had a material impact on the results of its operations. Inflation in Indonesia would adversely affect the Bumi Resources Groups net income and cash flow to the extent the group is unable to increase its revenues to cover any increases in operating costs and expenses resulting from inflation. In addition, the rates the Bumi Resources Groups mining contractors charge the group are, in certain cases, indexed to increases in inflation in the United States and Indonesia. Seasonality The Bumi Resources Groups operations are not subject to seasonality other than rainfall that can interfere with extracting activities. Geographical Sales Data The following table provides information regarding the Bumi Resources Groups gross sales revenue by destination of products sold:
Year Ended 31 December Nine Months Ended 30 September 2008 2009 2009 2010 (audited) (unaudited) (US$ inmillions, except percentages) Gross sales revenue by destination(1) Indonesia Asia Europe America Gross sales revenue(2)
Note:

152 2,150 310 18 2,630

6% 140 82% 2,013 12% 290 1% 7 100% 2,451

6% 253 82% 1,350 12% 164 5 100% 1,772

14% 200 76% 1,692 9% 205 100% 2,097

9% 81% 10% 100%

(1) Sales by geographical destination are based on the ultimate country of destination of the product if known. If the eventual destination of the product sold through traders is not known, then revenue is allocated to the location of the product at the time when the risks and rewards of ownership are passed. The Company is domiciled in Indonesia. (2) This includes 100per cent. of subsidiaries sales revenue and the Bumi Resources Groups share of the sales revenue of jointly controlled entities and of associates.

Off-Balance Sheet Arrangements The Bumi Group has no off-balance sheet arrangements or obligations that have or are reasonably likely to have a current or future material adverse effect on its financial conditions, changes in financial conditions, revenues or expenses, operating results, liquidity, capital expenditures or capital resources.

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Current Trading and Prospects The attributable volume of coal produced by the Bumi Resources Group during the last three months of 2010 was approximately 10.6 million tonnes, out of an estimated 40.3 million tonnes of attributable production for the full year 2010. The production in the last three months of 2010 was lower than the volume of coal produced by the Bumi Resources Group during the same period in 2009, due to the unusually heavy rainfall in the second half of 2010 compared to historical averages, which led to reduced coal production activities, particularly at Arutmin. The weighted average realised price per tonne of coal produced by the Bumi Resources Group over the last three months of 2010 was US$75.64, a 30.6 per cent. increase compared to the last three months of 2009 and a 9.2 per cent. increase compared to the weighted average of US$69.28 per tonne for the nine months ending 30 September 2010. The Bumi Resources Groups cash production cost per tonne for the full year 2010 are expected to be higher than in 2009, due to increases in fuel and explosives costs and depreciation. The Bumi Resources Group expects lower levels of coal production but higher prices in the first quarter of 2011 compared to the fourth quarter of 2010, due to generally higher rainfall levels in the first quarter compared to the fourth quarter. Costs of sales may increase slightly during that period due to the effect of higher international oil prices on fuel costs. The average realised price of coal is expected to increase from April 2011 onwards as the contracts with the Bumi Resources Groups Japanese customers are renewed. The Bumi Resources Group intends to expand its total annual coal production to approximately 71.2 million tonnes in 2011, through the installation of new equipment and machinery under its expansion program, primarily at KPC. The Bumi Resources Group intends to increase production at Fajar Sakti and begin commercial production at Pendopo Energi in 2011. Part C: Operating and Financial Review of the Berau Group Purchasers of Ordinary Shares should read the following discussion and analysis of the Berau Groups financial condition and results of operations in conjunction with and the Berau Groups consolidated financial statements and the related notes included in Part IX Financial Information. In general, the financial results discussed below relate to the Berau Groups consolidated financial data. This discussion contains forward-looking statements that reflect the Directors current views with respect to future events and financial performance. The Berau Groups actual results may differ materially from those anticipated in these forward-looking statements as a result of factors such as those set forth under Risk Factors and elsewhere in this document. See Presentation of Financial and Other Information Forward-Looking Statements. The Bumi Resources Groups consolidated financial statements are reported in US dollars and have been prepared in accordance with IFRS. Overview Berau is a holding company that indirectly owns 90 per cent. of Berau Coal, the fifth largest coal producer in Indonesia in terms of production volume in the first eleven months of 2010, according to the statistics released by the MEMR. Berau Coal engages in open-cut mining of coal in its concession area in East Kalimantan, Indonesia, where it holds coal mining rights until 26 April 2025. Berau Coal operates three mining areas in Lati, Binungan and Sambarata, where reserves were estimated to be 346 million tonnes as of 31 December 2009, of which 146 million tonnes are of the proved category and 200 million tonnes are of the probable category. Berau Coals concession area of approximately 118,400 hectares also contains three other reserve locations, namely Kelay, Gurimbang and Punan. In 2007, 2008, 2009 and the first nine months of 2010, Berau Coal produced 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes and 17.4 million tonnes of coal, respectively. Berau Coal subcontracts all of its mining, barging and drilling and blasting operations, which allows it to minimise capital expenditures and working capital requirements as mining contractors pay upfront for equipment and charge the Berau Group for such equipment over time and focus on exploration, mine planning, supervision, and sales and marketing. Berau Coal works closely with its mining contractors which undertake land clearing, overburden removal, coal excavation, hauling activities and road maintenance. Berau Coal also engages different contractors for other related operations such as barging, coal quality analysis and transhipping. Due to the 2009 Mining Law and its implementing regulations, Berau Coal

211

may be required to amend its existing mining agreements with mining contractors under which those mining contractors undertake coal-digging, extraction and loading activities prior to 30 September 2012 to the extent that Regulation 28/2009 remains in force in its current form. See Risks Relating to the Groups Operations A significant portion of the Groups coal production is, and will continue to be, conducted through contractors in Risk Factors. The Berau Group derives all of its revenues from Berau Coals sales of coal. Prior to 2010, approximately 60 per cent. of the Berau Groups total revenue was from exports to customers in China, Hong Kong, India, Japan, South Korea, Taiwan and Thailand. In the nine months ended 30 September and the year ended 31 December 2010, approximately 66 per cent. and 69 per cent., respectively, of the Berau Groups total revenue was from export sales to the these customers. Berau Coals customers are mainly utility companies and coal trading companies which purchase coal from Berau Coal for resale. In 2007, 2008, 2009 and for the nine months ended 30 September 2009 and 2010, the Berau Groups revenue totalled US$377 million, US$631 million, US$800 million, US$574 million and US$763 million, respectively. As of 1 January 2011, Berau Coal had contracts with aggregate commitments to purchase coal totalling 17.76 million tonnes in 2011 of which approximately eight million tonnes were at an agreed price while the prices for the remainder were yet to be agreed. Berau Coals export sales are priced, invoiced and paid in US dollars. Berau Coals domestic sales are invoiced and paid in Rupiah based on US dollar-denominated prices, converted at the exchange rate on the date the relevant invoice date. Under two of the Berau Groups domestic sales contracts, the exchange rate may be adjusted periodically and under one of these contracts, the exchange rate may be adjusted to partially take into account the exchange rate fluctuation. The Berau Groups cost of goods sold primarily comprises mining costs, freight and handling costs paid to Berau Coals contractors and royalties paid to the Indonesian Government. Factors Affecting the Berau Groups Business and Results of Operations Berau is a holding company and, accordingly, all of Beraus operations are conducted through Berau Coal. For purposes of the discussion below, references to Beraus coal production business are to the business of Berau Coal. The Berau Groups coal production business and the Berau Groups results of operations are primarily affected by the factors described below. Global and Regional Demand for and Supply of Coal and Coal Prices Coal is a commodity product that is traded internationally in competitive markets. Long-term pricing trends for internationally traded thermal and sub-bituminous coal are cyclical and are subject to significant fluctuations. Global coal prices depend principally on the supply and demand dynamics of world coal markets. Increased supply of coal and any coal supply surplus may reduce global coal prices. Furthermore, high coal prices may encourage the development of expanded or new capacity by other coal producers. Berau Coals customers are mainly utility companies and coal trading companies which purchase coal from Berau Coal for resale. Coal was the fastest growing fuel in the world for each of the last six years through 2008, according to the BP Statistical Review of World Energy for June 2010. Coal provides approximately 41 per cent. of the worlds electricity, according to a report published by the World Coal Institute in 2009. According to data reported by ABARE, an Australian government economic research agency, Asia is the worlds largest importer of internationally traded thermal coal, with 59.5 per cent. of worldwide import demand in 2009. Asia is also the worlds largest exporter of internationally traded thermal coal, with 49.3 per cent. of worldwide export supply in 2009. Demand for coal affects coal prices globally and increased demand has been reflected in the increase of steam coal contract prices (on a FOB basis based on data from The McCloskey Group) from US$23.30 per tonne on 11 June 2000 to US$120.75 per tonne on 11 February 2011. Unlike most other major commodities, there is no single global market price standard for coal, the price of which fluctuates significantly in different geographical markets and also depending on the type of coal. Berau Coal has attempted to mitigate its exposure to fluctuations in global coal prices through long-term coal supply agreements with its customers. Berau Coals selling prices under its coal supply agreements are generally negotiated with reference to certain international indices, and adjusted for a number of

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factors, including coal specifications and quality. Coal not sold under supply agreements is sold on a spot basis. Berau Coals selling prices are also driven by the quality of coal it sells. Higher quality coal generally attracts higher selling prices. Berau Coal markets its coal under four brand names Mahoni, MahoniB, Agathis and Sungkai. Each brand has distinctive features in terms of inherent moisture, ash content, volatile matter, fixed carbon, total moisture, total sulphur and gross calorific (or heat and energy) values and therefore has a different selling price to reflect the quality of coal. Berau Coal blends coal from its three mining locations in order to adjust the overall quality grade of its coal. See Coal Products and Production in Part V Information on the Berau Group. Berau Coals average selling price per tonne of coal was US$31.86, US$48.54, US$55.00, US$57.37 and US$60.49 in 2007, 2008, 2009 and the nine months ended 30 September 2009 and 2010, respectively. Production and Expansion The Berau Groups revenues are a function of the volume and the price of coal Berau Coal produces and sells. Coal production volumes are dependent upon mine planning by Berau Coals management and logistics management to extract coal and transport it from its mining concession area to ports at Lati, Suaran and Sambarata, as well as to a coal transhipment point at Muara Pantai. Berau Coals coal production depends on the performance of its mining contractors which undertake all of its mining activities under the supervision of Berau Coals management. In 2007, 2008, 2009 and the first nine months of 2009 and 2010, Berau Coal produced 11.8 million tonnes, 13.1 million tonnes, 14.3 million tonnes, 10.6 million tonnes and 17.4 million tonnes of coal, respectively, and sold 12.1 million tonnes, 13.0 million tonnes and 14.1 million tonnes, 10 million tonnes and 12.62 million tonnes of coal, respectively, with the difference between coal production volumes and coal sales volumes being attributable to sales from and additions to coal inventories. Berau Coals coal mining operations are generally adversely affected by inclement weather during the rainy season which occurs in the first and fourth quarters of each year. Berau Coal generally has higher production in dry months to build up coal inventory levels to make up for shortfalls in production during the rainy season. Berau Coals production and sales volumes are also affected by market demand, vessel availability and contractor capacity and performance. Berau Coal has a one-year mining plan for its concession area, which is constantly analysed and updated to take into account current and projected demand for and sales of its coal products, as well as the volume and quality of its coal reserves. Berau Coal plans to increase its annual gross coal production from an estimated 17.4 million tonnes in 2010 to approximately 20.4 million tonnes in 2011. See Expansion Plan and Growth Strategy in Part V Information on the Berau Group. Mining Contractors and Related Costs Berau Coals mining and coal haulage operations, including the supply of all mining and transportation equipment, road maintenance and the employees required to operate and maintain the equipment, are mainly carried out by two contractors, BUMA and SIS. Berau Coal has awarded contracts to three mining contractors for three new mines and is in the process of finalising the agreements. These contractors carry out mining operations based on Berau Coals instructions in accordance with its mining plan. Berau Coal has entered into multi-year mining operations and coal haulage contracts with each of its contractors. Increases in production volume generally increase Berau Coals mining costs as mining contractors are paid primarily based on a pre-agreed price per tonne of coal produced which is adjusted based on the volume of removed overburden and the distance it is moved. The pre-agreed contract price per tonne of coal produced is adjusted annually based on the projected strip ratio of the area in which the mining contractors have been engaged to mine, with a higher projected strip ratio resulting in higher prices per tonne. Tug and barge contractors transport coal from Berau Coals barge loading facilities to the transhipment point at Muara Pantai or transport Berau Coals coal directly to customers in Indonesia. Mining costs represented 55.4 per cent., 57.2 per cent., 58.4 per cent., 59.4 per cent. and 55.1 per cent. of the Berau Groups total cost of goods sold in 2007, 2008, 2009 and for the nine months ended 30 September 2009 and 2010, respectively. The Directors believe that Berau Coals reliance on contractors allows it to significantly reduce capital expenditures and working capital committed to mining operations and to focus on its value-added activities such as mine planning, exploration and marketing. Berau Coals mining contractors are responsible for providing substantially all of their own 213

equipment, machinery, supplies and labour necessary to mine within Berau Coals concession area. See Mine Operation and Logistics Contract Mining in Part V Information on the Berau Group. Fluctuations in Fuel Prices and Fuel Costs The price of fuel is an important driver of the Berau Groups results of operations. In the past, Berau Coals contracts with its mining contractors generally provided for the mining contractors fuel costs to be passed on to them with a fixed formula for calculating adjustments to the fuel costs. In October 2008, Berau Coal changed its arrangement with SIS and currently purchases fuel directly from PT Pertamina (Persero), Indonesias state-owned oil and gas company and provides such fuel to SIS. Berau Coal has entered into the same arrangement with BUMA with effect from 1 January 2010. Accordingly, the Berau Group is exposed to increases in the price of fuel which increase Berau Coals mining costs. In addition, a higher strip ratio increases the amount of overburden on coal moved per tonne of coal moved and thereby fuel consumption. Any increase in the price of fuel also increases Berau Coals cost of fuel and oil used in coal processing operations and increases the expenses incurred by its barging contractors in delivering coal, which it bears. Following Recapitals acquisition of an effective 90 per cent. interest in Berau Coal in December 2009, Berau Coal has implemented a new fuel tender process that is based upon the industrys best practices. The Directors believe that this new process will provide it with a reliable supply at a good price. Berau Coal does not currently engage in any hedging activities related to the price of fuel. Foreign Exchange Rates Berau Coals export sales, which have accounted for approximately 61 per cent. on average during 2007, 2008 and 2009 and 66 per cent. in the nine months ended 30 September 2010 of the Berau Groups total revenue are priced, invoiced and paid in US dollars. Berau Coals domestic sales are invoiced and paid in Rupiah based on US dollar-denominated prices, converted at the exchange rate on the date the relevant agreement is entered into. Under two of the Berau Groups domestic sales contracts, the exchange rate may be adjusted periodically and under one of these contracts, the exchange rate may be adjusted to partially take into account the exchange rate fluctuation. The Directors believe that Berau does not face significant foreign exchange transactional risks because of its effective hedge between the US dollar and the Rupiah. Royalties Paid to the Indonesian Government Under the terms of the Berau Coals CCOW, the Indonesian Government is entitled to 13.5per cent. of the Berau Coals coal production. Rather than deliver coal to the Indonesian Government, Berau Coal markets and sells the Indonesian Governments coal entitlement on the Indonesian Governments behalf and pays the Indonesian Government the cash proceeds less certain charges. In the Berau Groups financial statements, sales include the proceeds of the sales of the Indonesian Governments entitlement, and the cash payments made by Berau Coal to the Indonesian Government, being 13.5 per cent. of the proceeds derived from the final sale of coal, less charges for expenses and administrative fees, is included in its cost of sales. The Berau Group sets off Berau Coals unreimbursed value-added tax payments, for which it is entitled to be indemnified under its CCOW, against its cash payments to the Indonesian Government. However, the value-added tax recoverable and the royalty payable are presented gross in the Berau Groups consolidated balance sheets to reflect the amounts recoverable from different government departments. For a discussion of the risks associated with this offsetting, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government and Risks Relating to the Groups Operations The Bumi Resources Group and Berau Coal are paying the Indonesian Government cash equal to 13.5per cent. of the proceeds of coal sales instead of delivering coal. If the Indonesian Government chooses to require delivery of coal instead of cash, this could result in Berau Coal defaulting on its delivery requirements with other customers in Risk Factors. Indonesian Governmental Policies and Changes in Law While the current policies of the Indonesian Government toward the domestic coal mining industry are generally market-oriented, the Indonesian Government may, from time to time, issue new policies or laws that affect the Berau Groups mining operations.

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Effective from 12 January 2009, the Indonesian Government issued the 2009 Mining Law. The Indonesian Government and the mining companies are currently negotiating the terms of the amendment to the CCOWs. See The Indonesian Law on Mineral and Coal Mining and the regulations promulgated thereunder could adversely affect the Groups coal mining concessions, licences and authorisations and, in turn, its business, financial condition, results of operations and prospects in Risk Factors. In 2009, the Indonesian Government issued the New Environmental Law, which is currently in effect. However, some important matters such as a new environmental permit, environmental guarantee and a possible environmental risk analysis need to be detailed in implementing regulations. The Indonesian Government policies (including local government policies) that may affect the Berau Groups business include policies relating to coal mining, taxes and the environment. Trends in Mining Strip Ratios Berau Coals costs of coal production, particularly the fees charged by its mining contractors, are affected by the estimated strip ratios its mining contractors face in extracting coal from the mines. A strip ratio is the number of bank cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal. Higher strip ratios require Berau Coals mining contractors to remove higher amounts of overburden to access coal for mining, resulting in higher production costs. As Berau Coal mines new areas, its strip ratios will vary depending on the geological characteristics of the coal seams mined. Stripping costs incurred in the production phase are deferred to the extent that the actual stripping ratio in the period exceeds the estimated life of mine stripping ratio. These deferred costs are then released to the income statement, as production costs, in those periods where the actual stripping ratio is less than the life of mine stripping ratio. The five year mine plan stripping ratio is calculated as the total expected amount of overburden to be removed over the life of the mine, divided by the total expected amount of coal to be mined over the life of the mine. The life-of-mine stripping ratio is reviewed regularly and, where necessary, amended to reflect changes in the economically mineable coal reserves, and a more detailed understanding of the overburden to be removed. The accounting effects of changes to the life of mine stripping ratio are applied prospectively. For the years ended 31 December 2007, 2008 and 2009 and the first nine months ended 30 September 2009 and 2010, the estimated strip ratio at Berau Coals mines was 7.11, 8.04, 8.33, 8.34 and 8.70, respectively. The increase in the average strip ratio was because of expanded mining areas, including an increase in the average distance overburden is moved. If Berau Coals average strip ratio increases, Beraus coal production expenses, particularly contractor fees, would increase. Marketing Commissions Berau Coal markets its export sales of coal through international marketing agents. Under the terms of the agreements with these agents, Berau Coal is obligated to pay the agents a marketing commission based on the total sales proceeds (which includes freight and insurance for sales made on a cost insurance freight (CIF) basis) on each sale. The Berau Group is currently reconfiguring its marketing arrangements. See Sales and Marketing in Part V Information on the Berau Group. Demurrage costs A number of Berau Coals coal supply agreements typically contain demurrage provisions requiring Berau Coal to pay certain penalties in the event of any delay in loading vessels with coal. Berau Coal generally maintains adequate levels of inventories. However, in the event of disruption of transportation services due to severe weather-related problems, distribution problems, labour disputes or other events that could temporarily restrict Berau Coals ability to supply coal to its customers, these inventories could be insufficient to meet delivery requirements. In addition, if several customers vessels arrive at the same time, this could also result in loading delays. Either of these could result in demurrage claims by ship owners for loading delays and increase the Berau Groups operating costs.

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Results of Operations The following table shows a breakdown of the Berau Groups results of operations and each item as a percentage of total revenue for the periods indicated:
Year Ended 31 December Nine Months Ended 30 September 2007(1) 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions, except percentages) Statement of Operations Data: Revenue Cost of sales 377 (289) Gross profit 88 General and administrative expense (13) Distribution and marketing expense (4) (Gain) loss on foreign exchange net 2 Others net 1 Operating profit 74 Finance income 25 Finance costs (35) Net finance cost (10) Profit before taxation 64 Taxation (29) Profit for the period 35 Profit attributable to: Owners of parent Minority interest 100% 631 (77)% (460) 23% 171 (3)% (18) (1)% (7) 1% (4) 0% 1 20% 143 7% 25 (9)% (32) (3)% (7) 17% 136 (8)% (62) 9% 74 100% 800 (73)% (473) 27% 327 (3)% (26) (1)% (10) (1)% 2 0% 2 23% 295 4% 25 (5)% (48) (1)% (23) 22% 272 (10)% (124) 12% 148 100% 574 (59)% (334) 41% 240 (3)% (12) (1)% (6) 0% 7 0% 37% 229 3% 19 (6)% (22) (3)% (3) 34% 226 (16)% (102) 19% 124 100% 763 (58)% (502) 42% 261 (2)% (29) (1)% (7) 1% (3) 0% (1) 40% 221 3% 2 (4)% (61) (1)% (59) 39% 162 (18)% (94) 22% 68 100% (66)% 34% (4)% (1)% 0% 0% 29% 0% (8)% (8)% 21% (12)% 9%

Year Ended 31 December 2007 2008 2009
18 17 5% 5% 39 35 6% 6% 80 68 10% 9% 68 56 12% 10% 56 12

7% 2%

The following table provides certain operating data for the Berau Group: Nine Months Ended 30 September 2009 2010 10.6 10 322 252 57.37 32.82 8.86 12.23 17.1 506 257 60.49 38.14 8.17

(unaudited)

Operating Data: Production volume (million tonnes) Sales volume (million tonnes) Revenue (US$ millions): Export Domestic Average selling price per tonne (US$ per tonne of sales)(1) Cash cost per tonne (US$)(2) Average actual strip ratio(3)
Notes:

11.8 12.1 238 139 31.86 23.81 7.83

13.1 13.0 373 258 48.54 34.88 8.06

14.3 14.1 488 312 55.00 31.30 8.65

(1) Average selling price per tonne is calculated by dividing sales by sales volumes for the period presented. (2) Cash cost per tonne is calculated by adding mining costs freight and handling costs royalties paid to the Government of Indonesia coal processing and other production costs restoration costs and increases or decreases in coal inventories and dividing by sales volumes for the periods presented. Although depreciation and amortisation are added to the Companys cost of goods sold this is not included in cash costs. (3) The strip ratio is the number of bank cubic metres of overburden (rock and soil) that must be removed to access and extract one tonne of coal.

Cost of Sales The Berau Groups cost of sales comprises the following items: Mining costs. Mining costs comprise fees paid to Berau Coals mining contractors for excavating and hauling coal and overburden from its mines and dead rent of US$1.00 per hectare paid semi-annually to the Indonesian Government pursuant to Berau Coals CCOW. Fees paid to Berau Coals mining contractors typically increase if mining operations require greater amounts of overburden to be removed. 216

Freight and handling costs. These costs relate to shipping administration costs, barging costs, demurrage costs, port charges, transhipment costs, ocean freight costs (relating primarily to CIF sales) and other shipping operational costs. The costs relating to transporting coal from Berau Coals port facilities to customers under its CIF contracts are borne by Berau Coal, but the cost of any CIF sales are reflected in the contract prices. The mode of delivery varies among Berau Coals customers and affects its freight and handling costs for any particular period. The Berau Groups freight and handling costs are affected by global transport prices and fuel prices since Berau Coal is charged for its barging contractors fuel costs. Royalties paid to the Indonesian Government. See Factors Affecting the Berau Groups Business and Results of OperationsRoyalties Paid to the Indonesian Government. Coal processing and other production costs. These costs include wages for the Berau Groups employees stationed at the Berau Groups concession area, equipment hire, maintenance and fuel consumption, all associated with the Berau Groups coal processing and stockpiling activities. Depreciation and amortisation. These are costs relating to the depreciation of Berau Coals fixed assets and amortisation of mine properties. Restoration costs. These costs comprise mine reclamation and rehabilitation expenses based on the total amount of land disturbed each period. Decreases (increase) in coal inventories. The Berau Group adjusts its cost of goods sold for the difference in the carrying value of coal inventories at the start of the financial period against the carrying value coal inventories at the end of the financial period.

The following table sets forth the breakdown of the Berau Groups cost of sales and each item as a percentage of the Berau Groups total cost of goods sold for the periods indicated:
Year Ended 31 December Nine Months Ended 30 September 2007 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions, except percentages) Cost of sales: Mining costs Freight and handling costs Royalties paid to the Government of Indonesia Coal processing and other production costs Depreciation and amortisation Restoration costs Decrease (increase) in coal inventories Amortisation of coal mining rights Total 160 60 41 17 7 1 3 289 55% 21% 14% 263 100 70 57% 22% 15% 276 79 92 58% 17% 20% 199 59 66 59% 18% 20% 276 91 85 55% 18% 17% 4% 1% 0% 1% 3% 100%

6% 25 5% 24 5% 17 5% 21 2% 7 2% 7 1% 6 2% 5 1% 1 0% 2 0% 1 0% 1 1% (6) (1)% (7) (1)% (13) (4)% 7 15 100% 460 100% 473 100% 334 100% 502

Operating Expenses The Berau Groups operating expenses comprise general and administrative expenses, distribution and marketing expenses, net losses or gains on foreign exchange (primarily in relation to differences in royalty payments to the Indonesian Government which are denominated in both US dollars and Rupiah, in accordance with the Berau Groups sales, and Rupiah-denominated VAT payments) and other expenses. General and administrative expenses include salaries, wages and provisions for employee benefits, community development and donation expenses, travel expenses, professional fees, repairs and maintenance expenses, rental equipment, office rent, expenses for fuel and lubricants, freight, office expenses for promotion and advertising, training and education expenses, and other miscellaneous general and administrative expenses. Distribution and marketing expenses comprise commissions paid to Berau Coals marketing agents, bank charges, employee costs and other miscellaneous selling and marketing expenses. Net Finance Cost Net finance cost comprises finance income from cash deposits and loans to the related parties Begarion Central Limited and Highlander Investments Pte. Ltd. (whose loans are accrued), finance costs

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from the amortisation of deferred financing charges (relating to fees incurred in connection with the senior notes and loans), interest expenses (including transaction costs relating to debt), loss from early redemption of senior notes in 2009 and other miscellaneous income (charges). Income Tax Expense Income is taxable at the rate of 45.0 per cent. and is calculated in accordance with rules and guidelines provided in the CCOW. Berau Coal is entitled to an investment allowance of 20.0 per cent. of its total investments at the rate of 5.0 per cent. per annum from its taxable income under Indonesian tax law. Minority Interest Minority interests are stated as the minority shareholders proportion of the Berau Groups profit for the period. Following Berau Coals acquisition of 100per cent. of Winchester on 19 December 2009, Sojitz is the only minority shareholder of Berau Coal. For information about the acquisition of Winchester, see Note 7 to the Berau Groups Consolidated Financial Information for the years ended 31 December 2007, 2008 and 2009 include in Part IX Financial Information. Nine Months Ended 30 September 2010 Compared to the Nine Months Ended 30 September 2009 Revenue The Berau Groups revenue increased by 32.9 per cent. from US$574 million in the first nine months of 2009 to US$763 million in the first nine months of 2010. Revenue increased due to increases in average selling price and sales volumes of coal products. The Berau Groups average selling price increased by 5.4 per cent. from US$57.37 per tonne in the first nine months of 2009 to US$60.49 per tonne in the first nine months of 2010 due to higher global coal prices. Sales volume increased by 26.2 per cent. from 10 million tonnes in the first nine months of 2009 to 12.6 million tonnes in the first nine months of 2010 due to larger customer orders due to increased activity within their respective markets. Cost of Sales The Berau Groups cost of sales increased by 50.3 per cent. from US$334 million in the first nine months of 2009 to US$502 million in the first nine months of 2010 due to the following reasons: Mining costs. Mining costs increased by 39 per cent. from US$199 million in the first nine months of 2009 to US$276 million in the first nine months of 2010 primarily due to an increase in coal production from 10.57 million tonnes in the first nine months of 2009 to 12.23 million tonnes in the first nine months of 2010 and an increase in mining rates. Freight and handling costs. Freight and handling costs increased by 54 per cent. from US$59 million in the first nine months of 2009 to US$91 million in the first nine months of 2010. This was primarily due to an increase in sales volumes in the first nine months of 2010 as compared to the first nine months of 2009. Royalties paid to the Indonesian Government. Royalties paid to the Indonesian Government increased by 29 per cent. from US$66 million in the first nine months of 2009 to US$85 million in the first nine months of 2010 primarily due to the increases in average selling price and sales volumes in the first nine months of 2010 as compared to the first nine months of 2009. Coal processing and other production costs. Coal processing and other production costs increased by 24 per cent. from US$17 million in the first nine months of 2009 to US$21 million in the first nine months of 2010 primarily due to an increase in production volume. Depreciation and amortisation. Depreciation and amortisation decreased by 17 per cent. from US$6 million in the first nine months of 2009 to US$5 million in the first nine months of 2010 due primarily to the translation from US dollars to Rupiah in the consolidation of the Berau Groups accounts. Restoration costs. Restoration costs remained stable at US$1 million in the first nine months of 2009 and 2010.

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Decrease (increase) in coal inventories. The Berau Group had an increase in coal inventories of US$13 million in the first nine months of 2009 as compared to a decrease in coal inventories of US$7 million in the first nine months of 2010. This was a result of the increase in the carrying value of the inventories as a result of increases in coal prices and production volume. Amortisation of coal mining rights. The Berau Group had amortisation of coal resources of US$15 million in the first nine months of 2010 due to the allocation of goodwill generated by the acquisition of Winchester and Aries to coal resources in the ground.

Gross Profit The Berau Groups gross profit increased by 8.8 per cent. from US$240 million in the first nine months of 2009 to US$261 million in the first nine months of 2010. Gross profit as a percentage of revenue decreased from 41.8 per cent. in the first nine months of 2009 to 34.2 per cent. in the first nine months of 2010. General and Administrative Expenses General and administrative expenses increased by 141.7 per cent. from US$12 million in the first nine months of 2009 to US$29 million in the first nine months of 2010, primarily as a result of an increase in Berau Coals headcount and an increase of salaries. Distribution and Marketing Expenses Distribution and marketing expenses increased 16.7 per cent. from US$6 million in the first nine months of 2009 to US$7 million in the first nine months of 2010, primarily due to an increase in commissions paid to marketing agents as a result of the higher sales volume and an increase in Berau Coals average selling price per tonne of coal. Gain (Loss) on Foreign Exchange The Berau Group recorded a net foreign exchange gain of US$7 million in the first nine months of 2009 and a net foreign exchange loss of US$3 million in the first nine months of 2010. The change was primarily due to the impact of the appreciation of the Rupiah against the US dollar on the differences between Berau Coals US dollar-denominated royalty payments to the Indonesian Government and its Rupiah-denominated VAT payments. Other Income The Berau Groups other net expenses increased from US$nil in the first nine months of 2009 to an expense of US$1 million in the first nine months of 2010. Operating Profit The Berau Groups operating profit decreased by 3.5 per cent. from US$229 million in the first nine months of 2009 to US$221 million in the first nine months of 2010. Operating income as a percentage of revenue decreased from 39.9 per cent. in the first nine months of 2009 to 29.0 per cent. in the first nine months of 2010. Net Finance Cost The Berau Groups net finance costs increased by 1,866.7 per cent. from US$3 million in the first nine months of 2009 to US$59 million in the first nine months of 2010. Finance income. The Berau Groups finance income decreased by 89.5 per cent. from US$19 million in the first nine months of 2009 to US$2 million in the first nine months of 2010, primarily as a result of a decrease in current investments, a recent corporate restructuring of the Berau Group, the repayment of intercompany loans by Berau Coal Energy and a decrease of cash in banks. Finance cost. The Berau Groups finance costs increased by 177.3 per cent. from US$22 million in the first nine months of 2009 to US$61 million in the first nine months of 2010, primarily due to interest expenses from a new loan related to finance the acquisition of the 39 per cent. minority interest in Berau Coal.

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Profit Before Taxation The Berau Groups profit before income tax decreased by 28.3 per cent. from US$226 million in the first nine months of 2009 to US$162 million in the first nine months of 2010. Taxation The Berau Groups income tax expenses decreased by 7.8 per cent. from US$102 million in the first nine months of 2009 to US$94 million in the first nine months of 2010. The decrease was primarily due to the decrease in the Berau Groups profits. Profit for the Period As result of the foregoing factors, the Berau Groups profit for the period decreased by 45.2 per cent. from US$124 million in the first nine months of 2009 to US$68 million in the first nine months of 2010. The Berau Groups profit for the year as a percentage of revenue decreased from 21.6 per cent. in the first nine months of 2009 to 8.9 per cent. in the first nine months of 2010. 2009 Compared to 2008 Revenue The Berau Groups revenue increased by 26.8 per cent. from US$631 million in 2008 to US$800 million in 2009. Revenue increased due to increases in average selling price and sales volumes of coal products and the depreciation of the Rupiah against the US dollar, which had the effect of increasing the Berau Groups consolidated sales when expressed in Rupiah. The Berau Groups average selling price increased by 13.3 per cent. from US$48.54 per tonne in 2008 to US$55.00 per tonne in 2009 due to higher global demand for coal and higher global coal prices. Sales volume increased by 8.4per cent. from 13.0million tonnes in 2008 to 14.1million tonnes in 2009 due to larger customer orders as a result of higher global demand for coal. Cost of Sales The Berau Groups cost of sales increased by 2.8per cent. from US$460 million in 2008 to US$473 million in 2009 due to the following reasons: Mining costs. Mining costs increased by 4.9 per cent. from US$263 million in 2008 to US$276 million in 2009, primarily due to an increase in coal production from 13.1million tonnes in 2008 to 14.3million tonnes in 2009 partially offset by a decrease in fuel costs based on the formula for calculating the portion of the mining contractors fuel costs borne by Berau Coal. Freight and handling costs. Freight and handling costs decreased by 21.0 per cent. from US$100 million in 2008 to US$79 million in 2009, primarily due to a decrease in CIP shipments from 2.6million tonnes in 2008 to 2.0million tonnes in 2009. Royalties paid to the Indonesian Government. Royalties paid to the Indonesian Government increased by 31.4 per cent. from US$70 million in 2008 to US$92 million in 2009 primarily due to the increases in average selling price and sales volumes in 2009 as compared to 2008. Coal processing and other production costs. Coal processing and other production costs decreased by 4.0 per cent. from US$25 million in 2008 to US$24 million in 2009 primarily due to lower per-unit fuel costs in 2009 compared to 2008, partially offset by increases in the number of, and salaries paid to, employees involved in coal processing. The higher headcount was largely related to higher coal production volumes in 2009. Depreciation and amortisation. Depreciation and amortisation remained stable at US$7 million in 2008 and 2009. Restoration costs. Restoration costs increased by 100.0 per cent. from US$1 million in 2008 to US$2 million in 2009 primarily due to increases in provision for restoration from US$0.07 per tonne in 2008 to US$0.12 per tonne in 2009 and the increase in land area disturbed in connection with the increase in production volumes from 13.1million tonnes in 2008 to 14.3million tonnes in 2009.

220

Decrease (increase) in coal inventories. The Berau Group had an increase in coal inventories of US$7 million in 2009. This was a result of an increase in the carrying value of inventories at the start of the financial year compared to the carrying value of the inventories at the end of the financial year as a result of increases in coal prices and production volume.

Gross Profit The Berau Groups gross profit increased by 91.2 per cent. from US$171 million in 2008 to US$327 million in 2009. Gross profit as a percentage of revenue increased from 27.1 per cent. in 2008 to 40.9 per cent. in 2009. General and Administrative Expenses General and administrative expenses increased by 44.4 per cent. from US$18 million in 2008 to US$26 million in 2009, primarily as a result of increases in salaries, wages and employee benefits and, to a lesser extent, community development and donation expenses and professional fees. Salaries, wages and employee benefits increased due to an increase in the number of employees and an increase in projected employee benefits obligation, as the Berau Group reduced the discount rate used in calculating employee benefits obligation from 12 per cent. in 2008 to 10.5 per cent. in 2009. Community development increased due to the depreciation of the Rupiah. Distribution and Marketing Expenses Distribution and marketing expenses increased 42.9 per cent. from US$7 million in 2008 to US$10 million in 2009, primarily due to an increase in commissions paid to marketing agents as a result of the higher sales volume and an increase in Berau Coals average selling price per tonne of coal. Gain (Loss) on Foreign Exchange The Berau Group recorded a net foreign exchange loss of US$4 million in 2008 and a net foreign exchange gain of US$2 million in 2009. The change was primarily due to the impact of the appreciation of the Rupiah against the US dollar on the differences between Berau Coals US dollar-denominated royalty payments to the Indonesian Government and its Rupiah-denominated value-added tax payments. Other Income The Berau Groups other income-net increased from US$1 million in 2008 to US$2 million in 2009. Operating Profit The Berau Groups operating profit increased by 106.3 per cent. from US$143 million in 2008 to US$295 million in 2009. Operating profit as a percentage of revenue increased from 22.7 per cent. in 2008 to 36.9 per cent. in 2009. Net Finance Cost The Berau Groups net finance cost increased by 228.6 per cent. from US$7 million in 2008 to US$23 million in 2009. Finance Income. The Berau Groups finance income remained stable at US$25 million in 2009 and 2008. Finance Cost. The Berau Groups finance cost increased by 50.0 per cent. from US$32 million in 2008 to US$48 million in 2009, primarily due to the early prepayment premium paid by Beraus wholly owned subsidiary Empire Capital at the end of 2009 in connection with the redemption of its senior notes, which had been issued in 2006, as well as financing fees incurred in relation to the acquisition of Berau Coal by Mutiara. This increase was partially offset by the decrease in principal amount of senior notes of Empire Capital outstanding as a result of partial payment of US$25million in 2008 and a decrease in the US dollar London Interbank Offered Rate (LIBOR).

Profit Before Taxation The Berau Groups profit before income tax increased by 100.0 per cent. from US$136 million in 2008 to US$272 million in 2009.

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Taxation The Berau Groups income tax expense increased by 100.0 per cent. from US$62 million in 2008 to US$124 million in 2009. The increase was primarily due to the increase in the Berau Groups profits. Profit for the Year As a result of the foregoing factors, the Berau Groups profit for the year increased by 100.0 per cent. from US$74 million in 2008 to US$148 million in 2009. The Berau Groups profit for the year as a percentage of revenue increased from 11.7 per cent. in 2008 to 18.5 per cent. in 2009. 2008 Compared to 2007 Revenue The Berau Groups revenue increased by 67.4per cent. from US$377 million in 2007 to US$631 million in 2008. Revenue increased primarily as a result of an increase in Berau Coals average selling price per tonne of coal from US$31.86 per tonne in 2007 to US$48.54 per tonne in 2008 due to higher global demand for coal and higher global coal prices. Berau Coals sales volumes also increased from 12.1million tonnes in 2007 to 13.0million tonnes in 2008 due to larger customer orders as a result of higher global demand for coal. Cost of Sales The Berau Groups cost of sales increased by 59.2 per cent. from US$289 million in 2007 to US$460 million in 2008 due to the following reasons: Mining costs. Mining costs increased by 64.4 per cent. from US$160 million in 2007 to US$263 million in 2008, primarily due to an increase in fuel costs based on the formula for calculating the portion of the mining contractors fuel costs borne by Berau Coal and an increase in coal production from 11.8million tonnes in 2007 to 13.1million tonnes in 2008. Freight and handling costs. Freight and handling costs increased by 66.7 per cent. from US$60 million in 2007 to US$100 million in 2008, primarily due to additional fuel subsidies Berau Coal advanced to its barging subcontractors over the portion of fuel prices Berau Coal bore under such barging contracts, following from the increase in fuel prices in Indonesia, an increase in sales volumes, an increase in the percentage of Berau Coals sales conducted under CIF terms relative to FOB terms as well as an increase in demurrage costs. Royalties paid to the Indonesian Government. Royalties paid to the Indonesian Government increased by 70.7 per cent. from US$41 million in 2007 to US$70 million in 2008 primarily due to the increases in average selling price and sales volumes of coal products. Coal processing and other production costs. Coal processing and other production costs increased by 47.1 per cent. from US$17 million in 2007 to US$25 million in 2008 primarily due to an increase in production volume and also as a result of increases in fuel cost, as well as increases in the number of, and salaries paid to, employees involved in coal processing. Depreciation and amortisation. Depreciation and amortisation remained stable at US$7 million in 2007 and 2008. The Berau Group amortise mining property costs using the unit-of-production method. As the estimated amount of Berau Coals reserves increased in 2008, the Berau Group re-calculated its amortisation rate of deferred exploration costs and applied the resulting rate in 2008. Restoration costs. Restoration costs remained stable at US$1 million from 2007 to 2008. Decrease (increase) in coal inventories. The Berau Group had an increase in coal inventories of US$6 million in 2008 as a result of an increase in the carrying value of inventories at the end of the financial year compared to the carrying value of the inventories at the beginning of the financial year due to increases in coal prices and level of inventories.

222

Gross Profit The Berau Groups gross profit increased by 94.3 per cent. from US$88 million in 2007 to US$171 million in 2008. Gross profit as a percentage of revenue increased from 23.3 per cent. in 2007 to 27.1 per cent. in 2008. General and Administrative Expenses General and administrative expenses increased by 38.5 per cent. from US$13 million in 2007 to US$18 million in 2008, primarily as a result of an increase in salaries and wages partly because Berau Coal hired new personnel in 2008, and an increase in community development and donation expenses, generally in line with Berau Coals increase in production volumes. Also contributing to the increase was an increase in professional fees as a result of Berau Coals outsourcing in 2008 of certain administrative and maintenance services, and an increase in freight costs in 2008 as a result of an increase in fuel prices. Distribution and Marketing Expenses Distribution and marketing expenses increased by 75.0 per cent. from US$4 million in 2007 to US$7 million in 2008, primarily due to increases in commissions paid to marketing agents as a result of an increase in Berau Coals average selling price per tonne of coal and higher sales volumes. Gain (Loss) on Foreign Exchange The Berau Group recorded a net foreign exchange gain of US$2 million in 2007 and a net foreign exchange loss of US$4 million in 2008, primarily due to the impact of the depreciating Rupiah against the US dollar on the differences between Berau Coals US dollar-denominated royalty payments to the Indonesian Government and its Rupiah-denominated VAT payments. Other Income The Berau Groups other income-net remained stable at US$1 million in 2007 and 2008. Operating Profit The Berau Groups operating profit increased by 93.2 per cent. from US$74 million in 2007 to US$143 million in 2008. Operating profit as a percentage of revenue increased from 19.6 per cent. in 2007 to 22.7 per cent. in 2008. Net Finance Cost The Berau Groups net finance cost decreased by 30.0 per cent. from US$10 million in 2007 to US$7 million in 2008. Finance income. The Berau Groups finance income remained stable at US$25 million in 2007 to 2008. Finance cost. The Berau Groups finance cost decreased by 8.6 per cent. from US$35 million in 2007 to US$32 million in 2008, primarily due to the decrease in LIBOR in 2008 resulting in lower interest payments on the floating rate senior notes of Empire Capital, issued in 2006.

Profit Before Taxation As a result of the foregoing factors, the Berau Groups profit before income tax increased by 112.5 per cent. from US$64 million in 2007 to US$136 million in 2008. Taxation The Berau Groups income tax expense increased by 113.8 per cent. from US$29 million in 2007 to US$62 million in 2008. The increase was primarily due to the increase in the Berau Groups profits. Profit for the Year As a result of the foregoing factors, the Berau Groups profit for the year increased by 111.4 per cent. from US$35 million in 2007 to US$74 million in 2008. the Berau Groups profit for the year as a percentage of revenue increased from 9.3 per cent. in 2007 to 11.7 per cent. in 2008.

223

Liquidity and Capital Resources The Berau Groups principal liquidity requirements have been to finance its operations and fund working capital, for capital expenditures and debt service, and to maintain the groups cash reserves. Net cash flows from operations are the main source of the Berau Groups liquidity. As of 30 September 2010, the Berau Group had cash and cash equivalents of US$355 million. As of 31 December 2009, the Berau Group had cash and cash equivalents of US$305 million, compared to US$124 million and US$94 million as of 31 December 2008 and 2007, respectively. In addition, as of 30 September 2010, the Berau Group had restricted cash in banks of US$91 million. Restricted cash relates to guarantee deposits pledged for performance bonds required by several third-party customers. As of 31 December 2009, the Berau Group had restricted cash in banks of US$25 million, compared to US$3 million and US$4 million as of 31 December 2008 and 2007, respectively. As Berau Coal engaged contractors to carry out all mining and coal haulage activities, the Berau Groups own capital expenditures (which include exploration and development expenditures, and the purchase and maintenance of fixed plant and equipment, such as crushing plants, generator sets and conveyors) have been relatively limited. The Berau Groups capital expenditures have therefore been funded mainly from the groups cash flows from operations and debt financing. After funding operating expenses and working capital, the Berau Groups primary use of cash has been to service long-term debt. The following table summarises the Berau Groups cash flows for the periods indicated: Nine Months Ended Year Ended 31 December 30 September 2007 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions) Cash flows from operating activities: Cash receipts from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flow provided by operating activities 271 (144) (38) 89 (29) 60 553 (353) (67) 133 (31) 102 753 (345) (98) 310 (65) 245 524 (243) (68) 213 (54) 159 701 (356) (84) 261 (112) 149

Net cash provided from (used in) investing activities: Acquisition of minority interest Acquisition of subsidiary Purchases of available-for-sale investments Purchases of property, plant and equipment Purchases of exploration and evaluation assets Interest received Net cash flow used in investing activities

(14) 25

(14) (2) 25 9

(300) (12) (2) 25

(7) (1) 19 11

(201) (133) (40) (2) 2

11

(289)

374

224

Nine Months Ended Year Ended 31 December 30 September 2007 2008 2009 2009 2010 (audited) (unaudited) (US$ in millions) Cash flow from financing activities Proceeds from borrowings Repayment of borrowings Proceeds from/(paid) to related parties Proceeds from initial public offering Payments to Montelena Penalty paid on early redemption of senior notes Interest paid Dividends paid Net cash flows provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalent at the beginning of the period Cash and cash equivalents at end of period (22) (35) (25) (24) (32) 265 (300) 313 (15) (33) (5) (17) (19) (22) 801 (289) (300) 144 (20) (61)

(57) 14

(81) 30

225 181

(58) 112

275 50

80

94

124

124

305 355

94 124 305 236

Net Cash Flows From Operating Activities Net cash flows from operating activities include funds generated from the Berau Groups operating activities and net cash inflows or outflows from changes in operating assets and liabilities. Net cash flows from operating activities were US$159 million and US$149 million for the nine months ended 30 September 2009 and 2010, respectively. The decrease in net cash flows from operating activities for the nine months ended 30 September 2010 was primarily on account of increases in the cash used in operating activities, primarily consisting of increases in payments to suppliers and for operating expenses and increased income taxes, in line with the Berau Groups increased production volume and higher average selling prices in the nine months ended 30 September 2010. These increases in cash used in operating activities were partially offset by an increase in receipts from customers as a result of higher sales volumes and an increase in the average selling price. Net cash flows from operating activities were US$60 million, US$102 million and US$245 million in 2007, 2008 and 2009, respectively. The higher net cash flows from operating activities in 2008 and 2009 compared to 2007 was primarily on account of an increase in receipts from customers as a result of higher sales volumes and an increase in the average selling price per tonne of coal. This increase was partially offset by increases in the cash used in operating activities during the same period, primarily consisting of increases in, payment of royalties to the Indonesian Government in respect of its 13.5 per cent. entitlement under the CCOW, payments for environmental restoration as well as increased income taxes, in line with the Berau Groups increased production volume and higher average selling prices in 2007 and 2008. However, cash used for payments to suppliers and operating expenses was higher in 2008 than in 2009, largely due to higher per-unit diesel costs. Net Cash Flows Provided by (Used in) Investing Activities Net cash flows provided by investing activities was US$11 million in the nine months ended 30 September 2009 compared to cash flows used in investing activities of US$374 million in the nine months ended 30 September 2010. Net cash flows used in investing activities in the nine months ended 30 September 2010 was significantly higher primarily due to US$201 million paid to Mutiara in August 2010 for the acquisition of Maple and cash in the amount of US$133 million used for (i) an investment agreement entered into by Berau in relation to premium convertible unsecured loan notes issued by a third party with a principal amount of US$75 million and (ii) US$58 million in relation to discretionary

225

fund contract entered into with two third party fund managers. In addition, Armardian, an intermediary holding company in the Berau Group, paid US$20 million in settlement of a lawsuit by Montelena Capital Ltd. in relation to an option agreement that Armardian entered into in June 2004, prior to Beraus ownership of Berau Coal. Net cash flow provided by investing activities was US$11 million in 2007 and US$9 million in 2008, and net cash flow used in investing activities was US$289 million in 2009. The net cash flows used in investing activities in 2009 were primarily due to the US$300 million cash consideration paid for the acquisition of 54.5 per cent. of Winchester acquired from Eureka Company Limited and Shelburne Company Limited in December 2009. A significant portion of the net cash used in investing activities during 2007 and 2008 was for the acquisition of fixed assets and towards the Berau Groups exploration and development expenditures to develop new resources at the existing Lati, Binungan and Sambarata mines as well as in the Kelay area. In addition, in each of 2007, 2008 and 2009, Berau Coal received interest payments of US$24 million, US$23 million and US$24 million, respectively, under its loan to Begarion Capital Limited. Net Cash Flows Provided by (Used in) Financing Activities Net cash flow used in financing activities was US$58 million in the nine months ended 30 September 2009 compared to net cash flow provided by financing activities of US$275 million in the nine months ended 30 September 2010. In July and August 2010, the Berau Group received the net proceeds from the offering of US$450million in principal amount of 12.5% Guaranteed Senior Secured Notes and drew down US$400 million under the Berau Senior Secured Credit Facility. Of these net proceeds and the funds drawn down, the Berau Group repaid in full the US$300million credit facility of Empire Capital and the US$300million loan from Mutiara to Berau. In addition, Berau received net proceeds of US$144million from its initial public offering in August 2010. Net cash flows provided by financing activities were US$225 million in 2009, primarily as a result of proceeds received from a US$300 million loan from Mutiara and US$300 million received under a loan from Credit Suisse, partially offset by cash in the amount of US$315 million used in the redemption at the end of 2009 of the senior notes issued by Empire Capital and the payment of financing charges in the amount of US$33 million in 2009. Net cash flows used in financing activities were US$57 million in 2007 and US$81 million in 2008. The net cash used in financing activities in 2008 was primarily due to the repayment of principal on the amortising senior notes of Empire Capital in 2008. Indebtedness The following table provides an overview of the Berau Groups borrowings as at the dates indicated: At 31 December At 30 September 2007 2008 2009 2009 2010

(audited) (US$ inmillions) Non-current From third parties From related party Current From third parties From related party From finance lease liabilities 292 1 269

(unaudited) 768

293 24 1

269 24

289 300(1)

276

768 33 33

25

24

589

276

Total borrowings
Note:

318

226

293

589

276

801

(1) Includes US$300 million under a loan from PT Bukit Mutiara, which was repaid in August 2010.

As of 30 September 2010, the Berau Groups outstanding financial indebtedness, net of unamortised finance costs, comprised the US$450million aggregate principal amount of 12.5% Guaranteed Senior Secured Notes the Berau Group issued on 8 July and 29 July 2010 and the US$400 million principal amount of loans the Berau Group drew under the Berau Senior Secured Credit Facility on 23 July 2010. For information about the financial and other covenants contained in the Berau Groups financing arrangements, see paragraph 19 The Berau Groups Material Agreements of Part XII Additional Information. Other Financial Information The following table sets forth the Berau Groups consolidated EBITDA and EBITDA for the periods indicated: Nine Months Ended Year Ended 31 December 30 September 2007 2008 2009 2009 2010

Consolidated EBITDA(1) Minority interest in net income of consolidated subsidiaries EBITDA

Note:
(1)

78 (17) 61

(US$ in millions) (unaudited) 153 298

228

248

(35)

(68)

(56)

(12)

118

230

172

236

(1) Consolidated EBITDA and EBITDA are not a standard measure under IFRS. For information about the Berau Groups calculation and presentation of consolidated EBITDA and EBITDA, see Presentation of Financial and Other Information Non-IFRS Financial Measures EBITDA.

Contractual Obligations and Commitments As of 30 September 2010, the Berau Groups material contractual obligations are under the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility. For information about the maturity of the Berau Groups financial liabilities by period as of 31 December 2009, see Note 5.4 to the Berau Groups Consolidated Financial Information for the years ended 31 December 2007, 2008 and 2009 included in Part IX Financial Information. For information about the Berau Groups capital commitments as of 31 December 2009, see Note 27 to the Berau Groups Consolidated Financial Information for the Years ended 31 December 2007, 2008 and 2009 included in Part IX Financial Information. Capital Expenditures The following table shows the Berau Groups historical and forecast capital expenditures for the periods indicated:
Year Ended 31 December Year Ending 31 December 2007 2008 2009 2010 2011 2012-2014 (Unaudited) (Unaudited) (Unaudited) (Estimated) (Budgeted) (US$ in millions) Capital expenditures: Property, plant and equipment Exploration and development Total capital expenditures 14 14 14 2 16 12 2 14 99 4 103 131 4 135 353 12 365

The Berau Groups budgeted capital expenditures set forth in the table above represent current estimates. The Berau Group will reassess its capital expenditures from time to time in light of the then current circumstances, including without limitation, the Berau Groups operational requirements and its financial capacity. There can be no assurance that the Berau Groups actual capital expenditure will correspond to the current budget set forth in the table above.

227

Historically, most of the Berau Groups capital expenditures were made in connection with the upgrading and development of port facilities and stockpile and coal crushing facilities, the purchase of machinery and equipment and vehicles. As of 30 September 2010, the Berau Group had committed capital expenditures of US$23.1 million relating to the construction of crushing, stockpiling and barge loading facilities and hauling roads and exploration and development costs. The Berau Group currently expects capital expenditures of US$106.2 million during 2011 to maintain its existing facilities and operations as well as to upgrade, construct, acquire and explore new infrastructure or equipment to increase its production capacity. The Berau Group further expects to have capital expenditures of approximately US$37.7million during 2011 for Berau Coals exploration activities. The Directors expect capital expenditures to be higher for 2011 because of the Berau Groups expansion plans and to comply with requirements of the 2009 Mining Law. See Expansion Plan and Growth Strategy in Part VI Information on the Berau Group. The Berau Group intends to finance its capital expenditures in the future through cash on hand and cash flow generated by the Berau Groups business. Taxation Under Berau Coals CCOW, at the Berau Groups coal mining operations, Berau Coal is permitted to apply an accelerated depreciation on property, plant and equipment purchases, within any of the first four years of the life of the asset acquired. The Berau Group can use this accelerated depreciation in addition to straight-line depreciation of the same asset. The rates of accelerated depreciation permitted under the CCOW is 10 per cent. of the cost of any building and 25 per cent. of the cost of any other depreciable asset used in Berau Coals coal operations. In addition, Berau Coal has also been granted investment allowances under the CCOW. These investment allowances permit Berau Coal to deduct an additional 20 per cent. of the value of depreciable assets upon purchase. Under the CCOW, tax losses at Berau Coal may be carried forward for up to four years after the tax loss was incurred. The Berau Group did not have any tax loss carry-forwards as of 30 September 2010. Actual and Effective Corporate Tax Rates Under the Indonesian corporate tax system, each Indonesian company within a group of companies is taxed individually and it is not permissible to consolidate the taxable profits and tax loss carry-forwards of the companies on a group level for purposes of determining the Indonesian corporate taxes applicable to the companies as a whole. Under the terms of Berau Coals CCOW, Berau Coals corporate tax rate is 45.00 per cent. The effective corporate tax rate is different than Berau Coals corporate tax rate. The effective corporate tax rate was 46.58 per cent., 44.96 per cent., 44.24 per cent. and 45.15 per cent. in 2007, 2008, 2009 and the nine months ended 30 September 2010, respectively. The difference between the effective corporate tax rate and the corporate tax rate set under the CCOW is due to permanent differences in calculating Berau Coals taxable income under the CCOW compared to calculations of income tax expenses under Indonesian GAAP. Deferred Income Taxes The Berau Group recognises deferred income tax assets and liabilities relating to temporary differences between the accounting and tax treatment of certain expenses. These temporary differences relate principally to depreciation of fixed assets and amortisation of mine properties costs, environmental restoration obligations and employee benefits obligations. Recoverability of Value-Added Tax Receivable Berau Coal is also involved in a legal dispute with the Indonesian State Receivables Affairs Agency regarding whether Berau Coal may offset input value-added tax refunds against its royalty obligations to the Indonesian Government under Berau Coals CCOW. For more information about this dispute, including the Supreme Courts recent denial of Beraus cessation petition, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. Off-Balance Sheet Arrangements The Berau Group has no off-balance sheet arrangements or obligations.

228

Quantitative and Qualitative Disclosures About Market Risk The Berau Groups market risk is related principally to fluctuations in commodity prices (principally coal and fuel) and, to a lesser extent, fluctuations in exchange rates and interest rates. For information about the Berau Groups treasury policies, see Note 5 to the Berau Groups Consolidated Financial Statements at 31 December 2007, 2008 and 2009 included in Part IX Financial Information. Effects of Inflation According to the Indonesian Bureau of Statistics, Indonesias annual inflation, as measured by the consumer price index, was 6.6 per cent. in 2007, 11.1 per cent. in 2008, 2.8 per cent. in 2009 and 5.3 per cent. (on an annualised basis) in the first nine months of 2010. The Berau Group does not consider inflation in Indonesia, where all of groups operations are located, to have had a material impact on its results of operations. Seasonality Berau Coals mine operations can be adversely impacted by inclement weather, particularly during the rainy season between October and March when heavy rains can slow overburden removal and reduce coal production volumes. Berau Coals mine planning function anticipates and adjusts production levels to take into account such weather-related delays. Geographical Sales Data The following table provides information regarding the Berau Groups gross sales revenue by destination of products sold:
Year Ended 31 December 2007 2008 2009 (audited) (US$ inmillions) Gross sales revenue by destination(1) Indonesia China Taiwan South Korea India Hong Kong Japan Thailand Singapore Consolidated sales revenue 139 30 52 49 42 36 9 20 377 37% 8% 14% 13% 11% 10% 2% 5% 100% 258 45 83 90 53 15 45 42 631 42% 7% 13% 14% 8% 2% 7% 7% 100% 312 94 85 152 81 18 28 30 800 39% 11% 11% 19% 10% 2% 4% 4% 100% Nine Months Ended 30 September 2009 2010 (unaudited)

252 34 52 114 63 11 26 22 574

44% 6% 9% 20% 11% 2% 4% 4% 100%

257 213 60 139 53 15 23 3 763

34% 28% 8% 18% 7% 2% 3% 100%

Note: (1) Sales by geographical destination of the product if known. If the eventual destination of the product sold through traders is not known, then revenue is allocated to the location of the product at the time when the risks and rewards of ownership are passed. Berau is domiciled in Indonesia.

Current Trading and Prospects The Berau Group performance is mainly influenced by production and sales performance of its subsidiary Berau Coal. Overall, Berau Coal had a successful year in 2010 in comparison to previous years, with production increasing by 3.1 million tonnes compared to 2009, the single largest annual increase in the history of the company. Berau Coals estimated total production in 2010 was 17.4 million tonnes, of which 5.1 million tonnes was produced in the last three months of 2010. This was a 21 per cent. increase in volume in 2010 compared to production in 2009 of 14.3 million tonnes. One of the challenges in 2010 was unseasonal weather conditions. However, the Directors believe that the Berau Groups production activities were affected by these weather conditions to a lesser degree than its Indonesian competitors. Berau Coal achieved estimated sales volumes of 17.1 million in 2010, with an average estimated sales price of US$61.82 per tonne, which is a 9 per cent. increase compared to the average sales price in 2009. The Berau Group also experienced higher costs in 2010 compared to 2009, which resulted from an increase in the mining rate of Berau Coals largest contractor, an increase in the price of oil and, to a lesser degree, higher freight and handling costs.

229

Berau Coals revenues of Berau Coal are denominated in both Rupiah and the US dollar. However, the Directors believe Berau Coal enjoys a natural currency hedge as the related percentage of costs, in both currencies, are split by the same percentages as are revenues. In 2010, Rupiah strengthened against the US dollar. For example, in the last three months of 2010, the Rupiah exchange rate (mid rate Bank Indonesia) was around Rp.8,900 to Rp. 9,000 per US dollar, while in the last three months of 2009, the Rupiah exchange rate was around Rp 9,400 to Rp 9,545. For 2011, management has set both the production and sales volume targets for Berau Coal at 20 million tonnes. In addition, the current general upward trend in the Newcastle coal price index is expected to help the Berau Coal to achieve a better average sales price than in 2010. During 2011 Berau Coal will continue to expand its exploration activities, improve its mine infrastructure and rationalize its processing facilities as part of a greater plan to achieve 30 millions tonnes of production, per annum by the end of 2014.

230

PART VIII CAPITALISATION AND INDEBTEDNESS STATEMENT

Part A: Vallar Capitalisation The following table sets out the capitalisation of the Vallar Group as at 30 September 2010 and has been extracted without material adjustment from Section 2 of Part A of Part IX Financial Information. Vallar as at 30 September 2010 (unaudited) ( in millions) Shareholders equity Share capital 67 Share premium account 606 673 Total(1)(2)
Notes: (1) Shareholders equity does not include the profit and loss account reserve. (2) Since 30 September 2010, there has been no material change in the capitalisation of the Vallar Group.

Indebtedness(1) As at 30 November 2010, the Vallar Group had no debt. The following table sets out the unaudited consolidated net funds of the Vallar Group as at 30 November 2010, and has been extracted without material adjustment from unaudited accounting records. Vallar as at 30 November 2010 (unaudited) ( in millions) Cash and cash equivalents 208 Restricted cash in bank Liquidity 208 Current bank debt Current portion of non-current debt Other current financial debt Current financial debt Net current funds 208 Non-current bank loans Bonds issued Other non-current loans Non-current financial indebtedness Net funds(1) 208
Notes:

(1) This statement of indebtedness has been prepared under IFRS using policies which are consistent with those used in preparing the unaudited interim financial information on the Group as set out in Section 2 of Part A of Part IX Financial Information. (2) As at 30 November 2010, the Vallar Group had no indirect or contingent indebtedness.

231

Part B: The Bumi Resources Group Indebtedness As at 30 November 2010, the indebtedness of the Bumi Resources Group comprised US$4,362 million total debt and US$4,179 million net debt. Part C: The Berau Group Capitalisation The following table sets out the capitalisation of the Berau Group as at 30 September 2010 and has been extracted without material adjustment from Section 2 of Part C of Part IX Financial Information. Berau as at 30 September 2010 (unaudited) (US$ in millions) Shareholders equity Share capital Share premium account Other reserves(3) Total(1)(2)
Notes: (1) Shareholders equity does not include the profit and loss account reserve. (2) Since 30 September 2010, there has been no material change in the capitalisation of Berau. (3) Other reserves represents the excess of consideration over net assets of a transaction under common control.

386 106 (221) 271

Indebtedness(1) The following table sets out the indebtedness of the Berau Group as at 30 November 2010, and has been extracted without material adjustment from unaudited accounting records. Berau as at 30 November 2010 (unaudited) (US$ in millions) Total current debt Guaranteed Secured Guaranteed and secured(2) Unguaranteed/Unsecured Total current financial indebtedness Total non-current debt Guaranteed Secured Guaranteed and secured(2) Unguaranteed/Unsecured Total non-current financial indebtedness Total gross financial indebtedness 35 35 769 769 804

232

Notes: (1) This statement of indebtedness has been prepared under IFRS using policies which are consistent with those used in preparing the unaudited interim financial information on the Berau Group as set out in Section 2 of Part C of Part IX Financial Information. (2) Beraus guaranteed and secured debt comprises: (a) Beraus drawdown of US$400 million (on 23 July 2010) under the Berau Senior Secured Credit Facility with Credit Suisse AG, which is secured over the shares of Berau Coal, and guaranteed by Berau Coal and its subsidiaries (other than Rognar). Of the total US$400 million, US$45 million is disclosed as current debt (net of US$10 million deferred borrowing costs), and US$355 million is disclosed as non-current debt (net of $36 million deferred borrowing costs); and (b) Beraus 12.5% Guaranteed Senior Secured Notes being (i) the issuance of US$350 million of guaranteed senior secured notes on 8 July 2010; and (ii) the issuance of an additional US$100 million aggregate principal amount of guaranteed senior secured notes on 29 July 2010. The 12.5% Guaranteed Senior Secured Notes are guaranteed by Berau and the Berau Group Subsidiary Guarantors, and are secured by substantially all of its assets.

The following table sets out the unaudited net consolidated financial indebtedness of the Berau Group as at 30 November 2010, and has been extracted without material adjustment from unaudited accounting records. Berau As at 30 November 2010 (unaudited) (US$ in millions) 270 211 481 (35) (35) 446 (769) (769) (323)

Cash and cash equivalents Restricted cash in bank(2) Liquidity Current bank debt Current portion of non-current debt Other current financial debt Current financial debt Net current funds Non-current bank loans Other non-current loans Non-current financial indebtedness Net financial indebtedness
Notes:

(1) This statement of indebtedness has been prepared under IFRS using policies which are consistent with those used in preparing the unaudited interim financial information on the Berau Group as set out in Section 2 of Part C of Part IX Financial Information. (2) Restricted cash represents cash and Time Deposits held under the Cash and Accounts Management Agreement pursuant to the conditions as set forth in the Guaranteed Senior Secured Notes and Senior Secured Credit Facility, and Time Deposits used to secure Beraus sales performance bonds as required by several third-party customers. (3) As at 30 November 2010, the Berau Group had no indirect or contingent indebtedness.

233

PART IX FINANCIAL INFORMATION

Part A: Vallar IFRS Financial Information Section 1: Accountants report on the historical consolidated financial information relating to Vallar for the period ended 30 September 2010

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

The Directors Vallar PLC 12 Castle Street St. Helier, Jersey JE2 3RT Channel Islands 24 February 2011 Dear Sirs Vallar PLC (the Company) We report on the financial information of the Company set out in Section 2 of Part A of Part IX of the prospectus dated 24 February 2011 (the Prospectus) of the Company (the Vallar IFRS Financial Information). The Vallar IFRS Financial Information has been prepared for inclusion in the Prospectus on the basis of the accounting policies set out in note 2 to the Vallar IFRS Financial Information. This report is required by item 20.1 of Annex I to the PD Regulation and is given for the purpose of complying with that item and for no other purpose. Responsibilities The Directors of the Company are responsible for preparing the Vallar IFRS Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion as to whether the Vallar IFRS Financial Information gives a true and fair view, for the purposes of the Prospectus and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus. Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Services Authority for designated investment business.

234

significant estimates and judgements made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to the Companys circumstances, consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Opinion In our opinion, the Vallar IFRS Financial Information gives, for the purposes of the Prospectus dated 24 February 2011, a true and fair view of the state of affairs of the Company as at the dates stated and of its results, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation. Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

235

Section 2: Historical consolidated financial information relating to Vallar for the period ended 30 September 2010

VALLAR PLC
VALLAR PLC
Consolidated statement of comprehensive income For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Notes Revenue Cost of Sales Gross profit General and administrative expenses Costs associated with Initial Public Offering (IPO) Operating loss Finance income Loss before tax Taxation Loss and total comprehensive loss for the period Loss and total comprehensive loss attributable to: Owners of the parent Non-controlling interest 4

2010 (1) (21)

(22) 1 (21) (21)

10

(20) (1) (21)

Basic and diluted loss per share (GBP pence) 6

(31)

The accompanying notes are an integral part of this consolidated financial information. 236

VALLAR PLC
Consolidated balance sheet As of 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Notes CURRENT ASSETS Other current assets Cash and cash equivalents TOTAL ASSETS EQUITY Share capital Share premium Retained earnings Total equity attributable to owners of the parent Non-controlling interest TOTAL EQUITY 10 8 8 4 7

2010 1 671 672 67 606 (20) 653

19 672

The accompanying notes are an integral part of this consolidated financial information. 237

VALLAR PLC
Consolidated statement of changes in equity For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated)
Attributable to owners of the parent Total equity attributable to owners NonShare Share Retained of the controlling capital premium Earnings parent interest (20) (20) (1) 68 618 686 (1) (12) (13) 20 67 606 (20) 653 19

Note Loss for the period Issuance of new shares Ordinary shares repurchased and cancelled Capital introduced by non-controlling interest Balance at 30 September 2010

10

Total equity (21) 686 (13) 20 672

The accompanying notes are an integral part of this consolidated financial information. 238

VALLAR PLC
Consolidated statement of cash flows For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Notes Cash flows from operating activities Cash consumed by operations Net cash flows from operating activities Cash flows from investing activities Interest received Net cash flows from investing activities Cash flows from financing activities Costs paid in association with the IPO Proceeds from issue of Founder Shares and Founder Securities Proceeds from issue of ordinary shares Repurchase and cancellation of ordinary shares Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 11

2010 (2) (2) 1

1 (21) 20 686 (13) 672 671

671

The accompanying notes are an integral part of this consolidated financial information. 239

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) 1. GENERAL INFORMATION Vallar PLC (the Company) was incorporated in Jersey on 31 March 2010 and its principal activity is that of a holding company formed to acquire a major company, business or asset that has significant operations in the global metals, mining and resources sector. The Company and its subsidiaries are collectively referred to herein as the Group. The Companys registered office is 12 Castle Street, St. Helier, Jersey JE2 3RT. The Company is listed on the London Stock Exchange. 2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of this consolidated financial information are set out below. These policies have been consistently applied. 2.1 Basis of preparation The Groups consolidated financial information has been prepared for the purposes of the Prospectus in accordance with the Prospectus Directive Regulation, the Listing Rules and this basis of preparation. The basis of preparation describes how the consolidated financial information of the Group has been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union. As the Company was incorporated on 31 March 2010, comparative information comprises Share Capital of GBP2 and Cash balances of GBP2. The consolidated financial information has been prepared under the historical cost convention. The preparation of consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in Note 3. Actual results may differ from these estimates. The consolidated financial information is presented in millions of Pounds Sterling (GBP) except when otherwise indicated. 2.2 New accounting standards The Group did not adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is on or after 1 January 2010. The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010: (a) Business combinations (IFRS 3 Revised) IFRS 3 (revised), Business combinations, and consequential amendments to IAS 27, Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS 31, Interests in joint ventures are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent

240

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the noncontrolling interests proportionate share of the acquirees net assets. All acquisitionrelated costs are expensed. As the Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), consolidated and separate financial statements, at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. There has been no impact of IAS 27 (revised) on the current period, as none of the non-controlling interests have a deficit balance. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity. (b) New pronouncements not relevant to the Group Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group include: IFRIC 17, `Distribution of non-cash assets to owners (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. This is not currently applicable to the Group, as it has not made any non-cash distributions. IFRIC 18, `Transfers of assets from customers, effective for transfer of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers. Additional exemptions for first-time adopters (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer. Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but not effective for the financial year beginning 1 January 2010 and have not been early adopted: IFRS 9, `Financial instruments, issued in November 2009. This standard is the first step in the process to replace IAS 39, `Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Groups accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Group has yet to assess IFRS 9s full impact. Revised IAS 24, Related party disclosures, issued in November 2009. It supersedes IAS 24, Related party disclosures, issued in 2003. The revised IAS 24 is required to

241

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) be applied from 1 January 2011. Earlier application, in whole or in part, is permitted. The Group has yet to assess IAS 24s full impact. Classification of rights issues (amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. The Group will apply the amended standard from 1 January 2011 and does not anticipate any material impact on its financial statements. `Prepayments of a minimum funding requirement (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, `IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction. The Group will apply these amendments for the financial reporting period commencing on 1 January 2011. IFRIC 19, `Extinguishing financial liabilities with equity instruments, effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). The Group will apply the interpretation from 1 January 2011, subject to endorsement by the EU. It is not expected to have any impact on the Group or the parent entitys financial statements. Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2010.

2.3

Basis of consolidation The consolidated financial information consists of the consolidation of the accounts of the Company and its subsidiaries. Inter-company transactions, balances, realised and unrealised gains on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Consolidation of subsidiaries ceases from the date that control ceases. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Groups investment in associates includes goodwill identified on acquisition net of any accumulated impairment loss. The Groups share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are

242

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in the income statement. Loss of control or loss of significant influence When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. 2.4 Business combinations The Group uses the purchase method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisitionby-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquirees net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

243

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Transactions between entities under common control Business combinations involving entities under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or at the date that common control was established, if later. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Groups controlling shareholders financial statements. Any differences on consolidation are recognised directly in equity. 2.5 Foreign currency translation (a) Functional and presentation currency Items included in the consolidated financial information of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The GBP is the functional currency of the Company and its subsidiary. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

(b)

2.6

Segmental reporting IFRS 8 requires the Group to disclose information about its operating segments and the geographic areas in which it operates. It requires identification of operating segments on the basis of internal reports that are regularly reviewed by the entitys chief operating decision maker in order to allocate resources to the segment and assess its performance. As no operating activities are carried out in the Group, no operating segments can be identified and therefore no segmental information has been presented. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid investments. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, generally have an original maturity of 90 days or less and are subject to an insignificant risk of adverse changes in value. However, certain deposits of greater duration can be classified as cash equivalents if the funds can be withdrawn at short notice with an insignificant risk of adverse changes in value. Share based payments The Group operates an equity settled, share based compensation plan, under which the entity receives services from Directors and Founders as consideration for equity instruments (or options) of the Group. The fair value of the Director services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the equity instruments (or options) granted: including any market performance conditions (for example, an entitys share price); excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and including the impact of any non-vesting conditions.

2.7

2.8

244

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised in the statement of comprehensive income with a corresponding credit to equity over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the nonmarket vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of the consolidated financial information requires the use of certain critical estimates. It also requires management to exercise judgement in the process of applying the Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed below: (i) Valuation of share-based payments In preparing for the IPO, the terms of the Founder Shares and Founder Securities were adjusted after discussions with the Companys prospective investors, and reflected in the IPO Prospectus. The successful IPO reflects, therefore, an acceptance of the terms of the Founder Shares and Founder Securities as contained in the IPO Prospectus. Management has also considered, at the grant date, the probability of an acquisition being completed, and potential range of values for the Founder Shares and Securities, based on the circumstances at the grant date. Overall, it has been concluded that in the absence of a known acquisition target at the grant date the fair value of the share based payments to the Founders is represented by the amount subscribed for the Founder Shares and Founder Securities. Consequently, there is no charge in the statement of comprehensive income in relation to these share based payments. A summary of the terms of the Founder Shares and Founder Securities is set out in note 9. In respect of the share matching awards granted to the directors of the Company, management has determined that the most appropriate period to use for calculating the share based payment charge, in advance of any acquisition, is the full two year initial life of the Company. 4. OPERATING LOSS The operating loss for the period has been calculated after deducting the following:

2010 21 1 22

Costs associated with IPO (i) Administration costs (ii)

(i)

The costs associated with the IPO include placing and admission fees, legal, accounting, registration, printing, advertising and distribution costs and any other applicable expenses incurred solely for the purpose of the IPO. These costs have been expensed as incurred. The Company has entered into an Advisory Agreement with, Vallar Advisers Limited Partnership (the Adviser), to provide advice on the implementation of the Group strategy and the management of its daily operations and business. The Company has outsourced to the Adviser all of its operating functions, including identifying and assessing acquisition opportunities, designing the strategy to acquire the target, due diligence, and providing personnel and support staff to carry out those roles. At the period end an amount of GBP2 million had been paid, in accordance with the Advisory Agreement, to the Adviser of which GBP1 million is held as a prepayment within current assets.

(ii)

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VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) 5. TAXATION Neither the Company nor its subsidiary are financial services companies or specified utility companies under the Jersey Income Tax Law and are therefore subject to Jersey income tax at a rate of 0 per cent. If the Company or Subsidiary derives any income from the ownership or disposal of land in Jersey, such income will be subject to tax at the rate of 20 per cent. It is not expected that the Company or Subsidiary will derive any such income. 6. EARNINGS PER SHARE Loss per Diluted loss share per share (21) (21) 67 67 (31) (31)

Loss attributable to ordinary shareholders (GBP million) Shares in issue (million) Pence per ordinary share

Basic loss per ordinary share is calculated by dividing the loss attributable to ordinary shareholders of the Company of GBP21 million by the number of ordinary shares in issue at the end of the period of 67,342,736; which the directors believe provides a truer indication of the loss per share than a weighted average. Diluted earnings per share equal basic earnings per share at 30 September 2010 as the exercise of share options by directors is not dilutive, given the losses arising. 7. CASH AND CASH EQUIVALENTS

2010

Cash and cash equivalents are deposited with banks holding credit-ratings as follows: AAA AA+ AA AA Cash at banks and cash equivalents

211 460

The Group aims to mitigate the risk of default by one or more of its counterparties, regularly monitoring interest rates offered by, and the credit ratings of, current and potential counterparties, to ensure that the Group remains in compliance with its stated investment policy for cash balances. 8. CALLED UP SHARE CAPITAL AND SHARE PREMIUM

671

2010

Authorised: 2,500,000,000 Ordinary shares at GBP1 per share Issued and fully paid: 67,342,736 Ordinary shares at GBP1 per share Share premium: At 1 April 2010 Additions Less: Repurchase and cancellation of ordinary shares At 30 September 2010

67

618 (12)

246

606

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) On the 31 March 2010, two ordinary shares of GBP1 each were subscribed for at par value. On 9 July 2010 a written resolution of the sole member of the Company authorised the issue of 68,718,229 ordinary GBP1 shares at a price of GBP10 per share. On the 16 August 2010, pursuant to the terms of a Repurchase Option, the Company repurchased 1,375,495 ordinary shares of GBP1 each in the Company at a price of GBP10 per ordinary share. Following the repurchase and the related cancellation of the ordinary shares, the Companys issued ordinary share capital consists of 67,342,736 ordinary shares. There are no shares held in Treasury, therefore the total number of shares with voting rights in the Company is 67,342,736 ordinary shares of GBP1. Each share holds one voting right. 9. SHARE BASED PAYMENT RESERVE The Company has three share-based payment plans, which are described in detail in the IPO Prospectus. These plans have been accounted for in accordance with IFRS 2- Share based payments. Share Matching Award On 9 July 2010, the four Independent Non-Executive Directors of the Company were granted an option to purchase a maximum of 2 shares at par value of GBP1 for each share obtained during the IPO. The participation in the placement by the Independent Non-Executive Directors was limited to a maximum of 15,000 shares per director. The directors options are divided into two tranches, the details of which are set out below. Tranche 1 60,000 GBP10 GBP1 Later of acquisition and 1 year GBP9 Tranche 2 60,000 GBP10 GBP1 On acquisition GBP9

No of options granted Market value of shares at grant date Exercise price Vesting period

Fair value of options at grant date There are no expected forfeitures at grant date.

During the period, a share based payment expense of GBP0.1 million was recorded in the statement of comprehensive income and in the share based payment reserve within equity. Founder Shares On completion of an acquisition as defined in the IPO Prospectus, Founder Shares may be exchanged for up to 6.67% of the fully diluted ordinary shares of the Company. These have been treated as equity settled share based payments. The Founder Shares are deemed to have vested immediately as no performance conditions are attached to them. Management has determined that the fair value of these share based payments, on vesting, was equal to the consideration received, as set out in Note 3 - Critical accounting judgements and key sources of estimation uncertainty. Accordingly no share-based payment expense has been recognised in the statement of comprehensive income.

247

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) Founder Securities If within four years, post acquisition, the closing share prices reaches the higher of: A compound rate of return of 8.25% on the share from the IPO value of GBP10 and from date of acquisition An increase of 25% of the share price from the IPO value of GBP10.

The holders of the Founder Securities have the right to exchange the Founder Securities for ordinary shares in the Company to a value of 15% of the increase in value from the IPO value of GBP10. The Company has the option to settle by issuing shares or the equivalent in cash. The Founder Securities are deemed to have vested immediately as no performance conditions are attached to them. Management has determined that the fair value of these share based payments, on vesting, was equal to the consideration received, as set out in Note 3 - Critical accounting judgements and key sources of estimation uncertainty. Accordingly no share-based payment expense has been recognised in the statement of comprehensive income. 10. NON-CONTROLLING INTEREST Non-controlling interests represent the Founders investment in Founder Shares and Founder Securities of the subsidiary.

2010

At 1 April 2010 Issue of Founder Shares Issue of Founder Securities Loss attributable to non-controlling interest At 30 September 2010 11. CASH FLOWS FROM OPERATIONS

15 5 (1)

19

2010

Operating loss for the period Costs associated with IPO Operating cash flows before movements in working capital Increase in other current assets Cash flows from operations

(22) 21 (1) (1) (2)

12. RELATED PARTY TRANSACTIONS On 8 April 2010 NR Investments Limited, a company wholly owned by Mr. Nathaniel Rothschild, a director of the Company, agreed to loan the Company the sum of GBP10 million. The terms of the loan were that there should be no interest accrued on the principal amount. On 28 May 2010 the loan was repaid in full and the terms of the contract were therefore satisfied. The Company has outsourced to the Adviser, a related entity, all of its operating functions, including identifying and assessing acquisition opportunities, designing the strategy to acquire the target, due diligence, and providing personnel and support staff to carry out those roles. During the period Adviser fees of GBP2 million were paid, in accordance with the Advisory Agreement, of which GBP1 million had been prepaid at the period end.

248

VALLAR PLC
Notes to the consolidated financial information For the period ended 30 September 2010 (Expressed in millions of GBP, unless otherwise stated) During the period, the Group issued Founder Shares and Founder Securities to incentivise the Founders to achieve the Companys objectives. The Founder Shares reward such members for their initial capital commitment to the Company and for completing the acquisition (as defined in the IPO Prospectus), through exchange of the Founder Shares for ordinary shares on favourable terms following the acquisition. The Founder Securities encourage the Founders to grow the Company following the acquisition and to maximise value for holders of ordinary shares by entitling the Founders to a share of the upside in the Companys value once the performance conditions (as defined in the IPO Prospectus) are satisfied. Prior to the IPO, certain costs associated with the marketing, placing and listing of shares were incurred and paid by the Founders and Advisers, and recharged to the Company at cost. Within the total costs associated with the IPO, amounting to GBP21 million, GBP3 million represented recharges from related parties. All balances had been paid at 30 September 2010. 13. SUBSEQUENT EVENTS On 16 November 2010, the Company announced the intention to purchase a 25 per cent. stake in PT Bumi Resources Tbk and a 75 per cent stake in PT Berau Coal Energy Tbk for consideration of approximately USD3.0 billion made up of a combination of cash and new Vallar PLC shares. On 18 November 2010 a cash payment of USD639 million was made to PT Bukit Mutiara, and USD100 million was paid into an escrow account with JP Morgan Chase Bank. The new Vallar PLC shares to be issued as consideration together with the USD100 million in the escrow account, will be released on closing of the transaction following publication of this Prospectus in February 2011.

249

Part B: Bumi Resources IFRS Financial Information Section 1: Accountants report on the historical consolidated financial information relating to Bumi Resources for the years ended 31 December 2008 and 2009

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

The Directors Vallar PLC 12 Castle Street St. Helier, Jersey JE2 3RT Channel Islands 24 February 2011 Dear Sirs PT Bumi Resources Tbk We report on the financial information of PT Bumi Resources Tbk (Bumi Resources) set out in Section 2 of Part B of Part IX of the prospectus dated 24 February 2011 (the Prospectus) of Vallar PLC (the Company) (the Bumi Resources IFRS Financial Information). The Bumi Resources IFRS Financial Information has been prepared for inclusion in the Prospectus on the basis of the accounting policies set out in note 2 to the Bumi Resources IFRS Financial Information. This report is required by item 20.1 of Annex I to the PD Regulation and is given for the purpose of complying with that item and for no other purpose. Responsibilities The Directors of the Company are responsible for preparing the Bumi Resources IFRS Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion as to whether the Bumi Resources IFRS Financial Information gives a true and fair view for the purposes of the Prospectus, and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus. Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgements made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to the Companys circumstances, consistently applied and adequately disclosed.
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Services Authority for designated investment business.

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We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Opinion In our opinion, the Bumi Resources IFRS Financial Information gives, for the purposes of the Prospectus dated 24 February 2011, a true and fair view of the state of affairs of Bumi Resources as at the dates stated and of its results, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation. Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

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Section 2: Historical consolidated financial information relating to Bumi Resources for the years ended 31 December 2008 and 2009

PT Bumi Resources Tbk

Vallar does not have access to certain consolidated financial information in relation to Bumi Resources Group necessary to enable Vallar to prepare restated consolidated financial information for the Bumi Resources Group for the year ended 31 December 2007.

PT Bumi Resources Tbk

Consolidated income statements For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Notes Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses Gain on sale of investments Gain/(loss) on foreign exchange Impairment Other expenses Operating profit Share in net income of associates Profit before finance items and taxation Finance income Finance cost Fair value (losses)/gains on derivative financial instruments Profit before income tax Taxation Profit for the year Profit attributable to: Owners of the parent Minority interest 13 33 33 19 34 31 31 30

2009

2008

2,451 (1,582) 869

2,630 (1,536) 1,094 (61) (260) 10 (29) (3) (1) 750 7 757 2 (62) 111

(131) (182) 335 14 (38) 867

47 914 9 (352) (87) 484 (146) 338

809 (466) 342 342 342

328 10 338

Earnings per share (USD cents) Basic Diluted

35 1.73 1.69 1.78 1.34

The accompanying notes are an integral part of this consolidated financial information.

252

PT Bumi Resources Tbk

Consolidated statements of comprehensive income For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Notes Profit for the year Other comprehensive income Fair value (losses)/gains from AFS financial assets Foreign exchange differences on retranslation Total other comprehensive (loss)/income Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Minority interest 29, 17 29

2009 338

2008 342 5 8

(2) (17) (19)

13

319

355

309 10

355

319

355

The accompanying notes are an integral part of this consolidated financial information.

253

PT Bumi Resources Tbk

Consolidated balance sheets As of 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Notes ASSETS NON-CURRENT ASSETS Goodwill Exploration and evaluation assets Deferred stripping costs Property, plant and equipment Investment in associates Due from related parties Deferred tax assets Tax refund claims Loan receivable Other non-current assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Available-for-sale financial assets Trade and other receivables Derivative financial instruments Other current assets Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS 16 17 18 19 20 21

2009

2008

9 10 11 12 13 24 27 14 15

243 591 268 2,100 860 47 64 10 251 397 4,831

218 531 190 1,674 224 35 29 46 192 3,139 101 301 495 52 255

132 232 1,078 252 51 120 1,865

1,204

6,696

4,343

The accompanying notes are an integral part of this consolidated financial information.

254

PT Bumi Resources Tbk

Consolidated balance sheets As of 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Notes EQUITY AND LIABILITIES NON-CURRENT LIABILITIES Borrowings Due to related parties Deferred tax liabilities Pension benefit obligation Provisions Other non-current liabilities TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables Current tax payable Borrowings Derivative financial instruments Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES EQUITY Share capital Share premium Treasury stock Common control reserve Other reserves Retained earnings Total equity attributable to owners of the parent Minority interest TOTAL EQUITY TOTAL EQUITY AND LIABILITIES 26 22 19 25

2009

2008

22 24 27 23 25

3,163 2 350 25 88 91 3,719 910 278 469 26 16

1,180 3 334 16 70 98

1,701 948 478 131 1 16

1,699

1,574

28 28 29 29 29 1,401 123 (34) (987) 4 754 1,261

5,418

1,401 123 (34) (1,234) 23 770 1,049

3,275

17 1,278

19 1,068

6,696

4,343

The accompanying notes are an integral part of this consolidated financial information.

255

PT Bumi Resources Tbk

Consolidated statements of changes in equity For the years ended 31 December 2009 and 2008 Total equity
Share capital Share premium Treasury stock Common control reserve Other reserves attributable Retained to owners of earnings the parent Minority interest Total equity Attributable to owners of the parent

(Expressed in millions of USD, unless otherwise stated)

Notes

(1,234)

1 January 2008 Profit for the year Other comprehensive income Conversion of bonds Buy back of Bumis shares Dividends Acquisition of subsidiaries 7

29 28, 29

1,401

1,401

123

220 32 (129)

(34)

(22) 17 (29)

(1,234)

23

10 13

522 342 (94) 770

897 342 13 49 (158) (94)

1,049

19

19

897 342 13 49 (158) (94) 19

31 December 2008

1,068

256
8 7

Profit for the year Other comprehensive income Part disposal of Gallo Dividends Acquisition of minority interest

1,401

123

(34)

(987)

247

(19)

328 (247) (97)

754

328 (19) (97)

1,261

10 7 (19)

17

338 (19) 7 (97) (19)

31 December 2009

1,278

The accompanying notes are an integral part of this consolidated financial information.

PT Bumi Resources Tbk

Consolidated cash flow statements For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

31 Dec 09

31 Dec 08

CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Additions to exploration and evaluation assets Purchases of property, plant and equipment Purchases of other non-current assets Payment on deferred stripping costs Acquisition of subsidiaries Acquisition of associates Acquisition of AFS financial assets Proceeds from sale of AFS financial assets Premiums paid in respect of derivative financial instruments Payment on settlement of derivative financial instruments Interest received Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Proceeds from convertible bonds Repayment of borrowings Loan to PT Bukitt Mutiara Payment of finance lease liability Buy-back of Bumi shares Payments to related parties Debt issue costs paid Interest paid Dividends paid Net cash flows from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at the end of the period 21

2,441 (1,370) (236) 835 (349) 486

2,602 (1,655) (85) 862 (84) 778

(60) (317) (233) (132) (285) (811) (16) 84 (286) (52) 1

(329) (193) (33) (91) (542) (45) (183) 2

(2,107)

(1,414)

2,971 675 (1,439) (250) (54) (14) (238) (72) (97) 1,482

1,187 (110) (35) (158) (24) (46) (37) (94) 683

(139) 255 4 120

47 208

255

The accompanying notes are an integral part of this consolidated financial information.

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PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

1 CORPORATE INFORMATION PT Bumi Resources Tbk (Bumi) was established in the Republic of Indonesia on 26 June 1973. Bumi commenced its commercial operations on 17 December 1979. Bumi and its subsidiaries are collectively referred to herein as the Bumi Group. The activities of the Bumi Group include exploration and exploitation of coal and minerals deposits (including coal and minerals mining and selling) and oil and gas exploration. Bumis registered office address is at Bakrie Tower, 11th Floor, Kompleks Rasuna Epicentrum, JI. HR. Rasuna Said, Jakarta 12960, Indonesia. PT Bumi Resources Tbk is listed on the Indonesian Stock Exchange. 2 PRINCIPAL ACCOUNTING POLICIES The principal accounting policies applied in the preparation of this consolidated financial information are set out below. These policies have been consistently applied for all the years presented, unless otherwise stated. 2.1 Basis of preparation The Bumi Groups consolidated financial information has been prepared for the purposes of the Prospectus in accordance with the Prospectus Directive Regulation, the Listing Rules and this basis of preparation. The basis of preparation describes how the consolidated financial information of the Bumi Group has been prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union. This is the first set of consolidated financial information prepared in accordance with IFRS. Note 3 gives further details of the impact of the transition and application of IFRS 1 First-time adoption of International Financial Reporting Standards. The consolidated financial information has been prepared under the historical cost convention except for available-for-sale (AFS) financial assets, financial liabilities at fair value through profit or loss, and retirement benefit obligations. The preparation of consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Bumi Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in Note 4. Actual results may differ from these estimates. The consolidated financial information is presented in millions of United States dollars (USD) except when otherwise indicated. 2.2 New accounting standards This is the first set of consolidated financial information prepared in accordance with IFRS as endorsed by the European Union. The Group applied all applicable standards and all applicable interpretations as endorsed as of 31 December 2009. The Group did not adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is on or after 1 January 2010.

258

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

As a consequence, the Group will apply at their respective application dates the following standards and interpretations: a) IFRS 3 (revised), Business combinations (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interests proportionate share of the acquirees net assets. All acquisition-related costs should be expensed. The Bumi Group will apply IFRS 3 (revised) prospectively to all business combinations concluded from 1 January 2010. IAS 27 (revised), Consolidated and separate financial statements, (effective from 1 July 2009). The revised standard requires the effects of all transactions with minority interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Group will apply IAS 27 (revised) prospectively to transactions with minority interests from 1 January 2010. IAS 38 (amendment), Intangible Assets Mandatory for year 2010. IFRS 5 (amendment), Measurement of non-current assets (or disposal groups) classified as held-for-sale Mandatory for year 2010. IFRIC 17, Distribution of non-cash assets to owners Mandatory for year 2010. IAS 1 (amendment), Presentation of financial statements Mandatory for year 2010. IAS 36 (amendment), Impairment of assets Mandatory for year 2010. IFRS 9, Financial instruments, issued in November 2009. This standard is the first step in the process to replace IAS 39, Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Groups accounting for its financial assets. However, the standard has not yet been endorsed by the EU. The Group has yet to assess IFRS 9s full impact. Revised IAS 24 (revised), Related party disclosures Mandatory for year 2011. IFRIC 19, Extinguishing financial liabilities with equity instruments Mandatory for year 2011. Amendments to IFRIC 14, Prepayments of a minimum funding requirement Mandatory for year 2011. Amendment to IAS 32, Classification of rights issues Mandatory for year 2011.

b)

c) d) e) f) g) h)

i) j) k) l) 2.3

Basis of consolidation The consolidated financial information consists of the consolidation of the accounts of Bumi and its subsidiaries. All intergroup balances, transactions, income and expenses and profits or losses, including unrealised profits arising from intergroup transactions, have been eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.

259

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

a)

Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recognised at cost. The Groups investment in associates includes goodwill identified on acquisition, and is net of any accumulated impairment loss. The Groups share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

b)

c)

Joint ventures Companies over which the Group exercises joint control are consolidated by the proportionate method, based on the Groups percentage interest. Intergroup balances, transactions, and unrealised gains or losses on transactions between Group companies are eliminated to the extent of the Groups percentage interest. The Group accounting policies have been applied to joint ventures where necessary to ensure consistency with the policies adopted by the Group.

d)

Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any minority interest and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss.

2.4

Business combinations The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Provisional fair values allocated at a reporting date are finalised within twelve months of the acquisition date. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of

260

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. For non-wholly owned subsidiaries, minority interests are initially recorded at the minorities proportion of the fair values of the assets and liabilities recognised at acquisition. The results of businesses acquired during the year are brought into the consolidated financial information from the date on which control, joint control or significant influence commences and taken out of the consolidated financial information from the date on which control, joint control or significant influence ceases. Transactions with minority interests For purchases of equity from minority interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in goodwill or in the case of mining companies acquired, the difference is first recorded as Mining properties. When the Group ceases to have control or significant influence, the retained portion of the subsidiarys net assets becomes the carrying value of the investment on initial measurement. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. Accordingly, the amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Transactions between entities under common control Business combinations involving entities under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or at the date that common control was established, if later. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Groups controlling shareholders consolidated financial statements. Any differences on consolidation are recognised directly in equity. 2.5 Foreign currency translation a) Functional and presentation currency Items included in the consolidated financial information of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The USD is the functional currency of Bumi and of most of its subsidiaries. USD is the currency in which the Groups consolidated financial information is presented, as it most reliably reflects global business performance of the Group as a whole. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within the line item gain/(loss) on foreign exchange.

261

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

c)

Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 2.6 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Groups activities. Revenue is shown net of applicable sales taxes, value-added tax, returns, rebates and discounts and after eliminating sales within the Bumi Group. Under the terms of its Coal Contract of Work (CCoW), the Government of Indonesia (the Government) is entitled to 13.5% of the coal production of KPC and Arutmin. Rather than deliver coal to the Government, as agreed with the Government, KPC and Arutmin market and sell the Governments coal entitlement and pays the Government the sales proceeds less certain charges. Revenue in the income statement includes the proceeds of the sales of the Governments entitlement as the Group suffers the credit risk associated with these sales. The Government entitlement is recognised as royalty expense as part of cost of sales. Sales of coal Sales revenue is only recognised on individual sales when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when persuasive evidence exists that all of the following criteria are met: the significant risks and rewards of ownership of the product have been transferred to the buyer; neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the sale will flow to the Bumi Group; and the costs incurred or to be incurred in respect of the sale can be measured reliably.

These conditions are generally satisfied when title passes to the customer. In most instances sales revenue is recognised when the product is delivered to the destination specified by the customer, which is typically the vessel on which it will be shipped, the destination port or the customers premises. Occasionally products are provisionally priced. When the price adjustment for a particular year has not been agreed with the customer at the time a delivery is to be made, the Group will 262

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

continue to invoice coal at the prior years price and adjust the price after reaching an agreement with the customer. When this occurs, the Group records the sales revenue on an estimated market price for the coal and adjusts the sales revenue amount when a price agreement is reached with the customer. 2.7 Exploration and evaluation expenditure Exploration and evaluation expenditure relates to the initial search for deposits with economic potential and comprises costs such as: researching and analysing existing exploration data; conducting geological studies, exploratory drilling and sampling; examining and testing extraction and treatment methods; and/or compiling pre-feasibility and feasibility studies.

These costs are capitalised until such time as they are determined to be either commercially feasible at which point they are transferred to Mining properties, within Property, plant and equipment, or if it is determined that they are not commercially feasible they are written off to the income statement. Capitalised exploration and evaluation expenditure is not depreciated as the asset is not available for use but monitored for indications of impairment. Where a potential impairment is indicated, an assessment is performed in conjunction with the cash generating unit to which the exploration is attributed. 2.8 Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment comprises of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the estimated costs of decommissioning the assets and site rehabilitation costs to the extent that they relate to the asset and are the responsibility of the Group. The cost of an item of property, plant and equipment is capitalised into its various components where the useful life of the components differ from the main item of property, plant and equipment to which the component can be logically assigned. Expenditure incurred to replace or modify a significant component of property, plant and equipment is capitalised and any remaining carrying value of the component replaced is written off as an expense in the income statement. Subsequent expenditure on property, plant and equipment is only capitalised when the expenditure enhances the value or output of the asset beyond original expectations and it can be measured reliably. Costs incurred on repairing and maintaining assets are recognised in the income statement in the period in which they are incurred. Gains and losses on the disposal of property, plant and equipment, which are calculated as the proceeds on disposal of such assets less their carrying values at that date, are recognised in the income statement. Mining properties includes assets in production and in development, assets transferred from exploration and evaluation expenditure, deferred stripping performed in the development of the mine and the fair value of mineral resources acquired through business combinations. Mining

263

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

properties in development and acquired mineral resources are not amortised until production commences. Advances paid to contractors in respect of deferred stripping are also included in Mining properties as development costs. Property, plant and equipment are depreciated over their useful lives, or the term of the Mining Rights, Contract of Work (CoW) or CCoW, whichever is shorter. Depreciation commences when an asset is available for use. The major categories of property, plant and equipment are depreciated on a straight-line basis except for the mining properties in production which are depreciated on a units-of-production (UoP) basis as follows:

Estimated Useful Life

Machinery and equipment Office furniture and fixtures Vehicles Construction in progress Mining properties

3-30 years 3-8 years 3-8 years not depreciated up to 30 years on a UoP basis

Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively. Costs associated with commissioning new assets, in the period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit. Interest on borrowings related to construction or development projects is capitalised until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. 2.9 Deferred stripping It is necessary to remove overburden and other waste materials to open the mining area before production commences. The process of removing overburden and waste materials is referred to as stripping. Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning, stripping costs are accounted for separately by reference to the ore from each separate pit. If, however, the pits are highly integrated for the purpose of mine planning, the second and subsequent pits are regarded as extensions of the first pit in accounting for stripping costs. In such cases, the initial stripping (i.e. overburden and other waste removal) of the second and subsequent pits is considered to be production phase stripping relating to the combined operation. The Groups determination of whether multiple pit mines are considered separate or integrated operations depends on each mines specific circumstances. In the development stage of a mine, before production commences, stripping costs are capitalised as part of Mining properties and amortised on a UoP basis over the life of the mine. This includes any advance payments to contractors, where mining activities are outsourced, to compensate for the relatively high costs of overburden removal which arise in the early stages of a mines life. Stripping costs incurred in the production phase are deferred to the extent that the actual stripping ratio in the period exceeds the life of mine stripping ratio. These deferred costs are then released to the income statement, as production costs, in those periods where the actual stripping ratio is less than the life of mine stripping ratio. The life of mine stripping ratio is calculated as the total expected amount of overburden to be removed over the life of the mine, divided by the total expected amount of coal to be mined over

264

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

the life of the mine. The life of mine stripping ratio is reviewed regularly and, where necessary, amended to reflect changes in the economically mineable coal reserves, and a more detailed understanding of the overburden to be removed. The accounting effects of changes to the life of mine stripping ratio are applied prospectively. 2.10 Impairment of non-financial assets Assets that have an indefinite useful life such as goodwill or intangible assets not ready for use, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Financial instruments (i) Financial assets The Group classifies its financial assets into the following categories: at fair value through profit or loss (FVPL), loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition. a) Financial assets at fair value through profit or loss Derivatives are included in this category unless they are designated as hedges. Assets in this category are classified based on their maturity. Generally, the Group does not acquire financial assets for the purpose of selling in the short term. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. b) Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables comprise trade and other receivables, loans to related parties, loans receivable and cash and cash equivalents in the balance sheet. Loans and receivables are carried at amortised cost less any impairment. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid investments. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, generally have an original maturity of 90 days or less and are subject to an insignificant risk of adverse changes in value. However, certain deposits of greater duration can be classified as cash equivalents if the funds can be withdrawn at short notice with an insignificant risk of adverse changes in value. Trade and other receivables Trade receivables are recognised initially at fair value and are subsequently measured at amortised cost reduced by any provision for impairment. A provision 265

2.11

c)

d)

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. Indicators of impairment would include significant financial difficulties of the debtor, likelihood of the debtors insolvency, default in payment or a significant deterioration in credit worthiness. Any impairment is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the income statement. Included in this account are the trade receivables which pertain to amounts due from customers for coal sold in the ordinary course of business. e) Available-for-sale financial assets Available-for-sale financial assets include the Groups investments in nonconsolidated companies and equity or debt instruments that do not satisfy the criteria for classification in another category. These items are measured at fair value on initial recognition plus transaction costs. At each balance sheet date, available-for-sale financial assets are measured at fair value. For listed companies, fair value is determined based on the quoted market price at the balance sheet date. For unlisted companies, fair value is measured based on standard valuation techniques (reference to similar recent transactions, discounted future cash flows, etc.). Changes in fair value are recorded directly in other comprehensive income, except when the decline in the value of the investment below its historical acquisition cost is judged significant or prolonged enough to require an impairment. In this case, the loss is recognised in the income statement under Impairment charges. Only impairment losses recognised on debt securities may be reversed through income. Interest on available-for-sale financial assets are calculated using the effective interest method and recognised in the income statement. Dividends on availablefor-sale financial assets are recognised in the income statement as part of other income when the Groups right to receive payment is established. When financial assets classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement. (ii) Financial liabilities Financial liabilities are classified as financial liabilities at fair value through profit or loss or at amortised cost, as appropriate. Financial liabilities are recognised initially at fair value and, in the case of financial liabilities at amortised cost, inclusive of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification as follows: a) Financial liabilities at fair value through profit or loss Financial liabilities at FVPL include mainly derivative liabilities unless they are designated as effective hedging instruments. Financial liabilities at FVPL are stated at fair value, with changes in fair value during a reporting period immediately recognised in the income statement.

266

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

b)

Financial liabilities at amortised cost After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest rate method taking into account principal repayment or reduction. The calculation also takes into account any premium or discount paid or received either on acquisition or on redemption. It also includes transaction costs and fees that are an integral part of the effective interest rate. Gains and losses are recognised in the income statement when the liabilities are derecognised. Included in this category are trade payables and borrowings. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less otherwise they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowing using effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. c) Compound financial instruments Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The classification of the conversion option between liability and equity is determined based on the terms of the instruments including whether the issuer entity within the Group can settle the option in cash. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

267

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

d)

Derecognition of Financial Liabilities The Group derecognise financial liabilities when, and only when, the Groups obligations are discharged, transferred, cancelled or expired.

2.12

Inventories Inventories are valued at the lower of cost and net realisable value, primarily on a weighted average cost basis. Cost of coal inventories is determined by a twelve-month rolling weighted average of historical production costs, while cost of spare parts inventories is determined using the average method. Allowance for inventory obsolescence is provided to reduce the carrying values of inventories to their net realisable value based on the review of the status of the inventories at the end of the year.

2.13

Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. For finance leases, each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

2.14 Provisions Provisions are recognised when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. a) Environmental rehabilitation provision Rehabilitation costs are a normal consequence of mining, and are provided for as and when a legal or constructive obligation to incur costs associated with rehabilitation arises. The environmental rehabilitation provision consists of costs associated with the continuous mine reclamation during the mines operation. Estimated long-term environmental rehabilitation provisions are measured based on the net present value of the estimated future costs and although the ultimate cost to be incurred is uncertain, the Groups businesses estimate their respective costs based on feasibility and engineering studies using current restoration standards and techniques, taking into account the Groups environmental policy and current Indonesian

268

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

environmental and regulatory requirements, including the requirements of the Mining Rights, CoW or CCoW. The unwinding of the discount applied in establishing the net present value of provisions is charged to the income statement in each accounting period as a financing cost. b) Mine closure provisions Mine closure provisions, which include decommissioning and demobilisation of facilities and other closure activities, are recognised when the economic life of the mine ends within the period of the existing life of the CCoW because they relate to the facilities which are in use over the life of the mine. The initial mine closure provision together with other movements in the provisions for close-down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised in Mining Properties, within Property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate on a UoP basis. 2.15 Taxation The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where Bumi and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is provided in respect of fair value adjustments on acquisitions. These adjustments may relate to assets such as mining rights or resources that, in general, are not eligible for income tax allowances. In such cases, the provision for deferred tax is based on the difference between the carrying value of the asset and its nil income tax base. The existence of a tax base for capital gains tax purposes is not taken into account in determining the deferred tax provision relating to such mining rights or resources because it is expected that the carrying amount will be recovered primarily through use and not through disposal.

269

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 2.16 Employee benefits a) Post-employment benefits Depending on the laws and practices in force in the countries where the Bumi Group operates, mainly Indonesia, Group companies have obligations in terms of pensions, early retirement payments, retirement bonuses and other benefit plans. Such obligations generally apply to all of the employees within the companies concerned. In Indonesia, the Group is required to provide to its employees a minimum amount of pension benefits in accordance with Labour Law No. 13/2003. The Groups obligations in relation to pensions and other employee benefits are recognised and measured in compliance with IAS 19. Accordingly: the cost of defined contribution plans is expensed based on the amount of contributions payable in the period. the Groups obligations concerning pensions and other employee benefits payable under defined benefit plans are assessed on an actuarial basis using the projected unit credit method. These calculations are based on assumptions relating to mortality, staff turnover and estimated future salary increases, as well as the economic conditions specific to each country or subsidiary of the Group. Discount rates are determined by reference to the yield, at the measurement date, on government bonds, considering currently that there is no deep market for highquality corporate bonds in the related geographical area, mainly in Indonesia. provisions are recorded when commitments under these plans less the unrecognised past service cost exceed the fair value of plan assets. Where the value of plan assets (capped where appropriate) is greater than the related commitments, the surplus is recorded as an asset under Other current assets or Other non-current assets. actuarial gains and losses resulting from changes in actuarial assumptions and experience adjustments are recognised using the corridor method. Accordingly, actuarial gains and losses that fall outside the higher of 10 per cent of the present value of the defined benefit obligation or 10 per cent of the fair value of the plan assets (if any) are amortised over no more than the remaining working lives of the employees. past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

270

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

b)

Short-term Employee Benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related services are provided. A liability is recognised for the amount expected to be paid for short-term cash bonuses if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

2.17

Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown, net of tax, as a deduction to share premium. Reacquisition of ordinary shares to be held as treasury stock for future reissuance is accounted for under the par value method. Under this method, treasury stock is presented at the par value as a reduction to equity in the treasury stock reserve. If the treasury stock is purchased at a price above par value, the related share premium account is adjusted by the difference between the amount paid and the par value. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is credited to share premium.

2.18

Contingencies Contingent liabilities are not recognised in the consolidated financial information but are disclosed by way of note unless their occurrence is remote. Contingent assets are not recognised in the consolidated financial information but they are disclosed by way of note if they are deemed probable.

3 TRANSITION TO IFRS This is the Bumi Groups first consolidated financial information prepared in accordance with IFRS. The accounting policies set out in note 2 have been applied in preparing the consolidated financial information for the years ended 31 December 2009 and 31 December 2008 and in the preparation of an opening IFRS balance sheet at 1 January 2008 (the Bumi Groups date of transition). In preparing the opening IFRS balance sheet, the Bumi Group has adjusted amounts reported previously in financial statements prepared under Indonesian GAAP. An explanation of how the transition from Indonesian GAAP to IFRS has affected the Bumi Groups financial position, financial performance and cash flows is set out in the following tables and notes that accompany the tables. 3.1 Initial elections upon adoption Set out below are the applicable IFRS 1 exemptions and exceptions applied in the conversion from Indonesian GAAP to IFRS. 3.1.1 IFRS exemption options a) Exemption from business combinations IFRS 1 provides the option to apply IFRS 3, Business combinations, prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Bumi Group elected to apply IFRS 3 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.

271

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

b)

Exemption for fair value as deemed cost The Bumi Group elected not to measure items of property, plant and equipment at fair value as at 1 January 2008. Exemption for cumulative translation differences IFRS 1 permits cumulative translation gains and losses to be reset to zero at the transition date. This provides relief from determining cumulative currency translation differences in accordance with IAS 21, The effects of changes in foreign exchange rates, from the date a subsidiary or equity method investee was formed or acquired. The Bumi Group did not elect to reset all cumulative translation gains and losses to zero in opening retained earnings at its transition date. Exemption for employee benefits IFRS 1 provides relief from retrospective application of IAS 19, Employee benefits, for the recognition of actuarial gains and losses in excess of a limit of the greater of 10 per cent of plan assets and plan liabilities to be recognised in the income statement with the balance deferred on the balance sheet. The Bumi Group already used the corridor approach before adoption of IFRS and therefore, this exemption is not applicable to the Bumi Group. Exemption for compound financial instruments IFRS 1 provides exemption from identifying separately the two elements of equity if the liability is not outstanding at the date of transition. The Bumi Group did not have any outstanding liability as at the transition date as a result of a compound financial instrument issued earlier and therefore used this exemption not to identify two elements of equity. Exemption for leases There is an exemption in IFRS 1 permitting analysis of the arrangements that may contain a lease to be done based on facts and circumstances at the date of transition to IFRS. The Bumi Group has elected to analyse these facts and circumstances as of 1 January 2008. Exemption for decommissioning liabilities A decommissioning liability can be measured at the date of transition to IFRS in accordance with IAS 37, Provisions, contingent liabilities and contingent assets. The first-time adopter then discounts the liability back to when it first arose and adds that amount to the related fixed asset. The asset is depreciated with the appropriate additional amount up to the date of transition to IFRS. The Bumi Group has no decommissioning obligation and, as such, did not use this exemption. Designation of previously recognised financial instruments IFRS 1 permits the Bumi Group to designate an investment as available-for-sale at the date of transition to IFRS. Additionally, IFRS 1 permits the Bumi Group to designate any financial asset or liability as at fair value through profit or loss at the date of transition if the asset or liability meets the criteria prescribed in IAS 39 at that date. The Bumi Group has chosen not to apply this exemption.

c)

d)

e)

f)

g)

h)

272

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

i)

Borrowing costs As permitted by IFRS 1, the Bumi Group has chosen to apply the transitional provisions of IAS 23 at the date of transition to IFRS. This allows the Bumi Group to capitalise borrowing costs relating to qualifying assets prospectively from 1 January 2009. The remaining voluntary exemptions do not apply to the Bumi Group: Share-based payment (IFRS 2), as the Bumi Group has not entered into any share based payment arrangements; Insurance contracts (IFRS 4), as this is not relevant to the Bumi Groups operations; Assets and liabilities of subsidiaries, associates and joint ventures, as only the Bumi Groups consolidated financial information have been prepared in accordance with IFRSs, Investments in subsidiaries, jointly controlled entities and associates, as the Bumi Group does not prepare separate financial statements under IFRS, and Financial assets or intangible assets accounted for under IFRIC 12, Service Concession Arrangements as the Bumi Group has not entered into any arrangements within the scope of IFRIC 12.

3.1.2 IFRS mandatory exceptions a) Estimates The Bumi Group used the same estimates for preparing its consolidated financial information under IFRS as those used at the time when the financial statements under Indonesian GAAP were prepared for the same financial years. Hedge accounting exception Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in IAS 39, Financial instruments: Recognition and measurement, at that date. The Bumi Group does not have any derivative contracts which are designated into a hedge relationship.

b)

3.2

Reconciliations of Indonesian GAAP to IFRS The following tables represent the reconciliations on equity and comprehensive income from Indonesian GAAP to IFRS for the periods required by IFRS. The impact of IFRS on the cash flow statements is limited to the proportionate consolidation of the joint ventures, mainly KPC and Arutmin. The cash flow statements have been computed using the Bumi Groups share in the cash transactions concluded by KPC and Arutmin.

273

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

a)

Reconciliation of shareholders equity as at 1 January 2008

Indonesian GAAP Proportionate consolidation (i) (215) (215) Deferred tax (iii) 17 17 17

Share capital Share premium Treasury stock Common control reserve Other reserves Retained earnings Total equity attributable to owners of the parent Minority interest Total equity

1,401 220 (22) (1,234) 10 600 975 202 1,177

Derivatives (ii) (107) (107) (107)

Other (x) 12 12 13 25

IFRS 1,401 220 (22) (1,234) 10 522 897 897

Reconciliation of shareholders equity as at 31 December 2008
Indonesian GAAP Proportionate consolidation Derivatives (i) (ii) 4 (338) (338) 4 4 Deferred tax (iii) (10) (10) (10) Financial Foreign liabilities exchange (iv) (v) (9) (10) (29) (10) (10) (38) 9 (29) Other (x) 55 55 (5) 50

b)

IFRS 1,401 123 (34) (1,234) 23 770 1,049 19 1,068

Share capital Share premium Treasury stock Common control reserve Other reserves Retained earnings Total equity attributable to owners of the parent Minority interest Total equity

1,401 123 (34) (1,234) 32 760 1,048 353 1,401

Deferred tax (iii) 37 37 37 Financial liabilities (iv) (203) (203) (203) Foreign exchange (v) (46) (43) (89) 108 19 Deferred stripping (vi) 108 108 108 Investment Borrowing in costs associates capitalised (vii) (ix) (29) (29) (29) 49 49 49 Other (x) 5 5 2 7

c)

Reconciliation of shareholders equity as at 31 December 2009

Indonesian GAAP Proportionate consolidation Derivatives (i) (ii) 52 (219) (219) (24) 28 28

IFRS 1,401 123 (34) (987) 4 754 1,261 17 1,278

Share capital Share premium Treasury stock Common control reserve Other reserves Retained earnings Total equity attributable to owners of the parent Minority interest Total equity

1,401 71 (34) (987) 50 854 1,355 126 1,481

274

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

d)

Reconciliation of comprehensive income for the year ended 31 December 2008

Indonesian GAAP Proportionate consoliDeferred Financial Foreign dation Derivatives tax liabilities exchange Other IFRS (i) (ii) (iii) (iv) (v) (x) (1,211) 2,630 (527) 6 1,094 (330) 8 (29) 35 750 7 3 (17) (5) (62) 111 (27) (10) (29) 43 342

Revenue Gross Profit Operating Profit Share in net income of associates Finance cost Profit for the year attributable to owners of parent

3,840 1,615 1,066 7 (43) 254

e)

Reconciliation of comprehensive income for the year ended 31 December 2009

Indonesian GAAP ProporInvest- Disposal Borrowtionate ment of ing costs consoliDeferred Financial Foreign Deferred in asso- minority capitaldation Derivatives tax liabilities exchange stripping ciates interest ised Other IFRS (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (1,214) 2,451 (354) 108 7 869 (156) 23 (13) 108 247 (21) 867 (36) 47 7 (215) 49 (6) (352) (28) 48 (194) (13) 108 (29) 247 49 (50) 328

Revenue Gross Profit Operating Profit Share in net income of associates Finance Cost Profit for the year attributable to owners of parent

3,665 1,108 679 83 (187) 190

f)

Notes to the reconciliation of Indonesian GAAP and IFRS (i) Proportionate consolidation Following a review of the shareholders agreement with Tata Power Company Ltd., management has concluded that, under IFRS, certain coal companies (KPC, Arutmin, ICRL, Indo Kaltim and Indo Kalsel) meet the definition of jointly controlled entities under IAS 31 Interests in Joint Ventures. As a result, these entities (the JV Coal Companies) are recorded under IFRS using the proportionate consolidation method for the years ended 31 December 2008 and 2009 while they are recorded as subsidiaries under Indonesian GAAP for the same periods. This adjustment has no effect on the net equity attributable to the owners of Bumi or on the net profit attributable to the owners of Bumi as it only affects the manner of recognition of the minority interests. Included in this adjustment is reclassification from minority interests to provisions of a USD 84 million potential liability for potential future indemnity claims arising from the disposal of interests in the JV Coal Companies to Tata Power Company Ltd. Derivatives Under IFRS, embedded derivatives, including early redemption and prepayment options within debt instruments, have been identified by the Bumi Group and recognised at fair value. These embedded derivatives were not recognised in Bumis Indonesian GAAP financial statements. Under IFRS, settlement of derivative financial instruments is charged to the income statement. In its 2009 Indonesian GAAP financial statements, the Bumi Group deducted the settlement of derivatives of USD 52 million from share premium. (iii) Deferred tax Changes in deferred tax represent the impact of deferred taxes on the adjustments necessary for the transition to IFRS.

(ii)

275

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

(iv)

Financial liabilities Financial liabilities were measured at cost under Indonesian GAAP for the periods ended 31 December 2009 and 2008. Financial liabilities are measured at amortised cost under IFRS. As a result of using the effective interest method to compute the amortised cost of financial liabilities, the consolidated financial information does not include deferred transaction costs which were recognised as assets under Indonesian GAAP and amortised on a straight-line basis. Foreign exchange For the purposes of this consolidated financial information, the Bumi Group determined that the functional currency of some subsidiaries which had a functional currency of Indonesian Rupiah (IDR) in the Indonesian GAAP financial statements to be USD. The foreign exchange gains/losses reported under Indonesian GAAP have been adjusted to reflect the change in the functional currency under IFRS. In its Indonesian GAAP financial statements, the Bumi Group carried VAT recoverable at the Rupiah exchange rates prevailing when the VAT was claimed as the Government of Indonesia (the Government) has not yet clarified the exchange rate that would be used in the settlement of this matter. Under IFRS, the VAT recoverable is translated at the closing IDR Rupiah exchange rate at each reporting date. Deferred Stripping Stripping costs are capitalised based on the life of mine stripping ratio as explained in note 2.9. Adjustments to the life of mine stripping ratio are accounted for prospectively. In its Indonesian GAAP financial statements, the Bumi Group capitalised stripping costs based on the average estimated stripping ratio and significant adjustments to the average were accounted for retrospectively based upon the carried forward deferred stripping balance, as well as prospectively. Investment in associates The investments in associates have been adjusted to comply with IFRS in all material aspects. The main adjustments include (i) the reversal of accruals in deferred stripping costs booked by an associate and that are not compliant with IFRS; and (ii) the reclassification of goodwill previously recognised on acquisition of an associate to mine properties and its amortisation on a unit of production basis. Disposal of minority interest In its Indonesian GAAP financial statements, the Bumi Group recognised a gain on sale of USD 36 million of a 20 per cent minority interest in a subsidiary, previously acquired in a transaction under common control. The gain on disposal was after derecognising 20 per cent of the previously recognised common control reserve. Under IFRS, 20 per cent of the previously recognised common control reserve is transferred to retained earnings and a gain of USD 283 million is recognised. Capitalisation of borrowing costs Under Indonesian GAAP, the Bumi Group did not capitalise borrowing costs. Under IFRS, the Bumi Group has elected to capitalise borrowing costs to qualifying assets from 1 January 2009.

(v)

(vi)

(vii)

(viii)

(ix)

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PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

(x)

Others Financial assets classified as available for sale have been measured at fair value at the reporting dates under IFRS. Rehabilitation provisions under IFRS are discounted in order to reflect the effect of time whereas, in its Indonesian GAAP financial statements, the Bumi Group did not apply any discount factor. Under Indonesian GAAP, goodwill was amortised over a period corresponding to its estimated economic recovery. In accordance with IFRS, goodwill is not amortised; it is, instead, tested for impairment annually. In its Indonesian GAAP financial statements, the Bumi Group concluded the purchase of 77 per cent. of a subsidiary in 2008. In 2009, the sale and purchase agreement was renegotiated and the equity interest acquired was reduced to 50 per cent. Under IFRS, the acquisition has been restated to reflect a 50 per cent. equity interest from 2008. In its Indonesian GAAP financial statements, the Bumi Group capitalised certain costs, which under IFRS do not meet the definition of an asset. These costs have been written off under IFRS.

g)

Reclassifications Goodwill previously recognised under Indonesian GAAP (after the amortisation reversal mentioned above) was determined to be separately identifiable mineral properties under IFRS. The opening goodwill balance on 1 January 2008 of USD 269 million was reclassified to mining properties within property, plant and equipment. This reclassification to mining properties resulted in additional deferred tax liabilities and, as a consequence, new goodwill.

4 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of consolidated financial information requires the use of estimates and assumptions to determine the value of assets and liabilities, and contingent assets and liabilities at the balance sheet date, and revenues and expenses reported during the period. Due to uncertainties inherent in the estimation process, the Bumi Group regularly revises its estimates in light of currently available information. Final outcomes could differ from those estimates. The main estimates used in preparing the Bumi Groups consolidated financial information are presented below. 4.1 Measurement of the fair value of assets acquired and liabilities assumed Certain assumptions were used to measure the fair value of assets acquired and liabilities assumed, most notably on the recent business combinations of PT Dairi Prima Mineral, Pendopo Coal Ltd and PT Fajar Bumi Sakti. These estimations include values assigned to the estimated future coal or minerals prices, the market outlook for the measurement of future cash flows, and the applicable discount rate. These assumptions reflect managements best estimates. Determination of coal reserve estimates Except for the coal reserves in the Loa Ulung mine operated by Fajar Bumi, we report our coal reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition) (the 2004 JORC Code), prepared and published by The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. Under the 2004 JORC Code, the term coal resource refers to a concentration or occurrence of coal of intrinsic economic interest in or on the Earths crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade,

4.2

277

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

geological characteristics and continuity of a coal resource are known, estimated or interpreted from specific geological evidence and knowledge. Coal resources are subdivided, in order of increasing geological confidence, into inferred, indicated and measured categories. The term coal reserve is defined in the 2004 JORC Code as the economically mineable part of a measured and indicated coal resource. Coal reserves are subdivided in order of increasing confidence into probable coal reserves and proved coal reserves. Reserves, and for certain mines, other mineral resources, determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine stripping ratios and for forecasting the timing of the payment of close-down and restoration costs and clean up costs. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction. There are numerous uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in changes to reserve estimates. 4.3 Recoverable amount of property, plant and equipment and intangible assets The recoverable amount of goodwill, other intangible assets and property, plant and equipment is based on estimates and assumptions regarding in particular the expected market outlook and future cash flows associated with the assets. Estimated future cash flows include estimates on estimates of future costs to produce proven and probable reserves, future commodity prices and discount rates. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in adjustments to the impairment expenses already booked. Provision for environmental rehabilitation Parameters having a significant influence on the amount of provisions relating to environmental rehabilitation include the timing of expenditure and the discount rate applied to cash flows, as well as the actual level of expenditure. These parameters are based on information and estimates available to the Bumi Group at the current time, including the life of mine and the remaining term of the mining rights, CCoW or CoW. The amounts required to be provided for environmental remediation are subject to ongoing regulatory change in Indonesia, subsequent to the issuance of the new Law on Minerals and Coal Mining on 11 January 2009. As the Government of Indonesias implementation of new requirements becomes clearer, there may be a need to revise the rehabilitation provision. In addition, cost estimates can vary in response to many other factors including, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in ore reserves or production rates. As a result there could be significant adjustments to the provision for rehabilitation, which would affect future financial results. 4.5 Capitalisation and deferral of stripping costs The Bumi Group defers stripping costs incurred during the production stage of its operations when the actual stripping ratio for a specific period exceeds the expected stripping ratio over the life of the mine or pit (the life of mine ratio). Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the current period ratio falls below the life of mine ratio.

4.4

278

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The life of mine ratio is based on proved and probable reserves of the mine and is also highly dependent on the design of the mine and on the technical and economic parameters assumed over the life of the mine. The Bumi Group reviews regularly the life of mine ratio. 5 5.1 FINANCIAL RISK MANAGEMENT Financial risk factors The Bumi Groups policies with regard to financial risk management are clearly defined and consistently applied. They are a fundamental part of the Bumi Groups long term strategy covering areas such as foreign exchange risk, interest rate risk, commodity price risk, credit risk, liquidity risk and capital management. The Bumi Group is heavily dependent on coal which has a positive relationship to the global economic cycle. Financial risk management is under the direct supervision of the Board of Directors and especially the Chief Financial Officer. The CFO has a central treasury department (Bumi Group treasury) which follows policies approved by the Risk Management Division and Board of Directors. Bumi Group treasury identifies and evaluates financial risks in close co-operation with the Bumi Groups operating units. The Risk Management Division and the Board provides written principles for overall financial risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and nonderivative financial instruments, and investment of excess liquidity. Bumi does not acquire or issue derivative financial instruments for trading or speculative purposes; nor does it believe that it has material exposure to such trading or speculative holdings through its investments in joint ventures and associates. 5.2 Market risk a) Foreign exchange risk Management believes the Bumi Group is naturally hedged against foreign exchange risk. A significant portion of the Bumi Groups sales are priced, invoiced and paid in USD. Most of the cost of sales and operating expenses, including the freight costs, sales commissions, dispatch and demurrage expenses and capital expenditures in 2008 and 2009 were denominated and paid in USD. The major mining contractor expenses are also invoiced and paid in USD. All of the long-term debt is denominated in USD. For 2008 and 2009, the cash production costs denominated in Indonesian Rupiah, such as wages for the mine workers, represented approximately 4.3% and 4.8%, respectively, of the total cash production costs. Because certain of the cash production costs are denominated in IDR and a significant portion of the sales are priced in USD, weakening of the IDR against the USD may cause the gross profit to increase, whereas strengthening of the IDR against the USD may cause the gross profits to decline. In the event of a decline of the USD against the IDR, the Bumi Group may be exposed to an increased liability under the equity swap and capped call transactions which the Bumi Group have entered into in connection with the 9.25 percent Convertible Bonds and the capped call and call option transactions entered into in October 2009. 5.3 Commodity Price risk The Bumi Group faces commodity price risk because coal is a commodity product bought and sold on the world markets. Prices for our coal are based on global coal prices, which tend to be highly cyclical and subject to significant fluctuations. The Bumi Group also faces commodity price risk in purchases of fuel necessary to run its operations. The Bumi Group currently does not engage in any hedging activities related to the price of either coal or fuel. However, it may do so in the future. 279

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

5.4

Equity price risk The Bumi Group is exposed to equity securities price risk mainly because of the investments in equity derivatives on shares of Bumi including: Written calls embedded in convertible bonds issued by the Bumi Group. Derivative instruments, including those entered into to hedge the Bumi Groups convertible bonds. However, these transactions do not qualify for hedge accounting under IFRS (see notes 19 and 22 for further discussion).

5.5

Interest rate risk The Bumi Group is subject to fluctuations in interest rates on the floating rate debt. As of 30 September 2009, substantially all of the debt other than the Zero Coupon Convertible Bonds, China Investment Corporation (CIC) loan and the 9.25 per cent Convertible Bonds, being primarily the Credit Suisse loans then outstanding, was floating rate debt. However the Bumi Group used a portion of the net proceeds of the CIC loan to repay all of the then outstanding floating rate debt. The effective interest rate under the CIC loan is a fixed rate of 19.0% per annum. Since 1 October 2009 the Bumi Group entered into financing arrangements which are subject to a fixed interest rate, including the 12% Guaranteed Senior Secured Notes and the 5 per cent Convertible Bonds. Although the CIC loan and a portion of the other indebtedness that the Bumi Group has incurred since 1 October 2009 has been fixed interest rate indebtedness, the Bumi Group also incurred a substantial amount of indebtedness since 1 October 2009 under loan facilities that have floating interest rates. It is the Bumi Groups intention to refinance these floating rate loans with longer term fixed rate debt to the extent market conditions permit and the Bumi Group is commercially able to do so; therefore, management does not expect that it will be exposed to interest rate fluctuations on a significant portion of its outstanding debt in the long term. The Bumi Group expects to use the bond market to provide fixed rate funds as management believes it will be cheaper than the bank loan market. Bumis policy will favour fixed rate instruments where possible due to expected increases in LIBOR over the next few years. The average effective interest rate paid by the Bumi Group in 2009 was 11.3% compared to 7% in 2008. A change in the floating interest rate would have the following impact on the consolidated profit for the year of the Bumi Group:

2009 (6) (12) (18) 6 12 18

2008 (4) (8) (12) 4 8 12

Increase of 1% Increase of 2% Increase of 3% Decrease of 1% Decrease of 2% Decrease of 3% 5.6

Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Bumi Group is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Customer credit risk is managed by each business unit under established policies, procedures and controls relating to customer credit risk management. Where customers are rated by an independent credit rating agency, these ratings are used to set credit limits. In circumstances where no independent credit rating exists, management assessed the credit

280

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

quality of the counterparties and satisfies itself that there is no significant risk associated with them. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: 31 Dec 2009 Cash and cash equivalents Aaa Aa1 Aa2 Aa3 A1 A2 Ba3 B1 B Other and non-rated Cash at hand Total cash and cash equivalents

31 Dec 2008

36 9 10 1 16 36 5 3 4

78 9 10 12 57 40 45 4

31 Dec 2009 Trade receivables, other receivables and loan receivable A3 A2 A1 Baa2 Ba3 Ba2 B1 No credit rating available at Moodys Total trade receivables, other receivables and loan receivable

120

255

31 Dec 2008

25 48 12 6 788

6 8 57 1 5 11 107

The maximum exposure to credit risk for the Bumi Group is the carrying value of financial assets as shown in the table below. 31 Dec 2009 Cash and cash equivalents Trade and other receivables Loan receivable Other non current assets Available-for-sale financial assets Due from related parties Derivative financial instruments Total credit risk

120 1,078 251 397 232 47 252

879

195

31 Dec 2008

255 495 192 301 35

Management assessed the credit quality of the counterparties for which no external credit rating is available and is satisfied there is no significant risk associated with them.

2,377

1,278

281

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

5.7

Liquidity risk Cash flow forecasting is performed in the operating entities of the Bumi Group and aggregated by Bumi Group finance. Bumi Group finance monitors rolling forecasts of the Bumi Groups liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom so that the Bumi Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Bumi Groups debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, where applicable external regulatory or legal requirements. The table below analyses the Bumi Groups financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows: The Bumi Groups trading portfolio of derivative instruments with a negative fair value has been included at fair value. 2009 2008 Less than 1 year Trade and other payables Borrowings (excluding finance lease liabilities) Finance lease liabilities Derivative financial instruments

Between 1 to 5 years

Less than 1 year

Between 1 to 5 years

899 785 71 26

117 3,672 132

930 519 36 1

241 912 51

5.8

1,781

3,921

1,486

1,204

Capital risk management The Bumi Groups objectives when managing capital are to safeguard the Bumi Groups ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Bumi Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Bumi Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the combined and consolidated balance sheet) plus amounts due to related parties less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated balance sheet plus net debt. During 2009, the Bumi Groups strategy saw its gearing ratio increase to 73% from its policy of maintaining the gearing ratio below 50%. This was due to the acquisition of the Newmont shares in Batu Hijau at the end of 2009. It is the intention of the Bumi Group to bring its gearing ratio back to below 50% over the next 2 years and maintain a BB stable credit rating. The current credit rating has been maintained ever since this was first obtained on 30 October 2009. The gearing ratios at 31 December 2009, and 2008 were as follows:

282

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

2009

2008

Total borrowings and due to related parties Less: Cash and cash equivalents Total net debt Equity Total capital Gearing ratio (%)

3,634 120 3,514 1,278 4,792 73.3

1,314 255 1,059 1,068 2,127 49.8

6 SEGMENTAL REPORTING In accordance with the provisions of IFRS 8 Operating Segments, the operating segments used to present segment information were identified on the basis of internal reports used by the Bumi Groups Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is the Bumi Groups chief operating decision maker within the meaning of IFRS 8. The Bumi Group has identified three operating segments: Coal: subsidiaries and associates in this operating segment mine coal and deliver services related to coal mining. It includes mine contracting and operating infrastructures related to coal mining. Minerals: subsidiaries and associates in this operating segment explore for and mine minerals including iron ore, gold, copper and other minerals. Others: this operating segment includes Bumi and other holding companies together with oil and gas and coal bed methane (CBM) activities.

The accounting methods used to recognise and measure these segments for internal reporting purposes are the same as those used to prepare the consolidated financial information. a) Revenue

2009

2008

Coal Revenue b) Depreciation

2,451 2,451

2,630

2,630

2009 64 22 86

2008 36 21

Coal Minerals Others Total depreciation

58

283

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

c)

Additions to property, plant and equipment This represents the total cost incurred during the year to acquire non-current assets (other than financial instruments and deferred tax assets), measured on an accruals basis in accordance with IFRS 8.

2009 439 46 34 519

2008 780 91 15

Coal Minerals Others Additions to property, plant & equipment d)

886

Total assets Total assets allocated to the segments are presented below including the investments in associates where appropriate. 2009 2008 Coal Minerals Others Total assets 4,348 1,150 1,198 6,696 3,228 493 622

2008 %

4,343

e)

Operating segments Additional information Revenue by destination(a) 2009

Amount Indonesia Asia (excluding Indonesia) Europe America Revenue

Amount

140 2,014 290 7

6% 82% 12% 0%

152 2,150 310 18

6% 82% 12% 0%

(a) Revenue by geographical destination are based on the ultimate country of destination of the product if known. If the eventual destination of the product sold through traders is not known, then revenue is allocated to the location of the product at the time when the risks and rewards of ownership are passed. Bumi is domiciled in Indonesia.

2,451

100%

2,630

100%

Revenue by customer with more than 10% of total revenue

2009

2008 313

Taiwan Power Corporation

There were no customers with more than 10% of total sales for the year ended 31 December 2009.

313

284

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Non-current assets other than those excluded below The total of non-current assets other than those excluded below is shown by location. This is allocated based on the location of the business units holding the assets.

2009

2008

Indonesia Yemen Liberia Mauritania

2,679 332 15 176

2,150 285 12 166 2,613 224 35 29 46 192

3,202 Non-current assets excluded from analysis above: Investment in associates Due from related parties Deferred tax assets Tax refund claims Loan receivable Other non-current assets Total non-current assets per balance sheet 7 860 47 64 10 251 397

4,831

3,139

BUSINESS COMBINATIONS a) Herald Resources Ltd. On 31 July 2008, the Bumi Group acquired 84.15% of the shares in Herald Resources Ltd. (Herald) for a gross consideration of USD 542 million. Herald, a company domiciled in Australia, operates in mining and energy. Herald owns PT Herald Mining Services and 80% of PT Dairi Prima Mineral (Dairi), both companies being domiciled in Indonesia. As of 31 December 2009, Dairi was in the development stage and is engaged in the exploration and development of mining of lead and zinc. On 20 October 2009, the Bumi Group completed the takeover of Herald for a further consideration of USD 36 million. In accordance with Bumi Groups accounting policy, the excess of additional consideration paid to acquire the minority interest, was included in mining properties.

2008

2009

Gross consideration Recognised amounts of identifiable assets acquired and liabilities assumed Mining properties Fixed assets Other assets Current liabilities Deferred tax liability Total identifiable net assets Minority interest Goodwill

542

36

457 88 31 (19) (114) 443

17 (5) 13

(15) 114

19 5

The impact of the acquisition of Herald on the Bumi Groups consolidated financial information in 2008 was to increase net profit by USD 6 million.

285

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Had Herald been acquired on 1 January 2008, the impact would have been to increase revenue by USD 2 million and net profit by USD 4 million. b) Leap-Forward Finance Ltd. On 26 December 2008, the Bumi Group entered into an agreement to acquire control in PT Fajar Bumi Sakti (FBS), through the proposed acquisition of 77% of Leap-Forward Finance Ltd. (Leap-Forward) for USD 222 million. FBS holds rights to exploit and mine coal in Loa Ulung, Kutai Kartanegara, East Kalimantan under a Kuasa Pertambangan (KP) issued by the Government of Indonesia with a concession area of 988.34 hectares. The KP is valid for a period of ten years, commencing 7 May 1999. On 10 June 2008, FBS obtained an extension of the KP for a concession area of 984.50 hectares from the Government for a further ten years commencing 10 June 2008. At 31 December 2008, management determined that the Bumi Group controlled LeapForward as the Sale and Purchase Agreement allowed for certain management functions to be assumed by the Bumi Group prior to the consideration being paid, including the management of the operational and financial policies of Leap-Forward. As such LeapForward was consolidated at the balance sheet date. The fair values were determined provisionally at 31 December 2008. In 2009, the acquisition of Leap-Forward was investigated by the Indonesian authorities and as a result the sale and purchase agreement was re-negotiated. The revised sale and purchase agreement, entered into on 29 June 2009, reduced the equity interest that the Bumi Group acquired from 77% to 50%. As a result of the renegotiation, the fair values have been finalised and Leap-Forward remains consolidated within the Bumi Groups consolidated financial information as a result of management still exercising control. The revised fair values of the assets acquired are set out below and are reflected from the original date of control passing: Gross consideration Recognised amounts of identifiable assets acquired and liabilities assumed Mining properties Fixed assets Other assets Current assets Liabilities Deferred tax liability Total identifiable net assets Minority interest Goodwill 110 106 29 18 5 (44) (27) 87 (4) 27

The gross consideration was outstanding as at 31 December 2008 and was paid in the following year. c) Pendopo Coal Ltd. On 5 January 2009, the Bumi Group acquired 89% of Pendopo Coal Ltd. (Pendopo), for a total consideration of USD 102 million. Pendopo owns 95% of the company which holds the rights under the Pendopo Energi CCoW, which is a third generation coal contract of work, entered into with the Government in 1997 to mine for coal in two concession areas in South Sumatra, Indonesia. The two concession areas comprise approximately 17,840 hectares. The Pendopo Energi

286

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

CCoW expires 30 years after the commencement of Pendopo Energis mining operations, which occurred on 5 May 2009, on 5 May 2039. Gross consideration Recognised amounts of identifiable assets acquired and liabilities assumed Mining properties Deferred tax liabilities Total identifiable net assets Goodwill 102 102 (20) 82

20

The acquisition of Pendopo had no material impact on the Bumi Groups consolidated revenue and on the Bumi Groups consolidated profit since the mine is still in the development stage. 8 DISPOSAL OF AN INTEREST IN SUBSIDIARY Gallo Oil (Jersey) Ltd. On 28 December 2009, the Bumi Group sold a 20% interest in Gallo Oil (Jersey) Ltd. (Gallo) to Florenceville Financial Ltd for USD 290 million with a profit on disposal of USD 283 million. The profit on disposal was taken to the income statement and 20% of the reserve for restructuring transactions of entities under common control was recycled to retained earnings. The proceeds remain outstanding as at the date of the Prospectus (see note 18). 9 GOODWILL Goodwill on acquisitions is analysed as follows:

2009 218 25

2008 77 141

At 1 January 2008 Additions At 31 December 2009

The goodwill is allocated to the Bumi Groups segments on the following basis: Segment Coal Minerals Total

243

218

Acquisition

2009

2008

KPC, Arutmin, Pendopo, Fajar Bumi Sakti Herald Resources and others

114 129

94 124

As required under IFRS, management has performed impairment tests on all goodwill, and has determined that the cash generating units were at the level of the legal entity owning the underlying asset in each case. Management has used a value in use discounted cash flow basis to perform the Bumi Groups annual impairment test on goodwill.

243

218

287

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The following key assumptions were used in the impairment testing of goodwill and also in assessing the carrying value of other mining related assets: Cash flows are scheduled over the life of the mine or mining right, CCoW or CoW whichever is shorter; Average coal price over the life of the CCoW is between USD 91 and USD 113 per tonne; Average prices for non-coal assets are as follows; and Mineral Gold Zinc Copper Lead Unit Oz Tonne lb Tonne Average prices 1,200 2,461 3.5 1,531

Discount rates applied to the cash flow models vary by the region in which the assets are located. Location Discount rate Indonesia 12.1 13.1% Mauritania 15.80% Yemen 16.30%

The Weighted Average Cost of Capital (WACC) includes the gearing, cost of capital and pre-tax cost of debt. This reference rate reflects specific risks relating to the relevant operating segment and geographical location. A reasonable possible change in assumptions does not lead to carrying value being greater than the value-in-use. No class of asset including goodwill was impaired. 10 EXPLORATION AND EVALUATION ASSETS This note presents the investment of the Bumi Group in exploring and evaluating oil and gas properties and mine properties before the assets are proven to be either commercially feasible or commercially unfeasible. Oil & Gas 111 174 Mine properties 91 155

Total

At 1 January 2008 Additions At 31 December 2008 Additions At 31 December 2009

202 329

47
332

285

13
259

246

60
591

531

Oil and gas exploration and evaluation is being undertaken by Gallo in Yemen. Gallo and the Ministry of Oil and Mineral Resources (MOMR) of the Republic of Yemen entered into a Production Sharing Agreement. During 2009 and 2010, there were drilling activities in AI-Barakat #1 and Al-Rizq #1 wells of Block 13, respectively. On 16 January 2010, Gallo was able to secure its extension letter for 24 months from MOMR to enter the term of the second exploration period for Block 13. On 15 February 2011, Gallo also secured a one year extension to its exploration license for Block R2.

288

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The mine properties referred to above are within the minerals business. A breakdown of exploration and evaluation assets by site is set out below:

2009 160 172

2008 147 138

Block R2 Block 13

Oil & Gas Oil & Gas Total Oil & Gas

Bumi Mauritania PT Gorontalo PT Citra Palu Konblo Bumi

Iron ore mining Gold mining Gold mining Gold and Diamonds Total Mine properties

176

332

166

285

44 24 15

44 24 12

As of 31 December 2009 and 2008, management is satisfied that there are no indications of impairment. Additional information on the assumptions used for impairment testing is provided in note 9. 11 DEFERRED STRIPPING COSTS 2009 190 78 2008 99 100 (9)

259

246

At 1 January Additions Utilised At 31 December

Deferred stripping costs are expensed when the actual stripping ratio is lower than the planned stripping ratio. 12 PROPERTY, PLANT AND EQUIPMENT Fixtures, fittings and office equipment 6 3

268

190

At 1 January 2008 Additions Additions through business combinations At 31 December 2008

Mining properties 415 94

Plant and equipment 1,123 94

Assets under construction 18 15

Total 1,562 206

563

22

95

680

Additions Additions through business combinations Capitalised borrowing costs Disposal and retirement At 31 December 2009

90

1,072

207

1,239

128 54 (7)

2,448 351

1,330

119 49

1,446

175

2,960

119 49 (7)

289

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Mining properties Accumulated Depreciation At 1 January 2008 Depreciation At 31 December 2008 Depreciation At 31 December 2009 Net book value At 31 December 2008 At 31 December 2009 (79) (10) (89)

Plant and equipment (631) (48) (679)

Fixtures, fittings and office equipment (6) (6)

Assets under construction

Total (716) (58) (774)

(14)

(71)

(1)

(86)

(103)

(750)

(7)

(860)

966

560 690

3 2

145 199

1,674 2,100

1,209

In accordance with the CCoW, fixed assets recorded in the consolidated financial information of KPC and Arutmin remain the property of the Government, with KPC and Arutmin having an exclusive right to use the assets over their useful lives or the remaining term of the CCoW, whichever is shorter. The Bumi Group entered into finance lease agreements for various items of heavy equipment that are used for mining operations. Plant and equipment includes the following amounts where the Bumi Group is a lessee under a finance lease:

2009

2008

Cost capitalised finance lease Accumulated depreciation Net book value

286 (54)

151 (34)

Allocation of depreciation expense for financial years ended 31 December 2009 and 2008, respectively, was as follows:

2009 66 20

232

2008 45 13

117

Cost of sales General and administrative expenses

Assets under construction represent costs capitalised in connection with the development of Arutmins mine site in Satui South Kalimantan for the Brown Coal Upgrade Project and KPC, Dairi, FBS and Nusa Tambang Pratamas fixed assets not yet ready for their intended use. As of 31 December 2009 and 2008, the Bumi Group did not recognise any asset impairment and management believes that there are no indications of asset impairment.

86

58

290

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

13

INVESTMENTS IN ASSOCIATES 2009 Additions/ Share of net 1 January (disposals) income/(loss) 31 December 638 11 649 200 200 11 11 13 (50) 37 224 588 48 860

PT Newmont Nusa Tenggara PT Darma Henwa Tbk Westside Corporation Ltd. Enercorp Ltd.

PT Darma Henwa Tbk Westside Corporation Ltd. Enercorp Ltd.

2008 Additions/ Share of net 1 January (disposals) income/(loss) 31 December 200 200 10 1 11 6 7 13 16 201 7 224

The principal investments in associates are: a)

PT Newmont Nusa Tenggara In November 2009, the Bumi Group acquired 17% of PT Newmont Nusa Tenggara (NNT), a gold and copper mining company registered in the Republic of Indonesia. NNT operates the Batu Hijau copper and gold mine under a contract of work granted by the Indonesian Government. The Batu Hijau mine is located on the island of Sumbawa, approximately 950 miles (1,529 kilometres) east of Jakarta. As the Bumi Group acquired the stake in NNT together with three provincial governments, the Bumi Groups effective interest in NNT is 12.75%. The total consideration paid for the 17% stake was USD 638 million. On the acquisition date, fair values were assessed as follows: Total consideration paid: Share in the net book value of NNT Fair value attributed to mining properties USD 638m USD 387m USD 251m

The fair value of mining properties relate to assets not recognised in the balance sheet of NNT as of the date of acquisition. The Bumi Group based its estimation on the mining plan of Batu Hijau and on assumptions of future prices of marketable gold and copper over the remaining life of the mine. The mining properties are amortised over the remaining life of the mine on a unit of production basis. As of 31 December 2009, the net equity of NNT was USD 649 million. Had the Bumi Group acquired the 17% stake in NNT on 1 January 2009, the total contribution to net profit would have been USD 103 million. b) PT Darma Henwa Tbk On 23 December 2008, the Bumi Group acquired an effective interest of 44% in PT Darma Henwa Tbk (Darma Henwa) for USD 200 million. Following a rights issue in January 2010 in which the Bumi Group did not participate, the effective interest was reduced to 28.79%. Darma Henwas portfolio of mine contracts includes exclusive contracts to mine at the Bengalon mine operated by KPC and the Mulia and Asam Asam mines operated by Arutmin. Darma Henwa shares are 291

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

listed on the Indonesian Stock Exchange. The fair value of the investment of the Bumi Group in Darma Henwa is USD 90 million and USD 31 million as of 31 December 2009 and 2008 respectively, based on the market price of the shares. The Bumi Group believes that the carrying value of the investment in Darma Henwa is supported by the expansion plans at both KPC and Arutmin and does not believe that the investment in associate is impaired. c) Westside Corporation Ltd. The Bumi Group owns 20.2% (30.1% in 31 December 2008) of Westside Corporation Ltd. (Westside). Westside is a company domiciled in Australia that operates in the Coal Seam Gas industry. Westside shares were listed and traded on the Australian Stock Exchange from 10 January 2007. The fair value of the investment of the Bumi Group in Westside is USD 12 million and USD 16 million as of 31 December 2009 and 2008 respectively, based on the market price of the shares. The net equity investment of the Bumi Group in Westside was USD 11 million as of 31 December 2009 (unchanged compared to 31 December 2008). Enercorp Ltd. On 30 December 2009, Bumi sold its 50% interest in Enercorp to Thionville Financier Ltd. at a sales price of USD 90 million with a profit on disposal of USD 40 million. At the date of the Prospectus, the remainder of the consideration has been received in full. Below is an extract of the financial statements of the principal associates:
Name 2009 PT Newmont Nusa Tenggara PT Darma Henwa Tbk 2008 PT Darma Henwa Tbk Country of incorporation Indonesia Indonesia Indonesia % Interest Assets Liabilities Revenues Profit/(Loss) held 3,478 462 538 1,256 187 260 1,841 202 220 692 (2) 11 17.00% 28.79% 44.00%

d)

14 LOAN RECEIVABLE On 2 November 2009, the Bumi Group entered into a loan agreement with PT Bukit Mutiara (Bukit Mutiara), part of the Recapital Group, for a principal amount up to USD 300 million in connection with Bukit Mutiaras acquisition of an interest in PT Berau Coal. The loan is unsecured and shall be repaid in full upon its maturity in 2015. The interest rate of the loan is 12% per annum and is payable every quarter. The amortised cost of this loan is USD 251 million as of 31 December 2009. 15 OTHER NON-CURRENT ASSETS

2009 303 64 30 397

2008 111 49 32 192

Business development funds Advances and deposits Other

Business development funds are amounts that Bumi has placed with certain intermediaries to pursue business development opportunities. These funds have been invested in various projects, in forms ranging from loans, including rights to convert to equity, to direct funding for participation in mining and other business ventures. These projects are accounted for separately within the Bumi financial statements once Bumi has taken on a direct ownership interest. Advances and deposits include mainly advances to contractors.

292

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

16

INVENTORIES

2009 78 78 56 (2)

Coal inventories at cost: Clean coal Stores and consumable supplies at cost Less: Allowance for obsolescence

2008 56 56 48 (3)

Management believes that the allowance for stores and consumables obsolescence is adequate to cover possible losses. In accordance with their respective CCoWs, spare parts and fuel supplies recorded at Arutmin and KPC remain the property of the Government, with an exclusive right of use granted to the entities. 17 AVAILABLE-FOR-SALE FINANCIAL ASSETS

132

101

2009 301 16 (2) (83)

2008 116 183 5 (3)

1 January Additions Movements in fair value Impairment Disposal 31 December a)

232

301

PT Recapital Asset Management On 27 August 2008, Bumi and PT Recapital Asset Management (Recapital), entered into a discretionary fund management contract limited to USD 350 million. On 2 September 2009, Bumi and Recapital entered into a second discretionary fund contract for a further USD 50 million. The fair value of this investment is USD 229 million and USD 298 million as of 31 December 2009 and 2008 respectively.

b)

Avocet Mining PLC In February and March 2008, Bumi acquired 2,011,590 ordinary shares, representing 1.67% ownership interest in Avocet Mining PLC (Avocet) for a gross consideration of GBP 4 million (equivalent to USD 8 million). Avocet is a gold mining company domiciled in the United Kingdom, shares of which are listed and traded on the Alternative Investment Market (AIM), a market of the London Stock Exchange. TRADE AND OTHER RECEIVABLES

18

2009 184 451 380 65 (2) 443

2008 174 300 23 (2) 21

Trade receivables Tax recoverable Other receivables In relation to disposal of minority interests and associates Others Allowance for doubtful debts

293

1,078

495

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

There is no element of trade and other receivables that is interest bearing. Due to their short-term maturities, the fair value of trade and other receivables approximates their carrying value. All trade receivables are current, and none are past due. Receivables are used as collateral for long-term loans obtained from several lenders (note 22). Tax recoverable represents amounts claimed by KPC and Arutmin from the Government. This amount is part of an ongoing dispute with the Government which resulted from a change in the VAT law in 2001 when coal became a VAT exempt supply. This change meant that KPC and Arutmin could no longer claim credits for their input VAT on purchases. However, under the CCoW, KPC and Arutmin are indemnified against Indonesian taxes not in effect at the time of signing of their respective CCoWs. On this basis, KPC and Arutmin claimed reimbursement for input VAT paid from 2001. The claims were rejected and KPC and Arutmin began setting off the VAT receivable against royalty payments due under the CCoWs. The amounts have been disclosed gross in this consolidated financial information. On 19 September 2008, KPC and Arutmin paid USD 18 million into escrow as a gesture of good faith in respect of the royalty payable. These have been included in other current assets. Included within Other receivables is USD290 million of consideration receivable for the disposal of a 20 per cent. interest in Gallo Oil. On 31 January 2011, the Bumi Group received a request from the purchaser, Florenceville Financial Ltd, for a three month extension to the payment terms. The reason given for the extension request was that the recent political unrest in Yemen had caused changes to its financing. The Bumi Group continues to believe that the receivable is not impaired. 19 a) FINANCIAL INSTRUMENTS Derivative financial instruments Derivative financial instruments are measured at fair value and do not qualify as hedging instruments. Derivatives are classified as current assets or liabilities and include both stand alone derivatives and derivatives embedded in other contracts that have been accounted for separately. Derivative liabilities represent the fair value of embedded derivatives in convertible bonds issued by the Bumi Group (see note 22). Fair value changes in derivative financial instruments are recognised in the income statement.

Fair Value as at

31 Dec 2009

31 Dec 2008

Derivative liabilities Derivative assets Net position

(26) 252 226

(1) (1)

For the year ended 31 December 2009, the fair value (losses)/gains on financial derivatives recognised in the income statement include a loss in respect of the settlement of USD 52 million with a derivative financial instrument counterparty. The principal derivative financial instruments of the Bumi Group consist of the following:

Enercoal Resources Pte. Ltd. (Enercoal or the Issuer) has three issuances of convertible bonds outstanding as at 31 December 2009 (see note 22.2). These bonds are convertible into the equity shares of Bumi at the option of the bondholder. Notwithstanding the conversion right of each bondholder, the Issuer retains the option to settle the option in cash. Accordingly, the conversion option embedded in the bonds is classified as a liability with fair value changes recognised in the income statement. Prepayment options within the terms of USD 300 million 12% Guaranteed Senior Secured Notes issued in 2009 and of USD 1.9 billion Senior Secured Term Loan (see note 22.1).

294

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Equity swap agreements for a total notional principal amount of USD 140 million as of 31 December 2009 (nil in 2008) on the shares of Bumi: i. In connection with the issuance of the USD 375 million 9.25% Guaranteed Convertible Bonds, the Bumi Group entered into an Equity Swap Agreement with Credit Suisse International for a notional amount of USD 115 million. This agreement will mature on 5 August 2014. The Bumi Group will receive the difference, if positive, between the share price of Bumi and USD 0.26029. If the difference is a negative amount, the Bumi Group will pay it to Credit Suisse International. In connection with the issuance of the USD 300 million 5% Guaranteed Convertible Bonds, the Bumi Group entered into an Equity Swap Agreement with Credit Suisse International on 25 November 2009. The Notional amount of this Equity Swap is USD 25 million. This agreement will mature on 25 November 2016. The Bumi Group will receive the difference, if positive, between the share price of Bumi and USD 0.28505. If the difference is a negative amount, the Bumi Group will pay it to Credit Suisse International.

ii.

A capped call option transaction by Enercoal with Credit Suisse International in respect of the shares of Bumi Resources for a notional amount of USD 288 million. The capped call transaction is divided into five separate tranches with each tranche being exercisable on 5 December 2013, 5 February 2014, 7 April 2014, 5 June 2014 and 5 August 2014, respectively. The strike price per option is USD 0.33838 while the cap price is USD 0.45551. A Capped Call and Call Option Agreement by Enercoal with Credit Suisse International. This agreement matures on various dates in October 2011, October 2013, October 2014 and October 2015 with strike price per option of USD 0.36806, USD 0.36806, USD 0.41407 and USD 0.46008, respectively. The cap price per option upon each maturity in October 2013, October 2014 and October 2015 amounted to USD 0.58277, USD 0.62878 and USD 0.67478, respectively. On 7 November 2008, Bumi entered into a call option agreement with Credit Suisse in terms of which Bumi granted call options in respect of 420,810,578 shares of Bumi to Credit Suisse in connection with the USD 75 million credit facility. The Call Option Holder may exercise the call options commencing on the date of the agreement until the 36th calendar month after the calendar month in which the facility is first utilised. Furthermore, the agreement provides that the unexercised call options which have been granted remain valid although the credit facility had been repaid.

b)

Fair value of financial instruments The carrying values and fair values of the financial instruments are shown in the following table. The fair values of the Bumi Groups cash and cash equivalents, trade and other receivables and payables, short term borrowings and loans to jointly controlled entities and associates approximate their carrying values, as a result of their short term maturity or because they carry floating rates of interest.

295

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

2009

2008

Note Financial assets Loans and other receivables Cash and cash equivalents Trade and other receivables Due from related parties Loan receivable Financial assets measured at fair value Derivative financial instruments Available-for-sale financial assets Financial liabilities Measured at amortised cost Trade and other payables Borrowings Current Borrowings Non-current Due to related parties Measured at fair value Derivative financial instruments Provisions

Carrying value

Fair value

Carrying value

Fair value

21 18 24 14

120 1,078 47 251

120 1,078 47 251

255 495 35

255 495 35

19 17

252 232

252 232

301

301

26 22 22 24 19 25

910 469 3,163 2 26 104

910 469 3,590 2 26 104

948 131 1,180 3 1 86

948 131 1,184 3 1 86

Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

The following table presents the Bumi Group's assets and liabilities that are measured at fair value at 31 December 2009.

Level 1 3

Level 2 252

Level 3 229

Total 252 232 484 26 104

Derivative financial assets Available-for-sale financial assets

Derivative financial liabilities Provisions

252

26

229 104

26

104

130

296

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The following table presents the Bumi Group's assets and liabilities that are measured at fair value at 31 December 2008.

Level 1 3

Level 2

Level 3

Total 301

Available-for-sale financial assets

298

Derivative financial liabilities Provisions

298 86

301 1 86 87

See note 25 for movement in Provisions during the year.

86

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry Bumi Group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. Instruments included in level 1 comprise only the investment in Avocet, listed on AIM in London. The fair value of financial instruments that are not traded in an active market (for example, overthe-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. 20 OTHER CURRENT ASSETS

2009 51

2008 52

Deposits and prepayments

Deposits relate to USD 18 million paid by KPC and Arutmin into escrow as a gesture of good faith in respect of the royalty payable (see note 18). Prepayments include mainly advances to contractors. 21 CASH AND CASH EQUIVALENTS

2009 104 16

2008 237 18

Cash and cash equivalents Guarantee deposits

In accordance with the Cash Distribution Agreement (CDA) signed on 27 June 2007, the JV Coal Companies utilise a waterfall structure that ensures they have sufficient liquidity on hand to meet their debt obligations, operational requirements and tax obligations. In certain events such as the disposal of assets, the JV Coal Companies are required to reserve proceeds until the outstanding notes have been repaid in full, there was no such cash reserved as at 31 December 2008 and 2009. Guarantee deposits placed in PT Bank Central Asia Tbk, PT Bank Mega Tbk and PT ANZ Panin Bank are pledged for bid bonds and performance bonds required by several third party customers.

120

255

297

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The guarantee deposit in PT Bank Mandiri (Persero) Tbk is for a standby letter of credit provided to the Ministry of Oil and Mineral Resources in the Republic of Yemen for exploration activities of the subsidiary, Gallo Oil (Jersey) Ltd. 22 BORROWINGS

Bank borrowings (year due) Credit Suisse facility 2009 Credit Suisse facility 2010 Raiffeisen Zentralbank sterreich AG 2011 Credit Suisse facility 2011 Deutsche bank facility 2011 ICICI Bank UK 2011 ICICI Bank UK 2011 Credit Suisse facility 2012 Bank Niaga facility 2012 Country Forest Limited facility A 2013 Country Forest Limited facility B 2014 Country Forest Limited facility A 2015 Other borrowings Senior Secured Notes 2016 Convertible bonds 2012 Convertible bonds 2014 Convertible bonds 2016 Finance lease liabilities Other corporate loans Total

Coupon interest Principal rate (%) (m) 2009 2008 NonNoncurrent Current current Current Floating Floating Floating Floating Floating Floating Floating Floating 19% 12% 12% 12% 12% 0% 9.25% 5% US$100 US$410 US$80 US$325 US$60 55 CA$63 US$110 US$5 US$600 US$600 US$700 US$300 US$150 US$375 US$300 80 14 3 597 597 693 388 20 1 395 319 34 48 62 108 80 20

295 116 106 354 283 123 60 45 31 Various US$70 8 63 3,163 469 1,180 131

22.1

Bank borrowings a) China Investment Corporation (CIC) On 18 September 2009, the Bumi Group entered into a Senior Secured Term Loan Agreement (CFL Loan) with CIC through its subsidiary, Country Forest Limited, amounting to USD 1.9 billion. The interest on the loan is payable monthly at the rate of 12% per annum. On the redemption date, the Bumi Group will pay an additional sum to provide the lender with an internal rate of return of 19%. The lender is guaranteed a 19% return for the full period up to the early redemption date in the event that the loan is repaid earlier. The Bumi Group has an option to early redeem the loan facility at various dates by paying a maximum early redemption fee of 5%:

298

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Facility

Maturity date

First early redemption date

Early redemption premium

USD 600m

October 2013

October 2011 5% in 2011, decreasing on a linear basis up to maturity date October 2012 5% in 2012, decreasing on a linear basis up to maturity date October 2013 5% in 2013, decreasing on a linear basis up to maturity date

USD 600m

October 2014

USD 700m

October 2015

This loan facility is secured on the cash flows from and shares of PT Arutmin Indonesia, PT Kaltim Prima Coal, IndoCoal Resources (Cayman) Ltd., PT IndoCoal Kalsel Resources and PT IndoCoal Kaltim Resources. b) Guaranteed Senior Secured Notes On 13 November 2009, the Bumi Group issued USD 300 million 12% Guaranteed Senior Secured Notes due on 10 November 2016. The notes bear an interest of 12% per annum. The Bumi Group may at its option redeem the Notes prior to 10 November 2013, in whole but not in part, at a redemption price equal to the principal amount plus accrued and unpaid interest, if any, plus a premium. Redemptions made on or after 13 November 2009 may be made in whole or in part at the redemption prices equal to 106%, 103% and 100% of the principal amount plus accrued and unpaid interest for the 12-month period beginning on 10 November 2013, 10 November 2014 and 10 November 2015, respectively. Moreover, the Bumi Group may, at its option redeem 35% of the Notes before 13 November 2013 at a redemption price of 112% of the principal amount plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of capital stock of Bumi. The terms of the notes contain restrictions on the ability of the Bumi Group to take certain actions, which include among others, the incurrence of additional debt which would reduce the Fixed Charge Coverage Ratio below the specified limited, make restrictive payments, issue redeemable and preferred stocks, create liens, sell or otherwise dispose of assets, enter into merger or consolidations, enter into sale and leaseback transactions, enter into transactions of affiliates and enter into new lines of business. 22.2 Convertible bonds a) Convertible Bonds II On 1 October 2007, the Bumi Group issued a USD 150 million Zero Coupon Convertible Bond maturing on 1 October 2012. The Bonds are listed on the Singapore Exchange. These bonds are convertible at any time into ordinary shares of Bumi at a price of Rp 3,250 per share. The conversion price is subject to adjustment for standard dilutive events. The number of shares to be delivered on conversion of a bond will be determined by dividing the principal amount of the bond to be converted (translated into Rupiah at the fixed rate of Rp 9,389 = USD 1) by the conversion price in effect at the conversion date. Notwithstanding the conversion right of a bondholder , the issuer has an option to pay an amount of cash in USD equal to the cash settlement option amount. Accordingly, the

299

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

conversion option has been classified as an embedded derivative and measured at fair value. b) Guaranteed Convertible Bonds I On 5 August 2009, the Bumi Group issued USD 375 million 9.25% Guaranteed Convertible Bonds. These Guaranteed Bonds, maturing on 5 August 2014 are initially convertible at any time into ordinary shares of Bumi at Rp 3,366.90 per share. The conversion price is subject to adjustment for standard dilutive events. c) Guaranteed Convertible Bonds II On 25 November 2009, the Bumi Group issued USD 300 million 5% Guaranteed Convertible Bonds due 25 November 2016. These Guaranteed Bonds are convertible at any time into ordinary shares of Bumi at Rp 3,526.57 per share. The conversion price is subject to adjustment for standard dilutive events. The fair value of the convertible bonds was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount, representing the value of the equity conversion option, is included in derivative financial liabilities. The liabilities recognised in the balance sheet are calculated as follows: Date of issue of the convertible bonds: 25 Nov 2009 300 (12) 288 8 Aug 2009 375 (13) 362 1 Oct 2007 150 (8) 142

Face value of convertible bond issued Less: Derivatives classified as financial liabilities Liability component on initial recognition 22.3

Finance lease liabilities The present value of finance lease liabilities is as follows: 2009 71 132 Gross finance lease liabilities minimum lease payments No later than 1 year Later than 1 year and no later than 5 years Later than 5 years Less: Future finance charges on finance leases Present value of finance lease liabilities The present value of finance lease liabilities is as follows: No later than 1 year Later than 1 year and no later than 5 years Later than 5 years

2008 36 51

203 (20)

87 (11) 76

183

2009 61 122

2008 31 45

300

183

76

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Lease liabilities are effectively secured liabilities as the rights to the leased asset revert to the lessor in the event of default. 23 PENSION BENEFIT OBLIGATIONS The Bumi Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of plans are externally funded. Plan assets are held in trusts, foundations or similar entities, governed by local regulations and practice, as is the nature of the relationship between the Bumi Group and the trustees (or equivalent) and their composition. The amounts recognised in the balance sheet are determined as follows:

2009 42 (22) 10 30 (1) (4)

2008 29 (13) 7 23 (1) (6) 16

Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Net defined benefit obligation Unrecognised actuarial losses Unrecognised past service cost Liability in the balance sheet The movement in the defined benefit obligation over the year is as follows: At 1 January Current service cost Interest cost Actuarial losses Exchange differences Past service cost Benefits paid Liabilities acquired in business combination At 31 December The movement in the fair value of plan assets of the year is as follows:

25

2009 36 3 5 8 1 (1)

2008 37 3 3 (6) (1)

52

36

2009 13 2 1 3 4 (1)

2008 13 1 (1) (3) 3

At 1 January Expected return on plan assets Actuarial (losses)/gains Exchange differences Employer contributions Benefits paid At 31 December

22

13

301

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The amounts recognised in the income statement are as follows:

2009

2008

Current service cost Interest cost Actuarial losses/(gains) Past service cost Expected return on plan assets Total These amounts are recognised under General and administrative expenses. The actual return on plan assets was 1.4% in 2009.

3 5 5 1 (2)

3 3 (1) 5

12

Actuarial assumptions are determined individually per company in association with independent actuaries.
Parent 2009 2008 11% 10% 12% 9% Indonesian Mortality Table 2 Arutmin 2009 2008 12.50% 12% 12.50% 12% KPC 2009 2008 10.75 12% 8% 9% FBS 2009 2008 11% 12% 5% 5%

Discount rate Salary growth rate Mortality rate

Normal retirement age Disability rate

55 years old 5% from mortality table

USA Table of Mortality Indonesian Mortality Indonesian Mortality Commissioners Table 1999 Table 2 Standard Ordinary 1980 55 years old 55 years old 55 years old 10% from mortality table 10% from mortality table 5% from mortality table

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in the Republic of Indonesia. Mortality assumptions for the employees based in the Republic of Indonesia are based on the Indonesia Mortality Table 1999 (TMI 99). The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:

Change in assumption

Impact on overall liability

Discount rate Inflation rate Salary growth rate Life expectancy Plan assets are comprised as follows:

Increase/decrease by 0.5% Increase/decrease by 0.5% Increase/decrease by 0.5% Increase by 1 year

Increase/decrease by 7.2% Increase/decrease by 5.1% Increase/decrease by 3.3% Increase by 5.2%

2009

2008

Equity instruments Debt instruments

1 21

5% 95%

13

0% 100%

302

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

24 (i)

RELATED PARTIES Transactions and balances

Related party transactions Balance Trade Trade Due from Due to Revenue Purchases receivables payables related parties related parties At 31 December 2009 Joint ventures in which the entity is a venturer: IndoCoal Resources (Cayman) Limited (ICRL) PT Arutmin Indonesia PT Kaltim Prima Coal Associates: Enercorp Ltd. PT Artha Widya Persada PT Darma Henwa Tbk PT Visi Multi Artha Westside Corporation Ltd. (Westside) Others (each below USD 1 million)

175 175

101 101

11 3 14

15 24 3 2 3 47

1 1 2

Related party transactions Balance Trade Trade Due from Due to Revenue Purchases receivables payables related parties related parties At 31 December 2008 Joint ventures in which the entity is a venturer: IndoCoal Resources (Cayman) Limited (ICRL) PT Arutmin Indonesia PT Kaltim Prima Coal Associates: Enercorp Ltd. PT Darma Henwa Tbk Others (each below USD 1 million)

111 111

112 112

25 25

9 2 1 12

1 33 1 35

1 2 3

(ii)

2009 3 1 4

Remuneration of the key management personnel Key management personnel include the directors and other members of management. Remuneration paid or payable for their services is shown below:

2008 1 1

Salaries and social charges Bonus

303

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

25 PROVISIONS Provisions represent the present value of costs to be incurred for land rehabilitation. The Bumi Group has a detailed schedule of costs that are expected to be incurred every year until the end of each CCoW. Expected costs are inflated at 5% per annum and discounted using a rate of 7.1%.

2009

2008

At 1 January Unwinding of finance cost Addition Utilisation At 31 December of which current portion 26 TRADE AND OTHER PAYABLES

86 6 21 (9)

74 5 14 (7)

16

104

86

16

2009 186 476 101

2008 81 416 287 63

Trade payables Other payables Government of Indonesia Payables in relation to acquisitions of entities Others Accrued expenses

763 147 910

847 101

Deferred tax liabilities

Accelerated tax depreciation Leases Mining properties Rehabilitation provision

948

27 DEFERRED INCOME TAX The movement in deferred income tax assets and liabilities during the year is as follows:

Deferred stripping Costs Other Total

(76) 5 (18) (8) (67) 1 (141) (207) 22 (24) (15) (1) (10) (10) 6 (186) (7) (141) (334) (8) (24)

At 1 January 2008 (Charged)/credited to the income statement Acquired through business combinations At 31 December 2008 (Charged)/credited to the income statement Acquired through business combinations At 31 December 2009

(71) 4 (26) (9) (16) (1) (10) (4) (2) (6)

(67) (35) (209) (17) (12) (10)
Retirement benefit obligation Tax losses Deferred Financing Cost Derivative VAT Liabilities Receivables Other Total

(350)

Deferred tax assets

At 1 January 2008 (Charged)/credited to the income statement At 31 December 2008 (Charged)/credited to the income statement At 31 December 2009

(37) (2) (33) 4 21 (3) 6 4 31 21 (24) 2 20 29 35

37

33

83

10 31 4 (3) 22 64

(54)

304

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. As of 31 December 2009, the Bumi Group had no tax losses carried forward in respect of the coal mining operations. 28 SHARE CAPITAL AND PREMIUM The authorised share capital is represented by 20,000,000,000 shares, of IDR 500 (equivalent to USD0.07) each, as follows: Number of shares Share capital Share premium Total

At 1 January 2008 Conversion of bonds Buy back of shares At 31 December 2008 Buy back of shares At 31 December 2009

19,404,000,000

1,401 1,401 1,401

220 32 (129) 123 123

1,621 32 (129) 1,524 1,524

19,404,000,000 19,404,000,000

The number of shares issued and outstanding as presented above include treasury shares aggregating 473,212,607 as at 31 December 2009 and 2008. 29 TREASURY STOCK, COMMON CONTROL RESERVE AND OTHER RESERVES Other Reserves Foreign Availablecurrency for-sale translation investments Total

Treasury stock

Common control reserve

At 1 January 2008 Conversion of bonds Buy back of shares Foreign exchange translation Fair value gain At 31 December 2008 Revaluation Sale of investment Foreign exchange translation Fair value loss At 31 December 2009

(22) 17 (29) (34) (34)

(1,234) (1,234) 247 (987)

10 8 18

10 8 5

5 (2) 3

23 (17) (2) 4

(17) 1

The restructuring transactions of entities under common control reserve relates to the acquisition of Gallo from Minarak Labuan Ltd on 21 October 1999. On that date, the difference between the consideration and the book value of the assets was recorded in equity for USD 1,234 million. In 2009, the Bumi Group sold 20% of Gallo and recycled 20% of the reserve to retained earnings. The treasury stock reserve reflects the par value of shares in Bumi held to meet future obligation to deliver shares to bondholders exercising their conversion option. The available for sale (AFS) reserve comprises fair value movements on investments classified as available for sale. The foreign currency translation reserve relates to the translation of the consolidated financial information of subsidiaries which do not use the USD as their functional currency. 305

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

The Limited Liability Company Law of the Republic of Indonesia No. 1/1995 introduced in March 1995, and amended by Law No. 40/2007 that was issued in August 2007, requires the establishment of a general reserve from net income amounting to at least 20% of a Companys issued and paid-up capital. There is no time limit on the establishment of that reserve. As of 31 December 2009, Bumi has not yet established its general reserve. 30 COST OF SALES

2009

2008

Stripping and mining cost Coal processing Royalties and exploitation fees Depreciation Exploration and development cost Increase in coal inventory

1,088 150 296 66 4

1,105 203 211 45 5

1,604 (22) 1,582

1,569 (33) 1,536

31 OPERATING EXPENSES General and administrative expenses include:

2009 18 16 10 20 5 62

2008 15 13 9 13 5 6 61

Salaries and wages Professional fees Accommodation Depreciation Insurance Others Total Distribution and marketing expenses include: Commissions Dispatch and demurrage Marketing expenses Freight Others Total 32 EMPLOYEE BENEFIT EXPENSE

131

2009

2008 148 29 27 55 1 260

118 11 22 30 1 182

2009

2008

Wages and salaries(a) Others (including post employment benefits) Total Average headcount (number of employees)
(a) Part of the wages and salaries are recognised in the cost of sales.

64 14 78

56 7

6,997

6,315

63

306

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

33

FINANCE INCOME AND COSTS

2009 9

2008 2

Finance income Finance cost Bank and other borrowings Finance leases Capitalisation of borrowing costs Debt restructuring cost Unwinding of discounted provisions Other

198 6 (49) 155 6 36 352

49 5 5 3 62

Debt restructuring cost represents the finance charges such as early repayment penalties for lost margin and break costs incurred by Bumi on repayment of loans out of the proceeds of the CFL loan. 34 TAXATION

2009 189

2008 405 61 61

Current tax Deferred tax origination and reversal of temporary differences changes in tax rates Total deferred tax charge Total income tax expense

(3) (40)

(43)

A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Group effective income tax rate for the years ended is as follows: 2009 2008

484

146

809

466

Profit before tax Expected income tax expense at statutory income tax rate 23% (2008: 25%) Disposal of investments Foreign currency gains and losses Changes in tax rates Non-deductible expenses/(Non-taxable income) Effect of higher or lower tax rates in subsidiaries(a) Taxable deemed dividend Other Deferred tax movement not recognised Income tax expense

111 (46) 20 (40) 16 60 25 146

202 (2) (14) 144 122 (4) 18 466

(a) Corporate income tax rates are determined by the CoW or the CCoW (45% for the coal companies) and are significantly different from the corporate income tax rate applicable to Bumi (23% and 25% for the years ended 31 December 2009 and 31 December 2008 respectively).

As part of its regular business activities, the Bumi Group is subject to tax inspections for both income tax assessments, VAT and other taxes. Although the Bumi Group is cooperating with all relevant tax authorities for these inspections, the Bumi Group may be involved in some legal procedure to preserve its interests. Below is a summary of the main discussions or procedures on going with the tax authorities.

307

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

a)

Claims for Tax Refund Claims for tax refund consist of claims based on the Tax Assessment Letters and Tax Collection Letters issued by the Director General of Tax, which have been partially settled by the Bumi Group through the process of objection and appeal, and overpayments of corporate income tax which total USD 28 million and USD 46 million as of 31 December 2009 and 2008, respectively. Tax Assessments Letters and Tax Collection Letters In December 2009, Arutmin received Surat Tagihan Pajak (STP) (Tax Collection Letter) regarding Arutmins liability to pay administration fines for late payment of Corporate Income Tax for 2008 amounting to USD16 million. On 18 January 2010, Arutmin obtained an approval from the Directorate General of Tax to settle the payments on instalment basis during 2010. In December 2009, KPC received STP regarding KPCs liability to pay administration fines for late payment of Corporate Income Tax for 2008 amounting to USD 21 million. On 18 January 2010, KPC obtained an approval from the Directorate General of Tax to settle the payments on instalment basis during 2010. On 9 May 2008, KPC received a Surat Perintah Pemeriksaan (SPP) (Tax Audit Instruction Letter) concerning a tax audit for 2007.

b)

35 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to owners of Bumi by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the earnings attributable to owners of Bumi and the weighted average number of ordinary shares outstanding during the year for the effects of dilutive potential ordinary shares. Treasury shares are excluded for the calculation of the weighted average number of ordinary shares. Basic earnings per share calculations are set out below:

2009

2008

Profit attributable to owners of Bumi Weighted average number of ordinary shares in issue (thousands) Basic earnings per share (cents) Diluted earnings per share calculations are set out below:

328 18,930,787 1.73

2009

342 19,193,377 1.78

2008

Profit attributable to owners of Bumi Effect of dilutive potential ordinary shares1 Diluted earnings Weighted average number of ordinary shares in issue (thousands) Effect of dilutive potential ordinary shares Diluted weighted average number of ordinary shares (thousands) Diluted earnings per share (cents)
1

The effect of dilutive potential ordinary shares on earnings include the fair value changes in the conversion option embedded in the convertible bonds that are potentially dilutive.

328 (7) 321 18,930,787 79,848 19,010,635 1.69

342 (81) 261 19,193,377 301,996 19,495,373 1.34

Diluted earnings per share is calculated by adjusting weighted average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive securities.

308

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

36 (a)

COMMITMENTS Capital commitments The Bumi Group has capital commitments contracted for at the end of each reporting period, but not yet incurred as follows: 2009 2008

Property, plant and equipment TOTAL (b)

13

29 29

13

Operating lease commitments The Bumi Group leases various assets including machinery and infrastructure under noncancellable operating lease agreements. The lease terms are between 1 and 8 years, and the majority of lease agreements are renewable at the end of the lease period at market rates. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: 2009 2008

Less than 1 year 1 5 years TOTAL

3 3

2 6

37 CONTINGENCIES The Bumi Group is contingently liable for various claims from third parties arising from the ordinary conduct of business, including tax assessments, results of which are either pending or are being processed by the court, the outcomes of which may be substantial, but are not presently determinable. In addition, the Bumi Group has submitted various claims to third parties, the outcomes are not presently determinable pending decision by the Court. The following are the main contingencies as of the balance sheet date. 37.1 Illegal Mining in Arutmins mining concession and the issuance of other mining concessions that overlap with that of Arutmin Activities of illegal mining (PETI) and activities of other mining concessions that overlap with that of Arutmin (Overlapping Mining Concessions) are currently occurring in Arutmins mining concession. PETI and Overlapping Mining Concessions have increased production costs of mining coal in the area in three ways. Firstly, PETI and Overlapping Mining Concession miners disturb areas without regard to the measures necessary to reclaim and rehabilitate the area properly after mining is completed. Secondly, PETI and Overlapping Mining Concession miners extract the coal that is most accessible to the land surface with the lowest strip ratio, leaving the area that can be extracted a higher cost. Thirdly, PETI and Overlapping Mining Concession mining requires Arutmin to alter its mine plans for the area affected and incur additional incidental costs related to damage caused by illegal miners, such as road maintenance and rehabilitation costs. In 2004, Arutmin commissioned a report from the Center of Research and Development of Mineral and Coal Technology in Indonesia, an independent research institute involved in the coal mining industry, to verify its calculation of the incremental cost of mining in illegally mined areas. Arutmin has provided a copy of this report to the Government as evidence of the incremental costs it faces due to illegal mining. Since Arutmin has the right to mine the entire area covered by its Coal Mining Agreement, Arutmin believes that the incremental costs it will face in mining areas illegally mined should be

309

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

borne by the Government. On 30 June 2004, Arutmin requested the Government to compensate Arutmin for the incremental cost from the entitlement payments due to the Government. This request was rejected in a letter from the Directorate General of Geology and Mineral Resources, Ministry of Energy and Mineral Resources dated 23 July 2004. With regard to the existence of Overlapping Mining Concessions, Arutmin has always been active in providing clarification to the relevant parties concerning the boundaries of Arutmins mining concession area and taking necessary legal action to protect its mining area. As of the completion date of the consolidated financial information, legal actions against several Overlapping Mining Concessions are still ongoing. 37.2 Overlap on Arutmins CCoW areas On 9 June 2009, Arutmin filed two lawsuits in the State Administrative Court of Banjarmasin against the decrees of the Regent of Tanah Bumbu District concerning the issuance of exploration and exploitation mining rights to PT Anzawara Satria and CV Putra Parahyangan Mandiri that overlap Arutmins CCoW being, respectively, No. DU 314/KALSEL and DU322/KALSEL. On 3 November 2009, the Court issued two decisions which approved Arutmins claim. The decisions terminated the exploration and exploitation permits of each PT Anzawara Satria and CV Putra Parahyangan Mandiri, and ordered the Regent of Tanah Bumbu to revoke such permits. At the same time, the Court also issued two decrees which postponed the validity of the exploration and exploitation permits of each PT Anzawara Satria and CV Putra Parahyangan Mandiri. Due to the issuance of such court decisions and decrees, PT Anzawara Satria and CV Putra Parahyangan Mandiri had filed appeals to the High Administrative Court. On 17 March 2010, the High Administrative Court issued a decision confirming the decision of the Administrative Court in favour of Arutmin against CV Putra Parahyangan Mandiri. However, on 30 March 2010, the High Administrative Court issued a decision in favour of PT Anzawara Satria. The application of appeal at the Supreme Court for each of the decisions was filed, respectively, by CV Putra Parahyangan Mandiri and Arutmin. As of the completion date of the consolidated financial information, the above cases are still being examined by the Supreme Court. 37.3 Costs claimed by PT Thiess Contractors Indonesia On 28 March 2008, PT Thiess Contractors Indonesia (Thiess), a mining contractor of KPC, sent a letter to KPC, seeking compensation for additional costs incurred since July 2007 and costs that would continue to be incurred until a revised pricing is agreed. Thiess claimed that the current escalation rate formula with regards to the mining service fee no longer reflects the actual increase in its operating costs, hence must be revised with effect from July 2007. On the other hand, KPC believes that the current mining service fee rate with Thiess is still above other comparable mining contractors rate. The claim for this escalation rate dispute is approximately USD 37.7 million as of 30 September 2010. As of the completion date of the consolidated financial information, the parties have started the arbitration process. Permit from the Ministry of Forestry of Indonesia Certain contract areas under the CoWs of Dairi, PT Citrapalu Minerals (CPM) and PT Gorontalo Minerals (GM) fall within protected forests. Forestry Law No. 41, which became effective in 1999, prohibits open-cast mining within areas of protected forest, including CoWs that were granted prior to the declaration. In 2006, Dairi requested a land-use permit to undertake activities in the protected forest. On 20 July 2007, Dairi sent a letter to the Ministry of Forestry (Ministry) requesting acceleration of the land use permit in respect of protected forest Batu Ardan totalling 37 hectares, which is located in Sopokomil area, Silima Punggapungga sub-district, North Sumatra province. On 19 September 2007, Dairi received a letter from the Forestry Department that said the draft of

37.4

310

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

the Presidential Decree approving Dairis underground mining activities had been sent to the Secretary of the Cabinet. In response to the above letter, Dairi submitted an objection letter on 29 October 2007, as the management of Dairi believes that they have complied with all related regulations and there will be no negative environmental impact from the operation of underground mining in the protected forest. Since April 2009, management has temporarily suspended the construction activities for the Dairi Project while awaiting the final approval from the Ministry. Management is also negotiating the contract terms with its suppliers and contractors to reduce the short-term cash outflow requirements and to restart the development activities under better terms. In 2010, Government Regulation No. 24 Year 2010 (GR24) was issued to further implement Article 31 of Forestry Law No. 41. Under GR24, underground mining shall be allowed in areas within protected forest provided that the mining will not cause land subsidence or lowering of ground surface, changes or alterations to the main functions of the forest areas or damage to ground water aquifers. The Ministry issued land-use permits to Dairi on 11 October 2010 and GM on 8 December 2010. As at the date of this consolidated financial information, CPMs land-use permit application has not been responded to by the Ministry. Based on Government Regulation No. 2 dated 4 February 2008, all companies that have activities in production and protected forest areas that are not related to forestry activities will have an obligation to pay a forestry fee ranging from IDR 1.2 million to IDR 3 million per hectare (approximately USD 133 to USD 333 per hectare) annually effective from 2008. 37.5 Taxation Under the taxation laws of Indonesia, the Bumi Group submits tax returns on the basis of selfassessment. The Director General of Tax (DGT) may assess or amend taxes within ten years from the time the tax becomes due, or until the end of 2013, whichever is earlier. There are new rules applicable to fiscal year 2008 and subsequent years stipulating that the DGT may assess or amend taxes within five years of the time the tax becomes due. At the date of this consolidated financial information, the Bumi Group have received several Tax Assessment Letters that are not yet finalised. The Bumi Group have filed objections and/or appeals that as of the completion date of the consolidated financial information are still in process or pending decision, the outcomes of which could be substantial but are not presently determinable.

311

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

38 PRINCIPAL SUBSIDIARIES AND ASSOCIATES In the following table, subsidiaries consolidated are indicated by C, entities consolidated under the proportionate consolidation are indicated by P and associates recorded under the equity method by E.
Percentage of ownership 2009 2008 60 C 60 C 100 C 100 C 100 C 100 C 100 C 70 P 70 P 100 C 100 C 50 E 100 C 100 C 80 C 100 C 80 E 80 E 100 C 84 C 70 P 70 P 94 C 94 C 50 C 50 C 30 E 50 C 50 C 70 P 70 P 100 C 100 C 100 C 80 C 67 C 29 E 44 E 50 C 50 C 80 C 80 C 50 C 50 C 65 P 65 P 100 C 100 C 13 E 84 C 50 P 50 P 30 20 80 E E E 30 80 E E

Name of entities Bumi Mauritania SA Bumi Netherlands B.V. Bumi Resources Japan Company Ltd. Calipso Investments Pte. Ltd Candice Investments Pte. Ltd. Enercoal Resources Pte Ltd Enercorp Ltd. Forerunner International Pte. Ltd. Gallo Oil (Jersey) Ltd Goldwave Capital Ltd Herald Resources Ltd Indocoal Resources (Cayman) Ltd. Konblo Bumi, Inc Leap Forward Finance Ltd PT Artha Widya Persada PT Arutmin CBM PT Arutmin Indonesia PT Bumi Resources Minerals PT Citra Palu Minerals PT Dairi Prima Minerals PT Darma Henwa Tbk PT Fajar Bumi Sakti PT Gorontalo Minerals PT Kaltim Prima CBM PT Kaltim Prima Coal PT Mitratama Perkasa PT Newmont Nusa Tenggara PT Pendopo Energi Batubara PT Seamgas Indonesia PT Visi Multi Artha Westside Corporation Ltd Zurich Assets International Ltd

Country of incorporation Islamic Republic of Mauritania Netherlands Japan Singapore Singapore Singapore Jersey, UK Singapore Jersey, UK Virgin Islands Australia Cayman Islands Liberia Republic of Seychelles Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Republic of Seychelles Indonesia Indonesia Australia Republic of Seychelles

Nature of business Iron Ore Mining Intermediate holding company Marketing Services Intermediate holding company Coal Distributor Intermediate holding company Marketing Services Intermediate holding company Oil Mining Intermediate holding company Intermediate holding company Coal Distributor Gold Mining Intermediate holding company Coal Bed Methane Mining Coal Bed Methane Mining Coal Mining Trading Gold Mining Lead and Zinc Mining Mining Contractor Coal Mining Gold Mining Coal Bed Methane Mining Coal Mining Mining Services Gold and Copper Mining Coal Mining Methane Gas Exploration and Mining Contractor Coal Bed Methane Mining Coal Bed Methane Mining Intermediate holding company

Management believe the Bumi Group has significant influence over PT Newmont Nusa Tenggara. Although the Bumi Group owns only 13% of the shares it is able to appoint a director to the Board of Directors. Management believe the Bumi Group has significant influence over Zurich Assets International Ltd although the Bumi Group owns 80% of the shares because the shareholders agreement clearly states that the Bumi Group does not control the entity and cannot appoint any directors. Zurich Assets International owns a 40% interest in PT Darma Henwa and an 80% interest in Goldwave Capital recorded by the Bumi Group under the equity method. 39 39.1 SUBSEQUENT EVENTS PT Newmont Nusa Tenggara A share purchase agreement for additional shares in NNT, representing a further 7per cent. of the equity, was approved by the Capital Investment Coordinating Board and Directorate General of Minerals, Coal and Geothermal on 15 March 2010. At that date, the Bumi Group increased its stake in NNT from 17 per cent to 24 per cent for a consideration of USD 246 million and its effective interest from 12.75per cent to 18per cent.

312

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

39.2

Increase in share capital On 25 June 2010, Bumi increased its authorised share capital with par value of IDR 500 per share from 20,000,000 shares to 77,500,000 shares. PT Mitratama Perkasa On 31 August 2010, the Bumi Group entered into a Share Purchase Agreement to sell a 69.83 per cent stake in PT Mitratama Perkasa to PT Nusantara Pratama Indah for USD 190 million. On 7 September 2010, Bumi received USD 20million of the total consideration, and the remaining USD 170 million on 6 December 2010. Non-preemptive rights issue On 4 October 2010, Bumi issued 1,369,400,000 ordinary shares at an issue price of IDR 2,366 per share. The shares were listed on the IDX on 4 October 2010. Moorfields Investment Limited, a company established in Tortola, British Virgin Islands and Credit Suisse International, a company established in London, England acquired 760,777,778 shares and 608,622,222 shares, respectively. Moorfields Investment Limited is a company fully controlled by Raiffeisen Zentralbank Osterreich AG (RZB). The non pre-emptive rights issue, along with the issue of USD 700million 10.75% Guaranteed Senior Secured Notes, was made in order to accelerate Bumis debt repayments. As a result of this transaction, the total issued and fully paid shares of Bumi increased to 20,773,400,000.

39.3

39.4

39.5

Redemption of convertible bonds and repayment of loans On 1 October 2010, the Bumi Group redeemed in full the outstanding balance of the Zero Coupon Convertible Bonds II amounting to USD 94 million with a redemption price of USD 119.4 million and partially redeemed the 5% Guaranteed Convertible Bonds II amounting to USD 49.6 million with a redemption price of USD 49.4 million. Drawdown of proceeds of USD700million Guaranteed Senior Secured Notes On 6 October 2010, Bumi drew down the proceeds from the issue of USD 700 million 10.75% Guaranteed Senior Secured Notes amounting to USD 680 million for the following: (a) Repay in full the outstanding principal amount of USD 150 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 150.0 Million JCS Facility (January 2010); Repay in full the outstanding principal amount of USD 73 million, plus accrued interest and thereon and any break costs and other prepayment penalties, under the USD 100.0 Million CS Standby Credit Facility; Repay in full the outstanding principal amount of USD 80 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 80 Million RZB Facility (which was scheduled to mature in June 2011); and Repay in full the outstanding principal amount of USD 300 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 300 Million CS Facility (which was scheduled to mature on 30 October 2012).

39.6

(b)

(c)

(d)

39.7

Land-use permit On 11 October 2010 Dairi received a decision letter from the Ministry of Forestry of the Republic Indonesia that granted Dairi a land-use permit to undertake exploration of gold and other supplemental minerals in a protected forest (kawasan hutang lindung dan hutan produksi

313

PT Bumi Resources Tbk

Notes to the consolidated financial information For the years ended 31 December 2009 and 2008
(Expressed in millions of USD, unless otherwise stated)

terbatas) in Dairi and Pakpak Bharat, North Sumatera province, with an area of approximately 23,000 hectares. 39.8 Acquistion by Vallar PLC On 16 November 2010, Vallar PLC announced the intention to purchase a 25 per cent. stake in PT Bumi Resources Tbk and a 75 per cent stake in PT Berau Coal Energy Tbk for consideration of approximately USD 3.0 billion made up of a combination of cash and new Vallar PLC shares. Nomura Loan On 21 October 2010, Bumi Resources Japan Co. Ltd (BRJ), a subsidiary of BRM, drew down USD 21 million under the Nomura Loan to fund certain expenses relating to the initial public offering of BRM and capital expenditure and working capital requirements of BRM. In December 2010, the Bumi Resources Group received net proceeds of USD 220 million from BRMs initial public offering and used part of the net proceeds to repay the USD 150 million Bright Ventures Facility, which was drawn down in full in May 2010.

39.9

39.10 Bumi Resources Mineral (BRM) Initial Public Offering (IPO) On 9 December 2010, BRM completed its IPO of 3.3 billion primary shares (equivalent to approximately 18.6 per cent. of BRMs post-offering issued and outstanding share capital). Simultaneously with the BRM IPO, BRM has issued and allotted 2.2 billion Series I warrants to its new shareholders whereby each exercising BRM shareholder holding three BRM shares received two Series I warrants. Each Series I warrant entitles the warrant holder to buy one BRM share at Rp.700 per BRM share or at a 10.2 per cent. premium to the BRM IPO Price. Warrant holders will be able to exercise their rights starting from 2 June 2011 until 30 November 2012. By 9 March 2011 at the latest, Bumi, as holder of mandatory convertible bonds, will convert the bonds into BRM shares at a price 5.0 per cent. above the BRM IPO price per share. As a result, Bumi will hold 81.4 per cent. of BRMs share capital following the conversion of the mandatory convertible bonds. 39.11 5 per cent. convertible bonds On 25 January 2011, the Bumi Group completed its clean-up call for, and mandatorily redeemed, the remaining outstanding principal amount of USD 7 million of the 5 per cent convertible bonds.

314

Section 3: Unaudited consolidated financial information relating to Bumi Resources for the periods ended 30 September 2009 and 2010 and for the year ended 31 December 2009.

PT Bumi Resources Tbk

PT Bumi Resources Tbk
Unaudited interim consolidated income statements For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses Gain on sale of investments Gain on foreign exchange Other income/(expense) Operating profit Share in net income of associates Profit before finance items and taxation Finance income Finance cost Fair value gain/(loss) on derivative financial instruments Profit before taxation Taxation Profit for the period Profit attributable to: Owners of the parent Non-controlling interest 3

30 Sep 2010 2,097 (1,342) 755 (103) (159) 247 33 28 801 145 946 50 (449) 157 704 (308) 396

30 Sep 2009 1,772 (1,079) 693 (58) (131) 11 14 1 530 30 560 3 (236) (101) 226 (145) 81

31 Dec 2009 2,451 (1,582) 869 (131) (182) 335 14 (38) 867 47 914 9 (352) (87) 484 (146) 338

372 24 396 12 12 1.97 1.92 81 81 0.43 0.43

328 10 338 1.73 1.69

Earnings per share (USD cents) Basic Diluted

The accompanying notes are an integral part of this consolidated financial information.

315

PT Bumi Resources Tbk

Unaudited interim consolidated statements of comprehensive income For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes Profit for the period Other comprehensive income Fair value gains/(losses) from AFS financial assets Foreign exchange differences on retranslation Total other comprehensive income Total comprehensive income for the period Total comprehensive income attributable to: Owners of the parent Non-controlling interest

30 Sep 2010 396

30 Sep 2009 81

31 Dec 2009 338

388 24 412 73 73

8 8 16 412

(3) (5) (8) 73

(2) (17) (19) 319

309 10 319

The accompanying notes are an integral part of this consolidated financial information.

316

PT Bumi Resources Tbk

Unaudited interim consolidated balance sheets As of 30 September 2010 and 2009 and 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes ASSETS NON-CURRENT ASSETS Goodwill Exploration and evaluation assets Deferred stripping costs Property, plant and equipment Investment in associates Due from related parties Deferred tax assets Tax refund claims Loan receivable Other non-current assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Available-for-sale financial assets Trade and other receivables Financial assets at fair value through profit or loss Derivative financial instruments Other current assets Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS

30 Sep 2010

30 Sep 2009

31 Dec 2009

5 6 10

201 629 384 2,119 1,194 81 18 63 249 521 5,459 98 227 1,293

208 581 322 1,965 255 38 3 42 466 3,880 116 215 648 200 68 227 1,474 5,354

243 591 268 2,100 860 47 64 10 251 397 4,831 132 232 1,078 252 51 120 1,865 6,696

8 9

116 398 305 134 2,571 8,030

The accompanying notes are an integral part of this consolidated financial information.

317

PT Bumi Resources Tbk

Unaudited interim consolidated balance sheets As of 30 September 2010 and 2009 and 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes EQUITY AND LIABILITIES NON-CURRENT LIABILITIES Borrowings Due to related parties Deferred tax liabilities Pension benefit obligation Provisions Other non-current liabilities TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables Current tax payable Borrowings Derivative financial instruments Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES EQUITY Share capital Share premium Treasury stock Common control reserve Other reserves Retained earnings

30 Sep 2010

30 Sep 2009

31 Dec 2009

11

3,833 6 318 29 97 70 4,353 977 317 720 16 16 2,046 6,399

2,162 5 281 20 61 336 2,865 829 407 74 97 38 1,445 4,310

3,163 2 350 25 88 91 3,719 910 278 469 26 16 1,699 5,418

11 9

13

Total equity attributable to the owners of the parent Non-controlling interest TOTAL EQUITY TOTAL EQUITY AND LIABILITIES

1,401 123 (34) (987) 20 1,067 1,590 41 1,631 8,030

1,401 123 (34) (1,234) 15 754 1,025 19 1,044 5,354

1,401 123 (34) (987) 4 754 1,261 17 1,278 6,696

The accompanying notes are an integral part of this consolidated financial information.

318

PT Bumi Resources Tbk

Unaudited interim consolidated statements of changes in equity For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009

(Expressed in millions of USD, unless otherwise stated)

Attributable to owners of the parent

1 January 2009 Profit for the period Other comprehensive income Dividends

30 September 2009

319

1 January 2009 Profit for the year Other comprehensive income Part disposal of Gallo Dividends Acquisition of non-controlling interest

31 December 2009

Profit for the period Other comprehensive income Dividends

30 September 2010

Share capital 1,401 1,401 1,401 1,401 1,401

Share premium 123 123 123 123 123

Treasury stock (34) (34) (34) (34) (34)

Common control reserve (1,234) (1,234) (1,234) 247 (987) (987) Other reserves 23 (8) 15 23 (19) 4 16 20 Retained earnings 770 81 (97) 754 770 328 (247) (97) 754 372 (59) 1,067

Total equity attributable to owners of the parent 1,049 81 (8) (97) 1,025 1,049 328 (19) (97) 1,261 372 16 (59) 1,590

Noncontrolling interest 19 19 19 10 7 (19) 17 24 41

Total equity 1,068 81 (8) (97) 1,044 1,068 338 (19) 7 (97) (19) 1,278 396 16 (59) 1,631

The accompanying notes are an integral part of this consolidated financial information.

PT Bumi Resources Tbk

Unaudited interim consolidated statements of cash flows For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

30 Sep 2010 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Additions to exploration and evaluation assets Purchases of property, plant and equipment Purchases of other non-current assets Payment on deferred stripping costs Acquisition of subsidiaries Acquisition of associates Proceeds from sale of associates Acquisition of AFS financial assets Proceeds from sale of AFS financial assets Premiums paid in respect of derivative financial instruments Payment on settlement of derivative financial instruments Interest received Dividend received Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Proceeds from convertible bonds Repayment of borrowings Loan to PT Bukit Mutiara Payment of finance lease liability Payments to related parties Debt issue costs paid Interest paid Dividends paid 2,059 (1,494) (167) 398 (302) 96 (38) (78) (146) (115) (2) (229) 45 (113) 14 119 (543)

30 Sep 2009 1,733 (1,029) (190) 514 (178) 336 (50) (204) (260) (132) (130) (24) 84 (166) (52) 1 (933) 1,814 366 (1,183) (36) (3) (216) (80) (97) 565 (32) 255 4 227

31 Dec 2009 2,441 (1,370) (236) 835 (349) 486 (60) (317) (233) (132) (285) (811) 68 (286) (52) 1 (2,107) 2,971 675 (1,439) (250) (54) (14) (238) (72) (97) 1,482 (139) 255 4 120

1,098 (42) (210) (34) (30) (11) (246) (59) Net cash flows from financing activities 466 Net increase/(decrease) in cash and cash equivalents 19 Cash and cash equivalents at the beginning of the period 120 Exchange (losses)/gains on cash and cash equivalents (5) Cash and cash equivalents at the end of the period 134

The accompanying notes are an integral part of this consolidated financial information.

320

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

1 CORPORATE INFORMATION PT Bumi Resources Tbk was established in the Republic of Indonesia on June 26, 1973. Bumi commenced its commercial operations on December 17, 1979. Bumi and its subsidiaries are collectively referred herein as Bumi Group. The activities of Bumi Group includes exploration and exploitation of coal and minerals deposits (including coal and minerals mining and selling) and oil and gas exploration. Bumis registered office address is at Bakrie Tower, 11th Floor, Kompleks Rasuna Epicentrum, JI. HR. Rasuna Said, Jakarta 12960, Indonesia. PT Bumi Resources Tbk is listed on the Indonesian Stock Exchange. 2 PRINCIPAL ACCOUNTING POLICIES The accounting policies are consistent with those of the annual IFRS consolidated financial information for the year ended 31 December 2009, except as described in Note 2.3 below. 2.1 Basis of preparation of the interim consolidated financial information The interim consolidated financial information for the nine months ended 30 September 2010 have been prepared in accordance with IAS 34, Interim financial reporting, as adopted by the European Union. The interim consolidated financial information does not include all the information and disclosures required in the annual consolidated financial information, and should be read in conjunction with Bumi Groups annual IFRS consolidated financial information as at 31 December 2009. 2.2 Seasonality of interim operations Management believes that the activity of Bumi Group is not subject to seasonality other than rainfall that can interfere with the extracting activities. New and amended accounting standards The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010: a) Business Combinations (IFRS 3 Revised) IFRS 3 (revised), Business combinations, and consequential amendments to IAS 27, Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS 31, Interests in joint ventures are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquirees net assets. All acquisition-related costs are expensed. As Bumi Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), consolidated and separate financial statements, at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in 321

2.3

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. There has been no impact of IAS 27 (revised) on the current period, as none of the non-controlling interests have a deficit balance. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity; there have been no transactions with non-controlling interests. b) New pronouncements not relevant to Bumi Group Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to Bumi Group include: IFRIC 17, `Distribution of non-cash assets to owners (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. This is not currently applicable to Bumi Group, as it has not made any non-cash distributions. IFRIC 18, `Transfers of assets from customers, effective for transfer of assets received on or after 1 July 2009. This is not relevant to Bumi Group, as it has not received any assets from customers. Additional exemptions for first-time adopters (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to Bumi Group, as it is an existing IFRS preparer. Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but not effective for the financial year beginning 1 January 2010 and have not been early adopted: IFRS 9, `Financial instruments, issued in November 2009. This standard is the first step in the process to replace IAS 39, `Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect Bumi Groups accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU. Bumi Group has yet to assess IFRS 9s full impact. Revised IAS 24, Related party disclosures, issued in November 2009. It supersedes IAS 24, Related party disclosures, issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted. Bumi Group has yet to assess IAS 24s full impact. Classification of rights issues (amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Bumi Group will apply the amended standard from 1 January 2011 and does not anticipate any material impact on its consolidated financial information. `Prepayments of a minimum funding requirement (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, `IAS 19 The limit on 322

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

a defined benefit asset, minimum funding requirements and their interaction. Bumi Group will apply these amendments for the financial reporting period commencing on 1 January 2011. IFRIC 19, `Extinguishing financial liabilities with equity instruments, effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). Bumi Group will apply the interpretation from 1 January 2011, subject to endorsement by the EU. It is not expected to have any impact on Bumi Group or the parent entitys financial information. Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2010.

3 OPERATING SEGMENTS In accordance with the provisions of IFRS 8 Operating Segments, the operating segments used to present segment information were identified on the basis of internal reports used by Bumi Groups Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is Bumi Groups chief operating decision maker within the meaning of IFRS 8. Bumi Group has identified three operating segments: Coal: subsidiaries and associates in this operating segment are mining coal and deliver services related to coal mining. It includes mine contracting and infrastructures related to coal mining. Minerals: subsidiaries and associates in this operating segment are exploring and mining minerals including iron ore, gold, copper and other minerals. Others: this operating segment includes the parent company Bumi, as well as other holding companies together with oil and gas and coal bed methane (CBM) activities.

The accounting methods used to recognise and measure these segments for internal reporting purposes are the same as those used to prepare the consolidated financial information. a) Revenue Coal Revenue 30 Sep 2010 2,097 2,097 30 Sep 2009 1,772 1,772 31 Dec 2009 2,451 2,451

30 Sep 2009 44 16 60

b)

Depreciation Coal Minerals Others Total depreciation 30 Sep 2010 65 16 81 31 Dec 2009 64 22 86

323

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

c)

Additions to Property, plant and equipment This represents the total cost incurred during the year to acquire non-current assets (other than financial instruments and deferred tax assets), measured on an accruals basis in accordance with IFRS 8. 30 Sep 2010 130 70 200 30 Sep 2009 301 24 25 351 31 Dec 2009 434 46 32 512

Coal Minerals Others Additions to property, plant and equipment

30 Sep 2009 3,613 772 969 5,354

d)

Total assets Total assets allocated to the segments are presented below including the investments in associates where appropriate. 30 Sep 2010 Coal Minerals Others Total assets 3,853 2,153 2,024 8,030 31 Dec 2009 4,348 1,150 1,198 6,696

30 Sep 2010 Amount % 200 9% 1,692 81% 205 10% 0% 2,097 100% 30 Sep 2009 Amount % 253 14% 1,350 76% 164 9% 5 0% 1,772 100%

e)

Operating segments Additional information Revenue by destination(a) 31 Dec 2009 Amount % 140 6% 2,013 82% 290 12% 8 0% 2,451 100%

Indonesia Asia (excluding Indonesia) Europe America Revenue (a)

Revenue by geographical destination are based on the ultimate country of destination of the product if known. If the eventual destination of the product sold through traders is not known, then revenue is allocated to the location of the product at the time when the risks and rewards of ownership are passed. Bumi is domiciled in Indonesia.

324

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Non-current assets other than those excluded below The total of non-current assets other than those excluded below is shown by location. This is allocated based on the location of the business units holding the assets. 30 Sep 2010 2,774 362 16 181 3,334 1,194 81 18 63 249 521 5,459 30 Sep 2009 2,563 326 13 174 3,076 255 38 3 42 466 3,880 31 Dec 2009 2,679 332 15 176 3,202 860 47 64 10 251 397 4,831

Indonesia Yemen Liberia Mauritania Non-current assets excluded from analysis above: Investment in associates Due from related parties Deferred tax assets Tax refund claims Loan receivable Other non-current assets Total non-current assets per balance sheet

DISPOSAL OF SUBSIDIARY

PT Mitratama Perkasa On 31 August 2010, Bumi entered into a new Share Purchase Agreement to sell a 70% stake in PT Mitratama Perkasa to PT Nusantara Pratama Indah for USD 190 million. On 7 September 2010, Bumi received USD 20 million of the total consideration, and the remaining USD 170 million on 6 December 2010. The net asset position at the date of disposal, together with the resulting profit on disposal and related cash inflow, is shown below: 30 Sep 2010 18 172 190 20

Net assets disposed Net gain on disposal Net sale proceeds Net cash inflow from disposal of PT Mitratama Perkasa

5 PROPERTY, PLANT AND EQUIPMENT During the period to 30 September 2010, additions to property, plant and equipment amounted to USD 113 million. Additions were mainly to plant and equipment (USD 73 million) and assets under construction (USD 36 million). A further USD 87 million of borrowing costs was capitalised to mining properties. Depreciation for the period amounted to USD 81 million. During the period, a subsidiary PT Mitratama Perkasa was sold to PT Nusantara Pratama Indah. As a result, a disposal of USD 100 million of property, plant and equipment was recorded.

325

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

INVESTMENTS IN ASSOCIATES

PT Newmont Nusa Tenggara Bumi Group increased its investment in PT Newmont Nusa Tenggara (NNT) from 17% to 24% on 15 March 2010 for consideration of USD 246 million. This transaction was approved by the Capital Investment Coordinating Board (BKPM) and Directorate General of Minerals, Coal and Geothermal (DGCMG). The first 17% was acquired in November 2009. NNT is a gold and copper mining company registered in the Republic of Indonesia. NNT owns and operates the Batu Hijau copper and gold mine under a contract of work granted by the Indonesian Government to NNT for the Batu Hijau mine (the Batu Hijau Contract of Work). Bumi Group believes the Baju Hijau mine is Indonesias second largest copper mine. The Batu Hijau mine is located on the island of Sumbawa, approximately 950 miles (1,529 kilometres) east of Jakarta. The total consideration paid for the additional 7% stake was USD 246 million. On the 15 March 2010, Bumi Group estimated the following elements: Total consideration paid: Dividend deducted from the consideration paid Share in the net book value of NNT Fair value attributed to mining properties USD 246m USD (17)m USD 157m USD 72m

Bumi Group based its estimation on the mining plan of Batu Hijau and on assumed prices of marketable gold and copper over the remaining life of the mine. The mining properties are amortised over the remaining life of the mine on a unit of production basis. Together with the first transaction recorded in November 2009, the total mining rights recognised by Bumi Group are USD 324 million. This amount is included in the investment in associates. As of 30 September 2010, the net investment of Bumi Group in NNT was USD 907 million after Bumi Group received a dividend for USD 72 million. 7 OTHER NON-CURRENT ASSETS 30 Sep 2010 408 63 50 521 30 Sep 2009 371 59 36 466 31 Dec 2009 303 46 48 397

Business development funds Advances and deposits Other

Business development funds are amounts that Bumi has placed with certain intermediaries to pursue business development opportunities. These funds have been invested in various projects, in forms ranging from loans, including rights to convert to equity, to direct funding for participation in mining and other business ventures. These projects are accounted for separately within the Bumi financial statements once Bumi has taken on a direct ownership interest. 8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS On 9 June 2010, Bumi Group entered into a Discretionary Fund Agreement with PT Henan Putihrai Asset Management (HPAM), wherein HPAM agreed to manage the fund amounting to USD 113 millions. As 30 September 2010, the fair value of the investment of Bumi Group is USD 116 millions. Financial assets at fair value through profit or loss are presented within investing activities in the cash flow statement.

326

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Changes in fair values of financial assets at fair value through profit or loss are recorded in the income statement. The fair value of all equity securities in the portfolio is based on their current bid prices in an active market. 9 DERIVATIVES FINANCIAL INSTRUMENTS 30 Sep 2010 (16) 398 382

Derivative liability Derivative assets Net position

Increase in fair value of derivative assets as at 30 September 2010 includes USD 129 million increase in fair value of the prepayment option on the CIC loan. 10 i) RELATED PARTIES

Fair Value as of 30 Sep 2009 31 Dec 2009 (97) (26) 200 252 103 226

Transactions and balances Transactions with related parties mainly refer to sales and purchases and current accounts among other related parties, as follows:
Related party transactions Revenue Purchases Trade receivables Trade payables Balance Due from Due to related related parties parties

At 30 September 2010 Joint ventures in which the entity is a venturer: PT Arutmin Indonesia PT Kaltim Prima Coal Associates: Enercorp Ltd. PT Artha Widya Persada PT Darma Henwa Tbk PT Miratama Perkasa PT Visi Multi Artha Others (each below USD 1 million)

78 78

41 41

2 2

26 3 1 48 3 81

3 3 6

Related party transactions Purchases Trade receivables Trade payables At 30 September 2009 Joint ventures in which the entity is a venturer: PT Arutmin Indonesia PT Kaltim Prima Coal Associates: Enercorp Ltd. PT Artha Widya Persada PT Darma Henwa Tbk PT Visi Multi Artha Others (each below USD 1 million) Revenue

Balance Due from Due to related related parties parties

142 142

71 71

46 46

25 5 3 2 3 38

3 2 5

327

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated) Related party transactions Trade receivTrade Revenue Purchases ables payables Balance Due from Due to related related parties parties

At 31 December 2009 Joint ventures in which the entity is a venturer: IndoCoal Resources (Cayman) Limited (ICRL) PT Arutmin Indonesia PT Kaltim Prima Coal Associates: Enercorp Ltd. PT Artha Widya Persada PT Darma Henwa Tbk PT Visi Multi Artha Westside Corporation Ltd. (Westside) Others (each below USD 1 million) TOTAL

175 175

101 101

11 3 14

15 24 3 2 3 47

1 1 2

30 Sep 2010 2 1 3 30 Sep 2009 2 1 3

ii)

Remuneration of the key management personnel Key management personnel include the directors and other members of management. Remuneration paid or payable for their services is shown below: 31 Dec 2009 3 1 4

Salaries and social charges Bonus

30 Sep 2009 Noncurrent Current 19 586 586 393 115 352 102 9 2,162 20 54 74

11

BORROWINGS
Coupon interest Principal rate (%) (m) 30 Sep 2010 Noncurrent Current 80 145 261 212 3 633 633 737 296 116 358 253 100 6 3,833 150 305 52 1 64 149 720 31 Dec 2009 Noncurrent Current 80 14 3 597 597 693 295 116 354 283 123 8 3,163 388 20 1 60 469

Bank borrowings (year due) JP Morgan Chase Credit Suisse facility 2010 Raiffeisen Zentralbank sterreich AG 2011 Credit Suisse facility 2011 Deutsche bank facility 2011 Deutsche bank facility 2012 Credit Suisse facility 2012 Credit Suisse facility 2013 Bank Niaga facility 2012 Country Forest Limited facility A 2013 Country Forest Limited facility B 2014 Country Forest Limited facility A 2015 Other borrowings Senior Secured Notes 2016 Convertible bonds 2012 Convertible bonds 2014 Convertible bonds 2016 Finance lease liabilities Other corporate loans

Floating Floating Floating Floating Floating Floating 15% Floating 19% 12% 12% 12% 12% 0% 9.25% 5% Various

US$150 US$410 US$80 US$325 US$60 US$200 US$300 US$250 US$5 US$600 US$600 US$700 US$300 US$150 US$375 US$300 US$160

328

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

11.1 Bank and other borrowings The bank and other borrowings are described in the consolidated financial information as of 31 December 2009 except the new ones entered into by Bumi Group during the period and that are described below. a) JPMorgan Chase Bank On 14 December 2009, Bumi Group entered into a Credit Agreement with JPMorgan Chase Bank amounting to USD 150 million. On 11 March 2010, Bumi drew down USD 150 million. The loan is payable in full 6 months after its utilisation date; however, Bumi has got the option to extend the maturity until October 2010. The interest rate of the loan is LIBOR plus 9% per annum for the initial maturity date and LIBOR plus 12% for the succeeding months until the extension date. This facility was secured by the share pledges over the shares of PT Arutmin Indonesia, PT Kaltim Prima Coal, IndoCoal Resources (Cayman) Ltd., PT IndoCoal Kalsel Resources, PT IndoCoal Kaltim Resources. The amortised cost of this loan as of 30 September 2010 amounted to USD 150 million. b) Credit Suisse 2010 Facility 1 On 23 March 2010, Bumi Group entered into a Credit Agreement for an amount of USD 200 million, which is payable in full 24 months following the draw down date. On 1 April 2010, the loan agreement was amended granting Bumi Group an additional loan facility of USD 100 million, which increased the total loan facility from USD 200 million to USD 300 million. On the maturity date, Bumi Group shall pay a Redemption Premium, which is the amount that provides the lender with an overall internal rate of return of 15%. The interest rate of the loan is LIBOR plus 7% per annum and is payable every quarter. The loan was secured by the shares of Bumi Group in NNT. The amortised cost of this loan as of 30 September 2010 amounted to USD 305 million. c) Deutsche Bank AG 2010 Facility On 30 April 2010, Bumi Group entered into Credit Agreement with Deutsche Bank AG for an amount of USD 50 million, with a term of 24 months and interest rate of LIBOR plus 4.95% per annum. On 13 May 2010, 21 July 2010 and 13 September 2010, additional lenders entered into the Credit Agreement and provided additional commitments amounting to USD 50 million, USD 25 million and USD 75 million respectively. The amortised cost of this loan as of 30 September 2010 amounted to USD 196 million. d) Bright Ventures Pte. Ltd. On 26 May 2010, Bumi Group entered into a Credit Agreement with Bright Ventures Pte. Ltd., under which the Lender agreed to provide a credit facility amounting to USD 150 million at an interest rate of 10% per annum, with maturity date being the earlier of 36 months after the date of the agreement or five business days after the Initial Public Offering of PT Bumi Resources Minerals Tbk, a Subsidiary. The amortised cost of this loan as of 30 September 2010 amounted to USD 149 million.

329

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

e)

Credit Suisse 2010 Standby Facility On 28 September 2010, Bumi Group and Credit Suisse entered into a Credit Agreement for a credit facility amounting to USD 100 million. Bumi drewdown USD 73 million on 28 September 2010. The loan facility shall be repaid in full upon its maturity in 2013. The interest rate of the loan is LIBOR plus 11% per annum. The amortised cost of this loan as of 30 September 2010 amounted to USD 68 million.

f)

Credit Suisse 2010 Facility 2 On 19 August 2010, Bumi Group and Credit Suisse entered into a Credit Agreement for a credit facility amounting to USD 150 million. The loan facility shall be repaid in full upon its maturity in 2013. The interest rate of the loan is LIBOR plus 11% per annum. The amortised cost of this loan as of 30 September 2010 amounted to USD 144 million.

12 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to owners of Bumi by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by adjusting the earnings attributable to owners of Bumi and the weighted average number of ordinary shares outstanding during the period for the effects of dilutive potential ordinary shares. Treasury shares are excluded for the calculation of the weighted average number of ordinary shares. Basic earnings per share calculations are set out below: Profit attributable to owners of Bumi Weighted average number of ordinary shares in issue (thousands) Basic earnings per share (cents) Diluted earnings per share calculations are set out below: Profit attributable to owners of Bumi Effect of dilutive potential ordinary shares1 Diluted earnings Weighted average number of ordinary shares in issue (thousands) Effect of dilutive potential ordinary shares Diluted weighted average number of ordinary shares (thousands) Diluted earnings per share (cents) 30 Sep 2010 372 29 401 18,930,787 1,917,782 20,848,569 1.92 30 Sep 2009 81 81 18,930,787 18,930,787 0.43 31 Dec 2009 328 (7) 321 18,930,787 79,848 19,010,635 1.69 30 Sep 2010 372 18,930,787 1.97 30 Sep 2009 81 18,930,787 0.43 31 Dec 2009 328 18,930,787 1.73

Diluted earnings per share is calculated by adjusting weighted average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive securities.
1 The effect of dilutive potential ordinary shares on earnings include the fair value changes in the conversion option embedded in the convertible bonds that are potentially dilutive.

13 EQUITY Following the decision of the General Meeting of Shareholders dated 24 June 2010, Bumi Group paid a dividend of USD 59 million. On 25 June 2010, Bumi increased its authorised share capital, with a par value of IDR 500 per share, from 20,000,000 shares to 77,500,000 shares. 330

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

14 CONTINGENCIES Bumi Group is contingently liable for various claims from third parties arising from the ordinary conduct of business, including tax assessments, the results of which are either pending or are being processed by the court. The outcomes may be substantial, but are not presently determinable. In addition, Bumi Group has submitted various claims to third parties, the outcomes of which are not presently determinable. At the date of this consolidated financial information, the contingencies as disclosed in the consolidated financial information for the year ended 31 December 2009 remain unchanged for the period ended 30 September 2010. 15 PRINCIPAL SUBSIDIARIES AND ASSOCIATES The subsidiaries and associations included in the interim consolidated financial information are the ones described in the notes to the consolidated financial information as of 31 December 2009 except for the following:
Percentage of Ownership Name of Subsidiaries and Associates PT Mitratama Perkasa PT Newmont Nusa Tenggara Country of Incorporation Indonesia Indonesia Nature of Business Mining Services Gold and Copper Mining 30 Sep 2010 30 Sep 2009 31 Dec 2009 30 E 100 C 100 C 18 E 13 E

16

SUBSEQUENT EVENTS

16.1 Redemption of convertible bonds and repayment of loans On 1 October 2010, the Bumi Group redeemed in full the outstanding balance of the Zero Coupon Convertible Bonds II amounting to USD 94 million with a redemption price of USD 119.4 million and partially redeemed the 5% Guaranteed Convertible Bonds II amounting to USD 49.6 million with a redemption price of USD 49.4 million. The proceeds were used to repay in full, the outstanding principal amount of USD 150 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 150 Million Bright Ventures Facility (which was scheduled to mature on the earlier of 26 May 2013 and five business days after the initial public offering and listing of Bumi Resources Mineral (BRM) shares on the IDX). 16.2 Non-preemptive rights issue On 30 September 2010, Bumi issued 1,369,400,000 ordinary shares at an issue price of IDR 2,366 per share. The shares were listed on the IDX on 4 October 2010. Moorfields Investment Limited, a company established in Tortola, British Virgin Islands and Credit Suisse International, a company established in London, England acquired 760,777,778 shares and 608,622,222 shares, respectively. Moorfields Investment Limited is a company fully controlled by Raiffeisen Zentralbank Osterreich AG. The non pre-emptive rights issue, along with the issue of USD 700 million 10.75% Guaranteed Senior Secured Notes, was made in order to accelerate Bumis debt repayments. As a result of this transaction, the total issued and fully paid shares of Bumi increased to 20,773,400,000. 16.3 Drawdown of proceeds of USD700 million Guaranteed Senior Secured Notes On 6 October 2010, Bumi drew down the proceeds from the issue of USD 700 million 10.75% Guaranteed Senior Secured Notes amounting to USD 680 million for the following:

331

PT Bumi Resources Tbk

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

(a)

Repay in full the outstanding principal amount of USD 150.0 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 150.0 Million JCS Facility (January 2010); Repay in full the outstanding principal amount of USD 73.0 million, plus accrued interest and thereon and any break costs and other prepayment penalties, under the USD 100.0 Million CS Standby Credit Facility; Repay in full the outstanding principal amount of USD 80 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 80 Million RZB Facility (which was scheduled to mature in June 2011); and Repay in full the outstanding principal amount of USD 300 million, plus accrued interest thereon and any break costs and other prepayment penalties, under the USD 300 Million CS Facility (which was scheduled to mature on 30 October 2012).

(b)

(c)

(d)

16.4 Land-use permit On 11 October 2010, Dairi received a decision letter from Ministry of Forestry of the Republic Indonesia that granted Dairi a land-use permit to undertake exploration of gold and other supplemental minerals in a protected forest (kawasan hutang lindung dan hutan produksi terbatas) in Dairi and Pakpak Bharat, North Sumatera province, with an area of approximately 23,000 hectares. 16.5 Acquistion by Vallar PLC On 16 November 2010, Vallar PLC announced the intention to purchase a 25 per cent. stake in PT Bumi Resources Tbk and a 75 per cent. stake in PT Berau Coal Energy Tbk for consideration of approximately USD 3.0 billion made up of a combination of cash and new Vallar PLC shares. 16.6 Nomura loan In addition, on 21 October 2010, Bumi Resources Japan Co. Ltd (BRJ), a subsidiary of BRM, drew down USD 21 million under the Nomura Loan to fund certain expenses relating to the initial public offering of BRM and capital expenditure and working capital requirements of BRM. In December 2010, the Bumi Resources Group received net proceeds of USD 220 million from BRMs initial public offering and used part of the net proceeds to repay the USD 150 Million Bright Ventures Facility, which was drawn down in full in May 2010. 16.7 Bumi Resources Mineral (BRM) Initial Public Offering (IPO) On 9 December 2010, BRM completed its IPO of 3.3 billion primary shares (equivalent to approximately 18.6 per cent. of BRMs post-offering issued and outstanding share capital). Simultaneously with the BRM IPO, BRM has issued and allotted 2.2 billion Series I warrants to its new shareholders whereby each exercising BRM shareholder holding three BRM shares received two Series I warrants. Each Series I warrant entitles the warrant holder to buy one BRM share at Rp.700 per BRM share or at a 10.2 per cent. premium to the BRM IPO Price. Warrant holders will be able to exercise their rights starting from 2 June 2011 until 30 November 2012. By 9 March 2011 at the latest, Bumi, as holder of mandatory convertible bonds, will convert the bonds into BRM shares at a price 5.0 per cent. above the BRM IPO price per share. As a result, Bumi will hold 81.4 per cent. of BRMs share capital following the conversion of the mandatory convertible bonds. 16.8 5% convertible bonds On 25 January 2011, the Bumi Group completed its clean-up call for, and mandatorily redeemed, the remaining outstanding principal amount of USD 7 million of the 5% convertible bonds.

332

Part C: Berau IFRS Financial Information Section 1: Accountants report on the historical consolidated financial information relating to Berau for the years ended 31 December 2007, 2008 and 2009

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

The Directors Vallar PLC 12 Castle Street St. Helier, Jersey JE2 3RT Channel Islands 24 February 2011 Dear Sirs PT Berau Coal Energy Tbk We report on the financial information of PT Berau Coal Energy Tbk (Berau) set out in Section 2 of Part C of Part IX of the prospectus dated 24 February 2011 (the Prospectus) of Vallar PLC (the Company) (the Berau IFRS Financial Information). The Berau IFRS Financial Information has been prepared for inclusion in the Prospectus on the basis of the accounting policies set out in note 2 to the Berau Financial Information. This report is required by item 20.1 of Annex I to the PD Regulation and is given for the purpose of complying with that item and for no other purpose. Responsibilities The Directors of the Company are responsible for preparing the Berau IFRS Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion as to whether the Berau IFRS Financial Information gives a true and fair view for the purposes of the Prospectus, and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus. Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgements made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to the Companys circumstances, consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Services Authority for designated investment business.

333

the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Opinion In our opinion, the Berau IFRS Financial Information gives, for the purposes of the Prospectus dated 24 February 2011, a true and fair view of the state of affairs of Berau as at the dates stated and of its results, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation. Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

334

Section 2: Historical consolidated financial information, relating to Berau for the years ended 31 December 2007, 2008 and 2009

PT Berau Coal Energy Tbk (formerly PT Risco)

PT Berau Coal Energy Tbk (formerly PT Risco)
Consolidated statements of comprehensive income For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Notes Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses Gain/(loss) on foreign exchange Other income Operating profit Finance income Finance cost Profit before taxation Taxation Profit and total comprehensive income for the year Profit and total comprehensive income attributable to: Owners of the parent Minority interest 6 22 23 23

2007 377 (289) 88 (13) (4) 2 1

2008 631 (460) 171 (18) (7) (4) 1 143 25 (32) 136 (62) 74

2009 800 (473) 327 (26) (10) 2 2 295 25 (48)

24 24 25

74 25 (35)

64 (29) 35

272 (124) 148

18 17

Earnings per share 26 Basic and diluted earnings per share (USD cents)

144

35

39 35 74

80 68

148

312

615

The accompanying notes are an integral part of this consolidated financial information.

335

PT Berau Coal Energy Tbk (formerly PT Risco)

Consolidated balance sheets As of 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Notes ASSETS NON-CURRENT ASSETS Goodwill Exploration and evaluation assets Deferred stripping costs Property, plant and equipment Due from related parties Other non-current assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Trade and other receivables third parties related parties Other current assets Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES NON-CURRENT LIABILITIES Borrowings third parties related parties Deferred tax liabilities Provisions TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables third parties related parties Borrowings third parties related parties Current tax payable Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITES EQUITY Share capital Share premium Retained earnings Other reserves Total equity attributable to owners of the parent Minority interest TOTAL EQUITY TOTAL EQUITY AND LIABILITIES 20 20 21 13 14 17 15

2007

2008

2009

8 9 10 11 17

5 33 79 254 2 373 3

5 2 37 85 278 2

410 4 48 523 5

409 10

990 18

147 1 3 94 248

224 2 11 124 371

273 19 305

615

16 16,17 12 18 292 1 17 2

621

269 17 4 290

780

127 4

1,605

312

131

19 17,19 16 16,17 18

179 10 25 26 1

253 13 24 57 1

350 289 300 115 1

241

348

1,055

553

638

1,186

19 1 20 48

58 1

1 251 133

59 83

385 34

68

142

419

336

621

780

1,605

The accompanying notes are an integral part of this consolidated financial information.

PT Berau Coal Energy Tbk (formerly PT Risco)

Consolidated statements of changes in equity For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated) Total equity attributable to owners of the parent 1 18 1 20 39 59 80 252 (5) (1) 385

Notes 1 January 2007 Profit for the year Transactions under common control 31 December 2007 Profit for the year 31 December 2008 Profit for the year Issuance of new shares Dividends Acquisition of minority interest 31 December 2009 20

Attributable to owners of the parent Share Share Retained Other capital premium earnings reserves 1 18 1 1 251 251 19 39 58 80 (5) 133 1 1 1 (1)

Minority interest 31 17 48 35 83 68 (117) 34

Total equity 32 35 1 68 74 142 148 252 (5) (118) 419

21

The accompanying notes are an integral part of this consolidated financial information.

337

PT Berau Coal Energy Tbk (formerly PT Risco)

Consolidated statements of cash flows For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Notes CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of minority interest Purchases of property, plant and equipment Additions to exploration and evaluation assets Interest received Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings (Payments to)/proceeds from related parties Penalty paid on early redemption of senior notes Interest paid Dividends paid Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 15 7 11 9 24

2007

2008

2009

271 (144) (38) 89 (29) 60

553 (353) (67) 133 (31)

753 (345) (98) 310 (65)

102

245

(14) 25 11

(14) (2) 25 9

(300) (12) (2) 25 (289)

24

(22) (35) (57) 14

(25) (24) (32) (81) 30

265 (300) 313 (15) (33) (5) 225 181

80

94

124

94

124

305

The accompanying notes are an integral part of this consolidated financial information.

338

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

1 CORPORATE INFORMATION PT Berau Coal Energy Tbk (Berau), formerly PT Risco, was established in the Republic of Indonesia. Recent amendments to Beraus articles of association include: the change of Beraus name from PT Risco to PT Berau Coal Energy, increase in authorised capital stock, issuance of new shares and changes in directors and commissioners of Berau. On 28 April 2010, these amendments were approved by the Ministry of Law and Human Rights of the Republic of Indonesia. Berau and its subsidiaries are collectively referred to herein as the Berau Group. The activities of Berau based on its articles of association include trading, mining, plantation, construction, real estate, agriculture, printing, industry, transportation and services. Currently, Berau is engaged as a holding company, with its primary operating subsidiary, PT Berau Coal, (Berau Coal) being engaged in the business of mining. Beraus registered office is located at Wisma GKBI, 38th Floor, Jl. Jend. Sudirman Kav. 28, Jakarta 10210, Indonesia. 2 PRINCIPAL ACCOUNTING POLICIES The principal accounting policies applied in the preparation of this consolidated financial information are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The Berau Groups consolidated financial information has been prepared for the purposes of the Prospectus in accordance with the Prospectus Directive Regulation, the Listing Rules and this basis of preparation. The basis of preparation describes how the consolidated financial information of the Berau Group has been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union. This is the first set of consolidated financial information prepared in accordance with IFRS. Note 3 gives further details of the impact of the transition and application of IFRS 1 First-time adoption of International Financial Reporting Standards. The consolidated financial information has been prepared under the historical cost convention except for retirement benefit obligations. The preparation of consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Berau Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in Note 4. Actual results may differ from these estimates. The consolidated financial information is presented in millions of United States dollars (USD) except when otherwise indicated. 2.2 New accounting standards This is the first set of consolidated financial information prepared in accordance with IFRS as endorsed by the European Union. The Group applied all applicable standards and all applicable interpretations as endorsed as of 31 December 2009. The Group did not adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is on or after 1 January 2010.

339

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

As a consequence, the Group will apply at their respective application dates the following standards and interpretations: a) IFRS 3 (revised), Business combinations (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interests proportionate share of the acquirees net assets. All acquisition-related costs should be expensed. The Group will apply IFRS 3 (revised) prospectively to all business combinations concluded from 1 January 2010. IAS 27 (revised), Consolidated and separate financial statements, (effective from 1 July 2009). The revised standard requires the effects of all transactions with minority interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Group will apply IAS 27 (revised) prospectively to transactions with minority interests from 1 January 2010. IAS 38 (amendment), Intangible Assets Mandatory for year 2010. IFRS 5 (amendment), Measurement of non-current assets (or disposal groups) classified as held-for-sale Mandatory for year 2010. IFRIC 17, Distribution of non-cash assets to owners Mandatory for year 2010. IAS 1 (amendment), Presentation of financial statements. Mandatory for year 2010. IAS 36 (amendment), Impairment of assets Mandatory for year 2010. IFRS 9, `Financial instruments, issued in November 2009. This standard is the first step in the process to replace IAS 39, `Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Groups accounting for its financial assets. However, the standard has not yet been endorsed by the EU. The Group has yet to assess IFRS 9s full impact. Revised IAS 24 (revised), Related party disclosures Mandatory for year 2011. IFRIC 19, Extinguishing financial liabilities with equity instruments Mandatory for year 2011. Amendments to IFRIC 14, Prepayments of a minimum funding requirement Mandatory for year 2011. Amendment to IAS 32, Classification of rights issues Mandatory for year 2011.

b)

c) d) e) f) g) h)

i) j) k) l) 2.3

Basis of consolidation The consolidated financial information consists of the consolidation of the accounts of Berau and its subsidiaries. All intergroup balances, transactions, income and expenses and profits or losses, including unrealised profits arising from intergroup transactions, have been eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.

340

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recognised at cost. The Groups investment in associates includes goodwill identified on acquisition and is net of any accumulated impairment loss. The Groups share of its associates post-acquisition profits or losses is recognised in the statement of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group accounting policies have been applied to associates where necessary to ensure consistency with the policies adopted by the Group. Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any minority interest and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investment or as an AFS financial asset depending on the level of influence retained. 2.4 Business combinations The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Provisional fair values allocated at a reporting date are finalised within twelve months of the acquisition date. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income. For non-wholly owned subsidiaries, minority interests are initially recorded at the minorities proportion of the fair values of the assets and liabilities recognised at acquisition.

341

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

The results of businesses acquired during the year are brought into the consolidated financial information from the date on which control, joint control or significant influence commences and taken out of the consolidated financial information from the date on which control, joint control or significant influence ceases. Transactions with minority interests For purchases of equity from minority interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in goodwill or in the case of mining companies acquired, the difference is first recorded as Mining properties. When the Group ceases to have control or significant influence, the retained portion of the subsidiarys net assets becomes the carrying value of the investment on initial measurement. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. Accordingly, the amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Transactions between entities under common control Business combinations involving entities under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or at the date that common control was established, if later. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Groups controlling shareholders consolidated financial statements. Any differences on consolidation are recognised directly in equity. 2.5 Foreign currency translation a) Functional and presentation currency Items included in the consolidated financial information of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The USD is the functional currency of Berau and its subsidiaries. USD is the currency in which the Groups consolidated financial information is presented, as it most reliably reflects global business performance of the Group as a whole. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income within the line item Gain/(loss) on foreign exchange.

2.6

Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Groups activities. Revenue is shown net of applicable sales taxes, value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

342

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Under the terms of Berau Coals Coal Contract of Work (CCoW), the Government of Indonesia (the Government) is entitled to 13.5% of the coal production of Berau Coal. Rather than deliver coal to the Government, as agreed, Berau Coal markets and sells the Governments coal entitlement and pays the Government the cash proceeds less certain charges. Revenue in the statement of comprehensive income includes the proceeds of the sales of the Governments entitlement as the Group suffers the credit risk associated with these sales. The Government entitlement is recognised as royalty expense as part of cost of sales. Sales revenue is only recognised on individual sales when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when persuasive evidence exists that all of the following criteria are met: the significant risks and rewards of ownership of the product have been transferred to the buyer; neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the sale will flow to the Group; and the costs incurred or to be incurred in respect of the sale can be measured reliably.

These conditions are generally satisfied when title passes to the customer. In most instances sales revenue is recognised when the product is delivered to the destination specified by the customer, which is typically the vessel on which it will be shipped, the destination port or the customers premises. Occasionally, products are provisionally priced. When the price adjustment for a particular year has not been agreed with the customer at the time a delivery is to be made, the Group will continue to invoice coal at the prior years price and adjust the price after reaching an agreement with the customer. When this occurs, the Group records the sales revenue on an estimated market price for the coal and adjusts the sales revenue amount when a price agreement is reached with the customer. 2.7 Exploration and evaluation expenditure Exploration and evaluation expenditure relates to the initial search for deposits with economic potential and comprises costs such as: researching and analysing existing exploration data; conducting geological studies, exploratory drilling and sampling; examining and testing extraction and treatment methods; and/or compiling pre-feasibility and feasibility studies.

These costs are capitalised until such time as they are determined to be either commercially feasible at which point they are transferred to Mining properties, within Property, plant and equipment, or if it is determined that they are not commercially feasible they are written off to the statement of comprehensive income. Capitalised exploration and evaluation expenditure is not depreciated as the asset is not available for use but monitored for indications of impairment. Where a potential impairment is indicated, an assessment is performed in conjunction with the cash generating unit to which the exploration is attributed.

343

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

2.8

Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment comprises of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the estimated costs of decommissioning the assets and site rehabilitation costs to the extent that they relate to the asset and are the responsibility of the Group. The cost of an item of property, plant and equipment is capitalised into its various components where the useful life of the components differ from the main item of property, plant and equipment to which the component can be logically assigned. Expenditure incurred to replace or modify a significant component of property, plant and equipment is capitalised and any remaining carrying value of the component replaced is written off as an expense in the statement of comprehensive income. Subsequent expenditure on property, plant and equipment is only capitalised when the expenditure enhances the value or output of the asset beyond original expectations and it can be measured reliably. Costs incurred on repairing and maintaining assets are recognised in the statement of comprehensive income in the period in which they are incurred. Gains and losses on the disposal of property, plant and equipment, which are represented by the proceeds on disposal of such assets less their carrying values at that date, are recognised in the statement of comprehensive income. Mining properties includes assets in production and in development assets transferred from exploration and evaluation expenditure, deferred stripping performed in the development of the mine and the fair value of mineral resources acquired through business combinations. Mining properties in development and acquired mineral resources are not amortised until production commences. Advances paid to contractors in respect of deferred stripping are also included in mining properties as development costs. Property, plant and equipment are depreciated over their useful lives, the lease term, or the term of the CCoW, whichever is shorter. Depreciation commences when an asset is available for use. The major categories of property, plant and equipment are depreciated on a straight-line basis except for the mining properties in production which are depreciated on a units-of-production (UoP) basis as follows:

Estimated Useful Life

Land and buildings Plant and equipment Furniture, fixtures and office equipment Assets under construction Mining properties

20 years 3 30 years 3 8 years not depreciated up to 30 years on a UoP basis

Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively. Costs associated with commissioning new assets, in the period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

344

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Interest on borrowings related to construction or development projects is capitalised until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. 2.9 Deferred stripping It is necessary to remove overburden and other waste materials to open the mining area before production commences. The process of removing overburden and waste materials is referred to as stripping. Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning, stripping costs are accounted for separately by reference to the ore from each separate pit. If, however, the pits are highly integrated for the purpose of mine planning, the second and subsequent pits are regarded as extensions of the first pit in accounting for stripping costs. In such cases, the initial stripping (i.e. overburden and other waste removal) of the second and subsequent pits is considered to be production phase stripping relating to the combined operation. The Groups determination of whether multiple pit mines are considered separate or integrated operations depends on each mines specific circumstances. In the development stage of a mine, before production commences, stripping costs are capitalised as part of Mining Properties and amortised on a UoP basis over the life of the mine. Stripping costs incurred in the production phase are deferred to the extent that the actual stripping ratio in the period exceeds the life of mine stripping ratio. These deferred costs are then released to the statement of comprehensive income, as production costs, in those periods where the actual stripping ratio is less than the life of mine stripping ratio. The life of mine stripping ratio is calculated as the total expected amount of overburden to be removed over the life of the mine, divided by the total expected amount of coal to be mined over the life of the mine. The life of mine stripping ratio is reviewed regularly and, where necessary, amended to reflect changes in the economically mineable coal reserves, and a more detailed understanding of the overburden to be removed. The accounting effects of changes to the life of mine stripping ratio are applied prospectively. 2.10 Impairment of non-financial assets Assets that have an indefinite useful life such as goodwill or intangible assets not ready to use, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Financial instruments i) Financial assets The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition.

2.11

345

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

a)

Financial assets at fair value through profit or loss Derivatives are included in this category unless they are designated as hedges. Assets in this category are classified based on their maturity. Generally, the Group does not acquire financial assets for the purpose of selling in the short-term. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the statement of comprehensive income.

b)

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables comprise trade and other receivables, loans to related parties, other financial assets and cash and cash equivalents in the balance sheet. Loans and receivables are carried at amortised cost less any impairment. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid investments. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, generally have an original maturity of 90 days or less and are subject to an insignificant risk of adverse changes in value. However, certain deposits of greater duration can be classified as cash equivalents if the funds can be withdrawn at short notice with an insignificant risk of adverse changes in value. Trade and other receivables Trade receivables are recognised initially at fair value and are subsequently measured at amortised cost reduced by any provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. Indicators of impairment would include significant financial difficulties of the debtor, likelihood of the debtors insolvency, default in payment or a significant deterioration in credit worthiness. Any impairment is recognised in the statement of comprehensive income within net operating costs. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the statement of comprehensive income. Included in this account are the trade receivables which pertain to amounts due from customers for coal sold in the ordinary course of business.

c)

Available-for-sale financial assets Available-for-sale financial assets include the Groups investments in nonconsolidated companies and equity or debt instruments that do not satisfy the criteria for classification in another category. These items are measured at fair value on initial recognition plus transaction costs. At each balance sheet date, available-for-sale financial assets are measured at fair value. For listed companies, fair value is determined based on the quoted market price at the balance sheet date. For unlisted companies, fair value is measured based on standard valuation techniques (reference to similar recent transactions, discounted future cash flows, etc.).

346

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Changes in fair value are recorded directly in other comprehensive income, except when the decline in the value of the investment below its historical acquisition cost is judged significant or prolonged enough to require an impairment. In this case, the loss is recognised in the statement of comprehensive income under Impairment charges. Only impairment losses recognised on debt investments may be reversed through income. Interest on available-for-sale financial assets are calculated using the effective interest method recognised in the statement of comprehensive income as part of Other income. Dividends on available-for-sale financial assets are recognised in the statement of comprehensive income as part of Other income when the Groups right to receive payment is established. When financial assets classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income. ii) Financial liabilities Financial liabilities are classified as financial liabilities at fair value through profit or loss (FVPL) or at amortised cost, as appropriate. Financial liabilities are recognised initially at fair value and, in the case of financial liabilities at amortised cost, inclusive of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification as follows: a) Financial liabilities at fair value through profit or loss Financial liabilities at FVPL include mainly derivative liabilities unless they are designated as effective hedging instruments. Financial liabilities at FVPL are stated at fair value, with changes in fair value during a reporting period immediately recognised in the statement of comprehensive income. Financial liabilities at amortised cost After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest rate method taking into account principal repayment or reduction. The calculation also takes into account any premium or discount paid or received either on acquisition or on redemption. It also includes transaction costs and fees that are an integral part of the effective interest rate. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised. Included in this category are trade payables and borrowings. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less otherwise they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

b)

347

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowing using effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Derecognition of Financial Liabilities The Group derecognise financial liabilities when, and only when, the Groups obligations are discharged, transferred, cancelled or expired. 2.12 Inventories Inventories are valued at the lower of cost and net realisable value, primarily on a weighted average cost basis. Cost of coal inventories is determined by a twelve-month rolling weighted average of historical production costs, while cost of spare parts inventories is determined using the average method. Allowance for inventory obsolescence is provided to reduce the carrying values of inventories to their net realisable value based on the review of the status of the inventories at the end of the year. 2.13 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. For finance leases, each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. 2.14 Provisions Provisions are recognised when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount has been reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time

348

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. a) Environmental rehabilitation provision Rehabilitation costs are a normal consequence of mining, and are provided for as and when a legal or constructive obligation to incur costs associated with rehabilitation arises. The environmental rehabilitation provision consists of costs associated with the continuous mine reclamation during mine operation. Estimated long-term environmental rehabilitation provisions are measured based on the net present value of the estimated future costs and although the ultimate cost to be incurred is uncertain, the Groups businesses estimate their respective costs based on feasibility and engineering studies using current restoration standards and techniques, taking into account the Groups environmental policy and current Indonesian environmental and regulatory requirements, including the requirements of the CCoW. The unwinding of the discount applied in establishing the net present value of provisions is charged to the income statement in each accounting period as a financing cost. b) Mine closure provisions Mine closure provisions, which include decommissioning and demobilisation of facilities and other closure activities, are recognised when the economic life of the mine ends within the period of the existing life of the CCoW because they relate to the facilities which are in use over the life of the mine. The initial mine closure provision together with other movements in the provisions for close-down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised in Mining properties, within Property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate on a UoP basis. 2.15 Taxation The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where Berau and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

349

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is provided in respect of fair value adjustments on acquisitions. These adjustments may relate to assets such as mining rights or resources that, in general, are not eligible for income tax allowances. In such cases, the provision for deferred tax is based on the difference between the carrying value of the asset and its nil income tax base. The existence of a tax base for capital gains tax purposes is not taken into account in determining the deferred tax provision relating to such mining rights or resources because it is expected that the carrying amount will be recovered primarily through use and not from the disposal. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 2.16 Employee benefits Post-employment benefits Depending on the laws and practices in force in the countries where the Group operates, mainly Indonesia, Group companies have obligations in terms of pensions, early retirement payments, retirement bonuses and other benefit plans. Such obligations generally apply to all of the employees within the companies concerned. In Indonesia, the Group is required to provide to its employees a minimum amount of pension benefits in accordance with Labour Law No. 13/2003. The Groups obligations in relation to pensions and other employee benefits are recognised and measured in compliance with IAS 19. Accordingly: the cost of defined contribution plans is expensed based on the amount of contributions payable in the period; the Groups obligations concerning pensions and other employee benefits payable under defined benefit plans are assessed on an actuarial basis using the projected unit credit method. These calculations are based on assumptions relating to mortality, staff turnover and estimated future salary increases, as well as the economic conditions specific to each country or subsidiary of the Group. Discount rates are determined by reference to the yield, at the measurement date, on government bonds, considering currently that there is no deep market for high-quality corporate bonds, in the related geographical area, mainly in Indonesia. provisions are recorded when commitments under these plans less the unrecognised past service cost exceed the fair value of plan assets. Where the value of plan assets (capped where appropriate) is greater than the related commitments, the surplus is recorded as an asset under Other current assets or Other non-current assets. actuarial gains and losses resulting from changes in actuarial assumptions and experience adjustments are recognised using the corridor method. Accordingly, actuarial gains and losses that fall outside the higher of 10 per cent of the present value of the defined benefit obligation or 10 per cent of the fair value of the plan assets (if any) are amortised over no more than the remaining working lives of the employees. past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period

350

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

of time (the vesting period). In this case, the past-service costs are amortised on a straightline basis over the vesting period. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related services are provided. A liability is recognised for the amount expected to be paid for short-term cash bonuses if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. 2.17 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown, net of tax, as a deduction to share premium. Reacquisition of ordinary shares to be held as treasury stock for future reissuance is accounted for under the par value method. Under this method, treasury stock is presented at the par value as a reduction to equity in the treasury stock reserve. If the treasury stock is purchased at a price above par value, the related share premium account is adjusted by the difference between the amount paid and the par value. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is credited to share premium. 2.18 Contingencies Contingent liabilities are not recognised in the consolidated financial information but are disclosed by way of note unless their occurrence is remote. Contingent assets are not recognised in the consolidated financial information but they are disclosed by way of note if they are deemed probable.

3 TRANSITION TO IFRS This is the Berau Groups first set of consolidated financial information prepared in accordance with IFRS. The accounting policies set out in note 2 have been applied in preparing the consolidated financial information for the years ended 31 December 2009, 31 December 2008 and 31 December 2007 and in the preparation of an opening IFRS balance sheet at 1 January 2007 (the Berau Groups date of transition). In preparing the opening IFRS balance sheet, the Berau Group has adjusted amounts reported previously in financial statements prepared under accounting principals generally accepted in Indonesia (Indonesian GAAP). An explanation of how the transition from Indonesian GAAP to IFRS has affected the Berau Groups financial position and financial performance is set out in the following tables and notes that accompany the tables. Initial elections upon adoption Set out below are the applicable IFRS 1 exemptions and exceptions applied in the conversion from Indonesian GAAP to IFRS.

351

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

IFRS exemption options a) Exemption from business combinations IFRS 1 provides the option to apply IFRS 3, Business combinations, prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Berau Group elected to apply IFRS 3 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated. Exemption for fair value as deemed cost The Berau Group did not elect to measure certain property, plant and equipment at fair value as at 1 January 2007. Exemption for cumulative translation differences IFRS 1 permits cumulative translation gains and losses to be reset to zero at the transition date. This provides relief from determining cumulative currency translation differences in accordance with IAS 21, `The effects of changes in foreign exchange rates, from the date a subsidiary or equity method investee was formed or acquired. The Berau Group has not elected to reset all cumulative translation gains and losses to zero in opening retained earnings at its transition date. Exemption for employee benefits IFRS 1 provides relief from retrospective application of IAS 19, Employee benefits, for the recognition of actuarial gains and losses in excess of a limit of the greater of 10 per cent. of plan assets and plan liabilities to be recognised in the statement of comprehensive income with the balance deferred on the balance sheet. The Berau Group already used the corridor approach before adoption of IFRS and therefore, this exemption is not applicable to the Berau Group. Exemption for compound financial instruments IFRS 1 provides exemption from identifying separately the two elements of equity if the liability is not outstanding at the date of transition. The Berau Group did not have any outstanding liability as at the transition date as a result of a compound financial instrument issued, therefore this exemption is not applicable. Exemption for leases There is an exemption in IFRS 1 permitting analysis of the arrangements that may contain a lease to be done based on facts and circumstances at the date of transition to IFRS. The Berau Group has elected to analyse these facts and circumstances as of 1 January 2007. Exemption for decommissioning liabilities A decommissioning liability can be measured at the date of transition to IFRS in accordance with IAS 37, Provisions, contingent liabilities and contingent assets. The first-time adopter then discounts the liability back to when it first arose and adds that amount to the related fixed asset. The asset is depreciated with the appropriate additional amount up to the date of transition to IFRS. The Berau Group did not use this exemption. Designation of previously recognised financial instruments IFRS 1 permits the Berau Group to designate an investment as available-for-sale at the date of transition to IFRS. Additionally, IFRS 1 permits the Berau Group to designate any financial asset or liability as at fair value through profit or loss at the date of transition if the asset or liability meets the criteria prescribed in IAS 39 at that date. The Berau Group has designated its investments as available-for-sale at transition date however, these were not material. 352

b)

c)

d)

e)

f)

g)

h)

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

i)

Borrowing costs As permitted by IFRS 1, the Berau Group has chosen to apply the transitional provisions of IAS 23 at the date of transition to IFRS. This allows the Berau Group to capitalise borrowing costs relating to qualifying assets prospectively from 1 January 2009. The Berau Group has elected to capitalise borrowing costs from 1 January 2009. However, in the absence of material qualifying assets, no adjustments have been made. The remaining voluntary exemptions do not apply to the Berau Group: Share-based payments (IFRS 2), as the Berau Group has not entered into any share based payment arrangements; Insurance contracts (IFRS 4), as this is not relevant to the Berau Groups operations; Assets and liabilities of subsidiaries, associates and joint ventures, as only the Berau Groups consolidated financial information has been prepared in accordance with IFRS; Investments in subsidiaries, jointly controlled entities and associates, as the Berau Group does not prepare separate financial statements under IFRS; and Financial assets or intangible assets accounted for under IFRIC 12, Service Concession Arrangements as the Berau Group has not entered into any arrangements within the scope of IFRIC 12.

IFRS mandatory exceptions a) Estimates The Berau Group used the same estimates for preparing consolidated financial information under IFRS as those used at the time when the financial statements under Indonesian GAAP were prepared for the same financial years. The other compulsory exceptions of IFRS 1 have not been applied as these are not relevant to the Berau Group: 3.1 Hedge accounting; and Derecognition of financial assets and financial liabilities.

Reconciliations of Indonesian GAAP to IFRS IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows. The Berau Groups first-time adoption did not have an impact on the total operating, investing or financing cash flows. The following tables represent the reconciliations from Indonesian GAAP to IFRS for the years ended 31 December 2007, 2008 and 2009. a) There was no difference between shareholders equity under Indonesian GAAP and IFRS as at 1 January 2007.

353

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

b)

Reconciliation of shareholders equity as at 31 December 2007

Indonesian GAAP 6 7 13 49 62 (i) (ii) (iii) (iv) (v) Foreign AmortisDeferred Reclasexchange Goodwill ation Tax sification IFRS 6 5 2 19 (6) 1 5 5 2 2 2 20 (1) (2) 48 (1) 68

Share capital Share premium Retained earnings Other reserves Total equity attributable to owners of the parent Minority interest Total equity

c)

Reconciliation of shareholders equity as at 31 December 2008

Indonesian GAAP 21 19 40 91 131 (i) (ii) (iii) (iv) (v) Foreign AmortisDeferred Reclasexchange Goodwill ation Tax sification IFRS 18 10 9 58 (18) 1 10 10 2 2 9 59 (1) (9) 83 (1) 142

Share capital Share premium Retained earnings Other reserves Total equity attributable to owners of the parent Minority interest Total equity

d)

Reconciliation of shareholders equity as at 31 December 2009

Indonesian GAAP 1 251 100 18 370 35 405 (i) (ii) (iii) (iv) (v) Foreign AmortisDeferred Reclasexchange Goodwill ation Tax sification IFRS 1 251 18 14 1 133 (18) 14 14 1 385 (1) 34 419

Share capital Share premium Retained earnings Other reserves Total equity attributable to owners of the parent Minority interest Total equity

354

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

e)

Reconciliation of total comprehensive income for the year ended 31 December 2007
Indonesian GAAP 377 (291) 86 (13) (4) (4) (6) 59 25 (33) 51 (28) 23 (i) Foreign exchange 6 6 6 6 (ii) Goodwill 5 5 5 5 (iii) Amortisation 2 2 2 2 2 (iv) Deferred Tax (1) (1) (v) Reclassification 2 2 (2) IFRS 377 (289) 88 (13) (4) 2 1 74 25 (35) 64 (29) 35

Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses (Loss)/gain on foreign exchange Other income Operating profit Finance income Finance costs Profit before income tax Income tax expense Profit and total comprehensive income for the year Attributable to Owners of the parent Minority interest Profit and total comprehensive income for the year

4 19 23 6 6 5 5 1 1 2

2 18 (1) (2) 17 (1) 35

Indonesian GAAP 631 (460) 171 (18) (7) (17) (6) 123 25 (30) 118 (62) 56 (i) Foreign exchange 13 13 13 13 (ii) Goodwill 5 5 5 5 (iii) Amortisation (iv) Deferred Tax (v) Reclassification 2 2 (2)

f)

Reconciliation of total comprehensive income for the year ended 31 December 2008
IFRS 631 (460) 171 (18) (7) (4) 1 143 25 (32) 136 (62) 74

Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses (Loss)/gain on foreign exchange Other income Operating profit Finance income Finance costs Profit before income tax Income tax expense Profit and total comprehensive income for the year Attributable to Owners of the parent Minority interest Profit and total comprehensive income for the year

18 38 56 13 13 5 5 (1) 1 4 39 (4) 35 74

355

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

g)

Reconciliation of total comprehensive income for the year ended 31 December 2009
Indonesian GAAP 800 (473) 327 (26) (10) 17 (24) 284 25 (26) 283 (124) 159 (i) Foreign exchange (15) (15) (15) (15) (ii) Goodwill 4 4 4 4 (iii) Amortisation (iv) Deferred Tax (v) Reclassification 22 22 (22) IFRS 800 (473) 327 (26) (10) 2 2 295 25 (48) 272 (124) 148

Revenue Cost of sales Gross profit General and administrative Distribution and marketing Gain/(loss) on foreign exchange Other income Operating profit Finance income Finance costs Profit before income tax Income tax expense Profit and total comprehensive for the year Attributable to Owners of the parent Minority interest Profit and total comprehensive income for the year

83 76 159 (15) 4 (15) 4 8 80 (8) 68 148

b)

Notes to the reconciliation of Indonesian GAAP and IFRS (i) Foreign exchange For the purposes of this consolidated financial information, the Berau Group determined the functional currency of all entities within the Berau Group to be USD. Under Indonesian GAAP, some of the companies within the Berau Group had Indonesian Rupiah (IDR) as their functional currency. The foreign exchange gains/losses reported under Indonesian GAAP have been adjusted to reflect the change in the functional currency under IFRS. The Berau Group changed its presentation currency from Indonesian Rupiah to United States Dollars on transition date. (ii) Goodwill Under Indonesian GAAP, goodwill was amortised over a period corresponding to its estimated economic recovery. In accordance with IFRS, goodwill is not amortised; it is, instead, tested for impairment annually. The amortisation of goodwill amounting to USD 5 million, USD 5 million and USD 4 million for the years ended 31 December 2007, 2008 and 2009 respectively, was reversed in the statement of comprehensive income. Goodwill previously recognised under Indonesian GAAP (after the amortisation reversal above) was determined to be separately identifiable Mining properties under IFRS. The opening goodwill balance on 1 January 2007 of USD 19 million was reclassified to Mining properties within Property, plant and equipment. This reclassification to mining properties resulted in additional deferred tax liabilities and as a consequence, new goodwill. (iii) Amortisation The amortisation adjustments represent the amortisation of Mining Properties which are reclassified from goodwill. This is calculated using the units-of-production method. In its Indonesian GAAP consolidated financial statements, the Berau Group calculated amortisation on producing assets based on 75% of its mineable reserves. For IFRS, the

356

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Berau Group elected to align its policies to that of Vallar PLC and amortises its producing assets using 100% of its mineable reserves from 1 January 2007. (iv) Deferred tax Changes in deferred tax represent the impact of deferred taxes on the adjustments necessary for the transition to IFRS. Reclassifications Statement of comprehensive income The amortisation of deferred charges was reclassified from Other costs under Indonesian GAAP to Finance costs under IFRS. Similarly, penalties incurred on early repayment of loans were reclassified to Finance costs. In its Indonesian GAAP consolidated financial statements, the investment in Rognar Holding BV (Rognar) was classified as an investment in associate and carried at cost. As Berau indirectly held a further 5% interest in its subsidiary Berau Coal through this investment in Rognar, the minority interest under IFRS is 5% lower as compared to the same result in its Indonesian GAAP consolidated financial statements, and has been reclassified accordingly.

(v)

Balance sheet Some developed and producing Mining properties were disclosed as Exploration, evaluation and development assets under Indonesian GAAP. Developing and producing assets were reclassified to Property, plant and equipment under IFRS, in accordance with Vallar PLC policy. In-pit inventory recognised under Indonesian GAAP was reclassified to Deferred stripping under IFRS as it represented the cost of removing overburden to expose coal. Under Indonesian GAAP the royalty payable to the Government was set off against the Value Added Tax (VAT) recoverable from the Government. These amounts may not be settled net. Under IFRS and Vallar PLC policy, the VAT receivable has been reclassified to Other receivables.

4 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of consolidated financial information in accordance with IFRS requires the use of estimates and assumptions to determine the value of assets and liabilities, and contingent assets and liabilities at the balance sheet date, and revenues and expenses reported during the period. Due to uncertainties inherent in the estimation process, the Berau Group regularly revises its estimates in light of currently available information. Final outcomes could differ from those estimates. The main estimates used in preparing the Berau Groups consolidated financial information are presented below. 4.1 Measurement of the fair value of assets acquired and liabilities assumed Certain key assumptions were used to measure the fair value of assets acquired and liabilities assumed, most notably on the recent acquisition of Winchester Investment Holdings PLC. These key estimations include values assigned to the estimated future coal or minerals prices, the market outlook for the measurement of future cash flows, and the applicable discount rate. These assumptions reflect managements best estimates. Determination of coal reserve estimates The Berau Group report its coal reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition) (the 2004 JORC

4.2

357

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Code), prepared and published by The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. Under the 2004 JORC Code, the term coal resource refers to a concentration or occurrence of coal of intrinsic economic interest in or on the Earths crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a coal resource are known, estimated or interpreted from specific geological evidence and knowledge. Coal resources are subdivided, in order of increasing geological confidence, into inferred, indicated and measured categories. The term coal reserve is defined in the 2004 JORC Code as the economically mineable part of a measured and/or indicated coal resource. Coal reserves are subdivided in order of increasing confidence into probable coal reserves and proved coal reserves. Reserves, and for certain mines, other mineral resources, determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine stripping ratios and for forecasting the timing of the payment of close-down and restoration costs and clean up costs. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction within the term of the CCoW. There are numerous uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. 4.3 Recoverable amount of property, plant and equipment and goodwill The recoverable amount of goodwill and property, plant and equipment is based on estimates and assumptions regarding in particular the expected market outlook and future cash flows associated with the assets. Estimated future cash flows include estimates on estimates of future costs to produce proven and probable reserves, future commodity prices, foreign exchange rates and discount rates. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in adjustments to the impairment expenses already booked. Provision for environmental rehabilitation and mine closure Parameters having a significant influence on the amount of provisions relating to environmental rehabilitation include the timing of expenditure and the discount rate applied to cash flows, as well as the actual level of expenditure. These parameters are based on information and estimates available to the Berau Group at the current time. The amounts required to be provided for environmental remediation are also subject to ongoing regulatory change in Indonesia, subsequent to the issuance of the new Law on Minerals and Coal Mining on 11 January 2009. As the Government of Indonesias implementation of new requirements becomes clearer, there may be a need to revise estimates for the environmental rehabilitation provision. As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in ore reserves or

4.4

358

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

production rates. As a result there could be significant adjustments to the provision for closedown and restoration and environmental cleanup, which would affect future financial results. 4.5 Capitalisation and deferral of stripping costs The Berau Group defers stripping costs incurred during the production stage of its operations when the actual stripping ratio for a specific period exceeds the expected average stripping ratio over the life time of the mine or pit. Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the current period ratio falls below the average stripping ratio. The expected average ratio is based on proved and probable reserves of the mine. The expected average stripping ratio is highly dependent on the design of the mine and on the technical and economical parameters of the project. The Berau Group reviews regularly the expected average stripping ratio. 5 5.1 FINANCIAL RISK MANAGEMENT Financial risk factors The Berau Groups activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. Market risk a) Foreign exchange risk The Berau Group enjoys a natural hedge between the USD and IDR. The percentage of costs in USD is aligned with the revenues the Berau Group receives in USD. This relationship holds true for the Berau Groups revenues and costs in IDR. b) Commodity price risk The movement in coal price is determined by macro-economic factors, with global supply and demand conditions further adding to volatility. Berau has taken steps to mitigate the risk by modelling the impact of movements in coal prices, entering into long-term supply contracts, and closely monitoring the cost components. The Berau Groups normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the board and to rigid internal controls. The Berau Groups exposure to commodity prices is diversified by virtue of its broad commodity base and the Berau Group does not generally believe commodity price hedging would provide long term benefit to shareholders. Contract prices for coal are generally agreed annually or for longer periods with customers, although volume commitments vary by product. c) Cash flow and fair value interest rate risk The Berau Groups interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Berau Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Berau Group to fair value interest rate risk. The Berau Groups policy was to maintain approximately 50% 80% of its long-term borrowings in fixed rate instruments until it was all settled on 28 December 2009. By the end of 2009, the Berau Group made an exception to the policy by obtaining and maintaining a short-term variable rate borrowing for the acquisition of Winchester and settling the prior long-term borrowings. During 2007, 2008 and 2009, borrowings at variable rates were denominated in USD.

5.2

359

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Increase of 1% Increase of 2% Increase of 3% Decrease of 1% Decrease of 2% Decrease of 3% 5.3

Year ended 31 December 2007 2008 2009 1 1 1 1 1 2 2 1 (1) (1) (1) (1) (1) (2) (2) (1)

Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions and receivables. The Berau Group places funds with banks and financial institutions only if independently rated with a minimum rating of B1. The Berau Group does not extend credit and requires all customers to provide irrevocable letters of credit (LC) or pay by confirmed electronic transfer, a method that is only applicable to Indonesian Government State Owned Enterprises. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. Maximum exposure the Berau Group faces due to credit risks on various financial assets are as follows: 2007 2008 2009

Cash and cash equivalents Counterparties with external credit ratings: Aa2 Aa1 Ba3 B1 Counterparties without external credit ratings

89 2 3

18 100 3 3 124

284 18 3 305

Trade and other receivables Counterparties with external credit ratings: A1 A2 Ba2 Ba3 WR Counterparties without external credit ratings

12 7 128

94

7 5 212

9 6 7 12 239

5.4

Liquidity risk Cash flow forecasting is performed in the operating entities of the Berau Group and aggregated by group finance. Group finance monitors rolling forecasts of the Berau Groups liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its debts at all times so that the Berau Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Berau Groups debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements for example, currency restrictions. In accordance with the Cash Account Management Agreement (CAMA) signed on 15 December 2006, the Berau Group is required to keep in reserve, one complete coupon

147

224

273

360

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

payment for the USD 325 million outstanding notes issued by the Berau Group in 2006. The CAMA also utilises a waterfall structure that ensures the Berau Group will have sufficient liquidity on hand to meet its operational requirements and tax obligations. The table below analyses the Berau Groups financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:

2007

2008

2009

Less than 1 year 179 10 25 1

Between 1 to 5 years 300 1

Less than 1 year 253 13 25

Between 1 to 5 years 275

Less than 1 year 350 25 300

Between 1 to 5 years

Trade and other payables third parties related parties Borrowings third parties related parties finance lease

250

5.5

215

301

291

275

675

250

Capital risk management The Berau Groups objectives when managing capital are to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Berau Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Berau Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the combined and consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the combined and consolidated balance sheet plus net debt. During 2009, the Berau Groups strategy, which was unchanged from 2007, was to maintain the gearing ratio within 30% to 80% and a B1 credit rating. The credit rating has been maintained throughout the period. The gearing ratios at 31 December 2007, 2008 and 2009 were as follows:

2007

2008

2009

Total borrowings and dues to related parties Less cash and cash equivalents Total net debt Total equity Total capital Gearing ratio 5.6

328 (94) 234 68 302

306 (124) 182 142

589 (305) 284 419

324

703

77%

56%

40%

Fair value The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

361

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Berau does not have any financial assets on the consolidated balance sheets that are carried at fair value. Due to the short-term nature of all financial assets and liabilities classified as current on the balance sheet, their fair value approximate the carrying values. The fair value of the amounts due from related parties classified as non-current were USD 255 million, USD 279 million, and USD 2 million as at 31 December 2007, 2008 and 2009, respectively. For fair value of non-current borrowings, see note 16. The fair value of a financial instrument traded on an active market is based on its quoted market price at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arms length basis. The Berau Group did not hold any financial instruments that were traded on an active market and as such these were not included in level 1 hierarchy. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include: Quoted market prices or dealer quotes for similar instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value. Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

6 SEGMENTAL REPORTING In accordance with the provisions of IFRS 8 Operating Segments, the operating segments used to present segment information were identified on the basis of internal reports used by the Berau Groups Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is the Berau Groups chief operating decision maker within the meaning of IFRS 8. The Berau Group has identified only one segment-coal. All operations and assets of Berau Group are located in Indonesia. The Berau Group has entered into long-term sale agreements with various parties. The details of customers with sales of more than 10% of total revenue were as follows: Amount PT Indonesia Power PT Jawa Power Taiwan Power Company, Taiwan Others (each below 10%) Revenue 50 60 45 222

2007

% Amount

2008

% Amount 144 94 85 477

2009

13% 16% 12% 59%

134 90 81 326

21% 14% 13% 52%

18% 11% 11% 60%

362

377

100%

631

100%

800

100%

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

The Berau Groups revenue by destination is as follows: Amount Indonesia China Hong Kong India Japan South Korea Taiwan Thailand Revenue 139 30 36 42 9 49 52 20

2007

% Amount

2008

% Amount 312 94 18 81 28 152 85 30

2009

37% 8% 10% 11% 2% 13% 14% 5%

258 45 15 53 45 90 83 42

42% 7% 2% 8% 7% 14% 13% 7%

39% 11% 2% 10% 4% 19% 11% 4%

377

100%

631

100%

800

100%

7 BUSINESS COMBINATIONS Acquisition of 34% minority interest in Berau Coal On 29 December 2009, Berau acquired 100% of Winchester, a company incorporated in the Republic of Seychelles, which indirectly owned 34% of Berau Coal. Of the total, a 54.5% interest was acquired from Eureka Company Limited (Eureka) and Shelburne Company Limited (Shelburne) for USD 300 million in cash. The remaining 45.5% was acquired from PT Bukit Mutiara in consideration for the issue of 6,250 new shares in Berau, representing 83.33% of Beraus share capital. Based on an independent valuation report the fair value of 45.5% shares of Winchester amounted to USD251.6 million. At the time of the acquisition, Berau held a 51% interest in Berau Coal through its subsidiary, Armadian and an indirect 5% interest through a 12.8% investment in Rognar. As a result of the acquisition of Winchester, the minority interest in Berau Coal has reduced from 44% as at 31 December 2007 and 2008 to 10% as at 31 December 2009. On the date of acquisition, Winchesters liabilities included a loan payable to Berau Coal amounting to USD 296 million which was included in consideration. The calculation of the total consideration paid and the book value of minority interest acquired is as follows: Shares issued (note 20) Cash paid Loan receivable Less: Book value of minority interest acquired Excess of consideration over book value of minority interest acquired 252 300 296

848 (117) 731

434 (108) 405 731

The excess of consideration over book value of minority interest acquired is allocated as follows: Mining properties (see note 11) Deferred tax liabilities on above Goodwill (see note 8)

363

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

GOODWILL

2007

2008

2009 5 405

1 January Additions through business combination (note 7) 31 December

5 5

410

Impairment tests for goodwill Goodwill is all allocated to the Berau Groups only cash-generating unit (CGU) which is the Berau Coal mining operation. Management has used a value in use discounted cash flow basis to perform the Berau Groups annual impairment test on goodwill. The following key assumptions were used in the impairment testing of goodwill and also in assessing the carrying value of other mining related assets: a) b) c) d) Cash flows are scheduled over the life of the coal mine or CCoW, whichever is shorter; Inflation rate is 4% per annum; Average coal price per tonne is between USD 91 and USD 113 per tonne over the life of the CCoW; Discount rate used is the Weighted Average Cost of Capital (WACC) of the entity of 12.3%.

The WACC includes the gearing, cost of capital and pre-tax cost of debt. This reference rate reflects specific risks relating to the relevant operating segment, which is coal mining. A reasonable possible change in assumptions does not lead to carrying value being greater than the value-in-use. No class of asset including goodwill was impaired. 9 EXPLORATION AND EVALUATION ASSETS

Total

1 January 2007 and 31 December 2007 Additions 31 December 2008 Additions 31 December 2009

2 2 4

Exploration and evaluation assets relate to activities in Benungan, Block 8-10, Perapatan and Gurimbang areas.

364

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

10

DEFERRED STRIPPING COSTS

2007

2008

2009

1 January Additions Releases 31 December

19 16 (2)

33 12 (8) 37

37 15 (4)

Deferred stripping costs are expensed when the actual stripping ratio is lower than the planned stripping ratio. The following actual and planned stripping ratios applied during the years presented:

2008

33

48

2007

2009

Area of interest

Actual stripping ratio 7.51 6.60 10.18 7.23 10.99 9.45 303.90

Planned stripping ratio 7.18 8.56 7.54 5.06 7.87 9.10 6.71

Actual stripping ratio 8.31 6.77 11.18 6.48 8.38 8.83

Planned stripping ratio 7.77 8.67 7.75 8.21 8.54 9.10 13.00

Actual stripping ratio 8.55 5.36 12.36 8.08 8.21 9.23 10.45

Planned stripping ratio 8.60 7.11 7.18 7.90 10.10 7.41 7.10

Lati Binungan H3N Binungan H4 Binungan 7 Binungan K Sambarata A Sambarata B1 11

PROPERTY, PLANT AND EQUIPMENT Furniture, fixtures Assets Land and Plant and and office under buildings equipment equipment construction

Mining properties

Total 135 14

Cost At 1 January 2007 Additions At 31 December 2007 Additions Disposal and retirement Reclassifications At 31 December 2008 Additions Acquisitions Disposals and retirement Reclassifications At 31 December 2009

66 2 68 2

28 9 37 3 (1) 2 41 (1) 1 41

36 36 36 10 46

3 3 2 5 5

2 3

5 7 (2)

149 14 (1)

70 2 434 506

10 (1) 9

162 12 434 (1) 607

365

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

Mining properties Accumulated depreciation At 1 January 2007 Depreciation At 31 December 2007 Depreciation At 31 December 2008 Depreciation At 31 December 2009 Net book value At 31 December 2007 At 31 December 2008 At 31 December 2009

Furniture, fixtures Assets Land and Plant and and office under buildings equipment equipment construction

Total

16 3 19 3 22 3 25

16 2 18 2 20 2 22

29 2 31 2 33 2 35

2 2 2 2

63 7 70 7 77 7 84

49 48 481

19 21 19

5 3 11

1 3 3

5 10 9

79 85 523

In accordance with the CCoW, certain fixed assets recorded in this consolidated financial information remain the property of the Government of Indonesia. However, Berau has an exclusive right to use the fixed assets over the contract period. The Berau Group entered into finance lease agreements for various items of heavy equipment that are used for mining operations. Plant, machinery and equipment include the following amounts where the Berau Group is a lessee under a finance lease: 2007 2008

Cost capitalised finance lease Accumulated depreciation Net book value

5 (3) 2

5 (5)

As of 31 December 2007, 2008 and 2009, the Berau Group did not recognise any asset impairment. Management believes that there were no indicators of impairment.

Allocation of depreciation expense for the financial years ended 31 December 2007, 2008 and 2009, respectively, were as follows: 2007 2008 2009

Cost of sales

Assets under construction represent costs capitalised in connection with infrastructure development in Berau Coals mine site in Kalimantan. These are not yet ready for their intended use.

366

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

12 DEFERRED TAXES The analysis of deferred tax assets and deferred tax liabilities is as follows: Accelerated tax depreciation Deferred tax liabilities At 1 January 2007 (Charged)/credited to the income statement At 31 December 2007 (Charged)/credited to the income statement At 31 December 2008 (Charged)/credited to the income statement Acquired through business combinations At 31 December 2009

Lease

Total

(19) 1 (18)

(1) (1)

(20) 1

(19)

(18)

109

(1)

(19)

109

(127)

Rehabilitation Deferred tax assets At 1 January 2007 Charged)/credited to the income charge statement At 31 December 2007 (Charged)/credited to income statement At 31 December 2008 (Charged)/credited to the income statement At 31 December 2009 13 INVENTORIES

Employee benefit 1

(1)

(128)

Total 2

(1)

(1)

2007 2 1

1 2008 8 2

1 2009 15 3

Coal inventories Consumable supplies

In accordance with the CCoW, stores and consumable supplies recorded in the consolidated financial information remain the property of the Government with an exclusive right of use granted to Berau Coal. 14 TRADE AND OTHER RECEIVABLES

10

18

2007 50 96 1

2008 85 130 9

2009 93 171 9

Trade receivables Tax recoverable Other receivables

367

147

224

273

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

As of 31 December 2007, 2008 and 2009, Berau did not provide for any allowance for doubtful accounts since Beraus management believes that all receivables are collectible. There is no element of trade and other receivables that is interest bearing. Due to their short-term maturities, the fair value of trade and other receivables approximates their carrying value. At 31 December 2007, 2008 and 2009, the following trade receivables were past due but not impaired: Not past due Past due but not impaired

Total

0-30 days 31-60 days 61-90 days 48 85 86 2 5

> 90 days

Impaired

31 December 2007 31 December 2008 31 December 2009

50 85 93

Tax recoverable represents amounts claimed by Berau Coal from the Government. This amount is part of an ongoing dispute with the Government which resulted from a change in the VAT law in 2001 when coal became a VAT exempt supply. This change meant that Berau Coal could no longer claim credits for its input VAT on purchases. However, under the CCoW, Berau Coal is indemnified against Indonesian taxes not in effect at the time of signing of the CCoW. On this basis, Berau Coal claimed reimbursement for input VAT paid from 2001. The claims were rejected and Berau Coal began setting off the VAT receivable against royalty payments due under the CCoW. The VAT receivable and royalty payable amounts have been disclosed gross within Trade and other receivables and Trade and other payables, respectively. On 19 September 2008, Berau Coal paid IDR90 billion into escrow at the request of the Government as a gesture of good faith in respect of the royalty payable. This amount has been included in other current assets in the balance sheet as at 31 December 2008 and 2009 at USD8 million and USD10 million, respectively. 15 CASH AND CASH EQUIVALENTS

2007 90 4

2008 121 3 124

2009 280 25

Cash and cash equivalents Guaranteed deposits

In accordance with the CAMA signed on 15 December 2006, the Berau Group is required to keep in reserve, one complete coupon payment for the USD 325 million outstanding notes issued by the Berau Group in 2006. The CAMA also utilises a waterfall structure that ensures the Berau Group will have sufficient liquidity on hand to meet its operational requirements and tax obligations. In certain events such as the disposal of assets, the Berau Group is required to reserve proceeds until the outstanding notes have been repaid in full, there was no such cash reserved as at 31 December 2007, 2008 and 2009. Guarantee deposits placed in PT Bank Danamon Indonesia Tbk and PT ANZ Panin Bank are pledged for bid bonds and performance bonds required by several third party customers.

94

305

368

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

16

BORROWINGS
2007 Carrying value 2008 2009 269 269 24 24 293 289 300 589 589 2007 292 1 293 24 1 25 318 Fair value 2008 269 269 24 24 293 2009 289 300 589 589

Non-current From third parties From related parties Current From third parties From related parties Finance lease liabilities

292 1 293 24 1 25 318

As of 31 December 2007 and 2008, borrowings include Senior Notes comprising Floating Rate Notes and Fixed Rate Notes with principal amounting to USD 100 million and USD 225 million, respectively, each with a maturity date of 15 December 2011. The Floating Rate Notes bear interest at three-month LIBOR plus 3.75% per annum while the Fixed Rate Notes bear interest at a rate of 9.375% per annum. These Notes were repaid in 2009. As of 31 December 2009, borrowings includes a loan of USD 300 million from Credit Suisse AG, Singapore Branch (Credit Suisse) which will mature in 2010. The loan bears interest at three-month LIBOR plus 4.75% per annum for the first two quarters, 6.25% per annum for the third quarter, and 7.75% per annum for the fourth quarter. The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. Management believes that there was no significant difference between the carrying value and the fair market value of the non-current borrowings. 17 i) RELATED PARTIES Transactions and balances with related parties under common key management The Berau Group subcontracted PT Saptaindra Sejati (SIS) for its mining services with total costs amounting to USD 48 million and USD 68 million for 2007 and 2008 respectively. In 2009, SIS was no longer a related party. Amounts shown as other receivables and trade payables are balances with SIS. Loans to related parties arise mainly from the intercompany loan extended by Berau Coal to Begarion Capital Limited and Highlander Investments Pte. Ltd. that earned interest at rates of 10.375% and 9.85% respectively. These loans were repaid in December 2009. Amounts relating to the loans are disclosed as follows:

2007 249 5

2008 273 5

2009

Due from related parties: Begarion Capital Limited Highlander Investments Pte. Ltd

Finance income Begarion Capital Limited

24

254

23

278

24

369

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

ii)

Borrowings from the shareholder of Berau On 29 December 2009, Berau entered into a loan with PT Bukit Mutiara amounting to USD 300 million which will mature in 2010. The loan bears interest of three-month LIBOR plus 8.25% per annum for the first two quarters, 9.75% per annum for the third quarter, and 11.25% per annum for the fourth quarter. Remuneration of the key management personnel Key management personnel include the directors and other key members of management. Remuneration paid or payable for their services is shown below:

iii)

2007 1

2008 1 1

2009 2 1

Salaries and social charges Bonus

18 PROVISIONS

2007 2 1

2008 3 2

2009 3 2

Retirement benefit obligations Reclamation provisions

Non-current Current

2 1

4 1

4 1

The movements in provision are as follows:

Retirement benefit obligations

Reclamation provisions 1

Total 2 2 (1) 3 3 (1) 5 2 (2) 5

1 January 2007 Charged to the statement of comprehensive income Utilised in the year 31 December 2007 Charged to the statement of comprehensive income Utilised in the year 31 December 2008 Charged to the statement of comprehensive income Utilised in the year 31 December 2009

2 1 (1)

2 2 (1) 3 1 (2) 2

1 1 2 1

The Berau Group operates a defined benefit pension plan based on employee pensionable remuneration and length of service. The plans are unfunded.

The Berau Group recognised employee benefit obligations as of 31 December 2007, 2008, and 2009 based on actuarial calculations prepared using the Projected Unit Credit Method.

370

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

The principal assumptions used in the actuarial computation are set out below:

2007

2008

2009

Discount rate Future salary increases Mortality table Disability rate Retirement age 19 TRADE AND OTHER PAYABLES

10.50% 12% 10.50% 10.00% 10% 10.00% Table Mortality Indonesia 1999 10% Mortality Rate 55 years 2007 2008 46 13 140 67 2009 89 176 85

Trade payables third parties related parties Other payables Accrued expenses

31 10 104 44

Other payables relate to royalty payable to the Government and is subject to a dispute (see note 14).

189

266

350

Due to their short-term maturities, the fair value of trade and other payables approximates their carrying value. 20 SHARE CAPITAL AND SHARE PREMIUM Share capital and share premium as of 31 December 2007, 2008 and 2009 (amounts in USD000s) are as follows: Issued number of shares Share capital Share premium

Total 124

At 1 January 2007 Proceeds from shares issued At 31 December 2007 Proceeds from shares issued At 31 December 2008 Proceeds from shares issued At 31 December 2009

1,250 1,250 1,250 6,250 7,500

124 124 124 623 747

124

250,937 250,937

124 250,937 251,061

The authorised share capital of Berau for the years ended 31 December 2007, 2008 and 2009 was 5,000 shares, 5,000 shares and 30,000 shares, respectively. Ordinary shares have a par value of Rp1 million each. Berau issued 6,250 new shares for USD 251,560 thousand to PT Bukit Mutiara on 29 December 2009 as consideration for the acquisition of 45.5% interest in Winchester.These shares represent 83.33% of Berau.

371

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

21

OTHER RESERVES Common control reserve 1 1 (1)

1 January 2007 Transaction under common control (b) 31 December 2007 and 2008 Transfer transaction under common control 31 December 2009 a)

The Limited Liability Company Law of the Republic of Indonesia No. 1/1995 introduced in March 1995, and amended by Law No. 40/2007 that was issued in August 2007, requires the establishment of a general reserve from net income amounting to at least 20% of a companys issued and paid-up capital. There is no time limit on the establishment of that reserve. As of 31 December 2009, Berau has not yet established its general reserve. Transactions under common control On 2 April 2007, Berau, Armadian and Berau Coal entered into a Novation Agreement whereby all the receivables from Armadian to Berau Coal were transferred to Berau. On the same date, Berau and Armadian entered into a Debt to Equity Conversion Agreement in which Berau converted all its receivables from Armadian into 392,998 new ordinary shares of Armadian. On 8 June 2007, the shareholders of Armadian agreed to the transfer of 4,166 shares or 1% of Armadian shares held by a common shareholder to Berau. The book value and acquisition cost of Armadians shares amounted to USD1.3 million and USD0.4 million, respectively. This transaction was under common control and the difference between the carrying value and consideration amounting to USD 1 million was recorded as a Common control reserve within Other reserves.

Total 1 1 (1)

b)

22

COST OF SALES

2007 160 60 41 17 7 1 3 289

2008 263 100 70 25 7 1 (6) 460

2009 276 79 92 24 7 2 (7) 473

Mining Freight and handling costs Royalties Coal processing and other production costs Depreciation Restoration costs Decrease/(increase) in coal inventories

372

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

23

OPERATING EXPENSES

2007

2008

2009 14 5 3 1 1 2 26

General and administrative expenses Salary, wages and employee benefits Community development and donations Professional fees Rental equipment Repairs and maintenance Others Sub-Total Distribution and marketing expenses Commission Bank charges Employee costs Sub-Total Average number of people employed

6 2 1 1 1 2

8 3 2 1 1 3

13

18

3 1

5 1 1

8 1 1

10

2009

2008

2007

Average number of people (including executive directors) employed: Exploration Finance Operations and administration Total average headcount 24 FINANCE INCOME AND COSTS

58 23 576

53 20 493

42 20 448

657

566

510

2007 24 1

2008 23 2

2009 24 1

Finance income Interest due from related parties Interest on bank deposits

25

25

25

Finance costs Interest on bank borrowings Loss from early redemption of senior notes Net finance costs

(35)

(32) (32) (7)

(33) (15) (48)

(35)

(10)

(23)

373

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

25

TAXATION

2007

2008 62

2009 123 1

Current tax Deferred tax Income tax expense Effective tax rate

30 (1)

29 46%

62 46%

124 46%

The tax on Berau Groups profit before tax differs from the expected income tax charge that would arise using the tax rate applicable to profits of the operating entity under the CCoW (45%) as follows:

2007

2008 136

2009 272

Profit before tax Tax calculated at CCoW rate (45%) Tax effects of: Non-deductible expenses/(Non-taxable income) Foreign currency gains and losses Other Income tax expense

64

29 5 (3) (2)

62 9 (6) (3)

123 (3) 7 (3)

The corporate rate of taxation for Berau was 30%, 30%, and 28% for the fiscal years 2007, 2008, and 2009, respectively. However, as all of the profits have been generated by the subsidiary Berau Coal which is subject to the terms of the CCoW, a rate of taxation of 45% has been applied in the effective tax rate reconciliation. Factors that may impact future tax rates During 2008, the rate of corporate taxation (which will be applicable for Berau but not for Berau Coal) was reduced from 28% to 25% from the fiscal year ended 31 December 2010. 26 EARNINGS PER SHARE Basic earnings per share are calculated by dividing the earnings attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the earnings attributable to owners of the parent and the weighted average number of ordinary shares outstanding during the period for the effects of dilutive potential ordinary shares. There are no dilutive shares that dilute basic earnings per share. Earnings and weighted average number of shares used in the calculations are set out below:

29

62

124

2007

2008 39

2009 80

Profit and total comprehensive income attributable to owners of the parent Weighted average number of ordinary shares in issue (full amount)(a) Basic and diluted earnings per share (USD cents)

18 12,500,000

12,500,000

13,013,700

(a) The weighted average number of shares has been adjusted to reflect the share split effected on 20 March 2010 (see note 30.3).

144

312

615

374

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

27 a)

COMMITMENTS Capital commitments Berau Group has capital commitments contracted for at the end of each reporting period, but not yet incurred as follows:

2007

2008 8 3

2009 5 4

Property, plant and equipment Other

11

28 CONTINGENCIES Berau and its subsidiaries are contingently liable for various claims from third parties arising from the ordinary conduct of business, including tax assessments, results of which are either pending or are being processed by the court, the outcomes of which may be substantial, but are not presently determinable. In addition, the subsidiaries have submitted various claims to third parties, the outcomes of which are not presently determinable pending decision by the court. 29 PRINCIPAL SUBSIDIARY Country of incorporation Indonesia Nature of business Coal mining Effective ownership 2007 2008 2009

Name of subsidiaries PT Berau Coal

56

56

90

All the subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. 30 SUBSEQUENT EVENTS 30.1 Acquisition of Maple Holdings Limited On 18 August 2010, the Berau Group acquired 100% ownership (1 share) in Maple Holdings Limited, a private limited company engaged in coal sales services incorporated in Labuan, Malaysia, from PT Bukit Mutiara, Berau Groups controlling shareholder, for USD 201 million. 30.2 Lawsuit filed by Montelena On 18 May 2010, a writ of summons issued out of the High Court of Singapore by Montelena Capital Limited (Montelena) named Armadian, an intermediate holding company in the Berau Group that directly owns 51% of Berau Coal, as a defendant in an action connected with an option agreement that Armadian entered into in June 2004, prior to Beraus ownership of Berau Coal. On 23 July 2010 Armadian paid USD 20 million to Montelena as full and final settlement of Montelenas claims against Armadian in connection with the option agreement. Initial Public Offering On 20 March 2010 Berau increased its authorised share capital from 30,000 shares with a par value of Rp1 million per share to 90,000,000,000 shares with a par value of Rp100 per share. As a result, Berau effected a share split by converting its 7,500 issued shares with a par value of Rp1 million per share to 75,000,000 issued shares with a par value of Rp100 per share.

30.3

375

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the consolidated financial information For the years ended 31 December 2007, 2008 and 2009
(Expressed in millions of USD, unless otherwise stated)

On the same date, Berau issued 31,425,000,000 shares with a par value of Rp100 per share, which was carried out through an allocation of retained earnings of USD 76 million and share premium of USD 251 million. As the share capital of Berau is maintained in IDR, a foreign exchange rate movement of USD 20 million was recognised within Other reserves. On 19 August 2010, Berau issued 3,400,000,000 shares through an Initial Public Offering of Shares on the Indonesian Stock Exchange for net proceeds of USD 144 million. Share issue costs of USD 7 million were deducted from share premium. 30.4 Senior Notes 30.4.1 Guaranteed senior secured notes On 8 July 2010, Berau Capital Resources Pte. Ltd. (BCR), a wholly owned subsidiary, issued USD 350 million aggregate principal amount of 12.5% guaranteed senior secured notes. BCR also issued an additional USD 100 million aggregate principal amount of 12.5% guaranteed senior secured notes on 29 July 2010. The notes bear interest from 8 July 2010 at the rate of 12.5% per annum, payable semiannually, commencing on 8 January 2011. The maturity date of the notes is 8 July 2015. 30.4.2 Senior secured credit facility On 23 July 2010, Berau entered into a USD 400 million senior secured credit facility (the Senior Secured Credit Facility) and drew down the entire USD 400 million available thereunder. Beraus obligations under this facility rank pari passu with its obligations under its guarantees of the notes. The facility comprises two tranches: (i) tranche A in a principal amount of USD 300 million and (ii) tranche B in a principal amount of USD 100 million. The term loans under tranche A have a final maturity of four years and the term loans under tranche B have a final maturity of 57 months. The facility is guaranteed by Berau Coal and other subsidiaries of Berau.

376

Section 3: Unaudited consolidated financial information relating to Berau for the periods ended 30 September 2009 and 2010 and for the year ended 31 December 2009.

PT Berau Coal Energy Tbk (formerly PT Risco)

PT Berau Coal Energy Tbk (formerly PT Risco)
Unaudited interim consolidated statements of comprehensive income For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes Revenue Cost of sales Gross profit General and administrative expenses Distribution and marketing expenses (Loss)/gain on foreign exchange Others Operating profit Finance income Finance cost Profit before taxation Taxation Profit and total comprehensive income for the period Profit and total comprehensive income attributable to: Owners of the parent Non-controlling interest 9

30 Sep 2010

30 Sep 2009

31 Dec 2009

763 (502) 261 (29) (7) (3) (1) 221 2 (61) 162 (94) 68

574 (334) 240 (12) (6) 7 229 19 (22)

800 (473) 327 (26) (10) 2 2 295 25 (48)

226 (102) 124

272 (124) 148

56 12

68 56

80 68

Earnings per share Basic and diluted earnings per share (USD cents)

11

0.3 544 615

68

124

148

The accompanying notes are an integral part of this consolidated financial information.

377

PT Berau Coal Energy Tbk (formerly PT Risco)

Unaudited interim consolidated balance sheets As of 30 September 2010 and 2009 and 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes ASSETS NON-CURRENT ASSETS Goodwill Exploration and evaluation assets Deferred stripping costs Property, plant and equipment Due from related parties Other non-current assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Available-for-sale financial assets Trade and other receivables Other current assets Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES NON-CURRENT LIABILITIES Borrowings Deferred tax liabilities Provisions TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings third parties related parties Current tax payable Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES EQUITY Share capital Share premium Retained earnings Other reserves Equity attributable to owners of the parent Non-controlling interest TOTAL EQUITY TOTAL EQUITY AND LIABILITIES 9 9 10

30 Sep 2010

30 Sep 2009

31 Dec 2009

410 6 35 540 4 995

6 3 50 88 297 1

410 4 48 523 5

445

990

15 133 335 16 355 854

24 275 16 236 551

18 273 19 305

615

1,849

996

1,605

768 123 3

17 2

127 4

894

19

131

408 7 8 33 101 3 545

328 276 105 2

350 289 300 115 1

711

1,055

1,439

730

1,186 1 251 133

386 106 93 (221) 364 46

126 1

127 139

385 34

410

266

419

The accompanying notes are an integral part of this consolidated financial information.

1,849

996

1,605

378

PT Berau Coal Energy Tbk (formerly PT Risco)

Unaudited interim consolidated statements of changes in equity For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated) Total equity attributable Attributable to owners of the parent to owners NonShare Share Retained Other of the controlling Notes capital premium earnings reserves parent interest 1 January 2009 Profit for the period 30 September 2009 1 January 2009 Profit for the year Issuance of new shares Dividend Acquisition of non-controlling interest 31 December 2009 Profit for the period Settlement of Montelena Acquisition of subsidiary Capitalisation of retained earnings and share premium Initial Public Offering 30 September 2010 58 68 1 1 59 68 83 56

Total equity 142 124 266

1 251 58 80 (5) 1 59 80 252 (5) 83 68

126

127

139

142 148 252 (5)

(1)

(1)

(117) 34

(118) 419

10 3 9 9 56 (20) (201) (20) 56 (20) (201) 144 364 12 347 38 386 (251) 106 106 (76)

251

133

385

68 (20) (201) 144 410

93

(221)

46

The accompanying notes are an integral part of this consolidated financial information.

379

PT Berau Coal Energy Tbk (formerly PT Risco)

Unaudited interim consolidated statements of cash flows For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

Notes CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Cash paid to suppliers and employees Royalties paid Cash generated from operations Tax paid Net cash flows from operating activities CASH FLOW FROM INVESTING ACTIVITIES Acquisition of non-controlling interest Acquisition of subsidiary Purchases of available for sale financial assets Purchases of property, plant and equipment Additions to exploration and evaluation assets Interest received Net cash flows from investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Initial Public Offering Proceeds from borrowings Repayment of borrowings (Payments to)/proceeds from related parties Payment to Montelena Penalty paid on early redemption of senior notes Interest paid Dividends paid Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at end of the period 9 7 7 8 10

30 Sep 2010

30 Sep 2009

31 Dec 2009

701 (356) (84)

524 (243) (68) 213 (54) 159

753 (345) (98) 310 (65) 245

261 (112) 149

3 6 5

(201) (133) (40) (2) 2 (374)

(7) (1) 19 11

(300) (12) (2) 25

(289) 265 (300) 313 (15) (33) (5)

144 801 (289) (300) (20) (61)

(17) (19) (22)

275

(58)

225

50

112

181

305

124

124 305

355

236

The accompanying notes are an integral part of this consolidated financial information.

380

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

1 CORPORATE INFORMATION PT Berau Coal Energy Tbk (Berau), formerly PT Risco was established in the Republic of Indonesia. Recent amendments to Beraus articles of association include; the change of Beraus name from PT Risco to PT Berau Coal Energy, increase in authorised capital stock, issuance of new shares and changes in directors and commissioners of Berau. On 28 April 2010, these amendments were approved by the Ministry of Law and Human Rights of the Republic of Indonesia. Berau and its subsidiaries are collectively referred to herein as the Berau Group. The activities of Berau based on its articles of association include trading, mining, plantation, construction, real estate, agriculture, printing, industry, transportation and services. Currently, Berau is engaged as a holding company, with its primary operating subsidiary, PT Berau Coal, (Berau Coal) being engaged in the business of mining. The Bapepam (Indonesian Stocks Exchange Commission) approved the initial public offering of 3,400,000,000 of Beraus shares with par value of Rp100 per share, at the offering price of Rp400 per share. The shares were listed on the Indonesia Stock Exchanges on 19 August 2010. Beraus registered office is located at Wisma GKBI, 38th Floor, Jl. Jend. Sudirman Kav. 28, Jakarta 10210, Indonesia. 2 PRINCIPAL ACCOUNTING POLICIES The accounting policies are consistent with those of the consolidated financial information for the year ended 31 December 2009 included elsewhere in this Prospectus, except as described in Note 2.3 below. 2.1 Basis of preparation This interim consolidated financial information for the period ended 30 September 2010 has been prepared in accordance with IAS 34, Interim financial reporting. The interim consolidated financial information do not include all the information and disclosures required in the annual consolidated financial information, and should be read in conjunction with the Berau Groups annual consolidated financial information as at 31 December 2009 included elsewhere in this Prospectus. 2.2 Seasonality of interim operations Management believes that the activity of the Berau Group is not subject to seasonality other than rainfall that can interfere with the extracting activities. New and amended accounting standards The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010: a) Business combinations (IFRS 3 Revised) IFRS 3 (revised), Business combinations, and consequential amendments to IAS 27, Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS 31, Interests in joint ventures are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of

2.3

381

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the noncontrolling interests proportionate share of the acquirees net assets. All acquisitionrelated costs are expensed. As the Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), consolidated and separate financial statements, at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. There has been no impact of IAS 27 (revised) on the current period, as none of the non-controlling interests have a deficit balance. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity. b) New pronouncements not relevant to the Group Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group include: IFRIC 17, Distribution of non-cash assets to owners (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. This is not currently applicable to the Group, as it has not made any non-cash distributions. IFRIC 18, Transfers of assets from customers, effective for transfer of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers. Additional exemptions for first-time adopters (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer. Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but not effective for the financial year beginning 1 January 2010 and have not been early adopted: IFRS 9, Financial instruments, issued in November 2009. This standard is the first step in the process to replace IAS 39, Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Groups accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Group has yet to assess IFRS 9s full impact. Revised IAS 24, Related party disclosures, issued in November 2009. It supersedes IAS 24, Related party disclosures, issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted. The Group has yet to assess IAS 24s full impact. Classification of rights issues (amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier

382

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. The Group will apply the amended standard from 1 January 2011 and does not anticipate any material impact on its financial statements. Prepayments of a minimum funding requirement (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction. The Group will apply these amendments for the financial reporting period commencing on 1 January 2011. IFRIC 19, Extinguishing financial liabilities with equity instruments, effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). The Group will apply the interpretation from 1 January 2011, subject to endorsement by the EU. It is not expected to have any impact on the Group or the parent entitys financial statements. Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2010.

3 TRANSACTION UNDER COMMON CONTROL On 18 August 2010, the Berau Group acquired through a subsidiary, 100% ownership (1 share) in Maple Holding Limited (Maple), a private limited company engaged in coal sales service, and incorporated in Labuan. In consideration, the Berau Group paid USD 201 million. Maple was previously held by the majority shareholder of Berau, PT Bukit Mutiara and, as such, this acquisition is treated as a transaction under common control. The excess of consideration over net assets of Maple is recognised as a Common control reserve. Consideration at 18 August 2010 Cash Total consideration Less: Recognised amounts of identifiable assets acquired and liabilities assumed Common control reserve 201

201

201

4 SEGMENTAL REPORTING In accordance with the provisions of IFRS 8 Operating Segments, the operating segments used to present segment information were identified on the basis of internal reports used by the Berau Groups Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is the Berau Groups chief operating decision maker within the meaning of IFRS 8. The Berau Group has identified only one segment coal. All operations and assets are located in Indonesia.

383

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

The Berau Group has entered into long-term sale agreements with various parties. The details of customers with sales of more than 10% of total revenue were as follows:

30 Sep 2010

Amount

30 Sep 2009

Amount

31 Dec 2009

Amount

PT Indonesia Power PT Jawa Power Taiwan Power Company, Taiwan Others (each below 7%) Revenue

140 69 60 494

18% 9% 8% 65%

132 70 52 320

23% 12% 9% 56%

144 94 85 477

18% 11% 11% 60%

The Berau Groups revenue by destination is as follows:

30 Sep 2010 Amount 257 213 15 53 23 139 60 3 763

763

100%

30 Sep 2009 Amount 252 34 11 63 26 114 52 22

574

100%

31 Dec 2009 Amount 312 94 18 81 28 152 85 30

800

100%

Indonesia China Hong Kong India Japan South Korea Taiwan Thailand Revenue

34% 28% 2% 7% 3% 18% 8% 0%

44% 6% 2% 11% 4% 20% 9% 4%

39% 11% 2% 10% 4% 19% 11% 4%

100%

574

100%

800

100%

5 PROPERTY, PLANT AND EQUIPMENT During the period ended 30 September 2010, additions to Property, plant and equipment amounted to USD 40 million. Additions were mainly to Mining properties (USD 20 million) and Assets under construction (USD 14 million). Depreciation for the period amounted to USD 23 million. 6 AVAILABLE-FOR-SALE FINANCIAL ASSETS 30 Sep 2010 Beginning balance Acquisition Ending balance

30 Sep 2009

31 Dec 2009

133

On 26 January 2010, Berau purchased premium convertible unsecured loan notes with a principal amount of USD 75 million (the Notes) from the Chateau Asean Fund 1, a third party, (the Issuer). The Notes are non-interest bearing but receive a return based on the performance of the underlying assets prior to conversion date. The fund has the right to convert all or any part of the Notes into Redeemable Preference Shares at anytime during the term of the agreement. As at 30 September 2010, the fair value of investments amounted to USD 75 million. Management intend to liquidate these investments within a year and have classified the investment as current. On 12 August 2010, Berau and PT Lautandhana Investment Management (Lautandhana), a third party, entered into a discretionary fund management agreement for a period of three months. As at 30 September 2010, Lautandhana managed USD 33 million of Beraus funds. On 1 September 2010, Berau and PT Danatama Capital Management (Danatama), entered into a discretionary fund management agreement for a period of one month. As at 30 September 2010, Danatama managed USD 25 million Companys funds.

133

384

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

30 Sep 2010

30 Sep 2009

31 Dec 2009

Chateau Asean Fund 1 PT Lautandhana PT Danatama Makmur

75 33 25

7 7.1 BORROWINGS

133

Bank borrowings The bank borrowings are described in the consolidated financial information as of 31 December 2009. 30 Sep 2010

30 Sep 2009

31 Dec 2009 300 289

Non-current Bank borrowings and Senior Secured Notes Current Due to related party (note 8) Bank borrowings

768 33

276

801

276

589

7.1.1 Guaranteed Senior Secured Notes On 8 July 2010, Berau Capital Resources Pte. Ltd. (BCR), a wholly owned subsidiary, issued USD 350 million aggregate principal amount of 12.5% guaranteed senior secured notes. BCR also issued an additional USD 100 million aggregate principal amount of 12.5% guaranteed senior secured notes on 29 July 2010. The notes bear interest from 8 July 2010 at the rate of 12.5% per annum, payable semi-annually, commencing on 8 January 2011. The maturity date of the notes is 8 July 2015. 7.1.2 Senior Secured Credit Facility On 23 July 2010, Berau entered into a USD 400 million senior secured credit facility (the Senior Secured Credit Facility) and drew down the entire USD 400 million available thereunder.Beraus obligations under this facility rank pari passu with its obligations under its guarantees of the notes. The facility comprises two tranches: (i) tranche A in a principal amount of USD 300 million and (ii) tranche B in a principal amount of USD 100 million. The term loans under tranche A have a final maturity of four years and the term loans under tranche B have a final maturity of 57 months. The facility is guaranteed by Berau Coal and other subsidiaries of Berau. 8 (i) RELATED PARTIES Transactions and balances Amounts due to related parties of USD 300 million at 31 December 2009 were repaid during the period. There were no other related party transactions.

385

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

(ii)

Remuneration of the key management personnel Key management personnel include the directors and other members of management. Remuneration paid or payable for their services is shown below: 30 Sep 2010 Salaries and social charges Bonus

30 Sep 2009

31 Dec 2009

1 1

1 1 2

2 1 3

9 SHARE CAPITAL AND PREMIUM On 20 March 2010, Berau increased its authorised share capital stock from 30,000 shares with a par value of Rp1 million per share to 90,000,000,000 shares with a par value of Rp100 per share. As a result, Berau effected a share split by converting its 7,500 issued shares with a par value of Rp 1 million per share to 75,000,000 issued shares with a par value of Rp100 per share. On the same date, Berau issued 31,425,000,000 shares with a par value of Rp100 per share, through an allocation of retained earnings of USD 76 million and share premium of USD 251 million. As the share capital of Berau is maintained in IDR, a foreign exchange rate movement of USD 20 million was recognised within Other reserves. On 19 August 2010, Berau issued 3,400,000,000 shares through an Initial Public Offering of Shares on the Indonesian Stock Exchange for net proceeds of USD 144 million. Share issue costs of USD 7 million were deducted from share premium. 10 RETAINED EARNINGS On 18 May 2010, a writ of summons issued out of the High Court of Singapore by Montelena Capital Limited (Montelena) named Armadian, an intermediate holding company in the Berau Group that directly owns 51% of Berau Coal, as a defendant in action connected with an option agreement that Armadian entered into in June 2004, prior to Beraus ownership of PT Berau Coal. On 23 July 2010 Armadian paid USD 20 million to Montelena as full and final settlement of Montelenas claims against Armadian, in connection with the option agreement. 11 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the earnings attributable to owners of the parent and the weighted average number of ordinary shares outstanding during the period for the effects of dilutive potential ordinary shares. There are no dilutive/antidilutive instruments as of 30 September 2010. Earnings and weighted average number of shares used in the calculations are set out below:

30 Sep 2010

30 Sep 2009

31 Dec 2009 80 13,013,700 615

Profit attributable to owners of the parent 56 Weighted average number of ordinary shares in issue (full amount) 19,068,131,868 Basic and diluted earnings per share (USD cents) 0.3

68 12,500,000

544

386

PT Berau Coal Energy Tbk (formerly PT Risco)

Notes to the interim consolidated financial information (unaudited) For the periods ended 30 September 2010 and 2009 and the year ended 31 December 2009
(Expressed in millions of USD, unless otherwise stated)

12 SUBSEQUENT EVENTS On 16 November 2010, Vallar PLC, a company listed on the London Stock Exchange, announced its intention to purchase a 75% stake in Berau and a 25% stake in PT Bumi Resources Tbk for consideration of approximately USD 3 billion made up of a combination of cash and new Vallar PLC shares. On 18 November 2010 a cash payment of USD 639 million was made to PT Bukit Mutiara, and USD 100 million was paid into an escrow account with JP Morgan Chase Bank. The new Vallar PLC shares to be issued as consideration together with the USD 100 million in the escrow account, will be released on closing of the transaction following publication of a this Prospectus in February 2011.

387

PART X UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma financial information as of and for the period ended 30 September 2010 is based on: the audited historical consolidated income statement of the Vallar Group for the six months ended 30 September 2010 and the historical consolidated statement of net assets of the Vallar Group as at 30 September 2010; the unaudited historical consolidated income statement of the Berau Group for the nine months ended 30 September 2010 and the historical consolidated statement of net assets of the Berau Group as at 30 September 2010; and the unaudited historical consolidated income statement of the Bumi Resources Group for the nine months ended 30 September 2010 and the historical consolidated statement of net assets of the Bumi Resources Group as at 30 September 2010.

The unaudited pro forma financial information set out below has been prepared to illustrate the effect of the Acquisition on the net assets of the Vallar Group as if the Acquisition had occurred on 30 September 2010 and to show the effect on the income statement of the Vallar Group as if the Acquisition had occurred on 1 January 2010. This unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and, therefore, does not represent the Groups actual financial position or results. It may not, therefore, give a true picture of the Groups financial position or results nor is it indicative of the results that may, or may not, be expected to be achieved in the future. The pro forma financial information has been prepared on the basis set out in the notes below and in accordance with the requirements of items 1 to 6 of Annex II to the Prospectus Directive Regulation.

388

Part A: Unaudited pro forma statement of net assets as at 30 September 2010 Elimination of Berau Group goodwill Bumi and nonOther pro Vallar Berau Resources controlling forma Group Group Group interest adjustments (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) US$ US$ US$ US$ US$ in millions in millions in millions in millions in millions Assets Non-current assets Goodwill 410 (410) 1,847 Exploration and evaluation assets 6 Deferred stripping costs 35 Property, plant and equipment 540 Investment in associates 1,908 Other non-current assets 4 Total non-current assets 995 1,908 (410) 1,847 Current assets Inventories 15 Available-for-sale financial assets 133 Trade and other receivables 335 Other current assets 2 16 Cash and cash equivalents 1,060 355 (800) Total current assets 1,062 854 (800) Total assets 1,062 1,849 1,908 (410) 1,047 Liabilities Non-current liabilities Borrowings Deferred tax liability Provisions

Unaudited pro forma total US$ in millions 1,847 6 35 540 1,908 4 4,340 15 133 335 18 615 1,116 5,456

768 123 3 894 408 33 101 3 545 1,439 46 364 1,908 (46) (364) 1,047 768 123 3 894

Total non-current liabilities Current liabilities Trade and other payables Borrowings Current tax payable Provisions Total current liabilities Total liabilities Non Controlling Interest 30 Net assets attributable to Vallars shareholders 1,032
Notes:

408 33 101 3 545 1,439 30 3,987

(1) The net assets of the Vallar Group have been extracted, without material adjustment, from the financial information as set out in Part A of Part IX Financial Information Vallar. The balances as at 30 September 2010 have been translated from the presentational currency GBP to USD using a rate of USD1.58 : 1.00, being the rate prevailing as at that date. (2) The net assets of the Berau Group have been extracted, without material adjustments, from the financial information set out in Part C of Part IX Financial Information Berau.

389

(3) In accordance with IAS 28 Investments in Associates, Vallar will account for its 25 per cent. interest in Bumi Resources under the equity method in its consolidated financial statements. Therefore, the Group will not consolidate the Bumi Resources Group. Vallar will initially recognise its investment in Bumi Resources at cost as a noncurrent asset and the carrying amount will subsequently be increased or decreased to recognise the Companys share of the net profit or loss of the Bumi Resources Group after the date of acquisition. The adjustment shows the cost of Vallars investment in the Bumi Resources Group as at the date of the acquisition, represented by approximately 28.9 million New Vallar Voting Ordinary Shares and approximately 61.2 million new Suspended Voting Ordinary Shares. The calculation of the share based consideration is based on the Closing Price of Vallar Shares of GBP13.11, converted from GBP to USD at a rate of USD1.6153, as listed on 18th February 2011. The cost of Vallars investment in Bumi Resources Group is allocated between goodwill and Vallars share of net assets acquired as follows: US$ in millions
Goodwill Share of net assets acquired (excluding goodwill acquired within the Bumi Resources Group) Cost of investment 1,561 347 1,908

(4) In calculating the goodwill arising on the acquisition of the Berau Group, the goodwill in the Berau Groups consolidated balance sheet is eliminated. Further, any net assets attributable to non-controlling interest in the Berau Group are also reversed as the non-controlling interest will be adjusted to reflect the new ownership structure. (5) Other pro forma adjustments arising in respect of the acquisition of Berau are set out below: (i)

Vallar will consolidate its interest in Berau in its consolidated financial statements with effect from the Bumi Resources Transaction Completion Date and recognise 25 per cent. of net assets as a non controlling interest at the time Vallar gains control of Berau (and its subsidiary undertakings) under IAS 27 Consolidated and Separate Financial Statements. The acquisition of Berau will be accounted for in the Groups consolidated financial statements using the purchase method as required by IFRS 3 Business Combinations. The identified assets and liabilities of the Berau Group will be adjusted to fair value at the date of purchase and a purchase price allocation (PPA) exercise will be undertaken. As part of this PPA exercise, a majority of the purchase price may be allocated to mineral properties, which will be subject to an amortisation charge. A portion of the mineral properties would also be attributable to non-controlling interests. The excess of the costs of acquisition over the fair value of the identified assets and liabilities of Berau will be recorded as goodwill. However, for the purposes of the pro forma and in the absence of any fair value adjustments or a PPA exercise, no additional assets have been recognised. Therefore, the entire excess of consideration over identified net assets and liabilities acquired has been attributed to goodwill. Goodwill arising has been calculated as follows:
US$ in millions Consideration (note 5(ii)) Less net assets acquired of Berau Group (excluding goodwill acquired within the Berau Group) (note 5(iv)) Goodwill 1,847

(ii)

The calculation of consideration is based on the purchase price of an aggregate of 26,175,000,000 Berau Shares (representing 75 per cent. of the issued ordinary share capital of the Berau Group). The consideration is split between a cash payment of US$739 million for 35 per cent. of the Berau Group and the issue to Mutiara of approximately 52.3 million New Vallar Voting Ordinary Shares in consideration of 40 per cent. of the Berau Group. The calculation of the share based consideration is based on the Closing Price of Vallar Shares of GBP13.11, converted from GBP to USD at a rate of USD1.6153, as listed on 18th February 2011.

1,847

(iii) The adjustment to cash and cash equivalents relates to the cash payment of USD739 million for 35 per cent. of the Berau Group and USD 61 million of transaction costs, converted from GBP to USD at a rate of USD1.5204, being the average rate prevailing during the 6 months to 30 September 2010.

390

(iv) Given that the Berau Group has net assets of nil after the elimination of goodwill, and as calculated below, the 25 per cent. of net assets attributable to the minority interest in the Berau Group also has nil value for the purposes of the pro forma.
US$ in millions Berau Group net assets at 30 September 2010 Less: Goodwill acquired within the Berau Group 410 (410)

Net assets excluding goodwill Share of net assets attributable to non controlling interest

(6) No account has been taken of any trading or transactions of the Vallar, Bumi Resources or Berau Groups since 30 September 2010.

391

Part B: Unaudited pro forma combined income statement Vallar Berau Group for Group for the six the nine months ended months ended 30 September 30 September 2010 2010 (Note 1) (Note 2) US$ US$ in millions in millions Revenue 763 Cost of sales (502) Gross profit 261 General and administrative expenses (2) (29) Distribution and marketing costs (7) Costs associated with Initial Public Offering (IPO) (32) Loss on foreign exchange (3) Other expense (1) Operating profit/(loss) (34) 221 Share of profit of associates Profit/(loss) before finance items and taxation (34) 221 Finance income 2 2 Finance cost (61) Net finance cost 2 (59) Profit/(loss) before income tax (32) 162 Income tax expense (94) Profit/(loss) for the period (32) 68 Profit/(loss) for the period attributable to Owners of the parent (30) 56 Non-controlling Interest (2) 12 Profit/(loss) for the period (32) 68
Notes:

for the period ended 30 September 2010

Bumi Resources Group (Note 3) US$ in millions 93 93 93 93

Pro forma adjustments (Note 4) US$ in millions (61) (61) (61) (1) (1) (62) (62)

Unaudited pro forma total US$ in millions 763 (502) 261 (31) (7) (32) (3) (62) 126 93 219 3 (61) (58) 161 (94) 67

93 93

(76) 14 (62)

43 24 67

(1) The results of Vallar Group are extracted, without material adjustments, from the financial information set out in Part A of Part IX Financial Information Vallar. The results for the 6 months ended 30 September have been translated from the presentational currency GBP to USD using a rate of USD1.5204: GBP1.00, being the average rate prevailing during this period. (2) The results of the Berau Group are extracted, without material adjustments, from the financial information set out in Part C of Part IX Financial Information Berau. (3) In accordance with IAS 28 Investments in Associates, Vallar will account for its 25 per cent. interest in Bumi Resources under the equity method in its consolidated financial statements. Therefore, the Group will not consolidate the Bumi Resources Group. Instead, the Group will, among other things, only record the Companys proportionate share of the net profit or loss after tax of Bumi Resources in the Groups consolidated income statement under the line item Share of profit/(loss) of associates. The adjustment in the pro forma shows the

392

inclusion of Vallars 25 per cent. share of the Bumi Resources profit of USD 372 million for the nine months ended 30 September 2010 as extracted from Part B of Part IX Financial Information Bumi. (4) The pro forma adjustments as set out below arising in respect of the Berau Group Acquisition have been made to illustrate the effect of the acquisition as if it had occurred on 1 January 2010: (i) Vallar will consolidate its interest in Berau in its consolidated financial statements with effect from the Bumi Resources Transaction Completion Date and 25 per cent. of profits attributable to Vallar will be allocated to noncontrolling interest; Transaction costs directly attributable to the Transaction as incurred by Vallar are USD 61 million, converted from GBP to USD at a rate of USD1.5204, being the average rate prevailing during the 6 months to 30 September 2010. These costs include, but are not limited to: advisory, legal, accounting, valuation and other professional or consulting fees; and general administrative costs; and

(ii)

(iii) For the purposes of the pro forma, it has been assumed that the cash payment of US$739 for 35 per cent. of the Berau Group was made on 1 January 2010. The interest income foregone on this amount has therefore been deducted from the profit for the period for the purposes of the pro forma. (5) No account has been taken of any trading or transactions of the Vallar, Bumi Resources or Berau Groups since 30 September 2010. (6) The identified assets and liabilities of Berau will be adjusted to fair value at the date of purchase and a purchase price allocation (PPA) exercise will be undertaken. As part of thise PPA exercise, a majority of the purchase price may be allocated to mineral properties, which will be subject to an amortisation charge. Any non-cash amortisation charge will have an adverse impact on the reported profit or loss of the Vallar Group. (7) This pro forma financial information does not constitute financial statements within the meaning of section 434 of the Companies Act 2006.

393

Part C: Accountants report on unaudited pro forma financial information

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

The Directors Vallar Plc 12 Castle Street St. Helier, Jersey JE2 3RT Channel Islands 24 February 2011 Dear Sirs, Vallar PLC (the Company) We report on the pro forma financial information (the Pro forma financial information) set out in Part X of the Companys prospectus dated 24 February 2011 (the Prospectus), which has been prepared on the basis described in the notes to the Pro forma financial information, for illustrative purposes only, to provide information about how the proposed acquisition of ordinary shares of PT Berau Coal Energy Tbk and PT Bumi Resources Tbk (the Transaction) might have affected the financial information presented on the basis of the accounting policies to be adopted by the Company in preparing the audited financial information for the period ending 30 September 2010. This report is required by item 20.2 of Annex I to the PD Regulation and is given for the purpose of complying with that PD Regulation and for no other purpose. Responsibilities It is the responsibility of the Directors of the Company to prepare the Pro forma financial information in accordance with item 20.2 of Annex I to the PD Regulation. It is our responsibility to form an opinion, as required by item 7 of Annex II to the PD Regulation, as to the proper compilation of the Pro forma financial information and to report our opinion to you. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus. Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Services Authority for designated investment business.

394

documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the Directors of the Company. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company. Opinion In our opinion: (a) (b) the Pro forma financial information has been properly compiled on the basis stated; and such basis is consistent with the accounting policies of the Company.

Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and we declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation. Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

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PART XI TAXATION
General The comments below are of a general and non-exhaustive nature based on the Directors understanding of the current revenue law and published practice in Jersey and the UK, which is subject to change, possibly with retrospective effect. The following summary does not constitute legal or tax advice and applies only to persons holding Ordinary Shares as an investment (rather than as securities to be realised in the course of a trade) who are the absolute beneficial owners of their Ordinary Shares and who have not acquired their Ordinary Shares by reason of their or another persons employment. These comments may not apply to certain classes of person, including dealers in securities, insurance companies and collective investment schemes. An investment in the Company involves a number of complex tax considerations. Changes in tax legislation in any of the countries in which the Company, the Subsidiary or UK Subco has assets or in Jersey (or in any other country in which a subsidiary of the Company through which acquisitions are made is located), or changes in tax treaties negotiated by those countries, could adversely affect the returns from the Company to holders or purchasers of Ordinary Shares. Holders or purchasers of Ordinary Shares should consult their own independent professional advisers on the potential tax consequences of subscribing for, purchasing, holding or selling Ordinary Shares under the laws of their country and/or state of citizenship, domicile or residence. Jersey Taxation The following is a summary of the tax treatment in Jersey of the Company and non-Jersey tax resident holders of Ordinary Shares. The discussion is based on Jersey taxation law and practice in force at the date of this document. It does not constitute legal or tax advice. This summary applies only to Shareholders who hold their Ordinary Shares as an investment and who are the absolute beneficial owners of both the Ordinary Shares and any dividends paid on them. Acquisition of Ordinary Shares Holders of Ordinary Shares (other than residents of Jersey) are not subject to any tax in Jersey in respect of the acquisition of the Ordinary Shares. Disposal of Ordinary Shares Under current Jersey law there are no capital gains, gift, wealth, inheritance or capital transfer taxes and no stamp duty would currently be levied in Jersey on the issue or transfer of Ordinary Shares. Please refer to the section below dealing with stamp duty on the death of an individual. Income from Ordinary Shares Dividends on the Ordinary Shares may be paid by the Company without withholding or deduction for or on account of Jersey income tax. Goods and services tax The Company is an international services entity for the purposes of the Goods and Services Tax (Jersey) Law 2007 (the GST Law). Consequently, the Company is considered to be outside the scope of the GST Law, meaning that the Company is not: a taxable person pursuant to the GST Law; required to charge goods and services tax in Jersey in respect of any supply made by it; or (subject to limited exceptions that are not expected to apply to the Company) required to pay goods and services tax in Jersey in respect of any supply made to it.

396

Jersey Stamp Duty/Probate Duty On the death of a private individual investor (whether or not such individual was domiciled in Jersey), duty will be payable on the registration of any Jersey probate or letters of administration which may be required in order to transfer, convert, redeem or make payments in respect of, Jersey shares, limited partnership interests or unit trust units held by the estate of such deceased individual shareholder. There is a small estates exemption from the requirement for probate or letters of administration of 10,000 in respect of the relevant Jersey assets. In the case of a grant of probate or letters of administration, stamp duty is levied according to the size of the estate and is payable in a sliding scale at a rate of up to 0.75 per cent. of the estate. Taxation of the Company Under Article 123C of the Income Tax (Jersey) Law 1961 (the Jersey Income Tax Law), the Company (being neither a financial services company nor a specified utility company under the Jersey Income Tax Law at the date hereof) will (except as noted below) be regarded as subject to Jersey income tax at a rate of 0 per cent. If the Company derives any income from the ownership, development or disposal of land in Jersey, such income will be subject to tax at the rate of 20 per cent. It is not expected that the Company will derive any such income. United Kingdom Taxation The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of holding Ordinary Shares. They are based on current UK legislation and the what is understood to be the current practice of HM Revenue & Customs, both of which may change, possibly with retroactive effect. They apply only to Shareholders who are resident, and in the case of individual Shareholders, ordinarily resident and domiciled, for tax purposes in (and only in) the UK (except insofar as express reference is made to the treatment of non-UK residents), who hold their Ordinary Shares as an investment (other than under an individual savings account), and who are the absolute beneficial owner of both the Ordinary Shares and any dividends paid on them. The tax position of certain categories of Shareholders who are subject to special rules (such as persons acquiring their Ordinary Shares in connection with employment, dealers in securities, insurance companies and collective investment schemes) is not considered. In addition the summary below may not apply to: (i) a person who holds Ordinary Shares as part of or pertaining to or attributable to a fixed base or permanent establishment in a non-UK jurisdiction; or (ii) any Shareholders who, either alone or together with one or more associated persons, such as personal trusts and connected persons, control directly or indirectly at least 10 per cent. of the voting rights or any class of share capital of the Company. Purchasers of Ordinary Shares should consult their own professional advisers as to the consequences of the purchase, ownership and disposition of Ordinary Shares in light of their particular circumstances. (a) Dividends Dividend payments may be made without withholding or deduction for or on account of UK income tax. (i) UK Resident Individual Shareholders Dividends received by individual Shareholders will be subject to UK income tax. This is charged on the gross amount of any dividend paid (the gross dividend) and as increased for any UK tax credit available as described below. UK resident and certain non-resident individual Shareholders, will generally be entitled to a non-repayable UK tax credit equal to one-ninth of the amount of the gross dividend, equivalent to ten per cent. of the aggregate of the dividend and tax credit. An individual Shareholder, who is subject to income tax at a rate or rates not exceeding the basic rate will be liable to tax on the dividend plus the tax credit at the rate of ten per cent. and will therefore have no UK income tax liability to pay.

397

A Shareholder who is subject to income tax at the higher rate will be liable to income tax at the rate of 32.5 per cent. to the extent that such sum, when treated as the top slice of that Shareholders income, falls above the threshold for higher rate income tax. Because tax is charged on the gross dividend plus the tax credit, any tax credit lowers the effective rates of tax in respect of the dividend. So, for example, a gross dividend of 180 will carry a tax credit of 20 and the United Kingdom income tax payable on the dividend by an individual Shareholder who is subject to income tax at the higher rate would be 32.5 per cent. of 200, namely 65, less the tax credit of 20, leaving a net tax charge of 45. A rate of 42.5 per cent. applies to dividend income to the extent that such sum, when treated as the top slice of that shareholders income, falls above the threshold for additional rate income tax (i.e., currently 150,000). Because tax is charged on the gross dividend plus the tax credit, any tax credit lowers the effective rates of tax in respect of the dividend. So, for example, a gross dividend of 180 will carry a tax credit of 20 and the UK income tax payable on the dividend by an individual shareholder who is subject to income tax at the dividend additional rate would be 42.5 per cent. of 200, namely 85, less the tax credit of 20, leaving a net tax charge of 65. (ii) UK Resident Corporate Shareholders Corporate Shareholders who are UK resident should note that legislation has recently been enacted that has made significant changes to the corporation tax treatment of dividends, including the corporation tax treatment of dividends paid to UK-resident companies by companies not resident in the United Kingdom (such as the Company). Dividends paid on the Ordinary Shares to UK resident corporate shareholders may fall within one or more of the classes of dividend qualifying for exemption from corporation tax. Shareholders within the charge to corporation tax should consult their own professional advisers in relation to the implications of the legislation Non-UK Resident Shareholders A Shareholder who is not resident in the UK for UK tax purposes will not be liable to income or corporation tax in the UK on dividends paid on the Ordinary Shares unless such a Shareholder carries on a trade (or profession or vocation) in the UK and the dividends are either a receipt of that trade or, in the case of corporation tax, the Ordinary Shares are held by or for a UK permanent establishment through which the trade is carried on.

(iii)

(b)

Taxation of Disposals A disposal or deemed disposal of Ordinary Shares by a Shareholder who is (at any time in the relevant UK tax year) resident or, in the case of an individual, ordinarily resident in the UK for tax purposes, may depending upon the Shareholders circumstances and subject to any available exemption or relief (such as the annual exempt amount for individuals, or indexation for corporate shareholders), give rise to a chargeable gain or an allowable loss for the purposes of UK taxation of capital gains. UK Stamp Duty and Stamp Duty Reserve Tax (SDRT) No liability to UK stamp duty or SDRT will arise on the issue of Ordinary Shares to Shareholders. UK stamp duty will not normally be payable in connection with a transfer of Ordinary Shares, provided that the instrument of transfer is executed and retained outside the UK and no other action is taken in the UK by the transferor or transferee. The Company will not maintain any share register in the UK and, accordingly, no UK SDRT will be payable in respect of any agreement to transfer Ordinary Shares.

(c)

398

PART XII ADDITIONAL INFORMATION

1. 1.1 Responsibility The Directors, whose names appear under Directors, Agents, Registered Office and Advisors, and the Company accept responsibility for the information contained in this document. To the best of the knowledge of the Directors and the Company (who have each taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and contains no omission likely to affect its import. Runge, whose registered office is at Suite 301, 3rd Floor, Wisma Pondok Indah 2, JL. Sultan, Iskandar Muda Kav, V-TA Pondok Indah Jakarta 12310 Indonesia, accepts responsibility for the Mineral Experts Reports set out in Part XIV Mineral Experts Reports, and for any information sourced from the Mineral Experts Reports in this document, respectively. To the best of the knowledge of Runge (who has taken all reasonably care to ensure that this is the case) the information contained therein is in accordance with the facts and contains no omissions likely to affect its import. The Company, the Subsidiary and UK Subco The Company was incorporated with limited liability under the laws of Jersey under the Jersey Companies Law on 31 March 2010, with registered number 105417, under the name Vallar Limited. On 14 June 2010, pursuant to Special Resolutions passed on 9 June 2010, the Company was re-registered as a public company and changed its name to Vallar PLC. The Company is not regulated by the Jersey Financial Services Commission or the FSA or any financial services or other regulator. The Company will be subject to the Listing Rules and the Disclosure and Transparency Rules (and the resulting jurisdiction of the UK Listing Authority), to the extent such rules apply to companies with a Standard Listing pursuant to Chapter 14 of the Listing Rules. The principal legislation under which the Company operates, and pursuant to which the Ordinary Shares have been created, is the Jersey Companies Law and the subordinate legislation made under it. The Companys registered and head office is at 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands. The Companys telephone number is +44 (0)1534 728 235. The Company was incorporated with an authorised share capital of 10,000 divided into 10,000 ordinary shares of 1 each. One Voting Ordinary Share was issued to each of Juris Limited and Lively Limited (the Subscriber Shares), the subscribers to the Companys memorandum of association. The Subscriber Shares were issued at nominal value of 1 each and are fully paid up. On 31 March 2010, both Subscriber Shares were transferred to NR Investments Limited, a company wholly owned by Mr. Rothschild. On 9 June 2010: (a) the authorised share capital of the Company was increased to 2,500,000,000 divided into 2,500,000,000 ordinary shares of 1 each by the creation of an additional 2,499,990,000 ordinary shares of 1 each; and the Company adopted a new memorandum of association and the Articles in substitution for and to the exclusion of the Companys then existing memorandum and articles of association.

1.2

2. 2.1

2.2

2.3

2.4 2.5

2.6

(b)

2.7 2.8

On 9 July 2010, Vallar raised gross proceeds of 707 million and has 67,342,736 Voting Ordinary Shares in issue. The Subsidiary was incorporated with limited liability under the Jersey Companies Law on 1 June 2010, with registered number 105824, under the name Vallar Holding Company Limited. The Subsidiarys registered and head office is at 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands.

399

2.9

UK Subco was incorporated with limited liability under the Companies Act on 15 November 2010, with registered number 07440352, under the name Vallar Investments UK Limited. UK Subcos registered and head office is at 31 St. Jamess Place, London SW1A 1NR, United Kingdom. As at the Latest Practicable Date, other than the Subsidiary and UK Subco, the Company did not have any subsidiaries. Share Capitalisation The following table shows the changes in the issued share capital of the Company that have occurred between 31 March 2010 and The Latest Practicable Date: Issued share capital Number of Existing Voting Ordinary Nominal Existing Voting Ordinary Shares Shares Value () At 31 March 2010 2 2 Shares issued on 9 July 2010 68,718,229 68,718,229 (1,375,495) (1,375,495) Shares repurchased by the Company on 16 August 2010(1) At 30 September 2010 67,342,736 67,342,736
Note: (1) This repurchase was made pursuant to the Repurchase Option.

2.10

3. 3.1

3.2

The issued share capital of the Company immediately following the closing of the Bumi Resources Transaction and the closing of the Berau Transaction (assuming no shares are issued under the Share Matching Award) will be as follows: Immediately Immediately following the following the closing of the closing of the Bumi Resources Berau Transaction Transaction(1) Voting Ordinary Shares 96,203,908 135,879,377 Suspended Voting Ordinary Shares 61,211,044 73,833,255 Total 157,414,952 209,712,632
Note: (1) Assumes that the Bumi Resources Step-Up Transaction, if any, has not completed by such date.

For further information on the New Vallar Ordinary Shares to be issued in connection with the Acquisition, see the section entitled Admission and Listing. 3.3 On 8 April 2010, the Company borrowed 10,000,000 from NR Investments Limited (a company wholly owned by Mr. Rothschild). The loan did not accrue interest. On 28 May 2010, the loan was repaid in full and the indebtedness fully discharged (as described in Note 12 to the Vallar Plc Consolidated Financial Information at 30 September 2010 included in Part IX Financial Information). As at the date of this document, the Company will have no short, medium or long term indebtedness. At the date of this document, the issued share capital of the Subsidiary consists of 63,500,001 A ordinary shares which are held by the Company, and 10,000,000 B ordinary shares (the Founder Shares) and 10,000,000 C ordinary shares (the Founder Securities) which, in each case, are held by Vallar Capital on behalf of the Limited Partners. The A ordinary shares in the Subsidiary are only transferable with the consent of the holders of 75 per cent. of the Founder Shares and the Founder Securities. See paragraph 17.9 below which details further share issues to be made by the Subsidiary and UK Subco.

3.4 3.5

400

3.6

The numbers of Ordinary Shares which would be issued if the exchange right attaching to the Founder Shares was exercised (a) immediately following the date of Completion assuming the Bumi Resources Step-Up Transaction has not occurred by such date and (b) immediately following the date of Completion assuming the Bumi Resources Step-Up Transaction has been fully implemented by such date, are as set out below: Immediately following Completion Assuming Bumi Resources Assuming no Step-Up Bumi Resources Transaction Step-Up completed Transaction in full 14,987,499 21,682,162

Ordinary Shares 3.7 3.8

The issued share capital of UK Subco consists of 2 ordinary shares of 1 each which are held by the Subsidiary. Pursuant to written resolutions passed on 9 July 2010, the Company resolved that: (a) the Directors be authorised in accordance with the Articles to exercise all the powers of the Company to allot relevant securities, as defined in the Jersey Companies Law, as follows: (i) for the purposes of, or in connection with, the Placing, an aggregate nominal amount of up to 68,718,229; (ii) for the purposes of, or in connection with, the acquisition, as contemplated by the Vallar IPO prospectus or in connection with the restructuring of any debt or other financial obligation relating to such acquisition (whether assumed or entered into by the Company or the Subsidiary or owed or guaranteed by any company or entity acquired), up to a maximum nominal amount of 2,000,000,000; (iii) generally, for such purposes as the Directors may think fit, an aggregate nominal amount not exceeding 10 per cent. of the aggregate nominal value of the Ordinary Shares in issue as at the close of the first business day following Placing Admission; (iv) where securities have been offered by way of a rights issue (as defined in the Articles) up to an aggregate nominal amount not exceeding two-thirds of the aggregate nominal value of the Ordinary Shares in issue as at the close of the first business day following Placing Admission but subject to Directors having a right to make such exclusions or other arrangements in connection with the offering as they deem necessary or expedient (A) to deal with equity securities representing fractional entitlements; and (B) to deal with legal or practical problems under the laws of any territory, or the requirements of any regulatory body; (v) an aggregate nominal amount not exceeding such nominal amount as may be necessary for the purposes of, or in connection with, satisfying the rights of the holders thereof to exchange Founder Shares and Founder Securities for Ordinary Shares (as more particularly described in paragraphs 5.3 and 5.4 below); and (vi) for the purposes of, or in connection with, satisfying the Share Matching Award, an aggregate nominal amount not exceeding 120,000, provided always that: the authorities conferred on the Directors described in (i), (iii) and (iv) above shall expire at the conclusion of the next annual general meeting of the Company after the passing of such resolution; that the authority conferred on the Directors under (ii) and (vi) above shall expire on 30 September 2012; and the authority conferred upon the Directors under (v) above shall expire on 30 September 2020. The Company may make an offer or agreement which would or might require relevant securities to be allotted pursuant to the resolution set out in this paragraph (a) before the expiry of their power to do so, but allot the relevant securities pursuant to any such offer or agreement after that expiry date; all pre-emption rights in the Articles be waived for the purposes of, or in connection with, the Placing; the Directors be authorised to allot equity securities, as defined in and notwithstanding the Articles, wholly for cash: (i) for the purposes of, or in connection with, the acquisition as contemplated by the Vallar IPO prospectus or in connection with the restructuring of

(b) (c)

401

any debt or other financial obligation relating to such acquisition (whether assumed or entered into by the Company or the Subsidiary or owed or guaranteed by any company or entity acquired), up to a maximum nominal amount of 2,000,000,000; (ii) generally for such purposes as the Directors may think fit, an aggregate nominal amount not exceeding 10 per cent. of the aggregate nominal value of Ordinary Shares in issue (as at the close of the first business day following Placing Admission); (iii) for the purposes of the allotment of equity securities offered pursuant to paragraph 3.8(a)(iv) above; (v) for the purposes of the allotment of Ordinary Shares pursuant to paragraph 3.8(a)(v) above; and (vi) for the purposes of the allotment of equity securities for the purposes of, or in connection with satisfying the Share Matching Award an aggregate nominal amount not exceeding 120,000, on the basis that the authorities in (i), (iii) and (iv) above shall expire at the conclusion of the next annual general meeting of the Company after the passing of such resolution, the authority in (ii) and (vi) above shall expire on 30 September 2012, and the authority in (v) above shall expire on 30 September 2020. The Company may make an offer or agreement which would or might require equity securities to be allotted pursuant to any of the resolutions set out in this paragraph (c) before the expiry of their power to do so, but allot the equity securities pursuant to any such offer or agreement after that expiry date; (d) the Company be authorised to make market purchases of Ordinary Shares on such terms and in such manner as the Directors shall from time to time determine, and to hold such Ordinary Shares as treasury shares, provided that: (i) the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is 6,871,823 (representing approximately 10 per cent. of the aggregate issued ordinary share capital of the Company immediately following Placing Admission); (ii) the minimum price (exclusive of any expenses) which may be paid for an Ordinary Share is its nominal value; (iii) the maximum price (exclusive of any expenses) which may be paid for an Ordinary Share is not more than the higher of: (i) an amount equal to 5 per cent. above the average of the middle market quotations of an Ordinary Share (as derived from the London Stock Exchange Daily Official List) for the five Business Days immediately preceding the date on which that Ordinary Share is contracted to be purchased; and an amount equal to the higher of: (i) the price of the last independent trade of an Ordinary Share; and (ii) the highest current independent bid for an Ordinary Share on the London Stock Exchange at the time the purchase is carried out,

(ii)

provided that such authority shall expire on 31 December 2011 or otherwise by resolution at a general meeting, and that the Company may at any time prior to the expiry of such authority make a contract or contracts to purchase Ordinary Shares under such authority which will or might be completed or executed wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts; (e) the purchase by the Company, pursuant to the Placing Agreement, of up to 4,218,229 fully paid Ordinary Shares in the capital of the Company registered in the name of the Stabilising Manager in the register of members of the Company, for a purchase price per Ordinary Share not exceeding the Placing Price, be approved and sanctioned; and the terms of the Placing Agreement, comprising the contract for the purposes of Article 57 of the Jersey Companies Law pursuant to which the Company agrees to purchase from the Stabilising Manager up to 4,218,229 fully paid Ordinary Shares in the capital of the Company for a price per Ordinary Share not exceeding the Placing Price, be approved and sanctioned.

(f)

3.9

Save as disclosed in this document: (a) (b) (c) no share or loan capital of the Company has been issued or is proposed to be issued; no person has any preferential subscription rights for any share capital of the Company; no share or loan capital of the Company is currently under option or agreed conditionally or unconditionally to be put under option; and 402

(d)

no commissions, discounts, brokerages or other special terms have been granted by the Company since its incorporation in connection with the issue or sale of any share or loan capital of the Company.

4. 4.1

Rights Attaching to the Suspended Voting Ordinary Shares Except as set out below, the Suspended Voting Ordinary Shares rank pari passu with the Voting Ordinary Shares in all respects and no action may be taken by the Company in relation to, or any offer made by the Company to the holders of, the Voting Ordinary Shares unless the same action is taken in respect of, or the same offer is made to the holders of, the Suspended Voting Ordinary Shares.

Voting at General Meetings 4.2 A holder of Suspended Voting Ordinary Shares is entitled to receive notice of, and to attend and speak at, any general meeting of the Company, but shall not be entitled to vote in respect of any Suspended Voting Ordinary Shares held, except on any resolutions: (a) proposed by any person other than Bakrie & Brothers or Long Haul or any of their Affiliates or any person acting in concert with Bakrie & Brothers and Long Haul or any of their Affiliates, to wind up the Company or to present a petition to wind up the Company, other than for the purposes of a reconstruction or amalgamation whilst solvent; proposed by any person other than Bakrie & Brothers or Long Haul or any of their Affiliates or any person acting in concert with Bakrie & Brothers or Long Haul or any of their Affiliates, to appoint an administrator or to present a petition for the appointment of an administrator in relation to the Company, or to approve any arrangement with the Companys creditors; proposed by the Board, to sell all or substantially all of the undertaking of the Company (provided that such resolution is not in connection with a transaction to which the City Code applies); proposed by the Board for the purposes of, or in connection with, any scheme of arrangement of the Company under the Companies (Jersey) Law 1991 (as amended) under which a body corporate (Newco) will acquire the Company and the holdings of the members of Newco following the scheme becoming effective will be substantially the same as the holdings of the members of the Company immediately before the scheme becoming effective; or proposed by any person other than Bakrie & Brothers or Long Haul or any of their Affiliates or any person acting in concert with Bakrie & Brothers or Long Haul or any of their Affiliates, in accordance with the Articles, to vary, modify or abrogate any of the class rights attaching to the Suspended Voting Ordinary Shares,

(b)

(c)

(d)

(e)

in any which case each holder of Suspended Voting Ordinary Shares on a show of hands shall have one vote, and on a poll shall be entitled to vote on the resolution on the basis of one vote for each Suspended Voting Ordinary Share held. For the purposes of any resolution of a type referred to in paragraphs (a) to (d) above, the Suspended Voting Ordinary Shares shall be treated for all purposes as being of the same class as the Voting Ordinary Shares and no separate meeting or resolution of the holders of the Suspended Voting Ordinary Shares shall be required to be convened or passed. Income 4.3 On a distribution of profits (whether by cash dividend, dividend in specie, scrip dividend, capitalisation issue or otherwise), the Suspended Voting Ordinary Shares shall rank pari passu with the Voting Ordinary Shares. Capital 4.4 On a return of capital, whether on a winding-up or otherwise, the Suspended Voting Ordinary Shares shall rank pari passu with the rights to the assets of the Company attaching to the Voting Ordinary Shares.

403

Conversion 4.5 Upon a transfer of Suspended Voting Ordinary Shares by Bakrie & Brothers or Long Haul or by any of their Affiliates to a person who is not such an Affiliate or Bakrie & Brothers or Long Haul, such Suspended Voting Ordinary Shares shall convert into Voting Ordinary Shares (on a one-forone basis) automatically upon, and contemporaneously with, registration by the Company (or its registrar) of the transfer in the register of members of the Company following receipt of a duly executed stock transfer form and the share certificates in respect of such Suspended Voting Ordinary Shares. Upon: (a) a transfer of Voting Ordinary Shares by Bakrie & Brothers or Long Haul or any of their Affiliates to a person who is not such an Affiliate or Bakrie & Brothers or Long Haul, as the case may be; or any issue of further shares by the Company as a result of which Bakrie & Brothers and Long Hauls Voting Shareholding is reduced below the Maximum Voting Percentage,

(b)

such number of Suspended Voting Ordinary Shares as, immediately following conversion, will result in Bakrie & Brothers or Long Hauls Voting Shareholding being equal to the Maximum Voting Percentage, shall convert into Voting Ordinary Shares (on a one-for-one basis) automatically upon, and contemporaneously with, registration by the Company (or its registrar) of the transfer in the register of members of the Company following receipt of a duly executed transfer form and the share certificates in respect of such Voting Ordinary Shares or the issue of such further shares. In any such case, a proportionate number of each holders holding of Suspended Voting Ordinary Shares, also taking into account the conversion into Voting Ordinary Shares of any other suspended-voting ordinary shares issued on terms substantially equivalent to the terms of the Suspended Voting Ordinary Shares, shall be so converted (in each case rounded up or down to the nearest whole number as determined by any Director in his absolute discretion). Conversion at the Instance of Bakrie & Brothers or Long Haul (or any of their Affiliates) 4.6 At any time, Bakrie & Brothers and Long Haul (or any of their Affiliates) shall be entitled (but shall not be bound) to require the Company to convert Suspended Voting Ordinary Shares into Voting Ordinary Shares, on a one-for-one basis, so long as such conversion does not result in the Voting Shareholding being more than the Maximum Voting Percentage. General 4.7 Within 21 days after the conversion of any Suspended Voting Ordinary Shares into Voting Ordinary Shares, the Company shall forward to the relevant shareholder, at its own risk, free of charge, a definitive certificate for the appropriate number of fully paid up Voting Ordinary Shares and a new certificate for any unconverted Suspended Voting Ordinary Shares comprised in the certificate surrendered by it. Pending the despatch of definitive certificates, transfers shall be certified against the register of members of the Company. The Company shall procure that the Voting Ordinary Shares arising on conversion of the Suspended Voting Ordinary Shares are admitted to the Official List and to trading on the London Stock Exchanges market for listed securities. No admission to listing or admission to trading shall be sought for the Suspended Voting Ordinary Shares whilst they remain Suspended Voting Ordinary Shares. 5. Articles of Association of the Company, the Subsidiary and UK Subco Articles of Association of the Company 5.1 Under the Jersey Companies Law, the capacity of a Jersey company is not limited by anything contained in its memorandum or articles of association. Accordingly, the memorandum of association of a Jersey company does not contain an objects clause. The Articles of Association are available for inspection at the address specified in paragraph 27 of this Part XII and at the registered office of the Company, as set out in paragraph 2.4 of this Part XII.

404

Certain provisions have been incorporated into the Articles to enshrine rights that are not conferred by the Jersey Companies Law, but which the Company believes shareholders would expect to see in a company listed on the London Stock Exchange. Provisions in the Articles also require shareholders to make disclosures pursuant to Chapter 5 of the Disclosure and Transparency Rules, and require the Directors to comply with Chapter 3 of the Disclosure and Transparency Rules and themselves to require any persons discharging managerial responsibilities (within the meaning ascribed in the Disclosure and Transparency Rules) in relation to the Company who are not directors to do so, and to use reasonable endeavours to procure that their own and such persons connected persons do so. 5.2 The Articles contain (among other things) provisions to the following effect. (a) Voting Rights Subject to disenfranchisement in the event of non-payment of any sum due and payable in respect of a share or as provided in (d) below and subject to the rights attaching to the Suspended Voting Ordinary Shares and to any special terms as to voting on which any other shares may be issued (no such shares currently being in issue), on a show of hands every member present in person (or, being a corporation, present by a duly authorised representative) or by proxy shall have one vote and on a poll every member present in person or by proxy shall have one vote for each share of which he is the holder. Except in the case of the Suspended Voting Ordinary Shares, the Companys major shareholders do not have different voting rights. (b) Transfer of shares The Ordinary Shares are in registered form and are capable of being held in uncertificated form. A member may transfer all or any of his uncertificated shares in CREST. The Board may, in its absolute discretion, refuse to register any transfer of an uncertificated share where permitted to do so by applicable law, including the Jersey Companies Law and the Jersey CREST Order. All transfers of certificated shares must be effected by a transfer in writing in any usual form or any other form approved by the Directors. The instrument of transfer shall be executed by or on behalf of the transferor and (except in the case of fully paid shares) by or on behalf of the transferee. The Directors may, in their absolute discretion, refuse to register any instrument of transfer of a certificated share: (i) which is not fully paid up (but such discretion may not be exercised in such a way as to prevent dealings in those shares from taking place on an open and proper basis); or on which the Company has a lien.

(ii)

If the Directors refuse to register a transfer of a certificated share it shall, as soon as practicable and in any event within two months after the date on which the instrument of transfer was lodged, give to the transferor and the transferee notice of the refusal. The Directors must also provide the transferee with such further information about the reasons for the refusal as the transferee may reasonably request. Under the Articles, if the Board becomes aware that any shares are owned directly or beneficially by a person in circumstances which would or might result in: (a) the Company incurring a liability to taxation or suffering any pecuniary, fiscal, administrative or regulatory or similar disadvantages in connection with the Company being, or being required to register as, an investment company under the US Investment Company Act; (b) the Company losing any offering-related exemptions under the US Investment Company Act; or (c) the assets of the Company being deemed to be assets of a Plan Investor (in each case, a Prohibited Person), the Board may give notice to such person requiring such person either: (i) to provide the Board within 30 days of receipt of such notice with sufficient documentary evidence to satisfy the Board that such person is not a Prohibited Person; or (ii) to sell or transfer his shares to a person who is not a Prohibited Person within

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30 days and within such 30 days to provide the Board with satisfactory evidence of such sale or transfer. Where condition (i) or (ii) is not satisfied within 30 days after the serving of the notice, the Board is entitled to arrange for the sale of the relevant shares on behalf of the registered holder. If the Company cannot effect a sale of the relevant shares within five Business Days of its first attempt to do so, the registered holder will be deemed to have forfeited his shares. If the ownership of shares by a purchaser of Ordinary Shares will or may result in the Companys assets being deemed to constitute plan assets under the Plan Asset Regulations, the shares of such purchaser will be deemed to be held in trust by a purchaser for such charitable purposes as the Investor may determine (provided that the trust beneficiaries may not be Prohibited Persons), and such person shall not have any beneficial interest in the shares. (c) Dividends Subject to the Jersey Companies Law, the Company in general meeting may, by Ordinary Resolution, declare dividends in accordance with the respective rights of the members and may fix the time for payment of such dividend, provided that no dividend shall be payable in excess of the amount recommended by the Directors and no dividend shall be declared in excess of amounts standing to the credit of the Companys profit and loss account from time to time. Subject to the Jersey Companies Law, the Directors may pay such interim dividends as appear to them to be justified by the financial position of the Company and may also pay any dividends payable at a fixed rate as appear to be justified by the financial position of the Company. No dividend or other moneys payable in respect of a share shall bear interest as against the Company. Any dividend unclaimed for a period of 12 years after having become due for payment shall be forfeited and cease to remain owing by the Company unless otherwise provided by the rights attached to the share. (d) Disclosure of interests in shares The Company may give a disclosure notice to any person whom it knows or has reasonable cause to believe is either: (a) interested in the Companys shares; or (b) has been so interested at any time during the three years immediately preceding the date on which the disclosure notice is issued. The disclosure notice may require the person: (a) to confirm that fact or (as the case may be) to state whether or not it is the case; and (b) if he holds, or has during that time held, any such interest, to give such further information as may be required. A holder of shares whose shareholding represents less than 0.25 per cent. of the issued shares of that class, who fails to provide the information within 28 days after the notice has been given shall not be entitled to vote either personally or by proxy at a shareholder meeting or to exercise any other right conferred by membership in relation to shareholder meetings until (a) the date seven days after the date on which the Board is satisfied that the default is remedied; (b) the Company is notified that the default shares are the subject of an exempt transfer; or (c) the Board decides to waive those restrictions in whole or in part. A holder of shares whose shareholding represents more than 0.25 per cent. of the issued shares of that class, who fails to provide the information within 14 days after the notice has been given shall not be entitled to receive any payment by way of dividend on, or to transfer any rights in, the shares. These restrictions shall not prejudice a sale of the shares on the London Stock Exchange, a sale of the whole beneficial interest in the shares to a person whom the Directors are satisfied is unconnected with the existing holder or with any other person appearing to be interested in the shares or a disposal of the shares by way of acceptance of a takeover offer. (e) Distribution of assets on a winding up Subject to any particular rights or limitations for the time being attached to any of the Companys shares, if the Company is wound up, the assets available for distribution among shareholders shall be distributed to the shareholders pro rata to the number of shares held 406

by each member at the time of the commencement of the winding up. If any share is not fully paid up, that share shall only carry the right to receive a distribution calculated on the basis of the proportion that the amount paid up on that share bears to the issue price of that share. (f) Changes in share capital and variation of rights (i) Subject to the Jersey Companies Law and without prejudice to any rights attached to any existing shares, any share may be issued with such preferred, deferred or other special rights or restrictions as the Company may by Special Resolution determine, or in the absence of such determination as the Directors may determine. Subject to Jersey Companies Law, the Company may issue shares which are, or at the option of the Company or the holder are liable, to be redeemed. (ii) The Company may by, altering its memorandum of association by Special Resolution, increase its share capital, consolidate and divide all or any of its share capital into shares of larger amount, subdivide its shares or any of them into shares of smaller amount or cancel or reduce the nominal value of any shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amounts so cancelled or the amount of the reduction. Subject to the Jersey Companies Law, the Company may by Special Resolution reduce its share capital, any capital redemption reserve and any share premium account, and may also, by Special Resolution and subject to the Jersey Companies Law, purchase its own shares. Whenever the capital of the Company is divided into different classes of shares, all or any of the rights for the time being attached to any class of shares in issue may, subject to the Articles, from time to time (whether or not the Company is being wound up) be varied in such manner as those rights may provide or (if no such provision is made) either with the consent in writing of the holders of two-thirds in nominal value of the issued shares of that class or with the authority of a special resolution passed at a separate general meeting of the holders of those shares.

(iii)

(iv)

(g)

Directors interests (i) A Director who is in any way, directly or indirectly, interested in a transaction or arrangement with the Company shall, at a meeting of the Directors, declare in accordance with Article 75 of the Jersey Companies Law the nature of his interest. (ii) Provided that he has declared his interest in accordance with paragraph (i), a Director may be a party to or otherwise interested in any transaction or arrangement with the Company or in which the Company is otherwise interested and may be a director or other officer, or employed by, or a party to any transaction or arrangement with, or otherwise interested in any body corporate promoted by the Company or in which the Company is otherwise interested. No director so interested shall be accountable to the Company, for any benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office as Director and may act in a professional capacity to the Company on such terms as to tenure of office, remuneration and otherwise at the Directors discretion.

(iii)

(h)

Remuneration of Directors (i) The Directors will be paid fees not exceeding in aggregate 900,000 per annum (or such larger sum as the Company may, by Ordinary Resolution, determine) as the Directors may decide to be divided among them. Such fee shall be divided among them in such proportion and manner as they may agree or, failing agreement, equally. (ii) The Directors may grant special remuneration to any Director who performs any special or extra services to, or at the request of, the Company. Special remuneration

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may be payable to a Director in addition to his ordinary remuneration (if any) as a Director. (iii) The Directors shall also be paid out of the funds of the Company all expenses properly incurred by them in and about the discharge of their duties, including their expenses of travelling to and from the meetings of the Directors, committee meetings and shareholder meetings. A Director may also be paid all expenses incurred by him in obtaining professional advice in connection with the affairs of the Company or the discharge of his duties. The Directors may exercise all the powers of the Company to pay, provide or procure the grant of pensions or other retirement or superannuation benefits and death, disability or other benefits, allowances or gratuities to any person who is or has been at any time a Company director or in the employment or service of the Company or of any company which is or was a subsidiary undertaking of the Company or the relatives or dependants of any such person. The Company shall not make a payment for loss of office to a Director unless the payment has been approved by an Ordinary Resolution of the Company.

(iv)

(v) (i)

Retirement of Director A Director shall be capable of being appointed or reappointed as a Director, and shall not be required to retire, regardless of his having attained any particular age. All Directors shall retire at the first annual general meeting of the Company but shall be eligible for reelection. At each subsequent annual general meeting of the Company, (a) any director appointed by the Board since the last annual general meeting and (b) one third of all directors then in office (excluding any director appointed since the last annual general meeting) shall retire but shall be eligible for re-election. Borrowing powers The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of its undertaking, property and assets and uncalled capital and to issue debentures and other securities for any debt, liability or obligation of the Company or of any third party. Shareholders meetings The Board shall convene an annual general meeting of the Company within such time as may be required by Article 87 of the Jersey Companies Law. Thereafter general meetings (which are annual general meetings) shall be held at least once in each subsequent calendar year within six months of the end of each financial year of the Company. The Board may call general meetings whenever it thinks fit or on the requisition of members pursuant to the provisions of the Jersey Companies Law and the Articles. An annual general meeting and general meetings shall be called by at least 14 clear days notice. Subject to any other restrictions, every notice of meeting shall be given to all the members (other than any who, under the provisions of the Articles, are at the date of the notice not entitled to receive such notices from the Company) and to the Directors and auditors. Every notice of meeting shall specify the place, the day and the time of the meeting and the general nature of the business to be transacted and, in the case of an annual general meeting, shall specify the meeting as such. All general meetings shall be held in Jersey. The requisite quorum for general meetings of the Company shall be two qualifying persons.

(j)

(k)

(l)

Capitalisation of reserves Subject to the Jersey Companies Law the Directors may, with the authority of an Ordinary Resolution of the Company: (i) resolve to capitalise any sum standing to the credit of any reserve account of the Company including share premium account and capital redemption reserve) or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend (whether or not it is available for distribution); and (ii) appropriate that sum as capital to the shareholders in proportion to the nominal amount of the shares held by them respectively and apply that sum on their behalf in

408

paying up in full any unissued shares or debentures of the Company of a nominal amount equal to that sum and allot the shares or debentures credited as fully paid to those shareholders, or as they may direct, in those proportions or in paying up the whole or part of any amounts which are unpaid in respect of any issued shares held by them respectively, or otherwise deal with such sum as directed by the resolution. (m) Authority to allot securities and disapplication of pre-emption rights The Company may, subject to the provisions contained in the Articles relating to the disapplication of the pre-emption rights, from time to time pass an Ordinary Resolution authorising the Directors to exercise all the powers of the Company to allot relevant securities up to the nominal amount specified in the Ordinary Resolution. The Ordinary Resolution may provide that a proportion of the amount so authorised is to be used only for the allotment of equity securities in connection with rights issues. The authority, if not previously revoked, shall expire on the day specified in the resolution, not being more than five years after the date on which the resolution is passed. Shares to be paid up in cash must be offered to existing shareholders pro rata to their holdings of shares except that, on the passing of a Special Resolution, the Directors shall have power to allot equity securities for cash without regard to that restriction so long as that power shall be limited (generally): (a) to the allotment of equity securities in connection with a pre-emptive issue; and (b) to the allotment (other than in connection with a pre-emptive issue) of shares having a nominal amount not exceeding in aggregate the sum specified in the Special Resolution. Notwithstanding the general restriction on allotments of shares for cash, the Company has, by written Shareholder Resolution passed on 9 July 2010, authorised the Directors to make allotments otherwise than on a preemptive basis in the circumstances described in paragraph 3.8 above. (n) Website communication with Shareholders The Articles enable the Company to use its website as a means of sending or supplying documents or information to Shareholders. Before communicating with a shareholder by means of its website, the Company must have asked the shareholder, individually, to agree (generally or specifically) that the Company may send or supply documents or information to him by means of a website. A member shall be deemed to have agreed that the Company may send or supply a document or information to him by means of a website if no response indicating a refusal of the request is received within 28 days (or such longer period as the Directors may specify. When communicating with shareholders by means of website communications, the Company must notify the intended recipient (by post or other permitted means) of the presence of a document or information on the website, the address of the website and place that it appears and how to access the document on the website. Directors indemnities, insurance and defence expenditure As far as the Jersey Companies Law allows, the Company may: (i) indemnify any Director (or any director of any of its subsidiary undertakings) against any liability; (ii) indemnify a director of a company that is a trustee of an occupational pension scheme for employees (or former employees) of the Company (or of any of its subsidiary undertakings) against liability incurred in connection with that companys activities as trustee of the scheme; (iii) purchase and maintain insurance against any liability for any person referred to in paragraph (i) or (ii) above; and (iv) provide any person referred to in paragraph (i) or (ii) above with funds (whether by loan or otherwise) to meet expenditure incurred or to be incurred by him in defending any criminal, regulatory or civil proceedings or in connection with an application for relief (or to enable him to avoid incurring such expenditure).

(o)

Articles of Association of the Subsidiary 5.3 Founder Shares The articles of association of the Subsidiary provide that the Founder Shares (which take the form of B ordinary shares in the Subsidiary) grant the holders thereof the right (subject to the completion of an acquisition, as contemplated by the Vallar IPO prospectus) to exchange the Founder Shares for such number of Ordinary Shares issued for this purpose as represent the Applicable Percentage of the issued ordinary share capital of the Company (on a fully diluted basis). The Company may, at its option, satisfy the exchange right by purchasing each such

409

Founder Share for cash at an amount equal to the sum of (a) the Applicable Percentage of the market capitalisation of the Company (such market capitalisation being taken as the average market capitalisation for the five Business Days prior to the relevant exchange date) and (b) the Applicable Percentage of the subscription monies the Company would be entitled to receive in respect of the issue of those Ordinary Shares that would be issued to arrive at a fully diluted basis, divided by the number of Founder Shares in issue at the relevant exchange date. The Founder Shares may be exchanged no later than the last Business Day of the sixth month following the month in which an acquisition, as contemplated by the Vallar IPO prospectus, is completed. The Founder Shares are not transferable without the prior consent of the Company, save for transfers to other members of Vallar Capital, a Founder, or a family member or family trust of a Founder. The Founder Shares do not carry any dividend rights and do not carry voting rights, except in respect of consent to the voluntary winding up of the Subsidiary if made prior to the time (after the second anniversary of Placing Admission) at which it is determined that no acquisition, as contemplated by the Vallar IPO prospectus, will be made, certain alterations to the share capital of the Subsidiary and any variation or abrogation of class rights. 5.4 Founder Securities The Founder Securities, which take the form of C ordinary shares in the Subsidiary, carry a right of exchange, subject to completion of an acquisition, as contemplated by the Vallar IPO prospectus, and meeting the Performance Condition, enabling the holders to require the Company to acquire any Founder Securities in exchange for the issue to the holders of such Founder Securities of such number of Ordinary Shares as have a market value (at the date of issue) equal to 15 per cent. of the difference between (1) the market capitalisation (determined by reference to the volume weighted average price of the Ordinary Shares traded on the main market of the London Stock Exchange) of the Company at the relevant exchange date (plus the aggregate value created for those parties with outstanding options or convertible securities over or in respect of Ordinary Shares which have an exercise (or subscription or conversion) price of less than the volume weighted average price for an Ordinary Share at the exchange date) and (2) a deemed market capitalisation of the Company which is the product of the number of Ordinary Shares in issue at that time and the Adjusted Issue Price. The Company will have the right (instead of issuing the aforementioned Ordinary Shares) to pay a cash sum equivalent to the volume weighted average price of an Ordinary Share traded on the London Stock Exchanges main market at the date of exchange multiplied by the number of Ordinary Shares that would otherwise have been issued in exchange, entirely at the Companys discretion. A holder of Founder Securities may exercise his rights independently of the other holders of Founder Securities and may also exercise his rights in one or more instalments (and in such circumstances the holder will receive the applicable proportion(s) of the Ordinary Shares (or cash equivalent) referred to above). The Founder Securities exchange right can only be exercised within the four years from completion of an acquisition, as contemplated by the Vallar IPO prospectus. The Founder Securities are not transferable without the prior consent of the Company, save for transfers to other members of Vallar Capital, a Founder or a family member or family trust of a Founder. Founder Securities do not carry voting rights. However, save with the approval of the holders of 75 per cent. of the Founder Shares and of the Founder Securities (voting separately) in issue from time to time: (a) the Subsidiary may not be voluntarily wound up prior to the time (after the second anniversary of Placing Admission) at which it is determined that no acquisition, as contemplated by the Vallar IPO prospectus, will be made; and the Subsidiary may not alter its share capital (save for the allotment and issue of A ordinary shares).

(b)

5.5

Exchange of Shares The Ordinary Shares to be allotted and issued on the exchange of the Founder Shares and Founder Securities shall be Voting Ordinary Shares of the Company. It is proposed to amend the

410

rights attaching to the Founder Shares and Founder Securities so that in the event that the Company is aware that the issue of Voting Ordinary Shares would give rise to an obligation to make a mandatory cash offer under Rule 9 of the City Code, then the Company shall issue Voting Ordinary Shares to the extent that no obligation to make a mandatory offer arises, and Suspended Voting Ordinary Shares as to the balance. 5.6 Dividends Subject to the provisions of the Jersey Companies Law and the Subsidiarys articles of association, the Subsidiary may by Ordinary Resolution declare dividends in accordance with the respective rights of the holders of its shares, but no dividend shall exceed the amount recommended by the Directors. The Founder Shares and the Founder Securities do not entitle the holders thereof to share in any dividend distribution by the Subsidiary. Rights on Winding-up If the Subsidiary is wound up when the Company has not made an acquisition of the type contemplated by the Vallar IPO prospectus, the holders of the Founder Shares and the Founder Securities shall not be entitled to receive any sum out of the surplus assets of the Subsidiary remaining after the payment of its liabilities until the Company has received in aggregate (including in any prior distribution) an amount equal to the Priority Return Sum. Thereafter any distributable amounts remaining will be applied first to pay to the holders of the Founder Shares and Founder Securities amounts equivalent to the amounts paid upon those shares (pro rata to the amounts paid up thereon in the event of any insufficiency) and finally in distributing any remaining distributable assets amongst all the shareholders of the Subsidiary pro rata to the amounts paid upon their respective shares. If the Subsidiary is wound up after completion of an acquisition of the type contemplated by the Vallar IPO prospectus, and before the Founder Shares are exchanged for Ordinary Shares, if the Performance Condition has not been met, the surplus assets of the Subsidiary remaining after the payment of its liabilities shall be applied first to pay to the holders of the Founder Shares an amount equal to the amount they would have received had the Company elected to pay cash on an exercise of the exchange right attaching to the Founder Shares (as described in Section 5.3 above) and as if such right had been exercised on the date of commencement of the winding up of the Subsidiary, second in paying to the holders of the Subsidiarys Class A ordinary shares (the Company) and the holders of the Founder Securities an amount equal to the amounts paid up on the Class A Ordinary Shares and the Founder Securities respectively held by them (in the event of any insufficiency, the amount available for such distribution shall be divided between the holders of the Subsidiarys Class A ordinary shares (the Company) and the holders of the Founder Securities pro rata to the amounts paid up on such shares), and the balance shall be distributed to the Company as the holder of the Subsidiarys Class A Ordinary Shares. If the Subsidiary is wound up after completion of an acquisition of the type contemplated by the Vallar IPO prospectus, and before the Founder Shares are exchanged for Ordinary Shares, if the Performance Condition has been met, the surplus assets of the Subsidiary remaining after the payment of its liabilities shall be applied in the following priority: first to the holders of the Founder Shares, an amount equivalent to the amount they would have received had the Company elected to pay cash on an exercise of the exchange right attaching to the Founder Shares (as described in Section 5.3 above) as if such right had been exercised on the date of commencement of the winding up of the Subsidiary; next, to the holders of the Founder Securities an amount equivalent to the amount they would have received had the Company elected to pay cash on an exercise of the exchange right attaching to the Founder Securities (as described in Section 5.4 above) as if such right had been exercised on the date of commencement of the winding up of the Subsidiary; and any remaining balance to the Company as holder of the Class A ordinary shares in the Subsidiary. Articles of Association of UK Subco UK Subco has adopted the model articles for private companies limited by shares set out in the Companies (Model Articles) Regulations 2008 (SI 2008/3229) as its articles of association. Directorships and Partnerships In addition to their directorships of the Company, the Directors are, or have been, members of the administrative, management or supervisory bodies (Directorships) or partners of the following companies or partnerships, at any time in the five years prior to the date of this document: 411

5.7

5.8

6. 6.1

Indra Bakrie (Chairman) Current Directorships and partnerships Nathaniel Rothschild (Co-Chairman) Current Directorships and partnerships Attara Fund. Ltd (formerly known as Atticus European Fund Ltd) Attara Ltd (formerly known as Atticus European Ltd) Attara Management LLC Attara Capital LP Attara Holdings LLC (formerly Atticus European Holdings LLC) Attara Management Limited Attara UK Services Limited Barrick Gold Corporation Berma Trust SA Concordia Acquisitions Corporation Dryden Capital Advisors Ltd Dryden Capital Ltd En+ Group Limited JNR Limited NR Atticus Ltd NR Atticus SPC Fund. Ltd Scout Aviation II, LLC T & M Protection Resources LLC TRB Management Ltd Vallar Advisors GP Limited Vallar Capital LP Vallar Holding Company Limited Yad Hanadiv

Former Directorships and partnerships Energi Mega Persada Inc. Former Directorships and partnerships AAF Holdings LLC AC Holdings (Cayman) Ltd AOF Fund Holdings Limited AOF Fund Management Ltd. Atticus Alpha Fund Ltd. Atticus Alpha Ltd. Atticus Alpha Management Ltd Atticus Allocation Fund, Ltd Atticus Capital LP Atticus Capital Holdings LLC Atticus EM Holdings LLC Atticus EM Management Ltd Atticus Emerging Markets Fund Ltd Atticus Emerging Markets Ltd Atticus European Management Ltd Atticus Global Advisors Ltd Atticus Global Ltd Atticus Holdings LP Atticus International Fund Ltd Atticus LP Incorporated Atticus Management Limited Atticus Management LP, (previously Atticus Capital LLC) Atticus Management Ltd Atticus Mauritius, Limited Atticus Opportunity Fund Ltd Atticus Opportunity Ltd Atticus Select Specialty Finance Fund, Ltd Atticus Select Specialty Finance, Ltd Atticus Trading Ltd Atticus Trading (Cayman) Ltd Atticus UK Services Limited (previously Atticus UK Ltd) Doder Trust Ltd Dryden Capital Holdings LLC JNR Acquisitions Limited JNR Eastern Investments Limited JNR Investments, Ltd JNR Energy Resources Limited JNR Russia Fund GP JNR Ventures Ltd Life Science Capital (GP) Ltd Life Science Capital Fund Life Science Capital Master Fund Nameco Alternate 1 Limited Nameco Alternate 2 Limited NR Capital Ltd NR Concordia Ltd NR Global Fund Limited NR Management Ltd NR Ventures Ltd RIT Capital Partners Plc Scout Aviation LLC TRB Holdings LLC

412

Ari Hudaya (Chief Executive Officer) Current Directorships and partnerships Bakrie Energy International Pte Ltd PT Bumi Resources Tbk PT Bumi Resources Mineral Tbk PT Energi Mega Persada PT Kaltim Prima Coal James Campbell (Non-Executive Director) Current Directorships and partnerships Vallar Advisers GP Limited Z Filter Pty Ltd. Highveld Steel and Vanadium Corporation Ltd.

Former Directorships and partnerships PT Arutmin Indonesia PT Bakrie & Brothers Tbk

Former Directorships and partnerships Minara Resources Ltd. Ferrous Resources Ltd. Evraz S.A. Olivewood Resources Ltd.

Andrew Beckham (Finance Director) Current Directorships and partnerships PT Bumi Resources Tbk Herald Resources Ltd Beckham Books Ltd Rosan Roeslani (Non-Executive Director) Current Directorships and partnerships PT Berau Coal Energy Tbk PT Berau Coal PT Recapital Advisors PT Lupita Amanda PT Abdi Bangsa Tbk PT Lativi Media Karya PT Saratoga Investama Sedaya PT Mitra Global Telekomunikasi Indonesia PT Kemang Jaya Raya

Former Directorships and partnerships

Former Directorships and partnerships PT Sriboga Raturaya PT Kaltim Prima Coal PT Bank Tabungan Pensiona Nasional PT Arutmin Indonesia Fortman Cline Asia Pte Ltd

Sir Julian Horn-Smith (Deputy Chairman & Senior Independent Director) Current Directorships and partnerships Former Directorships and partnerships Cellco Partnership d.b.a. Verizon Wireless Bank of Scotland PLC China Mobile Limited De La Rue PLC Mannesmann AG Management Board Digicel (Pacific) Ltd. Sage Group PLC Digicel Group Ltd. Smiths Group PLC Digicel Ltd. Vodafone Group PLC Eaccess Ltd. (Japan) Emobile Ltd. (Japan) HBOS PLC Lloyds Banking Group PLC Lloyds TSB Bank PLC Martin Dawes Systems Holdings Ltd. Sky Malta Ltd.

413

Lord Renwick (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships Compagnie Financiere Richemont AG BHP Billiton plc First Sapphire Media LLP BHP Billiton Ltd. Fleming Family & Partners (FF&P) British Airways Plc Fluor Limited Fluor Corporation J.P. Morgan Cazenove (Executive Position) GEM Diamonds Ltd. J.P. Morgan Europe (Executive Position) Harmony Gold Mining Co Ltd. Kazakhmys plc Open Europe Limited Vallar Investments UK Limited SAB Miller plc (South African Breweries prior to 2002) Rand Europe (UK) Steven Shapiro (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships Barrick Gold Corporation Burlington Resources, Inc. El Paso Corporation The Water Company, LLC GeoSynFuels, LLC Sir Graham Hearne, CBE (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships Energy Development Partners Ltd. Ascott Farms Ltd. Gallaher Group PLC Ascott Properties Ltd. N. M. Rothschild & Sons Ltd. Braemar Shipping Services PLC. Novar PLC Catlin Group Ltd. Old Bailey 2005 LLP Gramcar Limited Personalprint.com Ltd. Rothschild Concordia SAS Philharmonica Orchestra Trust Ltd. Rowan Companies, Inc. Revus Energy A.S.A. Rothschild Employee Trustees Limited Stratic Energy Corporation Vetco International Limited Wellstream Holdings PLC Wibowo Suseno Wirjawan (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships BP Migas PT Hutchison Ports Indonesia PT Jakarta International Amir Sambodo (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships PT Tuban Petrochemical Industries PT Krakatau Steel Philip Yeo (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships Accuron Technologies Ltd PLEi Investments Pte Ltd Far Eastern Bank Ltd Dornier MedTech GmbH United Overseas Bank Ltd MTIC Holdings Pte Ltd P*YEO Investments Pte Ltd Ascendas Property Fund Trustee Pte Ltd Hexagon Development Advisors Pte Ltd Singapore Aerospace Manufacturing Pte Ltd City Developments Limited Singbridge International Singapore Pte Ltd

414

Sony B. Harsono (Independent Non-Executive Director) Current Directorships and partnerships Former Directorships and partnerships Harsono Hermanto Strategic Consulting Harsono Hadibroto Consulting PT Harum Energy Tbk PT Tokio Marine Indonesia 6.2 The current business address of each of the Directors (in such capacity) is the registered office address of Company. Directors Confirmations Save as disclosed below, at the date of this document none of the Directors: (i) (ii) has any convictions in relation to fraudulent offences for at least the previous five years; has been associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the administrative, management or supervisory body or of senior manager of any company for at least the previous five years; or has been subject to any official public incrimination and/or sanction of him by any statutory or regulatory authority (including any designated professional bodies) or has ever been disqualified by a court from acting as a director of a company or from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer for at least the previous five years. Save as set out below, none of the Directors has any potential conflicts of interest between their duties to the Company and their private interests and/or other duties they may also have.

7. 7.1

(iii)

7.2

In 2001, the SEC brought a civil lawsuit against KPMG Indonesia and Mr. Harsono alleging a violation of US law. Mr. Harsono resolved the matter without admitting or denying the allegations in the complaint, and consented to the entry of a permanent injunction by which he promised to comply with US law. The following potential conflicts of interest may arise for certain of the Directors: Each of the Founders indirectly holds Founder Shares and Founder Securities, which may give rise to a potential conflict of interest between their duties to the Company as Directors and their private interests as beneficial owners of the Founder Shares and Founder Securities. For further details please see the risk factor entitled The holders of the Founder Shares and the holders of the Founder Securities may have interests that conflict with the interests of the Company, with the interests of the holders of the Ordinary Shares and/or, as the case may be, with their interests and duties as Directors. Each of the Founders is interested in the Adviser, which may give rise to a potential conflict of interest between their duties to the Company as Directors and their private interests in the Adviser. For further details please see Indemnification under the Advisory Agreement and Sub-Advisory Agreement may lead the Adviser and Sub-Adviser to assume greater risks when assessing potential acquisitions than would otherwise be the case, The arrangements between the Company, the Adviser and the Sub-Adviser were negotiated in the context of an affiliated relationship and may contain terms that are less favourable to the Company than those which might otherwise have been obtained from unrelated parties, The Founders may in future undertake other activities which may reduce the time that they are able to spend on the Companys business and The Founders and the Adviser may enter into related party transactions with the Company which may give rise to a conflict of interest between the Company and the Founders, the Directors and/or the Adviser in Risk Factors. As well as being Chairman of the Company, Indra Bakrie is affiliated with Bakrie & Brothers and Long Haul. In addition, as well as being a Non-Executive Director, Rosan Roeslani is affiliated with Recapital and Mutiara. As well as being an Independent Non-Executive Director of the Company, Sony B. Harsono is an Independent Commissioner of PT Harum Energy Tbk, a company engaged in coal mining and logistics activities in East Kalimantan, Indonesia.

7.3

415

Saveasdisclosedabove andinPartVI DirectorsandCorporateGovernance,therearenopotential conflicts of interest between any duties owed by the Directors to the Company and their private interestsorotherduties. 8. Directors interests Save as disclosed in the table below or in the table at paragraph 9 below (and save, in the case of Sir JulianHorn-Smith,LordRenwick,StevenShapiroandSir GrahamHearne,pursuanttothetermsof theShareMatchingAward),noDirector,noranymemberoftheirimmediatefamilies,hasorwillhave anyinterests(beneficialornon-beneficial)inthesharecapitaloftheCompanyoranyofitssubsidiaries asatthedateofpublicationofthisdocumentandimmediatelyfollowing,respectively,(a)closingofthe Bumi ResourcesTransaction,and(b)closingoftheBerau Transaction.
As at the date of publication of this Following closing of the Following closing of the document Bumi Resources Transaction Berau Transaction   Percentage Percentage Percentage Percentage of issued Percentage of issued of issued of issued Voting of issued Voting No. of Ordinary No. of Ordinary Ordinary No. of Ordinary Ordinary Ordinary Share Ordinary Share Share Ordinary Share Share Director Shares(3) capital Shares(3) capital capital Shares(3) capital capital         IndraBakrieNil Nil Nil Nil Nil Nil Nil Nil NathanielRothschild(1)(2) 7,619,000 11.31% 7,619,000 4.84% 7.92% 7,619,000 3.63% 5.61% JamesCampbell(1)(2) 300,000 0.44% 300,000 0.19% 0.31% 300,000 0.14% 0.22% AriHudaya Nil Nil Nil Nil Nil Nil Nil Nil AndrewBeckham Nil Nil Nil Nil Nil Nil Nil Nil RosanRoeslani(4) Nil Nil Nil Nil Nil 27,772,829 13.24% 20.44% SirJulianHorn-Smith15,000 0.02% 15,000 0.01% 0.02% 15,000 0.01% 0.01% LordRenwick 15,000 0.02% 15,000 0.01% 0.02% 15,000 0.01% 0.01% StevenShapiro 15,000 0.02% 15,000 0.01% 0.02% 15,000 0.01% 0.01% SirGrahamHearne,CBE15,000 0.02% 15,000 0.01% 0.02% 15,000 0.01% 0.01% WibowoSusenoWirjawanNil Nil Nil Nil Nil Nil Nil Nil AmirSambodo Nil Nil Nil Nil Nil Nil Nil Nil PhilipYeo Nil Nil Nil Nil Nil Nil Nil Nil SonyB.HarsonoNil Nil Nil Nil Nil Nil Nil Nil

(I)14.2

(I)17.2 (III)3.3

Notes: (1) 2,619,000oftheOrdinarySharesinwhichNathanielRothschildisinterestedareheld(viaitsgeneralpartner)byVallar Capital. (2) Seefootnotes(1) and(2) tothetableatparagraph 9 below. (3) Excluding(i)anyOrdinaryShareswhichmaybeallottedtotrusts,pensionfundsandotherunaffiliatedinvestment entitiesinwhichaDirectormayholdanindirectbeneficialinterestwheresuchDirectorsdonotexercisecontrolor discretionarydecision-makingauthority,and(ii)anyOrdinarySharesthataresubscribedbyanyofSir JulianHornSmith,LordRenwick,StevenShapiroorSirGrahamHearneundertheShareMatchingAward,asdescribedinmore detailinparagraph 17.14 ofthisPart XII. (4) Including Ordinary Shares held indirectly by Rosan Roeslani by virtue of his beneficial ownership of Recapital. Throughthisshareholding,Mr.Roeslaniisindirectlyinterestedinapproximately71.6percent.oftheissuedshare capitalofMutiara.AllshareholdingsofMutiarahavebeenattributedtoMr.Roeslaniinthetableabove.Pleasesee PrincipalShareholdersinPart ITheAcquisitionfordetailsoftheshareholdingofMutiaraatCompletion.

416

9. Interests of the Founders and Long Haul 9.1 Thetablebelowsetsouttheinterests(beneficialornon-beneficial)thattheFoundersandLong Haul haveorwillhaveintheFounderSharesandFounderSecuritiesasatthedateofpublication ofthisdocumentandimmediatelyfollowingclosingoftheBerau Transaction.
Interests in Founder Interests in Founder Interests in Founder Shares as at the date of Securities as at the Securities following publication of this date of publication of closing of the document(1) this document Berau Transaction(2)     Percentage Percentage Percentage No. of of issued No. of of issued No. of of issued Founder Founder Founder Founder Founder Founder Name Shares Shares Securities Securities Securities Securities       NathanielRothschild8,730,000 87.3% 8,730,000 87.3% 5,238,000 52.38% JamesCampbell1,000,000 10% 1,000,000 10% 600,000 6% LongHaul    4,000,000 40%
Notes: 1 See EffectoftheAcquisitionontheFounderSharesandFounderSecuritiesin PartI TheAcquisition foradescriptionofcertainarrangementsbetweentheLimitedPartners,ontheonehand,andLongHaul,on theother,inrelationtoentitlementstoOrdinaryShares(orthecashequivalent,intheeventoftheCompany exercisingitsrighttopay the cashequivalent)onanyexerciseofexchangerightsattachingtotheFounder SharesorFounderSecurities,asthecasemaybe.Asaresultofthesearrangements(andsubjecttoclosing oftheBumi ResourcesTransactionandtheBerau Transaction),iffurtherOrdinarySharesareissuedafterthe dateofpublicationofthisdocumentsuchthatthenumberofOrdinarySharestobeissuedonexerciseofthe exchangerightattachingtotheFounderShareswouldexceedtheThresholdAmount,(i)LongHaul(orany Affiliate(s)nominatedbyLongHaul)willbeinterestedinFounderSharesthatentitleitto40 percent.ofthe ExcessShares,(ii)suchmembersofthemanagementofVallar (oritsadvisersorsub-advisers),Bumi Resources and/orBerau (ifany)asmaybe determinedbyVallarCapitalGPLimited(thegeneralpartnerofVallarCapital) may beinterestedinFounderSharesthatentitlethemtoupto20percent.oftheExcessSharesand(iii)the LimitedPartnerswillbeinterestedinFounderSharesthatentitle them totheremainingExcessShares. Under the arrangements between the Limited Partners, on the one hand, and Long Haul, on the other, summarised in Effect of the Acquisition on the Founder Shares and Founder Securities in Part I The Acquisition,subjecttoclosingoftheBumi ResourcesTransactionandtheBerau Transaction,(i)LongHaul (oranyAffiliate(s)nominatedbyLongHaul)willbeinterestedin40 percent.oftheFounderSecurities,(ii)such membersofthemanagementofVallar (oritsadvisersorsub-advisers),Bumi Resourcesand/orBerau (ifany) asmaybe determinedbyVallarCapitalGPLimited(thegeneralpartnerofVallarCapital) may beinterested inupto20percent.oftheFounderSecuritiesand(iii)theLimitedPartnerswillbeinterestedintheremaining FounderSecurities.Asaresultofthesearrangements,subjecttoclosingoftheBumi ResourcesTransaction andtheBerau Transaction,theLimitedPartnerscombinedinterestsintheFounderSecuritieswillbereduced by the number of such Founder Securities (if any) to which any members of management of Vallar (or its advisersorsub-advisers),Bumi Resourcesand/orBerau becomeentitledas determinedbyVallarCapitalGP Limited(thegeneralpartnerofVallarCapital).

(I)17.3 (III)9.1

9.2 Vallar Capitalistheinvestmentvehiclethathasbeenestablishedtohold,amongothersecurities, theFounderSharesandFounderSecuritiesonbehalfofthepersonsentitledthereto,andholds (viaitsgeneralpartner)10,000,000FounderSharesand10,000,000FounderSecurities.

417

10. 10.1

Major Shareholders and Other interests As at the Latest Practicable Date, the following persons (other than the Directors and the Founders) had a notifiable interest in the issued share capital of the Company: Number of Ordinary Shares 7,500,000 5,630,172 3,111,654 3,000,000 2,624,670 2,500,000 Percentage of issued Ordinary Shares 11.14 8.36 4.62 4.45 3.90 3.71

Shareholder(1) Abu Dhabi Investment Council Schroder Investment Mgmt Ltd Eton Park International LLP Wellington Management Company UBS AG Exor SpA

(1) Including those Shareholders that are interested in 3 per cent. or more of the issued share capital of the Company. Under the Jersey Companies Law, shareholders need only notify the company if they are interested in 5 per cent. or more of the issued share capital of that company. However, as described in paragraph 5.1 of this Part XII Additional Information, the Company has adopted the Disclosure and Transparency Rules into the Articles, pursuant to Chapter 5 of which a notifiable interest is 3 per cent.

Please see Principal Shareholders in Part I the Acquisition for details of the holdings of the Bakrie Group and Mutiara at Completion. Upon acquiring such holdings such persons will be required to notify such interests to the Company in accordance with the provisions of the Articles, and such interests will be notified by the Company to the public. 10.2 Save as disclosed in relation to the Credit Suisse Facility (see Risks Relating to the Ordinary Shares The Principal Shareholders will have significant influence over the Company and/or their interests may differ from those of other Shareholders in Risk Factors for further details), as at the Latest Practicable Date the Company was not aware of any person or persons who, directly or indirectly, jointly or severally, exercise or could exercise control over the Company nor is it aware of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company. Rivermede Limited, a long/short equity fund launched in August 2009 which has had a particular focus on the metals, mining and resources sector since inception, subscribed for 2,000,000 Ordinary Shares in the Placing. Mr. Daniel serves as portfolio manager and the Sub-Adviser serves as investment manager of Rivermede Limited. Those interested, directly or indirectly, in 3 per cent. or more of the issued share capital of the Company do not have different voting rights from other holders of Voting Ordinary Shares. Directors Letters of Appointment and Service Contracts

10.3

10.4

11.

Non-Executive Directors Indra Bakrie was appointed non-executive Chairman of the Board with effect from 22 November 2010. He is not independent as he was nominated by the Bakrie Group. He is entitled to receive a fee of 200,000 per annum. His appointment is terminable on 12 months notice by either party. The Company can elect to make him a cash payment in lieu of notice equal to his total fee for any unexpired portion of the notice period. He is required to resign without notice, with immediate effect and without compensation for loss of office if (i) the Bumi Resources Share Purchase Agreement is terminated without closing thereunder occurring, or (ii) the Bakrie Group or its Associates cease to be entitled to exercise or to control the exercise of 15 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company. Nathaniel Rothschild was appointed a Director of the Company on 31 March 2010 and as a nonexecutive Director of the Company on 21 April 2010. He was subsequently appointed non-executive Co-Chairman of the Board with effect from 18 November 2010. He is not considered to be independent. He is entitled to receive a fee of 200,000 per annum. His appointment is terminable on 12 months notice by either party. The Company can elect to make him a cash payment in lieu of notice equal to his total fee for any unexpired portion of the notice period.

418

Rosan Roeslani was appointed non-executive Director with effect from 22 November 2010. He is not independent as he was nominated by Mutiara. He is entitled to receive a fee of 70,000 per annum. His appointment is terminable by either party without notice at any time. He is required to resign immediately if (i) the Berau Share Purchase Agreement is terminated without closing thereunder occurring; or (ii) Mutiara or its associates cease to be entitled to exercise or to control the exercise of 15per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company. James Campbell was appointed a non-executive Director of the Company on 21 April 2010. He is not considered to be independent. On and from the date of publication of this document, he is entitled to receive a fee of 70,000 per annum. Prior to completion by the Company of the Acquisition, he is required to give the Company 12 months written notice should he wish to resign. After completion of the Acquisition, he may resign without prior notice. His appointment is terminable by the Company without notice at any time. It is also envisaged that he will have a consultancy agreement in place with the Company for a period of 12 months from completion of the Acquisition (and extendable by agreement for a further 12 months) pursuant to which he will provide advice on strategic options, operational improvement and capital expenditure programs to the Company for a fee of 5,000 per day. It is envisaged that no compensation will be payable to him on termination of the consultancy agreement by the Company. It is also envisaged that the agreement will contain non-compete and nonsolicitation clauses which will apply during the currency of the agreement. Sir Julian Horn-Smith, Steven Shapiro, Sir Graham Hearne CBE and Lord Renwick were all appointed as independent non-executive Directors between 21 April 2010 and 25 June 2010. The terms of their appointments have been amended with effect on and from the date of publication of this document. On and from 22 November 2010, Sir Julian Horn-Smith ceased to be the non-executive Chairman of the Company and became the Deputy Chairman and Senior Independent Non-Executive Director. Prior to completion by the Company of the Acquisition, these Directors are required to give the Company 12 months written notice should they wish to resign. After completion of the Acquisition, they may resign without prior notice. Their appointments are terminable by the Company without notice at any time. They are each entitled to receive a fee of 70,000 per annum (reduced from 90,000 with effect on and from the date of publication of this document) (with the exception of Sir Julian Horn-Smith who, as Deputy Chairman and Senior Independent Non-Executive Director, is entitled to 140,000). All four Directors elected to have their fees in respect of their first year of appointment paid as a lump sum prior to Placing Admission. They all irrevocably subscribed that lump sum amount (less any tax withheld by the Company) for Ordinary Shares as part of the Placing. Under the original terms of their appointment, they were all entitled to participate in the Placing by subscribing for Ordinary Shares at the Placing Price up to a maximum subscription of 150,000. On subscription, they were then entitled, subject to various conditions, to receive matching shares for every Ordinary Share they acquired in the Placing. All four of these Directors elected to do this. Wibowo Suseno Wirjawan, Philip Yeo, Sony B. Harsono and Amir Sambodo were all appointed as Independent Non-Executive Directors with effect on and from the date of publication of this document. They are each entitled to receive a fee of 70,000 per annum. Each of their appointments is terminable by either party without notice at any time. All of the Non-Executive Directors are subject to the following additional terms: Their appointments are contingent on satisfactory performance and re-election by the Shareholders as required by the Articles. They are all entitled to receive annual committee fees for sitting on or chairing Board committees (the maximum fee being 20,000 for chairing the Audit and Risk Committee and the lowest fee being 4,000 for sitting on the Nomination Committee). An additional attendance fee of 5,000 is also payable for any committee or Board meeting attended that involves more than 12 hours travel. Their fees are payable by the Company quarterly in arrears.

There are no pensions or other similar arrangements in place (and no such arrangements are proposed) for these directors and none of them have service contracts with the Company.

419

Executive Directors Ari Hudaya (Chief Executive Officer) and Andrew Beckham (Chief Financial Officer) will enter into service contracts with the Company. Salary and other benefits will be determined by the Remuneration Committee. It is envisaged that they would be subject to the following terms: Their service agreements would be terminable by either party on service of 12 months prior written notice. The Company would have the ability to terminate their service contracts by the payment of a cash sum in lieu of notice equal to the basic salary payable for any unexpired portion of the notice period. The Company would have the discretion to make the payment in lieu of notice as a lump sum within 21 days of the termination date or in equal monthly instalments subject to deductions for mitigation. They would be subject to confidentiality undertakings without limitation in time and to noncompetition and employee non-solicitation restrictive covenants for a period of six months after the termination of their employment. That six month period would be reduced by any period spent on garden leave.

Ari Hudaya and Andrew Beckmans service agreements would contain a provision requiring them to resign without notice, with immediate effect and without compensation for loss of office if (i) the Bumi Resources Share Purchase Agreement is terminated without closing thereunder occurring; or (ii) the Bakrie Group or its Associates cease to be entitled to exercise or to control the exercise of 15per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company. All Directors (Executive and Non-Executive) The Company maintains directors and officers liability insurance for all the Directors. In addition they all have the benefit of an indemnity provided by the Company against liabilities incurred as Directors, in terms that are in accordance with the Jersey Companies Law. They are all entitled to be reimbursed by the Company for expenses incurred in the course of their duties subject to compliance with any applicable Company policies. 12. Working Capital The Company is of the opinion that, taking into account the available debt facilities, the working capital available to the Group is sufficient for the Groups present requirements, that is for at least the 12 months from the date of this document. 13. Significant Change Save for those events described in paragraphs numbered (1) through (4) under Developments in the Bumi Resources Groups Liquidity and Capital Resources Position Since 30 September 2010 in Part B: Operating and Financial Review of the Bumi Resources Group of Part VII Operating and Financial Review, there has been no significant change in the financial or trading position of the Bumi Resources Group since 30 September 2010, the date to which the last unaudited consolidated accounts of the Bumi Resources Group were prepared. There has been no significant change in the financial or trading position of the Berau Group since 30 September 2010, the date to which the last unaudited consolidated accounts of the Berau Group were prepared. Save for the agreements related to the Acquisition and the transactions related thereto, there has been no significant change in the financial or trading position of the Company since 30 September 2010, the date to which the last audited interim consolidated accounts of Vallar were prepared.

420

14. Litigation Save as disclosed in Legal Proceedings and Disputes in Part IV Information on the Bumi Resources Group, there are no governmental, legal or arbitration proceedings (including any such proceeding which are pending or threatened of which the Company is aware) against Bumi Resources or any other member of the Bumi Resources Group which may have, or have had during the 12 months preceding the date of this document, a significant effect on Bumi Resources and/or the Bumi Resources Groups financial position or profitability and, upon Completion, the Group and/or the Groups financial condition or profitability. Save as disclosed in Legal Proceedings and Disputes in Part V Information on the Berau Group, there are no governmental, legal or arbitration proceedings (including any such proceeding which are pending or threatened of which the Company is aware) against Berau or any other member of the Berau Group which may have, or have had during the 12 months preceding the date of this document, a significant effect on Berau and/or the Berau Groups financial position or profitability and, upon Completion, the Group and/or the Groups financial condition or profitability. Save as disclosured in Legal Proceedings and Disputes in Part IV Information on the Bumi Resources Group and Legal Proceedings and Disputes in Part V Information on the Berau Group, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) since the Companys incorporation which may have, or have had in the recent past, a significant effect on the financial position or profitability of the Group. 15. City Code The City Code is issued and administered by the Takeover Panel. In Jersey, the Takeover Panel has been designated as the body to carry out certain regulatory functions in relation to takeovers pursuant to the Companies (Takeovers and Mergers Panel) (Jersey) Law 2009 and The Companies (Appointment of Takeovers and Mergers Panel) (Jersey) Order 2009 (the Takeovers Laws). Following the implementation of the Directive on Takeover Bids (2004/25/EC) by Part 28 of the Companies Act and the Takeovers Laws, the rules in the City Code now have a statutory basis in Jersey. The City Code applies to all takeovers and merger transactions, however effected, where, inter alia, the offeree company is a public company which has its registered office in the United Kingdom, the Isle of Man or the Channel Islands if the company has its securities admitted to trading on a regulated market in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man. The City Code therefore applies to the Company and its Shareholders are entitled to the protections afforded by the City Code. In particular, under Rule 9 of the City Code, where: (i) any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which persons in which he is already interested and in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company subject to the City Code; or (ii) any person who, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30 per cent. but holds shares which in the aggregate carry not more than 50 per cent. of the voting rights of such a company, if such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, then, except with the consent of the Takeover Panel, he, and any person acting in concert with him, must make a general offer in cash to the holders of any class of equity share capital whether voting or non-voting and also to the holders of any other class of transferable securities carrying voting rights to acquire the balance of the shares not held by him and his concert parties. Save where the Takeover Panel permits otherwise, an offer under Rule 9 of the City Code must be in cash and at the highest price paid within the 12 months prior to the announcement of the offer for any shares in the company by the person required to make the offer or any person acting in concert with him. Offers for different classes of equity share capital must be comparable; the Takeover Panel should be consulted in advance in such cases.

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16. 16.1

Subsidiaries Bumi Resources significant subsidiaries and associates In the following table, subsidiaries consolidated are indicated by C, entities consolidated under the proportionate consolidation are indicated by P and associates recorded under the equity method by E.
Percentage of ownership 2009 2008 60 C 60 C 100 C 100 C 100 C 100 C 100 C 70 P 70 P 100 C 100 C 50 E 100 C 100 C 80 C 100 C 80 E 80 E 100 C 84 C 70 P 70 P 94 C 94 C 50 P 50 P 30 E 100 C 100 C 70 P 70 P 100 C 100 C 100 C 80 C 67 C 29 E 44 E 50 P 50 P 80 C 80 C 100 C 100 C 65 P 65 P 100 C 100 C 13 E 84 C 50 P 50 P 30 20 80 E E E 30 80 E E

Name of entities Bumi Mauritania SA Bumi Netherlands B.V. Bumi Resources Japan Company Ltd. Calipso Investments Pte. Ltd Candice Investments Pte. Ltd. Enercoal Resources Pte Ltd Enercorp Ltd. Forerunner International Pte. Ltd. Gallo Oil (Jersey) Ltd Goldwave Capital Ltd Herald Resources Ltd Indocoal Resources (Cayman) Ltd. Konblo Bumi, Inc Leap Forward Finance Ltd PT Artha Widya Persada PT Arutmin CBM PT Arutmin Indonesia PT Bumi Resources Minerals PT Citra Palu Minerals PT Dairi Prima Minerals PT Darma Henwa Tbk PT Fajar Bumi Sakti PT Gorontalo Minerals PT Kaltim Prima CBM PT Kaltim Prima Coal PT Mitratama Perkasa PT Newmont Nusa Tenggara PT Pendopo Energi Batubara PT Seamgas Indonesia PT Visi Multi Artha West Side Corporation Ltd Zurich Assets International Ltd

Country of incorporation Islamic Republic of Mauritania Netherlands Tokyo, Japan Singapore Singapore Singapore Jersey, UK Singapore Jersey, UK Virgin Islands Australia Cayman Islands Monrovia, Liberia Republic of Seychelles Jakarta, Indonesia Jakarta, Indonesia Kalimantan, Indonesia Jakarta, Indonesia Palu, Indonesia Indonesia Jakarta, Indonesia Indonesia Indonesia Jakarta, Indonesia Kalimantan, Indonesia Jakarta, Indonesia Jakarta, Indonesia Republic of Seychelles Indonesia Jakarta, Indonesia Brisbane, Australia Republic of Seychelles

Nature of business Iron Ore Mining Intermediate holding company Marketing Services Intermediate holding company Coal Distributor Intermediate holding company Marketing Services Intermediate holding company Oil Mining Intermediate holding company Intermediate holding company Coal Distributor Gold Mining Intermediate holding company Coal Bed Methane Mining Coal Bed Methane Mining Coal Mining Trading Gold Mining Lead and Zinc Mining Mining Contractor Coal Mining Gold Mining Coal Bed Methane Mining Coal Mining Mining Services Gold Mining Coal Mining Methane Gas Exploration and Mining Contractor Coal Bed Methane Mining Coal Bed Methane Mining Intermediate holding company

16.2

Berau significant subsidiary Country of Name of Subsidiaries Incorporation PT Berau Coal Indonesia Nature of Business Coal mining Effective Ownership 2007 2008 2009

56

56

90

16.3

Vallar For a description of the Companys subsidiaries, see paragraph 2.10 of this Part XII Additional Information.

17. Vallars Material Contracts The following are all of the contracts (not being contracts entered into in the ordinary course of business) that have been entered into by the Group since the Companys incorporation which: (i) are, or may be, material to the Group; or (ii) contain obligations or entitlements which are, or may be, material to the Group as at the date of this document. 17.1 Bumi Resources Share Purchase Agreement On 16 November 2010, the Company entered into a sale and purchase agreement with Bakrie & Brothers and Long Haul (for the purposes of this paragraph 17.1, the Sellers) pursuant to which the Company agreed to purchase and the Sellers have agreed to sell an aggregate of 5,193,350,000 ordinary shares of 500 Rp. each in the capital of Bumi Resources (such number comprising 25 per cent. of the entire issued share capital of Bumi Resources). In consideration for

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the transfer of such shares in Bumi Resources, the Company agreed to issue a total of 90,072,216 new Ordinary Shares (the Bumi Resources Consideration Shares) to the Sellers. The Bumi Resources Consideration Shares will comprise Voting Ordinary Shares up to the Maximum Voting Percentage of the enlarged share capital of the Company immediately following issue of the Bumi Resources Consideration Shares, with the remainder of the Bumi Resources Consideration Shares consisting of Suspended Voting Ordinary Shares. Closing of the Bumi Resources Transaction is expected to occur on the Bumi Resources Transaction Closing Date, which is expected to be in the week commencing 28 February 2011. Pursuant to the terms of the Bumi Resources Share Purchase Agreement, the Sellers and the Company have each given certain customary warranties and undertakings and, in addition: the Sellers have warranted that, as at the date of the agreement and upon closing of the Bumi Resources Transaction, the Sellers and their affiliates control (or will control) Bumi Resources as that term is understood and applied in the rules and regulations of BAPEPAM-LK and the Sellers have further undertaken that, for so long as the Sellers hold at least 15 per cent. of the issued share capital of the Company, they and their affiliates will continue to control Bumi Resources through their ownership of shares in the Company; the Company has undertaken to propose to its shareholders a resolution to change the name of the Company to Bumi plc; the Company has undertaken to use best endeavours to procure that the Bumi Resources Voting Consideration Shares are admitted to the Official List and to trading on the London Stock Exchanges main market for listed securities as soon as practicable after closing of the Bumi Resources Transaction and in any event no later than 30 April 2011; each of the Sellers has agreed that, subject to customary exceptions, neither it nor any of its affiliates shall for a period of three years after closing of the Bumi Resources Transaction carry on or be engaged or interested in any base metal or coal mining business in Indonesia which competes or has competed with any business carried on by a member of the Bumi Resources Group during the 12 months prior to closing; and each of the Sellers has agreed that neither it nor any of its affiliates shall, for a period of two years after the closing of the Bumi Resources Transaction, offer to employ or seek to entice away from any member of the Bumi Resources Group or any member of the Vallar Group, or conclude any contract for services with, any person who was employed by any member of the Bumi Resources Group in skilled or managerial work at any time during the 12 months ending on the closing date of the Bumi Resources Transaction.

On 23 February 2011, Vallar, the Bakrie Group and UK Subco entered into an amendment deed to the Bumi Resources Share Purchase Agreement pursuant to which they agreed, amongst other things, that: (a) the Bumi Resources Shares to be acquired by Vallar would be acquired by Vallars subsidiary, UK Subco; and (b) that, as set out in more detail below, due to some of the Bumi Resources Shares to be transferred to UK Subco being subject to a lock-up from trading on the IDX, UK Subco would provide an irrevocable undertaking to the IDX to comply with the lock-up in order to facilitate those shares being transferred at closing of the Bumi Resources Transaction. Bumi Resources Transaction As noted in The Bumi Resources Transaction in Part I The Acquisition, after signing of the Bumi Resources Share Purchase Agreement, the Company was informed by the Bakrie Group that 587,630,948 of the Bumi Resources Shares to be transferred to the Company pursuant to such agreement (amounting to approximately 2.8 per cent of the issued Bumi Resources Shares) are subject to a lock up from trading on the IDX until 6 October 2011. In order to obtain the consent of the IDX to the transfer of these shares to the Company at closing of the Bumi Resources Transaction, the Company has given an irrevocable undertaking to the IDX that it will comply with the lock up arrangements and ensure that the shares are not sold or traded until the expiry of the above mentioned lock up period on 6 October 2011.

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17.2

Berau Share Purchase Agreement On 16 November 2010, the Company and the Subsidiary entered into a sale and purchase agreement with Mutiara pursuant to which the Company and the Subsidiary agreed to purchase and Mutiara agreed to sell an aggregate of 26,175,000,000 ordinary shares of Rp. 100 each in the capital of Berau (representing 75 per cent. of the entire issued share capital of Berau) for consideration comprising: (a) approximately US$739 million cash consideration for 35 per cent. of the issued share capital of Berau, of which approximately US$639 million was paid to Mutiara on 18 November 2010 and the balance was placed in an escrow account on the same date; and (b) the issue of 52,297,680 Ordinary Shares to Mutiara for 40 per cent. of the issued share capital of Berau. Mutiara is subject to regulatory restrictions in relation to the transfer of the title to and registered ownership of its Berau Shares pursuant to Rule No. IX.A.6 of the rules and regulations of BAPEPAM-LK which is due to expire on 7 April 2011. Closing of the Berau Transaction is therefore expected to take place on or around 8 April 2011. However, on 18 November 2010, pending release of the lock-up, Mutiara: irrevocably appointed the Company and the Subsidiary as its attorney to exercise all rights, powers and privileges attaching to the Berau Shares or otherwise capable of being exercised by Mutiara as the registered holder the Berau Shares including the right to attend and vote at general meetings of Berau; assigned and transferred to the Company and the Subsidiary all of its rights, interest and title to any and all dividends, returns of capital or other distributions by Berau paid or payable to it by Berau after 18 November 2010; pledged the Berau Shares to the Company and the Subsidiary in order to secure its obligations to transfer title to and registered ownership of the Berau Shares to the Vallar Group at closing; and irrevocably appointed the Company and the Subsidiary as its attorney to execute a deed of transfer and to do all such other things as may be necessary or required in order to effect the transfer of the Berau Shares to the Vallar Group at closing.

Other than the delivery of specified closing deliverables by Mutiara, the Company and the Subsidiary, there are no outstanding conditions to closing of the Berau Transaction. At closing of the Bumi Resources Transaction, the US$100 million of cash consideration paid into escrow on 18 November 2010 will be paid to Bumi Resources in part satisfaction of the Mutiara Loan. Further details of the escrow arrangements are set out below. Pursuant to the terms of the Berau Share Purchase Agreement, Mutiara, the Company and the Subsidiary have each given certain customary warranties and undertakings and, in addition: Mutiara has irrevocably agreed not to accept, or vote in favour of, any mandatory offer that the Company is required to make in relation to the shares of Berau as a result of the Berau Transaction; the Company has undertaken to propose to its Shareholders a resolution to change the name of the Company to Bumi plc; the Company has undertaken to use best endeavours to procure that the Berau Voting Consideration Shares are admitted to the official list and to trading on the London Stock Exchanges main market for listed securities as soon as practicable after closing of the Berau Transaction and in any even no later than 30 April 2011; Mutiara has agreed that, subject to customary exceptions, neither it nor any of its affiliates shall for a period of three years after closing of the Berau Transactions carry on or be engaged or interested in any base metal or coal mining business in Indonesia which competes with any business carried on by any member of the Berau Group during the 12 months prior to closing; and Mutiara has agreed that neither it nor any of its affiliates shall, for a period of two years after the closing of the Berau Transaction, offer to employ or seek to entice away from any

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member of the Berau Group or any member of the Vallar Group, or conclude any contract for services with, any person who was employed by any member of the Berau Group in skilled or managerial work at any time during the 12 months ending on the closing date of the Berau Transaction. As noted in Berau Transaction in Part I The Acquisition, on 23 February 2011, Vallar, the Subsidiary and Mutiara entered into an Amendment Deed to the Berau Share Purchase Agreement pursuant to which it was agreed that of the 52,297,680 New Vallar Ordinary Shares to be allotted and issued by Vallar at closing of the Berau Transaction 27,772,829 would be allotted and issued to Mutiara in the form of New Vallar Voting Ordinary Shares and, in satisfaction of Mutiaras obligations under the Mutiara Share Transaction Agreement, 24,524,851 would be allotted and issued to Long Haul in the form of Suspended Voting Ordinary Shares. Vallar, Vallar Holding and Mutiara intend to further amend the Berau Share Purchase Agreement prior to closing of the Berau Transaction so that the acquisition of the Berau Shares is effected through UK Subco. 17.3 Escrow Agreement On 18 November 2010, the Subsidiary, Mutiara, Bumi Resources and J.P. Morgan Chase Bank, N.A., London Branch (the Escrow Agent) entered into an escrow agreement (the Escrow Agreement) pursuant to which the parties agreed that the Subsidiary would, in accordance with the provisions of the Berau Share Purchase Agreement, pay US$100 million in cash (the Escrow Cash) into an account in the name of the Escrow Agent (the Escrow Account) to be held pursuant to the terms of the Escrow Agreement. Upon closing of the Bumi Transaction, the Escrow Cash will be transferred to Bumi Resources. If the Bumi Transaction does not close and is terminated by the Company under the terms of the Bumi Share Purchase Agreement, the Escrow Cash will be transferred to the Company. No payment shall be made out of the Escrow Account unless and until the Escrow Agent receives instructions signed on behalf of the Subsidiary and Bumi Resources and has confirmed such instructions by telephone call-back, whereupon it shall transfer the Escrow Cash as directed in those instructions. 17.4 Bakrie Relationship Agreement On 16 November 2010, the Company and members of the Bakrie Group entered into a relationship agreement (the Bakrie Relationship Agreement), which (other than certain provisions relating to the early appointment of certain directors mentioned below which came into effect on 18 November 2010) is conditional on closing of the Bumi Resources Transaction. The principal purpose of the Bakrie Relationship Agreement is to ensure that the Company is capable at all times of carrying on its business independently of the Bakrie Group and its Associates and that all transactions and relationships between the Company and the Bakrie Group are at arms length and on a normal commercial basis. The Bakrie Relationship Agreement will terminate on the earlier of: (a) the Company ceasing to have any of its Ordinary Shares listed on the Official List and traded on the London Stock Exchanges main market for listed securities; and (b) the Bakrie Group together with its Associates ceasing to be entitled to exercise or control the exercise of 10 per cent. of more of the votes available to be cast on all or substantially all matters at general meetings of the Company. Pursuant to the terms of the Bakrie Relationship Agreement, it has been agreed, among other things, that: (a) the Bakrie Group will, and will procure so far as it is reasonably able to do so that each of its Associates will: (i) conduct all transactions and relationships with any member of the Group, and ensure that all arrangements and agreements between the Bakrie Group or any of its Associates and the Company or any other member of the Group are entered into, on arms length terms and on a normal commercial basis;

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(ii) (iii)

not take any action which precludes or inhibits any member of the Group from carrying on its business independently of the Bakrie Group and its Associates; not exercise any of its voting rights or other rights and powers to procure any amendment to the Articles which would be inconsistent with or breach any provision of the Bakrie Relationship Agreement or the ability of any member of the Group to carry on its business independently of the Bakrie Group and its Associates; when paragraph 11.1.7R(3) of the Listing Rules applies to the Company, abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction (as defined in paragraph 11.1.5R of the Listing Rules) involving the Bakrie Group or any of its Associates as the related party; comply with all provisions of the Listing Rules, the Disclosure and Transparency Rules, the requirements of the London Stock Exchange and the FSMA that apply to it in connection with the Company; and not do anything within their power to cause or authorise to be done anything which would prejudice either the Companys status as a listed company or its suitability for listing, or listing on the premium listing segment of the Official List;

(iv)

(v)

(vi)

(b)

provided that the Bakrie Group and its Associates are entitled to exercise or control the exercise of 15 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company, the Bakrie Group shall be entitled to nominate for appointment to the board of directors of the Company three directors (one to hold the position of Chairman, one to hold the position of Chief Executive Officer and one to hold the position of Chief Financial Officer) by giving notice to the Company; provided that the Bakrie Group and its Associates are entitled to exercise or control the exercise of 15 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company, the Bakrie Group shall be entitled to nominate for appointment the President Commissioner and the President Director and a majority of the board of commissioners and directors of Bumi Resources and the Company shall take all such steps as are available to it under Indonesian law to seek to appoint the President Commissioner and/or President Director of Bumi Resources, as the case may be, in accordance with the nomination of the Bakrie Group; and the Bakrie Group will be restricted from voting on transactions where there is a conflict of interest between the Group and the Bakrie Group.

(c)

(d)

The initial directors to be nominated by the Bakrie Group pursuant to the Bakrie Relationship Agreement are Indra Bakrie (Chairman), Ari Hudaya (Chief Executive Officer) and Andrew Beckham (Chief Financial Officer). Pursuant to the terms of the Bakrie Relationship Agreement, Indra Bakrie was appointed as a director of the Company with effect from 22 November 2010, Ari Hudaya was appointed on 22 November 2010 and Andrew Beckham was appointed on 17 December 2010. However, these directors must be removed from office in the event that the Bumi Resources Transaction fails to complete. 17.5 Mutiara Relationship Agreement On 16 November 2010, the Company and Mutiara entered into the Mutiara Relationship Agreement, which (other than certain provisions relating to the early appointment of Rosan Roeslani mentioned below which came into effect on 18 November 2010) is conditional on closing of the Berau Resources Transaction. The principal purpose of the Mutiara Relationship Agreement is to ensure that the Company is capable at all times of carrying on its business independently of Mutiara and its Associates and that all transactions and relationships between the Company and Mutiara are at arms length and on a normal commercial basis. The Mutiara Relationship Agreement will terminate on the earlier of: (a) the Company ceasing to have any of its Ordinary Shares listed on the Official List and traded on the London Stock Exchanges main market for listed securities; and (b) Mutiara together with its Associates ceasing to be entitled to exercise or control the exercise of 10 per cent. of more of the votes available to be cast on all or substantially all matters at general meetings of the Company.

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Pursuant to the terms of the Mutiara Relationship Agreement, it has been agreed, among other things, that: (a) Mutiara will, and will procure so far as it is reasonably able to do so that each of its Associates will: (i) conduct all transactions and relationships with any member of the Group, and ensure that all arrangements and agreements between Mutiara or any of its Associates and the Company or any other member of the Group are entered into, on arms length terms and on a normal commercial basis; not take any action which precludes or inhibits any member of the Group from carrying on its business independently of Mutiara and its Associates; not exercise any of its voting rights or other rights and powers to procure any amendment to the Articles which would be inconsistent with or breach any provision of the Mutiara Relationship Agreement or the ability of any member of the Group to carry on its business independently of Mutiara and its Associates; when paragraph 11.1.7R(3) of the Listing Rules applies to the Company, abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction (as defined in paragraph 11.1.5R of the Listing Rules) involving Mutiara or any of its Associates as the related party; comply with all provisions of the Listing Rules, the Disclosure and Transparency Rules, the requirements of the London Stock Exchange and the FSMA that apply to it in connection with the Company; and not to do anything within their power to cause or authorise to be done anything which would prejudice either the Companys status as a listed company or its suitability for listing, or listing on the premium listing segment of the Official List;

(ii) (iii)

(iv)

(v)

(vi)

(b)

provided that Mutiara and its Associates are entitled to exercise or control the exercise of 15 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company, Mutiara shall be entitled to nominate for appointment to the board of directors of the Company one director (to hold the position of nonexecutive director) by giving notice to the Company; Mutiara shall be entitled to nominate for appointment to the Berau board of directors such number of directors as from time to time constitute a majority in number of the board. If Mutiara so nominates a person for appointment, the Company shall exercise its voting rights and other powers, if any, as a shareholder of Berau in favour of such appointment. This right is stated to terminate, among other circumstances, on 7 April 2011 or such other date as the parties agree in writing; and Mutiara and the Company have subsequently agreed that the right shall terminate immediately upon closing of the Bumi Resources Transaction; and Mutiara will be restricted from voting on transactions where there is a conflict of interest between the Group and Mutiara.

(c)

(d)

The initial director to be nominated by Mutiara pursuant to the Mutiara Relationship Agreement is Rosan Roeslani. Pursuant to the terms of the Mutiara Relationship Agreement, Rosan Roeslani was appointed on 22 November 2010. However, Rosan Roeslani must be removed from office in the event that the Berau Resources Transaction fails to complete. 17.6 Bumi Resources Side Letter On 16 November 2010, the Company and Bumi Resources entered into a side letter under which they agreed, among other things, that: the Company shall be entitled to appoint and remove a representative to attend as an observer at (a) every meeting of Bumi Resources board of directors and board of commissioners; and (b) every meeting of any committee of Bumi Resources board of commissioners, provided that such observer shall not be entitled to vote at any such meeting; and

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upon closing of the Bumi Resources Transaction, they will each procure the signing and delivery of the requisite notices to ensure the transfer of the US$100 million in cash from the escrow account (see discussion of escrow arrangements at paragraph 17.3 of this Part XII Additional Information above) to Bumi Resources in accordance with the Escrow Agreement.

17.7

Berau Side Letter On 16 November 2010, the Company, the Subsidiary and Berau entered into a side letter under which they agreed, among other things, that the Company shall be entitled to appoint and remove a representative to attend as an observer at (a) every meeting of Beraus board of directors and board of commissioners and (b) every meeting of any committee of Beraus board of commissioners, provided that such observer shall not be entitled to vote at any such meeting. Lock-up arrangements Pursuant to the Placing Agreement, the Founders and certain members of the Vallar Team (being Messrs. Daniel and Morris) have agreed not to, without the prior written consent of Credit Suisse Securities (Europe) Limited and J.P. Morgan Securities Ltd., offer, sell, contract to sell, pledge or otherwise dispose of any Ordinary Shares they hold directly or indirectly in the Company on Placing Admission (or acquired pursuant to the terms of the Founder Shares or the Founder Securities) or any Founder Shares or Founder Securities they are interested in, for a period of 365 days after the Company has made an acquisition, as contemplated by the Vallar IPO prospectus, in the case of the Founders, and the earlier of 365 days or until such time as they cease to be an Active Member in the case of Messrs. Daniel and Morris. In each case these restrictions are subject to exceptions for transfers between restricted members of the Vallar Team, and certain other exceptions. Push-down arrangements On 23 February 2011, the Company, the Subsidiary, Vallar Capital and UK Subco entered into an agreement pursuant to which, among other things: in consideration for the Company agreeing to amend the Berau Share Purchase Agreement to transfer the Berau Shares to be acquired thereunder by the Company to UK Subco: (a) UK Subco has agreed, as soon as practicable after completion of the Berau Transaction, to issue 52,297,680 new ordinary shares to the Subsidiary; and (b) the Subsidiary has agreed to issue the same number of Class A ordinary shares to the Company; in consideration for the Subsidiary agreeing to amend the Berau Share Purchase Agreement to transfer the Berau Shares to be acquired thereunder by the Subsidiary to UK Subco, UK Subco has agreed, as soon as practicable after completion of the Berau Transaction, to issue 45,760,469 new ordinary shares to the Subsidiary; and in consideration for the Company agreeing to amend the Bumi Share Purchase Agreement to transfer the Bumi Shares to be acquired thereunder to UK Subco: (a) UK Subco has agreed, as soon as practicable after completion of the Bumi Transaction, to issue 90,072,216 new ordinary shares to the Subsidiary; and (b) the Subsidiary has agreed to issue the same number of Class A ordinary shares to the Company.

17.8

17.9

17.10 Advisory and Sub-Advisory Agreements Advisory Agreement Under the Advisory Agreement, the Adviser has provided and provides services to the Company including: (i) researching and sourcing potential acquisitions for the Company; (ii) assisting with the due diligence for, structuring of an acquisition, as contemplated by the Vallar IPO prospectus, and completion of such an acquisition; and (iii) assessing the Companys funding requirements. In addition, the Adviser assists in procuring the provision to the Company (at the Companys expense) of other services required to assist the Company in operating as a listed company including (i) involvement in the reorganisation of any company or business acquired by the Company; (ii) assisting with the ongoing management and operation of that company or business; (iii) assisting with the Companys financial reporting including preparation of external

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financial reports, internal management information and reporting to the Board on related financial controls and procedures; and (iv) assisting with administrative services such as cash management and treasury services. In addition, the Adviser assists in procuring the provision to the Company (at the Companys expense) of other services required to assist the Company in operating as a listed company. The Adviser is required to: use reasonable care and skill expected of an experienced professional investment adviser operating in the global metals, mining and resources sector and with due regard to the acquisition criteria in providing its services; ensure the commitment of sufficient and appropriate resources to enable the proper performance of the services; and not knowingly or recklessly do, commit or permit to be done or committed any act, matter or thing which would be reasonably likely to prejudice to a material extent or bring into disrepute the business or reputation of the Company or any member of its Group.

The Company has agreed that, while the Advisory Agreement is in force, it will not (and it shall procure that no subsidiary of the Company will) make an acquisition, as contemplated by the Vallar IPO prospectus, unless it has been recommended by the Adviser. The Company, however, remains free to decide not to approve any acquisition recommended to it by the Adviser. The Adviser has, in turn, agreed to provide its services exclusively to the Company (and, to the extent applicable, to members of the Group) and it will not provide services to any other party, without the consent of the Board and the prior approval of the independent Shareholders by ordinary resolution. The costs of any circular to be sent to Shareholders in connection with any such approval being sought shall be borne by the Company. Furthermore, prior to the Company completing an acquisition, as contemplated by the Vallar IPO prospectus, the Adviser will refer to the Company all potential transactions of which it is and/or becomes aware that fall within the Companys acquisition criteria. The referral obligations do not apply to: a transaction (or potential transaction) of which the Adviser or either of the Founders becomes aware which falls within an exception to the Founders Exclusivity Undertaking; or a transaction (or potential transaction) of which it or either of the Founders becomes aware in circumstances where the Conflicts Procedures permits non-disclosure or non-referral.

The principal exceptions to the Founders Exclusivity Undertaking are (a) making or advising on investments of less than 50 million each or without restriction after completion of an acquisition, as contemplated by the Vallar IPO prospectus; (b) continuing existing executive, non-executive, advisory or consultancy roles disclosed in the Vallar IPO prospectus; (c) accepting future appointments to non-executive positions where approved by the Board; (d) accepting appointments in relation to personal or family investments or trusts; and (e) in the case of Mr. Rothschild, investments made by or through Mr. Rothschilds private office or the Rothschild family office. Where the Founders, the Adviser, the Sub-Adviser, and Messrs. Daniel and Morris have duties or interests which potentially conflict with their duties to, or the interests of, the Company or other conflicts of interests, the Adviser will deal with these in accordance with the Conflicts Procedures adopted by the Adviser. The Conflicts Procedures provide amongst other things that where Messrs. Rothschild and Campbell (as Founders) and Messrs. Daniel and Morris (as members of the Vallar Team) become aware of information or knowledge of an opportunity that falls within the Companys acquisition criteria and they are under an obligation to exploit the same information or opportunity for the benefit of another person or entity, they will recuse themselves from exploiting the information for the benefit of both the Company and the Subsidiary (on the one hand) and the other person or entity (on the other) unless and to the extent they receive waivers or consents on both sides. These Conflicts Procedures have been adopted by the

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Company, the Subsidiary, the Adviser, the Sub-Adviser and certain members of the Vallar Team (being the Founders and Messrs. Daniel and Morris). The Advisory Agreement may be terminated by either the Company or the Adviser on 12 months written notice, such notice not to be given until after completion of an acquisition, as contemplated by the Vallar IPO prospectus. The Advisory Agreement may also be terminated on the conclusion of the winding up of the Company, or if the Adviser becomes insolvent. The Company may terminate the Advisory Agreement forthwith if the Adviser is in uncured material or uncured persistent breach of its terms. Upon termination of the Advisory Agreement the Adviser will, if requested, cooperate with the Company and take all reasonable steps requested by the Company in making an orderly transition to any new adviser or to the Company. The Advisory Agreement also provides that in the absence of gross negligence, fraud, wilful misconduct, bad faith, or reckless disregard for its obligations and duties by the Adviser, it is not to be liable to the Company (or the Subsidiary) and (in the absence as aforesaid) the Company is to indemnify the Founders and the Adviser, the Sub-Adviser, and each of its and their respective partners, members, officers, employees and contractors designated by the Adviser or Sub-Adviser (at any time) as a beneficiary of this provision against any claims (and associated losses, expenses and liabilities) of any nature arising from or pursuant to the Advisory Agreement. The indemnified parties are entitled to enforce their exclusion of liability and the indemnity against the Company directly. The maximum liability of the Adviser for any breach, failure to comply with or non-performance of any provision of the Advisory Agreement is limited to an amount of 10,000,000. The Advisory Agreement also allows the Adviser to delegate or sub-contract to a third party, including the Sub-Adviser or the Advisers associates the whole or part of the provision of services under the Advisory Agreement. The Company is responsible for the cost and expenses of any third parties engaged by the Adviser in connection with any investigation into an acquisition target approved by the Company and prior to such approval (or conditional upon the Boards later ratification) the Company shall also be responsible for such costs and expenses up to the de minimis amount. This includes all due diligence, legal and other related costs (and will also include any costs in connection with the acquisition itself). Costs and expenses incurred on a day to day basis within the ordinary course of business by the Adviser in connection with its services under the Advisory Agreement shall be borne by the Adviser. The Company will pay the Adviser an annual fee, and certain expenses reasonably and properly incurred by the Adviser or Sub-Adviser on behalf of the Company (as described in the section entitled The Advisers and Sub-Advisers Fees and Expenses in Part III Information on Vallar). The Adviser has agreed with the Company that it shall cause any new Active Partner to execute an undertaking in substantially the same form as the Founders Exclusivity Undertaking. The Adviser may not admit a new partner to the Adviser without the prior written consent of the Board. The Advisory Agreement is governed by the law of England and Wales. See Risks relating to the Companys relationship with the Adviser and the Advisers relationship with the Sub-Adviser in Risk Factors for a discussion of certain risks relating to the Companys relationship with the Adviser and potential conflicts of interest. It has been agreed that the Advisory Agreement will be terminated with effect from the date of Completion. Sub-Advisory Agreement The Adviser has entered into the Sub-Advisory Agreement with the Sub-Adviser. The Sub-Advisory Agreement is on substantially the same terms as the Advisory Agreement save as follows: the Sub-Adviser is not exclusive to the Adviser and it has (and intends to have) other clients;

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the Sub-Advisers fees are a 300,000 transaction fee which was paid by the Adviser following Placing Admission and reimbursed by the Company, and a monthly fee of 75,000 paid by the Adviser, plus any applicable VAT thereafter; and the Sub-Advisers limit on liability to the Adviser is 1,000,000.

Each of Messrs. Daniel and Morris has agreed that the activities of the Sub-Adviser will be (in the case of Mr. Daniel) the matter to which he devotes the majority of his working time and (in the case of Mr. Morris) his principal business activity, in each case for so long as he is an Active Member. Each of Messrs. Daniel and Morris has agreed to serve as an Active Member until at least the earlier of (i) six months following the completion of an acquisition, as contemplated by the Vallar IPO prospectus, (ii) immediately following the second anniversary of Placing Admission (if no such acquisition has been completed) and (iii) the termination of the Sub- Advisory Agreement. Each of Messrs. Daniel and Morris has given an exclusivity undertaking (as described herein for the Active Members) to the Sub-Adviser in substantially the same terms as that given by the Founders (subject to similar exceptions and save that the Sub-Adviser will have other clients, as noted above) and each has agreed to follow the Conflicts Procedures. The Sub-Adviser has agreed with the Adviser to use all reasonable endeavours to procure compliance by each Active Member with (and not to agree, without the consent of the Adviser, any amendment or waiver of) his undertakings and covenants. The Active Members exclusivity undertakings (as described herein) and agreement to follow the Conflicts Procedures may (subject to the Sub-Advisers legal duties and obligations) be amended or waived by the Sub-Adviser itself. The Company is not a party to the Sub-Advisory Agreement and therefore, as a general matter, it does not have any rights to enforce its terms. It has, however, been granted specific rights to enforce the referral obligation and to procure compliance with the exclusivity undertakings and the agreement to follow the Conflicts Procedures. The Sub-Advisers duties are owed to the Adviser (and therefore not directly to the Company). It is the Adviser (and not the Company) that may exercise rights to terminate the Sub-Advisory Agreement. Accordingly, the Company is dependent upon the Advisers discretion to monitor the Sub-Advisers performance under, and to enforce the terms of, the Sub-Advisory Agreement. 17.11 Limited Partnership Agreement NR Investments Limited and Simcocks Pensions Limited (as trustee of the Campbell Family International Pension Scheme), being investment vehicles of the Founders, have entered into the Limited Partnership Agreement dated 28 June 2010 with the General Partner. The Limited Partnership Agreement provides the terms on which the Adviser has been established and constituted. It provides that the Adviser will advise and procure services to the Company and the Subsidiary in relation to any acquisition, as contemplated by the Vallar IPO prospectus, and perform its duties under the Advisory Agreement to the standards required by the Advisory Agreement. The Limited Partnership Agreement provides that the Adviser will not voluntarily be wound up whilst the Advisory Agreement is in force. The distribution of profits is to be controlled by the General Partner. The Company is not entitled to any percentage of the profits of the Adviser. The Limited Partnership Agreement provides that the General Partner is and any Active Partner may be indemnified, out of the partnerships (the Advisers) assets, against claims, liability, costs, damages, losses or reasonable expenses incurred or threatened arising in the proper conduct of the Advisers business except as a result of fraud, wilful misconduct, bad faith, gross negligence or reckless disregard for his or its obligations. Mr. Campbells investment vehicle holding interests as a limited partner of the Adviser must be removed as such limited partner on 12 months notice or without such notice in certain circumstances if the Board requires such action to be taken pursuant to the terms of the Advisory Agreement.

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17.12 Founders Exclusivity Deeds Each of the Founders has undertaken to the Adviser and the Company that the activities of the Adviser will be his principal business activity and will remain so for as long as each serves as an Active Partner. Mr. Rothschild has agreed to serve as an Active Partner until completion of an acquisition, as contemplated by the Vallar IPO prospectus, and may thereafter withdraw as an Active Partner (but he may retain an economic interest in the Adviser) on 12 months notice. Mr. Campbell has agreed to serve as an Active Partner until completion of an acquisition, as contemplated by the Vallar IPO prospectus, and may thereafter withdraw on 12 months notice. In each case, Messrs. Rothschild and Campbell shall remain Active Partners for the duration of their 12 months notice period. Each Founder has given an exclusivity undertaking to the effect that he will not (subject to certain exceptions described in more detail under the heading Founders Commitment in Part III Information on Vallar): (i) accept any executive office in any business similar to, or that competes with, the business of the Adviser or the Company; (ii) directly or indirectly, solicit any employee of the Adviser, or any senior employee of the Company or of any subsidiary of the Company, to become an employee, member, partner or have a substantial business role for the purpose of any new business or entity he may set up or a client of the Adviser to become a client of such business or entity; or (iii) undertake activities which may compete with the Company. Each Founders undertaking will apply during the time he serves as an Active Partner. 17.13 Registrar Agreement The Company and the Registrar have entered into the Registrar Agreement dated 8 July 2010, pursuant to which the Registrar has agreed to act as Registrar to the Company and to provide transfer agency services and certain other administrative services to the Company in relation to its business and affairs. The Registrar is entitled to receive an annual fee for the provision of its services under the Registrar Agreement. The annual fee shall be calculated on the basis of the number of holders of shares in the Company and the number of transfers of such shares, subject to a minimum fee of 10,000 per annum. The Registrar may increase the fee annually at the rate of the United Kingdom Retail Prices Index prevailing at that time. In the event that the Registrar seeks to increase the fee in any other circumstance, the Company may terminate the Registrar Agreement by giving three months written notice. In addition to the annual fee, the Registrar is entitled to reimbursement for all out-of-pocket expenses incurred by it in the performance of its services. The Registrar Agreement shall continue for an initial period of two years and thereafter shall automatically renew for successive periods of twelve months, unless and until terminated by either party, by giving not less than three months written notice. In addition, the agreement may be terminated immediately if either party commits a material breach of the agreement which has not been remedied within 30 days of a notice requesting the same, or upon an insolvency event in respect of either party. Such notice may be served at any time, but may not expire earlier than the end of the first two years. The Company has agreed to indemnify the Registrar (together with its affiliates and any directors, officers, employees and agents of the Registrar or its affiliates) against, and hold it harmless from, any damages, losses, costs, claims or expenses incurred by the Registrar in connection with or arising out of the Registrars performance of its obligations in accordance with the terms of the Registrar Agreement, save to the extent that the same arises from some act of fraud or wilful default on the part of the Registrar. The Registrar may delegate the carrying out of certain matters to one of its affiliates which the Registrar considers appropriate without giving prior written notice to the Company. The Registrar will continue to be responsible for the provision of the delegated services and remain liable to the Company. The Registrar Agreement is governed by Jersey law.

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17.14 Share Matching Award The Independent Non-Executive Directors were entitled to participate in the Placing by subscribing for Ordinary Shares at the Placing Price, up to a maximum subscription of 150,000 each. Pursuant to deeds entered into between each of the Independent Non-Executive Directors and the Company, dated 9 July 2010, in the event that an Independent Non-Executive Director subscribed for Ordinary Shares in the Placing that Independent Non-Executive Director has a right to subscribe, in two tranches, for up to a maximum of two Ordinary Shares (at a price per share equal to the nominal value of an Ordinary Share) (Matching Shares) for every Ordinary Share acquired by that Independent Non-Executive Director in the Placing (up to that aforementioned maximum). Each Independent Non-Executive Director was entitled to exercise his (or her) right to subscribe for: (a) the first of these Matching Shares either on or after the first anniversary of his (or her) appointment as a non-executive director of the Company or on or after the date of completion of an acquisition, as contemplated by the Vallar IPO prospectus, whichever date is later; and the second of these Matching Shares either on the date of such completion, provided that it occurs prior to the second anniversary of his (or her) appointment, or such later date as might be agreed by the Shareholders of the Company in general meeting.

(b)

On a variation of the issued share capital of the Company, for example by way of capitalisation issue, rights issue, sub-division, consolidation or reduction, the number of Matching Shares and/or the nominal value of the Matching Shares will be adjusted by the Board in a manner which is fair and reasonable, subject to the consent of the Independent Non-Executive Director entitled to the Matching Shares. No Matching Shares may be subscribed by an Independent Non-Executive Director if at the time of such subscription the Independent Non-Executive Director is no longer a non-executive director of the Company or if such Independent Non-Executive Director no longer holds the Ordinary Share subscribed for in the Placing to which the Matching Share relates subject to certain exceptions. 17.15 Admission Agreement On 24 February 2011, an agreement was entered into between the Company and J.P. Morgan plc (JPM). Pursuant to this agreement, the Company has agreed to provide JPM with certain representations, warranties and indemnities, which are uncapped as to time and amount. The indemnities provided by the Company indemnify JPM against claims made against it or losses suffered or incurred in connection with, inter alia, the issue of New Vallar Ordinary Shares and Admission, subject to certain exceptions. The Company has also agreed not to make certain announcements in connection with the issue of the New Vallar Ordinary Shares or Admission without the consent of JPM (not to be unreasonably withheld or delayed), subject to certain exceptions. 18. The Bumi Resources Groups Material Contracts The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by Bumi Resources or another member of the Bumi Resources Group: (i) within two years immediately preceding the date of this document and which are, or may be, material to the Bumi Resources Group, or (ii) at any other time and contain provisions under which any member of the Bumi Resources Group has obligations or entitlements which are, or may be, material to the Bumi Resources Group as at the date of this document. Contracts of Work and Mining Authorisations KPC and Arutmin CCOWs On 2 November 1981, Arutmin entered into an Agreement with PT Tambang Batubara Bukit Asam Tbk. (as successor to Perusahaan Negara Tambang Batubara), an Indonesian Government-controlled coal mining company (Batubara), for sole and exclusive rights in connection with the exploration and

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exploitation of coal deposits under the Arutmin CCOW. On 8 April 1982, KPC entered into an agreement with Batubara, for sole and exclusive rights in connection with the exploration and exploitation of coal deposits under the KPC CCOW (together with the Arutmin CCOW, the KPC and Arutmin CCOWs). On 7 October 1997, the KPC CCOW and the Arutmin CCOW were each amended to transfer all rights and obligations of Batubara to the MEMR. The following is a summary of the key provisions of the KPC and Arutmin CCOWs and the differences between the KPC CCOW and the Arutmin CCOW. Concession Area The initial concession area under the KPC CCOW covered approximately 790,900 hectares, and the initial concession area under the Arutmin CCOW covered approximately 1.3 million hectares. After intensive exploration from the initial concession area from 1982 to 1986, KPC returned 75.2 per cent. of the initial concession area to the Indonesian Government. In 1999, KPC returned a further 50,000 hectares, retaining approximately 90,938 hectares of the initial concession area. Since 1991, Arutmin has relinquished 1.2 million hectares, or approximately 94.4 per cent. of its original concession area. During each year of the term of the KPC and Arutmin CCOWs, KPC and Arutmin must pay the Indonesian Government an annual rent of US$1.00 per hectare. Under the terms of the KPC and Arutmin CCOWs, if KPC and Arutmin discover coal deposits that extend beyond the boundaries of their respective concession areas, they may request that the Indonesian Government grant to them an enlargement of the concession area to include such coal deposits. The Indonesian Government may grant KPCs and Arutmins request for enlargement of the initial concession area if it determines that the granting of the enlargement of the concession area would not infringe upon existing exclusive rights of others. Any enlargement of the concession area is subject to the approval of the MEMR. In addition, if KPC and Arutmin discover minerals other than coal within the concession area, they have first priority to conduct further exploration for, and exploitation of, the relevant minerals, subject to Indonesian Government approval. KPC and Arutmin have not requested an enlargement of the concession area or the right to carry out exploration for, and exploitation of, minerals other than coal within the concession area. Term and Operating Period The terms of the KPC and Arutmin CCOWs began on the respective dates on which they were entered into and end 30 years after the date mining operations began. The Arutmin CCOW is scheduled to terminate on 1 October 2019 and the KPC CCOW is scheduled to terminate on 31 December 2021. Each of KPC and Arutmin may notify the Indonesian Government at any time during the term of the KPC and Arutmin CCOWs that it is necessary to suspend, in whole or in part, its coal mining operations because economic or other conditions make it desirable to do so. If a force majeure event or suspension of operations occurs, each of KPC and Arutmin can request an extension of the term of its CCOW and the operating period for a period equal to the period of such occurrence. Notwithstanding the original 30-year term of the KPC and Arutmin CCOWs, each of KPC and Arutmin may request from the Indonesian Government an extension of the operating period if it and the Indonesian Government consider it necessary for the KPCs or Arutmins long-term marketing requirements and requirements for appropriate economic recovery of coal from the concession area. Appointment of Sub-Contractors Each of KPC and Arutmin may appoint sub-contractors, or one or more of its affiliates, to carry out its mining and other obligations under their respective CCOWs. Doing so, however, does not release it from its obligations under its CCOW. In the event those obligations are contracted to its affiliates, each of KPC and Arutmin has agreed that the cost will not be more than a non-affiliated party would charge for fulfilling those obligations. Work Programs, Budget and Regular Reporting Requirements KPC and Arutmin are each required to submit annual work programs and budgets to the Indonesian Government containing the coal operations it proposes to carry out during the next calendar year. If the Indonesian Government fails to notify KPC or Arutmin, as the case may be, of any revisions to the

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work program or budget within 30 days of the Indonesian Governments receipt of the submission, the proposed work programs and budgets are deemed to be accepted and adopted by the Indonesian Government. If the Indonesian Government and KPC or Arutmin, as the case may be, fail to agree upon a revised work program or budget within 30 days after the receipt of the Indonesian Governments proposed revisions, KPC or Arutmin, as the case may be, may continue coal operations under the previously agreed work program and budget until the revised work program and budget are mutually agreed upon. The Indonesian Governments approval of the revised work program and budget may not be unreasonably withheld and the Indonesian Government shall consider that KPC or Arutmin, as the case may be, carries the risk of, and provides the funds for, coal mining operations. Under the terms of the KPC and Arutmin CCOWs, each of KPC and Arutmin must submit quarterly progress reports of its operations to the Indonesian Government. Each of KPC and Arutmin also must keep the Indonesian Government advised of plans concerning its coal operations, including the progress of any construction. These progress reports are required to be submitted within 30 days after the end of each calendar quarter. To date, KPC and Arutmin have each submitted such progress reports in a timely manner. Furthermore, each of KPC and Arutmin is required to provide to the Indonesian Government: maps indicating locations of all drill holes and sunk pits in the concession areas; copies of logs of drilled holes and pits and of assay results with respect to any analysed samples recovered from them; and copies of any geophysical maps of the concession area prepared by KPC or Arutmin, as the case may be.

The Indonesian Government retains title to such data and any other original data resulting from the coal operations of each of KPC and Arutmin during the term of their respective CCOWs. Each of KPC and Arutmin and its affiliates may retain copies of, and freely use, this data. Financing Each of KPC and Arutmin must provide all necessary funds for, and has the sole responsibility for the financing of, its coal operations in the concession areas. Under the terms of their respective CCOWs, each of KPC and Arutmin has the right to determine the terms on and manner in which those funds will be obtained. However, under the Arutmin CCOW, the total amount of capital borrowed by Arutmin from non-affiliates may not exceed 60 per cent. of Arutmins total capitalisation. The KPC CCOW does not contain a similar restriction. Under the terms of each of KPCs and Arutmins operating agreements, its mining contractors are responsible for financing their own operations. Acquisition and Ownership of Supplies and Equipment Under the terms of their respective CCOWs, each of KPC and Arutmin must purchase or lease all materials, supplies and property, plant and equipment necessary to be purchased or leased under the mutually agreed work program. Each of KPC and Arutmin must finance the cost of purchasing those items, which become the property of the Indonesian Government upon arrival at the Indonesian port of import or when purchased locally. In consideration for relinquishing its ownership of such assets to the Indonesian Government, each of KPC and Arutmin retains the right of sole use of those items for its coal operations for as long as it may require. Each of KPC and Arutmin is responsible for the maintenance and repair of the equipment it uses. Production Under the terms of their CCOWs, in each calendar year, each of KPC and Arutmin may take 86.5 per cent. of the amount of coal it has produced from the final production processes and available for sale, while the Indonesian Government is entitled to take and receive the balance of 13.5 per cent. of such amount. The Indonesian Government may request that KPC or Arutmin sells, as the Indonesian Governments agent, all or part of the Indonesian Governments share of the coal produced. Each of KPC and Arutmin has entered into an agreement with the Indonesian Government that governs its sales of the Indonesian Governments portion of coal. Under the terms of the respective CCOWs, each of KPC and Arutmin agree to make commercially reasonable efforts to enter into agreements for the sale of the Indonesian Governments portion of the coal on terms acceptable both to the Indonesian

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Government and KPC and Arutmin, as the case may be. Since 1991, in the case of Arutmin, and 2001, in the case of KPC, the Indonesian Government has requested that each of KPC and Arutmin satisfies this obligation through the payment of cash rather than the physical delivery of coal. Each of KPCs and Arutmins actual cash settlement is, however, lower than 13.5 per cent. of its sales as a result of credits, such as Indonesian Government taxes, an administrative fee and selling and marketing commissions, and, in the case of Arutmin only, deductions attributable to illegal mining in the Arutmin concession area, which KPC or Arutmin use to offset cash payable to the Indonesian Government. Under the terms of the Arutmin Coal Sale Agreement, if Arutmin fails to make timely payments within 30 days of the end of each quarter, Arutmin is subject to a late payment interest charge of 2.0 per cent. each month for Rupiah-denominated transactions and 1.0 per cent. each month for US dollar-denominated transactions, with respect to the Indonesian Governments portion of coal. Payment of Taxes Each of the KPC and Arutmin CCOWs requires payment of the following taxes: corporation taxes of 35.0 per cent. of the taxable income of KPC or Arutmin, as the case may be, during the first full 10 years after the commencement of the operating period (which ended as of 31 December 2000, in the case of Arutmin and, as of 31 December 2001, in the case of KPC), and 45.0 per cent. of the taxable income of KPC or Arutmin, as the case may be, thereafter; withholding taxes on: dividends, interest and royalties on patents at a rate of 10.0 per cent.; remuneration of KPCs and Arutmins employees, based on the applicable personal income tax rates in Indonesia for expatriate individuals who are engaged by KPC or Arutmin, as the case may be, or its contractors or affiliates who remain in Indonesia for more than 90 days during any calendar year; other payments made by KPC and Arutmin, as the case may be, (including fees for technical services based on prevailing laws and regulations in Indonesia at a rate of 10.0 per cent.);

a regional development tax of US$100,000 per annum; sales tax on services rendered to KPC or Arutmin, as the case may be, in Indonesia at a rate not exceeding 5.0 per cent. of the assessable basis of the services. This is the percentage of the total contract sum approved by the Indonesian Minister of Finance; stamp duty on loan agreements between KPC or Arutmin, as the case may be, and financial institutions, for use in Indonesia, up to a maximum rate of 0.1 per cent. of the total amount of the loan referred to in the loan agreement; and excise taxes on tobacco and liquor.

In addition, each of KPC and Arutmin has a right to an investment allowance of 20.0 per cent. of its total investment (at a rate of 5.0 per cent. per year) from taxable income. With the exception of the taxes specified above, the Indonesian Government has agreed to hold each of KPC and Arutmin harmless from all present and future Indonesian taxes, duties, rentals and royalties levied by the Indonesian Government (including provincial and regency Indonesian Governments), including transfer taxes, import and/or export duties on materials, equipment and supplies brought into or taken out of Indonesia, exactions on property, capital, net worth, operations, remittances or transactions (including any tax or levy on or in connection with coal operations performed by KPC or Arutmin, as the case may be, or its contractors). In the event that either KPC or Arutmin (or another person on its behalf) pays any taxes from which KPC and Arutmin is exempt under their CCOWs, the Indonesian Government is obligated to reimburse KPC or Arutmin (or another person on its behalf) within 60 days after receipt of the invoice, as the case may be. In a practice consistent with this indemnification provision, each of KPC and Arutmin has been setting off its entitlement payments to the Indonesian Government by certain value-added tax payments that KPC and Arutmin, as the case may be, has been required to make since January 2001.

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See Legal Proceedings and Disputes Value Added Taxes and Royalty Obligations Dispute with the Indonesian Government in Part IV Information on the Bumi Resources Group and, for risks associated with these set-offs, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. Marketing Under the terms of their respective CCOWs, each of KPC and Arutmin may export the coal produced in the concession areas, but it must give due consideration to the domestic demand for coal within Indonesia, and its right to export is subject to the national security policy of the Indonesian Government. If domestic consumption of coal cannot be met by the Indonesian Governments share of coal or by the production of coal mines in Indonesia operated by the Indonesian Government, at the Indonesian Governments request, KPC or Arutmin, as the case may be, will sell all or part of its coal production to the Indonesian Government based on terms and conditions as agreed between the Indonesian Government and KPC or Arutmin, as the case may be, provided that this obligation will not impair its other outstanding obligations. In such an event, under their respective CCOWs, the initial purchase price to be paid to each of KPC and Arutmin by the Indonesian Government should be equal to the lowest export contract price to be received by KPC or Arutmin, as the case may be, from any overseas purchaser for coal produced in the concession area at the time coal deliveries to the Indonesian Government commenced (netted back to the point of delivery to the Indonesian Government and adjusted for any quality or quantity variations in other significant terms and related costs of production). In the event KPC or Arutmin, as the case may be, does not have any such export sales at the time coal deliveries to the Indonesian Government commence, the initial purchase price for that delivery will be equal to the current sales price for coal of like quality and quantity produced from the Southwest Pacific region, including Australia and Indonesia, being sold into the world markets as adjusted for variations in significant contract terms. Each of KPCs and Arutmins right to export coal is also subject to the Indonesian Governments national security policy and the Indonesian Government can require it to divert coal sales to the Indonesian Government if it determines it is necessary for national security purposes. The Indonesian Government has not required either KPC or Arutmin to divert any sales. Title to the coal that the KPC and Arutmin are entitled to take from the respective concession areas under the KPC and Arutmin CCOWs is retained by the Indonesian Government until delivery of that coal to the vessel at the point of export or at the point of sale in Indonesia, at which time title passes to KPC and Arutmin, as the case may be. Default, Settlement of Disputes and Termination Except in the case of a force majeure event, if the Indonesian Government determines that KPC or Arutmin have defaulted under their respective CCOWs, the Indonesian Government must provide written notice to KPC or Arutmin, as the case may be, requesting it to correct the default, specifying a default cure period that cannot be less than 30 days. If KPC or Arutmin, as the case may be, does not correct the material default within the time period stipulated in the notice, the Indonesian Government will have the right to terminate the respective CCOW within 90 days after the end of the cure period, except that the Indonesian Governments right to terminate will not arise if, within the cure period stipulated, KPC or Arutmin, as the case may be, is attempting in good faith to correct the specified default. Except for tax matters, any dispute between the Indonesian Government and either KPC or Arutmin arising before or after termination concerning anything related to their respective CCOWs will, unless settled by mutual agreement, be referred for settlement by arbitration to the International Center for Settlement of Investment Disputes (ICSID). If the services of ICSID are unavailable, the unsettled dispute will be referred for settlement to a Board of Arbitration of three members consisting of two arbitrators (one each appointed by KPC or Arutmin, as the case may be, and the Indonesian Government) and an umpire (appointed by the two arbitrators), who will not be closely connected with or have been in the public service of, or (in the case of Arutmin) be a national of Indonesia or the United States, or (in the case of KPC) be a national of Indonesia, Australia or the United Kingdom. The umpire must also be a person of recognised standing in international jurisprudence.

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At any time during the term of each of the KPC and Arutmin CCOWs, the Indonesian Government is entitled to terminate the respective CCOW by giving 30 days written notice to KPC or Arutmin, as the case may be, if KPC or Arutmin is found to be in major breach of their respective CCOW by an arbitration body and KPC or Arutmin, as the case may be, fails to remedy the relevant breach within the time specified by the arbitration award or court decision. The Indonesian Governments right to terminate will not accrue, however, if KPC or Arutmin, as the case may be, is attempting in good faith to cure the breach. On the other hand, each of KPC and Arutmin is entitled to terminate its CCOW upon 90 days written notice to the Indonesian Government if a major breach of the respective CCOW is committed by the Indonesian Government, as determined conclusively by arbitration or final court decision, and the Indonesian Government fails to remedy that default within the time specified by the arbitration award or court decision or, in the opinion of KPC or Arutmin, circumstances do not warrant continuation of the coal operations. Upon termination KPC or Arutmin, as the case may be, would have no further rights under its CCOW except for those rights accrued before the date of termination. KPs of Fajar Sakti Fajar Sakti holds three KPs for its three mining concession areas; namely, the Loa Ulung KP, the Desa Gunung Sari KP and the Desa Buluk Sen KP. The Loa Ulung KP was issued by the Regent of Kutai Kartanegara on 10 June 2008. The Loa Ulung KP is valid until 10 June 2018 and covers an area of 984.5 hectares. The Desa Gunung Sari KP was issued by the Regent of Kutai Kartanegara to Guruh Putra on 28 December 2007. The Desa Gunung Sari KP is valid until December 28, 2027 and covers an area of 4,008 hectares. The Desa Buluk Sen KP was issued by the Regent of Kutai Kartanegara to Ade Putra on 9 January 2008. The Desa Buluk Sen KP is valid until 9 January 2028 and covers an area of 4,061 hectares. These KPs contain, among other terms, the following material terms: the KP holder is required to be domiciled in or maintain office addresses at the District Court of Kutai Kartanegara Regency for matters relating to the KP; the KP holder is required to pay dead rent, exploitation or production rents, regional levies of US$0.50 per tonne of coal and placement fees on reclamation guarantees; the KP holder is required to submit a mining activity report once every three months and an annual report to the Head Office of Mining and Energy of the Regent Kutai Kartanegara; if the concession areas overlap with the business areas of an oil and gas company, the KP holder is required to coordinate with the oil and gas company prior to undertaking any exploration activities; the KP holder is required to conduct environmental management and monitoring in accordance with all prevailing laws and regulations; the KP holder may not enter into co-operations or joint ventures with foreign parties without the prior written approval of the Head Office of Mining and Energy of the Regent Kutai Kartanegara; and the KP holder is required to report any findings of other minerals to the Head Office of Mining and Energy of the Regent of Kutai Kartanegara.

Pendopo Energi CCOW On 20 November 1997, Pendopo Energi entered into a Work Agreement for Coal Mining Enterprises with the Indonesian Government, for sole and exclusive rights in connection with the exploration and exploitation of coal under the Pendopo Energi CCOW. The following is a summary of the key provisions of the Pendopo Energi CCOW. Concession Area The initial concession area under the Pendopo Energi CCOW covered approximately 97,330 hectares. On 20 November 1998 Pendopo Energi returned 24,330 hectares, or 25.0 per cent. of the initial concession area to the Indonesian Government. In 2004, Pendopo Energi returned a further 438

55,160 hectares to the Indonesian Government. The current size of the concession area is 17,840 hectares or 18.3 per cent. of the original concession area. During each year of the term of the Pendopo Energi CCOW, Pendopo Energi must pay the Indonesian Government an annual rent calculated on a US dollar per hectare basis. The rent amounts range from US$0.025 per hectare to US$0.50 per hectare for pre-operation stages of the enterprise and between US$1.50 per hectare and US$3.00 per hectare in the operation stage. Pendopo Energi has not requested an enlargement of the concession area or the right to carry out exploration for, and exploitation of, minerals other than coal within the concession area. Term and Operating Period The term of the Pendopo Energi CCOW began on 5 May 2009 and ends 30 years after this date, or 5 May 2039. Pendopo Energi may, with Indonesian Government consent, suspend its coal mining operations in whole or in part, during the term of the Pendopo Energi IPO. If a force majeure event occurs, Pendopo Energi can request an extension of the term of the Pendopo Energi CCOW for a period equal to the period of such occurrence. Notwithstanding the original 30-year term of the operating period of the Pendopo Coal CCOW, Pendopo Energi may request from the Indonesian Government an extension of the operating period or any of the periods preceding the operating period. Appointment of Sub-Contractors Pendopo Energi may appoint sub-contractors to provide necessary technical, management and administrative services under the Pendopo Energi CCOW. Doing so, however, does not release it from its obligations under the Pendopo Energi CCOW. In the event those obligations are contracted to its affiliates, Pendopo Energi has agreed that the cost will not be more than a non-affiliated party would charge for fulfilling those obligations. Work Programs, Budget and Regular Reporting Requirements Pendopo Energi is required to submit annual work programs and budgets to the Indonesian Government containing the coal operations it proposes to carry out during the next calendar year. Under the terms of the Pendopo Energi CCOW, Pendopo Energi must submit quarterly and annual progress reports of its operations to the Indonesian Government. Pendopo Energi also must keep the Indonesian Government advised of plans concerning its coal operations, including the progress of any construction. These progress reports are required to be submitted within 30 days after the end of each calendar quarter. To date, Pendopo Energi has submitted such progress reports in a timely manner. The Indonesian Government retains title to such data and any other original data resulting from the coal operations Pendopo Energi compiles during the term of the Pendopo Energi CCOW. In accordance with the Pendopo Energi CCOW, Pendopo Energi established an interest-bearing escrow account in the amount of US$100,000 as security deposit for the benefit of the Indonesian Government in 1997. After satisfactorily completing the relevant requirements under the Pendopo Energi CCOW, the Indonesian Government released the security deposit to Pendopo Energi. Financing Pendopo Energi has the sole responsibility for the financing of its coal operations in the concession areas and must maintain sufficient capital to carry out its obligations under the Pendopo Energi CCOW. Pendopo Energi has the right to determine the terms on and manner in which those funds will be obtained. However, any long-term borrowing as to be on such repayment terms and at such effect rates of interest that are reasonable and appropriate for mining companies then prevailing in the international money markets. Construction and Operation of Project Facilities Under the terms of the Pendopo Energi CCOW, Pendopo Energi is granted all necessary licences and permits to construct and operate project facilities, including coal washing facilities, port facilities, aircraft landing facilities and transportation, communication, water supply and any other related facilities. The granting of such licences and permits remains subject to the rights of third parties.

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Production Under the terms of the Pendopo Energi CCOW, Pendopo Energi may take 86.5 per cent. of the gross amount of coal it has produced from the final production processes and available for sale, while the Indonesian Government is entitled to receive the balance of 13.5 per cent. of such gross amount in cash valued at the FOB price or at the price of Pendopo Energis final load out at the sale point. If no sales contract exists at the time payment is due to the Indonesian Government in respect of its share of coal, the price of the coal will be based on the prevailing market price at the time of sale. Payment of Taxes The Pendopo Energi CCOW requires payment of the following taxes: corporation taxes of 10.0 per cent. of Pendopo Energis taxable income up to Rp.25 million, 15.0 per cent. for taxable income exceeding Rp.25 million up to Rp.50 million, and 30.0 per cent. or lower rate as set by the relevant Indonesian Government regulations for taxable income exceeding Rp.50 million; withholding taxes on: (i) (ii) personal income of Pendopo Energis employees, including both resident taxpayers and expatriate individuals; personal income of Pendopo Energis employees in respect of a payment of dividends, interest, including remuneration due to loan payments, rents, royalties and other income related to the utilisation of property, remuneration on technical and management service as well as any other services.

during the operating/production period, a land and building tax of an amount equal to the amount of annual rent payable to the Indonesian Government plus an amount of 0.5 per cent. of 30.0 per cent. of gross revenue from the mining operations; a land and building tax on land/water and building areas used by Pendopo Energi for its facilities which are closed to the public, payable in accordance with the applicable Indonesian tax laws; any applicable value-added tax or sales tax on goods and services rendered to Pendopo Energi in Indonesia; import duty on goods imported into Indonesia; taxes, fees and charges imposed by regional Indonesian Governments and approved by the Indonesian Government; duties on the transfer of ownership of motor vehicles and registration certificates and transfer of ships operating in Indonesia; and stamp duty on documents.

With the exception of the taxes specified above, the Indonesian Government has agreed to hold Pendopo Energi harmless from all present and future taxes, duties, levies, contributions, charges or fees imposed or approved by the Indonesian Government other than those set out in the provisions of the Pendopo Energi CCOW. Marketing Under the terms of the Pendopo Energi CCOW, Pendopo Energi may export the coal produced in the concession areas, but it must have due consideration to the domestic demand for coal within Indonesia, and its right to export is subject to the export laws and regulations of Indonesia. The Indonesian Government retains the right to prohibit the sale or export of coal if such a sale or export would be contrary to the international obligations of the Indonesian Government or to the external political considerations affecting the national interest of Indonesia. In the event of such a prohibition, if Pendopo Energi is unable to find alternative markets on equivalent terms and conditions, the Indonesian Government shall assist it to overcome the possible consequences of such prohibition.

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Special Rights of the Indonesian Government Under the terms of the Pendopo Energi CCOW, Pendopo Energi and its shareholders agree that they will not, without the Indonesian Governments prior approval: amend Pendopo Energis articles of association; change the basic nature of Pendopo Energis business; voluntarily liquidate or wind up Pendopo Energi; merge or consolidate Pendopo Energi with any other company; or pledge or otherwise use as collateral the coal in the concession area.

The Indonesian Government has the right to withhold its approval of plans and designs relating to construction, operation, expansion, modification and replacement of facilities of the coal operations in the concession area that may disproportionately and unreasonably damage the surrounding environment, limit its further development potential, significantly disrupt the socio-political stability in the area or be adverse to the interests of national security. Under the terms of the Pendopo Energi CCOW, the Indonesian Government and its authorised representatives have the right to review and audit Pendopo Energis financial statements within ten years after the end of each tax year. Default, Settlement of Disputes and Termination Except in the case of a force majeure event, if the Indonesian Government determines Pendopo Energi defaulted under the Pendopo Energi CCOW, the Indonesian Government must provide written notice to Pendopo Energi requesting it to correct the default, specifying a default cure period that cannot be more than 180 days. If Pendopo Energi does not correct the default within the time period stipulated in the notice, the Indonesian Government will have the right to terminate the Pendopo Energi CCOW. Notwithstanding the above, if Pendopo Energi is found to be in default in making any payment of money to the Indonesian Government pursuant to the Pendopo Energi CCOW, Pendopo Energi must cure such default within 30 days after the receipt of the notice of default. In case of a late payment, the penalty is an interest charge on the amount in default, calculated from the date the payment was due, at the rate of the New York prime interest rate in effect at the date of default plus 4.0 per cent. Except for tax matters, any dispute between the Indonesian Government and Pendopo Energi arising before or after termination concerning anything related to the Pendopo Energi CCOW will, unless settled by mutual agreement, be referred for settlement by conciliation, if the parties wish to seek an amicable settlement by conciliation, or to arbitration. The conciliation or arbitration shall take place in accordance with conciliation rules or arbitration rules (as applicable) adopted by the National Arbitration Board of Indonesia. At any time during the term of the Pendopo Energi CCOW, if in Pendopo Energis opinion, the coal operations enterprise is not workable, it must consult with the MEMR and may thereafter submit a written notice to terminate the Pendopo Energi CCOW. Upon confirmation of termination by the MEMR, Pendopo Energi could be relieved of its obligation under the Pendopo Energi CCOW. Dairi Prima Contract of Work On 19 February 1998, Dairi Prima, a majority-owned subsidiary of Herald, entered into the Dairi Prima contract of work with the Indonesian Government as the sole contractor of the Indonesian Government for the exploration, development and mining gold and other supplemental minerals, such as zinc and lead, in areas within Dairi Primas concession area in Dairi, North Sumatra covering approximately 27,520 hectares. The current size of the Dairi Prima contract of work concession area is 25,420 hectares. During each year of the term of the Dairi Prima contract of work, Dairi Prima must pay the Indonesian Government an annual rent calculated on a US dollar per hectare basis. The rent amounts range from US$0.025 per hectare to US$0.50 per hectare for pre-operation stages of the enterprise and between US$1.50 per hectare and US$3.00 per hectare in the operation stage.

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Term and Operating Period The term of the Dairi Prima contract of work is 30 years from the commencement of the operating period of the Dairi Prima contract of work. The operating period of the Dairi Prima contract of work has not commenced, and Dairi Prima has been granted an extension of its construction period until 7 November 2010. The operating period of the Dairi Prima contract of work will automatically commence upon the expiry of this period, unless Dairi Prima is able to obtain a further extension of the construction period. Appointment of Sub-Contractors Dairi Prima may appoint sub-contractors to provide necessary technical, management and administrative services under the Dairi Prima contract of work. Doing so, however, does not release it from its obligations under the Dairi Prima contract of work. The Dairi Prima contract of work also states that the company is to make maximum use of registered Indonesian sub-contractors where comparable services and prices are available. Work Programs, Budget and Regular Reporting Requirements Under the terms of the Dairi Prima contract of work, Dairi Prima must submit monthly, quarterly and annually progress reports of its operations to the Indonesian Government. Dairi Prima also must keep the Indonesian Government advised of all activities in relation to its operations. In accordance with the Dairi Prima contract of work, Dairi Prima established an interest-bearing escrow account in the amount of US$100,000 as security deposit for the benefit of the Indonesian Government in 1998. Establishment and Operation of Project Facilities Under the terms of the Dairi Prima contract of work, Dairi Prima has agreed to process ore to produce metal and or marketable concentrate and work with the Indonesian Government to establish downstream metals processing facilities in Indonesia, if the minerals extracted are of sufficient tonnage and amenable to smelting, refining or metals manufacturing. Dairi Prima is required to submit to the Indonesian Government results of its feasibility studies on the establishment of its downstream metals processing facilities. Payment of Taxes The Dairi Prima contract of work requires payment of the following taxes: Corporation taxes of 10.0 per cent. of Dairi Primas taxable income up to Rp.25 million, 15.0 per cent. for taxable income exceeding Rp.25 million up to Rp.50 million, and 30.0 per cent. or lower rate as set by the relevant Indonesian Government regulations for taxable income exceeding Rp.50 million; withholding taxes on: personal income of Dairi Primas employees, including both resident tax payers and expatriate individuals; personal income of Dairi Primas employees in respect of a payment of dividends, interest, including remuneration due to loan payment warranty, rents, royalties and other income related to the utilisation of property, remuneration on technical and management service as well as any other services. during the operating/production period, a land and building tax of an amount equal to the amount of annual rent payable to the Indonesian Government plus an amount of 0.5 per cent. of 30.0 per cent. of gross revenue from the mining operations; during the term of the Dairi Prima contract of work, a land and building tax on land/water and building areas used by Dairi Prima for its facilities which are closed to the public, payable in accordance with the applicable Indonesian tax law; any applicable value-added tax or sales tax on goods and services rendered Dairi Prima in Indonesia, import duty on goods imported into Indonesia;

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taxes, fees and charges imposed by regional Indonesian Governments and approved by the Indonesian Government; duties on the transfer of ownership of motor vehicles and registration certificates and transfer of ships operating in Indonesia; and stamp duty on documents.

With the exception of the taxes specified above, the Indonesian Government has agreed to hold Dairi Prima harmless from all present and future taxes, duties, levies, contributions, charges or fees imposed or approved by the Indonesian Government. Marketing Under the terms of the Dairi Prima contract of work, Dairi Prima may export the products obtained from its concession areas, but it must have due consideration to the domestic demand for these minerals within Indonesia, and its right to export is subject to the export laws and regulations of Indonesia. The Indonesian Government retains the right to prohibit the sale or export of minerals produced by Dairi Prima if such a sale or export would be contrary to the international obligations of the Indonesian Government or to the external political considerations affecting the national interest of Indonesia. In the event of such a prohibition, if Dairi Prima is unable to find alternative markets on equivalent terms and conditions, the Indonesian Government has agreed to assist it to overcome the possible consequences of such prohibition. Special Rights of the Indonesian Government Under the terms of Dairi Prima contract of work, Dairi Prima and its shareholders agree that they will not, without the Indonesian Governments prior approval: amend Dairi Primas articles of association; change the basic nature of Dairi Primas business; voluntarily liquidate or wind up Dairi Prima; merge or consolidate Dairi Prima with any other company; or pledge or otherwise use as collateral the minerals in Dairi Primas concession areas.

The Indonesian Government has the right to withhold its approval of plans and designs relating to construction, operation, expansion, modification and replacement of facilities of the operations in the concession area which may disproportionately and unreasonably damage the surrounding environment or limit its further development potential, significantly disrupt the socio-political stability in the area or be adverse to the interests of national security. The Dairi Prima contract of work also provides that in the event of an increase in share capital, the Indonesian participants in Dairi Prima shall be entitled to subscribe for new shares in proportion to existing shares. Default, Settlement of Disputes and Termination Except in the case of a force majeure event, if the Indonesian Government determines Dairi Prima has defaulted under the Dairi Prima contract of work, the Indonesian Government must provide written notice to Dairi Prima requesting it to correct the default, specifying a default cure period that cannot be more than 90 days. If Dairi Prima does not correct the default within the time period stipulated in the notice, the Indonesian Government will have the right to terminate the Dairi Prima contract of work. Except for tax matters, any dispute between the Indonesian Government and Dairi Prima arising before or after termination concerning anything related to the Dairi Prima contract of work will, unless settled by mutual agreement, be referred for settlement by conciliation, if the parties wish to seek an amicable settlement by conciliation, or to arbitration. The conciliation or arbitration shall take place in accordance with the UNCITRAL Conciliation Rules, or the UNCITRAL Arbitration rules.

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AtanytimeduringthetermoftheDairiPrima contractofwork,ifinDairiPrimasopinion,theenterprise isnotworkable,itmustconsultwiththeMEMRandmaythereaftersubmitawrittennoticetoterminate theDairiPrima contractofwork.UponconfirmationofterminationoftheDairiPrima contractofwork bytheMEMR,DairiPrimawouldberelievedofitsobligationsundertheDairiPrima contractofwork. Gorontalo Mineral Contract of Work On19February1998,GorontaloMinerals,an80percent.-ownedsubsidiaryofBRM,enteredintoa contractofworkwiththeIndonesianGovernmentasthesolecontractoroftheIndonesianGovernment fortheexploration,developmentandminingofgold,andothersupplementalmineralssuchascopper, in areas within Gorontalo Minerals concession area in Gorontalo, North Sulawesi, covering approximately51,570hectares.ThecurrentsizeoftheGorontaloMineralscontractofworkconcession areais36,070hectares. DuringeachyearofthetermoftheGorontaloMineralscontractofwork,GorontaloMineralsmustpay the Indonesian Government an annual rent calculated on a U.S. dollar per hectare basis. The rent amounts range from US$0.025 per hectare to US$0.50 per hectare for pre-operation stages of the enterprise and between US$1.50 per hectare and US$3.00 per hectare in the operation stage. In addition, during each calendar quarter of the term of the Gorontalo Minerals contract of work, Gorontalo Minerals must also pay royalties to the Indonesian Government based on the type and amountofmineralproduced,tobepaidonorbeforethelastdayofthemonthfollowingeachcalendar quarter. Term and Operating Period The term of the Gorontalo Minerals contract of work is 30 years from the commencement of the operatingperiodoftheGorontaloMineralscontractofwork,orsuchlongerperiodastheIndonesian Governmentmayapprove.TheoperatingperiodoftheGorontaloMineralscontractofworkhasnot commenced. Appointment of Sub-Contractors Gorontalo Minerals may appoint sub-contractors to provide necessary technical, management and administrative services under the Gorontalo Minerals contract of work. Doing so, however, does not releaseitfromitsobligationsundertheGorontaloMineralscontractofwork. Work Programs, Budget and Regular Reporting Requirements UnderthetermsoftheGorontaloMineralscontractofwork,GorontaloMineralsmustsubmitquarterly progressreportsofitsoperationstotheIndonesianGovernment.GorontaloMineralsmustalsokeep theIndonesianGovernmentadvisedofallactivitiesinrelationtoitsoperations.Inaccordancewiththe Gorontalo Minerals contract of work, Gorontalo Minerals established an interest-bearing escrow accountintheamountofUS$100,000assecuritydepositforthebenefitoftheIndonesianGovernment in1998. Establishment and Operation of Project Facilities UnderthetermsoftheGorontaloMineralscontractofwork,GorontaloMineralshasagreedtoprocess ore to produce metal and/or marketable concentrate and work with the Indonesian Government to establishdownstreammetalsprocessingfacilitiesinIndonesia,ifthemineralsextractedareofsufficient tonnages andamenabletosmelting,refiningormetalsmanufacturing.GorontaloMineralsisrequired to submit to the Indonesian Government results of its feasibility studies on the establishment of its downstreammetalsprocessingfacilities. Payment of Taxes TheGorontaloMineralscontractofworkrequirespaymentofthefollowingtaxes: corporation taxes of 10 per cent. of Gorontalo Minerals taxable income up to Rp25 million, 15percent.fortaxableincomeexceedingRp25millionuptoRp50million,and30percent.or lower rate as set by the relevant Indonesian Government regulations for taxable income exceedingRp50million;

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 withholdingtaxeson: personal income of Gorontalo Minerals employees, including both resident tax payers andexpatriateindividuals; income of Gorontalo Minerals in respect of a payment of dividends, interest, including remunerationduetoloanpaymentwarranty,rents,royaltiesandotherincomerelatedto theutilizationofproperty,remunerationontechnicalandmanagementservicesaswellas anyotherservices;and duringtheoperating/productionperiod,alandandbuildingtaxofanamountequaltothe amountofannualrentpayabletotheIndonesianGovernmentplusanamountof0.5per cent.of30percent.ofgrossrevenuefromtheminingoperations; duringthetermoftheGorontaloMineralscontractofwork,alandandbuildingtaxonland/water andbuildingareasusedbyGorontaloMineralsforitsfacilitieswhichareclosedtothepublic, payableinaccordancewiththeapplicableIndonesiantaxlaw; anyapplicablevalue-addedtaxorsalestaxongoodsandservicesrenderedGorontaloMinerals inIndonesia,andimportdutyongoodsimportedintoIndonesia; taxes, fees and charges imposed by regional Indonesian governments and approved by the IndonesianGovernment; dutiesonthetransferofownershipofmotorvehiclesandregistrationcertificatesandtransferof shipsoperatinginIndonesia;and stampdutyondocuments. Withtheexceptionofthetaxesspecifiedabove andotherlevies,taxesanddutiesasspecifiedinthe Gorontalo Minerals contract of work, the Indonesian Government has agreed to hold Gorontalo Minerals harmless from all present and future taxes, duties, levies, contributions, charges or fees imposedorapprovedbytheIndonesianGovernment. Marketing Under the terms of the Gorontalo Minerals contract of work, Gorontalo Minerals may export the products obtained from its concession areas, but it must have due consideration to the domestic demandforthesemineralswithinIndonesia,anditsrighttoexportissubjecttotheexportlawsand regulationsofIndonesia.TheIndonesianGovernmentretainstherighttoprohibitthesaleorexportof mineralsproducedbyGorontaloMineralsifsuchasaleorexportwouldbecontrarytotheinternational obligations of the Indonesian Government or to the external political considerations affecting the nationalinterestofIndonesia.Intheeventofsuchaprohibition,ifGorontaloMineralsisunabletofind alternative markets on equivalent terms and conditions, the Indonesian Government has agreed to assistittoovercomethepossibleconsequencesofsuchprohibition. Special Rights of the Government UnderthetermsofGorontaloMineralscontractofwork,GorontaloMineralsanditsshareholdersagree thattheywillnot,withouttheIndonesianGovernmentspriorapproval: amendGorontaloMineralsarticlesofassociation; changethebasicnatureofGorontaloMineralsbusiness; voluntarilyliquidateorwindupGorontaloMinerals; mergeorconsolidateGorontaloMineralswithanyothercompany;or pledgeorotherwiseuseascollateralthemineralsinGorontaloMineralsconcessionareas. The Indonesian Government has the right to withhold its approval of plans and designs relating to construction,operation,expansion,modificationandreplacementoffacilitiesoftheoperationsinthe concessionareawhichmaydisproportionatelyandunreasonablydamagethesurroundingenvironment

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orlimititsfurtherdevelopmentpotentialorsignificantlydisruptthesocio-politicalstabilityinthearea orbeadversetotheinterestsofnationalsecurity. Default, Settlement of Disputes and Termination Except in the case of a force majeure event, if the Indonesian Government determines Gorontalo Minerals has defaulted under the Gorontalo Minerals contract of work, the Indonesian Government must provide written notice to Gorontalo Minerals requesting it to correct the default, specifying a default cure period that cannot be more than 90 days. If Gorontalo Minerals does not correct the defaultwithinthetimeperiodstipulatedinthenotice,theIndonesianGovernmentwillhavetheright toterminatetheGorontaloMineralscontractofwork. Except for tax matters, any dispute between the Indonesian Government and Gorontalo Minerals arisingbeforeorafterterminationconcerninganythingrelatedtotheGorontaloMineralscontractof workwill,unlesssettledbymutualagreement,bereferredforsettlementbyconciliation,iftheparties wish to seek an amicable settlement by conciliation, or to arbitration. The conciliation or arbitration shall take place in accordance with the UNCITRAL Conciliation Rules, or the UNCITRAL Arbitration rules. At any time during the term of the Gorontalo Minerals contract of work, if in Gorontalo Minerals opinion, the enterprise is not workable, it must consult with the Minister of Energy and Mineral ResourcesandmaythereaftersubmitawrittennoticetoterminatetheGorontaloMineralscontractof work.UponconfirmationofterminationoftheGorontaloMineralscontractofworkbytheMinisterof Energy and Mineral Resources, Gorontalo Minerals would be relieved of its obligations under the GorontaloMineralscontractofwork. IfterminationoftheGorontaloMineralscontractofworkoccursduring: thegeneralsurveyorexplorationperiods,GorontaloMineralswillhaveaperiodofsixmonths withinwhichtosell,removeorotherwisedisposeofitspropertyinIndonesia.Anypropertynot soremovedorotherwisedisposedofwillbecomethepropertyoftheIndonesianGovernment withoutanycompensationtoGorontaloMinerals; thefeasibilitystudiesperiod,allpropertyofGorontaloMineralslocatedinthecontractareamust beofferedforsaletotheIndonesianGovernment,whichhasanoption,validforthirtydaysfrom the date of such offer, to buy all such property at a fair and reasonable market price. If the Indonesian Government does not accept such offer within the thirty day period, Gorontalo Mineralsmaysell,removeorotherwisedisposeofanyorallofsuchpropertyduringaperiodof six months after the expiration of such offer. Any property not so sold, removed or otherwise disposedofwillbecomethepropertyoftheIndonesianGovernmentwithoutanycompensation toGorontaloMinerals; theconstructionperiod,allpropertyofGorontaloMineralslocatedinthecontractareamustbe offeredforsaletotheIndonesianGovernment,whichhasanoption,validforthirtydaysfromthe dateofsuchoffer,tobuyallsuchpropertyatafairandreasonablemarketpricefromGorontalo Minerals.IftheIndonesianGovernmentdoesnotacceptsuchofferwithinthethirtydayperiod, GorontaloMineralsmaysell,removeorotherwisedisposeofanyorallofsuchpropertyduring aperiodoftwelvemonthsaftertheexpirationofsuchoffer.Anypropertynotsosold,removed orotherwisedisposedofwillbecomethepropertyoftheIndonesianGovernmentwithoutany compensationtoGorontaloMinerals;and the operating period, or by reason of the expiration of the term of the Gorontalo Minerals contractofwork,allpropertyofGorontaloMineralslocatedinthecontractareamustbeoffered forsaletotheIndonesianGovernmentatcostormarketvalue,whicheveristhelower,butinno eventlowerthanthedepreciatedbookvalue.TheIndonesianGovernmenthasanoption,valid for thirty days from the date of such offer, to buy all such property at the agreed value. If the Indonesian Government does not accept such offer within the thirty day period, Gorontalo Mineralsmaysell,removeorotherwisedisposeofanyorallsuchpropertyduringaperiodof twelvemonthsaftertheexpirationofsuchoffer.Anypropertynotsosold,removedorotherwise disposedofwillbecomethepropertyoftheIndonesianGovernmentwithoutanycompensation toGorontaloMinerals.

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Notwithstanding any of the above, any property that is in use for public purposes, including roads, schoolsand/orhospitals,togetherwiththeirequipment,willimmediatelybecomethepropertyofthe Indonesian Government without any compensation to Gorontalo Minerals upon termination of the GorontaloMineralscontractofwork. Citra Palu Contract of Work On 28 April 1997, Citra Palu Minerals, a wholly-owned subsidiary of BRM, entered into a contract of workwiththeGovernmentasthesolecontractoroftheIndonesianGovernmentfortheexploration, development and mining of gold, and other supplemental minerals such as molybdenum, in areas within Citra Palu Minerals concession area in Citra Palu, Central and South Sulawesi, covering approximately561,050hectares.ThecurrentsizeoftheCitraPalucontractofworkconcessionareais 138,889hectares. During each year of the term of the Citra Palu contract of work, Citra Palu Minerals must pay the IndonesianGovernmentanannualrentcalculatedonaU.S.dollarperhectarebasis.Therentamounts rangefromUS$0.15perhectaretoUS$0.50perhectareforpre-operationstagesoftheenterpriseand betweenUS$1.50perhectareandUS$3.00perhectareintheoperationstage.Inaddition,duringeach calendar quarter of the term of the Citra Palu contract of work, Citra Palu Minerals must also pay royaltiestotheIndonesianGovernmentbasedonthetypeandamountofmineralproduced,tobepaid onorbeforethelastdayofthemonthfollowingeachcalendarquarter. Term and Operating Period ThetermoftheCitraPalucontractofworkis30yearsfromthecommencementoftheoperatingperiod oftheCitraPalucontractofwork,orsuchlongerperiodastheIndonesianGovernmentmayapprove. TheoperatingperiodoftheCitraPalucontractofworkhasnotcommenced. Appointment of Sub-Contractors Citra Palu Minerals may appoint sub-contractors to provide necessary technical, management and administrativeservicesundertheCitraPalucontractofwork.Doingso,however,doesnotreleaseit fromitsobligationsundertheCitraPalucontractofwork. Work Programs, Budget and Regular Reporting Requirements UnderthetermsoftheCitraPalucontractofwork,CitraPaluMineralsmustsubmitquarterlyprogress reports of its operations to the Indonesian Government. Citra Palu Minerals must also keep the IndonesianGovernmentadvisedofallactivitiesinrelationtoitsoperations.InaccordancewiththeCitra Palucontractofwork,CitraPaluMineralsestablishedaninterest-bearingescrowaccountintheamount ofUS$109,400,plusaguaranteeintheamountofUS$255,300,assecuritydepositforthebenefitofthe IndonesianGovernmentin1997. Establishment and Operation of Project Facilities UnderthetermsoftheCitraPalucontractofwork,CitraPaluMineralshasagreedtoprocessoreto producemetaland/ormarketableconcentrateandworkwiththeIndonesianGovernmenttoestablish downstreammetalsprocessingfacilitiesinIndonesia,ifthemineralsextractedareofsufficienttonnages andamenabletosmelting,refiningormetalsmanufacturing.CitraPaluMineralsisrequiredtosubmit totheIndonesianGovernmentresultsofitsfeasibilitystudiesontheestablishmentofitsdownstream metalsprocessingfacilities. Payment of Taxes TheCitraPalucontractofworkrequirespaymentofthefollowingtaxes: corporationtaxesof10percent.ofCitraPaluMineralstaxableincomeuptoRp25million,15per cent.fortaxableincomeexceedingRp25millionuptoRp50million,and30percent.orlower rate as set by the relevant Indonesian Government regulations for taxable income exceeding Rp50million;

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 withholdingtaxeson: personalincomeofCitraPaluMineralsemployees,includingbothresidenttaxpayersand expatriateindividuals; income of Citra Palu Minerals in respect of a payment of dividends, interest, including remunerationduetoloanpaymentwarranty,rents,royaltiesandotherincomerelatedto theutilizationofproperty,remunerationontechnicalandmanagementservicesaswellas anyotherservices;and duringtheoperating/productionperiod,alandandbuildingtaxofanamountequaltothe amountofannualrentpayabletotheIndonesianGovernmentplusanamountof0.5per cent.of30percent.ofgrossrevenuefromtheminingoperations; during the term of the Citra Palu contract of work, a land and building tax on land/water and buildingareasusedbyCitraPaluMineralsforitsfacilitieswhichareclosedtothepublic,payable inaccordancewiththeapplicableIndonesiantaxlaw; anyapplicablevalue-addedtaxorsalestaxongoodsandservicesrenderedCitraPaluMinerals inIndonesia,andimportdutyongoodsimportedintoIndonesia; taxes, fees and charges imposed by regional Indonesian governments and approved by the IndonesianGovernment; dutiesonthetransferofownershipofmotorvehiclesandregistrationcertificatesandtransferof shipsoperatinginIndonesia;and stampdutyondocuments. Withtheexceptionofthetaxesspecifiedabove andotherlevies,taxesanddutiesasspecifiedinthe Citra Palu Minerals contract of work, the Indonesian Government has agreed to hold Citra Palu Minerals harmless from all present and future taxes, duties, levies, contributions, charges or fees imposedorapprovedbytheIndonesianGovernment. Marketing Under the terms of the Citra Palu Minerals contract of work, Citra Palu Minerals may export the products obtained from its concession areas, but it must have due consideration to the domestic demandforthesemineralswithinIndonesia,anditsrighttoexportissubjecttotheexportlawsand regulationsofIndonesia.TheIndonesianGovernmentretainstherighttoprohibitthesaleorexportof mineralsproducedbyCitraPaluMineralsifsuchasaleorexportwouldbecontrarytotheinternational obligations of the Indonesian Government or to the external political considerations affecting the nationalinterestofIndonesia.Intheeventofsuchaprohibition,ifCitraPaluMineralsisunabletofind alternative markets on equivalent terms and conditions, the Indonesian Government has agreed to assistittoovercomethepossibleconsequencesofsuchprohibition. Special Rights of the Government UnderthetermsofCitraPalu Minerals contractofwork,CitraPaluMineralsanditsshareholdersagree thattheywillnot,withouttheIndonesianGovernmentspriorapproval: amendCitraPaluMineralsarticlesofassociation; changethebasicnatureofCitraPaluMineralsbusiness; voluntarilyliquidateorwindupCitraPaluMinerals; mergeorconsolidateCitraPaluMineralswithanyothercompany;or pledgeorotherwiseuseascollateralthemineralsinCitraPaluMineralsconcessionareas. The Indonesian Government has the right to withhold its approval of plans and designs relating to construction,operation,expansion,modificationandreplacementoffacilitiesoftheoperationsinthe concessionareawhichmaydisproportionatelyandunreasonablydamagethesurroundingenvironment

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orlimititsfurtherdevelopmentpotentialorsignificantlydisruptthesocio-politicalstabilityinthearea orbeadversetotheinterestsofnationalsecurity. Default, Settlement of Disputes and Termination Except in the case of a force majeure event, if the Indonesian Government determines Citra Palu Minerals has defaulted under the Citra Palu Minerals contract of work, the Indonesian Government must provide written notice to Citra Palu Minerals requesting it to correct the default, specifying a default cure period that cannot be more than 180 days. If Citra Palu Minerals does not correct the defaultwithinthetimeperiodstipulatedinthenotice,theIndonesianGovernmentwillhavetheright toterminatetheCitraPalu Minerals contractofwork. Exceptfortaxmatters,anydisputebetweentheIndonesianGovernmentandCitraPaluMineralsarising beforeorafterterminationconcerninganythingrelatedtotheCitraPalu Minerals contractofworkwill, unlesssettledbymutualagreement,bereferredforsettlementbyconciliation,ifthepartieswishto seekanamicablesettlementbyconciliation,ortoarbitration.Theconciliationorarbitrationshalltake placeinaccordancewiththeUNCITRALConciliationRules,ortheUNCITRALArbitrationrules. At any time during the term of the Citra Palu Minerals contract of work, if in Citra Palu Minerals opinion, the enterprise is not workable, it must consult with the Minister of Energy and Mineral ResourcesandmaythereaftersubmitawrittennoticetoterminatetheCitraPalu Minerals contractof work.UponconfirmationofterminationoftheCitraPalu Minerals contractofworkbytheMinisterof EnergyandMineralResources,CitraPaluMineralswouldberelievedofitsobligationsundertheCitra Palucontractofwork. IfterminationoftheCitraPalucontractofworkoccursduring: thegeneralsurveyorexplorationperiods,CitraPaluMineralswillhaveaperiodofsixmonths withinwhichtosell,removeorotherwisedisposeofitspropertyinIndonesia.Anypropertynot soremovedorotherwisedisposedofwillbecomethepropertyoftheIndonesianGovernment withoutanycompensationtoCitraPaluMinerals; thefeasibilitystudiesperiod,allpropertyofCitraPaluMineralslocatedinthecontractareamust beofferedforsaletotheIndonesianGovernment,whichhasanoption,validforthirtydaysfrom the date of such offer, to buy all such property at a fair and reasonable market price. If the Indonesian Government does not accept such offer within the thirty day period, Citra Palu Mineralsmaysell,removeorotherwisedisposeofanyorallofsuchpropertyduringaperiodof six months after the expiration of such offer. Any property not so sold, removed or otherwise disposedofwillbecomethepropertyoftheIndonesianGovernmentwithoutanycompensation toCitraPaluMinerals; theconstructionperiod,allpropertyofCitraPaluMineralslocatedinthecontractareamustbe offeredforsaletotheIndonesianGovernment,whichhasanoption,validforthirtydaysfromthe dateofsuchoffer,tobuyallsuchpropertyatafairandreasonablemarketpricefromCitraPalu Minerals.IftheIndonesianGovernmentdoesnotacceptsuchofferwithinthethirtydayperiod, CitraPaluMineralsmaysell,removeorotherwisedisposeofanyorallofsuchpropertyduringa periodoftwelvemonthsaftertheexpirationofsuchoffer.Anypropertynotsosold,removedor otherwise disposed of will become the property of the Indonesian Government without any compensationtoCitraPaluMinerals;and theoperatingperiod,orbyreasonoftheexpirationofthetermoftheCitraPalucontractofwork, allpropertyofCitraPaluMineralslocatedinthecontractareamustbeofferedforsaletothe IndonesianGovernmentatcostormarketvalue,whicheveristhelower,butinnoeventlower thanthedepreciatedbookvalue.TheIndonesianGovernmenthasanoption,validforthirtydays from the date of such offer, to buy all such property at the agreed value. If the Indonesian Governmentdoesnotacceptsuchofferwithinthethirtydayperiod,CitraPaluMineralsmaysell, removeorotherwisedisposeofanyorallsuchpropertyduringaperiodoftwelvemonthsafter the expiration of such offer. Any property not so sold, removed or otherwise disposed of will become the property of the Indonesian Government without any compensation to Citra Palu Minerals.

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Notwithstanding any of the above, any property that is in use for public purposes, including roads, schoolsand/orhospitals,togetherwiththeirequipment,willimmediatelybecomethepropertyofthe IndonesianGovernmentwithoutanycompensationtoCitraPalu Minerals uponterminationoftheCitra Palu Minerals contractofwork. Contractor Agreements Thiess Strategic and Operating Agreements KPC-Thiess Agreements On10October2003,KPCenteredintoanoperatingagreementwithThiesstominecoalreservesat theSangattamine.Undertheoperatingagreement,KPChasappointedThiesstomanageallmining andotheractivitiesincludingminingandextractingcoalfrompitsintheSangattamineandloading, hauling,transportinganddeliveringcoaltothecrushingandstockpilingfacilitiesfortheSangattamine. Thiessisrequiredtomeet specified minimumproductionrequirementsof: threemilliontonnesofrawcoalforthefirstoperatingyear; after the end of the first operating year, an agreed amount between 2.7 million tonnes and 3.3 milliontonnesofrawcoalforeachoperatingquarter;and after the end of the first operating year, an agreed amount between 10.8 million tonnes and 13.2 milliontonnesofrawcoalforeachperiodoffourconsecutiveoperatingquarters. Underthisoperatingagreement,KPCpaysThiessaservicefee,calculatedonamonthlybasis,based on a formula applying prescribed rates to the amount of raw coal mined, hauled and delivered, variationsforservicesrequiredundertheoperatingagreementcarriedoutbyThiessattheinstruction of KPC and dayworks, which are miscellaneous works carried out at the instruction of KPC using machineryandoperatorsattheminingsite.AdjustmentsintheservicefeepaidtoThiessaremadefor inflationandcurrencyfluctuationsbetweentheUSdollar andIndonesianRupiahonayearlybasis.The servicefeeisalsosubjecttochangeforspecifiedevents,includingchangeinlaw,thelatestgeological conditions and liquidated damages payable by KPC for maintaining stockpiles. The service fee is subjecttoreviewon1July2009,andeveryfiveyearsafterthatdate. Underthisoperatingagreement,KPCbelievesthatThiesshasanincentivetomaximiseproduction(to theextentpracticablegiveninvestmentrequirements)andreduceoverheadcostsbecauseitispaidby KPConapermilliontonnebasisofoverburdenminedandhauledcoaldeliveredtothestartofKPCs coalchain.Therefore,KPCbelievesthatThiesswillseektoexpanditsoutputattheSangattaminein accordance with the terms of the operating agreement and the joint mine plan between KPC and Thiess. The operating agreement between KPC and Thiess remains effective during the life of the Sangatta mine (which ends at the earlier of the expiration of the KPC CCOW and the date when all of the economical coal reserves at the Sangatta mine are exhausted). However, the Thiess operating agreement may terminate earlier than the end of the agreed life of the Sangatta mine upon the occurrenceofcertainevents,includingtheeconomicunviabilityofthemine,adefaultbyeitherparty, financedefault,forcemajeure,lossofnecessarystatutoryauthorisationsorbreachofassignmentand change in control provisions of the operating agreement. Thiess is entitled to certain contractual remediesintheeventofabreachordefaultbyKPCincluding,atThiessdiscretion,requiringKPCto acceptThiessassignmentofthelattersright,titleandinterestinleasedplantandequipment,andto acquireplantandequipmentownedbyThiessatcurrentmarketvalue asagreedbytheparties.KPC mustalsopayThiessforanyunrecoupedcapitalexpendituresuponterminationoftheagreementdue to any reason other than a default by Thiess. Except for instances of fraud, illegal acts or reckless misconduct,totalliabilityforbreachofcontractorothercausesofactionislimitedtoUS$10 million(in respect of Thiess) and all amounts due and payable by KPC under the operating agreement plus US$10 million(inrespectofKPC). On6July2005,KPC,ThiessandIndocoalKaltimenteredintoadeedofaccessionandamendmentto thisoperatingagreement.Underthedeedofaccessionandamendment,IndocoalKaltimagreedto accede to the operating agreement dated 10 October 2003 and Thiess agreed to provide mining servicesinaccordancewiththetermsoftheoperatingagreementintheeventthatKPCsrightsand obligationsundertheKPCCCOWaretransferredtoIndocoalKaltim.

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Under a strategic agreement dated 10 October 2003, KPC and Thiess established management groups to be composed of representatives of both parties covering project management, site management and site control. This strategic agreement will terminate upon expiry or termination of the operating agreement. This strategic agreement was subsequently amended on 6 July 2005 when KPC, Thiess and Indocoal Kaltim entered into a deed of accession and amendment, under which Indocoal Kaltim acceded to the terms of this strategic agreement and the parties agreed that KPC shall be substituted by Indocoal Kaltim in the event that KPCs rights and obligations under the KPC CCOW are transferred to Indocoal Kaltim. Arutmin-Thiess Agreements On 19 May 2000, Arutmin entered into a strategic agreement and an operating agreement, which provides for Thiess to operate and maintain the South Kalimantan coal mines. Under the strategic agreement, Arutmin and Thiess established a project management group consisting of representatives of both parties covering management of the project. The project management group may at any time establish new project sub-groups. This strategic agreement will terminate upon expiry or termination of the operating agreement discussed below. The operating agreement entered between Thiess and Arutmin provides for the mining and extraction of coal, maintenance and operation of coal treatment facilities, the handling and maintenance of stockpiles of coal, and the transportation of coal from the mines to stockpile areas and then to port sites. On 10 October 2003, the operating agreement was amended to expand the services provided by Thiess and to extend the term of the operating agreement. This operating agreement remains effective until the earlier of the expiration of the Arutmin CCOW and the date when all of the economical coal reserves at the Senakin and Satui mines are exhausted. However, the Thiess operating agreement may terminate earlier than the end of the agreed life of the mines upon the occurrence of certain events, including the economic unviability of the mines, a default by either party, failure to obtain consent of the other party for a change in control, a force majeure event including acts or omissions of Indonesian Government authorities or a loss of statutory authorisation. Thiess is entitled to certain contractual remedies in the event of a breach or default by Arutmin including, at Thiess discretion, requiring Arutmin to accept Thiess assignment of the latters right, title and interest in leased plant and equipment, and to acquire plant and equipment owned by Thiess of current market value as agreed by the parties. Arutmin must also pay Thiess for any unrecouped capital expenditures upon termination of the agreement arising from any reason other than default by Thiess breach. Except for instances of fraud, illegal acts or reckless misconduct, each partys total liability for breach of contract or other causes of action is limited to US$10 million. As the contractor, Thiess provides substantially all of the equipment, facilities, services, materials, supplies, and labour required for the services provided by Thiess at the coal mines. Thiess is responsible for managing all mining and other activities at the contracted mining area. Arutmin is responsible for making arrangements for the removal of coal from the loading facility at its own cost in accordance with production requirements, subject to Thiess obligation to load the coal. If Arutmin fails to make such arrangements and, as a result, Thiess is prevented from transporting coal to the barge loading sites because stockpiles are full, Arutmin must pay Thiess an interim payment equivalent to 90 per cent. of the service fee that would otherwise have been payable to Thiess. Under the operating agreement, Arutmin has supplied certain plant and equipment for use by Thiess in its mining operations. Thiess is responsible for repairing and maintaining the plant and equipment supplied by Arutmin. Under this operating agreement, Arutmin pays Thiess a service fee, calculated on a monthly basis, based on a formula, which includes the amount of coal barged from each pit, variations in the services rendered, miscellaneous work carried out at the instruction of Arutmin, and payments required by the project management group. The service fee is adjusted in favour of Arutmin to account for amounts of coal produced using plant and equipment that was supplied by Arutmin. Adjustments are also made for inflation and currency fluctuations between the US dollar and Indonesian Rupiah. Every three months, Arutmin is required to provide Thiess with a production schedule for the following 12 month-period. Under the terms of the operating agreement, Arutmin may increase or decrease the production requirements of Thiess, provided that Arutmin notifies Thiess three months prior to the commencement of the relevant operating quarter.

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On 6 July 2005, Arutmin, Thiess and Indocoal Kalsel entered into a deed of accession and variation in respect of this operating agreement. Under this deed of accession and variation, Indocoal Kalsel agreed to accede to the operating agreement dated 10 October 2003 and Thiess agreed to provide mining services in accordance with the terms of the operating agreement in the event that Arutmins rights and obligations under the Arutmin CCOW are transferred to Indocoal Kalsel. Under a strategic agreement dated 19 May 2000, Arutmin and Thiess established management groups to be composed of representatives of both parties covering project management, site management and site control. This strategic agreement will terminate upon expiry or termination of the operating agreement. This strategic agreement was subsequently amended on 6 July 2005 when Arutmin, Thiess and Indocoal Kalsel entered into a deed of accession and amendment, under which Indocoal Kalsel acceded to the terms of this strategic agreement and the parties agreed that Arutmin shall be substituted by Indocoal Kalsel in the event that Arutmins rights and obligations under the Arutmin CCOW are transferred to Indocoal Kalsel. Pama Strategic and Operating Agreements On 8 April 2004, KPC entered into strategic and operating agreements with Pama. Under the strategic agreement, KPC and Pama established management groups to be comprised of representatives from both parties covering project management and site management. The strategic agreement terminates upon the expiration or termination of the operating agreement. Under the operating agreement, Pama agreed to provide coal mining and haulage services for KPC in the Bendili area of the Sangatta mine, and any future mining areas determined from time to time during the course of the Pama operating agreement, including to strip overburden, mine and extract coal, construct and maintain haul roads and load, haul, transport and deliver coal to the crushing and stockpile facilities for the Sangatta mine. Under the terms of this operating agreement, Pama is required to provide to KPC 12-month and quarterly mine plans, describing the methodology and sequencing of the mining and haulage services Pama will provide over the following quarter or 12-month period. Pamas mine plans must be consistent with Pamas minimum production requirements under the operating agreement and the mine plan provided by KPC. Pama is also required to provide monthly reports on production estimates, capital expenditures, operational issues, insurance, non-compliance with statues or authorisations, and safety. In consideration for its services, KPC has agreed to pay Pama service fees each month from the commencement date. The service fees are based on formulas that include the amount of raw coal and overburden mined, hauled and delivered, variations to the services required under the operating agreement, miscellaneous work carried out by Pama at the instruction of KPC and interim payments required as a result of an act by KPC that prevents Pama from delivering coal. Each year, the rates for calculating fees applicable to coal production, variations and miscellaneous work are adjusted for inflation in Indonesia over the preceding twelve months and for currency fluctuations between the US dollar and Indonesian Rupiah. Under its terms, the Pama operating agreement will expire on 31 December 2015 or any other day agreed in writing by KPC and Pama, unless terminated earlier in accordance with its terms. The Pama operating agreement may be terminated: (i) after six years following commencement, by KPC if its net profit from the project is less than or equal to zero for a six-month period; (ii) by either KPC or Pama, if the other party commits a substantial breach or becomes insolvent; (iii) by Pama, as a result of KPCs default or failure to make a payment due to Pama under the terms of the operating agreement; (iv) by either KPC or Pama in the event of force majeure or loss of statutory authorisations required for the project; (v) by either KPC or Pama, if the other party commits a breach of the assignment and change in control provisions of the operating agreement. Pama is entitled to certain contractual remedies in the event of a breach or default by KPC including, at Pamas discretion, requiring KPC to accept Pamas assignment of its right, title and interest in leased plant and equipment, and to acquire plant and equipment owned by Pama at current market value, as agreed by the parties. KPC must also pay Pama for any unrecouped capital expenditures upon termination of the agreement arising from any reason other than a default by Pama. Except for instances of fraud, total liability for breach of contract or other causes of action is limited for Pama to US$10.0 million and for KPC to all amounts due and payable by KPC to Pama under the operating agreement plus US$10.0 million. On 6 July 2005, KPC, Pama and Indocoal Kaltim entered into deeds of accession and amendment in respect of each of the strategic agreement and operating agreement. Under these deeds of accession and amendment, Indocoal Kaltim agreed to accede to the strategic agreement operating agreements dated 8 April 2004 and Pama agreed to provide mining services in accordance with the terms of the 452

operating agreement in the event that KPCs rights and obligations under the KPC CCOW are transferred to Indocoal Kaltim. KPC Darma Henwa Strategic and Operating Agreements On 27 May 2004, KPC entered into strategic and operating agreements with Darma Henwa. Under the strategic agreement, KPC and Darma Henwa established management groups to be comprised of representatives from both parties covering project management and site management. The strategic agreement terminates upon the expiration of the operating agreement discussed below. Under the agreement, Darma Henwa agreed to provide infrastructure, coal mining and haulage services in the Bengalon mine. Darma Henwa also agreed to provide all plant, equipment, machinery, appliances and other items necessary for performing the mining and haulage services. The Darma Henwa operating agreement requires Darma Henwa to meet minimum production requirements of six million gross tonnes of coal in 2005 and each year thereafter until the operating agreement expires or terminates. The commencement date of the operating agreement was 1 July 2004. Under the terms of this operating agreement, Darma Henwa is required to provide to KPC 12-month mine plans and six-week rolling forecasts, describing the methodology and sequencing of the mining and haulage services Darma Henwa will provide over the following period of four quarters and six weeks respectively. Darma Henwas mine plans must be consistent with the minimum production requirements under the operating agreement and the mine plan provided by KPC. In consideration for its services, KPC has agreed to pay Darma Henwa service fees comprised of working capital services fees and coal service fees each month from the commencement date. The working capital service fees are comprised of: (i) Darma Henwas working capital costs (total costs incurred in relation to the infrastructure and mine development required under the operating agreement), (ii) a working capital margin amount; and (iii) a development fee assessed on accumulated and unpaid working capital services fees. The coal service fees are based on formulas that include the amount of raw coal mined and hauled, variations to the services required under the operating agreement, miscellaneous dayworks carried out by Darma Henwa at the instruction of KPC, interim payments required as a result of an act, omission or default by KPC that prevents Darma Henwa from delivering coal, fixed overhead amounts, and escalation claims. Under its terms, the Darma Henwa operating agreement will expire on the last day of the life of the mine, or any other date agreed between the parties in writing. The Darma Henwa operating agreement may be terminated earlier: (i) by KPC, if its net profit is less than or equal to zero for a three-month period; (ii) by either KPC or Darma Henwa, if the other party commits a substantial breach; (iii) by Darma Henwa, as a result of KPCs default or failure to make a payment due to Darma Henwa under the terms of the operating agreement; (iv) by Darma Henwa, if enforcement action is taken in relation to the collateral assignment of the operating agreement; (v) by either KPC or Darma Henwa, upon the occurrence of a event of force majeure or loss of a statutory authorisation; or (vi) by either KPC or Darma Henwa, if the other party has breached certain anti-assignment provisions or the restriction on change of control. Darma Henwa is entitled to certain contractual remedies in the event of a breach or default by KPC including, at Darma Henwas discretion, requiring KPC to accept Darma Henwas assignment of its right, title and interest in leased plant and equipment, and to acquire plant and equipment owned by Darma Henwa at market value agreed by the parties. KPC must also pay Darma Henwa for any unrecouped capital expenditures upon termination of the agreement arising from KPCs breach. Except for instances of fraud, illegal acts or reckless misconduct, each partys total liability for breach of contract or other causes of action is limited to US$10 million. In January 2005, the Australian parent company of Darma Henwa, Henry Walker Eltin Group Limited (Henry Walker Eltin Group), went into voluntary judicial administration after it faced financial difficulties related to undisclosed liabilities. Although Darma Henwa was not included in the administration proceedings of Henry Walker Eltin Group, the financial difficulties at the parent company caused difficulties and delays in the mining operations of Darma Henwa at the Bengalon site. As a result, Darma Henwa did not begin exposing coal for mining at Bengalon until January 2005. Under the terms of the operating agreement with Darma Henwa, total liability for breach of contract or other causes of action is limited for Darma Henwa to US$10.0 million and for KPC to all amounts due and payable by KPC to Darma Henwa under the operating agreement plus US$10.0 million. In February 2005, in an effort to ensure continued development of the Bengalon project, Bumi Resources entered into an agreement to purchase the entire share capital of Darma Henwa from the

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administrators of the Henry Walker Eltin Group (the HWE Share Purchase Agreement). Under the terms of the HWE Share Purchase Agreement, Bumi Resources had the option to nominate a company to be the purchaser of the Darma Henwa shares, provided such company was within the same group of companies as Bumi Resources. Bumi Resources organised a consortium of investors as its nominee to purchase Darma Henwa from the Henry Walker Eltin Group administrators. Bumi Resources nominated Zurich Asset International Ltd, a company controlled by the controlling shareholders of PT Danatama Makmur, to be the purchaser (the HWE Purchaser). Although the HWE Purchaser is not in the Bumi Resources Group, the Henry Walker Eltin Group administrators accepted this nomination and, on 6 May 2005, the HWE Purchaser completed the purchase of Darma Henwa. As part of the purchase, all of the indebtedness of Darma Henwa to Henry Walker Eltin Group was assigned to the HWE Purchaser. Darma Henwa had previously incurred approximately US$175.0 million in financing for machinery and equipment to mine the Bengalon project. The HWE Purchaser has expressed its commitment to Bumi Resources and KPC to cause Darma Henwa to comply with its obligations under its operating agreement with KPC and continue to develop and mine the Bengalon site. The Bengalon mine is now operational, with Darma Henwa as the main contractor for the mine. On 6 July 2005, KPC, Darma Henwa and Indocoal Kaltim entered into deeds of accession and amendment in respect of each of the strategic agreement and operating agreement. Under these deeds of accession and amendment, Indocoal Kaltim agreed to accede to the strategic and operating agreements dated 27 May 2004 and Darma Henwa agreed to provide mining services in accordance with the terms of the operating agreement in the event that KPCs rights and obligations under the KPC CCOW are transferred to Indocoal Kaltim. In order to continue funding the purchase of equipment necessary to operate the Bengalon site, on 6 May 2005, Darma Henwa entered into a bridging facility agreement for US$63.0 million with UOB Asia Limited. Darma Henwa refinanced this bridge loan and raised additional financing for equipment purchases for the Bengalon project with the proceeds of a US$205.0 million long-term loan facility, arranged through UOB Asia Limited. Arutmin BUMA Strategic and Operating Agreement On 28 October 2010, Arutmin entered into an operating agreement with BUMA to mine coal reserves at pits 4 7 of the Senakin mine. Under the operating agreement, Arutmin has appointed BUMA to plan and manage all mining and other activities, including the removal of topsoil and overburden, mining, extracting, cleaning, hauling, transporting and delivering coal to the washing and stockpiling facilities. BUMA is furthermore responsible for the rehabilitation of disturbed areas and the construction and maintenance of environmental controls including drainage structures and sedimentation control structures. Under the operating agreement, BUMA is required to mine the coal quantities and meet the quality standards set out in Arutmins annual mine plan for the Senakin mine. In the event BUMA fails to produce the required quantity or quality of coal, BUMA is obligated to present Arutmin with a plan detailing the steps to be taken in order to remedy shortfalls and fully comply with the mine plan. Under the operating agreement, BUMA is entitled to a contractual coal services fee, calculated on a monthly basis, based on a formula applying specified rates to the amount of coal delivered to the relevant delivery point, variations of the contractual services carried out at the instruction of Arutmin and approved daywork performed by BUMA. The coal services fee is payable to BUMA within forty-five days of the end of the month in which the relevant work was performed. Arutmin is entitled to set off certain expenses against the monthly coal services fee, including costs of diesel fuel supplied to BUMA, costs of blasting material and accommodation for BUMAs workforce. The coal services fee is subject to monthly adjustments for increases or decreases of the site delivered costs of diesel fuel. Arutmin is also entitled to adjust the coal services fee semi-annually if the costs of production, including spare parts, tyres, explosive devices and labour, increase over the period of the operating agreement. Fuel price and price increase adjustments are calculated based a formula applying prescribed parameters. The coal services fee is subject to further adjustments in the event of changes to the mining operations at the Senakin mine such as extensions of coal hauling distances. The operating agreement between Arutmin and BUMA has an initial term of four years. During a period of six months commencing on 1 January 2014 and ending on 30 June 2014, both Arutmin and BUMA are entitled to request the negotiation of an extension of the term of the operating agreement. If no

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extension is agreed, the operating agreement terminates upon exhaustion of the mineable reserves within pits 4 7 of the Senakin mine (which occurs when all of the economical coal reserves at these pits are exhausted). However, the operating agreement may be terminated earlier upon occurrence of certain events, including a default by either party, non-payment of the coal services fees or breach of any payment agreement, loss of Arutmins requisite statutory authorizations, force majeure or a breach of assignment provisions. Both Arutmin and BUMA are furthermore entitled to terminate the operating agreement with immediate effect in the event there is a material change in the shareholding of either party without the other partys prior written consent. BUMA is entitled to certain contractual remedies in the event of a termination for default of Arutmin, including a compensation for all losses and damages suffered or incurred by BUMA arising out of or in connection with the termination of the operating agreement. Furthermore, BUMA, at its sole discretion, is entitled to require Arutmin to accept BUMAs assignment of the latters rights, title and interest in leased plant and equipment, and to acquire plant and equipment owned by BUMA at current market values. Under a strategic agreement entered into concurrently with the operating agreement on 28 October 2010, Arutmin and BUMA agreed common strategic goals, including the improvement of customer relationships, safety, quality and performance, with the objective to maintain a sustainable position in the competitive coal markets. The strategic agreement provides for the establishment of project management, site management and site control groups composed of representatives of both BUMA and Arutmin. In the event of inconsistencies between the operating agreement and the strategic agreement, the strategic agreement prevails. However, the breach or termination of the strategic agreement does not effect the parties respective rights under the operating agreement. The strategic agreement terminates upon the date of the expiration of the operating agreement. Arutmin Darma Henwa Mining Agreements Arutmin-Darma Henwa Consortium Agreement On 25 August 2006, Arutmin and Darma Henwa entered into a consortium agreement in relation to participation in a coal qualification tender by PLN for the supply of low rank coal. Under this agreement, Arutmin and Darma Henwa have agreed to form a consortium under which they shall co-operate to supply Ecocoal from the coal mining area DU 322 within Arutmins mining concession area under the Arutmin CCOW. Arutmins obligations include: (i) to guarantee the supply of Ecocoal during the term of the sale and purchase agreement with PLN in the event the consortium is successful in the tender exercise; (ii) to pay royalties to the Indonesian Government in accordance with the Arutmin CCOW in respect of the sales of Ecocoal; and (iii) to arrange for land clearance for mining operations within the relevant concession area. Arutmin has agreed to pay Darma Henwa mining services fees in accordance with the Arutmin Darma Henwa operating agreement, which is envisaged to be entered into by the parties. Under this consortium agreement, Darma Henwa has agreed to perform mining and other services, including transporting the Ecocoal to the barge loading port, in accordance with the Arutmin Darma Henwa operating agreement to be entered into by the parties. Further, Arutmin and Darma Henwa have agreed to appoint PT Energi Transporter Indonesia for the transportation of the Ecocoal from the barge loading port to the designated port under the sale and purchase agreement to be entered into with PLN. The parties have also agreed to appoint Enercorp as the consortiums marketing agent in the tender exercise upon the terms of the marketing services agreement between Arutmin and Enercorp. The term of this consortium agreement is from 25 August 2006 until the termination of any sale and purchase agreement between the consortium and PLN. Arutmin-Darma Henwa Cooperation Agreement On 1 August 2008, Arutmin and Darma Henwa entered into a cooperation agreement for mining services. This agreement is an interim contract for mining services agreement which is intended to apply until the primary mining services agreement (i.e. the term of the operating agreement between Arutmin and Darma Henwa) commences. Under this interim contract, Darma Henwa has agreed to provide overburden removal, coal transportation, coal pressing, port operation, coal loading and road management at Arutmins Asam Asam mine. Darma Henwa has also agreed to supply all labour, materials and equipment in connection with the services it has agreed to provide under this interim contract. The term of the cooperation agreement commenced on 1 August 2008 and was due to expire on the earlier of the date on which the operating agreement between the parties became operative or 1 August 2010. The parties had the option to mutually extend the term of the cooperation agreement

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by giving their written approval no later than three months prior to 1 August 2010; the parties made such an extension until 31 July 2012. Arutmin-Darma Henwa Strategic and Operating Agreements On 22 March 2007, Arutmin entered into a strategic agreement and an operating agreement with Darma Henwa. Under the terms of the strategic agreement, Arutmin and Darma Henwa have established management groups comprised of representatives from both parties covering project management and site management. The strategic agreement automatically terminates upon the expiration of the related operating agreement between the two parties. Under the operating agreement, Darma Henwa has agreed to provide infrastructure, coal mining, haulage and transport services for Arutmins Asam Asam mine. Darma Henwa has also agreed to provide all plant, equipment, machinery, appliances and other items necessary for performing the mining and haulage services required under the operating agreement. The Arutmin-Darma Henwa operating agreement requires Darma Henwa to meet minimum production requirements stipulated in the operating agreement until the operating agreement expires or terminates. The operating agreement contains an indicated production schedule, which shall be replaced by a detailed production schedule within three months of the commencement date of this agreement. Under the terms of this operating agreement, Darma Henwa is required to provide Arutmin with twelve-month mine plans and three-month rolling forecasts, describing the methodology and sequencing of the mining and haulage services Darma Henwa will provide over the following period of four quarters and three months respectively. Darma Henwas mine plans must be consistent with the minimum production requirements under the operating agreement. In consideration for its services, Arutmin has agreed to pay Darma Henwa service fees comprised of working capital amounts and coal service fees each month from the commencement date. The working capital service fees are allocated towards: (i) Darma Henwas working capital costs (total costs incurred in relation to the infrastructure and mine development required under the operating agreement) and (ii) a working capital margin amount. The coal service fees are based on a formula that includes the amount of raw coal mined and hauled, variations to the services required under the operating agreement, all dayworks carried out by Darma Henwa, interim payments required as a result of an act by Arutmin that prevents Darma Henwa from delivering coal, fixed overhead amounts, and escalation claims. Under its terms, the Darma Henwa operating agreement will automatically expire 20 years after its commencement date, unless terminated earlier in accordance with its terms. The Darma Henwa operating agreement may be terminated: (i) if the Arutmin CCOW is terminated; (ii) by either Arutmin or Darma Henwa, if the other party commits a substantial breach; (iii) by Darma Henwa, as a result of Arutmins failure to make a payment due to Darma Henwa under the terms of the operating agreement within five Business Days of receiving notice by Darma Henwa of the non-payment; (iv) by Darma Henwa, if enforcement action is taken in relation to the collateral assignment of the operating agreement; (v) by either Arutmin or Darma Henwa, upon the occurrence of an event of force majeure lasting for 60 days or longer which has not been resolved by Arutmin and Darma Henwa, or loss of a statutory authorisation; or (vi) by either Arutmin or Darma Henwa, if the other party has breached certain anti-assignment provisions or the restriction upon a change of control of the other party. Darma Henwa is entitled to certain contractual remedies in the event of a breach or default by Arutmin including, at Darma Henwas discretion, requiring Arutmin to accept Darma Henwas assignment of the latters right, title and interest in leased plant and equipment, and to acquire plant and equipment owned by Darma Henwa. Arutmin must also pay Darma Henwa for any unrecouped working capital expenditures upon termination of the agreement arising from any reason other than default by Darma Henwa. Except for instances of fraud, criminal acts or wilful misconduct, Arutmins total liability for breach of contract or other causes of action is limited to the aggregate amount due and payable to Darma Henwa under the agreement plus US$10.0 million, whereas Darma Henwas total liability is limited to US$15.0 million. The term of the Arutmin-Darma Henwa operating agreement has not commenced as Arutmin has not completed studies of the Asam Asam mine which are necessary to determine the exact scope of services it requires from Darma Henwa and a production schedule. Under the terms of this operating agreement, Arutmin may require Darma Henwa to perform all or some of the services under this operating agreement prior to the commencement date, in which case Arutmin and Darma Henwa shall enter into an interim contract. Under the Artumin-Henwa operating agreement, Artumin has agreed

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that Darma Henwa has the exclusive right to provide all of the mining, coal-handling and related services to Artumin in connection with the Asam Asam mine. Arutmin-WBM Mining Agreement In December 2007, Arutmin and WBM entered into an agreement for the mining of coal on the common boundary in Satui concession site to maximise the exploitation of the coal reserve near this boundary area and to address some operational issues that had arisen as a result of the common boundary. Under this agreement, the parties agreed on the guidelines in respect of the cooperation to maximise coal recovery along the common boundary. Such guidelines cover mine plan nomination, each of Arutmin and WBMs rights to coal, pit limit boundary, coal and cost sharing mechanism, coal mining parameters, overburden dumping, safety and environment, land compensation, dewatering, surveys, agreement rates, invoicing and payment, as well as the resolution of disputes. This agreement shall remain in full force or effect until the earlier of: (i) the expiry, cancellation and revocation of WBMs work agreement for coal mining enterprises or the Arutmin CCOW; or (ii) the termination of the agreement as a result of substantial breach of the agreement by either party. Arutmin-Cipta Kridatama Mining Services Agreement On 1 July 2006, Arutmin entered into an open cut mining project agreement with Cipta Kridatama. Under this agreement, Cipta Kridatama agreed to provide mining services and manage various activities on behalf of Arutmin at the Ata and Magkalapi areas and the Mereh, Saring and Sarongga deposits of the Batulicin mine, including mining planning, mining, transportation, crushing, washing and barge loading. The agreement requires Cipta Kridatama to meet minimum production requirements in accordance with short-term mine plans prepared by Cipta Kridatama in respect of every operating quarter, i.e. the three-month periods commencing 1 January, 1 April, 1 July, or 1 October, during the term of this agreement. For 2010, the Bumi Resources Group expects Cipta Kridatama to produce at least approximately 0.7 million tonnes of coal product during each operating quarter. Under the terms of this contract, Cipta Kridatama also functions as the custodian of the Ata and Magkalapi areas of the Batulicin mine. Cipta Kridatama is responsible for all technical and operational activities at these mining areas, except where specifically excluded. These responsibilities include managing and establishing a documented pit to port coal management program to ensure delivery of sufficient quality coal to the nearest port. Cipta Kridatama is responsible for delivering to Arutmin a rolling three-month mining plan, updated each month, that sets forth plans to rehabilitate the mines to ensure that its mining activities are conducted in a cost-effective manner, which meets the standards of the Indonesian mining industry. Cipta Kridatama is not responsible for the rehabilitation of the disturbed areas caused by illegal mining activities. Under this contract, Arutmin pays Cipta Kridatama all-inclusive fees based on a schedule of rates calculated using average monthly coal productions, strip ratio, coal crushing, screening and barge loading services and a fixed total cost for overheads. For payments under this contract, Cipta Kridatama is required to present Arutmin with a progress certificate for approval within seven days of receipt and payment is required from Arutmin within 30 days from the approval of the certificate. Cipta Kridatama is also responsible for maintaining its own insurance, subject to Arutmins prior approval. Under its terms, the Cipta Kridatama operating agreement will expire on the expiration of Arutmins rights over the Batulicin mine or the exhaustion of all economic reserves of the Batulicin mine. The Cipta Kridatama open cut mining agreement may be terminated by Arutmin if the open cut mining project at the Ata and Mangkalapi area becomes unprofitable for a continuous period of not less than three months, or Cipta Kridatama commits a substantial breach, becomes insolvent or declares bankruptcy. Cipta Kridatama may also terminate this agreement if Arutmin commits a substantial breach, commits a payment related breach, becomes insolvent or declares bankruptcy. Either party may also terminate this agreement by giving 30 days notice on the occurrence of a terminating event (as defined in the mining contract).

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Marketing Agreements Glencore Marketing Agreement On 10 October 2003, KPC entered into a 12-year marketing agreement with Glencore (through its wholly owned subsidiary, Glencore Mauritius). Under the Glencore marketing agreement, KPC appointed Glencore as its exclusive agent for purposes of providing marketing and sales agency services in all regions of the world other than Japan. In consideration for its services, KPC has agreed to pay Glencore a commission at the rate of 5.0 per cent. of the net sales value of coal sold in any country other than Japan through sales contracts. Pursuant to the terms of the marketing agreement, KPC agreed to consult with Glencore in respect of the proposed coal sales price in Japan and discuss generally with Glencore the sale of coal in Japan including details of its sales contracts in Japan. The agreement also gives Glencore a right of first refusal, under certain circumstances, to extend their territory into Japan. On 6 July 2005, KPC, Indocoal Kaltim, IndoCoal Resources and Glencore Mauritius entered into a deed of accession and amendment which amended and restated the Glencore marketing agreement dated 10 October 2003. Under the amended and restated marketing agreement, each of KPC, Indocoal Kaltim (in the event KPCs rights and obligations under the KPC CCOW are transferred to Indocoal Kaltim) and IndoCoal Resources agreed to appoint Glencore Mauritius as their exclusive agent for the provision of services on the same terms as the Glencore marketing agreement dated 10 October 2003. On 3 June 2010, KPC, IndoCoal Kaltim and IndoCoal Resources entered into a marketing agreement with Glencore Avalino under which each of KPC and IndoCoal Resources appointed Glencore as its exclusive marketing and sales worldwide agent other than for Japan and Indonesia with respect to coal produced from the Sangatta and Bengalon mines (other than coal sold (i) for use by the Tata Group in its power plants and (ii) to members of the Tata Group for supply under tolling arrangements, provided that total sales under (i) and (ii) may not exceed 30 per cent. of KPCs worldwide sales worldwide in any calendar year (the Tata Excluded Contracts)), from the expiry of the marketing agreement with Glencore Mauritius until 5 August 2021, the expiry of the KPC CCOW. For each calendar year during the term of the marketing agreement, KPC must ensure that the Glencore Avalino sales will be at least 54.3 per cent. of the coal produced from the Sangatta and Bengalon mines. Glencore Avalino will be paid a commission of 2.5 per cent. of the net sales value of any coal sold. KPC, Indocoal Kaltim and IndoCoal Resources also entered into a termination agreement with Glencore Mauritius, which will be effective on 30 November 2011, in connection with its appointment of Glencore Avalino. On 3 June 2010, Arutmin, Indocoal Kalsel and IndoCoal Resources entered into a marketing agreement with Glencore Mehrano, an affiliate of Glencore, under which each of Arutmin and IndoCoal Resources appointed Glencore Mehrano as its exclusive worldwide marketing agent, excluding Indonesia, for coal products produced from Arutmins mines (other than coal sold under the Tata Excluded Contracts). This appointment will take effect from 30 November 2011 upon the expiry of the current marketing agreement with BHP Marketing, and expire on 30 September 2019, the expiry of the Arutmin CCOW. Glencore Mehrano will be paid a commission of 2.5 per cent. of the net sales value of any coal sold through sales contracts, provided, however, that in respect of any coal sold to the Government of Indonesia, Glencore Mehrano will be paid a commission equal to the commission actually received by Arutmin from the government. For each calendar year during the term of the marketing agreement, Arutmin must ensure that Glencore Mehrano sales will be at least nine million metric tonnes annually until aggregate sales of 72 million metric tonnes have been achieved, following which Arutmin will have no further obligations in this regard. According to the consolidated financial statements of Bakrie & Brothers as of, and for the six-month period ended, 30 June 2010, on 26 June 2010, Bakrie & Brothers entered into a share swap agreement with Glencore with a notional amount of US$200.0 million. Under this agreement, Glencore agreed to purchase up to US$200.0 million of Bumi Resources shares and granted Bakrie & Brothers the right to buy back those Bumi Resources shares from it at the same price within two years. Glencore also agreed to vote the Bumi Resources shares it purchased under the terms of this share swap agreement at the instruction of authorised officers of Bakrie & Brothers. According to the records of the Indonesian Central Securities Depository, as of 31 January 2011, Glencore held 4.99 per cent. of the total outstanding Bumi Resources Shares.

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Mitsubishi Marketing Agreement On 9 January 2004, KPC entered into a 12-year marketing agreement with Mitsubishi to act as its exclusive marketing agent in Japan. Under the Mitsubishi marketing agreement, Mitsubishi provides KPC with all marketing and invoicing services at its own cost and with a best sales practice to ensure that any increase in KPCs coal sales to Japan matches any increase in KPCs coal production volumes. In consideration for its services, KPC pays Mitsubishi a commission of 5.0 per cent. of the net sales value of coal sold in Japan through sales contracts. The commission is payable in US dollars outside Indonesia to Mitsubishi. Subject to the satisfaction of certain conditions, Mitsubishi may nominate an affiliate to replace it as a party to the marketing agreement. On 6 July 2005, KPC, Indocoal Kaltim, IndoCoal Resources and Mitsubishi entered into a deed of accession and amendment which amended and restated this marketing agreement. Under the amended and restated marketing agreement, each of KPC, Indocoal Kaltim (in the event KPCs rights and obligations under the KPC CCOW are transferred to Indocoal Kaltim) and IndoCoal Resources agreed to appoint Mitsubishi as their exclusive agent for the provision of services on the same terms as the marketing agreement dated 9 January 2004 between KPC and Mitsubishi. BHP Billiton Marketing Agreement On 22 October 2001, Arutmin entered into a five-year marketing agreement with BHP Marketing, an affiliate of BHP Billiton. On 4 October 2003 and 14 July 2004, Arutmin and BHP Marketing amended the agreement. Under the terms of the BHP Billiton marketing agreement, Arutmin has appointed BHP Marketing as its exclusive agent for purposes of providing marketing services in all regions of the world other than Indonesia in respect of all of the coal mined in the concession area. In consideration for its services, Arutmin has agreed to pay BHP Marketing a commission at the rate of 4.0 per cent. of the sales proceeds received in respect of Arutmin coal sold in the export market through sales contracts. Arutmin is only required to pay the commission if it has received payment from the purchaser of the coal. Under the marketing agreement, BHP Marketing is required to pay Enercorp a service fee at the rate of 0.75 per cent. of the sale proceeds received in respect of Arutmin coal sold in the export market through sales contracts. BHP Marketing has the option to purchase any coal mined in the concession area for the account of BHP Marketing. However, the sale must be on a willing seller and buyer arms-length basis and Arutmin is not required to pay any commission to BHP Marketing. The BHP Billiton marketing agreement provides that the agreement does not in any way limit or restrict the rights of BHP Marketing to act as agent for any other seller or producer of coal (including affiliates of BHP Marketing) or to purchase or sell coal for its own account or the account of any other party, regardless of whether the coal is similar to the coal produced by Arutmin and regardless of whether the coal is sold in markets in which the coal produced by Arutmin is also marketed. However, the BHP Billiton marketing agreement prohibits BHP Marketing from entering into any agreement to provide services where the performance of that agreement will materially impair BHP Marketings ability to perform its obligations under the BHP Billiton marketing agreement. Under its terms, the BHP Billiton marketing agreement will expire on 29 November 2011. The term may be extended by the period or periods of delay caused by any periods of non-production by Arutmin. Arutmin may terminate the BHP Billiton marketing agreement if it believes that there has been a material breach by BHP Marketing in the performance of its marketing services, and, if after Arutmin has provided BHP Marketing notice of the default, BHP Marketing fails to cure its defective performance within a specified period. On 6 July 2005, BHP Marketing and Arutmin terminated the existing marketing agreement and BHP Marketing, Arutmin, Indocoal Kalsel and IndoCoal Resources entered into a new marketing agreement, under which each of Arutmin, Indocoal Kalsel (in the event Arutmins rights and obligations under the Arutmin CCOW are transferred to Indocoal Kaltim) and IndoCoal Resources appointed BHP Marketing as its exclusive agent for purposes of providing marketing services in all regions of the world other than Indonesia in respect of all of the coal mined in the Arutmin CCOW concession area. The terms of the amended marketing agreement are similar to the terms of the earlier marketing Agreement, except the amended marketing agreement prohibits BHP Marketing from entering into any agreement to provide services where the performance of that agreement will leave BHP Marketing with insufficient resources to perform its obligations under the marketing agreement in accordance with best sales practice. This was a change to the standard provided for in the earlier agreement with BHP Marketing. Under the terms of the amended marketing agreement, upon the termination of the IndoCoal Securitisation 459

Transaction Documents, Arutmin undertook to execute a new marketing agreement with BHP Marketing in substantially similar form as the then existing marketing agreement. On 23 March 2009, BHP Marketing, Arutmin, Indocoal Kalsel and IndoCoal Resources entered into a new marketing agreement on substantially similar terms as the 6 July 2005 marketing agreement. This new agreement, having a commencement date of 1 September 2007, terminated the 6 July 2005 marketing agreement from the commencement date. The new agreement also expires on 29 November 2011, and contains similar terms to the earlier marketing agreement, except that references to the CAMA (as defined below under the description of the Cash Distribution Agreement) have been amended to refer to the Cash Distribution Agreement made between and the payment provisions have been amended accordingly. Bexington Technical and Marketing Services Agreement On 28 April 2009, Forerunner entered into a technical and marketing services agreement with Bexington Investments Limited (Bexington), an indirect subsidiary of PT Kutai Timur Sejahtera (KTS) which currently owns 5.0 per cent. of the outstanding shares of KPC. Under the terms of the Bexington technical and marketing services agreement, Bexington has agreed to provide Forerunner with a monthly technical and marketing services report relating to coal price indices and coal markets generally for an agreed fee which is calculated at the rate of 5.0 per cent., being the current shareholding of KTS in KPC, of the coal sales by IndoCoal Resources attributable to coal produced by KPC, which is currently available for distribution at the end of the cash waterfall structure under the Cash Distribution Agreement, and which may be adjusted based on the financial statements of IndoCoal Resources. In return, Bumi Resources entered into a letter of undertaking dated 28 April 2009, with KTS, whereby Bumi Resources guaranteed Forerunners payment obligations under the Bexington technical and marketing services agreement. In addition, pursuant to the terms of the letter of undertaking, KTS has granted Bumi Resources a right of first refusal to purchase all or part of the shares in KPC held by KTS in the event that KTS wishes to transfer any of its shares in KPC. The purchase price for the KPC shares will be the price which KTS has been offered for the KPC shares or the price at which KTS is prepared to sell the KPC shares. Upon a change of control of Bumi Resources, Bumi Resources will be deemed to have made an offer to purchase all of the KPC shares held by KTS at a cash price equal to 90 per cent. of the value of the KPC shares based on the fair market value of KPC. Rental Agreements with Mitratama On 20 December 2004, KPC entered into a development agreement with Mitratama, Inacia and PT McConnell Dowell Indonesia (McConnell Dowell) and a coal handling agreement with Inacia in connection with the construction, lease and operation of a coal processing plant and barge loading facilities at the Bengalon mine. Under the development agreement, McConnell Dowell agreed with KPC, Mitratama and Inacia to design, construct and install a coal handling plant to crush, size, stack and deliver coal to the barge loading facilities. The development agreement required McConnell Dowell and Mitratama to enter into an engineering, procurement and construction (EPC) contract to implement actual construction of the processing plant as well as the barge loading facilities. On 18 November 2005, KPC entered into a rental agreement with Mitratama, under which KPC agreed to rent from Mitratama the coal crushing and handling facility to be constructed pursuant to the EPC contract. KPC agreed to assume substantially all of the maintenance responsibility, which may be subcontracted to Inacia, and to procure insurance for the facility while taking all steps to protect Mitratamas ownership. KPC may not sell, assign, pledge or otherwise dispose of the facility or any interest therein. KPCs monthly rental started at approximately US$1.1 million on 1 February 2006 and gradually decreased to approximately US$0.3 million at the last rental payment date, 1 November 2008. On 18 April 2008, KPC and Mitratama entered into a termination deed and a rental agreement in relation to the termination of the rental agreement dated 18 November 2005 and the entering into of a new rental agreement with respect to the rental by KPC of the Bengalon Port with effect from 18 April 2009 for a term of five years. On 10 September 2008, KPC and Mitratama entered into an amending agreement under which the parties agreed to amend certain terms of the 18 April 2008 rental agreement. Under the new rental agreement, as amended and restated, the monthly rentals being paid by KPC for the coal crusher plant stockpiling facility and the barge port at Bengalon is approximately US$1.1 million.

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Under the coal handling agreement, Inacia has agreed to operate and maintain the coal preparation plant and the barge loading facility at the Bengalon port and handle and transport coal mined at the Bengalon deposit. Inacia is responsible for maintaining and repairing the facilities, keeping records and managing the inventories of equipment and other supplies for the facilities. Inacia agreed, among other things, to provide stockpiling, reclaiming, loading and related services to KPC. It is also required to maintain the handling and transhipping capacity of facilities above six million tonnes per year and a sufficient number of barges and tugs to load coal onto two buyers vessels concurrently. Inacia agreed to submit annual maintenance program, operating plans for approval by KPC. Under this agreement, KPC pays US$1.1 million as a fixed amount and also pays additional fees, which are determined by the weight of coal handled per month, to Inacia for its services under the agreement. The minimum quantity of coal to be provided by KPC and handled and transhipped by Inacia is 450,000 million tonnes, subject to certain adjustments, per month. This agreement will expire after eight years from the date of the completion of the facilities. If KPCs costs and expenses, including fees paid by under this agreement, exceeds the revenue from its sale of the Bengalon coal for a continuous three-month period, KPC may terminate this agreement after three years, provided that it pays the losses Inacia incurred as a result of such early termination plus additional amounts of US$3.4 million during the fourth year and US$1.8 million during the fifth year. Pursuant to the terms of the coal handling agreement, Inacia has the right of first refusal to undertake the development, construction, and operation of a deepwater ship-loading terminal for export of coal from primarily the Bengalon deposit and an inter-terminal coal transfer system between the barge loading facility at the Bengalon Port and the Tanjung Bara terminal, if KPC considers such development and construction to be appropriate. These facilities commenced operations in April 2006. Agreements with WestSide Corporation Limited On 11 May 2007, KPC and Bumi Resources signed a heads of agreement with WestSide, an Australian new generation energy company seeking to develop and exploit coal seam gas resources, formalising the arrangements for the development and exploitation of coal seam gas resources at the KPC concession. Bumi Resources currently owns a 20.2 per cent. equity interest in WestSide. Under the heads of agreement, Bumi Resources and WestSide have agreed to establish a special purpose project company to implement their arrangements at the KPC mines, with Bumi Resources and WestSide each owning 50.0 per cent. of the shares in that project company. The Bumi Resources Group have invited Tata to purchase up to 30.0 per cent. of the shares of the company that holds Bumi Resources shareholding of the project company. Under a services agreement expected to be entered into by the project company and KPC, the project company will undertake a project definition study for the exploration of coal bed methane reserves in the KPC concession area and will provide certain exploration and drilling services to KPC for the development and exploitation of economically viable coal bed methane reserves discovered. The form of services agreement is attached to the heads of agreement for the KPC concession, but has not been entered into by the Bumi Resources Group and WestSide. On 3 September 2007, Arutmin and Bumi Resources entered into a heads of agreement with WestSide which is substantially similar to the heads of agreement among KPC, Bumi Resources and WestSide, but relating to the development and exploitation of coal seam gas resources at the Arutmin concession. At the dates of execution of the two heads of agreement, the Indonesian Government was not yet in a position to offer cooperation contracts to the Bumi Resources Group for the exploration, development and production of coal bed methane in, and the supply and sale of coal bed methane from, the KPC and Arutmin concessions. If, for each of the heads of agreement, a cooperation contract cannot be executed by the Bumi Resources Group within 48 months after execution of the relevant heads of agreement, or such later date as the parties may mutually agree, the heads of agreement shall terminate automatically. On 20 February 2008, Bumi Resources wholly owned subsidiary, Knightley Business Resources Pte. Ltd. (Knightley), and a wholly owned subsidiary of WestSide, CSG, established Seamgas as the project company for the WestSide project. Each of Knightley and CSG own 50 per cent. respectively of the shares of Seamgas. The Bumi Resources Group have determined a large quantity of coal bed methane at the KPC mine sites. The Bumi Resources Group and WestSide are currently in discussions with BP MIGAS, the Indonesian state-owned oil and gas regulatory authority with respect to the extraction of the methane. Pending discussions with BP MIGAS, the Bumi Resources Group do not intend to incur significant costs in this project. If the Bumi Resources Group determines that the project is economically viable, it intends to produce and use any coal seam gas resources extracted at its coal mining concessions for its internal operations, including operation of their on-site power plants. Further, if the Bumi Resources Group and WestSide

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are able to successfully conclude negotiations on formal arrangements with BP Migas, the Bumi Resources Group may sell any excess coal seam gas resources to third parties. The Bumi Resources Group expects to achieve significant cost savings by using the coal bed methane, instead of diesel or coal, to power the Bumi Resources Groups on-site power plants. Kobe Steel Collaboration Agreement for Upgraded Brown Coal On 19 May 2006, Bumi Resources entered into a collaboration agreement with Kobe Steel, Ltd. (KSL) for development of the production process for upgraded brown coal (UBC), which involves the refining of lignite by eliminating inherent moisture into transportable fuel with higher heating value without spontaneous combustion (the UBC Process). Under the terms of this agreement, KSL has agreed to build a demonstration plant at the Satui mine of Arutmin for the research, development and eventual production of UBC, with a planned capacity of 600 tonnes per day. KSL has agreed to undertake development of the UBC Process at Arutmin and continue its activities at the demonstration plant until the end of May 2011. The parties have agreed to extend the term of the collaboration agreement accordingly. Bumi Resources will contribute to KSL approximately 1.1 billion (or approximately US$12.1 million) over three years, through 2009, and to assist KSL in negotiating with the Indonesian Government for the development of the UBC Process. In exchange, KSL has agreed to grant Bumi Resources an exclusive two-year right to build the first commercial plant in Indonesia utilising the UBC Process under a licence to be granted by KSL. KSL has also agreed to grant to Bumi Resources, upon Bumi Resources request, a non-exclusive licence for the commercial production of UBC products, under which Bumi Resources would be allowed to utilise the UBC technology to commercially produce UBC free from royalty, up to a production of 5,000 tonnes of UBC products per day for a period of five years from the end of the development phase. Licences for additional plants may be granted to Bumi Resources or Arutmin. KSL has the right to invest in Bumi Resources first commercial plant and a first refusal right to purchase upgraded brown coal produced by such plant, subject to terms mutually agreed upon between the parties. PLN Sale and Purchase Agreement for Ecocoal Between June 2007 and April 2008, a consortium of Arutmin and Darma Henwa entered into 10 long term sale and purchase agreements for the supply of a total of 7.40 million tonnes of Ecocoal with PLN. Under each of these agreements, a Arutmin and Darma Henwa have agreed to supply a fixed annual amount of Ecocoal from Arutmins concession area under the Arutmin CCOW to identified coalfired power plants owned by PLN for a period of 20 years from their respective effective dates. The annual amount of coal may be varied by PLN, provided that the variation may not be more than 20 per cent. of the agreed annual amount. The price for the Ecocoal is calculated on a base price per tonne, subject to certain escalation adjustments and adjustments related to differences from agreed-upon calorific value, sulphur content and ash content parameters. The base price per tonne of the coal is adjusted on a monthly basis, in respect of changes in fuel costs and the foreign exchange rate of the Indonesian Rupiah against the US dollar and, on an annual basis, in respect of changes based on the Indonesian Coal Price Index. The consortium is still negotiating the coal sale and purchase agreements for a further three PLN coal-fired power plants. Agreements with Enercorp KPC-IndoCoal Resources and Enercorp Coal Sale and Purchase Agreement On 13 March 2007, KPC entered into a coal sale and purchase agreement with Enercorp, as buyer and IndoCoal Resources, as seller, in relation to the sale and delivery by IndoCoal Resources of coal produced by KPC to Enercorp. This agreement took effect retrospectively from 1 January 2007 and is effective until 31 December 2016, unless earlier terminated in accordance with the terms. The term of the coal sale and purchase agreement is divided into two terms: (i), an initial term commencing on 1 January 2007 until 31 December 2013; and (ii) an extended term which will commence upon the expiry of the initial term and expire on 31 December 2016. The conditions of this agreement during the extended term shall be discussed and agreed upon by the parties. The price for the coal is calculated on a price per tonne basis, subject to certain escalation adjustments and adjustments related to differences from agreed-upon calorific value, sulphur content, total moisture content and ash content parameters. Under this coal sale and purchase agreement, KPC has agreed to guarantee the obligations of IndoCoal Resources to Enercorp. This coal sale and purchase agreement was subsequently amended on 18 September 2008 to adjust the quantity and price of coal. Under this

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agreement, as amended, Enercorp has agreed to purchase a total of 20.0 million tonnes of Pinang or Melawan coal at certain agreed prices. Arutmin-Enercorp Marketing Agreement On 6 October 2003, Arutmin entered into a five-year marketing agreement with Enercorp. Under the terms of this agreement, Arutmin appointed Enercorp as its exclusive agent in Indonesia for purposes of providing marketing services for the domestic sale of the coal mined from the Senakin, Satui and Mulia mines. Enercorp is authorised to execute sales contracts on behalf of Arutmin subject to certain terms and conditions, including Arutmins approval. In consideration for its services, Arutmin has agreed to pay Enercorp a commission at the rate of 4.0 per cent. of the sales proceeds received in respect of Arutmin coal sold. Arutmin is required to pay the commission only if Arutmin has received payment from the purchaser of the coal. Enercorp has the right to act as agent for other coal producers or to purchase or sell coal for its own account or the account of any other party, regardless of whether the coal is sold in markets where Arutmins coal is marketed, provided that such activities would not leave it with insufficient resources to perform its obligation under the Enercorp marketing agreement. The Enercorp marketing agreement may be terminated before its terms; (i) by mutual consent; (ii) by either party serving 90 days notice on the other party for any reason; (iii) by Arutmin as a result of Enercorps failure to cure its material breach in the performance of its marketing service; or (iv) by either party as a result of the other partys failure to rectify a breach of agreement; and (v) by the termination or expiration of the CAMA. On 6 July 2005, the Enercorp marketing agreement was amended and restated to include Indocoal Kalsel and IndoCoal Resources as parties to that agreement and to extend its term to 6 July 2010. Although the term of this agreement has expired, Enercorp has continued to perform marketing services in a manner consistent with terms of this agreement. Arutmin is currently engaged in discussions with Enercorp on the renewal of this agreement. In addition, Arutmin has entered into an agreement on 9 October 2008 under which Arutmin appointed Enercorp as its marketing agent for the sale of Ecocoal by Arutmin to PLN, until 31 December 2013. Enercorp was an associated company of the Bumi Resources Group until December 2009, when Bumi Resources entered into an agreement to sell all the shares it owned, constituting 50.0 per cent. of the equity interest in Enercorp. All of the proceeds of the sale had been received by 17 December 2010. Agreements among the Bumi Resources Group Members Long-Term Supply Agreements Each of KPC and Arutmin is party to a long-term coal supply agreement dated 6 July 2005 with IndoCoal Resources (as amended and restated on 28 April 2006, 26 June 2007, 1 July 2008 and 21 December 2009, the Long-Term Supply Agreements) for the sale of coal from KPC or Arutmin, as the case may be, to IndoCoal Resources. Supply of Coal Under each Long-Term Supply Agreement, KPC or Arutmin, as the case may be, sells to IndoCoal Resources, and IndoCoal Resources purchases from KPC or Arutmin, as the case may be, coal in accordance with IndoCoal Resources obligations to supply coal under its coal supply agreements with third-party customers or under novated coal supply agreements among KPC or Arutmin, as the case may be, IndoCoal Resources and third-party customers. Performance Guarantee Each of KPC and Arutmin, has agreed that, where required by IndoCoal Resources and, provided that it determines, taking into account anticipated production of coal, that it is capable of complying with the supply obligations of IndoCoal Resources under the specified coal supply agreement with that third-party customer, it will grant such third-party customer a guarantee of IndoCoal Resources performance of its obligations under the specified coal supply agreement with that customer.

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Entitlement of the Indonesian Government All coal sold by KPC or Arutmin, as the case may be, under its Long-Term Supply Agreement with IndoCoal Resources is subject to all rights and entitlements of the Indonesian Government under the relevant CCOW and coal sale agreement between KPC or Arutmin, as the case may be, and the Indonesian Government. Each of KPC and Arutmin has appointed IndoCoal Resources to act for and on its behalf as agent in relation to the sale to third-party customers of all of the Indonesian Governments entitlement to its portion of coal under its CCOW and the proceeds of sale shall be set aside, applied and paid to the Indonesian Government in accordance with the coal sale agreement with KPC or Arutmin (as the case may be). Purchase Price With effect from 1 January 2009, the purchase price payable by IndoCoal Resources to KPC or Arutmin, as the case may be, for each shipment of coal is an amount equal to the number of tonnes of coal delivered to IndoCoal Resources multiplied by the applicable price per tonne of coal, at which IndoCoal sells the coal to its customers. Term Each Long-Term Supply Agreement terminates on the date on which the KPC CCOW or the Arutmin CCOW, as the case may be, is a party expires or is terminated. Governing Law Each Long-Term Supply Agreement is governed by the laws of Indonesia. Cash Distribution Agreement Upon termination of the IndoCoal Securitisation Transaction Documents on 26 June 2007, Bumi Resources, Tata, Power (Cyprus) Limited, BNY Mellon, as cash management agent and an account bank, and Standard Chartered Bank, Singapore Branch, as an account bank, entered into a cash distribution agreement (the Cash Distribution Agreement) on 27 June 2007 to replace the terminated CAMA, which was one of the IndoCoal Securitisation Transaction Documents, and to implement certain cash management and account administration arrangements in relation to the revenues of the IndoCoal Group Companies. Under the Cash Distribution Agreement, on each business day, BNY Mellon applies all collections relating to export and domestic sales by KPC and Arutmin received in the collection accounts to pay commissions to the marketing agents of KPC and Arutmin in accordance with the specifications of the Cash Distribution Agreement. Collections from the sale of KPC and Arutmin are applied by BNY Mellon to pay expenses of the IndoCoal Group Companies in the order of priority set forth in the following diagram:

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Coal Buyers

Disbursement Account

Daily Allocation and Distribution

Collection Accounts

Payment of shortfall for Production Contractors Priority Expenses

Payments to Marketing Agents

Payment of unpaid fees of any account bank or other Senior Payee

Payment of Arutmin Marketing Agent Disbursements Payment of Cash management agent and account bank fees and other service fees

Payment of Non Priority Production Contractor Payments

Allocation of Production Contractor Priority Expenses

Payment of KPC Freight Expenses

Weekly Allocation and Distribution

Payment of Government Royalties

Payment of Approved Rental Agreements Expenses and Technical Services Fees

Weekly Allocation and Distribution

Payment of Approved Equipment Leases and Priority Suppliers Payment of Estimated Corporate Taxes Payment of Budgeted Production Expenses

Disbursement Account Payment of Hedging Expenses

Allocation for Annual Tax Liabilities

Payment of Approved Capital Expenditures

Payment of Approved Other Expenses and Taxes

Excess Cash Payments to Bumi Resources and Tata

Monthly Distribution

On each business day, BNY Mellon applies all collections relating to export sales received in the collection accounts to pay commissions to the marketing agents of KPC and Arutmin in accordance with the specifications of the Cash Distribution Agreement. On each business day, BNY Mellon also applies all collections relating to domestic sales received in collection accounts to pay commissions to the marketing agents entitled to commissions in respect of domestic coal sales. On each weekly payment date, BNY Mellon allocates (based upon instructions in the cash management reports furnished to BNY Mellon) all remaining collections from export sales to the cash management agent and account bank fees, priority level service fees of the production contractors, Indonesian Government royalties and estimated corporate taxes in the amounts and in the order of priority set forth under the Cash Distribution Agreement. On each weekly payment date, all Rupiah-denominated collections from domestic coal sales in certain Rupiah collection accounts remaining after giving effect to any allocations and distributions required to

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be made in respect of the cash management agent and account bank fees, priority level service fees of the production contractors, Indonesian Government royalties, and estimated corporate taxes as required under the Cash Distribution Agreement are paid (i) first, to meet any shortfall in service fees of the production contractors paid at a priority level and fees of the production contractors paid at a non-priority level, (ii) second, to meet any Rupiah-denominated expenses of KPC and Arutmin, and (iii) third, to a Rupiah disbursement account where the funds are retained until the next monthly payment date. On the next monthly payment date, funds in the Rupiah disbursement account are paid in agreed proportions to Bumi Resources and Tata to the accounts they have designated under the terms of the Cash Distribution Agreement. On each weekly payment date, BNY Mellon also allocates (based upon instructions in cash management reports furnished to it) all funds then on deposit in the disbursement account (including all funds transferred to the disbursement account on that weekly payment date) in the order of priority set forth in the diagram of the cash waterfall structure above. The funds remaining in the disbursement account at the end of the cash waterfall structure are paid in agreed proportions to Bumi Resources and Tata to the accounts they have designated under the terms of the Cash Distribution Agreement. Production contractors and marketing agents who are paid at a priority level are third-party beneficiaries to the Cash Distribution Agreement. Payments to production contractors are based on detailed invoices, and priority payments are subject to certain limitations specified in the Cash Distribution Agreement. KPC, Arutmin, IndoCoal Kalsel and IndoCoal Kaltim assign by way of security their respective rights and remedies under or in connection with the respective marketing agreements, agreements with principal contractors and the Cash Distribution Agreement. If Bumi Resources or any of its affiliates (or Tata or any of its affiliates) cease to own individually or collectively more than 15per cent. of the shares of any of KPC, Arutmin or IndoCoal Resources, then KPC, Arutmin or IndoCoal Resources shall cease immediately to have any obligation to obtain Bumi Resources (or Tatas) signature in respect of any cash management report or other instructions given under the Cash Distribution Agreement and KPC, Arutmin or IndoCoal Resources shall cease to have any obligation to accept any instructions or directions from or to obtain the agreement or approval of Bumi Resources (or Tatas) representative for any action to be taken under the Cash Distribution Agreement. Bumi Resources Management Services Agreements On 20 November 2008, Arutmin entered into a management services agreement (as varied by the MSA Agreement dated 19 April 2009 between Arutmin, KPC, Bumi Resources and Bhivpuri) with Bumi Resources, under which Bumi Resources provides certain management support services to Arutmin in exchange for a monthly services fee. The services provided by Bumi Resources under the agreement include providing a fully furnished office in Jakarta, computer maintenance and support for automation equipment in line with the Bumi Resources Group standards, providing management services, including the services of the members of the board of directors, submission of Indonesian Government and statutory reporting requirements, provision of tax services, assisting in identifying suitable marketing and distribution parties and providing legal support services. The management fee payable by Arutmin is US$3.5 million per month (net of all taxes). The fee is paid to Bumi Resources as part of other expenses under the Cash Distribution Agreement. The term of this agreement is from 1 July 2008 until terminated. On 20 November 2008, KPC entered into a management services agreement (as varied by the MSA Agreement dated 19 April 2009 between Arutmin, KPC, Bumi Resources and Bhivpuri) with Bumi Resources on substantially the same terms as the above management services agreement between Arutmin and Bumi Resources. The only material difference between the KPC and Arutmin agreements with Bumi Resources is that the management fee payable by KPC to Bumi Resources is US$7.0 million per month (net of all taxes). IndoCoal Resources-Forerunner Intercompany Loan Facility On 26 June 2007, IndoCoal Resources, as lender, entered into an intercompany loan facility agreement with Forerunner, as borrower, under which IndoCoal Resources agreed to grant to Forerunner a loan facility equivalent to the total amount of surplus cashflow paid by IndoCoal Resources to Forerunner

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after meeting the payments under the cash waterfall under the Cash Distribution Agreement. This agreement provides for drawdown of the facility to occur on each date when the surplus cash is made available to Forerunner. Forerunner shall repay the facility out of the dividends to be declared by IndoCoal Resources to Forerunner, by setting off the amount payable by IndoCoal Resources to Forerunner against the amount owed by Forerunner to IndoCoal Resources under the facility under this agreement. Agreements Between the Bumi Resources Group Members and Tata IndoCoal Shareholders Agreement In connection with the Divestment, the IndoCoal Group Companies, Bumi Resources, the Bumi Resources Group19 (defined as Sitrade Coal, Kalimantan Coal, Sangatta Holdings, Forerunner), and Tata entered into the IndoCoal Shareholders Agreement on 30 March 2007. The following are summaries of the significant terms of the IndoCoal Shareholders Agreement: Ownership Bumi Resources and Tata have agreed, subject to the terms of the IndoCoal Shareholders Agreement, to maintain their shareholdings in the IndoCoal Group Companies in the following proportions: Bumi Resources will continue to hold 65.0 per cent. of the shares of KPC (13.6 per cent. through Bumi Resources itself, 32.4 per cent. through Sitrade Coal, 9.5 per cent. through Kalimantan Coal and 9.5 per cent. through Sangatta Holdings), 70.0 per cent. of the shares of Arutmin (all through Bumi Resources itself), 70.0 per cent. of the shares of IndoCoal Resources (all through Forerunner), 70.0 per cent. of the shares of Indocoal Kalsel (all through Bumi Resources itself) and 70.0 per cent. of the shares of Indocoal Kaltim (all through Bumi Resources itself); and Tata will continue to hold 30 per cent. of the shares in each of the Indocoal Group Companies.

Bumi Resources and Tata have agreed that both Bumi Resources and Tata will maintain such shareholdings for a period of two years from the Divestment Completion Date (namely, the completion of the Divestment) and, thereafter, any divestment will be subject to the conditions set forth below, including that the shares be first offered to the non-transferring party and that any transferee must execute an agreed form of a deed of adherence (the Deed of Adherence) agreeing to be bound by the terms of the IndoCoal Shareholders Agreement. Undertakings In the IndoCoal Shareholders Agreement, each of Bumi Resources and Tata has agreed with the other that it, and any company which is its holding company, its subsidiary, a subsidiary of its holding company, which controls it, is controlled by it or is under common control with it (a Related Party) will not undertake any of the following actions: participate in ventures to invest, develop, own, operate and/or manage a new thermal coal or coal bed methane (CBM) or similar natural gas business in Indonesia, without first offering the other an opportunity to participate in that venture (i) directly up to 30 per cent. of the offerors proposed interest; or (ii) through a newly formed company in which each of Bumi Resources and Tata will have the right to subscribe for up to 30 per cent., in the case of the offeree, and up to 70 per cent., in the case of the offeror, of the total issued share capital; or invest, develop, own, operate and/or manage a KP unless the KP production is for its own consumption or that of a Related Party and any excess production is sold to IndoCoal Resources.

Under the IndoCoal Shareholders Agreement, KPC and Arutmin are permitted to exploit the CBM reserves located within their concession areas, and, if either is unable to do so, their shareholders have the right to exploit those CBM reserves and Tata has the right to participate in the exploitation of those CBM reserves up to its shareholding in either KPC or Arutmin, as the case may be. In the IndoCoal Shareholders Agreement, Bumi Resources and Tata have agreed to pursue an expansion of production at KPC and Arutmin mines by approximately 30.0 million tonnes per annum in aggregate, assuming positive results from planned customary feasibility studies.

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Shareholder Reserved Matters Management. The IndoCoal Shareholders Agreement requires the approval of a super-majority of the shareholders of the relevant IndoCoal Group Company for approval of certain actions by that IndoCoal Group Company. The approval of at least 75 per cent. of the shares in the relevant IndoCoal Group Company is required for the following matters (Shareholder Reserved Matters): any change in the Articles of Association of that IndoCoal Group Company; any consolidation, merger, take over, bankruptcy or dissolution of that IndoCoal Group Company; any transaction in which the economic interests of that IndoCoal Group Company are in conflict with the private economic interests of the directors, commissioners or any shareholder party to the IndoCoal Shareholders Agreement; any transaction in an amount that is greater than 10 per cent. of the revenues of that IndoCoal Group Company or 20 per cent. of the share capital of that IndoCoal Group Company; payment of fees and expenses of commissioners and directors; changes in the share capital of that IndoCoal Group Company (including issuance of new shares or debt or equity securities, the reduction of share capital, the grant of options, the right to call for the issue of equity or debt securities, share buybacks, changes in the structure of share capital to be proposed for approval to the Board of Commissioners and the general meeting of shareholders of that IndoCoal Group Company); the declaration of any dividend or other distribution of capital or profits of a IndoCoal Group Company; changes in the limits of the Board of Directors Reserved Matters (as defined below); any public offering, listing or delisting of that IndoCoal Group Companys securities on or from any stock exchange; and any other matter requiring by law more than simple majority approval.

In the event one of the Shareholder Reserved Matters does not receive the requisite shareholder approval, the matter will be referred to one of Bumi Resources appointed senior representatives and one of the senior representatives of Tata for resolution. In the event these two senior representatives fail to agree, either Bumi Resources or Tata may serve a notice on the other appointing an industry expert to assist in the resolution of the deadlock. The recipient of such a notice may also appoint its own industry expert. The recommendation of those industry experts will not be binding on Bumi Resources or Tata. If, after consideration of the industry experts recommendations, Bumi Resources and Tata are still unable to agree on the matter, the matter will be referred to Bumi Resources President Director and Tatas chairman (or a senior management member nominated by Tatas chairman) for resolution. If resolution is not reached at the chairman level, (i) Bumi Resources may serve a notice on Tata requiring Tata to either sell all of Tatas shares in the IndoCoal Group Companies to Bumi Resources or its nominee, or Tata or its nominee must purchase all of the shares of the IndoCoal Group Company held by Bumi Resources at the price stated in the notice or (ii) Tata may serve a notice on Bumi Resources requiring Bumi Resources to either sell all of the shares of the IndoCoal Group Companies held by members of the Bumi Resources Group to Tata or its nominee, or Bumi Resources or its nominee must purchase all of the shares of the IndoCoal Group Companies held by Tata at the price stated in the notice. Composition of the Boards of Commissioners. Under the terms of the IndoCoal Shareholders Agreement, on the Divestment Completion Date, the board of commissioners (the Board of Commissioners) for each of KPC and Arutmin, Indocoal Kaltim and Indocoal Kalsel were required to include five commissioners, with three of the commissioners (including the president commissioner) appointed by the Bumi Resources Group and two of the commissioners appointed by Tata. After the Divestment Completion Date, the right to appoint commissioners is dependent upon the percentage of share capital of the relevant IndoCoal Group Company held by each of the Bumi Resources Group Company and Tata with a percentage holding of 15 per cent. to 24.9 per cent. entitling the shareholder

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to appoint one commissioner; a percentage holding of 25 per cent. to 49.9 per cent. entitling the shareholder to appoint two commissioners and a percentage holding of 50 per cent. or more entitling the shareholder to appoint three commissioners. In the event that Bumi Resources and Tata each hold 50 per cent. of the shares of an IndoCoal Group Company, the Board of Commissioners of that IndoCoal Group Company will be increased to six members. The Bumi Resources Group have agreed with Tata to reconsider the composition of the Board of Commissioners of the relevant IndoCoal Group Company in the event of a transfer of shares of that IndoCoal Group Company to a third party. The Board of Commissioners supervises and oversees the activities of the Board of Directors without limiting the powers and duties of the Board of Directors. Composition of the Boards of Directors; Board of Directors Reserved Matters. Under the IndoCoal Shareholders Agreement, on the Divestment Completion Date, the board of directors (the IndoCoal Board of Directors) for each IndoCoal Group Company were required to include five directors, with three of the directors (including the president director) appointed by the Bumi Resources Group and two of the directors appointed by Tata. After the Divestment Completion Date, the right to appoint directors is dependent upon the percentage of share capital of the relevant IndoCoal Group Company held by each of a Bumi Group Company and Tata with a percentage holding of 15 per cent. to 24.9 per cent. entitling the shareholder to appoint one director; a percentage holding of 25 per cent. to 49.9 per cent. entitling the shareholder to appoint two directors and a percentage holding of 50 per cent. or more entitling the shareholder to appoint three directors. In the event that Bumi Resources and Tata each hold 50 per cent. of an IndoCoal Group Company, the IndoCoal Board of Directors of that IndoCoal Group Company will be increased to six members. The Bumi Resources Group have agreed with Tata to reconsider the composition of the IndoCoal Board of Directors of an IndoCoal Group Company in the event of a transfer of shares of that IndoCoal Group Company to a third party. The IndoCoal Shareholders Agreement requires the approval of one director appointed by the Bumi Resources Group and one director appointed by Tata of the relevant IndoCoal Group Company for approval of certain actions by that IndoCoal Group Company. The approval of at least one director appointed by the Bumi Resources Group and one director appointed by Tata of an IndoCoal Group Company is required for the following matters (Board of Directors Reserved Matters): the approval of the annual accounts of that IndoCoal Group Company to be proposed for approval to the Board of Commissioners and the general meeting of shareholders of that IndoCoal Group Company; a resolution or petition for winding up to be proposed for approval to the Board of Commissioners and the general meeting of shareholders of that IndoCoal Group Company; the appointment or change in the auditors of that IndoCoal Group Company; a change in the financial indebtedness of that IndoCoal Group Company in excess of US$5.0 million in any financial year or the creation of an encumbrance over any asset of that IndoCoal Group Company in excess of US$1.0 million; the formation of any subsidiary or investment in any other company partnership or any other form of business organisation by that IndoCoal Group Company; any transaction or renewal of contract with a Related Party or affiliate thereof or a related party as defined in PSAK No. 7 on Related Party Disclosures which is not on an arms length basis; transactions or renewals of contracts for the mining of coal; expenditures in excess of certain thresholds; incurrence of liability for financial obligations or financial accommodations outside the ordinary course; salary arrangements in excess of US$125,000 per year; hedging policies or arrangements; the declaration of any dividend or other distribution; any decision to commence, defend or compromise litigation matters in excess of US$1.0 million;

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adoption of, or material deviation from, the agreed financial plan for that IndoCoal Group Company; cessation of a material part of that IndoCoal Group Companys business; an application for, or amendment or termination of, any Indonesian Governmental approval except as specified; writing off in the books of account of that IndoCoal Group Company of more than US$500,000; buying, selling or leasing of any real property other than leasing of staff housing; amendment of the cash flow distribution mechanism relating to IndoCoal Resources; and any request for repayment of a shareholder loan made to the shareholders of IndoCoal Resources other than through the dividend flow of IndoCoal Resources.

If, in respect to either KPC or Arutmin, one of the Board of Directors Reserved Matters does not receive the requisite Board approval, that matter will be submitted to a joint meeting of the commissioners and directors of that IndoCoal Group Company. The quorum for such a meeting is required to be one of the commissioners appointed by Bumi Resources, one of the commissioners appointed by Tata and three directors, including at least one director appointed by Bumi Resources and one director appointed by Tata. In this case, approval of the matter will be by a simple majority of the meeting, which majority must include a simple majority of the IndoCoal Board of Directors and the approval of at least one commissioner or director appointed by Bumi Resources or and at least one commissioner or director appointed by Tata. If resolution is not reached at this joint meeting, the matter will be referred to one of Bumi Resources appointed senior representatives and one of Tatas appointed senior representatives for resolution. If, in respect to IndoCoal Resources, one of the Board of Directors Reserved Matters does not receive the requisite board approval, that matter will be directly referred to one of Bumi Resources appointed senior representatives and one of Tatas appointed senior representatives for resolution. In the event these two senior representatives fail to unanimously agree, in the case of IndoCoal Resources or any other IndoCoal Group Company, either Bumi Resources or Tata may serve a notice on the other appointing an industry expert to assist in the resolution of the deadlock. The recipient of such a notice may also appoint its own industry expert. The recommendation of such industry experts will not be binding on Bumi Resources or Tata. If, after consideration of the industry experts recommendations, Bumi Resources and Tata are still unable to agree, the matter will be referred to Bumi Resources president director and Tatas chairman (or a senior management member nominated by Tatas chairman) for resolution. If resolution is not reached at the chairman level, (i) Bumi Resources may serve a notice on Tata requiring Tata to either sell all of Tatas shares in the IndoCoal Group Company to Bumi Resources or its nominee, or Tata or its nominee must purchase all shares of the IndoCoal Group Company held by a Bumi Resources Group Company at the price stated in the notice or (ii) Tata may serve a notice on Bumi Resources requiring Bumi Resources to either sell all shares of the IndoCoal Group Company held by the Bumi Resources Group Company to Tata or its nominee, or Bumi Resources or its nominee must purchase all shares of the IndoCoal Group Company held by Tata at the price stated in the notice. Management Committee. The IndoCoal Shareholders Agreement provides for the formation of certain management committees at KPC and Arutmin to handle certain special functions. These special functions of KPC and Arutmin to be delegated to these special management committees include the following: the approval of the financial plans of that IndoCoal Group Company and any material variation thereto (provided that a difference of plus or minus 10 per cent. in relation to any amounts stated in those financial plans will not require any further approval by the Board of Directors of that IndoCoal Group Company); any strategic decision to effect a material change in the manner and scope in which that IndoCoal Group Company conducts its business, such as a joint venture, any material partnership, any material acquisition or disposal of assets or voluntary liquidation; entering into, amending or terminating any material contract with a term in excess of one year; and the commencement or settlement of material litigation. 470

The composition of these management committees may be varied from time to time by the IndoCoal Board of Directors of the relevant IndoCoal Group Company. The management committee of KPC includes 11 individuals who are employees or directors of KPC, three of whom were appointed by Tata (including a mining expert who need not be an employee or director). The KPC management committee includes a chief financial officer who is a director appointed by Tata and a chief executive officer who is a director appointed by Bumi Resources. The Arutmin management committee includes seven individuals who are employees or directors of Arutmin, two of whom were appointed by Tata (including a mining expert who need not be an employee or director). The Arutmin management committee includes a chief financial officer who is a director appointed by Tata and a chief executive officer who is a director appointed by Bumi Resources. Under the terms of the IndoCoal Shareholders Agreement, Bumi Resources is entitled to appoint a finance manager for each IndoCoal Group Company, who must not be a director. Matters considered by the management committees will be presented as recommendations for resolution at the next IndoCoal Board of Directors meeting of the relevant IndoCoal Group Company. The terms of the IndoCoal Shareholders Agreement applicable to KPC are also applicable to Indocoal Kaltim and the terms applicable to Arutmin are also applicable to Indocoal Kalsel. Dividends Subject to the availability of profits, the adequacy of projected cash flows and any capital expenditure requirements, the IndoCoal Shareholders Agreement requires the IndoCoal Board of Directors of each IndoCoal Group Company to maximise the distribution of profits (including dividends or capital reduction) to the shareholders of that IndoCoal Group Company. With respect to IndoCoal Resources, the cash flow calculations will be subject to an agreed cash waterfall mechanism, with the excess allocated to the shareholders of IndoCoal Resources in the form of a loan to be repaid from dividends. The Bumi Resources Group and Tata have agreed to use best efforts to procure that each IndoCoal Group Company enters into a cash waterfall mechanism agreement. Issue of New Shares Under the terms of the IndoCoal Shareholders Agreement, any IndoCoal Group Company proposing to allot new shares must first offer to Bumi Resources and Tata, on the same or more favourable terms, a proportion of shares which is as nearly as practicable equal to that shareholders percentage shareholding. In the event there is no response from a shareholder or the shares offered are refused or only partially accepted, that IndoCoal Group Company must make a further offer of the shares refused or not accepted to the other shareholder. Transfer of Shares The IndoCoal Shareholders Agreement requires that neither Bumi Resources nor Tata may transfer any of their respective shares in the IndoCoal Group Company for a period of two years from the Divestment Completion Date. Transfers after this two-year period are conditional upon agreement being reached by all of the shareholders of the relevant IndoCoal Group Company and the third-party transferee on the terms of amendment to the IndoCoal Shareholders Agreement. Failure of the parties to agree to these changes will prohibit transfer of the shares unless (i) in the case of a transfer by Bumi Resources, Bumi Resources transfers all of its shares in the IndoCoal Group Companies to the same third party or (ii) in the case of a transfer by Tata, Tata transfers all of its shares in the IndoCoal Group Companies to the same third party. Under the terms of the IndoCoal Shareholders Agreement, a shareholder is not permitted to transfer any part of its shares in an IndoCoal Group Company without simultaneously transferring the same percentage of its shares in all of the IndoCoal Group Companies to the same third party. Any of the Bumi Resources Group companies which is an Indonesian company and owns shares of an IndoCoal Group Company may only transfer those shares to a non-Indonesian company if such transfer does not result in the shareholding by Indonesians of that IndoCoal Group Company falling below 51.0 per cent. or the Bumi Resources Group obtains the prior written approval from the appropriate Indonesian Governmental authority. The IndoCoal Shareholders Agreement contains additional provisions imposing obligations on Bumi Resources to ensure that any requirements with respect to shareholding thresholds by Indonesian shareholders are met and provides an indemnity obligation from Bumi Resources to Tata for four years following a sale to a non-Indonesian in the event Tata is required to divest any of its shares and suffers losses as a result.

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The IndoCoal Shareholders Agreement also provides Bumi Resources and Tata tag along rights on any sale of shares to a third party on the same terms offered to the transferor. Subject to the provisions regarding shareholding by Indonesians described above, if a shareholder proposes to transfer any of the shares registered in its name (the Proposing Transferor), it must first give notice in writing (a Transfer Notice) to the relevant IndoCoal Group Company and (i) (ii) if the Proposing Transferor is Bumi Resources, to Tata; or if the Proposing Transferor is Tata, to Bumi Resources,

(in either case, the Remaining Shareholder) that it wishes to transfer such shares. The Remaining Shareholder has 60 days from the date of despatch to accept the offer (the Remaining Shareholder Offer). At the expiration of that 60 day period, the Remaining Shareholder accepting a Remaining Shareholder Offer is required to pay the offer price to the Proposing Transferor and the Proposing Transferor is required to transfer the shares referred to in the Remaining Shareholder Offer to the Remaining Shareholder. If the Remaining Shareholder rejects the offered shares, the Proposing Transferor may within six months of the date on which it has received notification of rejection by the Remaining Shareholder or following the expiry of the 60 day period, transfer all (but not some) of the shares referred to in the Transfer Notice to the Proposed Transferee in a bona fide sale at a price not less than the offer price (after deduction, where appropriate, of any net dividend or other distribution or interest to be retained by the Proposing Transferor). The Proposing Transferor is required to provide the Remaining Shareholder with reasonable evidence of the bona fide sale at a price not less than the offer price. Any transferee of shares in an IndoCoal Group Company is required to enter into the Deed of Adherence agreeing to be bound by the terms of the IndoCoal Shareholders Agreement. The right of first offer referred to above will not apply to transfers to a Related Party provided the transferee executes and agrees to be bound by a Deed of Adherence. If the Related Party transferee ceases to be a Related Party, it is required to retransfer the shares to the original transferor; and failure to retransfer those shares will result in those shares being deemed to be the subject of a Transfer Notice at par. The parties to the IndoCoal Shareholders Agreement may, without the prior written consent of the other parties, be entitled to create or permit to subsist any pledge, lien or charge over any of the shares or the certificates representing any of the shares in favour of any finance parties providing finance to that shareholder. Default If a Bumi Resources Group Company, Tata or any shareholder in an IndoCoal Group Company that acquired shares under the IndoCoal Shareholders Agreement: commits a material breach of its obligations which, if capable of remedy, is not remedied in accordance with the provisions of the IndoCoal Shareholders Agreement; passes a resolution for its compulsory or voluntary winding-up or dissolution; permits the appointment of an administrator, receiver, trustee or similar official over the whole or a material part of its property, assets or undertaking; has the whole or a material part of its property, assets or undertaking possessed, distressed or levied upon by an encumbrancer; ceases to carry on its business, or disposes of a material part of its properties, assets or undertakings, or such a part is seized, nationalised, appropriated or compulsorily purchased by or under the authority of any Indonesian Government; becomes a subsidiary of another holding company; experiences a change in control; or as a shareholder party to the IndoCoal Shareholders Agreement who is Indonesian, ceases to be an Indonesian shareholder,

then, without prejudice to the other rights and remedies the non-defaulting party may have under the IndoCoal Shareholders Agreement, the defaulting party will be deemed to have made an offer to sell

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its entire shareholding in the IndoCoal Group Company to the other non-defaulting party (or that partys nominee) at a cash price equal to 90 per cent. of the value of the defaulting partys shares in the IndoCoal Group Companies based on the fair market value of the IndoCoal Group Companies as determined by a firm of international independent accountants. Upon the occurrence and continuance of an event of default, the defaulting partys right to receive dividends and distributions from the IndoCoal Group Companies and its right to vote at the general meetings of the shareholders of the IndoCoal Group Companies will be suspended until the event of default has been cured and all losses suffered by the non-defaulting party have been paid or settled. Upon an event of default, the defaulting party is required to procure and cause the resignation of its nominees as directors or commissioners, indemnify the remaining non-defaulting party and pay incidental costs for disposal of the defaulting partys shareholding. Bumi Resources, Bhira and Bhivpuri Direct Agreement On 1 October 2009, Bumi Resources entered in to a direct agreement with Bhira and Bhivpuri (the Direct Agreement) in relation to Bumi Resources incurrence of indebtedness under the Bumi Resources-CFL Loan and creation of security interests over Bumi Resources shares with the IndoCoal Group Companies under the Intercreditor Agreement and the Common Security Documents. Under the Direct Agreement, Bhira and Bhivpuri agreed not to take any enforcement action against Bumi Resources for any breach by Bumi Resources under the IndoCoal Shareholders Agreement, until it has given 60 days prior written notice (Tata Enforcement Notice) to Standard Chartered Bank, Jakarta Branch, as onshore common security agent (the Onshore Common Security Agent). During the 60day notice period, Bhira and Bhivpuri will, if requested to do so by the Onshore Common Security Agent, discuss and negotiate in good faith with the Onshore Common Security Agent with a view to remedying in a mutually acceptable manner the event of default or the relevant breach then subsisting under the IndoCoal Shareholders Agreement. The parties have also agreed that the transfer of shares by the Onshore Common Security Agent pursuant to an enforcement action under any security documents under the Bumi-CFL Loan would not constitute an event of default under the IndoCoal Shareholders Agreement, provided that Bhira and Bhivpuri shall have the right to purchase all of the shares of the IndoCoal Group Companies at a purchase price which is the higher of: (i) 90 per cent. of the fair market value of the shares of the IndoCoal Group Companies as determined by a firm of international independent accountants, acting as experts and not as arbitrators (the FMV Purchase Price); and (ii) all amounts due and payable by Bumi Resources and/or any other member of the Bumi Resources Group to the finance parties under the Bumi Resources-CFL Loan which is not to exceed a maximum principal amount of US$1.9 billion (the Maximum Borrower Debt). Further, the enforcement party under the relevant security document shall within 60 days of the occurrence of an enforcement event, determine the FMV Purchase Price and/or obtain a price at which a third-party purchaser would be prepared to purchase the IndoCoal Group Companies shares (the Enforcement Sale Price) and notify the same to Bhira and Bhivpuri in writing. If the Enforcement Sale Price is equal to or greater than the Maximum Borrower Debt, Bhira and Bhivpuri shall have the right for the period of 10 Business Days following receipt of a notice thereof to notify the enforcement party in writing whether it wishes to accept or reject the offer to buy all of the IndoCoal Group Companies shares at the Enforcement Sale Price. If Bhira and Bhivpuri reject, or are deemed to have rejected, an offer to buy the IndoCoal Group Companies shares at the Enforcement Sale Price, then (i) the enforcement party shall, within a period of 60 days from the date of the rejection, be entitled to transfer all of the IndoCoal Group Companies shares to any single person or entity at a price which is not less than the Enforcement Sale Price and any such transfer will not constitute a breach of the IndoCoal Shareholders Agreement; and (ii) Bhira and Bhivpuri will waive all rights they would otherwise have had against Bumi Resources, any of the Bumi Resources Group companies or the buyer under the IndoCoal Shareholders Agreement in respect of such transfer. Bumi Resources and Tata have amended the Direct Agreement so that the maximum amount of indebtedness which can be incurred by the Bumi Resources Group which is secured by the shares of the IndoCoal Group Companies is no greater than four times the Bumi Resources Groups adjusted consolidated EBITDA. KPC-Bhira Technical Services Agreement In April 2008 KPC entered into a technical services agreement with Bhira. Under the agreement, Bhira provides various technical services to KPC, including technical advice on the crushing, washing,

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preparation, efficient loading and transportation of coal, as well as low rank coal burning techniques for power generation in developing countries. The fee payable by KPC under the agreement is US$0.9 million per month and is paid to Bhira as part of technical services fees under the Cash Distribution Agreement. Pursuant to an amending agreement executed in 2008, the fee will be varied to maintain a ratio of 2.1 to 0.9, being the ratio of the payments under the rental amounts under Approved Rental Agreements (as defined in the Cash Distribution Agreement) to payments under the technical services agreement. Both the technical services agreement and the amending agreement will terminate if all of the Approved Rental Agreements under the Cash Distribution Agreement have been terminated and not replaced. Arutmin-Bhivpuri and KPC-Bhivpuri Management Services Agreements On 20 November 2008, Arutmin entered into a management services agreement (as varied by the MSA Agreement dated 19 April 2009 between Arutmin, KPC, Bumi Resources and Bhivpuri) with Bhivpuri, under which Bhivpuri provides certain management support services to Arutmin in exchange for a monthly services fee. The services provided by Bhivpuri under the agreement include identifying and interviewing manpower, identifying markets and suitable parties to market and distribute Arutmins coal, technical support services, legal support services including contract review and other advisory and professional services. The management fee payable by Arutmin is US$1.5 million per month (net of all taxes). The fee is paid to Bhivpuri as part of other expenses under the Cash Distribution Agreement. The term of the agreement is from 1 July 2008 until terminated. On 19 December 2008, KPC entered into a management services agreement (as varied by the MSA Agreement dated 19 April 2009 between Arutmin, KPC, Bumi Resources and Bhivpuri) with Bhivpuri on substantially the same terms as the above management services agreement between Arutmin and Bhivpuri. The only material difference between the KPC and Arutmin agreements with Bhivpuri is that the management fee payable by KPC to Bhivpuri is US$3.0 million per month (net of all taxes). Tata Coal Sales Agreement On 30 March 2007, IndoCoal Resources entered into a coal sales agreement with Tata for the supply of Melawan coal from the mines of KPC to be used at three coal fired power plants owned by Tata in India, namely the Trombay, Mundra and Coastal facilities. This agreement was entered into as part of the documents entered into pursuant to the Divestment. Under this coal sales agreement, Tata has agreed to purchase a minimum of 71.6 million tonnes of Melawan coal from IndoCoal Resources on a take-orpay basis over a guaranteed period of 14 years beginning in 2008. Tata, in its absolute discretion, may extend this guaranteed period to 20 years. The price for the coal is calculated on a base price per tonne, subject to certain escalation adjustments and adjustments related to differences from agreedupon calorific value, sulphur content and ash content parameters. Under the terms of this agreement, IndoCoal Resources has agreed to give priority to Tata in the event of unforeseen shortfall in the production of coal by KPC and continue to deliver and sell coal to Tata as provided under this agreement. This coal sales agreement will terminate upon the earlier of: (i) the expiry of the KPC CCOW; or (ii) 20 years after the commercial operation dates of the Mundra and Coastal facilities and 10 years after the commercial operation date of the Trombay facility. IndoCoal Resources-Bhivpuri Intercompany Loan Facility On 26 June 2007, IndoCoal Resources, as lender, entered into an intercompany loan facility agreement with Bhivpuri, as borrower, under which IndoCoal Resources agreed to grant to Bhivpuri a loan facility equivalent to the total amount of surplus cashflow paid by IndoCoal Resources to Bhivpuri after meeting the payments under the cash waterfall under the Cash Distribution Agreement. This agreement provides for drawdown of the facility to occur on each date when the surplus cash is made available to Bhivpuri. Bhivpuri shall repay the facility out of the dividends to be declared by IndoCoal Resources to Bhivpuri, by setting off the amount payable by IndoCoal Resources to Bhivpuri against the amount owed by Bhivpuri to IndoCoal Resources under the facility under this agreement. This intercompany loan facility is provided in order to pay out the income attributable to the 30 per cent. interest of Tata in the IndoCoal Group Companies on a monthly basis. Preferred Partnership Agreement between Bumi Resources and CFL In connection with the Bumi Resources-CFL Loan, Bumi Resources and CFL have entered into a preferred partnership by way of a letter agreement (the Preferred Partner Letter) effective

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18 September 2009, under which the parties seek to establish a long- term, mutually beneficial business and strategic business relationship during the term of the Bumi Resources-CFL Loan. Under the Preferred Partner Letter, Bumi Resources has agreed to invite CFL as its preferred partner to participate in business opportunities Bumi Resources and its subsidiaries may undertake during the term of the Bumi Resources-CFL Loan. Bumi Resources has agreed, among other things, to: endeavour to afford CFL (or another wholly owned subsidiary of CIC designated by CFL) the opportunity to participate in certain debt and equity offerings and in certain selected acquisitions, in each case, which Bumi Resources or any of its subsidiaries over which it exercises control, may undertake during the term of the Bumi Resources-CFL Loan to the extent it is reasonably practicable, legally possible and commercially feasible to do so; encourage companies in which Bumi Resources holds minority interests to offer CFL the same opportunity to participate in certain debt and equity offerings and selected acquisitions as Bumi Resources endeavors to offer to CFL in the manner described above, to the extent it is able to influence the decisions of those companies; endeavour to facilitate discussions between CFL and Bakrie & Brothers whereby CFL and Bakrie & Brothers may explore opportunities for CFL to participate in certain debt and equity offerings and in certain selected acquisitions relating to Bakrie & Brothers and its subsidiaries; and subject to applicable laws and Bumi Resources contractual obligations, inform CFL in writing with respect to each and every future proposed debt or equity offering (as such terms are defined in the Preferred Partner Letter) or acquisition (as such term is defined in the Preferred Partner Letter) prior to Bumi Resources or any of its subsidiaries over which it exercises control entering into such debt or equity offering or acquisition, of the proposed transaction (including reasonable details thereof to the extent available) in a written notification (including the nature of the transaction and the proposed principal terms of the transaction as of such date).

Financing Arrangements The Bumi Resources Group have entered into certain trust deeds, loan agreements, guarantees and security agreements relating to its indebtedness. The following descriptions summarise the terms of certain material indebtedness. These descriptions are summaries and should not be considered to be full statements of the terms and conditions of the Bumi Resources Groups indebtedness. 9.25% Convertible Bonds On 5 August 2009, Enercoal, a wholly owned subsidiary of Bumi Resources, issued the 9.25% Convertible Bonds in an aggregate principal amount of US$375.0 million. The Bumi Resources Group used the net proceeds of this issuance to fund the deposit of US$115.0 million for an equity swap transaction and to pay for the premium of US$51.3 million for a capped call option transaction entered into in connection with the issuance, with the remainder of the net proceeds used for working capital and general corporate purposes, including the expansion of the Bumi Resources Groups coal and non-coal businesses. As of 30 September 2010, the outstanding principal amount of the 9.25% Convertible Bonds was US$375.0 million. Maturity Date The maturity date for the 9.25% Convertible Bonds is 5 August 2014. Enercoal has agreed to redeem each of the 9.25% Convertible Bonds not previously redeemed, converted or purchased and cancelled at its principal amount together with unpaid accrued interest thereon on the maturity date. Interest The 9.25% Convertible Bonds bear interest from (and including) 5 August 2009 at the rate of 9.25 per cent. per annum, payable on the 5th day of each month, commencing on 5 September 2009. Early Redemption at the Option of Enercoal Under the terms of the 9.25% Convertible Bonds, Enercoal has the right to redeem the 9.25% Convertible Bonds at their principal amount (plus accrued but unpaid interest) on or any time after 5 August 2012 but not less than 20 days prior to the maturity date. Enercoal may also redeem all, but not

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part, of the 9.25% Convertible Bonds, in the event of certain changes in taxation or if 10.0 per cent. or less of the aggregate principal amount of the 9.25% Convertible Bonds are outstanding. Early Redemption at the Option of Bondholders/Conversion Price Under the terms of the 9.25% Convertible Bonds, Enercoal has agreed, at the option of the holder of any of the 9.25% Convertible Bonds, to redeem all or part of that holders 9.25% Convertible Bonds on 5 August 2012 at their principal amount (plus accrued but unpaid interest). This option may be exercised by a bondholder at anytime at least 20 days (but not more than 60 days) prior to 5 August 2011. The 9.25% Convertible Bonds also contain terms providing for the early redemption of the bonds at their principal amount together with accrued but unpaid interest, at the option of the holders, in the event of a Change of Control (as defined in the terms of the 9.25% Convertible Bonds) of Bumi Resources or a delisting of Bumi Resources shares from trading on the IDX or an alternative stock exchange. The initial conversion price for the 9.25% Convertible Bonds is Rp.3,366.9046 per Bumi Resources share. The 9.25% Convertible Bonds include provisions for the adjustment of the conversion price in the event of certain dilutive events, including, among others, bonus issues, alterations to the nominal value of the Bumi Resources shares, rights issues and capital distributions (including extraordinary cash dividends). The conversion price is also adjustable downwards for a conversion period of 30 days if a Change of Control (as defined in the terms of the 9.25% Convertible Bonds) has occurred based on a formula which reduces the conversion premium used to determine the initial conversion price upon issuance of the 9.25% Convertible Bonds, adjusted for the remaining life of the bonds when the Change of Control occurred. Conversion Period The conversion period of the 9.25% Convertible Bonds began on 17 September 2009 and will end on 26 July 2014 or, if the 9.25% Convertible Bonds are called for redemption before 5 August 2014, then up to the close of business on a date no later than 10 days prior to the date fixed for redemption. Mandatory Cash Settlement The 9.25% Convertible Bonds provide for mandatory cash settlement if Bumi Resources does not hold a sufficient number of its own shares as treasury stock and is unable to issue shares which are freely transferable in Indonesia to satisfy the conversion rights of the 9.25% Convertible Bonds. Optional Cash Settlement The terms of the 9.25% Convertible Bonds also include an optional cash settlement right of Enercoal to settle an exercise of conversion by a holder with cash in US dollars equal to an amount calculated in accordance with the terms of each of the 9.25% Convertible Bonds in lieu of delivery of shares. Negative Pledge The terms of the 9.25% Convertible Bonds include a negative pledge clause which restricts Enercoal, Bumi Resources and certain significant subsidiaries of Bumi Resources from creating or permitting to subsist any security interests to secure the repayment of any international investment securities if the issuance of such international investment securities would result in Bumi Resources ratio of Total Consolidated Debt (as defined in the 9.25% Convertible Bonds) to Consolidated EBITDA (as defined in the 9.25% Convertible Bonds) to be greater than 3.0 to 1 unless the bondholders receive a pro rata interest in any such security. Equity Swap and Capped Call Transactions In conjunction with the issue of the 9.25% Convertible Bonds, Enercoal entered into a cash settled total return equity swap with Credit Suisse International in respect of the shares of Bumi Resources for a notional amount equal to 30 per cent. of the principal amount outstanding under the 9.25% Convertible Bonds. The equity swap is scheduled to terminate on 5 August 2014 but is subject to optional early termination by Enercoal on dates which coincide with the early redemption of the 9.25% Convertible Bonds. The Bumi Resources Group are currently negotiating with Credit Suisse International to novate Enercoals rights and obligations under the equity swap to Bumi Resources.

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Enercoal has also entered into a capped call option transaction with Credit Suisse International in respect of the shares of Bumi Resources for a notional amount equal to 70 per cent. of the principal amount outstanding under the 9.25 per cent. Convertible Bonds. The capped call transaction is divided into five separate tranches with each tranche being exercisable on 5 December 2013, 5 February 2014, 7 April 2014, 5 June 2014 and 5 August 2014, respectively. Enercoal has the option to terminate the options early by giving notice to the counterparty. The Bumi Resources Group are currently negotiating with Credit Suisse International to novate Enercoals rights and obligations under the capped call transaction to Bumi Resources. 12% Guaranteed Senior Secured Notes On 13 November 2009, Bumi Resources Capital, a wholly owned subsidiary of Bumi Resources, issued the 12% Guaranteed Senior Secured Notes in an aggregate principal amount of US$300.0 million. The Bumi Resources Group used the net proceeds of the 12% Guaranteed Senior Secured Notes for making available such funds available to MDB under a facility agreement dated 16 November 2009 between Bumi Resources and MDB. The 12% Guaranteed Senior Secured Notes are secured by the Common Security on an equal and ratable basis with the Bumi Resources-CFL Loan, the US$300.0 million CS Facility, the US$200.0 Million DB Facility, the US$80.0 Million RZB Facility, the US$150.0 Million JPMorgan Chase Facility, the US$150.0 Million CS Facility and the US$100.0 Million CS Standby Credit Facility, and are guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors. As of 30 September 2010, the outstanding principal amount of the 12% Guaranteed Senior Secured Notes was US$300.0 million. Maturity Date The maturity date for the 12% Guaranteed Senior Secured Notes is 10 November 2016. Bumi Resources Capital has agreed to redeem each of the 12% Guaranteed Senior Secured Notes not previously redeemed or purchased and cancelled at its principal amount together with unpaid accrued interest thereon on the maturity date. Interest The 12% Guaranteed Senior Secured Notes bear interest from (and including) 13 November 2009 at the rate of 12 per cent. per annum, payable every six months on 10 May and 10 November of each year, commencing 10 May 2010. Security The obligations of Bumi Resources Capital with respect to the 12% Guaranteed Senior Secured Notes under the indenture entered into in connection therewith are secured by a pledge of the promissory note evidencing the intercompany loan from Bumi Resources Capital to Bumi Resources of the proceeds of the 12% Guaranteed Senior Secured Notes and all proceeds from that promissory note. The 12% Guaranteed Senior Secured Notes are also secured by liens on the assets over which the Common Security has been created, which are shared pari passu in right and priority of payment with the other Intercreditor Debt. Optional Redemption Bumi Resources Capital may at its option redeem the 12% Guaranteed Senior Secured Notes prior to 10 November 2013, in whole but not in part, at a redemption price equal to 100 per cent. of the principal amount of the 12% Guaranteed Senior Secured Notes plus accrued and unpaid interest, if any, to the redemption date, plus a make-whole premium. Bumi Resources Capital also has the option to redeem the 12% Guaranteed Senior Secured Notes on or after 10 November 2013, in whole or in part, at the redemption prices equal to 106 per cent. (during the twelve-month period beginning on 10 November 2013), 103 per cent. (during the twelve-month period beginning on 10 November 2014) and 100 per cent. (during the twelve-month period beginning on 10 November 2015) of the principal amount of the 12% Guaranteed Senior Secured Notes, plus accrued and unpaid interest, if any, to the relevant redemption date. Further, Bumi Resources Capital may redeem up to 35 per cent. of the aggregate principal amount of the 12% Guaranteed Senior Secured Notes before 10 November 2013 at a redemption price of 112 per cent. of the principal amount of the 12% Guaranteed Senior Secured Notes, plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of capital stock of Bumi Resources. Subject to certain exceptions, Bumi Resources Capital may redeem all, but

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not some, of the 12% Guaranteed Senior Secured Notes at their principal amount, plus accrued interest, upon a change in tax law increasing the rate of Indonesian or Singapore withholding taxes on amounts payable under the 12% Guaranteed Senior Secured Notes or the guarantees provided by Bumi Resources and the Bumi Resources Subsidiary Guarantors. Repurchase of Notes Upon a Change of Control Triggering Event Bumi Capital must make an offer to repurchase all the 12% Guaranteed Senior Secured Notes outstanding at a purchase price equal to 101 per cent. of their principal amount, plus accrued and unpaid interest, upon the occurrence of a change of control triggering event, that is, when (i) any person or a group of persons (acting together), other than Bakrie & Brothers and its affiliates, acquires control of Bumi Resources or Bumi Resources undertakes a consolidation, merger or sale transaction with respect to all or substantially all of its assets resulting in another person acquiring control of Bumi Resources or its successor entity and (ii) there is a ratings decline of the 12% Guaranteed Senior Secured Notes. Certain Restrictive Covenants The indenture constituting the 12% Guaranteed Senior Secured Notes contains restrictions on the ability of Bumi Resources, Bumi Capital, the IndoCoal Group Companies and their holding companies (collectively, the 12% Notes Restricted Group) to take certain actions, including the following: incur additional debt if the Bumi Resources Groups fixed charge coverage ratio (as defined in its indenture) would be less than 2.5 or 3.0 (depending on the entity incurring the indebtedness) to 1; make restricted payments; issue redeemable and preferred stock; create liens; sell or otherwise dispose of assets; enter into mergers or consolidations; enter into sale and leaseback transactions; enter into transactions with affiliates; and enter into new lines of business,

unless the relevant member of the 12% Notes Restricted Group fulfills certain conditions or the transaction or action sought to be undertaken falls within the exceptions provided under the terms of the indenture constituting the 12% Guaranteed Senior Secured Notes. US$1.9 Billion Loan Facility from CFL On 18 September 2009, Bumi Resources, as original borrower, each of the Bumi Resources Subsidiary Guarantors, as original subsidiary guarantors, CFL, as original lender and BNY Mellon as administrative agent and security agent, entered into a US$1,900,000,000 senior secured term loan agreement (the CFL Loan Agreement, which was subsequently amended and restated on 24 September 2009, and further amended on 28 October 2009 under a deed of amendment to this agreement and then amended and restated on 5 November 2009), under which the original lender agreed to lend US$1.9 billion to Bumi Resources (the Bumi Resources-CFL Loan). Under the terms of the CFL Loan Agreement as at 24 September 2009, a provision of the loan at such time allowed Bumi Resources to transfer its rights and obligations under the loan to a finance subsidiary to achieve greater tax efficiency, subject to amendments to the Bumi Resources-CFL Loan that are satisfactory to the parties. This transfer process was completed on 5 November 2009 whereupon the rights and obligations of Bumi Resources as borrower under the Bumi Resources-CFL Loan were assumed by its wholly owned Dutch subsidiary, Bumi Resources Netherlands B.V. (BRN). Bumi Resources, together with the Bumi Resources Subsidiary Guarantors, continue to guarantee the obligations of BRN under the transferred Bumi Resources-CFL Loan.

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The Bumi Resources-CFL Loan is secured by the Common Security on an equal and ratable basis with the US$200.0 Million DB Facility, the US$150.0 Million CS Facility, the 12% Guaranteed Senior Secured Notes and the 10.75% Guaranteed Senior Secured Notes, and are guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors. Bumi Resources applied the net proceeds of the Bumi Resources-CFL Loan to repay most of its then outstanding indebtedness which was secured by the Common Security, including the Share Pledges, and to complete the payment of the acquisition prices (including incentive payments) for the shares of PCL, Leap-Forward and Zurich Assets. Bumi Resources used the remaining proceeds of the Bumi Resources-CFL Loan for capital expenditures, acquisitions and general corporate purposes. The CFL Loan Agreement provided for three series of loans: (i) Facility A in an aggregate amount of US$600.0 million; (ii) Facility B in an aggregate amount of US$600.0 million; and (iii) Facility C in an aggregate amount of US$700.0 million. Bumi Resources incurred an aggregate of US$1.9 billion under all the three facilities of this loan. As of 31 December 2010, the outstanding principal amount of the Bumi Resources-CFL Loan was US$1.9 billion. Interest on the Bumi Resources-CFL Loan is payable monthly in arrears on the fifth business day of each month, commencing on the fifth business day in November 2009, and accrues at a rate of 12.0 per cent. per annum. The maturity date for Facility A is the interest payment date falling immediately after the fourth anniversary of the loan drawdown date, being the fifth business day in October 2013. Facility B matures on the fifth business day in October 2014 and Facility C matures on the fifth business day in October 2015. On the maturity date of each of the facilities under the Bumi Resources-CFL Loan, BRN shall pay: (i) the outstanding applicable amount of the relevant facility together with accrued but unpaid interest thereon; (ii) a make-whole amount, which is an amount that provides the lender with an overall internal rate of return in respect of the relevant facility of 19.0 per cent. per annum (taking into account all interest paid on the relevant facility but excluding any default interest paid or payable on the relevant facility); and (iii) any other amounts payable in respect of the relevant facility. Prior to the relevant maturity date, BRN may repay (i) Facility A in whole or in part on any interest payment date on or after the Facility A first optional repayment date, being the fifth business day in October 2011, (ii) Facility B in whole or in part on any interest payment date on or after the Facility B first optional repayment date, being the fifth business day in October 2012, and (iii) Facility C in whole or in part on any interest payment date on or after the Facility C first optional repayment date, being the fifth business day in October 2013. Each repayment in part shall be for an amount of at least US$50 million and integral multiples of US$10 million in excess thereof. Each repayment (whether in whole or in part) shall be made together with (i) any accrued and unpaid interest on the amount being repaid up to the repayment date; (ii) the applicable premium, which is an amount calculated at the repayment date for the relevant facility, being 5.0 per cent. of the relevant facility (or portion thereof being repaid) as of the first optional repayment date of the relevant facility and decreasing on a straight line basis to zero as at the applicable maturity date for that facility; (iii) a make-whole amount, which is an amount that provides the lender with an overall internal rate of return up to the repayment date in respect of the relevant facility (or portion thereof being repaid) of 19.0 per cent. per annum (taking into account all interest paid on the relevant facility (or portion thereof being repaid) but excluding any default interest paid or payable on the relevant facility (or portion thereof being repaid)); and (iv) any other amounts payable in respect of the relevant facility (or portion thereof being repaid). BRN must provide irrevocable written notice to the administrative agent of its intention to repay a facility, specifying the repayment amount and the repayment date, no earlier than 20 business days and no later than five business days prior to the repayment date. Upon the occurrence of a change of control of Bumi Resources, BRN must offer to the lender to repay all outstanding facilities at 101 per cent. of the outstanding principal amount of the facilities, together with (i) any accrued and unpaid interest on the facilities up to the repayment date; (ii) the applicable premium, which is an amount calculated in relation to each facility at the repayment date, being 5.0 per cent. of each facility as of or prior to the first optional repayment date of that facility and decreasing on a straight line basis to zero as at the applicable maturity date for that facility (the Applicable Premium); (iii) a make-whole amount, which is an amount that provides the lender with an overall internal rate of return up to the later of (x) the first optional repayment date of the relevant facility and (y) the repayment date in respect of that facility of 19.0 per cent. per annum (taking into account all interest paid on the relevant facility but excluding any default interest paid or payable on the relevant facility) (the Make-Whole Amount); and (iv) any other amounts payable in respect of each facility.

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If BRN pays any amount due under the CFL Loan Agreement on a day other than an interest payment date, BRN must also pay any break costs attributable to such amount being paid. The Bumi Resources-CFL Loan contains restrictions on the ability of Bumi Resources and its subsidiaries to take certain actions, including the following: Bumi Resources will not permit either KPC or Arutmin to sell, transfer or otherwise dispose of, directly or indirectly, any of KPCs or Arutmins rights or interests under the KPC and Arutmin CCOWs. No member of Bumi Resources, the IndoCoal Group Companies, the Bumi Resources Subsidiary Guarantors or BRN (each of the IndoCoal Group Companies, BRN and the Bumi Resources Subsidiary Guarantors a CFL Loan Restricted Subsidiary and together with Bumi Resources, the CFL Loan Restricted Group) is permitted to, subject to certain exceptions, make a restricted payment (as defined in the CFL Loan Agreement) unless (a) no default has occurred or would occur as a result of the restricted payment, (b) Bumi Resources, KPC, Arutmin and IndoCoal Resources are able to satisfy the relevant financial ratios applicable to them (as described below) to incur further indebtedness of at least US$1.00, and (c) BRN or Bumi Resources has sufficient cash and cash equivalents to pay the future principal and/or interest expense and/or other amounts due on the Bumi Resources-CFL Loan for the relevant period designated under the CFL Loan Agreement. None of Bumi Resources, KPC, Arutmin, IndoCoal Resources or any other CFL Loan Restricted Subsidiary with a direct or indirect equity interest in KPC, Arutmin or IndoCoal Resources is permitted, subject to certain exceptions, to issue or sell, any shares of capital stock of KPC, Arutmin, IndoCoal Resources or any such CFL Loan Restricted Subsidiary with such a direct or indirect equity interest, unless (a) the consideration received is in cash, (b) the consideration is at least equal to the fair market value (as defined in the CFL Loan Agreement) of the shares of capital stock issued or sold or, with respect to any of KPC, Arutmin or IndoCoal Resources, is otherwise in compliance with the IndoCoal Shareholders Agreement, and (c) BRN or Bumi Resources promptly makes an offer to repay all outstanding loans (and any other indebtedness secured by the Common Security) on a pro rata basis with the proceeds of such issuance or sale at 100 per cent. of the outstanding principal amount of the Bumi Resources-CFL Loan plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the repayment date, and the Make-Whole Amount. No member of the CFL Loan Restricted Group is permitted to, subject to certain exceptions, directly or indirectly, enter into, renew or extend any transaction or arrangement with (i) any beneficial holder (or any affiliate of such holder) of 10 per cent. or more of any class of capital stock of Bumi Resources, (ii) PT Bakrie & Brothers Tbk and its affiliates or (iii) any affiliate of Bumi Resources, unless (a) such transaction is on terms that are no less favourable to Bumi Resources or such CFL Loan Restricted Subsidiary than those that could be obtained in a comparable armslength transaction by Bumi Resources or such CFL Loan Restricted Subsidiary with a person that is not such a holder or an affiliate of Bumi Resources, and (b) Bumi Resources complies with certain requirements if the affiliate transactions exceed specified thresholds stipulated in the CFL Loan Agreement, including that such affiliate transaction has been approved by the majority of the disinterested members of the board of directors of Bumi Resources. Except for certain liens permitted under the CFL Loan Agreement, no member of the CFL Loan Restricted Group shall incur, assume or permit to exist any lien (as defined in the CFL Loan Agreement) over any assets, unless all outstanding loans under the CFL Loan Agreement (and any other indebtedness secured by the Common Security) are secured equally and rateably with (or, if the obligation to be secured by such lien is subordinated in right of payment to the outstanding loans under the CFL Loan Agreement (and any other indebtedness secured by the Common Security), in priority to) the obligations so secured for so long as such obligations are secured. No CFL Loan Restricted Subsidiary is permitted to engage in any business other than the businesses specified in the CFL Loan Agreement and the making of investments permitted under the CFL Loan Agreement. Bumi Resources shall not consolidate with, merge with or into another person, permit any person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially

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all of its properties and assets and those of the CFL Loan Restricted Subsidiaries to another person unless: (i) Bumi Resources shall be the continuing person, or the person formed by such consolidation or merger or that acquired or leased such property and assets (the Continuing Person of Bumi Resources) shall be a corporation organised and validly existing under the laws of Indonesia and shall expressly assume all the obligations of Bumi Resources under the CFL Loan Agreement; immediately after giving effect to such transaction, no default shall have occurred and be continuing; immediately after giving effect to such transaction on a pro forma basis Bumi Resources or the Continuing Person of Bumi Resources could incur at least US$1.00 of indebtedness under the CFL Loan Agreement; Bumi Resources complies with certain documentary requirements; and each of the Bumi Resources Subsidiary Guarantor executes and delivers an amendment to the CFL Loan Agreement confirming that its guarantee of the Bumi Resources-CFL Loan shall apply to the obligations of BRN, Bumi Resources or the Continuing Person.

(ii) (iii)

(iv) (v)

No member of the CFL Loan Restricted Group or any other subsidiary of Bumi Resources that is designated as a CFL Loan Restricted Subsidiary after the loan drawdown date is permitted to incur indebtedness (as defined in the CFL Loan Agreement) unless, after giving pro forma effect to the incurrence of such indebtedness and the receipt and application of the proceeds therefrom, the parent guarantor financial ratio (as defined in the CFL Loan Agreement) is satisfied, i.e. the ratio of the adjusted consolidated total indebtedness (as defined in the CFL Loan Agreement) of the CFL Loan Restricted Group to the adjusted consolidated EBITDA (as defined in the CFL Loan Agreement) of the CFL Loan Restricted Group for the most recent four financial quarters of the CFL Loan Restricted Group prior to the date on which such indebtedness is to be incurred is less than 4.0 to 1 prior to 30 September 2011 and less than 3.0 to 1 thereafter. No indebtedness may be incurred by KPC, Arutmin or IndoCoal Resources unless, after giving pro forma effect to the incurrence of such indebtedness and the receipt and application of the proceeds therefrom, the coal companies financial ratio (as defined in the CFL Loan Agreement) is satisfied, i.e. the ratio of the consolidated total indebtedness (as defined in the CFL Loan Agreement) of KPC, Arutmin and IndoCoal Resources to the consolidated EBITDA (as defined in the CFL Loan Agreement) of KPC, Arutmin and IndoCoal Resources, in each case for the most recent four financial quarters of KPC, Arutmin and IndoCoal Resources prior to the date on which such indebtedness is to be incurred is not more than 1.0 to 1.

The Bumi Resources-CFL Loan also requires Bumi Resources, BRN and the Bumi Resources Subsidiary Guarantors to: assign, and cause each of the CFL Loan Restricted Subsidiaries to assign, to BNY Mellon, as offshore common security agent (the Offshore Common Security Agent and together with the Onshore Common Security Agent, the Common Security Agents) for the benefit of the Secured Creditors (as defined in the Intercreditor Agreement) on terms reasonably satisfactory to the Offshore Common Security agent any right under any indebtedness owed to it or the CFL Loan Restricted Subsidiaries by any other subsidiary (other than a financing subsidiary) of Bumi Resources and such assignment shall constitute part of Additional Common Security (as defined in the CFL Loan Agreement); assign, and cause each of the CFL Loan Restricted Subsidiaries to assign, to BNY Mellon, as offshore common security agent, or to Standard Chartered Bank, Jakarta Branch, as onshore common security agent, for the benefit of the Secured Creditors (as defined in the Intercreditor Agreement) on terms reasonably satisfactory to the relevant common security agents any right to dividends or distributions from the CFL Loan Restricted Subsidiaries and such assignment shall constitute part of the Additional Common Security (as defined in the CFL Loan Agreement); only incur, and cause each of the CFL Loan Restricted Subsidiaries to only incur, indebtedness to any subsidiary of Bumi Resources if such indebtedness is subordinated on terms reasonably satisfactory to the offshore common security agent and the onshore common security agent to

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any and all obligations of Bumi Resources, BRN and the Subsidiary Guarantors under the CFL Loan Agreement and any other finance documents (as defined in the Intercreditor Agreement); and document and cause each of the CFL Loan Restricted Subsidiaries to document, by a promissory note or an intercompany loan agreement, indebtedness by Bumi Resources or any of the CFL Loan Restricted Subsidiaries to any of their respective affiliates.

Events of default under the CFL Loan Agreement include non-payment, breach of other obligations by BRN, Bumi Resources or a Bumi Resources Subsidiary Guarantor, cross-default to other indebtedness of Bumi Resources or a CFL Loan Restricted Subsidiary (other than IndoCoal Kalsel or IndocCoal Kaltim) (subject to a minimum threshold), any final judgement or order is made against Bumi Resources or a CFL Loan Restricted Susbidiary (other than IndoCoal Kalsel or IndocCoal Kaltim) for an amount more than US$25 million, an insolvency or bankruptcy event or proceedings in relation to Bumi Resources or a CFL Loan Restricted Susbidiary (other than IndoCoal Kalsel or IndocCoal Kaltim), any amendment, waiver, modification, variation, revocation or cancellation in relation to the IndoCoal Notice is effected without the prior written consent of BNY Mellon as administrative agent, any representative of Bhivpuri Investments Limited (formerly known as Tata Power (Cyprus) Limited) states in writing that it does not consider Bhivpuri Investments Limited to be bound by any provision of the IndoCoal Notice, revocation, termination, suspension or other cessation of effectiveness of either the KPC or Arutmin CCOW which results in a cessation or suspension of calo-mining operations for more than 60 consecutive days, misrepresentation by BRN, Bumi Resources or a Subsidiary Guarantor, failure by Bumi Resources or a CFL Loan Restricted Susbidiary (other than IndoCoal Kalsel or IndocCoal Kaltim) to carry out its business for more than 60 consecutive days as a result of any expropriation, and the occurrence or any event which the lender or BNY Mellon reasonably believes has or is reasonably likely to have a material adverse effect on the business, operations, property, condition (financial or otherwise) or prospects of the CFL Loan Restricted Group as a whole. Following an event of default which is continuing, BNY Mellon, as administravtive agent may, and shall if so directed by the lender, declare that all or part of the facilities under the CFL Loan Agreement are immediately due and payable together with (i) any accrued and unpaid interest on the facilities (or any portion thereof) to be repaid; (ii) the Applicable Premium up to the date of such acceleration in respect of each facility (or any portion thereof) to be repaid; (iii) the Make-Whole Amount up to the date of such acceleration in respect of each facility (or any portion thereof) to be repaid; and (iv) any other amounts accrued or outstanding in connection with the CFL Loan Agreement or the facilities. Pursuant to the Bumi Resources-CFL Loan, Bumi Resources, the Subsidiary Guarantors, BNY Mellon, as administrative agent, offshore account bank and Offshore Common Security Agent, and Standard Chartered Bank, Jakarta Branch, as onshore account bank and Onshore Common Security Agent, entered into an Intercreditor Agreement dated 1 October 2009 (as amended and restated on 29 October 2009 under a deed of amendment and restatement agreement) in respect of the security over, among other things, various bank accounts of Bumi Resources into which proceeds payable to Bumi Resources under the Cash Distribution Agreement are deposited and the pledges over the shares of the Subsidiary Guarantors and the IndoCoal Group Companies by Bumi Resources and the Bumi Resources Subsidiary Guarantors which are given to the Common Security Agents as part of the Common Security. For a description of the Intercreditor Agreement, see Intercreditor Agreement in this paragraph 18. 2010 MDB-CS Facility On 23 March 2010, MDB as borrower, certain financial institutions as lenders, Credit Suisse AG, Singapore Branch as original lender, mandated arranger and bookrunner, facility agent, security agent and trustee and account bank, and Credit Suisse International as hedging bank, entered into a credit agreement under which the lenders agreed to lend MDB US$200.0 million. The purpose of this loan was to fund the partial repayment by MDB of its indebtedness to Bumi Resources under a facility agreement dated 16 November 2009. Subsequently, on 1 April 2010, the parties entered into an amendment agreement amending and restating the credit agreement dated 23 March 2010 under which the lenders agreed to lend MDB an additional US$100.0 million, increasing the amount lent under the credit agreement to US$300million. There are two facilities under the 2010 MDB-CS Facility: Facility A in an aggregate amount of US$200.0 million and Facility B of an aggregate amount of US$100.0 million. MDB drew down the entire amount of US$200 million of Facility A in March 2010 and the entire amount of US$100 million of Facility B in April 2010. MDB used the net proceeds of this loan to repay a part of its

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indebtedness to Bumi Resources under a facility agreement dated 16 November 2009, which Bumi Resources used to repay certain short-term indebtedness incurred in relation to the purchase of the NNT shares. In June 2010 MDB repaid US$27.6million and, as of 30 September 2010, the amortised cost of the loans outstanding under the 2010 MDB-CS Facility was US$305 million. The 2010 MDB-CS Facility has a term of 24 months, and is repayable in full on its final maturity date in March 2012. Interest on the 2010 MDB-CS Facility will accrue at the applicable LIBOR plus 7.0 per cent. per annum and will be payable on the last day of each successive period of three months. A change of control of Bumi Resources or MDB gives the lenders an option to terminate their respective commitments and to require the mandatory prepayment of their respective loans. Except in certain circumstances, MDB must pay a redemption premium in addition to principal and interest upon repayment or prepayment in full of a loan in an amount that would give the relevant lender an internal rate of return up to the repayment or prepayment date of 15 per cent. per annum on the loan being repaid or prepaid in full. Under the 2010 MDB-CS Facility, any dividends received from MDBs 24 per cent. shareholding interest in NNT and an agreed proportion of any other amounts paid by NNT to MDB (including cash distributions other than dividends) are to be paid directly to a proceeds account maintained by MDB. Such amounts must be applied in making payments to one of MDBs shareholders and to the lenders as detailed in the 2010 MDB-CS Facility. The 2010 MDB-CS Facility contains restrictions on the ability of MDB to take certain actions, including the following: subject to certain exceptions, MDB is not permitted to create or allow to exist any security interest over its assets; subject to certain exceptions, MDB is not permitted to: (i) (ii) (iii) (iv) sell, transfer or otherwise dispose of any of its assets on terms where they may be leased to or re-acquired or acquired by its affiliate; sell, transfer or otherwise dispose of any of its receivables on recourse terms; enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or enter into any other preferential arrangement having a similar effect,

in circumstances where the primary purpose of the transaction is to incur financial indebtedness or finance an asset acquisition. MDB is not permitted to dispose of any shares in NNT or any part of its assets unless it is a disposal made with the consent of the majority lenders, as defined in the 2010 MDB-CS Facility, is a disposal of assets in exchange for other assets comparable or superior as to type, value and quality or is a disposal of obsolete assets; MDB is not permitted to incur any financial indebtedness (as defined under the 2010 MDB-CS Facility), except subordinated loans made to it by NNT, certain subordinated shareholder loans and secured acquisition financing for purposes of acquiring additional shares in NNT; MDB is not permitted to enter into any derivative transaction protecting against or benefiting from rate or price fluctuations, except those entered into to hedge MDBs interest rate risk under the 2010 MDB-CS Facility; subject to certain exceptions, MDB may not (i) declare, make or pay any dividend, charge, fee or other distribution on or in respect of its share capital, (ii) repay or distribute any dividend or share premium reserve, or (iii) pay any management, advisory, technical or other fee to its shareholders; MDB shall not substantially change the general nature of its business; MDB shall not enter into any amalgamation, demerger, merger or reconstruction;

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MDB may not provide loans except intercompany loans (as defined in the 2010 MDB-CS Facility); subject to certain exceptions, MDB may not (i) redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so; (ii) issue any shares which by their terms are redeemable; or (iii) issue any share capital to any person; subject to certain exceptions, MDB must not incur any guarantee in respect of any person; MDB must not have any business other than incurring the 2010 MDB-CS Facility, entering into documents relating to any additional financing of NNT shares, entering into contracts identified under the 2010 MDB-CS Facility and holding shares of NNT; and MDB may not make any acquisition or invest in any business or any shares or other securities, except for (i) any transaction expressly contemplated under the 2010 MDB-CS Facility, (ii) any transaction expressly allowed by the majority lenders, or (iii) the acquisition of additional shares in NNT in excess of the 24.0 per cent. equity interest acquired by MDB.

The events of default under the 2010 MDB-CS Facility include, among other things, (i) cross-default or cross-acceleration of any of the debt of MDB, Multi Capital or NNT (subject to a minimum threshold); (ii) the insolvency of, or insolvency proceedings or creditors process in relation to any of MDB, Multi Capital or NNT; (iii) cessation of all or a material part of the business of MDB, Multi Capital or NNT; (iii) any court judgement or order made against MDB, Multi Capital or NNT (subject to a minimum threshold); (iv) expropriation of all or a material part of the assets of MDB, Multi Capital or NNT; (v) cessation or suspension of the mining operations at Batu Hijau Mine for more than 60 days resulting from the NNT contract of work ceasing to have effect; or (vi) any event or series of events which in the opinion of the majority lenders has or is reasonably likely to have a material adverse effect on, among other things, the business, prospects or condition (financial or otherwise) of MDB, Multi Capital or NNT. The 2010 MDB-CS Facility is secured by, among other security interests, a share pledge by MDB over its shares in NNT, a share pledge by Multi Capital over its shares in MDB, each in favour of Credit Suisse, AG, Singapore Branch, as security agent and a charge over certain bank accounts of MDB. In addition, pursuant to a subordination agreement dated 24 March 2010 between MDB, Multi Capital, Bumi Resources and Credit Suisse, MDB has agreed that all liabilities owing from it to Bumi Resources and Multi Capital (or to any future shareholder) pursuant to shareholder loans extended to it (or to be extended to it), are subordinated to its liabilities to Credit Suisse under the 2010 MDB-CS Facility. However, an exception is provided for repayment of the loan extended by Bumi Resources to MDB that has been used by MDB to acquire 24per cent. of the shares in NNT. US$200.0 Million Credit Facility with Deutsche Bank and Other Banks On 30 April 2010, Bumi Resources, as borrower, the Bumi Resources Subsidiary Guarantors, as original guarantors, each of Deutsche Bank AG, Singapore Branch and Erste Group Bank AG, Hong Kong Branch as original lenders, Deutsche Bank AG, Singapore Branch, as arranger, Deutsche Bank, Hong Kong Branch, as facility agent and DB Trustees (Hong Kong) Limited, as security agent and trustee, entered into a credit agreement (the US$200.0 Million DB Facility). Under the US$200.0 Million DB Facility, the original lenders agreed to lend US$50.0 million to Bumi Resources. Under the terms of the credit agreement, if the arranger, before 30 July 2010, determined that any of the lenders or any new lenders were prepared to fund additional amounts under the credit agreement, subject to an aggregate additional amount of no more than US$150.0 million. On 13 May 2010, Bank of India, Singapore Branch and Bank of India, Tokyo Branch, as additional lenders, agreed to lend Bumi Resources additional commitments aggregating US$50.0 million. The Bumi Resources Group used the net proceeds of this loan for general corporate purposes. On 21 July 2010, Deutsche Bank AG, Singapore Branch, as an original lender, and WestLB AG, Singapore Branch, as an additional lender, agreed to lend Bumi Resources a further US$25.0 million on 23 July 2010. Further, on 13 September 2010, Deutsche Bank AG, Singapore Branch, as an original lender, and China Development Bank Corporation, as an additional lender, agreed to lend Bumi Resources a further US$75.0 million. As of 30 September 2010, the amortised cost of the US$200.0 Million DB Facility was US$196 million. The US$200.0 Million DB Facility has a term of two years, and is expected to mature in May 2012. Interest on the US$200.0 Million DB Facility will accrue at the applicable LIBOR plus 4.95 per cent. per annum and will be payable on the fifth business day of each month. The principal amount of the

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US$200.0 Million DB Facility is repayable in twelve installments on each payment date, which is defined as the fifth business day of each calendar month, commencing on the payment date falling in the thirteenth calendar month after the first utilisation date. The first eleven installments will each be 8.33 per cent. of the outstanding principal loan amount and the final installment will be 8.37 per cent. of the outstanding principal loan amount. A change of control of Bumi Resources gives the lenders an option to terminate their respective commitments and to require the mandatory prepayment of their respective loans. The US$200.0 Million DB Facility contains restrictions on the ability of Bumi Resources and its subsidiaries to take certain actions, including the following: none of Bumi Resources or its subsidiaries may create or allow to exist any security interest on: (i) (ii) (iii) any of the shares it holds in any IndoCoal Group Company or in any Bumi Resources Subsidiary Guarantor (other than security interests created under the Common Security); any asset secured under or subject to a security interest created by a security document (other than under that security document); amounts payable at the direction of IndoCoal Resources to Bumi Resources under the Cash Distribution Agreement or various bank accounts of Bumi Resources under the Cash Distribution Agreement unless by way of the Common Security Documents in accordance with the provisions of the Intercreditor Agreement and the Common Security Documents and the provider of the relevant financial indebtedness secured by that security interest has acceded to the Intercreditor Agreement; or any other asset secured or subject to a security interest created by a Common Security Document (other than under that Common Security Document);

(iv)

subject to certain exceptions, none of Bumi Resources or the IndoCoal Group Companies or the Bumi Resources Subsidiary Guarantors (each of the IndoCoal Group Companies and the Bumi Resources Subsidiary Guarantors, a Restricted Subsidiary and together with Bumi Resources the Restricted Group) may create or allow to exist any security interest over its assets other than those assets referred to in the immediately preceding paragraph; subject to certain exceptions, no member of the Restricted Group may: (i) sell, transfer or otherwise dispose of any of its assets on terms where they may be leased to or re-acquired or acquired by a member of the Restricted Group or any of its related entities; sell, transfer or otherwise dispose of any of its receivables on recourse terms; enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or enter into any other preferential arrangement having a similar effect,

(ii) (iii) (iv)

in circumstances where the primary purpose of the transaction is to incur financial indebtedness or finance an asset acquisition; no member of the Restricted Group may, either in a single transaction or in a series of transactions and whether related or not, dispose of any of the shares in KPC, Arutmin, IndoCoal Resources or any Bumi Resources Subsidiary Guarantor; subject to certain exceptions, no member of the Restricted Group may, either in a single transaction or in a series of transactions and whether related or not, dispose of all or any part of an asset (other than the shares in KPC, Arutmin, IndoCoal Resources or any Bumi Resources Subsidiary Guarantor); subject to certain exceptions, no member of the Restricted Group is permitted to incur any financial indebtedness if, after giving pro forma effect to the incurrence of such financial indebtedness and the receipt and application of the proceeds therefrom, the company financial ratio (as defined in the US$200.0 Million DB Facility) is exceeded, i.e. the ratio of the company

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consolidated total borrowings (as defined in the US$200.0 Million DB Facility) of the Restricted Group to the adjusted company consolidated EBITDA (as defined in the US$200.0 Million DB Facility) of the Restricted Group, in each case for the most recent four financial quarters of Bumi Resources prior to the date on which such indebtedness is to be incurred is more than 4.0 to 1 on or prior to the eighteenth interest payment date under the US$200.0 Million DB Facility and more than 3.0 to 1 thereafter; subject to certain exceptions, none of KPC, Arutmin or IndoCoal Resources is permitted to incur any financial indebtedness if, after giving pro forma effect to the incurrence of such financial indebtedness and the receipt and application of the proceeds therefrom, the coal companies financial ratio (as defined in the US$200.0 Million DB Facility) is exceeded, i.e. the ratio of the coal companies consolidated total borrowings (as defined in the US$200.0 Million DB Facility) of KPC, Arutmin and IndoCoal Resources to the coal companies consolidated EBITDA (as defined in the US$200.0 Million DB Facility) of KPC, Arutmin and IndoCoal Resources, in each case for the most recent four financial quarters of KPC, Arutmin and IndoCoal Resources prior to the date on which such indebtedness is to be incurred is more than 1.0 to 1; subject to certain exceptions, no financial indebtedness incurred by Bumi Resources or its subsidiaries may be secured on, nor may payments in respect thereof be funded or serviced in equal or higher priority to the funding or servicing of any amounts payable under the US$200.0 Million DB Facility from, cashflows payable out of the accounts referred to in the Cash Distribution Agreement; subject to certain exceptions, no financial indebtedness incurred by Bumi Resources or its subsidiaries may be funded or serviced out of cashflows payable at the direction of IndoCoal Resources to Bumi Resources under the Cash Distribution Agreement; subject to certain exceptions, no member of the Restricted Group may enter into any hedging or derivative transaction; neither Bumi Resources nor any Bumi Resources Subsidiary Guarantor may substantially change the nature of its business unless it involves the development, extraction, production, marketing or sale of coal bed methane, oil and gass or any other similar natural resources; subject to certain exceptions, neither Bumi Resources nor any Bumi Resources Subsidiary Guarantor may enter into any amalgamation, demerger, merger or reconstruction; Bumi Resources is not permitted to amend the Cash Distribution Agreement in a manner which would materially and adversely affect the amounts payable at the direction of IndoCoal Resources to Bumi Resources without the prior written consent of the facility agent; each Restricted Subsidiary must remain a Restricted Subsidiary until all amounts under the US$200.0 Million DB Facility are paid in full; neither Bumi Resources nor the Bumi Resources Subsidiary Guarantors may provide cash to their shareholders or affiliates that are not members of the Group (as defined in the US$200.0 Million DB Facility) for the purpose of enabling them to repay, prepay, redeem any financial indebtedness incurred by that shareholder or affiliate; subject to certain exceptions, no Restricted Subsidiary may issue any share capital to any person; subject to certain exceptions, no member of the Restricted Group is permitted to make any restricted payment (as de fined in the US$200.0 Million DB Facility) unless (i) no default has occurred or would occur as a result of such restricted payment and (ii) Bumi Resources, KPC, Arutmin and IndoCoal Resources are able to satisfy the relevant financial ratios applicable to them (as described above) to incur financial indebtedness of at least US$1.00; subject to certain exceptions, no member of the Restricted Group is permitted to, directly or indirectly, enter into, renew or extend any transaction or arrangement with: (i) any beneficial holder (or any affiliate of such holder) of 10per cent. or more of the shares of Bumi Resources;

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(ii) (iii)

PT Bakrie & Brothers Tbk and its affiliates; or any affiliate of Bumi Resources,

unless (a) such transaction is on terms that are no less favourable to such member of the Restricted Group than those that could be obtained in a comparable arms-length transaction by such member of the Restricted Group with a person that is not such a holder or an affiliate of Bumi Resources; and (b) Bumi Resources complies with certain requirements if the affiliate transaction exceeds specified thresholds stipulated in the US$200.0 Million DB Facility, including that such affiliate transaction has been approved by the majority of the disinterested members of the board of directors of Bumi Resources; and Bumi Resources is not permitted to amend any provision or definition in the CFL Loan Agreement which is referred to in the Intercreditor Agreement of any Common Security Document without the prior written consent of the facility agent.

The US$200.0 Million DB Facility also requires Bumi Resources and the Bumi Resources Subsidiary Guarantors to: assign, and cause each of the Restricted Subsidiaries to assign, to BNY Mellon, as offshore common security agent (the Offshore Common Security Agent and together with Standard Chartered Bank, Jakarta Branch as onshore common security agent, the Common Security Agents) for the benefit of the secured creditors (as defined in the Intercreditor Agreement) on terms reasonably satisfactory to the Offshore Common Security Agent any right under any financial indebtedness owed to it or any Restricted Subsidiary by any subsidiary (other than a finance subsidiary (as defined in the US$200.0 Million DB Facility)) of Bumi Resources and such assignment shall constitute part of the Common Security; assign, and cause each of the Restricted Subsidiaries to assign, to the relevant Common Security Agent, for the benefit of the secured creditors on terms reasonably satisfactory to the relevant Common Security Agent any right to dividends or distributions from any Restricted Subsidiary and such assignment shall constitute part of the Common Security; subject to certain exceptions, only incur, and cause each of the Restricted Subsidiaries to only incur, financial indebtedness to any subsidiary of Bumi Resources if such financial indebtedness is subordinated on terms reasonably satisfactory to the Common Security Agents to any and all obligations of Bumi Resources and the Bumi Resources Subsidiary Guarantors under the US$200.0 Million DB Facility and the other finance documents (as defined in the US$200.0 Million DB Facility); and only incur, and cause each of the Restricted Subsidiaries to only incur, subordinated shareholder loans (as defined in the US$200.0 Million DB Facility) if the creditor of such subordinated shareholder loan to Bumi Resources or the relevant Bumi Resources Subsidiary Guarantor has executed a subordination deed agreeing to the subordination of such financial indebtedness and such subordination deed shall constitute part of the Common Security.

The events of default under the US$200.0 Million DB Facility include, among other things, (i) crossdefault or cross-acceleration of any of the debt of Bumi Resources or any Significant Restricted Subsidiary (as defined in the US$200.0 Million DB Facility) subject to a minimum threshold; (ii) the insolvency of, or any insolvency proceedings or creditors process in respect of Bumi Resources or any Significant Restricted Subsidiary; (iii) cessation or of all or a material part of the business of Bumi Resources, a Bumi Resources Subsidiary Guarantor or any other member of the Restricted Group; (iii) any court judgement or order made against Bumi Resources or a Significant Restricted Subsidiary (subject to a minimum threshold); (iv) expropriation of all or a material part of the assets of Bumi Resources or any of its subsidiaries; (v) cessation or suspension of the mining operations at the coal mining concessions of KPC or Arutmin for more than 60 days resulting from the KPC contract of work or the Arutmin contract of work ceasing to have effect; (vi) any amendment, waiver or cancellation in relation to the IndoCoal Notice is made without the consent of the facility agent or any Tata Representative states in writing that it is not in agreement with or does not consider Tata to be bound by any provision of the IndoCoal Notice; (vii) Bumi Resources becomes a Defaulting Entity (as defined in the IndoCoal Shareholders Agreement); or (vi) any event or series of events which in the opinion of the majority lenders has or is reasonably likely to have a material adverse effect on the business,

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prospects or condition (financial or otherwise) of a member of the Restricted Group or Bumi Resources and its subsidiaries as a whole. Each of the original lenders, additional lenders, facility agent and security agent under the US$200.0 Million DB Facility has acceded to the terms of the Intercreditor Agreement for the benefit of the lenders under the US$200.0 Million DB Facility and, therefore, those lenders share in the security over various bank accounts of Bumi Resources under the Cash Distribution Agreement and other security interests under the terms of the Intercreditor Agreement. For a description of the Intercreditor Agreement, see Intercreditor Agreement in this paragraph 18. US$150.0 Million Facility with Credit Suisse On 19 August 2010, Bumi Resources, as borrower, the Bumi Resources Subsidiary Guarantors, as original guarantors and Credit Suisse AG, Singapore Branch, and Credit Suisse International, as original lenders, and Credit Suisse AG, Singapore Branch, as arranger, facility agent, security agent and account bank, entered into a US$150.0 million credit agreement (the US$150.0 Million CS Facility). Under the US$150.0 Million CS Facility, the original lenders agreed to lend US$150.0 million to Bumi Resources. Bumi Resources had fully drawn down this loan as of 30 September 2010 and utilised the net proceeds of this loan towards the repurchase of Zero Coupon Convertible Bonds and 5 per cent. Convertible Bonds and the redemption of the outstanding Zero Coupon Convertible Bonds, for which the Bumi Resources Group have received valid put option notices. As of 30 September, 2010, the outstanding principal amount of the US$150.0 Million CS Facility was US$150.0 million. A change of control of Bumi Resources gives the lenders an option to terminate their respective commitments and to require the mandatory prepayment of their respective loans together with (i) any accrued and unpaid interest up to the repayment date and (ii) an amount equal to the margin that would have accrued on the amount of the loans repaid from the date of repayment to the final maturity date of the US$150.0million CS Facility. The US$150.0 Million CS Facility has a term of three years, and is repayable in full on its final maturity date in August 2013. Interest on the US$150.0 Million CS Facility will accrue at the applicable LIBOR plus a margin of 11.0 per cent. per annum and will be payable on the fifth business day of each month. The US$150.0 Million CS Facility contains covenants, undertakings and events of default which are similar to those contained in the US$200.0 Million DB Facility described above. Credit Suisse AG, Singapore Branch, as original lender, facility agent and security agent under the US$150.0 Million CS Facility, has acceded to the terms of the Intercreditor Agreement for the benefit of the lenders under the US$150.0 Million CS Facility and, therefore, the lender shares in the security over various bank accounts of Bumi Resources under the Cash Distribution Agreement and other security interests under the terms of the Intercreditor Agreement. For a description of the Intercreditor Agreement, see Intercreditor Agreement in this paragraph 18. For a description of the Cash Distribution Agreement, see Cash Distribution Agreement in this paragraph 18. 10.75% Guaranteed Senior Secured Notes On 6 October 2010, Bumi Investment Pte. Ltd., a wholly owned subsidiary of Bumi Resources, issued the 10.75% Guaranteed Senior Secured Notes in an aggregate principal amount of US$700.0 million. The Bumi Resources Group used the net proceeds of the 10.75% Guaranteed Senior Secured Notes to prepay certain of the Bumi Resources Groups then-outstanding indebtedness. The 10.75% Guaranteed Senior Secured Notes are secured by the Common Security on an equal and ratable basis with the other Intercreditor Debt, and are guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors. Maturity Date The maturity date for the 10.75% Guaranteed Senior Secured Notes is 10 November 2016. Bumi Investment Pte. Ltd. has agreed to redeem each of the 10.75% Guaranteed Senior Secured Notes not previously redeemed or purchased and cancelled at its principal amount together with unpaid accrued interest thereon on the maturity date.

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Interest The 10.75% Guaranteed Senior Secured Notes bear interest from (and including) 6 October 2010 at the rate of 10.75 per cent. per annum, payable every six months on 6 April and 6 October of each year, commencing 6 April 2011. Security The obligations of Bumi Investment Pte. Ltd. with respect to the 10.75% Guaranteed Senior Secured Notes under the indenture entered into in connection therewith are secured by a pledge of the promissory note evidencing the intercompany loan from Bumi Investment Pte. Ltd. to Bumi Resources of the net proceeds of the 10.75% Guaranteed Senior Secured Notes and all proceeds from that promissory note. The 10.75% Guaranteed Senior Secured Notes are also secured by liens on the assets over which the Common Security has been created, which are shared pari passu in right and priority of payment with the other Intercreditor Debt. Optional Redemption Bumi Investment Pte. Ltd. may at its option redeem the 10.75% Guaranteed Senior Secured Notes prior to 6 October 2014, in whole but not in part, at a redemption price equal to 100 per cent. of the principal amount of the 10.75% Guaranteed Senior Secured Notes plus accrued and unpaid interest, if any, to the redemption date, plus a make-whole premium. Bumi Investment Pte. Ltd. also has the option to redeem the 10.75% Guaranteed Senior Secured Notes on or after 6 October 2014, in whole or in part, at the redemption prices equal to 105.375 per cent. (during the twelve-month period beginning on 6 October 2014), 102.6875 per cent. (during the twelve-month period beginning on 6 October 2015) and 100 per cent. (during the twelve-month period beginning on 6 October 2016) of the principal amount of the 10.75% Guaranteed Senior Secured Notes, plus accrued and unpaid interest, if any, to the relevant redemption date. Further, Bumi Investment Pte. Ltd. may redeem up to 35 per cent. of the aggregate principal amount of the 10.75% Guaranteed Senior Secured Notes before 6 October 2014 at a redemption price of 110.75 per cent. of the principal amount of the 10.75% Guaranteed Senior Secured Notes, plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of capital stock of Bumi Resources. Subject to certain exceptions, Bumi Investment Pte. Ltd. may redeem all, but not some, of the 10.75% Guaranteed Senior Secured Notes at their principal amount, plus accrued interest, upon a change in tax law increasing the rate of Indonesian or Singapore withholding taxes on amounts payable under the 10.75% Guaranteed Senior Secured Notes or the guarantees provided by Bumi Resources and the Bumi Resources Subsidiary Guarantors. Repurchase of Notes Upon a Change of Control Triggering Event Bumi Investment Pte. Ltd. must make an offer to repurchase all the 10.75% Guaranteed Senior Secured Notes outstanding at a purchase price equal to 101 per cent. of their principal amount, plus accrued and unpaid interest, upon the occurrence of a change of control triggering event, that is, when (i) any person or a group of persons (acting together), other than Bakrie & Brothers and its affiliates, acquires control of Bumi Resources or Bumi Resources undertakes a consolidation, merger or sale transaction with respect to all or substantially all of its assets resulting in another person acquiring control of Bumi Resources or its successor entity and (ii) there is a ratings decline of the 10.75% Guaranteed Senior Secured Notes. Certain Restrictive Covenants The indenture constituting the 10.75% Guaranteed Senior Secured Notes contains restrictions on the ability of Bumi Resources, Bumi Investment Pte. Ltd., the IndoCoal Group Companies and their holding companies (collectively, the 10.75% Notes Restricted Group) to take certain actions, including the following: incur additional debt if the Bumi Resources Groups fixed charge coverage ratio (as defined in its indenture) would be less than 2.5 or 3.0 (depending on the entity incurring the indebtedness) to 1; make restricted payments; issue redeemable and preferred stock; create liens; sell or otherwise dispose of assets;

489

enter into mergers or consolidations; enter into sale and leaseback transactions; enter into transactions with affiliates; and enter into new lines of business,

unless the relevant member of the 10.75% Notes Restricted Group fulfils certain conditions or the transaction or action sought to be undertaken falls within the exceptions provided under the terms of the indenture constituting the 10.75% Guaranteed Senior Secured Notes. Nomura Loan On 18 October 2010, BRJ as borrower, BRM as guarantor, Nomura International plc as lender, facility agent and security agent and Nomura Singapore Limited as arranger entered into a loan agreement, under which the lender agreed to provide to BRJ a loan facility in the amount of US$ 21 million, with a term of 27 months following the initial drawdown (the Nomura Loan). On 21 October 2010, BRJ drew down US$21 million under the loan from Nomura. The proceeds of the loan must be used to pay for certain expenses relating to the initial public offering of BRM, capital expenditure of BRM and working capital requirements of BRM. Interest accrues on the loan at a rate of 8 per cent. per annum and is payable every three months. The loan must be repaid in instalments of 2,333,333 at the end of every three month period commencing on 11 January 2011, with any outstanding amounts under the loan to be repaid on the loan maturity date. Subject to certain exceptions, (i) none of BRM or its subsidiaries (including BRJ) may dispose of its assets, change the nature of its business, or amend its constitutional documents, (ii) neither BRJ nor BRM may enter into any merger or amalgamation, and (iii) BRJ may not create or allow to exist any security interest on its assets, incur any financial indebtedness, pay any dividends, make any loans or enter into derivative transactions. Under the terms of the loan agreement, events of default include, (i) non-payment, (ii) breach of other obligations by BRJ or BRM, (iii) misrepresentation by BRJ or BRM, (iv) cross default or cross acceleration of any financial indebtedness of BRJ, BRM, KPC or IndoCoal Resources (subject to a minimum threshold), (v) any insolvency or bankruptcy event or proceedings in relation to BRJ, BRM, KPC or IndoCoal Resources, (vi) BRJ, BRM, KPC or IndoCoal Resources ceases or threatens to cease to carry on business, (vii) any material amendment, waiver, modification, variation, revocation, cancellation or termination in relation to certain specified agreements, including a marketing agreement between Mitsubishi Corporation, KPC and IndoCoal Resources, any material coal off-take contract to a Japanese company, and a cash distribution agreement between BNY Mellon, KPC and IndoCoal Resources, is effected without the prior written consent of the facility agent, (viii) any litigation which, if adversely determined, could reasonably be expected to have a material adverse effect on the business, prospects or condition (financial or otherwise) of BRJ, BRM, KPC or IndoCoal Resources, (ix) any court judgement or order is made against BRJ, BRM, KPC or IndoCoal Resources for an amount more than US$1 million, (x) all or a material part of the assets of BRJ, BRM, KPC or IndoCoal Resources are expropriated, (xi) any required operating licence for the business of BRJ, BRM, KPC or IndoCoal Resources is revoked or terminated, (xii) cancellation of any material insurances in respect of the business of BRJ, BRM, KPC or IndoCoal Resources, and (xiii) any event or series of events occurs which, in the opinion of the majority of lenders under the loan agreement, has or is reasonably likely to have a material adverse effect on the business, prospects or condition (financial or otherwise) of BRJ, BRM, KPC or IndoCoal Resources. The lenders under the loan agreement also have the right to require BRJ to repay or prepay the loan in full (together with accrued interest) immediately following a change of control of BRJ. The obligations of BRJ and BRM under the loan agreement are secured by (i) an assignment of a marketing advisory agreement dated on or about 18 October 2010 between BRJ and Mitsubishi Corporation, (ii) an assignment of the inter-company loan agreement dated 18 October 2010 between BRJ and BRM, (iii) a charge over an escrow account held with BNY Mellon pursuant to the terms of an escrow agreement dated 18 October 2010 between BRJ and BNY Mellon, (iv) an assignment of a coal

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price swap contract dated 21 October 2010 between BRJ and Nomura International plc, and (v) a pledge over all the shares of BRJ held by BRM. Intercreditor Agreement On 1 October 2009, Bumi Resources and the Bumi Resources Subsidiary Guarantors (as initial obligors), BNY Mellon, as administrative agent and security agent under the Bumi Resources-CFL Loan, Offshore Account Bank and Offshore Common Security Agent and Standard Chartered Bank, Jakarta Branch, as Onshore Account Bank and Onshore Common Security Agent entered into an intercreditor agreement governing the sharing of collateral for the benefit of the lender under the Bumi Resources-CFL Loan (the Intercreditor Agreement) and other creditors who have provided financial indebtedness to other Bumi Resources subsidiaries (which was subsequently amended and restated on 29 October 2009 to add CFL, the original lender under the Bumi Resources-CFL Loan, as a secured party and to provide for the resolution of certain disputes under the Intercreditor Agreement by arbitration). The Intercreditor Agreement sets forth the voting rights of creditors who are parties to the agreement as Secured Creditors and the instructions they may give to the Common Security Agents regarding, among other things: the pari passu ranking of certain debts of Bumi Resources and any other members of the Bumi Resources Group which accedes to the Intercreditor Agreement as a new obligor (the Bumi Resources Obligors); enforcement restrictions; application of recoveries; enforcement of security; incurrence of additional debt; incurrence of hedging debt; and maintenance of bank accounts under the Intercreditor Agreement and payments of Intercreditor Debt (as defined below).

As of 31 December 2010, the lender under the Bumi Resources-CFL Loan, the lenders under the US$200.0 Million DB Facility and the US$150.0 Million CS Facility, the holders of the 12% Guaranteed Senior Secured Notes and the holders of the 10.75% Guaranteed Senior Notes (and their administrative agents, security agents and trustees, as the case may be) are entitled to the security arrangements of the Intercreditor Agreement. The Intercreditor Agreement is governed by English law. The following description is simply a summary of the material terms and provisions of the Intercreditor Agreement and should not be considered to be a complete statement of its terms and conditions. Common Security Under the terms of the Intercreditor Agreement, the liabilities of the obligors under the Bumi Resources-CFL Loan, the 12% Guaranteed Senior Secured Notes, the US$200.0 Million DB Facility, the US$150 Million CS Facility, the 10.75% Guaranteed Senior Secured Notes, the security documents under these loans and bonds and the financing documents under any Additional Intercreditor Debt (as defined below) or Hedging Intercreditor Debt (as defined below) (together, Intercreditor Debt), rank pari passu in right and priority of payment, unless otherwise provided in the Intercreditor Agreement. All security interests (the Common Security) created under the following security documents (the Common Security Documents): (1) (2) the assignment of the right of Bumi Resources to receive any payments under the Cash Distribution Agreement; the first priority charge over an interest bearing US dollar account (into which US dollar payments made to Bumi Resources are deposited under the terms of the Cash Distribution Agreement) in the name of Bumi Resources and held with BNY Mellon, as the offshore account bank;

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(3)

the pledge over the receivables standing to the credit of the interest bearing Indonesian Rupiah account (into which Indonesian Rupiah payments made to Bumi Resources are deposited under the terms of the Cash Distribution Agreement) in the name of Bumi Resources and held with Standard Chartered Bank, Jakarta Branch, as the onshore account bank; the power of attorney to withdraw funds from the interest bearing Indonesian Rupiah account in the name of Bumi Resources and held with the onshore account bank; the Share Pledges, namely the share pledges over the shares of the Bumi Resources Subsidiary Guarantors and the IndoCoal Group Companies by Bumi Resources and the Bumi Resources Subsidiary Guarantors; the assignment of the right of Bumi Resources and each CFL Loan Restricted Subsidiary to receive any payments under the intercompany loans between them (as lenders) and the subsidiaries of Bumi Resources, other than a finance subsidiary (as borrowers); the subordination of indebtedness incurred by Bumi Resources and each CFL Loan Restricted Subsidiary to any subsidiary of Bumi Resources, other than a finance subsidiary; and any other document evidencing or creating a security interest as designated by Bumi Resources or the Common Security Agents,

(4) (5)

(6)

(7) (8)

rank pari passu as common security for all the Intercreditor Debt irrespective of the order of execution, creation, registration, notice enforcement or otherwise, the date on which the Intercreditor Debt arose, whether a secured creditor is obliged to advance further Intercreditor Debt or any fluctuation in the amount of any intermediate discharge in whole or in part of any of the Intercreditor Debt, unless otherwise provided in the Intercreditor Agreement. Enforcement Restrictions Under the terms of the Intercreditor Agreement, until all of the Intercreditor Debt has been fully and irrevocably paid or discharged, no secured creditor may take any action to exercise any right to enforce any Common Security. However, the Common Security Agents may take action to enforce the Common Security or any rights under the Common Security Documents if: (1) in the case of a payment event of default (a Payment Event of Default), instructed to do so by the affected secured creditor (or its agent) (the Affected Secured Creditor) under the relevant Intercreditor Debt; or in the case of an event of default other than a Payment Event of Default (a Payment Unrelated Event of Default), if instructed to do so by secured creditors (or their agents) representing at least 66 and two thirds per cent. of the Intercreditor Debt (the Majority Secured Creditors) or a group of secured creditors (or their agents) representing a certain designated percentage of the Intercreditor Debt, but which percentage decreases over time if that Payment Unrelated Event of Default remains outstanding (an Instructing Group).

(2)

If an event of default is outstanding under the Intercreditor Debt and the Common Security Agents have received a written notice of that event of default from one of the secured creditors stating that the secured creditor wishes to take enforcement action, the Common Security Agents are required to notify the agents of the other secured creditors within five Business Days of its receipt of the notice. The Affected Secured Creditor is required to determine what enforcement action, if any, is to be taken in the case of a Payment Event of Default, and the Majority Secured Creditors are required to determine what enforcement action, if any, is to be taken in the case of a Payment Unrelated Event of Default and, in both cases, inform the Common Security Agents accordingly. In the case of a Payment Unrelated Event of Default, the Common Security Agents are required to take enforcement actions requested by an Instructing Group, if the Majority Secured Creditors do not reach agreement on actions to be taken after the Payment Unrelated Event of Default. If the circumstances give rise to more than one Instructing Group and there are conflicting instructions from these Instructing Groups, the Common Security Agents are entitled to act upon the instructions of the Instructing Group representing the larger amount of Intercreditor Debt.

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Application of Recoveries Under the terms of the Intercreditor Agreement, the Common Security Agents are required to apply the proceeds from enforcement of the Common Security and all other amounts paid to it under the Intercreditor Agreement in the following manner: (1) first, towards the payment of expenses and costs incurred by, and the remuneration of, the Common Security Agents in relation to the performance of its duties, power or discretion under the Intercreditor Agreement; second, in or toward the payment to the secured creditors pari passu in respect of the outstanding Intercreditor Debt; and third, after discharge of the Intercreditor Debt, in payment of the surplus (if any) to Bumi Resources or any other person entitled to it.

(2) (3)

Enforcement of Security Until the discharge of the Intercreditor Debt, and unless a contrary indication appears in the Intercreditor Agreement or a Common Security Document, each of the Common Security Agents is required to exercise, or refrain from exercising, any right, power, authority or discretion in accordance with the instructions given to it by the Majority Secured Creditors. Any instructions given in accordance with the provisions of the Intercreditor Agreement described above is binding on all of the secured creditors. The Common Security Agents are not liable if they act in accordance with an instruction of the Affected Secured Creditor, the relevant Instructing Group or the Majority Secured Creditors (as the case may be). Each of the Common Security Agents is entitled to refrain from acting until as it has received security satisfactory to it against any cost, loss or liability in complying with any instructions given by the Affected Secured Creditor, the relevant Instructing Group or the Majority Security Creditors (as the case may be). In cases where it has requested clarification or further instructions on the matters relating to its powers, rights and discretion, each of the Common Security Agents is entitled to refrain from acting until that clarification or instructions is received. Incurrence of Additional Intercreditor Debt Bumi Resources and any other Bumi Resources Obligor may, from time to time, incur additional debt which is or is to be secured by the Common Security under the Intercreditor Agreement (the Additional Intercreditor Debt), subject to the following conditions: (1) five Business Days prior to the incurrence of the Additional Intercreditor Debt, Bumi Resources has delivered to the Common Security Agents a duly completed certificate stating that: (a) no event of default in respect of the any Intercreditor Debt has occurred or is outstanding or may be reasonably expected to occur as a result of the proposed Additional Intercreditor Debt or the entering into of any finance documents related to the Additional Intercreditor Debt; and each of the representations and warranties made by the Bumi Resources Obligors under each of the finance documents related to the Intercreditor Debt is true and accurate and will remain true and accurate in all material respects on the proposed date of the incurrence of the Additional Intercreditor Debt;

(b)

(2)

the Common Security Agents have received a duly executed deed of accession in the form attached to the Intercreditor Agreement (the Deed of Accession) from each party to the Additional Intercreditor Debt (including each Bumi Resources Obligor, creditor, bond trustee, facility agent, account bank and security agent), under which that party agrees to accede and become a party to the Intercreditor Agreement; the Common Security Agents have received legal opinions from external counsel (subject to customary qualifications) confirming that all necessary or desirable steps for the new finance parties to share pari passu in the Common Security have been completed; and the Common Security Agents have not received a notice from any secured creditor (or its agent) or a trustee for bondholders that an event of default has occurred and is outstanding under the finance documents in relation to the existing Intercreditor Debt.

(3)

(4)

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Incurrence of Hedging Intercreditor Debt A person providing hedging under the relevant hedging documents (the Hedging Documents) to any Bumi Resources Obligor (the Hedging Party) which is intended to be secured by the Common Security (the Hedging Intercreditor Debt) may accede to the Intercreditor Agreement and share in the Common Security in respect of the relevant hedging transaction if no event of default is outstanding at the time the Hedging Party has executed and delivered a Deed of Accession to the Common Security Agents. All Hedging Documents must be based on the 1992 ISDA Master Agreement or the 2002 ISDA Master Agreement, unless the Common Security Agents agree otherwise. Unless the Majority Secured Creditors agree otherwise: (1) none of the Bumi Resources Obligors will be permitted to pay, and no Hedging Party will be permitted to demand, in cash or in kind, amounts under the Hedging Documents, except for scheduled payments under the Hedging Documents or proceeds of enforcement pursuant to the Intercreditor Agreement; a Hedging Party is not permitted to terminate or close out any hedging transaction covered by the Hedging Documents prior to the originally stated maturity of the relevant Hedging Document or rely on any condition precedent to that hedging transaction so as to not make a payment or delivery under the relevant Hedging Documents, unless: (a) the Hedging Intercreditor Debt has not been paid when due and the default continues for more than one month after a notice of default containing the Hedging Partys intention to close out or not to make payment is given to the Common Security Agents; or any other event of default has arisen under a Hedging Document and is outstanding for more than 60 days; and

(2)

(b) (3)

no Hedging Intercreditor Debt can be discharged by set-off or any right of combination of accounts or otherwise except as described in paragraph (1) above.

In the event of the termination of a hedging transaction covered by Hedging Documents, the Hedging Documents must provide for two way payments or payments under the Second Method of the 1992 ISDA Master Agreements. At the time of any enforcement action, each Hedging Party is required to promptly exercise any rights that it may have to terminate or close out the transactions under the Hedging Documents. Maintenance of Accounts; Payments of Intercreditor Debt Under the terms of the Intercreditor Agreement and the Common Security Documents, Bumi Resources is required to maintain an interest bearing US dollar bank account with BNY Mellon, as the offshore account bank (the USD Proceeds Account) and an interest bearing Indonesian Rupiah bank account with Standard Chartered Bank, Jakarta branch, as the onshore account bank (the IDR Proceeds Account). Bumi Resources is required to ensure that all amounts payable to it under the Cash Distribution Agreement in US dollars are paid into the USD Proceeds Account and that all amounts in Indonesian Rupiah are paid into the IDR Proceeds Account. On the business day following the business day when the monthly US dollar proceeds under the Cash Distribution Agreement are credited to the USD Proceeds Account, the Offshore Common Security Agent is required to instruct the offshore account bank to transfer the relevant amounts of the monthly debt service in respect of the Intercreditor Debt to the corresponding debt service accounts. If the amounts on deposit in the USD Proceeds Account are insufficient to meet the aggregate monthly debt service amount for the outstanding Intercreditor Debt, the Offshore Common Security Agent is required to (i) instruct the offshore account bank to transfer an amount to each debt service account which bears the same proportion to the available debt service amount as its required debt service amount bears to the aggregate required debt service amount and (ii) instruct the onshore account bank to transfer, from the IDR Proceeds Account following a conversion into US dollars, to the USD Proceeds Account an amount equal to the shortfall and if such amount is less than the shortfall, instruct the offshore account bank to transfer such amount, in the same proportions, to the corresponding debt service accounts. On the second business day falling after the date the US dollar proceeds under the Cash Distribution Agreement are credited monthly to the USD Proceeds Account, the Common Security Agents are required to instruct the offshore account bank and onshore account bank to transfer all amounts on deposit in both the USD Proceeds Account and the IDR Proceeds Account to bank accounts notified to 494

the Common Security Agents by Bumi Resources provided the monthly debt service amount in respect of the Intercreditor Debt has been funded in full and the Common Security Agents is not aware that any payment then due under any finance documents related to Intercreditor Agreement remains unpaid or that an event of default is outstanding on that date. 19. The Berau Groups Material Contracts The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by Berau or another member of the Berau Group: (i) within the two years immediately preceding the date of this document and which are, or may be, material to the Berau Group, and (ii) at any other time and contain provisions under which any member of the Berau Group has an obligation or entitlement which is, or may be, material to the Berau Group as at the date of this document: Material Agreements CCOW In 1983, Berau Coal entered into a CCOW with PNTB, a state-owned company that had the authority to grant coal mining concessions. PNTBs rights and obligations were subsequently transferred to PT Perusahaan Negara Tambang Batubara. In 1997, the CCOW was further amended to transfer PT Perusahaan Negara Tambang Batubaras rights and obligations to the Indonesian Government. Concession Area Pursuant to the CCOW, Berau Coal obtained a permit to conduct coal mining operations in a concession area covering 487,217 hectares in East Kalimantan. After conducting mining feasibility studies, Berau Coal voluntary relinquished parts of the concession area, leaving it with a 118,400 hectare concession area for coal mining. Under the CCOW, Berau Coal is obligated to explore and exploit coal resources in its concession area. Berau Coal was granted an exclusive right to mine in six exploration areas: Lati, Binungan, Sambarata, Kelay, Gurimbang and Punan. Term and Operating Period The Berau Coals CCOW is effective for a 30-year period after the commencement of the last commercial operation of a mining area unless extended pursuant to a request made to the MEMR. The expiry date of the CCOW is 26 April 2025 pursuant to Decree No. 858 K/20.01/DJP/2000 dated 29 December 2000. The decree suggests that the permit for the commencement of mining operations and the concession of the mining area consisting of Lati, Binungan, Sambarata, Teluk Bayur, Kelay, Punan and Gurimbang with total covering area of 121,589.1 hectares is retroactively valid for 30 years from 27 April 1995. The CCOW provides that the ownership of the coal deposits remains with the Indonesian Government until the coal is mined and delivered to customers. Berau Coal may request an extension of the operating period of a particular mine site if it is considered necessary; however the discretion to approve such request lies solely with the MEMR. Production The Berau Coals CCOW also provides that the MEMR is entitled to receive 13.5 per cent. of the total coal produced and available for sale each year as of the commencement of commercial production. In September 1996, the Indonesian Government issued Decree 75 which provides that royalties totalling 13.5 per cent. of the proceeds of sale derived from the final processed coal production in each year, net of certain costs and an administration fee of 2.5 per cent., may be paid to the MEMR instead of the physical delivery of coal produced. Accordingly, Berau Coal markets and sells all of the coal it produces, and pays to the MEMR the cash proceeds resulting from the sale of 13.5 per cent. of its final processed coal production in each year, after deducting certain costs and the abovementioned administrative fee. The MEMR may also require Berau Coal to sell all or part of its coal domestically to meet local demands. Such mandatory domestic sales must be on mutually agreed terms and must not result in Berau Coal defaulting on any existing coal supply agreements with third parties. Berau Coal is entitled to the proceeds of 86.5 per cent. of its final processed coal, free of royalty payment to the Indonesian Government. For information regarding Berau Coals request for reimbursement of VAT paid and the offsetting of such VAT amounts against its coal entitlement payments to the Indonesian Government, see Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain valueadded tax entitlements against their coal royalty obligations to the Indonesian Government under their

495

CCOWs. The treatment of these amounts may be rejected by the Indonesian Government in Risk Factors. Payment of Taxes Berau Coals CCOW requires payment of the following taxes: corporation taxes of 35.0 per cent. of the taxable income of Berau Coal during the first full 10 years after the commencement of the operating period and 45.0 per cent. of the taxable income of Berau Coal thereafter; withholding taxes on: (i) (ii) dividends, interest and royalties on patents at a rate of 10.0 per cent.; remuneration of Berau Coals employees, which is based on the applicable personal income tax rates in Indonesia for expatriate individuals who are employed or engaged by Berau Coal or its contractors or affiliates and who remain in Indonesia for more than 90 days during any calendar year; other payments made by Berau Coal (including fees for technical services based on prevailing laws and regulations in Indonesia at a rate of 10.0 per cent.);

(iii)

a regional development tax of US$100,000 per annum as from the commencement of the construction period; sales tax on services rendered to Berau Coal in Indonesia at a rate not exceeding 5.0 per cent. of the assessable basis of the services which is the percentage approved by the Indonesian Minister of Finance of the total contract sum; stamp duty on loan agreements between Berau Coal and financial institutions, for use in Indonesia, up to a maximum rate of 0.1 per cent. of the total amount of the loan referred to in the loan agreement; sales tax on goods purchased by Berau Coal in Indonesia; and excise taxes on tobacco and liquor.

In addition, Berau Coal has a right to an investment allowance of 20.0 per cent. of its total investment (at a rate of 5.0 per cent. per year) from taxable income. With the exception of the taxes specified above, the Indonesian Government has agreed to hold Berau Coal harmless from all present and future Indonesian taxes, duties, rentals and royalties levied by the Indonesian Government (including provincial and regency governments), including transfer taxes, import and/or export duties on materials, equipment and supplies brought into or taken out of Indonesia, exactions on property, capital, net worth, operations, remittances or transactions (including any tax or levy on or in connection with coal operations performed by Berau Coal or its contractors). In the event that Berau Coal (or another person on its behalf) pays any taxes from which Berau Coal is exempt under its CCOW, the Indonesian Government is obligated to reimburse Berau Coal (or another person on its behalf) within 60 days after receipt of the invoice. In a practice that Berau believes to be consistent with this indemnification provision, Berau Coal has been setting off its entitlement payments to the Indonesian Government by certain VAT payments that Berau Coal has been required to make since 2001. See Risk Factors Risks Relating to the Groups Operations KPC, Arutmin and Berau Coal have set off certain value-added tax entitlements against their coal royalty obligations to the Indonesian Government under their CCOWs. The treatment of these amounts may be rejected by the Indonesian Government. Default, Settlement of Disputes and Termination Under the Berau Coal CCOW, if Berau Coal is in default constituting a major breach, the MEMR may deliver a written notice to Berau Coal requiring Berau Coal to correct the default within a period of not less than 60 days. However, if Berau Coal defaults on any of its payment obligations, it only has a 30day cure period after it receives a default notice from MEMR. Both parties are entitled to terminate the CCOW by giving 90 days written notice if the other party fails to correct a major breach within the cure

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period. The CCOW is governed by the laws of Indonesia and any disputes except for tax disputes shall be resolved by arbitration at ICSID. Sale of Indonesian Governments Coal Portion On 23 November 2001, Berau Coal entered into the Coal Sale Agreement with the Indonesian Government, effective for five years as of the signing date, pursuant to which the Indonesian Government has appointed Berau Coal to sell the Indonesian Governments allocation of 13.5 per cent. of coal under Article 12.1 the CCOW. The Indonesian Government will pay 13.5 per cent. of all shipping and land transportation costs and 2.5 per cent. for administration cost of every tonne of the Indonesian Governments coal portion from each shipping in FOB price at Jetty Lati and/or Jetty Suaran. Discussion between Berau Coal and the Indonesian Government for the extension of the Coal Sale Agreement is still on-going, particularly in relation to the cost payable by the Indonesian Government. In the absence of an effective agreement, both parties continue to perform their obligations under the Coal Sale Agreement. Cash and Accounts Management Agreement Under its cash and accounts management agreement, the Berau Group has established a series of domestic and offshore bank accounts with designated account banks. Each account may only make a transfer, payment or release of funds in accordance with the cash and accounts management agreement. With certain limited exceptions, all of the cash receipts of Berau and the Berau Group Subsidiary Guarantors and any other subsidiaries of Berau that guarantee the 12.5% Guaranteed Senior Secured Notes (the Berau Group Subsidiary Guarantors), including all the coal sales revenues of Berau Coal, will be deposited into designated accounts. Funds in these accounts will be applied to for payments of operating expenses, taxes and capital expenditures of Berau and the Berau Group Subsidiary Guarantors. Subsequently, payments will be made to Sojitz as the 10 per cent. shareholder of Berau Coal, and to debt service and required debt service reserves under the 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility. After required amounts for debt service and debt service reserves for the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility are funded, 50 per cent. of the remaining funds will be deposited in a lender reserve account from which funds may only be applied to payment, redemption or repurchase of Secured Obligations (as defined below), and the other 50 per cent. of such remaining funds will be deposited in a reserve account from which the Berau Group will be required to fund, with an amount equal to 90 per cent. of the overrun, any of the collection accounts in accordance with terms specified in the cash and accounts management agreement. The remainder will first lend amounts necessary to cover shortfalls in various collection and debt accounts, in accordance with terms specified in the cash and accounts management agreement, second, the amounts needed to cover the administrative accounts of any obligor and third, the remaining funds can be applied at the Berau Groups discretion, subject to applicable covenants in the Berau Groups debt arrangements. The accounts under the cash and accounts management agreement, including the holding accounts and the collection accounts, are subject to charges in favour of Credit Suisse AG, Singapore Branch, as the common security agent (the Berau Group Common Security Agent) under the intercreditor agreement for the holders of the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility (the Berau Group Intercreditor Agreement). These accounts will form part of the common security for the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility, except that the sub-accounts for payment of debt service and debt service reserves for the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility will be pledged as security solely for the 12.5% Guaranteed Senior Secured Notes and such loans, respectively. Under the cash and accounts management agreement, Berau Coals annual budgets for operating expenses and capital expenditures will be submitted to the Berau Group Common Security Agent 30 days before the beginning of each financial year. Until the Berau Senior Secured Credit Facility is fully repaid, the Majority Lenders (as defined in the Berau Senior Secured Credit Facility) will have the right to approve these budgets. The following chart summarises the series of accounts under the cash and accounts management agreement and the order of priority in which cash receipts deposited into those accounts will be allocated and applied to designated costs and expenses of the Berau Group.

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Revenues and other cash of Berau Coal excluding certain cash

Revenues and other cash of the Group (other than Berau Coal) excluding certain cash

Holding accounts Within two business days of receipt Collection accounts Bi-weekly Tax reserve account Bi-weekly Payment of annual corporate income tax if necessary Bi-weekly Payment of operating expenses (1) and capital expenditures Monthly(2)
(3) Berau Coal asset sale proceeds account

Collection accounts Bi-weekly Payment of administrative costs

Operating expenses reserve account Bi-weekly

Replacement of disposed assets

Distribution account Bi-weekly

90% Prepayment, early redemption or repurchase of Secured Obligations

10%

10% Sojitz reserve account

90% Berau Coal Energy debt service account

Quarterly payment of fees, costs and expenses

Quarterly interest payments (4)

Quaterly amortisation

Quaterly deposit of shortfall in debt (5) reserve accounts for Secured Obligations 50%(6) Berau Coal Energy lender reserve account 50%(6) Berau Coal Energy reserve account

Prepayment, early redemption or repurchase of Secured Obligations

To fund 90% of amount in excess of budgeted capital expenditure and operating costs To fund shortfalls in the collection accounts, the debt service accounts and the debt reserve accounts To fund administrative costs of any Group company to the extent not funded by the collection accounts Any other purpose determined by Berau Coal Energy

Notes: (1) Subject to exercise by Berau Coal of flex for additional operating expenses up to 10% of the then-current annual operating expense budget, additional expenses due to increases in production and increases in capital expenditures up to 15 per cent. of the then-current annual capital expense budget. (2) Only at Berau Coals request. Amount of aggregate monthly top-ups not to exceed US$15 million per financial year. (3) A relevant sale of assets by Berau Coal Energy or a Berau Group Subsidiary Guarantor other than Berau Coal will be subject to similar provisions. (4) In the case of the notes, 50 per cent. of the next interest payment on the then-outstanding principal amount of the notes. (5) In the case of the notes, the reserve will be one full semi-annual interest payment on the then-outstanding principal amount of the notes. (6) After the Berau Senior Secured Credit Facility is fully repaid, 100 per cent. of cash remaining after funding debt service and debt service reserve accounts for the Secured Obligations will be deposited in the Berau Coal Energy reserve account.

Berau Coals Collection Accounts Berau Coal will be obligated to send irrevocable notices of assignment to its customers instructing them to continue to deposit all payments on their purchases of Berau Coals coal products into holding accounts with PT ANZ Panin Bank. Berau Coal will also be obligated to use reasonable efforts to procure acknowledgements of these notices from its customers. In addition, all other cash with certain exceptions will also be deposited into the holding accounts with PT ANZ Panin Bank. PT ANZ Bank 498

Panin will be required to ensure that all amounts deposited into the holding accounts, within two Business Days of receipt, are deposited into collection accounts under the cash and accounts management agreement. On bi-weekly distribution dates, funds will be transferred from the collection accounts of Berau Coal: First, to the tax reserve account to fund corporate taxes, based on a bi-weekly allocation of Berau Coals anticipated annual corporate income tax liability. Second, if additional funds are required for an imminent annual corporate income tax payment, such amounts as are necessary to provide for payment of such tax. Third, to certain operating accounts for payment of budgeted operating costs and capital expenditures, based on a bi-weekly allocation of Berau Coals budgeted operating expenses and capital expenditures for the calendar year, plus certain additional amounts that Berau Coal may designate due to differences in timing of incurrence of such expenses during the course of a year and increased expenses that were not included in Berau Coals operating expense and capital expenditure budgets. Fourth, on alternate bi-weekly distribution dates at Berau Coals written request, to the operating reserve accounts up to an aggregate amount not exceeding US$15 million per year. Fifth, to Berau Coals distribution account.

Berau Coal Distribution Account On a bi-weekly basis, funds will be transferred from Berau Coals distribution account as follows: 10 per cent. of the funds to the Sojitz reserve account; and 90 per cent. of the funds to the Berau debt service account.

Collection Accounts of Berau Coal Energy and the Berau Group Subsidiary Guarantors Berau and its subsidiaries (other than Berau Coal) that are party to the cash and accounts management agreement (initially, the initial Berau Group Subsidiary Guarantors other than Berau Coal) will deposit all revenues and any other cash they receive from time to time (subject to certain exceptions) into collection accounts. Notices will be sent out to the principal debtors of each of the Berau Group companies (other than Berau Coal) requiring them to deposit all payments into the collection accounts. On bi-weekly distribution dates, funds will be transferred from these collection accounts: first, to pay any administrative costs of the relevant Berau Group company (if any); and second, the remainder to the Berau debt service account.

Berau Operating Reserve Accounts Berau will deposit cash proceeds from additional debt it receives into operating reserve accounts. Berau Debt Service Account On a quarterly basis, funds in the amounts as set out below will be transferred from the Berau debt service account into the corresponding debt service account and debt service reserve account: in respect of the Berau Senior Secured Credit Facility, the aggregate of fees, costs and expenses, interest, amount of principal and reserve payments due and payable on a quarterly basis; in respect of the notes, guarantees and the security documents, the aggregate of fees, costs and expenses and interest on the notes accrued on a quarterly basis (such that by each semi-annual interest payment date on the notes the required fees, costs and expenses under the indenture and the amount of semi-annual interest payable on the notes has been deposited into this account) and amounts required to maintain a debt service reserve of one full semi-annual interest payment on the then outstanding principal amount of the notes; in respect of the hedging agreements, the aggregate of all scheduled amounts and any amount due and payable under the hedging agreements as a result of the termination; and

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in the case of any additional debt, the aggregate of fees, costs and expenses, interest, amount of principal and reserve payments due and payable on a quarterly basis.

If the aggregate amount in the Berau debt service account on any transfer date is less than the aggregate of the amounts required to be transferred to all the debt service accounts and debt reserve accounts respectively on that date, the amounts in the Berau debt service account will be applied in the following order of priority: first, towards payment of all fees, costs and expenses due and payable on a quarterly basis on that transfer date; second, towards payment of all interest and all quarterly hedging scheduled payments on that transfer date; third, towards payment of all quarterly principal payments and all quarterly hedging termination payments on that transfer date; and fourth, towards payment of all quarterly reserve payments on that transfer date.

On each quarterly transfer date, after all the transfers to the relevant debt service accounts and debt service reserve accounts have been made in full, the funds in the Berau debt service account will be transferred as follows: 50 per cent. of the remaining amounts to the lender reserve account; and 50 per cent. of the remaining amounts to the Berau reserve account.

If either (i) the amount in the lender reserve account on the date falling one business day before such transfer date equals or exceeds 50 per cent. of the principal amount of the liabilities under the Berau Group Intercreditor Agreement, the Berau Senior Secured Credit Facility, the notes, the guarantees, the security documents, the hedging agreements and any additional debt agreements (Secured Obligations) on that date; or (ii) on such transfer date, there are no amounts outstanding under the Berau Senior Secured Credit Facility, then the entire amount in the Berau debt service account will be transferred solely to the Berau reserve account. If there are no amounts outstanding under the Berau Senior Secured Credit Facility, Berau may request that all amounts then held in the lender reserve account be transferred into the Berau reserve account. Berau Lender Reserve Account On any business day, Berau may request that all or a part of the amounts in the lender reserve account be applied towards the voluntary prepayment, early redemption or repurchase of any Secured Obligations, provided that such prepayment, redemption or repurchase will be effected on a pro rata basis to the extent required by the relevant Secured Obligations. Berau Reserve Account On each transfer date or each distribution date, in each case, only after the relevant transfers as described above have been effected, amounts from the Berau reserve account may be transferred in the following order of priority: first, an amount equal to 90 per cent. of the amount in excess of the budgeted capital expenditure and operating costs to any Berau Coal collection account for application in accordance with the cash and accounts management agreement; second, an amount necessary to cover any shortfall in: (i) either of Berau Coals collection accounts to make any payment to the tax reserve account, the operating accounts, the operating reserve accounts and Berau Coals distribution account; or the Berau debt service account to make any payment to the debt service accounts and the debt reserve accounts;

(ii)

500

provided that, other than pursuant to the second bullet point above, in each case, no default has occurred and is continuing or will occur as a result of such withdrawal. Assets Sale Proceeds Accounts Berau Coal will be required to deposit all its net cash proceeds from the disposal of certain assets into the Berau Coal asset sale proceeds account within five Business Days of completion of the relevant disposal. The amounts in the Berau Coal asset sale proceeds account may be applied towards the purchase or acquisition of replacement assets that are comparable or superior as to type, value or quality to the asset that was the subject of the disposal. If not so applied within 360 days after the deposit of such net proceeds, any remaining proceeds will be applied as follows: 10 per cent. of such remaining proceeds to the Sojitz reserve account; and 90 per cent. of such remaining proceeds towards the prepayment, early redemption or repurchase of any Secured Obligations, provided that such prepayment, redemption or repurchase will be effected on a pro rata basis to the extent required by the relevant Secured Obligations.

To the extent the application of the net cash proceeds of certain sales of assets by Berau or any Berau Group Subsidiary Guarantors other than Berau Coal is subject to requirements or restrictions under any Secured Obligations, such net cash proceeds will be deposited into a comparable asset sale proceeds account for the relevant company and will be subject to the foregoing requirements with respect to the application of such proceeds. Governing Law; Amendments The cash and accounts management agreement is governed by and construed in accordance with English law. The cash and accounts management agreement can only be amended in accordance with the terms of the Berau Group Intercreditor Agreement. Coal Sales Contract with PT Indonesia Power On 27 August 2008, Berau Coal entered into a 10-year sales contract effective from January 2009 to December 2018 with PT Indonesia Power. The quantity of coal to be delivered by Berau Coal is 3,000,000 tonnes per year, subject to adjustment of up to plus or minus 5 per cent. at the buyers option. The selling price is determined on a yearly basis. PT Indonesia Power may terminate the agreement with 14 days prior written notice if: (i) the coal delivered in three consecutive shipments does not meet the specification stated in the agreement and is rejected by PT Indonesia Power; or (ii) Berau Coal fails to deliver the coal within the agreed schedule for more than two months for reasons which are not acceptable by PT Indonesia Power. Coal Supply Agreement with PT Jawa Power Berau Coal entered into a coal supply agreement with PT Jawa Power in December 1995. The initial term of this agreement was until November 2010. In January 2009, the term of contract was extended by five years to November 2015. The quantity of coal to be delivered by the Company is 2,000,000 tonnes per year, subject to adjustment of up to plus or minus 20 per cent. at the buyers option. The buyer may extend the term by five years on up to three more occasions. The selling price is determined on a yearly basis. If the ownership or control of Berau Coal passes to a third party which is unacceptable to PT Jawa Power, this constitutes an event of default. Either party may terminate the agreement by giving 30 days notice upon the occurrence of certain events, including an event of default. Sales Contracts with Taiwan Power Company On 7 November 2008, Berau Coal entered into two long-term contracts with Taiwan Power Company with terms ending in 2014 and 2016, respectively. The quantity of coal to be delivered is 500,000 tonnes annually for each contract, subject to adjustment of up to plus or minus 20 per cent. at the buyers option. Berau Coal is liable to the buyer for any and all losses, damages and costs (including third-party claims against buyer) caused by or related to Berau Coals failure to perform in accordance with the representations and warranties. The selling price is determined on a yearly basis. Taiwan Power

501

Company has the right to rescind, cancel or terminate without liability by notice to Berau Coal if a certain number of shipments of coal fail to meet the required specifications. If delays caused by force majeure declared by Berau Coal persist for more than 300 days in any 365-day period, Taiwan Power Company may terminate the contract by giving no less than 60 days prior notice to Berau Coal. Marketing Service Agreement with Maple Holdings Limited On 30 December 2009 Berau Coal entered into a 10-year marketing services agreement with Beraus affiliate Maple, which is 99 per cent. indirectly owned by Recapital. Under the agreement, as amended on 14 April 2010, Berau Coal appointed Maple as its exclusive agent for the purposes of providing marketing, pricing and sales agency services on a worldwide basis, excluding Japan. Each existing marketing agreement with other marketing agents will continue until its expiry date. However, prior to such expiry date the existing marketing agreement shall be renegotiated on the most favourable terms possible or will be allowed to expire on the expiry date and shall not be renewed (provided that if an existing marketing agreement expires within 12 months from 30 December 2009, Berau Coal shall extend the agreement for a further term but such term shall not expire prior to 31 December 2010). Maple will receive a fee of 2 per cent. (increasing to 4 per cent. beginning 1 January 2011) of the proceeds Berau Coal actually receives for each sale of coal outside of Japan pursuant to each existing sales contract and each new sales contract for which Maple acts as the agent. Beginning on 31 December 2010, Maple has the right to purchase coal from Berau Coal for a period of ten years. Maple may engage other parties to act as sub-agents with Berau Coal's approval. The sub-agents' fees and commissions are payable by Maple to the extent such fees and commissions relate to the export market and are payable by Berau Coal to the extent they relate to the domestic market. The agreement may be terminated before the expiry of its term by either party with thirty days' written notice upon the occurrence of certain events, including a material default by either party or financial default. It may furthermore be terminated by mutual agreement of both parties in writing any time. As discussed below, Seacoast Offshore, Inc., a wholly owned subsidiary of Berau, acquired Maple in July and August 2010. Coal Marketing Agreement with Noble Resources Pte Ltd On 28 September 2010, Berau, Berau Coal and Maple entered into a life of mine coal marketing agreement with Noble Resources Pte Ltd (Noble) pursuant to which Maple agreed to appoint Noble as Maples sub-agent to market and sell all coal currently mined and produced by Berau Coal from the mines covered by Berau Coals CCOW (the Berau Product) on a worldwide basis excluding Malaysia, Japan and Indonesia (Territory), except that such agreement shall include services relating to the sale of Berau Product under existing coal and marketing agreements. Furthermore, Maple has agreed not to exercise any of its rights, powers or authority under the marketing services agreement between Maple and Berau Coal to carry out any marketing or sales agency services in the Territory (including the right to receive the commission payable in respect of such services). The agreement incorporates the terms of the direct marketing agreement between Berau Coal and Noble subject to certain limited exceptions. Under the agreement, Berau Coal undertakes to Noble and agrees to procure the due and punctual performance and observance by Maple of all its obligations and commitments under the agreement. Noble is required to provide a range of marketing and sales-agency services as fiduciary of Berau Coal in order to secure the most favourable price and terms of sale. In respect of the sale of Berau Product, Noble is entitled to receive a commission of 2.5 per cent. of the net sales value of any Berau Product sold pursuant to any contract for sale of Berau Product in the Territory. Each of Berau, Berau Coal, Maple and Noble have the right to terminate the agreement prior to the expiry of its term upon the occurrence of certain events, including the inaccurateness of contractual representations and warranties or a financial default of either party. Each of Berau, Berau Coal and Maple are entitled to terminate the agreement in the event Noble ceases to be a wholly owned subsidiary of Noble Group Limited at any time. On 28 September 2010, Berau Coal and Noble also entered into a direct marketing agreement on the same terms as set out above except that Noble is appointed as an exclusive agent of Berau Coal rather than a sub-agent of Maple. This separate agreement may become effective in certain circumstances,

502

such as the termination of the Maple Marketing Services Agreement or the issuance to Berau Coal of a new concession to replace Berau Coals CCOW. Agreement to Acquire Maple Holdings Limited On 21 May 2010, Seacoast Offshore Inc., a wholly owned special purpose subsidiary of Berau, entered into a conditional share sale and purchase agreement with Regulus International Pte. Ltd., PT Bukit Mutiara, to acquire Maple, one of Berau Coals marketing agents, for US$201 million. The Berau Group paid the first tranche of US$175 million using a portion of the proceeds from the issuance of the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility. The Berau Group paid the second tranche of US$25 million using a portion of the proceeds from Beraus combined equity offering in August 2010. Financing Arrangements 12.5% Guaranteed Senior Secured Notes General On 8 July 2010, Berau Capital, a wholly owned finance subsidiary of Berau, issued US$350 million aggregate principal amount of 12.5% guaranteed senior secured notes. Berau Capital also issued an additional US$100 million aggregate principal amount of 12.5 per cent. guaranteed senior secured notes on 29 July 2010 (together with the US$350 million aggregate principal amount of 12.5% guaranteed senior secured notes, the 12.5% Guaranteed Senior Secured Notes). The Berau Group used the net proceeds of the 12.5% Guaranteed Senior Secured Notes and the Berau Senior Secured Credit Facility to repay indebtedness and make the first payment for its acquisition of Maple. The maturity date of the notes is 8 July 2015. The notes bear interest from 8 July 2010 at the rate of 12.5 per cent. per annum, payable semi-annually every 8 January and 8 July commencing on 8 January 2011. Security Berau Capitals obligations under the 12.5% Guaranteed Senior Secured Notes are guaranteed by Berau and the Berau Group Subsidiary Guarantors, including Berau Coal and all of Beraus other subsidiaries other than Rognar. The Berau Groups obligations under the notes and the guarantees are secured by substantially all of its assets, including pledges of all of the capital stock that Berau owns, directly or indirectly, in its subsidiaries, security over insurance and receivables of Berau Coal, security over the rights of Berau Coal under material sales and offtake agreements, and security over substantially all of the other assets of Beraus other subsidiaries. Optional Redemption At any time and from time to time prior to 8 July 2013, Berau Capital may redeem up to 35 per cent. of the aggregate principal amount of the 12.5% Guaranteed Senior Secured Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 112.5 per cent. of the principal amount of the notes plus accrued and unpaid interest, if any, to the redemption date; provided that at least US$227.5 million aggregate principal amount of the 12.5% Guaranteed Senior Secured Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering. At any time and from time to time prior to 8 July 2013, Berau Capital may at its option redeem the 12.5% Guaranteed Senior Secured Notes, in whole or in part, at a redemption price equal to 100 per cent. of the principal amount of the notes, plus a premium as of, and accrued and unpaid interest, if any, to the redemption date. Berau Capital also has the option to redeem the 12.5% Guaranteed Senior Secured Notes on or after 8 July 2013, in whole or in part, at a redemption price of 106.25 per cent. (during the twelve-month period beginning on 8 July 2013) or 103.125 per cent. (during the twelve-month period beginning on 8 July 2014) of the principal amount of the notes, plus accrued and unpaid interest, if any, to the redemption date. Subject to certain exceptions, Berau Capital may redeem all, but not some, of the 12.5% Guaranteed Senior Secured Notes at their principal amount, plus accrued and unpaid interest, upon a change in tax law increasing the rate of withholding taxes on amounts payable under the notes or the guarantees. Repurchase of Notes Upon a Change of Control Berau Capital must make an offer to repurchase all of the 12.5% Guaranteed Senior Secured Notes outstanding at a purchase price equal to 101 per cent. of their principal amount, plus accrued and unpaid interest, no later than 30 days after a change of control. For these purposes, a change of

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control is the occurrence of any of the following events: (i) the merger, amalgamation or consolidation of Berau with or into another entity or the merger or amalgamation of another entity with or into Berau, or the sale of all or substantially all the assets of Berau to another entity, other than Recapital Advisors and its affiliates; (ii) Recapital Advisors and its affiliates are the beneficial owners of less than 50.1 per cent. of the total voting power of the voting stock of Berau; (iii) individuals who on 8 July 2010 constituted the board of directors of Berau, together with any new directors whose election was approved by a vote of at least a majority of the directors then still in office who were either directors or whose election was previously so approved, cease for any reason to constitute a majority of the board of directors then in office; or (iv) the adoption of a plan relating to the liquidation or dissolution of Berau. The Berau Transaction will constitute a change of control under the indentures governing the 12.5% Guaranteed Senior Secured Notes. Within 30 days following the Bumi Resources Transaction Closing Date, Berau Capital intends to make a change-of-control offer for all of such notes. According to Bloomberg, the 12.5% Guaranteed Senior Secured Notes were trading at an average price of 117.1 per cent. of their principal amount on 21 February 2011. Restrictive Covenants The indenture governing the 12.5% Guaranteed Senior Secured Notes contains covenants that, among other things, limit the ability of Berau, Berau Coal and certain other subsidiaries of Berau to: incur additional indebtedness if the fixed charge coverage ratio (as defined in the indenture) is less than 2.5 to 1; make investments or other specific restricted payments; declare dividends or purchase or redeem capital stock; enter into agreements that restrict Beraus subsidiaries ability to pay dividends and transfer assets or make inter-company loans; issue or sell capital stock; issue guarantees; enter into transactions with equity holders or affiliates; create liens; enter into sale and leaseback transactions; sell assets; engage in different business activities; or effect a consolidation or merger;

subject to in each case to certain limitations, exceptions and qualifications. Berau Senior Secured Credit Facility On 23 July 2010, Berau and Rognar Holdings BV entered into a US$400 million senior secured credit facility (the Berau Senior Secured Credit Facility) with Credit Suisse AG, Singapore Branch as lead manager, facility agent and security agent and the financial institutions listed therein as lenders. The Berau Group drew down the entire US$400 million available under this facility on 23 July 2010. The facility comprises two tranches: (i) tranche A in a principal amount of US$300 million and (ii) tranche B in a principal amount of US$100 million. Interest for the tranche A loans is payable quarterly and accrues at the rate of LIBOR plus a margin of 4.75 per cent. per annum. The tranche A loans amortise in 13 quarterly instalments on the last day of each calendar quarter from 31 March 2011 through 31 March 2014 plus one final instalment on 23 July 2014. The repayment amount of each instalment varies and is set forth in the facility agreement. Interest for tranche B loans is payable quarterly and accrues at the rate of LIBOR plus a margin of 5.75 per cent. per annum. The tranche B loans amortise in three equal instalments on 30 September 2014, 31 December 2014 and 23 April 2015. The lenders also have the right to require the Berau Group to prepay the loans in full (together with accrued interest and an 504

amount equal to the margin that would have accrued on the loans from the day of prepayment to 23 July 2011) immediately following a change of control of Berau or Berau Coal. Berau is the borrower under the Berau Senior Secured Credit Facility and its obligations under this facility rank pari passu with its obligations under its guarantee of the 12.5% Guaranteed Senior Secured Notes. The facility has the benefit of guarantees from the Berau Group Subsidiary Guarantors that rank pari passu with the guarantees by such entities in favour of the notes and shares with the notes on a pari passu basis in substantially all of the collateral securing the notes. The Berau Senior Secured Credit Facility contains financial and other covenants that impose significant restrictions on the Berau Group. The Berau Group must ensure that the ratio of consolidated total borrowings as of the last day of its most recent fiscal quarter to adjusted consolidated EBITDA for the 12 months ended on the last day of its most recent fiscal quarter does not exceed 3.25:1 in the first year of the facility and 2.75:1 thereafter, the ratio of consolidated EBITDA to interest costs for the 12 months ended on the last day of its most recent fiscal quarter is not less than 3.75:1 and the debt service cover ratio is not less than 1.3:1. Subject to certain exceptions, none of the members of the Berau Group may (i) create or allow to exist any security interest over its assets; (ii) dispose of its assets; (iii) incur or permit to be outstanding any financial indebtedness; (iv) enter into any derivative transaction; (v) be the creditor in respect of any financial indebtedness or guarantee any obligation; (vi) open or maintain any bank accounts; (vii) issue any shares; (viii) acquire any business, shares or other ownership interests of any entity; (ix) enter into any material contract; (x) pay any dividend or make any other distribution in respect of its capital stock (other than as permitted by the cash and accounts management agreement); (xi) amend its constitutional documents; or (xii) in the case of Berau Coal, incur operating costs or capital expenditures in excess of its budget and certain flex amounts as permitted by the cash and accounts management agreement. Events of default under the Berau Senior Secured Credit Facility include non-payment, breach of other obligations by any member of the Berau Group or Mutiara, misrepresentation by any member of the Berau Group or Mutiara, cross-default to other indebtedness of any member of the Berau Group or Mutiara, insolvency of any member of the Berau Group or Mutiara, cessation of business, expropriation, the abandonment of all or a substantial part of the operation or production activities of Berau Coal, repudiation or rescission of Berau Coals CCOW, the commencement of significant litigation, any member of the Berau Group (other than Berau and Berau Coal) ceasing to be a wholly owned subsidiary of Berau, Berau ceasing to hold, directly or indirectly, 90 per cent. of the shares in the capital of Berau Coal or the occurrence of any event reasonably likely to have a material adverse effect on the business, prospects or financial condition of any obligor under the facility or the Berau Group as a whole. On 16 February 2011, Berau received the Lender Waiver, waiving certain rights, including any prepayment rights of the lenders under the Berau Senior Secured Credit Facility that would have arisen as a result of the Berau Transaction. 20. Related Party Transactions Save as described in the Bumi Resources Groups IFRS Consolidated Financial Information for the years ended 31 December 2009 and 2008 included in Part IX Financial Information (as set out in Note 24 Related Parties thereto) and its IFRS Interim Consolidated Financial Information for the months ended 30 September 2010 and 2009 included in Part IX Financial Information (as set out in Note 10 Related Parties thereto) and as described in paragraphs 17.1, 17.3, 17.4 and 17.6 of this Part XII Additional Information, there are no related party transactions between Bumi Resources or members of the Bumi Resources Group that were entered into during the financial years ended 31 December 2008 and 2009 and during the period between 1 January 2010 and up to and including the date of this document. Save as described in the Berau Groups IFRS Interim Consolidated Financial Information for the years ended 31 December 2007, 2008 and 2009 included in Part IX Financial Information (as set out in Note 17 Related Parties thereto) and its IFRS Interim Consolidated Financial Information for the nine months ended 30 September 2010 and 2009 included in Part IX Financial Information (as set out in Note 8 Related Parties thereto) and as described in paragraphs 17.2, 17.3, 17.5 and 17.7 of this Part XII, there are no related party transactions between Berau or members of the Berau Group that were entered into during the financial years ended 31 December 2007, 2008 and 2009 and during the period between 1 January 2010 and up to and including the date of this document.

505

Save as described in Vallars IFRS Interim Financial Information for the six months ended 30 September 2010 included in Part IX Financial Information (as set out in Note 12 Related Parties thereto) and as described in paragraph 17 of this Part XII Additional Information, there are no related party transactions between Vallar or members of the Group that were entered into from 31 March 2010 (being the Companys date of incorporation) up to and including the date of this document. Any significant related party transaction will be referred to the Conflicts Committee, further details of which are in Part XI Directors and Corporate Governance. 21. Accounts and Annual General Meetings The Companys annual report and accounts will be made up to 31 December in each year, with the first annual report and accounts covering the period from incorporation to 31 December 2010. It is expected that the Company will make public its annual report and accounts within four months of each financial year end (or earlier if possible) and that copies of the annual report and accounts will be sent to Shareholders within six months of each financial year end (or earlier if possible). Shareholders will also receive an unaudited interim report covering the six-month period ending 30 June each year. The first annual general meeting of the Company is expected to be held by 30 September 2011. Further information on annual general meetings is contained in paragraph 5.2(k) of this Part XII. 22. Issues of New Shares The Directors are authorised to allot Ordinary Shares in such numbers and such circumstances as described in paragraph 3.8 (above). The pre-emption rights in the Articles have been disapplied, and therefore pre-emption rights do not apply, to allotments of Ordinary Shares in the circumstances described in paragraph 3.8 (above). Otherwise, subject to certain other exceptions, the Directors are obliged to offer new Ordinary Shares to Shareholders on a basis pro rata to their existing holdings before offering them to any other person for cash. The Directors will only issue new Ordinary Shares if they deem it to be in the interests of the Company and (save pursuant to the powers or exceptions referred to above) will not issue Ordinary Shares for cash on a non pre-emptive basis without first obtaining Shareholder approval. See paragraph 3.8 in this Part XII for further details. 23. Certain Tax Disclosure for US Shareholders The following discussion is a general summary under present law of certain US federal income tax considerations relevant to the acquisition, ownership and disposition of the Ordinary Shares. The summary is not a complete description of all tax considerations that may be relevant. It applies only to US holders (as defined below) that acquire Ordinary Shares, hold the Ordinary Shares as capital assets and use the US dollar as their functional currency. It does not address the tax treatment of persons subject to special rules, such as financial institutions, dealers or traders, insurance companies, tax exempt entities, persons owning 5per cent. or more of the Companys share capital, persons holding Ordinary Shares as Part of a hedge, straddle, conversion or constructive sale transaction or persons holding Shares in connection with a permanent establishment in the United Kingdom. It also does not address US state and local or non-US tax considerations. THE STATEMENTS ABOUT US FEDERAL TAX CONSIDERATIONS ARE MADE TO SUPPORT MARKETING OF THE ORDINARY SHARES. NO TAXPAYER CAN RELY ON THEM TO AVOID US FEDERAL TAX PENALTIES. EACH PROSPECTIVE PURCHASER SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR ABOUT THE TAX CONSEQUENCES UNDER ITS OWN PARTICULAR CIRCUMSTANCES OF INVESTING IN THE SHARES UNDER THE LAWS OF THE UNITED KINGDOM, THE UNITED STATES AND ITS CONSTITUENT JURISDICTIONS, AND ANY OTHER JURISDICTIONS WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION. As used in this section, US holder means a beneficial owner of Ordinary Shares that for US federal income tax purposes is (i) a US citizen or individual resident of the United States, (ii) a corporation or other business entity treated as a corporation created or organised under the laws of the United States or its political subdivisions, (iii) a trust subject to the control of a US person and the primary supervision

506

of a US court or (iv) an estate the income of which is subject to US federal income tax without regard to its source. The US federal income tax treatment of a partner in a partnership purchasing, owning and disposing of Shares generally will depend on the status of the partner and the activities of the partnership. Partners should consult their own tax advisors about the US federal income tax consequences to them of the partnerships acquisition, ownership and disposition of Ordinary Shares. 23.1 Distributions Subject to the passive foreign investment company (PFIC) rules discussed below, dividends on the Ordinary Shares should be included in a US holders gross income as ordinary income from foreign sources. Dividends will not be eligible for the dividends-received deduction generally available to US corporations. Dividends received in taxable years beginning before 2013, however, should qualify for the preferential tax rate available for qualified dividend income of individuals and certain other non-corporate US holders if the Ordinary Shares are regularly traded on the London Stock Exchange and the holder meets certain holding period requirements. Dividends paid in non-US currency will be includable in income in a US dollar amount based on the exchange rate in effect on the date of receipt whether or not the payment is converted into US dollars at that time. A US holders tax basis in the non-US currency will equal the US dollar amount included in income. Any foreign currency gain or loss on a subsequent conversion or other disposition of the non-US currency for a different amount generally will be US source ordinary income or loss. Dispositions Subject to the PFIC rules discussed below, a US holder will recognise capital gain or loss on the sale or other disposition of Ordinary Shares in an amount equal to the difference between the US holders adjusted tax basis in the Ordinary Shares and the US dollar value of the amount realised. A US holders adjusted tax basis in the Ordinary Shares generally will be its fair market value in US dollars on the date acquired. Any gain or loss generally will be treated as arising from US sources and generally will be long-term capital gain or loss if the holder has held the Ordinary Shares for more than one year. Deductions for capital losses are subject to significant limitations. A US holder that receives non-US currency on the disposition of Ordinary Shares will realise an amount equal to the US dollar value of the currency received at the spot rate on the date of sale (or, in the case of cash basis and electing accrual basis US holders, the settlement date). A US holder will recognise foreign currency gain or loss to the extent the US dollar value of the amount received at the spot exchange rate on the settlement date differs from the amount realised. A US holder will have a tax basis in the currency received equal to the US dollar value of the currency received on the settlement date. Any gain or loss on a subsequent conversion or other disposition of the currency will be US source ordinary income or loss. 23.3 Passive Foreign Investment Company In general, a non-US corporation will be a PFIC for any taxable year if (1) 75per cent. or more of its gross income is from passive income or (2) 50 per cent. or more of the value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of this determination, the tested company is treated as deriving directly and as owning directly the income and assets of any 25per cent. or more owned direct or indirect subsidiary. However, a newly formed non-US corporation will not be a PFIC in the first taxable year that such corporation has gross income (the start-up year) provided that (i) no predecessor of such corporation was a PFIC, (ii) it is established to the satisfaction of the US Internal Revenue Service (the IRS) that such corporation will not be a PFIC for either of the first two taxable years following the start-up year and (iii) such corporation is not a PFIC for either of the first two taxable years following the start-up year. There is no guidance on how it may be established to the satisfaction of the IRS that such corporation will not be a PFIC for either of the first two taxable years following the start-up year, and the IRS generally will not grant requests for rulings on inherently factual matters. Accordingly, it is likely that this requirement merely permits the IRS to determine a recently formed non-US corporations PFIC status prior to the end of the second following taxable year and to take the position that such corporation will be a PFIC in one or both of such years for purposes of disallowing the start-up year exception. 507

23.2

Because the Company had no active business and derived all of its income from passive income in 2010, it is likely the Company would meet the PFIC income and/or assets test for 2010. However, because the Company is a newly formed corporation and not a successor to any other non-US corporation for US tax purposes, the Company should be eligible for the start-up year exception and should not be PFIC for its first taxable year if it is not in fact a PFIC for either 2011 or 2012. The Company currently expects that, provided the Transactions are completed as contemplated, the Company will qualify for the start-up year exception and, therefore, will not be a PFIC at any time from the date of its incorporation through 2012. However, the PFIC determination is a factual determination made annually, and a companys status can change depending, among other things, on changes in the composition and relative value of its gross receipts and assets, changes in its operations and changes and the market value of its stock. The Company therefore cannot assure a US holder that it will not be a PFIC in any year. If the Company were a PFIC for any taxable year in which a US holder holds Ordinary Shares, a US holder would be subject to additional taxes on any excess distribution and any gain realised from the disposition of Ordinary Shares (regardless of whether the Company continues to be a PFIC). A US holder would have an excess distribution to the extent that distributions on Ordinary Shares during a taxable year exceeded 125per cent. of the average amount received during the three preceding taxable years (or, if shorter, the US holders holding period). To compute the tax on excess distributions or any gain, (i) the excess distribution or gain would be allocated ratably over the US holders holding period, (ii) the amount allocated to the current taxable year and any year before the Company became a PFIC would be taxed as ordinary income in the current year and (iii) the amount allocated to other taxable years would be taxed at the highest applicable marginal rate in effect for each year and an interest charge imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year. A US holder may be able to avoid some of the adverse impacts of the PFIC rules described above with respect to Ordinary Shares by electing to mark the Ordinary Shares to market annually. The election is available only if the Ordinary Shares are traded in more than de minimis quantities on the LSE. Any gain from marking the Ordinary Shares to market or from disposing of them would be ordinary income. Any loss from marking the Ordinary Shares to market would be recognised only to the extent of unreversed gains previously included in income. Loss from marking the Ordinary Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark to market gains previously included in income. Each US holder should ask its own tax advisor whether a mark to market election is available or desirable. A valid mark to market election cannot be revoked without the consent of the IRS unless the Ordinary Shares cease to be marketable. A US holder also may be able to avoid some of the adverse impacts of the PFIC rules described above with respect to Ordinary Shares by making a qualified electing fund or QEF election for the Company. If this election is made by the shareholder, the shareholder would report as income his or her pro rata share of the earnings and capital gains of the QEF for the taxable year. This election is only allowed if the PFIC complies with the IRS information disclosure requirements, which are designed to enable the IRS to determine the PFICs ordinary earnings and capital gains. The Company may, but it is not obligated to, provide to US holders of Ordinary Shares the information that would be necessary in order for such persons to make a qualified electing fund election with respect to the Ordinary Shares for any year in which the Company is a PFIC. However, US holders holding Ordinary Shares would not need to make a QEF election for 2010 or any later taxable year as long as Vallar qualifies for the start-up exception and does not subsequently become a PFIC. US holders should consult their own tax advisors concerning the Companys possible PFIC status and the consequences to them if the Company were a PFIC for any taxable year. 23.4 Information Reporting and Backup Withholding Dividends on and proceeds from the sale or other disposition of the Ordinary Shares may be reported to the IRS unless the holder is a corporation or otherwise establishes a basis for exemption. Backup withholding at the applicable statutory rate may apply to amounts subject to reporting if the holder fails to provide an accurate taxpayer identification number or otherwise

508

establish a basis for exemption. Any amount withheld may be credited against the holders US federal income tax liability or refunded to the extent it exceeds the holders liability. Recently enacted legislation requires certain US holders to report information with respect to their investment in financial instruments not held through an account with a financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with their own tax advisers about information reporting requirements applicable to their ownership of the Ordinary Shares. THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE ORDINARY SHARES IN LIGHT OF THE INVESTORS OWN CIRCUMSTANCES. 24. 24.1 General By a resolution of the Directors passed on 14 June 2010, PricewaterhouseCoopers LLP, whose address is 1 Embankment Place, London WC2N 6RH, United Kingdom, were appointed as the first auditors of the Company. PricewaterhouseCoopers LLP are registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. The Adviser was established as a limited partnership established under the Limited Partnerships (Jersey) Law 1994 on 22 June 2010. The registered office of the Adviser is 12 Castle Street, St. Helier, Jersey, JE2 3RT. The Company has not had any employees since its incorporation and does not own any premises. The Company confirms that where information in this document has been sourced from a third party, the source of this information has been provided, this information has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. The total expenses incurred (or to be incurred) by the Company in connection with the Ordinary Shares of Vallar being admitted pursuant to this document is approximately 40 million. The terms of the Founder Shares and of the Founder Securities mean that it is not possible at the date of this document to confirm what the effective cash cost would be to any person entitled to any Ordinary Shares pursuant to the terms of the Founder Shares or of the Founder Securities. Unless the context otherwise requires, this document assumes that the Bumi Resources Transaction and the Berau Transaction have completed. In this document, unless otherwise provided, references to the Group are to the Vallar Group and the Berau Group and, other than in the sections of this document entitled Part VIII Capitalisation and Indebtedness Statement and paragraph 12 Working Capital in Part XII Additional Information, the Bumi Resources Group, in each case as constituted immediately following the completion of the Bumi Resources Transaction. References to the Vallar Group are to Vallar and its subsidiaries and subsidiary undertakings as constituted immediately prior to the completion of the Bumi Resources Transaction and excludes the Bumi Resources Group and the Berau Group. References to the Bumi Resources Group are to Bumi Resources and its subsidiaries and subsidiary undertakings. References to the Berau Group are to Berau and its subsidiaries and subsidiary undertakings. Details of the Acquisition are set out in Part I The Acquisition. The ISIN for the New Vallar Voting Ordinary Shares will be the same as that of the existing Ordinary Shares, which are admitted to trading on the London Stock Exchanges main market for listed securities, being JE00B61G4Z19.

24.2

24.3 24.4

24.5 24.6

24.7

24.8

509

24.9

In relation to the period from the Companys incorporation to 31 December 2010, (i) the Directors received aggregate remuneration (including any contingent or deferred compensation) in the amount of 0.6 million from the Vallar Group, and (ii) the Vallar Group did not set aside or accrue any amount to provide pension, retirement or similar benefits for the Directors.

24.10 The Directors do not intend to propose that the Company pay a dividend in respect of the financial period ended 31 December 2010. The Directors intend to retain cash generated from the Group to invest in the Groups operations, expand globally and to repay the Groups debt and for other corporate purposes and do not currently anticipate paying any cash dividends in the short term. 24.11 As of the date of this document, the Vallar Group had no outstanding borrowings. 25. 25.1 Consents PricewaterhouseCoopers LLP has given and has not withdrawn its written consent to the inclusion of its accountants report on Vallar in Part A of Part IX Financial Information, its accountants report on Bumi Resources in Part B of Part IX Financial Information, its accountants report on Berau in Part C of Part IX Financial Information, and its accountants report on unaudited pro forma financial information in Part C of Part X Unaudited Pro Forma Financial Information in the form and context in which they are included, and has authorised the contents of such Parts of this document which comprise its reports for the purposes of Rules 5.5.3R(2)(f) of the Prospectus Rules. Runge has given and has not withdrawn its written consent to the inclusion of its reports in Part XIV Mineral Experts Reports in the form and context in which they are included, and has authorised the contents of such Parts of this document which comprise its reports for the purposes of Rules 5.5.3R(2)(f) of the Prospectus Rules. J.P. Morgan plc has given and has not withdrawn its written consent to the inclusion in this document of its name and the references to it in the form and context in which they are included. Availability of this document Copies of this document are available for viewing on the National Storage Mechanism, which is located at http:\\www.hemscott.com\nsm.do. Copies of this document may be collected, free of charge, during normal business hours from the Companys registered office at 12 Castle Street, St. Helier, Jersey JE2 3RT.

25.2

25.3

26. 26.1 26.2

27. Documents for inspection Copies of the following documents may be inspected at the offices of Freshfields Bruckhaus Deringer LLP and at the registered office of the Company during usual business hours on any day (except Saturdays, Sundays and public holidays) from the date of this document until 5.00 p.m. (London time) on 30 April 2011: (a) (b) (c) the memorandum and Articles of Association of the Company; the memorandum and articles of association of the Subsidiary; the accountants report from PricewaterhouseCoopers LLP and the consolidated historical financial information of Vallar in respect of the period ended 31 September 2010 set out in Part IX Financial Information Part A: Vallar; the accountants report from PricewaterhouseCoopers LLP and the consolidated historical financial information of the Bumi Resources Group in respect of the two financial years ended 31 December 2008 and 2009 set out in Part IX Financial Information Part B: Bumi Resources; the accountants report from PricewaterhouseCoopers LLP and the consolidated historical financial information of the Berau Group in respect of the three financial years ended 31 December 2007, 2008 and 2009 set out in Part IX Financial Information Part B: Berau;

(d)

(e)

510

(f) (g) (h) (i)

the accountants report from PricewaterhouseCoopers LLP on the pro forma financial information set out in Part X Unaudited Pro Forma Financial Information; the reports by Runge set out in Part XIV Mineral Experts Report; the letters confirming the consents referred to in paragraph 25 above; and this document.

Dated: 24 February 2011

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PART XIII DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

Part A: Definitions The following definitions apply throughout this document unless the context requires otherwise: 5 per cent. Convertible Bonds 9.25% Convertible Bonds means the US$300 million aggregate bonds issued by Enercoal on 25 November 2009; means the US$375,000,000 9.25 per cent. guaranteed convertible bonds due 2014 issued by Enercoal on 5 August 2009 and guaranteed by, and exchangeable into ordinary shares of, Bumi Resources; means the US$700,000,000 10.75% senior secured notes due 2016 issued by Bumi Investment Pte. Ltd., a wholly owned Singapore subsidiary of Bumi Resources, and guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors; means the US$300,000,000 12% senior secured notes due 2016 issued by Bumi Capital Ltd., a wholly owned Singapore subsidiary of Bumi Resources, and guaranteed by Bumi Resources and the Bumi Resources Subsidiary Guarantors; means the US$450,000,000 aggregated principal amount of 12.5% guaranteed senior secured notes due 2015 issued by Berau Capital Resources Pte. Ltd., a wholly owned subsidiary of Berau, and guaranteed by Berau and the Berau Group Subsidiary Guarantors; means Law No. 11 of 1967 Regarding Basic Mining Regulations; means Indonesian Law Number 40 of Year 2007; means the Indonesian energy law brought into force in August 2007; means the Indonesian investment law brought into force in April 2007; means Law no. 4 on Mineral and Coal Mining, as ratified by the President of the Republic of Indonesia on 12 January 2009; means Bumi Resources non-preemptive share issue of 1,369,400,000 ordinary shares at an issue price of RP. 2,366 per share, which completed in October 2010; means the Australian Bureau of Agriculture and Resource Economics; shall have the meaning given in the City Code (as applied by the Takeover Panel), and references to acting in concert shall be construed as acting in concert in relation to the Company, but references to acting in concert with Bakrie & Brothers and/or Long Haul or any of their Affiliates shall not include any member of the Company Concert Party Group; means the acquisition of 5,193,350,000 Bumi Resources Shares pursuant to the Bumi Resources Share Purchase Agreement and/or the acquisition of the 26,175,000,000 Berau Shares

10.75% Guaranteed Senior Secured Notes

12% Guaranteed Senior Secured Notes

12.5% Guaranteed Senior Secured Notes

1967 Mining Law 2007 Company Law 2007 Energy Law 2007 Investment Law 2009 Mining Law 2010 Non-Preemptive Share Issuance ABARE acting in concert

Acquisition

512

pursuant to the Berau Share Purchase Agreement, or, if either of the Transactions does not close, the acquisition of those of the abovementioned Berau Shares and/or Bumi Resources Shares actually purchased by the Company and/or any other member of the Vallar Group; Active Member means a member of the Sub-Adviser (or an individual otherwise contracted to provide services to the Sub-Adviser) who is actively involved in servicing the account of the Adviser, in relation to the business of the Company (for so long as he or she remains actively involved); means (i) a partner in the Adviser, or (ii) an individual contracted to provide services to the Adviser or (iii) a director of the General Partner who, in each case and in such capacity or capacities, has agreed to be actively involved in servicing the account of the Company (for so long as he or she has such capacity) and includes, for so long as they each remain actively involved in servicing the account of the Company, the Founders; means PT Ade Putera Tanrajeng, a wholly owned subsidiary of Fajar Sakti; means the Placing Price as adjusted appropriately for matters such as any subsequent consolidation or subdivision of the Ordinary Shares or allotment of Ordinary Shares by capitalising the Companys profits or reserves and as reduced by the Discount Value (if any) and by the Value Return (if any); means admission of any or all of the New Vallar Voting Ordinary Shares to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities; means Vallar Advisers LP, a limited partnership established in Jersey on 22 June 2010; means the advisory agreement dated 9 July 2010 between the Adviser and the Company, details of which are set out in Part III Information on Vallar and paragraph 17.10 of Part XII Additional Information; means, in relation to Bakrie & Brothers and Long Haul, (i) any person that directly or indirectly controls, is controlled by, or is under common control with Bakrie & Brothers or Long Haul (but excluding the Company and any person or entity controlled by the Company), (ii) any person holding shares as nominee for Bakrie & Brothers or Long Haul or any of their Affiliates (but only in relation to the shares so held) and (iii) any person holding shares which represent an identifiable, distinct partnership interest of Bakrie & Brothers or Long Haul or any of their Affiliates (but only in relation to the shares so held), and, for the purposes of this definition, control, when used with respect to any person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise (and controlled shall be construed accordingly); means Anglo American plc; means PT Antam Tbk (Indonesia);

Active Partner

Ade Putera Adjusted Issue Price

Admission

Adviser Advisory Agreement

Affiliate

Anglo American Antam

513

Aries Applicable Percentage

means Aries Investments Limited; means the lower of: (i) 6.667 per cent., and (ii) 2.5 times the Founder Incentive Subscription expressed as a percentage of the sum of the Founder Incentive Subscription and the gross proceeds from the Placing at or immediately following Placing Admission (subject to the effect of any exercise of the Repurchase Option); means PT Armadian Tritunggal; means the articles of association of the Company in force from time to time; means PT Arutmin Indonesia, a company established with limited liability under the laws of Indonesia and a majorityowned subsidiary of Bumi Resources; means the first generation CCOW entered into by Arutmin, expiring on 1 October 2019, for Arutmins assigned concession area in South Kalimantan, Indonesia; means the English law governed assignment of intercompany loans dated 5 November 2009 between Bumi Resources, Sangatta Holdings, Kalimantan Coal and BNY Mellon in its capacity as the offshore common security agent under the Intercreditor Agreement (as may be further amended, supplemented or restated from time to time); has the meaning given to it in the Listing Rules; means PT Bakrie & Brothers Tbk; means Bakrie & Brothers, companies controlled by Bakrie & Brothers and members of the Bakrie family in Indonesia, both individually and through affiliates of Bakrie & Brothers; means Bakrie & Brothers and Long Haul; means any Director appointed at the request of Bakrie & Brothers or Long Haul under the terms of the Bakrie Relationship Agreement; means the relationship agreement between Vallar, Bakrie & Brothers and Long Haul dated 16 November 2010; means the Indonesian Capital Markets and Financial Institutions Supervisory Agency; means a contract of work granted to NNT by the Indonesian Government for the Batu Hijau Mine; means the statutory lock-up under Indonesian law pursuant to which Mutiara is restricted from transferring title to and registered ownership of Berau Shares until 7 April 2011; means PT Berau Coal Energy Tbk; means Berau Capital Resources Pte. Ltd.; means PT Berau Coal;

Armadian Articles of Association or Articles Arutmin

Arutmin CCOW

Assignment of Additional Intercompany Loans

Associate Bakrie & Brothers Bakrie Entities

Bakrie Group Bakrie Nominated Director

Bakrie Relationship Agreement BAPAPEM-LK Batu Hijau Contract of Work BCE Lock-Up

Berau Berau Capital Berau Coal

514

Berau Consideration Share Admission Berau Consideration Shares Berau Group Berau Group Common Security Agent Berau Group Intercreditor Agreement Berau Group Subsidiary Guarantors Berau Senior Secured Credit Facility Berau Shares

means admission of the Berau Voting Consideration Shares to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market for listed securities; means the Berau Voting Consideration Shares and the Mutiara Share Transaction Shares; means Berau and its subsidiaries and subsidiary undertakings from time to time; means Credit Suisse AG, Singapore Branch; means the intercreditor agreement for the holders of the 12.5% Guaranteed Senior Secured Notes and the loans under the Berau Senior Secured Credit Facility; means PT Armadian Tritunggal, Berau Coal, Empire Capital, Winchester, Aries, Maple and Seacoast Offshore Inc; means the US$400 million senior secured credit facility entered into by Berau and Rognar Holdings BV on 23 July 2010; means ordinary shares of 100 Rp. in the share capital of Berau;

Berau Share Purchase Agreement means the sale and purchase of shares agreement between members of the Vallar Group (including the Subsidiary) and Mutiara dated 16 November 2010, as amended from time to time; Berau Transaction means the purchase of 26,175,000,000 Berau Shares (representing 75 per cent. of the issued ordinary share capital of Berau) by the Vallar Group pursuant to the Berau Share Purchase Agreement;

Berau Voting Consideration Shares means 27,772,829 New Vallar Voting Ordinary Shares to be allotted and issued to Mutiara at closing of the Berau Transaction; Bhira Bhivpuri BHP Billiton BHP Marketing Bloomberg BNY Mellon BP BRI Bright Ventures Facility means Bhira Investments Limited, a subsidiary of the Tata Power Company Limited of India; means Bhivpuri Investments Limited; means BHP Billiton plc; means BHP Billiton Marketing AG; means Bloomberg Financial Markets; means the Bank of New York Mellon; means BP Plc; means PT Bumi Resources Investment (Indonesia); means the US$150 million loan agreement dated 26 May 2010 between Calipso as borrower and Bright Ventures Pte. Ltd. as lender; means Bumi Resources Japan Co. Ltd.; means PT Bumi Resources Minerals Tbk; means the initial public offering of 3.3 billion primary shares in BRM at an offer price of Rp.635 per share; 515

BRJ BRM BRM IPO

BRM IPO Price BRN BUMA Bumi Capital Bumi Investment Bumi Japan Bumi Mauritania Bumi Resources Bumi Resources CFL Loan

means the price at which BRM shares were offered through the BRM IPO, i.e. Rp.635 per BRM share; means Bumi Resources Netherlands B.V.; means PT Bukit Makmur Mandiri Utama; means Bumi Capital Pte. Ltd., a wholly owned Singapore subsidiary of Bumi Resources; means Bumi Investment Pte. Ltd., a wholly owned Singapore subsidiary of Bumi Resources; means Bumi Resources Japan Co. Ltd.; means Bumi Mauritania SA; means PT Bumi Resources Tbk.; means the loans outstanding under the US$1,900,000,000 Senior Secured Term Loan Agreement dated 18 September 2009 (as amended and restated on 24 September 2009, further amended under a deed of amendment dated 28 October 2009 and further amended and restated on 5 November 2009) among Bumi Netherlands B.V., as the borrower, Bumi Resources as the parent guarantor, Forerunner, Sangatta Holdings, Kalimantan Coal and Sitrade Coal, as the original subsidiary guarantors, CFL, as the original lender, and BNY Mellon, as the administrative agent and the security agent; means the loans outstanding as of 30 September 2009 under the following credit agreements, which were repaid in full with a portion of the net proceeds of the Bumi Resources-CFL Loan on 1 October 2009, including: the US$110,000,000 credit agreement dated 1 April 2008 among Bumi Resources, as borrower, and Credit Suisse AG, Singapore Branch, as lender, arranger, facility agent, security agent and account bank; the US$55,000,000 credit agreement dated 16 May 2008 among Bumi Resources, as borrower, the financial institutions named therein, as lenders, and Credit Suisse AG, Singapore Branch, as one of the lenders, arranger, facility agent, security agent and account bank; the US$200,000,000 credit agreement dated 15 August 2008 among Bumi Resources, as borrower, and Credit Suisse AG, Singapore Branch, as lender, arranger, facility agent, security agent and account bank; the US$50,000,000 credit agreement dated 26 September 2008 among Bumi Resources, as borrower, and Credit Suisse AG, Singapore Branch, as lender, arranger, facility agent, security agent and account bank; the US$75,000,000 credit agreement dated 7 November 2008 and the amending agreement dated 19 December 2008 among Bumi Resources, as borrower, and Credit Suisse AG, Singapore Branch, as lender, arranger, facility agent, security agent and account bank; the US$50,000,000 credit agreement dated 17 July 2009 among Bumi Resources, as borrower, the financial institutions 516

Bumi Resources CS Loans

named therein, as lenders, and Credit Suisse AG, Singapore Branch, as arranger, facility agent, security agent and account bank; and the US$200,000,000 credit agreement dated 24 August 2009 among Bumi Resources, as borrower, the financial institutions named therein, as lenders, and Credit Suisse AG, Singapore Branch, as arranger, facility agent, security agent and account bank; Bumi Resources Consideration Shares means the 90,072,216 Ordinary Shares to be issued to the Bakrie Group on closing of the Bumi Resources Transaction, comprising the Bumi Resources Voting Consideration Shares and 61,211,044 Suspended Voting Ordinary Shares; means admission of the Bumi Resources Voting Consideration Shares to the Official List and to trading on the London Stock Exchanges main market for listed securities; means Bumi Resources and its subsidiaries and subsidiary undertakings from time to time, including Bumi Investment and the IndoCoal Group Companies; means the sale and purchase of shares agreement between the Vallar Group, Bakrie & Brothers and Long Haul dated 16 November 2010, as amended from time to time; means ordinary shares of 500 Rp. in the capital of Bumi Resources; means holders of Bumi Resources Shares; means the potential exchange transaction or transactions, on terms to be confirmed and conditional on the publication of a supplementary prospectus or further prospectus containing, among other things, details of such terms, pursuant to which Vallar would issue New Vallar Voting Ordinary Shares in return for outstanding Bumi Resources Shares which when aggregated with the Bumi Resources Shares acquired by the Vallar Group pursuant to the Bumi Resources Transaction will represent not more than 51 per cent. of the issued ordinary share capital of Bumi Resources; means Forerunner, Sangatta Holdings, Kalimantan Coal, and Sitrade Coal; means the purchase of 5,193,350,000 Bumi Resources Shares (representing 25 per cent. of the issued ordinary share capital of Bumi Resources) by the Vallar Group pursuant to the Bumi Resources Share Purchase Agreement; means the date on which the Bumi Resources Transaction closes, which is expected to be in the week commencing 28 February 2011; means 28,861,172 of the New Vallar Voting Ordinary Shares to be allotted and issued to the Bakrie Group at closing of the Bumi Resources Transaction; means a day (other than a Saturday or a Sunday) on which banks are open for business in London; means Calipso Investment Pte. Ltd. (Singapore);

Bumi Resources Consideration Shares Admission Bumi Resources Group

Bumi Resources Share Purchase Agreement Bumi Resources Shares Bumi Resources Shareholders Bumi Resources Step-Up Transaction

Bumi Resources Subsidiary Guarantors Bumi Resources Transaction

Bumi Resources Transaction Closing Date Bumi Resources Voting Consideration Shares Business Day Calipso

517

CAGR CAMA Cash Distribution Agreement

means cumulative average growth rate; means the cash and accounts management agreement forming part of the IndoCoal Securitisation Transaction Documents; means the cash distribution agreement dated 27 June 2007 among the IndoCoal Group Companies, Bumi Resources, Tata, BNY Mellon, as cash management agent and account bank, and Standard Chartered Bank, Singapore Branch, as account bank, to implement certain cash management and account administration arrangements in relation to the revenues of the IndoCoal Group Companies, as amended from time to time; means Coal Contract of Works; means a UK controlled foreign company; means Country Forest Limited; means the acquisition of Control of the Company following Placing Admission by any person or party (or by any group of persons or parties who are acting in concert) or the removal (other than for cause) of a Founder from the Board or as the case may be the non re-appointment of a Founder to such office following any retirement by rotation (unless with such persons prior written consent); means PT Cipta Kridatama (Indonesia); means PT Citra Palu Minerals (Indonesia); means the UK City Code on Takeovers and Mergers as in effect from time to time; means the Agreement for Cooperation of Sale of Coal that Berau Coal entered into with the Indonesian government in November 2001; means Coal Vista Resources, a wholly owned subsidiary of Darma Henwa; means the Combined Code on Corporate Governance issued by the Financial Reporting Council in the UK in June 2008; has the meaning given that term under paragraph 18 of Part XII Additional Information; means the Offshore Common Security Agent and the Onshore Common Security Agent; means: (a) (b) the assignment of the right of Bumi Resources to receive any payments under the Cash Distribution Agreement; the first priority charge over an interest bearing U.S. dollar account (into which US dollar payments made to Bumi Resources are deposited under the terms of the Cash Distribution Agreement) in the name of Bumi Resources and held with BNY Mellon, as the offshore account bank; the Pledge over IDR Proceeds Account Receivables; the Power of Attorney to Withdraw Funds; the Share Pledges;

CCOWs CFC CFL Change of Control

Cipta Kridatama Citra Palu Minerals City Code Coal Sale Agreement

Coal Vista Combined Code Common Security Common Security Agents Common Security Document

(c) (d) (e)

518

(f)

the assignment of the right of Bumi Resources and each of the IndoCoal Group Companies and the Subsidiary Guarantors to receive any payments under the intercompany loans between them (as lenders) and the subsidiaries of Bumi Resources, other than a finance subsidiary (as borrowers); the subordination of indebtedness incurred by Bumi Resources and each of the IndoCoal Group Companies and the Subsidiary Guarantors to any subsidiary of Bumi Resources, other than a finance subsidiary; and any other document evidencing or creating a security interest as designated by Bumi Resources or the Common Security Agents;

(g)

(h)

Company or Vallar Company Concert Party Group

means Vallar PLC; means, when used to refer to persons acting in concert with Bakrie & Brothers and/or Long Haul or any of their Affiliates, each Non Bakrie Director, the Company and each other member of the Group and any person acting in concert with a Non Bakrie Director or a member of the Group other than Bakrie & Brothers or Long Haul, any Bakrie Nominated Director and any Affiliate of Bakrie & Brothers and/or Long Haul; means the UK Companies Act 2006, as amended; means the later of completion of the Bumi Resources Transaction and completion of the Berau Transaction (or if only one of the Transactions completes, the completion of that Transaction); means the conflicts procedures agreed between the Company, the Subsidiary, the Adviser, the Sub-Adviser, each of the Founders and Messrs. Daniel and Morris; means: (i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to: (a) cast, or control the casting of, 50 per cent. or more of the maximum number of votes that might be cast at a general meeting of the Company; or (b) appoint or remove all, or the majority, of the directors or other equivalent officers of the Company; or (c) give directions with respect to the operating and financial policies of the Company with which the directors or other equivalent officers of the Company are obliged to comply; and/or (ii) the holding beneficially of 50 per cent. or more of the issued share capital of the Company (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital), but excluding in the case of each of (i) and (ii) above any such power or holding that arises as a result of the issue of Ordinary Shares by the Company in connection with an acquisition as contemplated in the Vallar IPO prospectus; means Credit Suisse Securities (Europe) Limited; means the US$1,350,000,000 credit agreement entered into by the Bakrie Group (as borrowers) and, among others, Credit Suisse AG (as lender) on or around the date of this document;

Companies Act Completion

Conflicts Procedures

Control

Credit Suisse Credit Suisse Facility

519

CREST or CREST System

means the paperless settlement system operated by Euroclear enabling securities to be evidenced otherwise than by certificates and transferred otherwise than by written instrument; means CV Putra Parahyangan Mandiri means the joint venture formed by Herald and Antam in respect of their joint shareholding in Dairi Prima; means PT Danatama Makmur; means PT Dairi Prima (Indonesia), a subsidiary of Herald; means the contract of work entered into by Dairi Prima for Dairi Primas assigned commission area in North Sumatra, Indonesia; means a zinc and lead concession held by Dairi Prima, located in the Dairi regency of the province of North Sumatra in Indonesia; means PT Darma Henwa (Indonesia); means the Indonesian Director General of Taxes; means the directors of the Company, whose names appear in Part VI Directors, Senior Management and Corporate Governance, or the board of directors from time to time of the Company, as the context requires, and Director is to be construed accordingly; means the letters of appointment for each of the Directors, details of which are set out in Part XII Additional Information; means the disclosure and transparency rules of the Financial Services Authority made in accordance with section 73A of FSMA, as amended from time to time; means in respect of each and any rights issue by the Company the theoretical ex-rights price per share in respect of that rights issue less the price per share at which Ordinary Shares are offered (subject to customary exclusions) to holders of Ordinary Shares pursuant to that rights issue, multiplied by the number of shares issued pursuant to the rights issue and divided by the total number of Ordinary Shares in issue immediately prior to that rights issue; means the sale by Bumi Resources of 30 per cent. of the outstanding shares in each of the IndoCoal Group Companies to Tata for a total consideration of US$1.1 billion; means the date on which the transactions contemplated under the Divestment were consummated, being 26 June 2007; means PT Daerah Maju Bersaing; means domestic market obligations; means East Kalimantan, Indonesia; means the provincial government of East Kalimantan, Indonesia; has the meaning ascribed to it in Presentation of Financial and Other Information Non-IFRS Financial Measures EBITDA; means the member states of the European Union and the European Economic Area, and each an EEA State;

CV Putra Dairi Joint Venture Danatama Dairi Prima Dairi Prima COW Dairi Project Darma Henwa DGT Directors or Board or Board of Directors

Directors Letters of Appointment Disclosure and Transparency Rules Discount Value

Divestment

Divestment Completion Date DMB DMO East Kalimantan East Kalimantan Government EBITDA EEA States

520

EHS Policy or Environmental Health and Safety Policy

means the high level statement that highlights the principles as well as reference standards and will expand on the governance structure of the Company concerning environmental health and safety matters; means Empire Capital Resources Pte. Ltd.; means Enercoal Resources Pte. Ltd., a wholly owned Singapore subsidiary of Bumi Resources; means the Zero Coupon Convertible Bonds, the 9.25 per cent. Convertible Bonds and the 5 per cent. Convertible Bonds; means Enercorp Ltd. (Jersey); means the sum of a companys market capitalisation and its net debt; means the US Employee Retirement Income Security Act of 1974; means the escrow agreement entered into on 18 November 2010 between the Subsidiary, Mutiara, Bumi Resources and J.P. Morgan Chase Bank N.A., London Branch, as more fully described in paragraph 17.3 of Part XII Additional Information; means Euroclear UK & Ireland Limited; means such number of Ordinary Shares as is calculated by subtracting the Threshold Amount from the aggregate number of Total B Exchange Right Shares, provided that this number can never be less than zero; means an executive Director of the Company; means PT Fajar Bumi Sakti (Indonesia); means Florenceville Financial Ltd.; means free on board; means Forerunner International Pte. Ltd, a wholly owned Singapore subsidiary of Bumi Resources; means Indonesian Law No. 41 of 1999 concerning Forestry, as amended by Law No. 19 of 2004, which ratifies the Indonesian Government Regulation in Lieu of Law No. 1 of 2004; means Nathaniel Rothschild and James Campbell; means the deeds of undertaking in relation to time commitment, referral of potential transactions, and non-competition entered into by each of the Founders on or around the date of Placing Admission; means the undertakings given by each of the Founders and described in more detail in Part III Information on Vallar; means the Founder Shares and the Founder Securities; means the total subscription amount paid by the Founders for the Founder Shares and the Founder Securities prior to Placing Admission;

Empire Capital Enercoal Enercoal Convertible Bonds Enercorp Enterprise Value ERISA Escrow Agreement

Euroclear Excess Shares

Executive Director Fajar Sakti Florenceville FOB Forerunner Forestry Law

Founders Founders Exclusivity Deeds

Founders Exclusivity Undertaking Founder Incentives Founder Incentive Subscription

521

Founder Securities

means the C ordinary shares in the capital of the Subsidiary, details of which are set out in Part III Information on Vallar and paragraph 5.4 of Part XII Additional Information; means the B ordinary shares in the capital of the Subsidiary, details of which are set out in Part I The Acquisition, Part III Information on Vallar and paragraph 5.3 of Part XII Additional Information; means PT Freeport Indonesia;

Founder Shares

Freeport FSA or Authority FSMA FTSE Gallo Oil GBP Shareholders General Partner Financial Services

means the UK Financial Services Authority; means the Financial Services and Markets Act 2000 of the UK, as amended; means FTSE International Limited; means Gallo Oil (Jersey) Ltd.; means three individuals collectively holding 5 per cent. of the shares of Guruh Putra; means the general partner of the Adviser, Vallar Adviser GP Limited, a company incorporated with limited liability in Jersey under the Jersey Companies Law on 20 May 2010, with registered number 105763; means PT Geoservices; means Glencore International AG; means Avalino Marketing AG; means Glencore Mauritius Limited (formerly known as Wolf Mountain Mining Investments Ltd.); means Mehrano Trading AG; means PT Gorontalo Minerals (Indonesia), a subsidiary of BRM; means Indonesian Government Regulation No. 22 of 2010 on the Determination of Mining Areas; means Indonesian Government Regulation No. 23 of 2010 concerning the Implementation of Mineral and Coal Mining Business Activities; means Indonesian Government Regulation Number 38 of 2007 on the Division of Government Affairs among the Indonesian Government, provincial government and regency/municipality government; means Indonesian Government Regulation No. 55 of 2010 concerning the Development and Monitoring of Mineral and Coal Mining Business Activities; means Indonesian Government Regulation No. 78 of 2010 concerning Reclamation and Post-Mining; means the three shareholders who have entered into a cooperation agreement with Fajar Sakti; means PT Green Resources (Indonesia);

Geoservices Glencore Glencore Avalino Glencore Mauritius Glencore Mehrano Gorontalo Minerals Government Regulation 22 Government Regulation 23

Government Regulation 38

Government Regulation 55

Government Regulation 78 GPB Shareholders Green Resources

522

Group

means the Vallar Group and the Berau Group and, other than in Part VIII Capitalisation and Indebtedness Statement and paragraph 12 Working Capital in Part XII Additional Information, the Bumi Resources Group, in each case as constituted immediately following the completion of the Bumi Resources Transaction; means PT Guruh Putra Bersama, a 95 per cent. owned subsidiary of Fajar Sakti; means Herald Resources Ltd. (Australia), a mining and energy company formerly listed on the Australian Stock Exchange; means PT Hitachi Construction Machinery Finance Indonesia; means HM Revenue and Customs; means Honson International Corporation; means International Accounting Standards; means the International Center for Settlement of Investment Disputes; means an interest bearing Indonesian Rupiah bank account with Standard Chartered Bank, Jakarta Branch, as the onshore account bank, which Bumi Resources is required to maintain under the terms of the Intercreditor Agreement and the Common Security Documents; means the Indonesia Stock Exchange; means International Financial Reporting Standards, as adopted by the European Union; means PT Inacia Perkasa; means the independent Non-Executive Directors; means IndoCoal Exports (Cayman) Limited; means IndoCoal Resources, KPC, Arutmin, IndoCoal Kaltim and IndoCoal Kalsel, and each an IndoCoal Group Company; means PT IndoCoal Kalsel Resources (Indonesia); means PT IndoCoal Kaltim Resources (Indonesia); means the notice dated 27 June 2007 delivered by IndoCoal Resources to BNY Mellon and any of its successor, as the cash management agent, directing the distribution or allocation of all remaining amounts referred to in paragraph (i)(n) and paragraph (ii) of sub clause 7.6 (Allocations from Disbursement Account and IDR Disbursement Account) of the Cash Distribution Agreement and providing for a specified proportion of such remaining amounts to be paid to Bumi Resources; means IndoCoal Resources (Cayman) Limited; means the notes issuance program under which the Series 20062 Notes were issued, which was discontinued as of 26 June 2007;

Guruh Putra Herald Hitachi HMRC Honson IAS ICSID IDR Proceeds Account

IDX IFRS Inacia Independent Non-Executive Director IndoCoal Exports IndoCoal Group Companies IndoCoal Kalsel IndoCoal Kaltim IndoCoal Notice

IndoCoal Resources IndoCoal Securitisation Program

523

IndoCoal Securitisation Transaction Documents IndoCoal Shareholders Agreement Indonesia Indonesian GAAP Indonesian Government or Government Intercreditor Agreement

means the transaction and other operative documents entered into by the Company and other parties under the IndoCoal Securitisation Program, which were terminated on 26 June 2007; means the shareholders agreement entered into on 30 March 2007 between Bumi Resources and Tata in respect of the IndoCoal Group Companies; means the Republic of Indonesia; means accounting principles generally accepted in Indonesia; means the Government of the Republic of Indonesia; the Intercreditor Agreement dated 1 October 2009 (as amended and restated on 29 October 2009) among (i) Bumi Resources, (ii) Sitrade Coal, Kalimantan Coal, Sangatta Holdings and Forerunner, as the subsidiary guarantors, (iii) BNY Mellon, as the administrative agent, the Offshore Account Bank and the Offshore Common Security Agent, (iv) Standard Chartered Bank, Jakarta Branch, as the Onshore Account Bank and the Onshore Common Security Agent, (v) BNY Mellon, as trustee for the holders of the 12 per cent. Guaranteed Senior Secured Notes and the Notes, (vi) CFL as lender under the Bumi Resources-CFL Loan, (vii) Credit Suisse AG, Singapore Branch as lender under the US$300.0 million CS Facility and (viii) other holders of Permitted Pari Passu Secured Indebtedness (or their representatives), as amended from time to time; has the meaning given that term under paragraph 18 of Part XII Additional Information; means International Minerals Company LLC (Delaware, USA); means Izin Pertambangan Rakyat (community mining licence); means the loan in U.S. dollars made to Bumi Resources, as obligor, from Bumi Investment, as obligee, with the amount of the gross proceeds received by Bumi Investment from the offering of the 10.75% Guaranteed Senior Secured Notes pursuant to intercompany loan agreements entered into on the Bumi Investment and Bumi Resources; means Izth Usaha Pertambangan (mining business licence); means Izth Usaha Pertambangan Khusus (special mining business licence); means the Bailiwick of Jersey, Channel Islands; means the Companies (Jersey) Law 1991 (as amended) and subordinate legislation thereunder; means the Companies (Uncertificated Securities) (Jersey) Order 1999, as amended; means the Income Tax (Jersey) Law 1961, as amended; means J.P. Morgan plc (which conducts its UK investment banking activities as J.P. Morgan Cazenove); means Kin Rich International Enterprises Ltd.;

Intercreditor Debt International Minerals Company IPR Issuer Intercompany Loan

IUP IUPK Jersey Jersey Companies Law Jersey CREST Order Jersey Income Tax Law J.P. Morgan Cazenove Kin Rich

524

KSA Kalimantan Coal KNLH Komatsu Konblo Bumi KP KPC KPC CCOW

means PT Kartika Samudra Adijaya; means Kalimantan Coal Limited; means Kementerian Negara Lingkungan Hidup (Indonesian State Ministry of Environment); means PT Komatsu Astra Finance (Indonesia); means Konblo Bumi, Inc. (Liberia); means Kuasa Pertambangam (concession); means PT Kaltim Prima Coal (Indonesia); means the first generation CCOW entered into by KPC, expiring on 31 December 2021, for KPCs assigned concession area in East Kalimantan, Indonesia; means PT Kutai Timur Sejahtera; means 22 February 2011; means Indonesian Law No. 22 of 1999 concerning the delegation of certain powers to the Indonesian regional governments; means Law No. 32 of 2004 concerning the Regional Government, as amended by Government Regulation in Lieu of Law No. 3 of 2005 and reaffirmed by Law No. 8 of 2005 and further amended by Law No. 12 of 2008; means Indonesian Law No. 40 of Limited Liability Companies; means Leap-Forward Finance Ltd. (Seychelles); means the written waiver received from the requisite majority of lenders under the Berau Senior Secured Credit Facility waiving any prepayment obligation arising under that facility that would have arisen as a result of the Berau Transaction; means the London Inter-Bank Offered Rate; any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind); the indirect limited partners of Vallar Capital as at the date of this document (being Nathaniel Rothschild, James Campbell, Tom Daniel and Daren Morris); means the limited partnership agreement of the Adviser dated 28 June 2010 between the General Partner, NR Investments Limited and Simcocks Pensions Limited (as trustee of the Campbell Family International Pension Scheme) (being investment vehicles of the Founders), details of which are set out in Part XII Additional Information; means the listing rules made by the UK Listing Authority under section 73A of FSMA, as amended from time to time; means London Stock Exchange plc;

KTS Latest Practicable Date Law No. 22

Law No. 32

Law No. 40 Leap-Forward Lender Waiver

LIBOR Lien

Limited Partners

Limited Partnership Agreement

Listing Rules London Stock Exchange

525

Long Haul Maple MAPPI Maximum Voting Percentage

means Long Haul Holdings Ltd.; means Maple Holdings Limited; means the Indonesian society of professional appraisers (Masyarakat Profesi Penilai Indonesia); means such percentage as would, in relation to the Bakrie Group, in the event of Bakrie & Brothers or Long Haul or any of their Affiliates subsequently acquiring one additional Voting Ordinary Share, result in Bakrie & Brothers or Long Haul or any of their Affiliates being required to make a mandatory offer for the Company under Rule 9 of the City Code; means The McCloskey Group; means mandatory cash offer; means PT Multi Daerah Bersaing (Indonesia); means the Indonesian Ministry of Energy and Mineral Resources; means Indonesian Government Regulation No. 18 concerning Reclamation and Mine closure; means the Regulation of the Minister of Energy and Mineral Resources No. 28 of 2009; means Indonesian Government Regulation 23, a Ministerial Regulation No. 34 of 2009 regarding Prioritisation of Domestic Mineral and Coal Supplies; means the Mineral Experts Reports set out in Part XIV Mineral Experts Reports, or either of them; means the Ministry of Forestry of the Indonesian Government; means PT Mitratama Perkasa (Indonesia); means Mitsubishi Corporation (Japan); means Minarco-MineConsult means the Model Code on directors dealings in securities set out in Listing Rule 9, Annex 1 R; means Montelena Capital Limited; means the arithmetic mean of the market capitalisation of the Company at the close of trading on the first and last Business Days of each month; means the secured note issuance programme permitting the issuance of short-term and medium-term notes by Bumi Resources up to an aggregate of Rp.6.0 trillion established on 17 November 2008; means PT Multi Capital (Indonesia), a wholly owned subsidiary of Bumi Resources; means PT Bukit Mutiara; means the US$300 million loan agreement entered into on 2 November 2009 between Bumi Resources as lender and Mutiara as borrower; means the relationship agreement between Vallar and Mutiara dated 16 November 2010;

McCloskey MCO MDB MEMR MEMR Regulation 18 MEMR Regulation 28 MEMR Regulation 34

Mineral Experts Reports or MER Ministry of Forestry Mitratama Mitsubishi MMC Model Code Montelena Monthly Market Capitalisation

MTN Programme

Multi Capital Mutiara Mutiara Loan

Mutiara Relationship Agreement

526

Mutiara Share Transaction Agreement Mutiara Share Transaction Arrangements

has the meaning ascribed to it in Part I The Acquisition; means the arrangements pursuant to the Mutiara Share Transaction Agreement and the amendments to the Berau Share Purchase Agreement described in Part I The Acquisition pursuant to which, in satisfaction of Mutiaras obligations under the Mutiara Share Transaction Agreement, Vallar will issue 24,524,851 Suspended Voting Ordinary Shares under the terms of the Berau Share Purchase Agreement (as amended) directly to Long Haul; has the meaning given to it in Part I The Acquisition Berau Transaction; means the New Vallar Voting Ordinary Shares and the Suspended Voting Ordinary Shares to be issued by the Company in connection with the Bumi Resources Transaction and the Berau Transaction; means the up to 202,358,218 new Voting Ordinary Shares identified in more detail in the section of this document entitled Admission and Listing; has the meaning ascribed to it in paragraph 4.2(d) of Part XII Additional Information; means Newcrest Mining Limited of Australia; means Newmont Mining Corporation; means Newmont Indonesia Limited; means PT Newmont Nusa Tenggara (Indonesia); means PT Nomura Indonesia; means the loan facility in the amount of US$21 million, dated 18 October 2010, between BRJ as borrower, BRM as guarantor, Nomura International plc as lender, facility agent and security agent and Nomura Singapore Limited as arranger; means a non-executive director of the Company; means a Director who is not a Bakrie Nominated Director; means the security agreements, pledge agreements, assignments, mortgages, deeds of trust, security trustee or collateral agency agreements, control agreements or other grants or transfers of security executed and delivered by Bumi Investment creating (or purporting to create) a lien upon the proceeds of the Issuer Intercompany Loan in favour of BNY Mellon, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time; means Nusa Tenggara Mining Corporation; means the official list maintained by the FSA; means The Bank of New York Mellon, as the offshore common security agent under the Intercreditor Agreement (regarding Bumi Resources); means Standard Chartered Bank, Jakarta Branch, as the onshore common security agent under the Intercreditor Agreement (regarding Bumi Resources);

Mutiara Share Transaction Shares New Vallar Ordinary Shares

New Vallar Voting Ordinary Shares Newco Newcrest Newmont NIL NNT Nomura Indonesia Nomura Loan

Non-Executive Director Non Bakrie Director Notes Security Documents

NTMC Official List Offshore Common Security Agent Onshore Common Security Agent

527

Ordinary Resolution

means a resolution which has been passed by a simple majority of the members who (being entitled to do so) vote in person or by proxy at a duly called general meeting of the Company; means ordinary shares of 1.00 each in the capital of the Company and includes, if the context requires, the Voting Ordinary Shares and the Suspended Voting Ordinary Shares; means PT Paiton Energy Company (Indonesia); means PT Pamapersada Nusantara (Indonesia); means Pendopo Coal Ltd.; means the open cut coal resource and reserve statement issued on 19 August 2008 by Pendopo Energi; means the coal mining company PT Pendopo Energi Batubara (Indonesia); means the CCOW entered into by Pendopo Energi expiring on 5 May 2039; means the condition for exercising the exchange rights in relation to the Founder Securities, which is satisfied: if and when, within the period of four years from completion of an acquisition, as contemplated in the Vallar IPO prospectus, the price per Ordinary Share has reached (for any 20 Business Days out of 30 successive Business Days) a market closing price equal to the greater of (i) an equivalent of a compound rate of return from the date of completion of an acquisition, as contemplated by the Vallar IPO prospectus on the Adjusted Issue Price equal to 8.5 per cent. per annum accrued daily and compounded quarterly and (ii) an amount equal to a 25 per cent. increase in the Adjusted Issue Price (such closing price, the Threshold Price); or on the occurrence of a Change of Control in relation to the Company, subject (where the Change of Control results from an offer to holders of the Ordinary Shares) to that offer being at a price per Ordinary Share equal to (or greater than) the Threshold Price;

Ordinary Shares

Paiton Pama PCL Pendopo Coal Reserve Statement Pendopo Energi Pendopo Energi CCOW Performance Condition

PFIC PI Placing Placing Admission

means a passive foreign investment company, as defined in section 1297 of the US Tax Code; means PT Pukuafu Indah; means the placing of Ordinary Shares on behalf of the Company at a price of 10.00 per share completed on 14 July 2010; means admission of the then entire issued ordinary share capital of the Company to the standard listing segment of the Official List and to trading on the London Stock Exchanges main market which took place on 14 July 2010; means Credit Suisse, J.P. Morgan Securities Ltd., Evolution Securities Ltd and Liberum Capital Limited; means the placing agreement dated 9 July 2010, in relation to the Placing, between the Company, the Directors, the Adviser, the Founders, certain members of the Vallar Team and the Placing Agents;

Placing Agents Placing Agreement

528

Placing Price

means 10.00 per Ordinary Share, which was the subscription price of the Ordinary Shares issued in connection with the Placing; means the regulations promulgated by the US Department of Labor at 29 CFR 2510.3-101, as modified by section 3(42) of ERISA; means (i) any employee benefit plan that is subject to Part 4 of Subtitle B of Title I of ERISA, (ii) a plan, individual retirement account or other arrangement that is subject to section 4975 of the US Tax Code, (iii) entities whose underlying assets are considered to include plan assets of any plan, account or arrangement described in preceding paragraph (i) or (ii), or (iv) any governmental plan, church plan, non-US plan or other investor whose purchase or holding of Ordinary Shares would be subject to any similar laws; means the Indonesian law governed pledge over the receivables standing to the credit of the IDR Proceeds Account in favour of the Onshore Common Security Agent dated 1 October 2009 between the Parent Guarantor and the Onshore Common Security Agent; means PT Perusahan Listrik Negara Persero (Indonesia); means PT Perusahaan Negra Tambang Batubara; means PT Porodisa Trading & Industrial Co. Ltd.; means the Indonesian law governed power of attorney to withdraw funds from the IDR Proceeds Account in favour of the Onshore Common Security Agent dated 1 October 2009 between Bumi Resources and the Onshore Common Security Agent; means a premium listing under Chapter 6 of the Listing Rules; means the Bakrie Group and Mutiara, and each a Principal Shareholder; means the total subscription price paid to the Company by the holders of Ordinary Shares for the Ordinary Shares in issue on (or immediately following) Placing Admission which were not repurchased pursuant to the exercise of the Repurchase Option, after deduction of the total expenses incurred (or to be incurred) by the Company in connection with Placing Admission, the Placing and the incorporation of the Company and the Subsidiary, less the aggregate amount of Value Return in respect of those Ordinary Shares; means Directive 2003/71/EC and includes any relevant implementing measures in each EEA State that has implemented Directive 2003/71/EC; means the prospectus rules of the Financial Services Authority made in accordance with section 73A of FSMA, as amended from time to time; means Prove Energy Investment Limited, an investment company listed on the IDX; means PT Anzawara Satria means PT Recapital Advisers; 529

Plan Asset Regulations

Plan Investor

Pledge over IDR Proceeds Account Receivables

PLN PNTB Porodisa Power of Attorney to Withdraw Funds

Premium Listing Principal Shareholder Priority Return Sum

Prospectus Directive

Prospectus Rules

Prove PT Anzawara Recapital

Registrar Registrar Agreement

means Capita Registrars (Jersey) Limited, or any other registrar appointed by the Company from time to time; means the Registrar agreement dated 8 July 2010 between the Company and the Registrar, details of which are set out in paragraph 17.13 of Part XII Additional Information; means Regulation No. 28 of 2009 on the Operation of Mineral and Coal Mining Services; means Regulation S under the Securities Act; means an information service that is approved by the FSA and on the FSAs list of Registered Information Services; means the repurchase option granted by the Company pursuant to stabilisation transactions in connection with the Placing which was exercised on 16 August 2010; means PCI Consortium (Rinkai); means Rio Tinto plc.; means RMMC Pty Ltd. (formerly known as Minarco-MineConsult Pty Ltd), an independent mine consultant; means Rognar Holdings B.V.; means Rule 144A under the Securities Act; means PT Runge Indonesia; means the lawful currency of Indonesia; means the share sale and purchase agreement entered into on 30 March 2007 in respect of the Divestment; means Sangatta Holdings Limited; means PT Seamgas Indonesia; means the US Securities and Exchange Commission; means the US Securities Act of 1933; means the Notes Security Documents and the Common Security Documents; means the US$900 million Series 2006-2 Notes due 2011 and 2012 issued by IndoCoal Exports (Cayman) Limited in October 2006, which were backed by the sale of existing and future coal sale receivables of the IndoCoal Group Companies and were repaid in full on 26 June 2007; means PT SGS Indonesia, an independent international inspection, testing, verification and certification company; means the share matching award granted by the Company to certain of the Independent Non-Executive Directors, details of which are set out in paragraph 17.14 of Part XII Additional Information; means, collectively, (i) the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 70.0 per cent. of the shares in Arutmin held by Bumi Resources, the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Onshore Common

Regulation 28/2009 Regulation S Regulatory Information Service Repurchase Option

Rinkai Rio Tinto RMMC Rognar Rule 144A Runge Rupiah, Rp. or IRD Sale and Purchase Agreement Sangatta Holdings Seamgas SEC Securities Act Security Documents Series 2006-2 Notes

SGS Share Matching Award

Share Pledges

(ii)

530

Security Agent, as the pledgee, related to 13.6 per cent. of the shares in KPC held by Bumi Resources; (iii) the Pledge Agreement, dated 1 October 2009, between Sangatta Holdings, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 9.5 per cent. of the shares in KPC held by Sangatta Holdings; the Pledge Agreement, dated 1 October 2009, between Kalimantan Coal, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 9.5 per cent. of the shares in KPC held by Kalimantan Coal; the Pledge Agreement, dated 1 October 2009, between Sitrade Coal, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 32.4 per cent. of the shares in KPC held by Sitrade Coal; the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Offshore Common Security Agent, as the pledge, related to all of the shares in Sangatta Holdings held by Bumi Resources; the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Offshore Common Security Agent, as the pledgee, related to all of the shares in Kalimantan Coal held by Bumi Resources; the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to all of the shares in Sitrade Coal held by Bumi Resources; the Pledge Agreement, dated 1 October 2009, between Forerunner, as pledgor, and the Offshore Common Security Agent, as the pledgee, related to 70.0 per cent. of the shares in IndoCoal Resources held by Forerunner; the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Offshore Common Security Agent, as the pledgee, related to all of the shares in Forerunner held by Bumi Resources; the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 70.0 per cent. of the shares in Indocoal Kaltim held by Bumi Resources; and the Pledge Agreement, dated 1 October 2009, between Bumi Resources, as pledgor, and the Onshore Common Security Agent, as the pledgee, related to 70.0 per cent. of the shares in Indocoal Kalsel held by Bumi Resources;

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

Shareholders SIS Sitrade Coal Sojitz Special Resolution

means the holders of the Ordinary Shares from time to time; means PT Saptaindra Sejati; means PT Sitrade Coal; means Sojitz Corporation; means a resolution which has been passed by two-thirds of the members who (being entitled to do so) vote in person, or by proxy, at a duly called general meeting of the Company;

531

SST Berau Stabilising Manager Standard Listing Sub-Adviser

means the semi-submersible transshipper Berau; means Credit Suisse, which acted as stabilising manager pursuant to the Repurchase Option; means a standard listing under Chapter 14 of the Listing Rules; means Vallar LLP, formerly named Red Seal Capital LLP, formerly Life Science Capital LLP a limited liability partnership established in England and Wales on 23 February 2005 and authorised and regulated by the FSA; means the sub-advisory agreement dated 9 July 2010 between the Sub-Adviser and the Adviser, details of which are set out in Part III Information on Vallar and paragraph 17.10 Vallars Material Contracts Advisory and Sub-Advisory Agreements of Part XII Additional Information; means Vallar Holding Company Limited, a company incorporated with limited liability in Jersey under the Jersey Companies Law on 1 June 2010, with registered number 105824; means Forerunner, Sangatta Holdings, Kalimantan Coal and Sitrade Coal; means the Supreme Court of Indonesia; means suspended voting ordinary shares of 1.00 each in the capital of the Company, details of which are set out in paragraph 4 of Part XII Additional Information; means Tata Power Company Limited (India); means the long term coal sales agreement entered into on 30 March 2007 between KPC and Tata; means the UK Panel on Takeovers and Mergers; means PT Thiess Contractors Indonesia; means 21,600,000; means the Ordinary Shares issued by the Company following the exercise of exchange rights attaching to the Founder Shares; means the aggregate number of Ordinary Shares issued by the Company following the exercise of exchange rights attaching to the Founder Securities; means PT Trada Tug and Barge; means the Bumi Resources Transaction and the Berau Transaction, and each a Transaction; means the UK Corporate Governance Code issued by the Financial Reporting Council in the UK from time to time; means the FSA in its capacity as the competent authority for listing in the UK pursuant to Part VI of FSMA; means Vallar Investments UK Limited, a limited liability company incorporated in England and Wales, with registered number 07440352; means, in relation to a share or other security, a share or other security, title to which is recorded in the relevant register of the

Sub-Advisory Agreement

Subsidiary

Subsidiary Guarantors Supreme Court Suspended Voting Ordinary Shares Tata Tata Coal Sales Agreement Takeover Panel Thiess Threshold Amount Total B Exchange Right Shares Total C Exchange Right Shares

Trada Transactions UK Corporate Governance Code UK Listing Authority UK Subco

uncertificated or uncertificated form

532

share or other security concerned as being held in uncertificated form (that is, in CREST) and title to which may be transferred by using CREST; United Kingdom or UK United States or US United Tractors Up-to Shares US$30.0 Million TAEL Facility means the United Kingdom of Great Britain and Northern Ireland; has the meaning given in Regulation S; means PT United Tractors Tbk.; has the meaning set forth in the first paragraph under Admission and Listing of this document; means the loan outstanding as of 30 September 2009, under the US$30,000,000 credit agreement dated 23 December 2008 among Bumi Resources, as borrower, and certain financial institutions listed therein;

US$37.0 Million ICICI Bank Facility means the US$37,000,000 credit agreement dated June 28, 2009 among Bumi Resources, as borrower, ICICI Bank Limited, Singapore Branch, as lender, arranger and facility agent, ICICI Bank UK Plc, as account bank, and BNY Mellon, as security agent and trustee; US$75.0 Million UBS Facility means the short-term loan under the credit agreement dated 30 April 2010 among Bumi Resources, as borrower, each of Sitrade Coal, Kalimantal Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors and UBS AG; means the loans are under the credit agreement dated 14 December 2009 among Bumi Resources, as borrower, each of Sitrade Coal, Kalimantan Coal and Sangatti Holding and Forerunner as original subsidiary guarantors and Raiffeisen Zentralbak Osterreich AG, Singapore Bank, as original lender arranger, facility agreement security agent and trustee; means the short-term loan under the credit agreement dated 17 November 2009 (as amended on 5 March and 24 March 2010, respectively) among Bumi Resources, as borrower, each of Sitrade Coal, Kalimantan Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors, and Credit Suisse AG, Singapore Branch; means the loans under the credit agreement dated 28 September 2010 among Bumi Resources, as borrower, each of Sitrade Coal, Kalimantan Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors, the financial institutions named therein, as original subsidiary guarantors and Credit Suisse AG, Singapore Branch; means the loans under the credit agreement dated 19 August 2010 among Bumi Resources, as borrower each of Sitrade Coal, Kalmantan Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors, the financial institutions named herein, as original subsidiary lenders, and Credit Suisse AG, Singapore Branch; means the short-term loan under the credit agreement dated 26 January 2010 (as amended on 5 March 2010) among Bumi Resources, as borrower, each of Sitrade Coal, Kalimantan Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors, and Credit Suisse AG, Singapore Branch; means the loans under the credit agreement dated 7 December 2009 among Bumi Resources, as borrower, each of Sitrade Coal,

US$80.0 Million Credit Facility

US$100.0 Million CS Facility (November 2009)

US$100.0 Million CS Standy Credit Facility

US$150.0 Million CS Facility

US$150.0 Million JCS Facility (January 2010)

US$150.0 Million JPMorgan Chase Facility

533

Kalimantan Coal, Sangatta Holdings and Forerunner as original subsidiary guarantors, JP Morgan Chase, N.A. as original lender and arranger, and JPMorgan Chase Bank, N.A., Hong Kong Branch as facility agreement, security agent and trustee; US$150 Million Bright Ventures facility US$200.0 Million DB Facility means the loans under the credit agreement dated 26 May 2010 (as amended 1 September 2010) among Calipso, as borrower, and Bright Ventures Pte. Ltd. as lender; means that loans under the credit agreement dated 30 April among Bumi Resources, as borrower, each of Sitrade Coal, Kamilimanta Coal, and Sangatta Holdings and Forerunner as original subsidiary guarantors, the financial institutions named therein and Deutsche Bank AG, Singapore Branch, as arranger, Deutsche Bank, Hong Kong Brach, as facility agent and DB Trustees (Hong Kong) Limited, as security agent and trustee; means the loans under the credit agreement dated 29 October 2009 among Bumi Resources, as borrower, the financial institutions named therein, and Credit Suisse AG, Singapore Branch, as one of the lenders, arranger, facility security agent, and account bank; means the US Investment Company Act of 1940, as amended, and related rules; has the meaning given in Regulation S; means the US Internal Revenue Code of 1986, as amended; means the lawful currency of the United States; means Vallar PLC; means Vallar Capital LP, a limited partnership established in Guernsey on 27 May 2010 with registered number 1303; means Vallar and its subsidiaries and subsidiary undertakings immediately prior to completion of the Bumi Resources Transaction and excludes the Bumi Resources Group and the Berau Group; means the initial public offering of Vallar in the form of the Placing, which was completed on 14 July 2010; means Nathaniel Rothschild, James Campbell, Tom Daniel, Daren Morris, Robin Mills and Tony Redman and such additional or replacement individuals as the Adviser may from time to time determine; means the cumulative amount of any value per Ordinary Share paid by the Company (whether in the form of cash or otherwise) and received by (or issued to) holders of Ordinary Shares on or in respect of that holding including normal course dividends and consideration received by, or issued or allotted to, a holder of Ordinary Shares as a result of any disposal by the Company or any subsidiary thereof of any business, assets, shares or securities in the Company or any subsidiary thereof; means (i) within the EU, any tax imposed by any Member State in conformity with the Directive of the Council of the European Union on the common system of value added tax (2006/112/EC), and (ii) outside the EU, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition;

US$300.0 Million CS Facility

US Investment Company Act US Person US Tax Code US$ or US dollar Vallar or Company Vallar Capital Vallar Group

Vallar IPO Vallar Team

Value Return

VAT

534

VAT Regulation

means the regulation adopted by the Indonesian Government in 2000 providing that, effective as of 1 January 2001, unprocessed coal is not subject to value-added taxes; means ordinary shares of 1.00 each in the capital of the Company that have Voting Rights attaching to them; means, in relation to the Company, rights attaching to shares in the Company that entitle the holders to vote at general meetings of the Company on all, or substantially all, matters; means the aggregate number of Voting Ordinary Shares in which the Bakrie Group and/or any of their Affiliates has an interest at the relevant time divided by the aggregate number of Voting Ordinary Shares in issue at the relevant time expressed as a percentage; means the memorandum of understanding entered into between Arutmin and WBM in February 2007; means PT Wahana Baratama Mining; means the agreement for the construction and operation of haul roads, entered into on 24 August 2007, between Arutmin and WBM; means the agreement for the use and maintenance of the Sumpol Haul Road, entered into on 24 August 2007, between Arutmin and WBM; means WestSide Corporation Ltd. (Australia); means Winchester Investment Holdings PLC; means Wilayah Iztu Usaha Pertambangan (mining area business licence); means Wilayah Iztu Usaha Pertambangan Khusus (special mining area business licence); means Wilayah Pertambangan Rakyat (peoples mining area); means Wilayah Usaha Pertambangan (mining operational area); means Wilayah Usaha Pertambangan Khusus (special mining operation area); means the US$150,000,000 zero coupon guaranteed convertible bonds due October 2012 issued by Enercoal on 1 October 2007 and guaranteed by, and exchangeable into Bumi Resources Shares, none of which were outstanding after 1 October 2010; means Xstrata plc; and means Zurich Assets International Ltd.

Voting Ordinary Shares Voting Rights

Voting Shareholding

Wahana MOU WBM WBM Haul Road Construction Agreement WBM Road Use Agreement

WestSide Winchester WIUP WIUPK WPR WUP WUPK Zero Coupon Convertible Bonds

Xstrata Zurich Assets

References to a company in this document shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established.

535

Part B: Glossary of Technical Terms Certain Defined Coal Terms 2004 JORC Code

the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition) prepared and published by the JORC, which sets out the minimum standards, recommendations and guidelines for public reporting of exploration results, mineral resources and ore reserves in Australasia; coal with the highest energy content, and a volatile content of less than 15 per cent. (adb); impurities consisting of iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal; a long and large, usually flat-bottomed, boat that is towed by other boats or ships; the most common type of coal and characterised by a moisture content of less than 20.0 per cent. by weight and heating value of 10,500 to 14,000 BTU per pound. Bituminous coal is a soft, dense and black coal containing large amounts of carbon, often with well-defined bands of bright and dull material. It is used primarily as fuel in coal fired power generation, with substantial quantities also used for heating and industrial/chemical applications and high quality coking coal used in the manufacture of coke for steel and ferroalloy production; the process of explosion in the mine; the process of coal mixing to obtain the desired coal quality; term of sale signifying that the price invoiced or quoted by a seller for a shipment does not include insurance charges, but includes all expenses up to a named port of destination; a coal samples energy content measured as the heat released on complete combustion in air or oxygen, usually expressed as the amount of heat (measured in kilo calories) per unit weight of coal (measured in kilograms) or (kcal/kg); term of sale signifying that the price invoiced or quoted by a seller includes insurance and all other charges up to the named port of destination; coal contract of works; a readily combustible black or brownish-black rock with a composition, including inherent moisture, which consists of more than 50.0 per cent. by weight and more than 70.0 per cent. by volume of carbonaceous material. It is formed from plant remains that have been compacted, hardened, chemically altered and metamorphosed by heat and pressure over time; coal deposits occur in layers in a bed of coal lying between a roof and floor with each layer called a coal seam or seam; a hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air and used in the manufacture of iron and steel;

anthracite ash

barge bituminous coal

blasting blending C&F

calorific value or cv

CIF

CCOWs coal

coal seam or seam coke

536

coking coal cost, insurance and freight (CIF) cost and freight (C&F) Ecocoal

coal used to make coke and also referred to as metallurgical coals; transportation and insurance are paid for by the seller and prices are quoted inclusive of such costs; CIF terms with no insurance; a sub-bituminous coal with a low calorific value, high moisture content and low ash and sulphur content produced at the Mulia and Asam Asam mines, which the Bumi Resources Group markets under the brand name Ecocoal; the price paid for coal at the mining operation site excluding freight and insurance costs where the buyer pays and arranges for transportation (and insurance thereof) and the sellers responsibility stops at delivery to the point of origination; gross as received; an unexcavated face of exposed overburden and coal in a surface mine or bank on the uphill side of a contour mine excavation; refers to that part of the coal deposit for which quality and quantity can be estimated with a reasonable level of confidence, as defined in the 2004 JORC Code. Indicated resources have a lower level of geological confidence than measured resources; mining business licence (Izin Usaha Pertambangan); the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia; mining authorisations (Kuasa Pertambangan); the lowest quality type of coal with a high moisture content (up to 45 per cent. by weight) and heating value of less than 4,600 kcal/kg. It is brownish-black in color and tends to oxidise and disintegrate when exposed to air; an estimate of the quantity of coal that could be profitably sold under expected market conditions; net as received; a reference price for thermal coal delivered on an FOB basis at Newcastle Port in New South Wales, Australia; a form of mining designed to extract minerals that lie near the surface. Overburden is removed to expose the minerals for mining. Rock covering the minerals is blasted and removed by large draglines or electric shovels and trucks; any material, consolidated or unconsolidated, such as layers of earth and rock, that overlies a coal seam. In surface mining operations, overburden is removed prior to coal extraction; usually located on a mine site, although one plant may serve several mines. A preparation plant is a facility for crushing, sizing and washing coal to prepare it for use by a particular customer. The washing process has the added benefit of reducing the coals sulphur content;

free on board (FOB)

gar highwall

indicated resources

IUP JORC

KP lignite

marketable reserves nar NEWC 6,322 Index open cut or open pit mining

overburden

preparation plant

537

probable reserves

similar to proved reserves, but with a lower level of confidence, as the number of intersections of the coal seams by pits trenches and boreholes in the sampling is less than that conducted in arriving at the proved reserves (as defined in the 2004 JORC Code); the economically mineable part of an indicated, and in some circumstances, measured mineral resource (as defined in the 2004 JORC Code). It includes diluting materials and allowances for losses that may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified; the process of restoring the environment to its original state following mining activities by restoring topsoil and planting vegetation. The process commonly includes recontouring or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is regulated by applicable local law; coal, about which size, form, distribution, quantity and quality are known, and which is mineable considering the economic, technical, legal and environmental aspects at the time of measurement; means, usually, the typical quality of coal that is extracted prior to any act of beneficiation such as washing, crushing or screening. The term is used loosely and can be applied on a pitby-pit basis and is typically also used to refer to the processing and raw stockpile areas; the ratio of amount of overburden expressed per bank cubic metre that must be removed to excavate a tonne of coal. A strip ratio of 4:1 means that four cubic metres of overburden must be removed to produce one tonne of run of mine coal. Strip ratios vary primarily on mine topography and the depth at which deposits lie; dull black coal that ranks between lignite and bituminous coal with moisture content between 20.0 per cent. and 30.0 per cent. by weight and heat content ranging from 4,000 kcal/kg to 5,300 kcal/kg of coal; one of the elements present, in varying quantities, in coal that contributes to environmental degradation when coal is burned. Sulphur dioxide is produced as a gas from coal combustion; is the sulphur content of coal. It is important to customers concerned in complying with environmental regulation. Low sulphur coal has a variety of definitions, but typically is used to describe coal consisting of 0.75 per cent. or less sulphur. Sulphur capture removal is undertaken in thermal power stations using electrostatic precipitation techniques; a mine in which the coal lies near the surface and can be extracted by removing the overburden;

proved reserves

reclamation

reserve

ROM or run of mine

strip or strip ratio

sub-bituminous coal

sulphur

sulphur content

surface mine

538

thermal coal underground mine

coal used in thermal plants to generate electricity; also known as a deep mine. Usually located several hundred feet below the earths surface, an underground mines coal is removed mechanically and transferred by shuttle car or conveyor to the surface; refers to that portion of coal comprising both gases and liquids that is released following heating it from 105C to 800C; the removal or reduction of impurities from coal.

volatile matter washing or washed Units of Measurement British thermal unit or BTU

a measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit); dead weight tonnes; a metric unit of square measurement of surface or land equal to 10,000 square metres, or approximately 2,471 acres; kilocalorie per kilogram; kilometres; means metric tonne or tonne; and a metric tonne or tonne which is equivalent to 1,000 kilograms, or 2,204.60 pounds. The metric tonne, and not the net tonne or British tonne, is the unit of weight measure referred to in this document.

dwt hectare kcal/kg km MT tonne

539

PART XIV MINERAL EXPERTS REPORTS

Page THE BUMI RESOURCES GROUP THE BERAU GROUP 541 640

540

PT Bumi Resources Tbk. & Vallar PLC

Minerals Experts Report Bumi Coal Assets
February 2011

541

24 February 2011

The Directors and Commissioners PT Bumi Resources Tbk. Wisma Bakrie 2, 7th Floor Jalan H.R. Rasuna Said, Kav.B-2 Jakarta 12920 Republic of Indonesia

The Directors Vallar PLC 12 Castle Street St Helier Jersey JE2 3RT Dear Sirs, MINERALS EXPERTS REPORT PT BUMI COAL ASSETS This Minerals Experts Report, (MER), has been prepared by PT Runge Indonesia (Runge) at the request of PT Bumi Resources Tbk., (Bumi), and Vallar PLC, (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Vallar in Indonesia; specifically the Bumi coal assets located in South and East Kalimantan plus Sumatera, Indonesia. The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed listing of shares of Vallar, (the Prospectus). The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment and capital and operating costs estimates. This report, which summarises the findings of our review, has been prepared in accordance with the requirements set out in the United Kingdom Financial Services Authority Prospectus Rules and the European Commissions Regulation on Prospectuses No. 890/2004 published by the Committee of European Securities Regulators (CESR) with respect to the listing of mineral companies. a) The details of the reserves: i. Mineral Resource and Mineral Reserve estimates in this MER are reviewed in detail and are compliant with the requirements of the reporting guidelines of the 2004 Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (The JORC Code). ii. Details are shown in Section 3 as well as associated tables.

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b)

The expected period of working of those reserves: i. This is shown in Life of Mine Plan discussion in Sections 5.1 and 5.2 as well as associated tables. An indication of the periods and main terms of any licenses and concessions: i. These are shown in Section 2. Indications of the progress of actual working: i. All four mines are in operation and expected to continue in that state. A discussion of the operating history for each mine is shown in Section 4.1 and associated tables. The forecast operating scenarios are as described in (b) above. ii. The state of working of the exploration properties is shown by the current exploration budget in Section 4.2, as well as the individual property status discussion throughout Section 4.

c)

d)

e)

An explanation of any exceptional factors that have influenced (a) to (d) above. i. In Jack Standas opinion, there are no exceptional factors that have influenced (a) to (d). The assets are subject to normal mining and exploration risks as summarized in Sections 14.1. Runge understands Vallar holds interest in other key Indonesian assets, specifically, PT Berau Coal Energy Tbk. This other asset of Vallar have been reviewed and summarised in a separate report by Runge.

Substantiation of the existence of the resource A visit to the sites and the observation of operations as well as an analysis of drilling results, resource and reserve statements, mine plans and management reports supplied to the competent persons by the directors, substantiates the existence of the resources. Limitations, exclusions and reliance on information The ability of Bumi and its operations to achieve operational, quality and financial targets is dependent on factors beyond the control and anticipation of Runge and its associates. These factors include mining and geologic conditions, the capabilities of the management and staff at the operations, variations in market conditions, changes in mining legislation as well as new industry developments and innovations. This MER specifically excludes all legal issues, land titles and agreements except if they have a direct influence on technical and operational issues or costs. There has been no formal environmental review other than the review of permits and management reports. There has been no valuation of fixed or mobile assets and equipment (i.e. no appraised value). Runge has accepted source documentation but cannot verify its accuracy. In areas where no data has been provided, Runge has used its professional judgement to make comment. Independence Runge has received fees for the preparation of this MER in accordance with normal consulting practices. The fees received for the work are not contingent on the success of the prospectus or the proposed listing of shares of Vallar. Neither Runge, nor any of its directors, staff or sub consultants who have contributed to this report has any material interest in Bumi and/or Vallar or the operations under review.

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Drafts of this report were provided to Bumi, but only for the purpose of confirming the accuracy of factual material and the reasonableness of assumptions relied upon in the report. Consent Runge hereby gives consent for the inclusion of this MER in the prospectus as well as reference to and use of Runge name in the prospectus, subject to Runge having first consented in writing to the content and context. Reliance This report has been prepared by Runge at the request of Bumi and Vallar. For the purposes of Prospectus Rule 5.5.3R(2)(f) Runge is responsible for this report as part of the prospectus and declares that it has taken all reasonable care to ensure that the information contained in this report is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in accordance with Item 1.2 of Annex I and 1.2 of Annex III of the Prospectus Directive Regulation. Runges opinion as expressed in this MER is effective at the date of this report. Parameters used in assessing the assets are shown in the report. Some of these parameters can vary significantly and changes could alter Runges opinion subsequent to the date of this MER. The information, conclusions, opinions, and estimates contained herein are based on: (a) (b) (c) information available to Runge at the time of preparation of this report. assumptions, conditions, and qualifications as set forth in this report. data, reports and opinions supplied by the Company and other third party sources.

Save as set out herein, Runge does not guarantee the validity or accuracy of conclusions or recommendations based on information supplied by third parties. The report is intended to be read as a whole, including the Executive Summary and sections should not be read or relied upon out of context. Notes on Terms All years referred to in the report are year ending 31 December unless otherwise stated and all currency is United States Dollars ($) unless otherwise stated. Glossary of Terms A glossary of terms used in this report is included in Appendix B. Signatory The signatory to this MER is Mr. Jack Standa, BSc (Mining Engineering), MSc (Geotechnical Engineering), MBA, MAusIMM and is an employee of Runge. Jack has over 20 years experience in the international mining industry with significant experience in technical reviews, audits, due diligence assessments and valuation of mining assets. Jack has sufficient experience in this type of coal deposit and operation plus is also qualified as a Competent Person for estimating Reserves (as defined in the 2004 Edition of the JORC Code) for this type of coal deposit.

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Mr. Standa has been assisted in this MER by suitably qualified mining engineers in Mr. Chris Smith (BE (Mining), MBA, MAusIMM) and Mr. Michael Trainor (BEng in the Division of Mining, MAusIMM) plus suitable qualified geologist Mr. William Park, (BSc (Geology), BEcon, MAIG). Yours Sincerely,

Jack Standa Operations Manager PT Runge Indonesia

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MINERALS EXPERTS REPORT BUMI COAL ASSETS

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IMPORTANT INFORMATION ABOUT THIS DOCUMENT

1. Our Client This report has been produced by or on behalf of PT Runge Indonesia, (Runge), solely for PT Bumi Resources Tbk. and Vallar PLC (jointly the Client). 2. Client Use The Clients use and disclosure of this report is subject to the terms and conditions under which Runge prepared the report. 3. Inputs, subsequent changes and no duty to update Runge has created this report using data and information provided by or on behalf of the Client and Clients agents and contractors. Unless specifically stated otherwise, Runge has not independently verified that data and information. Runge accepts no liability for the accuracy or completeness of that data and information, even if that data and information has been incorporated into or relied upon in creating this report (or parts of it). The conclusions and opinions contained in this report apply as at the date of the report. Events (including changes to any of the data and information that Runge used in preparing the report) may have occurred since that date which may impact on those conclusions and opinions and make them unreliable. Runge is under no duty to update the report upon the occurrence of any such event, though it reserves the right to do so.

4. Mining Unknown Factors The ability of any person to achieve forward-looking production and economic targets is dependent on numerous factors that are beyond Runges control and that Runge cannot anticipate. These factors include, but are not limited to, site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalize the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. Any of these factors may substantially alter the performance of any mining operation.

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EXECUTIVE SUMMARY ES1 Commissioning Entity and Purpose of Report This report, the Mineral Experts Report (MER), dated February 2011, has been prepared by PT Runge Indonesia (Runge) at the request of PT Bumi Resources Tbk. (Bumi), and Vallar PLC (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Bumi in Indonesia; specifically PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia (Arutmin) and PT Pendopo Energi Batubara (Pendopo) (the Relevant Assets). The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed acquisition of 25% of Bumi (the Prospectus) and in respect of up to 25% of Bumi in terms of the Bumi Resources step up transaction. The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment, and capital and operating costs estimates. ES2 Location and Relevant Assets The Relevant Assets of Bumi are KPC, Arutmin and Pendopo, where the percentage ownership by Bumi is as follows: KPC 70% PTAI 70% Pendopo 84%

KPC holds a first generation Coal Contract of Work, (CCOW), No. J2/JiDu/16/82, mining lease over the coal mining areas of Sangatta and Bengalon in East Kalimantan, Indonesia. The lease is located approximately 120 kilometres north of Samarinda and 200 kilometres north of Balikpapan on the east coast of Kalimantan and covers an area of approximately 90,960 hectares (Ha), refer to Figure 1. KPC operates nine large open-cut coal areas in East Kalimantan, namely Pits J, Bendili, AB, Pelikan, Kanguru, Melawan West, Peri and Mustahil located in the Sangatta area and Bengalon Pit A. The coal rank varies from sub-bituminous to bituminous with higher rank coal occurring in the Sangatta area closest to the Pinang Dome, a sub-surface igneous feature. Sangatta commenced coal production in 1991 and Bengalon commenced production in 2005. Mining at KPC is done using a mix of contract mining companies and KPCs own equipment and workforce. KPC operates both a ship loading and barge loading facility at Sangatta and a barge loading facility at Bengalon. The barged coal is loaded onto ships by floating cranes and a designated Floating Transfer Ship (FTS) which is operated by a contractor. Arutmin operates four open-cut coal mining areas in South Kalimantan, namely Satui, Senakin and Batulicin (being Ata, Mangkalapi and Mereh Pits) which are bituminous coal deposits and EcoCoal (being Mulia and Asam Asam Pits) which is sub-bituminous coal. The total lease area held by Arutmin is approximately 70,153 Ha, refer to Figure 2. In addition to the operating mines there are associated coal preparation plants, barge loading, unloading and ship loading facilities. Currently several mining contractors are used to carry out all mining activities from land clearing through to barge loading and rehabilitation. Arutmin operates a number of barging loading facilities and coal is loaded onto barges at these ports for shipment to the export loading terminal at the North Pulau Laut Coal Terminal (NPLCT) or direct loading into ships. The Pendopo asset is a lignite coal deposit located in South Sumatra approximately 140 km west from the major city of Palembang. The lease covers an area of approximately 17,840 Ha and is separated into three separate blocks, Sigoyang in the east, Benuang in the west and Block C in the North, refer to Figure 3. The deposit is in the early stages of evaluation and development, and has a small scale test pit.

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ES3

Coal Resources and Reserves The JORC Code provides minimum standards for public reporting of Resources and Reserves to the investment community. JORC Code Compliant Resource and Reserve Reports, dated March 2010, have been prepared by Arutmin and KPC. Runge has reviewed the KPC Coal Resource and Reserve Statement and concludes that the 8.9 billion tonnes of Coal Resources quoted and the 1.4 billion tonnes of Marketable Reserves quoted are a reasonable representation of the Coal Resources and Reserves at KPC (as at 31 March 2010) and that Coal Resources and Reserves have been estimated in accordance with the JORC Code. Runge has reviewed the Arutmin Coal Resource Statement and concludes that the 2.3 billion tonnes of Coal Resources quoted and the 0.5 billion tonnes of Marketable Reserves quoted are a reasonable representation of the Marketable Coal Reserves at Arutmin (as at 31 May 2010) and that Coal Resources and Reserves have been estimated in accordance with the JORC Code. The Sigoyang block at Pendopo has 1.1 billion tonnes of Resources and 0.69 billion tonnes of Reserves (as at August 2008). These were reviewed by Runge and they have been estimated in accordance with the JORC Code. Details of the split of the Resources and Reserves into the different categories of level of confidence plus Reserve Quality is provided in the body of the report, along with the outline of the processes and assumptions used in estimating the amounts.

ES4

Mine Plans and Production The existing pit limits of the Relevant Assets were determined by KPC and Arutmin through either a pit optimisation or incremental strip ratio review process. In 2010, KPC and Arutmin produced Life of Mine Plans based on the Coal Reserves estimated. KPC estimates coal sales increasing from the actual level of 40 Million tonne (Mt) in 2010 to around 70 Mt in 2015. In Runges opinion the 2011 coal mined production forecast of 46 Mt is achievable. Continued expansion beyond 2011 will require well planned development of additional working areas to accommodate the necessary additional equipment and timely addition of coal transport and handling infrastructure. KPC is not planning to operate any areas classed as protected or production forest for the next 10 years according to their current plans and schedules. Arutmin estimates coal sales increasing from the actual level of 20 Mt in 2010 to a peak of around 44 Mt in 2014. In Runges opinion the 2011 coal mined production forecast of 25 Mt is achievable. Continued expansion beyond 2011 will require well planned development of additional working areas to accommodate the necessary additional equipment and timely addition of coal transport and handling infrastructure. Arutmin is not planning to operate in any areas classed as protected forest areas or any production forest areas, where they do not have the appropriate permits, for the next 10 years according to their current plans and schedules Pendopo is in its early stages of development. Further project planning is required to support the project production forecast of up to 70 Mtpa.

ES5

Production History KPC has steadily increased coal production over the life of the project. Production for the period 2007 to 2009 is shown in Table ES 1.1. Table ES 1-1 KPC Historical Production Unit 2007 2008 Mbcm 335 366 Mt 36 37 bcm:t 9.2 9.8 Mt 40 36

Item Waste Coal Mined SR Coal Sold

2009 444 40 11.0 39

2010 460 39 11.7 40

(Note: Million bank cubic metres (Mbcm) and the 2010 quantities are estimated).

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Arutmin has steadily increased coal production over the life of the project. Production for the period 2007 to 2009 is shown in Table ES 1.2. Table ES 1-2 Arutmin Historical Production Unit 2007 2008 2009 Mbcm 117 129 209 Mt 16 15 23 bcm:t 7.5 8.4 9.3 Mt 16 16 19

Item Waste Coal Mined SR Coal Sold ES6

2010 167 21 8.0 20

Operating and Capital Costs The operating costs associated with KPCs production increased from $34.10/t in 2007 to $46.70/t in 2008. This equates to a $12.60/t or 37% overall increase in one year. Most of this increase is attributable to a combination of an increase in fuel price and mining costs, predominantly driven by stripping ratio increases. Sales and marketing costs also increased by $3.70/t. This was driven by higher sales commissions and management fees. KPCs 2009 operating cost was $45.00/t, a $1.70 or 4% decrease from 2008. This was driven primarily by lower mining and logistics costs. The KPC operating cost is forecast to decrease from $53.30/t in 2011 to $47.90/t in 2015 or by 11% overall. The forecast operating costs are reasonable and reflect the forecast strip ratios and anticipated contractor unit rates. The KPC capital forecast for the five year period from 2011 to 2015 is $269 million. The majority of capital will be spent on additional and replacement equipment to increase coal production to 70 Mt per annum. KPC leases mobile equipment and this cost is not included in the capital forecast. The forecast includes sustaining capital for years 2011 and 2012. The capital forecast is reasonable and reflects the planned production increase at KPC. The operating costs associated with Arutmins production have increased from $27.50/t in 2007 to $39.10/t in 2009. This equates to a 42% overall increase over two years. The largest year on year increase occurred between 2007 and 2008. The year on year increase was $7.30/t or a 27% increase. More than two-thirds of this increase is attributable to a combination of an increase in fuel price and mining costs. Increased mining costs were attributable to higher unit rates for contract miners and a higher average strip ratio. The Arutmin operating cost is forecast to decrease from $40.20/t in 2011 to $30.50/t in 2015 or by 32% overall. The forecast operating costs are reasonable and reflect the forecast strip ratios and anticipated contractor unit rates. The capital cost estimate for Arutmins expansion includes coal hauling roads, power production, and the development of new mining areas. The total expansion capital required for 2011 to 2015 is estimated to be $123 million. Arutmin has agreements with third parties that will construct several infrastructure projects. Arutmin will pay for the use of this infrastructure on a toll basis. The cost of this infrastructure is not included in the capital forecast. The forecast includes sustaining capital for years 2011 and 2012. The capital forecast is reasonable and reflects the planned production increase at Arutmin.

ES7

Key Findings Runge has reviewed the Relevant Assets and concludes from this review: no material flaws, errors or omissions on the technical aspects of the Relevant Assets were discovered during the review; the technical information reviewed is considered reasonable and has been prepared by professionals using appropriate software and industry standards; the geological and geotechnical understanding is of a sufficient level to support short and medium term planning as appropriate;

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the mine plans appropriately reflect geological and geotechnical understanding and account for predicted mining hazards; the mining contractors (either in place or planned) are suited to the mine plans and support a significant portion of production levels forecast; the assumptions used in estimating coal and waste production volumes, mining losses and dilutions are appropriate and reasonable; coal handling and other infrastructure including barge and port are capable of supplying appropriate quality products to satisfy the export markets at the forecast volumes; environmental issues are being well managed and there are no issues that could significantly impede production; the assumptions used in estimating operating costs are appropriate and reasonable, covering the spectrum of mining, processing, coal transport, and site administration associated in getting the coal to the point of sale; capital costs used in the financial models reflect the mine plans, development and construction schedules and the forecast production levels; and the drivers of the production and cost forecasts are understood by management and are receiving the management focus required.

Runge is of the opinion that: The KPC and Arutmin assets of Bumi: Have a credible track record of producing coal at forecast quantities and qualities; Have long term mine plans which contain forward schedules for more than 10 years, and allow for the mining of coal predominantly classed as Reserves; The Resource and Reserve estimates of the Relevant Asset have been estimated in accordance with internationally accepted standards;

Closure plans have been completed in accordance with the 2009 Mining Law; Mining contracts are not yet in place to cover the planned expansion of production. Additional contractor or owner coal mining capacity is required to achieve the forecast production levels; Infrastructure planning associated with the strategic expansion appears to have been completed to conceptual level. The next level of infrastructure planning to project specification level is required to ensure timely construction according to program; While the production forecasts and expected equipment capabilities allow for weather conditions normally expected in Indonesia, higher than average rainfall may lead to greater than planned production delays, affecting the actual production levels.

ES8

Opportunities There are a number of areas within the Assets which have identified in situ coal quantities and Inferred Resources. As exploration work continues and further strategic development matters are addressed, some of the coal identified will then likely be converted to Reserves. It could be beneficial to put in place tender packages associated with the planned production expansion that will allow mining contractors to tender for these packages. This will create a competitive environment amongst mining contractors when submitting tender proposals.

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TABLE OF CONTENTS
MAPS 1. INTRODUCTION 1.1 Purpose of Report 1.2 Scope of Work 1.3 Methodology Used to Conduct Mineral Experts Report 1.3.1 Site visit KPC 1.3.2 Site visit Arutmin 1.3.3 Request for data and information 1.4 Site Inspections, Data Review and Report Preparation Team 2. RELEVANT ASSET 2.1 Asset Overview 2.1.1 Coal Contract of Works 2.2 Location 2.3 Asset History 2.3.1 KPC Asset History 2.3.2 Arutmin Asset History 2.3.3 Pendopo Asset History 2.4 Project Layout 2.4.1 KPC Project Layout 2.4.2 Arutmin Project Layout 2.4.3 Pendopo Project Layout 3. GEOLOGY OVERVIEW 3.1 KPC Geology 3.2 Arutmin Geology 3.3 Pendopo Geology 3.4 Resources and Reserves 3.4.1 KPC JORC Resources and Reserves Process 3.4.2 Arutmin JORC Resources and Reserves Process 3.4.3 Pendopo JORC Resources and Reserves Process 3.4.4 KPC Resources and Marketable Coal Reserves Summary 3.4.5 Arutmin Coal Resources and Marketable Coal Reserves Summary 3.4.6 Pendopo Coal Resources and Marketable Coal Reserves Summary 3.4.7 Review of the Resource and Reserve Work Undertaken 4. PRODUCTION 4.1 Historical Performance 4.2 Production Forecast 4.2.1 KPC Forecast 4.2.2 Arutmin Forecast 4.2.3 Forecast Product Quality 4.2.4 Pendopo Production Forecast Page No. 555 581 581 581 583 583 584 584 584 584 584 585 585 585 585 586 586 586 586 587 587 588 588 588 589 589 589 589 590 590 591 592 592 594 594 595 595 596 597 598

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MINE PLANS 5.1 KPC Long Term Planning 5.1.1 General 5.1.2 Long Term Plan 5.1.3 Five Year Mine Plan 5.2 Arutmin Long Term Plan 5.2.1 General 5.2.2 Satui including Karuh 5.2.3 Senakin 5.2.4 Batulicin 5.2.5 East Mulia 5.2.6 West Mulia 5.2.7 Asam Asam 5.2.8 Sarongga 5.3 Reconciliations MINING OPERATIONS 6.1 KPC Mining Operations 6.2 Arutmin Mining Operations 6.2.1 Overview 6.2.2 Satui including Karuh 6.2.3 Senakin 6.2.4 Batulicin 6.2.5 East Mulia 6.2.6 Asam Asam 6.2.7 West Mulia 6.2.8 Sarongga 6.3 Coal Quality Management COAL HANDLING FACILITIES 7.1 KPC Coal Handling Facilities 7.1.1 Sangatta Coal Handling Facilities 7.1.2 Bengalon Coal Handling Facilities 7.1.3 Expanded Facilities and Capacity 7.2 Arutmin Coal Handling Facilities 7.2.1 Satui and East Mulia 7.2.2 Senakin 7.2.3 Batulicin and Sarongga 7.2.4 Asam Asam 7.2.5 West Mulia 7.2.6 Coal Handling and Ship Loading 7.2.7 Infrastructure Construction Contracts 7.3 Arutmin Barge Port to Customer Logistics 7.3.1 Overview 7.3.2 Direct Barging 7.3.3 North Pulau Laut Coal Terminal (NPLCT) 7.3.4 Transhipment SUPPORT INFRASTRUCTURE 8.1 KPC Support Infrastructure 8.2 Arutmin Support Infrastructure

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FINANCIAL MODEL 9.1 KPC Financials 9.1.1 KPC Historical Operating Costs 9.1.2 KPC Forecast Operating Costs 9.1.3 KPC Capital Cost Estimates 9.2 Arutmin Financials 9.2.1 Arutmin Historical Operating Costs 9.2.2 Arutmin Forecast Operating Costs 9.2.3 Arutmin Capital Cost Estimates 10. HUMAN RESOURCES 10.1 Organisation Structure 10.2 Manning Levels 10.2.1 KPC Manning 10.2.2 Arutmin Manning 11. ENVIRONMENT 11.1 AMDALS 11.1.1 KPC AMDAL 11.1.2 Arutmin AMDAL 11.1.3 Environmental Management Plans 11.1.4 Mine Closure 12. SAFETY 12.1 Safety Management Plan and Policy 12.2 KPC Safety Performance and Statistics 12.3 Arutmin Safety Performance and Statistics 12.4 Pendopo Safety Performance and Statistics 13. COMMUNITY 13.1 Community Relations & Development Policy 13.2 Land Access 14. KEY FINDINGS & OPPORTUNITIES 14.1 Key Findings 14.2 Opportunities Appendix A Qualifications and Experience Appendix B Glossary of Terms

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1. 1.1

INTRODUCTION Purpose of Report This report, the Mineral Experts Report (MER), dated February 2011, has been prepared by PT Runge Indonesia (Runge) at the request of PT Bumi Resources Tbk (Bumi) and Vallar PLC (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Vallar in Indonesia; specifically the Coal Assets of Bumi. The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed acquisition of 25% of Bumi (the Prospectus) and in respect of up to 25% of Bumi in terms of the Bumi Resources step up transaction. The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment, and capital and operating costs estimates.

1.2

Scope of Work The Scope of Work (SOW) includes the following Services: Description of Reserves A description of: o The nature and extent of Bumis rights of exploration and extraction and a description of the properties to which the rights attach. Details of the duration and other principal terms and conditions of the concessions including relevant legislation, environmental and rehabilitation requirements, abandonment costs and any necessary licenses and consents including planning permission; The geological characteristics of the occurrence of the reserves, the type of deposit, its dimensions and quality; and The methods to be employed for exploration and extraction, and where appropriate the mineral and metallurgical processes to be employed.

o o

Maps and plans Maps, sections and plans demonstrating for each major property or field its location, the nature and extent of workings thereon and its principal geological characteristics; and Surface location plan showing wells, platforms, pipelines, bore holes, sample pits, trenches and other evidence.

Reserves A statement in respect of the Companys Reserves giving: o o o o An estimate of the volume, tonnage in place and grades, as appropriate, each split between proven and probable Reserves; The method by which the Reserves were estimated; The expected recovery and dilution factors; Where appropriate, mineral processing and metallurgical recovery factors and grades, with evidence in support thereof, or recovery factors with respect to mineral Reserves in place on a deposit by deposit basis, together with the expected period of working; The expected extraction tonnage or volume; and Where relevant, processing volumes or tonnages together with the other principal assumptions relating to forecast revenues and operating costs.

o o

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If there are coal Resources which have not been sufficiently appraised to demonstrate them as proven or probable Reserves, a separate statement of such mineral Resources, which may not include any quantified information other than in respect of such mineral Resources which have been appraised as measured, indicated and inferred coal Resources, in which case quantified information with regard to tonnage (or volume) and grade may be included in the statement.

Long term prospects Details of any coal Resources and assets relevant to the long term future of the Company and the potential for the company to increase their Reserve and Resource base Nature of evidence A statement of: o o o o The nature of any geophysical and geological evidence used in the estimation of Reserves; Summarised details of this evidence including information on quality control procedures; The results of drilling and sampling, stating the number of holes drilled, sample pits or trenches and their location, with a description of their current status; and The names of the organisations that carried out the investigation and analysis.

Production schedule A statement in relation to the Companys or, where relevant, to the consortium to which it belongs giving: o o o o o o o The production policy, including production rates of sites, mines and wells where production has already been commenced; The estimated production rates relating to new mines, or re-workings, or new drilling, or work-overs; Comment on the feasibility of managements production plans; An estimate of the working lives and degree of depletion of each major property; An assessment of the expertise of the technical staff being or to be employed; An indication of the bases on which these estimates have been arrived at; and Historic production/expenditures an appropriate selection of historic production statistics and operating expenditures over a minimum of a three year period per operating asset.

Commencement of working The date(s) on which commercial extraction by the Companys was commenced, or is expected to commence, on each major property; Progress of workings An indication of the progress of actual working, including analysis (both in narrative and numerical form) of previous exploration, development and extraction carried out on the relevant properties or fields; Plant and equipment Commentary on the type, extent and condition of plant and equipment which is of material significance to the companys operations and which is currently in use on the Companys major properties or fields;

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Information on additional plant and equipment which will be required to achieve the forecast rates of extraction (including an estimate of the relevant costs and of the cost of maintaining and repairing all plant and equipment); and Comment on the quantum and reasonableness of the directors forecasts of development capital expenditures.

Environmental, Social and Facilities An assessment of o Environmental closure liabilities inclusive of biophysical and social aspects, including (if appropriate) specific assumptions regarding sale of equipment and/or recovery of commodities on closure, separately identified; Environmental permits and their status including where areas of material non-compliance occur; and Commentary on facilities which are of material significance

o o

Infrastructure, a discussion of location and accessibility of the property, availability of power, water, tailings storage facilities, human resources, occupational health and safety.

Operating costs Comment on the quantum and reasonableness of the directors forecasts of the operating expenditures. Special factors A statement setting out any additional information required for a proper appraisal of any special factors affecting the exploration or extraction businesses of the Company, including difficulties of access to, or in recovery of, coal Reserves on properties where the Company has extraction rights, and special circumstances, such as difficulties in transporting or marketing the extracts which may affect the commercial viability of the project, or an appropriate negative statement Other An indication of the periods and main terms of any licenses or concessions and the economic conditions for working those licenses or concessions; and Any other information or analysis required by the United Kingdom Listing Authority (UKLA).

Note that the environmental work is not a detailed environmental review and is to be based on a review of the Company supplied documentation. 1.3 Methodology Used to Conduct Mineral Experts Report 1.3.1 Site visit KPC The site visit to KPC was conducted over two days. The visit included a helicopter flight over the Sangatta and Bengalon mining operations as well as the coal handling and ship loading infrastructure at both operations. A visit to the Bengalon site was not possible due to community strike action on the haul road to the mining operation. Time was rather spent at the Sangatta operation visiting the Bendili pit. Due to heavy rain the mining equipment and hence the operation was on standby. This is normal practice at the mine, as operating heavy equipment in such weather results in damage to haul roads. Infrastructure including the control room, coal handling and ship loading facilities were also visited. Meetings were arranged with mine planning and environmental personnel. Presentations on the operations were made by senior Bumi executives.

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Other site visits to KPC have also been undertaken by senior Runge personnel (including those involved in the preparation of this report) in the previous 12 months. 1.3.2 Site visit Arutmin The two day site visit to Arutmin included visits to the Satui and Senakin mines and the North Pulau Laut Coal Terminal (NPLCT). In order to ensure maximum time on the ground viewing the assets, two helicopters were used to transport the team of three reviewers from site to site. The Satui leg consisted of a helicopter flight over all of the mining area including the operating pits, reclamation areas and infrastructure including haul roads, coal preparation and waste dumps, including the nearby mining areas of Bukitbaru, Kintap, Mulia and Asam Asam. Once on the ground, mine personnel presented an overview of the Satui and Mulia mines. The Satui pit visit consisted of an inspection of the haul roads, waste dumps and the Hanoman pit. This pit is the re-opening of a previous pit, down to lower coal seams previously deemed uneconomic. The visit continued on to the NPLCT by helicopter and included an aerial inspection of the Muara Satui crushing and barge loading infrastructure which services the Satui and Mulia mines. The NPLCT visit consisted of a presentation by management as well as a tour of the barge unloading and ship loading facilities. The Senakin leg included an inspection by helicopter to view operating pits, haul roads, coal handling infrastructure and reclamation areas. This was followed by a presentation from mining staff and a visit to an operating pit and a coal washing facility. The presentations at all three sites consisted of a recent summary Resource and Reserve Statements, a history of the operation, safety achievements, mine equipment, mining and coal handling process, infrastructure layouts, production capacity, coal and port handling capacity, as well as providing information on reclamation, environmental management and community development. Other site visits to Arutmin have also been undertaken by senior Runge personnel (including those involved in the preparation of this report) in the previous 12 months. 1.3.3 Request for data and information The data requested to complete the MER was not collected during the site visit but was placed in an electronic data room. The data requested included reports, statements, forecasts and communication on the subjects of exploration, geotechnical, hydrological, Resources Reserves, mine planning (strategic to one year time frame), staged landforms, capital and operating costs, design criteria, water management, manning, geology, site descriptions, coal processing, environmental and reclamation management, historical production as well as existing and future contracts. 1.4 Site Inspections, Data Review and Report Preparation Team The mine site was inspected by Runges Kevin Holm. Mr Holm has 22 years experience in the mining industry in open cut and underground coal operations and consulting. Runges Bill Park, Michael Trainor, Kevin Holm, Greg Eisenmenger, Jack Standa, Agus Lumbantoruan and Riki Tardo contributed in the review of the available data and preparation of this report. 2. 2.1 RELEVANT ASSET Asset Overview The Relevant Assets of Bumi are: PT Kaltim Prima Coal, (KPC); PT Arutmin Indonesia, (Arutmin); and

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PT Pendopo Energi Batubara, (PEB).

KPC holds a first generation Coal Contract of Work, (CCOW), No. J2/JiDu/16/82, mining lease, a single lease area which includes two coal mining areas, Sangatta and Bengalon within the Lembak Exploration Area in East Kalimantan, Indonesia. The lease now covers approximately 90,960 Ha. Arutmin holds a first generation CCOW No. J2/Ji.DU/45/19 over 11 separate mining areas being: Senakin Satui Batulicin Mulia Asam Asam Saring Pulau Laut Sarongga Bunati

The total Arutmin area now covers approximately 70,153 Ha PEB is a Generation III CCOW No. 380.K/30.00/DJB/2008 and the project consists of a single lease area which includes three blocks Sigoyang, Benuang and Block C covering approximately 17,840 Ha. 2.1.1 Coal Contract of Works The Indonesian government issued 11 first generation CCOWs, initially called Coal Cooperation Contracts, in the 1980s and in the early to mid 1990s they issued 18 second generation CCOWs. In the later part of the 1990s third generation CCOWs were issued. The differences between the generations are predominantly related to contract conditions, asset ownership and tax. For example companies with first generation CCOWs have a 45% corporate tax while third generations have a 30% tax rate. 2.2 Location Bumis Relevant Assets are located in Kalimantan and Sumatra. The KPC lease is located in the province of East Kalimantan approximately 120 km north of Samarinda and 200 km north of Balikpapan on the east coast, refer to Figure 1. Access to the project is via the Trans Kalimantan highway, or via air to a small KPC operated airport located at Tanjung Bara, adjacent to the main KPC port facility. All of Arutmins leases are located in the province of South Kalimantan, Indonesia, refer to Figure 2. The lease areas can be accessed by road via the provincial highway from the Capital of Banjarmasin. PEB is located in South Sumatra, Indonesia approximately 140 km west from the major city of Palembang, refer to Figure 3. Access to the site is via provincial roads from Palembang. 2.3 Asset History 2.3.1 KPC Asset History In April 1982, KPC entered into the CCOW with the Indonesian Government for the exploration and production over an area of approximately 790,000 Ha. Between1982 and 1986, KPC conducted detailed exploration within its concession. In 1987 KPC relinquished 593,900 Ha with subsequent further area relinquishments in the 1990s. Development of

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the Sangatta mine commenced in 1989 with commercial production starting in early 1992. Construction of the Bengalon facilities commenced in 2004 with production starting in 2005. The KPC CCOW is scheduled to expire at the end of December 2021. Bumi is exploring options to continue operations beyond the expiration date. 2.3.2 Arutmin Asset History In November 1981, Arutmin entered into the CCOW with the Indonesian Government, with the initial concession area covering 1,260,000 Ha, and commenced exploration. In 1990 Arutmin relinquished 1,190,000 Ha. Commercial open-cut coal mining operations began at Senakin in 1989, at Satui in 1990 and at Batulicin in 2003. The North Pulau Laut Coal Terminal (NPLCT) was completed during 1996. The Arutmin CCOW is scheduled to expire at the end October 2019. Bumi is exploring options to continue operations beyond the expiration date. 2.3.3 Pendopo Asset History In November 1997, PEB entered into a CCOW for an initial concession area covering 97,330 Ha. In November 1998 PEB relinquished 24,330 Ha, around 25% of the initial concession area and a further 55,160 Ha in 2004. The current CCOW is scheduled to expire at the end May 2039. Bumi is exploring options to continue operations beyond the expiration date. 2.4 Project Layout 2.4.1 KPC Project Layout KPC Sangatta operations are located near Sangatta, the capital of the East Kutai Regency, located 50 km north of the Equator. The town is located on the Sangatta River, which also lies on the southern boundary of the KPC lease. Another major River, the Bengalon River bisects the lease, with the main Sangatta operations to the south of this river and the Bengalon operations to the north. The port for the Sangatta coal, Tanjung Bara lies 13 km to the east of the coal processing facility, located near the southern edge of the lease, refer to Figure 4. There are a number of existing and planned operating areas at Sangatta being: Bendili which is adjacent to the Pinang Dome, (a large igneous intrusion located approximately in the centre of the deposit) and has the highest quality coal at KPC. Pit J- located to the south of and close to the Pinang Dome. Melawan the western-most mining region. Pelikan-Kanguru which is to the northwest of the Pinang Dome and lies between Melawan and Sangatta. North Pinang or Inul located to the north of the Pinang Dome Pedayak located north of the Pelikan Kanguru Pits and west of the Inul Pits

In the Bengalon area, the current mining operations are focused around the Pit A area. A new pit, Elang, located to the north of Pit A is currently being developed. Pits B and C are located around 7km to the south of Pit A. A major river, the Lembak River separates Pit A from Pits B and C. Coal is blended from the various pits and the four principal categories of coal are Prima (highest quality), Pinang A, Pinang B and Melawan (lowest quality). A further coal category of Lignite coal will be added when the Inul Pits become operational. Typical coal product qualities are as shown on Table 2-1.

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Item Calorific Value (adb) Calorific Value (gar) Total Moisture (TM) Inherent moisture Volatile Matter Ash Total Sulphur

Table 2-1 Coal Quality per product type Unit Prima Pinang Melawan kcal/kg 7,100 6,300 5,700 kcal/kg 6,700 6,000 5,350 % ar 10.0 17.0 23.0 % ar 5.0 13.0 18.0 % adb 39.0 39.0 38.5 % adb 4.0 6.0 2.5 % adb 0.6 0.5 0.2

Pinang B 6,000 5,600 19.5 14.0 38.5 4.5 0.95

The Bengalon mining area is located approximately 30 km to the north of Sangatta and has a separate barge loading port. It is a new operation which started in 2004. The coal quality is mid-range between Melawan and Prima. There is a barge loading facility at Bengalon and a barge loading facility at Sangatta which allows some of the Sangatta coal to be blended with Bengalon coal. An infrastructure lease corridor connects the Bengalon mine to the barge loading port located on the coast at Lubuk Tutung. The mine and port are connected by a 22 km long all weather haul road. 2.4.2 Arutmin Project Layout Arutmin currently operates at the Senakin, Satui, Batulicin, Mulia and Asam Asam deposits. The Senakin mine lies about 14 km inland and extends nearly 40 km from north to south parallel to the coast, with the deposit split in two, East and West Senakin, due to a regional anticline. Mining operations in West Senakin have now finished. All coal at Senakin is washed after crushing and two washplants treat all of the coal, a Jig Plant located in East Senakin and a Dense Media Plant at West Senakin, (which now treats coal from East Senakin). Coal is barged from two river ports, Air Tawar and Sembilang. All facilities are connected by all-weather haul roads; refer to Figures 5 to 7. The Satui mine lies about 20 km inland and extends approximately 40 km north-east to south-west, parallel to the coastline. The mine includes the Kintap and Bukit Baru deposits. An all-weather haul road connects the mine and the Muara Satui barge loading river port. The Mulia and Asam Asam deposits are parallel to the Satui deposit, approximately 7 km inland from the coast. The western-most Asam Asam deposit is separated from the Mulia deposit by the Kintap River. Coal from Asam Asam is currently transported via a haul road to the Asam Asam coastal port, while coal from Mulia is hauled to the Muara Satui port. The Batulicin deposits consist of the Ata, Mangkalapi and Mereh deposits. These are located inland from the town of Batulicin. All coal from these deposits is hauled on existing provincial roads to the Batulicin port. The majority of coal from the Arutmin deposits is barged to the NPLCT coal terminal, located on the northern tip of Pulau Laut (Laut Island) close to the regional centre of Kota Baru. 2.4.3 Pendopo Project Layout There are three separate blocks within the PEB lease, Sigoyang in the east, Benuang in the west and Block C in the North. The lease is approximately 9 km long and 5 km wide. Access to the lease is from the south, refer to Figure 8. A ridge runs through the middle of the lease, where to date no potentially mineable coal has been identified, and the terrain flattens off on the east, west and north of the lease. The current plan is for the site infrastructure and coal handling facilities to be located in this higher middle area.

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3. 3.1

GEOLOGY OVERVIEW KPC Geology The KPC coal deposit lies within the Miocene Age Balikpapan Formation of the Kutai Basin. The formation exceeds 1,000 m in thickness and is a multi-seam deposit. Coal is currently mined from four areas within the deposit, the adjoining Sangatta, Melawan and North Pinang areas in the south of the mining concession and the Bengalon area in the north. The Sangatta-Melawan area has more than 128 coal seams and seam splits. The coal seams are folded and uplifted by the Pinang Dome located to the east of the mining areas. Higher subsurface heat flow associated with the Pinang Dome, a sub-surface igneous body, has affected the coal rank such that the higher Calorific Value (CV) bituminous rank coals are located adjacent to the dome and in general, as distance from the dome increases, the CV of the coal decreases to sub-bituminous and locally to lignite rank to the northeast of the Dome. The coal seams to the west of the Pinang Dome are gently folded by the Lembak and Runtu Synclines and by the Melawan Anticline. Seam dips are typically of the order of 15 degrees but range from less than 5 degrees to 45 degrees. Coal in the Sangatta-North Pinang area is generally low ash, medium sulphur, sub-bituminous to bituminous coal while the Melawan deposit has lower CV and sulphur, but higher moisture content. The general stratigraphy of the Sangatta area can be seen in Figure 18. The Bengalon area has more than 45 coal seams. The Bengalon deposit is a structurally complex deposit, with large scale folding and several regional scale normal faults with displacements in excess of 200m. The dip of the seams varies from 5 degrees to 15 degrees. Coal in the Bengalon area is generally low ash, medium to high sulphur sub-bituminous coal with an intermediate CV compared to Sangatta and Melawan. The general stratigraphy of the Bengalon area can be seen in Figure 19.

3.2

Arutmin Geology Coal seams of the Arutmin coal concession occur within two separate coal-bearing formations; the older Eocene age Tanjung Formation and the younger Miocene age Warukin Formation. The Tanjung Formation coal seams are typically of higher bituminous rank (i.e. lower TM and higher Calorific Value) with higher ash and sulphur content than the lower rank sub-bituminous Warukin coal seams which are typically lower ash and sulphur. Tanjung seams are mined at Satui, Senakin and Batulicin while Warukin seams are mined at Mulia and Asam Asam. At Satui up to 17 coal horizons occur, however only four are of suitable thickness for mining with the majority of mineable coal occurring in the Satui Middle and Satui Lower coal seams in the basal sequence of the Tanjung formation. The Satui seam has a strike of southwest-northeast and an average dip to the southeast of 15 degrees. Satui typical cross sections are in Figure 15. The Senakin deposit is similar to the Satui sequence with the main seams occurring in the basal Tanjung sequence. Three main coal seams are mined at Senakin, the Senakin Upper Seam which is generally high in sulphur content, the Senakin Middle Seam with moderate sulphur content, and the Senakin Lower Seam which is usually low sulphur content. Most coal in the Senakin deposit is washed to 12% ash to meet market specifications. The Senakin deposit lies on the eastern and western flanks of a north-south trending anticline with pre-Tertiary ultra-basic basement rocks including mlange, granite, volcanic and metasediments) exposed in the axis of the syncline. Senakin typical cross sections are in Figure 14. Three separate deposits have been identified in the Batulicin area, Ata, Mangkalapi and Mereh. All three deposits have multiple seams with moderate dips. The coal is of bituminous rank with variable ash and sulphur content. Batulicin typical cross sections are in Figure 16. The geologically younger Mulia and Asam Asam coal deposits are of Miocene age and lie to the southeast of the main Satui pits and are of sub-bituminous rank with variable ash and sulphur content. Coal seam dips are moderate. Asam Asam and Mulia drillhole typical cross sections are in Figure 17. The general stratigraphy of the Arutmin deposits can be seen in Figures 20 to 26.

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3.3

Pendopo Geology The Pendopo coal occurs in the Miocene age Lower Muara Enim Formation. The deposit has multiple coal seams with up to nine seams identified. The main seams are Seams A_LMT and A_BN1 which average 10.9 m and 21.0 m, respectively, while other minor seams are typically in the range of 0.5 to 4.5 m. The coal seams occur on the north-eastern flank of a synclinal structure with dips of approximately 5-10 degrees. The coal is of lignite rank and average in situ coal is medium ash (9.8% adb), low sulphur (0.24% adb), high TM (59%) and low CV (2,300 kcal/kg gross as received, gar). Resources and Reserves 3.4.1 KPC JORC Resources and Reserves Process Exploration is conducted using KPC drilling rigs capable of drilling to a maximum depth up to 400 m. The drilling is supported by contractor geophysical logging units. Drilling is staged by firstly drilling across strike at a spacing of between 500 and 1,000 m (including some fully cored coal quality holes). This is followed by pre-development drilling on a 100 m triangular grid including fully cored coal quality/geotechnical holes at 200 m spacing. Drill locations at Sangatta and Bengalon are shown on Figure 9. All holes are geophysically logged and geological drill logs of all holes are reconciled to obtain consistent coal seam depths and thicknesses. All drill-hole locations are surveyed. Cored drill holes provide coal quality data with a minimum core recovery of 90%. Exploration drilling areas are topographically surveyed. Coal quality and drill survey data are imported into a Minex software model via Excel. Seam roof and floor surfaces, base of weathering and topography are used to generate a three-dimensional geological model. Coal losses in faults, burn zones or washouts are accounted for by the software. Coal seams are then categorised by level of confidence into Measured, Indicated and Inferred categories based on the JORC Code and Resource quantities are estimated from the geological model. Resource categories are determined based on the number and distribution of drill data points, drill spacing, seam continuity and variability in terms of seam thickness, quality and structure. The Reserve estimation process is conducted by applying mining, processing and exclusion criteria to the resources. Mining criteria such as recovery and dilution are defined by the open cut mining method in use. Economic limits of mining are determined using operating cost and revenue estimates. The revenue is based on a benchmark coal price in USD at a given quality on a kcal/kg gross as received basis. The benchmark price is estimated using prior averages and forward pricing indices. Software is used to generate three dimensional incremental pit shells of varying cost using depth and distance. Current results indicate that a majority of the known coal Resource is economic and pit limits are principally determined by lease boundaries, dumping provisions, transport corridors and mine planning status. In compliance with the JORC Code only Measured and Indicated Coal Resources are classified as Reserves. 3.4.2 Arutmin JORC Resources and Reserves Process Arutmin currently operate a number of drill rigs in addition to contractor rigs. All exploration drilling is supported by contractor geophysical logging units. The Arutmin process for determining resources is identical to KPC except for the spacing of exploration and pre-development drill holes. Drilling is typically on a staged basis of firstly exploration drilling at 250 meter spacing (including cored coal quality holes at 500 m spacing). This is followed by pre-development drilling on 125 to 150 meter spacing (including cored coal quality and geotechnical holes). Drill locations are shown on Figures 10 to 13. Coal quality and drill survey data are imported into a Mincom software model via Excel. Seam roof and floor surfaces, base of weathering and topography are used to generate a three-dimensional geological model. Coal losses in faults, burn zones or washouts

3.4

589

are accounted for by the software. Coal seams are then categorised by level of confidence into Measured, Indicated and Inferred categories based on the JORC Code and Resource quantities are estimated from the geological model. Resource categories are determined based on the number and distribution of drill data points, drill spacing, seam continuity and variability in terms of seam thickness, quality and structure. Reserves were estimated by applying mining, processing, and exclusion criteria to the coal resources. Mining factors such as recovery and dilution were defined by the open cut mining method in use. Mincom software in conjunction with XPAC and Excel is used to sub-divide the coal deposit into blocks and calculate the strip ratio of each block. Practical pits shells were then designed around a cut-off strip ratio. In compliance with the JORC Code only Measured and Indicated Coal Resources were used to classify Coal Reserves. At Asam Asam, a series of incremental pit shells are generated using identical software and methods as used at KPC to determine the Coal Reserves. 3.4.3 Pendopo JORC Resources and Reserves Process The Resources and Reserves at PEB were only estimated for the Sigoyang Block. This block was subject to adequate drilling with drill lines at approximately 500 m spacing. All holes were geophysically logged with a large number of holes cored to obtain coal samples for analysis. Due to the high moisture content of the coal, care was taken to ensure that all samples were sampled and stored to minimise any potential moisture loss and the sampling process was checked by independent geologists. Due to the continuity of the coal the level of confidence of data was adequate for Coal Resource estimates to be reported to predominantly Measured and Indicated categories with deeper coal largely of Inferred category. Coal Reserves were estimated by applying mining factors and exclusion criteria to the Coal Resources. The mining factors (such as recovery and dilution) were defined from the proposed open cut mining method. The exclusion criteria included the lease boundary and a minimum working section thickness. Costs and revenue factors were used to determine economic limits to mining that were then used to estimate the break even strip ratio. The economic pit shell was modified to produce a practical pit shell and mineable in situ coal quantities were estimated. The marketability of the coal was a key issue examined in estimating the Reserves; the Statement was supported by a detailed mine-mouth power plant feasibility study. There were a number of issues which could impact on the stated mining Reserves. These include: additional drilling in Benuang and Block C, further geotechnical studies to confirm the slope angles and hydrology, power plant viability including the placement of a new submarine power cable connection between Sumatra and Java, further detailed drilling and subsequent updates to the geological model; and the requirement for further detailed mine planning, mining methodology and costing studies before project execution.

These issues may cause the Reserve estimates in future JORC statements to change significantly. 3.4.4 KPC Resources and Marketable Coal Reserves Summary KPC Open Cut Coal Resources and Reserves stated as of 31 March 2010 are as shown on Tables 3-1 and 3-2.

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Table 3-1 KPC Coal Resources (inclusive of Coal Reserves) Coal Resources (Million tonne (Mt)) Project Area Status Measured Indicated Inferred Total Sangatta Operating 1,795 2,472 1,970 6,237 Bengalon Operating 540 439 554 1,533 Sangatta Dump areas 652 230 249 1,132 Bengalon Dump areas 20 7 2 28 Total Mar 2010 3,007 3,148 2,776 8,930

Table 3-2 KPC Marketable Coal Reserves

Proved Probable Total CV CV Quantity % Ash kcal/kg % Su TM Quantity % Ash kcal/kg % Su TM Quantity (Mt) (ar) (ar) (ar) % (ar) (Mt) (ar) (ar) (ar) % (ar) (Mt) Sangatta 119 6.2 6,559 0.76 10.0 0 8.6 6,302 0.59 10.9 120 Melawan 266 4.8 5,424 0.47 20.3 44 3.8 5,475 0.56 20.0 310 North Pinang 179 7.4 5,073 0.34 20.9 594 6.9 4,940 0.48 23.7 773 Subtotal - Sangatta 564 5.9 5,553 0.49 18.3 638 6.7 4,977 0.49 23.4 1,202 Bengalon 201 7.1 5,425 0.91 19.3 19 6.7 5,367 0.95 19.9 220 Total 765 657 1,422

3.4.5 Arutmin Coal Resources and Marketable Coal Reserves Summary Arutmin Open Cut Coal Resources and Reserves stated as of 31 May 2010 are shown on Tables 3-3 and 3-4. Table 3-3 Arutmin Coal Resources (inclusive of Coal Reserves) Coal Resources (Mt) Deposit Status Measured Indicated Inferred Total Senakin Operating 87 111 215 412 Satui Operating 150 52 44 246 Karuh Operating 3 2 1 6 Ata Operating 21 23 8 52 Mangkalapi Operating 9 7 8 24 Mereh Operating 15 35 58 107 Mulia Operating 134 146 285 566 Asam Asam Operating 92 149 106 348 Other Areas Feasibility 42 115 344 501

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Table 3-4 Arutmin Marketable Coal Reserves

Proved Probable Specific *Specific Specific *Specific Energy Energy Sulphur Energy Energy Quantity Ash (%) Sulphur (kcal/kg) (kcal/kg) Quantity Ash (%) (%) (kcal/kg) (kcal/kg) Deposit (Mt) adb (%) adb adb gar (Mt) adb adb adb gar Senakin 26 12 1.1 6,700 6,543 4 12 1.3 6,700 6,543 Satui 64 11 0.7 6,670 6,478 8 11 0.7 6,560 6,371 Batulicin 10 11 1.1 6,600 6,423 7 12 0.8 6,550 6,375 Asamasam 64 3 0.2 4,900 4,202 50 4 0.2 4,900 4,202 West Mulia 71 4 0.2 5,000 3,995 76 4 0.2 5,000 3,995 East Mulia 33 5 0.1 5,000 4,176 16 5 0.1 5,000 4,176 Sarongga 9 6 0.1 4,450 3,479 28 9 0.1 4,100 3,206 Sub Total (Mt) 278 191 Total (Mt) 469 (*Note: Arutmin Reported only adb quality, the gar quality in Table 3-4 has been estimated by Runge based on subsequent data supplied by Arutmin, the actual gar quality may slightly vary from this)

3.4.6 Pendopo Coal Resources and Marketable Coal Reserves Summary Pendopo Open Cut Coal Resources and Reserves and coal qualities stated as of 19 August 2008 are shown on Tables 3-5 to 3-7. Table 3-5 Pendopo Coal Resources (inclusive of Coal Reserves) Coal Resources (Mt) Measured Indicated Inferred Sub-Total 319 558 225 1,102 Table 3-6 Pendopo Coal Reserves Marketable Coal Reserves (Mt) Proved (Mt) Probable (Mt) Total (Mt) 145 542 687 Table 3-7 Pendopo Reserve Quality ASH TM IM % % % gar 56 16 13.7 59 22 7.8 59 13 14.2 60 28 4.7 60 25 10.6

Total

Total

SEAM A_NR A_LMT A_G2 A_BN1 A_BN2 TOTAL

Reserves Mt 12 126 13 494 43

TS % gar 0.15 0.09 0.14 0.10 0.52 0.13

CV gar kcal/kg gar 2,049 2,264 1,994 2,316 2,193

687

60

26

6.0

2,288

3.4.7 Review of the Resource and Reserve Work Undertaken Common observations and key issues: The software and procedures used and the professionals undertaking the work are of a world class standard. There is a clear audit trail available for the Coal Resources and Reserves estimation process. The 2010 Coal Resources and Reserves Statement has allowed for new geological data, depletion of existing Reserves and application of updated costs and revenues. The geological database and geological models used as the basis for Coal Resources and Reserves estimation are of a high standard.

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Practical pit designs have been developed for the economic limits estimated as part of the 2010 Reserves estimate. Operating costs used in the Reserves estimation are based on the historical costs. The costs have been reviewed and are considered reasonable.

Unique observations and key issues for PT Kaltim Prima Coal: There has been an overall decrease in reported Coal Resources since the previous Report. Measured category coal has increased in those pits where detailed predevelopment drilling was completed and previous Indicated category coal has been upgraded. A number of seams in the exploration areas (Pedayak East and West) were upgraded from Inferred to Indicated category due to additional infill drilling including coal quality data which had a material impact on coal Reserves estimates. Inferred category coal has reduced in a number of exploration areas due to re-modelling of the Sangatta deposit by KPC geologists using additional dummy holes to control the seam trend surface close to the seam subcrops. Future infill drilling would be expected to raise the confidence level in such areas. The Reserve estimates for KPC were prepared using a benchmark price of $US78.17/t for coal with a CV of 6,322 kcal/kg (gar) which was then adjusted for energy and other quality parameters for each product type produced. The major influence on reporting Coal Reserves was less driven by pit economics as by mine planning and pit shell constraints. The constraints applied to pit shells included lease boundaries, maximum pit depth (300 m), dumping provisions, transport corridors and status of mine planning.

Unique observations and key issues for PT Arutmin Indonesia; There has been a significant decrease in reported Coal Resources since the previous JORC Resource estimate in 2008. The most significant variance is in Inferred category coal with also a reduction in Indicated and Measured. The variances are due to a number of factors including the following: o o o The mining of approximately 40 Mt (principally Measured). Application of a depth limit to 50 m below the current depth of drilling, whereas previously the limit was the extent of the model. Determination of seam-by-seam Coal Resource polygons based on data per seam, as opposed to previous practice of assigning common polygons to a group of seams based on the data from the main seam within the group. Reduction in polygon dimensions (50% reduction in data extrapolation) for thinner seams (<0.4 m). Application of a buffer zone 50m either side of significant faults (>5 m displacement). Elimination of isolated or irregular polygons. Downgrading of Coal Resource category due to either limited coal quality data or quality variance (i.e. Measured to Indicated, Indicated to Inferred etc.) for a significant number of seams. Relative Density (RD) was converted from air dried to in situ using the PrestonSanders formulae, which resulted in an overall reduction of 2-3%.

o o o o

593

The Reserve estimates for Satui, Senakin, and Batulicin were prepared using a benchmark price of $US78.17/tonne for coal with a CV of 6,322 kcal/kg (gar) which was then adjusted for energy and other quality parameters for each product type produced. The Reserve estimates for Mulia and Asam Asam were prepared using a benchmark price of $US32.62/tonne for coal with a CV of 4,220 kcal/kg (gar), which was then adjusted for energy and other quality parameters for each product type produced. The Reserve estimates for Sarongga were prepared using a benchmark price of $US21.54/tonne for coal with a CV of 3,480 kcal/kg (gar), which was then adjusted for energy and other quality parameters for each product type produced. There has been a significant decrease of reported Marketable Reserves of 88 Mt (or 16%) from the 2008 Reserve Statement. his decrease in Marketable Reserves is attributable to depletion and adjusted Resource boundaries applied to the Reserves estimation. Some areas of planned production are overlain by palm oil plantations and villages. Arutmin is confident the coal within these areas can be mined.

Unique observations and key issues for PEB; There has been no previous JORC Statement prepared for the Pendopo area; therefore there are no previous estimates against which to compare the current estimates. The 19th August 2008 Reserve estimates for Pendopo were prepared using a benchmark price of $US14.47/tonne for coal with a CV of 2,288 kcal/kg (gar).

4. 4.1

PRODUCTION Historical Performance Appropriate historic production statistics and operating expenditures over a minimum three year period for KPC and Arutmin are as shown on Table 4-1 and 4-2. Table 4-1 KPC Historical Production Unit 2007 2008 Mbcm 335 366 Mt 36 37 bcm:t 9.2 9.8 Mt 40 36

Item Waste Coal Mined SR Coal Sold

2009 444 40 11.0 39

2010 460 39 11.7 40

(Note: Million bank cubic metres (Mbcm))

Item WASTE MINED Senakin Satui EcoCoal Batulicin WASTE TOTAL COAL MINED Senakin Satui EcoCoal Batulicin ROM TOTAL

Table 4-2 Arutmin Historical Production Unit 2007 2008 Mbcm Mbcm Mbcm Mbcm Mbcm 42 55 6 15 117 49 48 13 20 129

2009 77 62 33 36 209

2010 E 65 45 32 26 167

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Mt Mt Mt Mt Mt

4 5 4 2 16

4 4 6 2 15

7 5 8 3 23

6 4 9 2 21

Item STRIP RATIO Senakin Satui EcoCoal Batulicin Strip Ratio Total COAL SOLD Senakin Satui EcoCoal Batulicin Coal Sold 4.2 Production Forecast 4.2.1 KPC Forecast

Unit bcm:t bcm:t bcm:t bcm:t bcm:t

2007 11.0 10.2 1.3 7.0 7.5

2008 13.3 12.3 2.2 10.5 8.4

2009 11.8 11.6 4.4 11.6 9.3

2010 E 11.5 12.3 3.4 11.6 8.0

Mt Mt Mt Mt Mt

4 5 4 2 16

3 5 6 2 16

4 5 7 3 19

5 4 9 2 20

KPCs recent production forecast to 2021 is shown in Table 4-3. Table 4-3 KPC Forecast Schedule
Item

Waste
Coal Mined SR Coal Sold

Unit 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Mbcm 530 720 780 762 700 665 630 630 630 630 585 Mt 46 58 65 70 70 70 70 70 70 70 65 bcm:t 11.4 12.2 12.0 10.9 10.0 9.5 9.0 9.0 9.0 9.0 9.0 Mt 46 58 65 70 70 70 70 70 70 71 68

The forecast shows production increasing from the actual level of 40 Mt in 2010 to a peak of 70 Mt by 2014. While this increase in production is achievable, it is subject to detailed planning and suitable equipment, infrastructure and adequate human resources. Graph 4-1 KPC ROM Quality Forecast

Graph 4-1 shows an overall reduction in coal quality at KPC. Graph 4-2 indicates a long term change in product split, where the majority of the planned production increases will produce a subbituminous product.

595

Graph 4-2 KPC Product Split

4.2.2 Arutmin Forecast Coal production has been forecast over to 2019 and is shown in Table 4-4. Table 4-4 Arutmin Forecast Schedule
Item WASTE MINED Senakin Satui Batulicin EcoCoal Unit 2011 2012 105 67 18 64 252 2013 81 68 10 74 233 2014 75 64 13 90 242 2015 61 64 12 91 229 2016 44 52 11 87 194 2017 37 45 9 90 181 2018 29 46 19 89 184 2019 24 43 16 87 170

Mbcm 71 Mbcm 53 Mbcm 25 Mbcm 50 WASTE TOTAL Mbcm 200 COAL MINED Senakin Satui Batulicin EcoCoal ROM TOTAL STRIP RATIO Senakin Satui Batulicin EcoCoal SR TOTAL COAL SOLD Senakin Satui Batulicin EcoCoal COAL SOLD

6 4 3 12 25 6 5 2 21 34 6 6 2 25 39 6 6 1 31 45 6 7 1 32 46 6 6 2 33 46 5 6 2 35 47 4 5 2 35 45 3 5 2 35 44

Mt Mt Mt Mt Mt

12.5 11.9 8.2 4.3 8.0 18.4 12.6 7.2 3.1 7.4 13.6 11.6 4.9 2.9 6.0 11.7 10.3 11.3 2.9 5.4 10.2 9.7 12.0 2.9 5.0 7.9 8.6 7.3 2.6 4.2 7.7 8.2 6.0 2.6 3.9 7.6 10.1 12.8 2.6 4.1 7.7 9.6 10.6 2.5 3.9

bcm:t bcm:t bcm:t bcm:t bcm:t

4 4 3 12 23 5 5 2 20 33 6 6 2 24 38 6 6 1 30 44 6 6 1 31 44 5 6 1 32 44 5 5 1 34 45 4 4 1 34 43 3 4 1 34 42

Mt Mt Mt Mt Mt

The forecast shows production increasing from the actual level of 20 Mt in 2010 to a peak of 45 Mt in 2017. While this increase in production is achievable, it is subject to detailed planning which may subsequently demonstrate that there can potentially be issues in meeting these targets.

596

There will be a material change in average coal quality over the life of the mine operations at Arutmin. Bituminous coal from Senakin, Satui, and Batulicin currently accounts for approximately 50% of the coal production. By 2020, bituminous coal production will account for less than 10% of Arutmin coal. This trend is illustrated in Graphs 4-3 and 4-4. Graph 4-3 Arutmin ROM Quality Forecast

Graph 4-4 Arutmin Product Split

4.2.3 Forecast Product Quality Both KPC and Arutmin will predominantly be producing sub-bituminous coal in the future. This will be a gradual change and is a change which is expected to be mirrored in the Indonesian mining sector. Runge does not consider this to be a major issue providing this change in product split is appropriately addressed by the Bumi marketing departments.

597

4.2.4 Pendopo Production Forecast The Pendopo forecast is as per Table 4-5. Table 4-5 Pendopo Production Forecast
Description Coal Production (Mt) 2012 2013 2014 2015 2016 2017 ~2027 3 19 20 20 25 25 25

Total (Mt)

Pendopo is in its early stages of development and while a mine plan has been completed it only represented production from the Sigoyang Block. Further project planning is required to support this production forecast. 5. 5.1 MINE PLANS KPC Long Term Planning 5.1.1 General There are essentially two different types of Long Term Plan at KPC. The first being a high level plan (produced in Excel format) from the total Reserves, and target scheduled using Strip Ratio or Coal Tonnes. It is high level and is based on Reserves from the most recent Reserves Statement. The second is when the Mine Planning and Strategic Planning (detailed) engineers interactively schedule the pits using mine planning software, with planned dig and dump locations and thus generating estimated travel and cycle times. These mine plans are developed to 2 levels of detail, being: A Life of Mine, (LOM) Plan; and A Five Year Plan.

The LOM Plan is usually updated every two to three years, whilst KPC tends to update its Five Year Plan every year. Due to the differences in the timing of the development of these 2 plans, there are differences between the plans. There are also difference between these plans and the latest production forecast supplied as part of this review, refer to Section 4.2.1. It is reasonable that these differences exist because there are continual changes in corporate requirements, economics, pit conditions, market requirements and reserves. The mine planning cycle and approach taken by KPC is robust and practical. There is a continual reconciliation process occurring at KPC with respect to quantities and qualities produced compared to model, areas mined compared to plan plus equipment and contractor performance compared to plan. These reconciliations are used as a basis to ensure that the plans produced represent realistic targets at the time of their release. KPC has well established and detailed mine planning guidelines, procedures and systems in place to assist in the planning process. These deal not only with the approach to planning but also address the mining parameters which need to be included in the plans, e.g. geotechnical requirements and coal recoveries. 5.1.2 Long Term Plan The coal flow from the long term mine plan is presented in Graph 5-1.

598

Graph 5-1 KPC Long Term Plan Coal Schedule

This mine plan has production ramping up beyond the 70 Mtpa level in 2019. While it is not KPCs current plan to go beyond this 70 Mtpa level, the mine plan demonstrates that from a mining perspective higher production levels can be obtained. 5.1.3 Five Year Mine Plan A detailed strategic 5 year mine plan, developed in the third quarter 2010, was provided to Runge; refer to Table 5-1. Table 5-1 KPC 5 Year Production Forecast
Five Year Plan (20112015) BIG AB OB Removed Coal Exposed and mined S.R. KANGURU OB Removed Coal Exposed and mined S.R. BENDILI (including Parkit) OB Removed Coal Exposed and mined S.R. TAMARA OB Removed Coal Exposed and mined S.R. KANCIL OB Removed Coal Exposed and mined S.R. PEDAYAK WEST OB Removed Coal Exposed and mined S.R. MUSTAHIL OB Removed Coal Exposed and mined S.R. 2011 Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t 19 1.1 17.3 57 7.3 7.8 108 7.7 14.0 3 0.1 29.4 12 0.8 15.1 0 0.0 2012 11 1.4 7.7 57 8.4 6.8 109 7.6 14.4 10 0.6 16.7 12 1.5 7.8 2 0.1 16.3 33 3.0 11.1 35 7.6 4.6 96 7.4 13.0 10 0.6 17.3 6 0.8 7.6 20 1.5 13.1 3 0.4 8.9 48 4.9 9.8 0 0.0 48 6.4 7.5 30 7.2 4.1 80 7.9 10.1 10 0.6 17.0 61 9.0 6.7 10 0.2 52.3 2013 2014 2015 Total 5 years 30 2.5 12.0 179 30.5 5.8 453 39.6 11.4 43 2.0 20.8 30 3.2 9.6 118 12.9 9.2 69 6.6 10.5

33 3.3 10.1

599

Five Year Plan (20112015) PELIKAN OB Removed Coal Exposed and mined S.R. BENDILI OB Removed Coal Exposed S.R. PEDAYAK SMALL OB Removed Coal Exposed and mined S.R. PERI OB Removed Coal Exposed and mined S.R. PIT ELANG OB Removed Coal Exposed and mined S.R. INUL OB Removed Coal Exposed and mined S.R. INUL K WEST OB Removed Coal Exposed and mined S.R. MELAWAN W OB Removed Coal Exposed and mined S.R. BENGALON PIT A OB Removed Coal Exposed and mined S.R. Pit J 401 OB Removed Coal Exposed and mined S.R. SOUTH PINANG OB Removed Coal Exposed and mined S.R. BENGALON PIT BC OB Removed Coal Exposed and mined S.R. GRAND TOTAL OB Removed Coal Exposed and mined S.R.

2011 Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t Mbcm Mt bcm/t 12 0.8 14.2 552 47.5 11.6 25 1.8 14.2 57 6.2 9.2 72 7.4 9.8 52 3.7 14.1 41 3.3 12.3 15 0.3 43.1 6 0.6 9.9 25 2.0 12.5 16 1.0 15.0

2012 41 4.0 10.1 25 0.3 76.2 11 1.3 8.3 40 3.9 10.3 16 1.2 13.5 16 1.5 10.5 54 5.2 10.4 42 4.0 10.4 57 6.4 8.9 51 4.2 12.0 12 1.1 10.7 37 3.0 12.3 636 59.0 10.8

2013 69 7.5 9.2 40 1.3 29.7

2014 80 8.4 9.6 39 1.0 39.8

2015 110 11.2 9.8 49 4.5 11.0

Total 5 years 341 34.4 9.9 168 7.5 22.5 17 1.9 8.8

55 5.4 10.2 16 1.6 10.1 33 2.8 11.9 92 9.4 9.8 57 5.1 11.2 47 7.2 6.5 33 3.4 9.7 30 3.0 9.9 47 4.4 10.6 688 69.3 9.9

60 7.0 8.6 16 1.4 11.6 56 5.2 10.7 78 8.2 9.6 55 4.6 12.0 13 2.9 4.4 6 0.9 6.3 30 3.3 9.2 81 8.4 9.7 682 71.7 9.5

60 8.4 7.1 7 0.9 7.5 56 6.0 9.3 77 7.9 9.8 55 5.4 10.3

240 26.7 9.0 70 6.1 11.5 161 15.6 10.4 327 32.4 10.1 266 25.2 10.5 189 23.9 7.9 141 12.2 11.6

30 3.2 9.4 103 10.6 9.7 666 73.6 9.1

102 10.6 9.6 281 27.3 10.3 3,224 321.1 10.0

SUB-TOTAL KPC OPERATED PITS OB Removed Mbcm Coal Exposed and mined Mt S.R. bcm/t SUB-TOTAL CONTRACTORS TOTAL OB Removed Mbcm Coal Exposed and mined Mt S.R. bcm/t

600
327 32.3 10.1 357 37.2 9.6 375 43.5 8.6 375 43.7 8.6 375 39.9 9.4 224 15.2 14.8 279 21.7 12.8 313 25.8 12.2 307 28.0 10.9 291 33.8 8.6

1,415 124,5 11.4

1,809 196.6 9.2

In developing this plan KPC undertook a detailed equipment fleet requirement analysis for a number of production scenarios. The pit development sequences followed the base sequences developed as part of the long term plan, whereas this detailed planned looked at: Strategic decisions with respect to contracted quantities, Split of owner operated and contracted areas, Waste and coal haulage requirements, Excavator mixes, Excavator and truck matching, Equipment delivery times, Tyres, (which effects hauling capacity), Coal Quality output, and Waste and coal quantity output.

This Five Year Mine Plan has been professionally prepared; it examined a number of different operational scenarios and represents a practical achievable mining solution. The totals in this plan are slightly different than the forecast production, however, this is not considered as being material. 5.2 Arutmin Long Term Plan 5.2.1 General Arutmin updated its LOM for its coal assets in 2010. The LOM update was based on survey face positions at the end of September 2010, an estimate of the end of year 2010 face positions based on the production forecast for the fourth quarter 2010 and the updated pit shell quantities and qualities from the 2010 Arutmin Resources and Reserves Statement. Other data that was used in the derivation of the LOM update included the 2011 production forecast used in the 2011 budget forecast prepared in September 2010. The production schedule for each pit within each mine was produced using XPAC software auto scheduler function to determine the excavation and dumping sequence for each pit at each mine. The results from the LOM plan are slightly different from the forecast production levels, however, this difference is not considered as being material. The objective of the Arutmin LOM schedule is to increase total product coal production from the 2010 level of 20 Mtpa to over 40 Mtpa by 2014. This is to be achieved from the operation of existing bituminous coal mines of Satui, Senakin and Batulicin at nameplate and fixed plant and facilities levels of production. This would result in an increase in bituminous coal production from 13 Mt in 2011 to 16 Mt in 2014. The additional Arutmin increase in production comes from the Mulia and Asam Asam areas and the development of a new sub-bituminous mine at Sarongga. Sub-bituminous coal production is planned to increase from 12 Mt in 2011 to 25 Mt in 2014. The 40 Mtpa LOM level of production is only sustained however for 3 years and then decreases to a level averaging approximately 30 Mtpa for the period 2017 to 2026 as the bituminous coal production levels reduce with Reserve depletion. The LOM bituminous marketable coal Reserves at Satui, Senakin and Batulicin are 69 Mt, 37 Mt and 24 Mt respectively. At the nominated annual production rate of each mine the Reserves will be depleted at Satui, Senakin and Batulicin in 16 years, 7 years and 9 years respectively. After the depletion of the bituminous coal Reserves Arutmin will become a sub bituminous coal producer.

601

The LOM extends to 2032 at gradually reducing levels of annual production as the subbituminous coal Reserves are also progressively depleted over this period of time. The annual Arutmin coal production schedule is shown in Graph 5-2. Graph 5-2 Arutmin Long Term Plan Coal Schedule

5.2.2 Satui including Karuh For the 2010 LOM update for Satui the economical remaining Reserves of bituminous coal are 70 Mt. These Reserves are contained in 8 pits including Karuh. Three pits are in the Bukit Baru area (Gatokaca North, Bisma and Rama) and four pits are in the Kintap area (Bima, Kresna, Hanoman and Yudistiria). The pit with the largest remaining reserve is Hanoman with 42 Mt or 60% of the remaining Reserve. The size of this Reserve is a result of the boundary coal agreement Arutmin has in place with its neighbour PT Wahana Baratama Mining (Wahana), whereby the coal is mineable up to the lease boundary through the development of a single mega-pit in conjunction with Wahana. Arutmin and Wahana share a common lease boundary and the coal located down dip of the historical open cut workings in the Hanoman pit is now economic because of the elements of the boundary coal agreement. Arutmin and Wahana have agreed that the volume of overburden removal to access each parties coal at the boundary (and hence the cost) will be to the common vertical plane that determines the lease boundary. Arutmin therefore does not have to bear the cost of excavating the batter overburden that occurs on the Wahana side of the lease boundary to access all of its coal up to the vertical plane representing the lease boundary. Wahana will have similar cost savings. This agreement benefits both parties and will lead to an extension of the remaining bituminous coal reserves at Satui and resultant longer mine life. Satui production is planned to ramp up from 4.5 Mtpa in 2011 to approximately 6.5 Mtpa in 2014 and 2015. This will require an increase of installed overburden removal capacity from 52 Mbcm in 2011 to 67 Mbcm in 2014. The source of coal pit by pit on an annual basis is shown in Graph 5-3.

602

Graph 5-3 Satui Production Plan

The main contributor to Satui coal production is the Hanoman pit with smaller pits being depleted by 2019. From 2019 through to 2026 coal production is sourced from two pits, Hanoman and Bisma at a rate of about 4 Mtpa to 2023 and decreasing to 1 Mtpa by 2026. Overburden removal required will drop to approximately 50 Mbcmpa when producing from Hanoman and Bisma at the 4 Mtpa coal rate and then reduce in the period 2024 to 2026 in line with the coal production schedule. 5.2.3 Senakin The majority of the remaining Reserves at Senakin are contained in two pits, Pit 8-14 and Pit South which contain 28 Mt or 72% of the remaining Reserves. Pit 8-14 is in an area that has been mined historically, backfilled and reclaimed. The Reserves are down dip of the previously mined out area. Mining of these Reserves will require excavation of some of the previous backfill to access the previous limit of mining. Pit South is the southernmost pit in Senakin and historically Arutmin has had issues with the local community in gaining access to the pit. As a result of slow access to the remaining recoverable coal in Pit South and the high Total Sulphur (TS) of Pit South (1.39%) the average TS of the remaining Senakin Reserves is 1.04%. The TS of Pit 15 and Pit Manggis are also above 1.0% contributing to the Senakin average TS being above 1%. The TS of the remaining Senakin Reserves will impact on the marketing strategy to be adopted. It will likely require the marketing of two separate products, one with TS below 1% and one with TS above 1%. This is because some customers will not purchase product with TS above 1%. Those customers that purchase product with TS above 1% will likely do so with a price discount relative to the reference coal specification. Two main contractors operate at Senakin, PT Bukit Makmur (Buma) and PT Thiess Contractors Indonesia (TCI). In 2011 Senakin will have available overburden removal capacity of 23 Mbcm from BUMA and 63 Mbcmpa from Thiess for a total of 86 Mbcmpa. BUMA will complete mining in Pit 1 in 2011 and relocate to Pit 4-7. Buma will complete mining of Pit 4-7 in 2014. Thiess will mine in Pit 15, Pit Manggis and Pit South in 2011 and start mining in Pit 8-14. Pit 15 and Pit Manggis will be completed in 2012, leaving Pit 8-14 and Pit South as the main sources of Thiess production until the depletion of Senakin Reserves in 2017. The Senakin waste removal schedule is shown on Graph 5-4 and the coal uncovered schedule is shown of Graph 5-5.

603

Graph 5-4 Senakin Waste Removal Schedule

Graph 5-5 Coal Uncovered Schedule

Coal mined in 2012 2014 is above Senakin washplant nameplate capacity of about 6.2 Mtpa. This will require some adjustment in the mining schedule to either reduce waste removal capacity, re-sequence the excavation to a slightly higher strip ratio in those years or adjust mining downwards to match the washplant feed capacity and allow the uncovered coal accrue as pit inventory in those years. 5.2.4 Batulicin For the 2010 LOM plan update for Batulicin the remaining Reserve is estimated to be 26 Mt in three main mining areas, Ata, Mangalapi and Mereh. In Ata the majority of the remaining Reserves are in the existing Pit 3 being mined by PT Citra Kridatama (CK) and in the still to be mined Pit 2. The Ata Pit 2 and Reserve

604

boundary overlaps with the (HPH) or Production Forest of Kodeco and the Izin Pinjam Pakai (IPPKH) is yet to be obtained. It has been assumed that the IPPKH will be obtained to allow mining to commence in January 2012. In Mangkalapi small Reserves remain in each of the three active pits. Mereh contains 53% of the remaining Batulicin Reserve with 13 Mt contained in 3 pits. Pit Ulin at Mereh is overlapping with 2 Mt of Reserve has an overlapping HPH with Kodeco but an IPPKH has been obtained and mining is planned to commence in Q3 2011. Pit Meranti with 9 Mt of reserve also has an overlapping HPH with Kodeco and an IPPKH has not yet to be obtained. It has been assumed that this will be forthcoming and mining is scheduled to commence in Q2 2013. The Batulicin production schedule is approximately 3 Mtpa although 4 Mt is planned to be uncovered in 2011. Existing Ata operations and Mangalapi operations will be completed in 2011/2012. From 2013 through 2019 mining will concentrate in Ata Pit 2 at a rate of 1 Mtpa and from the Ulin and Meranti Pits at Mereh at mining rate of 1.5 2 Mtpa. The coal exposed schedule is shown in Graph 5-6. Graph 5-6 Batulicin Coal Exposed Schedule

The overburden production schedule will increase from about 27 Mbcmpa in the period 2011 2013 to about 37 Mbcmpa for the period 2014 through 2017 as shown in Graph 5-7. Reserves are depleted in 2019.

605

Graph 5-7 Batulicin Waste Schedule

5.2.5 East Mulia East Mulia includes Pit 8, Pit 1-4, Perintis and Jumbang containing 54 Mt of remaining Ecocoal Reserves. Major issues associated with East Mulia are land access to the remaining Perintis Reserves as the village of Sungai Danau has encroached into the lease area and the need to build a bridge across the Satui River to access the Jumbang Reserves. It is planned to mine East Mulia at a rate of 5 Mtpa from 2011 through to the depletion of Reserves in 2021 as shown in Graph 5-8. Graph 5-8 East Mulia Coal Mining Schedule

Existing operations in Perintis and Pit 8 will be replaced by Pit 1-4 and Jumbang operations progressively over the period 2011 2015. The coal production rate of 5 Mtpa will require overburden removal production to increase from about 10 Mbcmpa to about 24 Mbcm per annum by 2015 as shown in Graph 5-9.

606

Graph 5-9 East Mulia Waste Schedule

5.2.6 West Mulia West Mulia is essentially a single pit containing 168 Mt of coal and 585 Mbcm of waste. Constraints associated with West Mulia are an area of overlap with PT Smart Oil Palm plantation in the northeast and the substantial Block C village in the middle of the pit that will require relocation. Arutmin advises that they are confident that the relocation will be successful. Runge believes that as Arutmin has a history of successfully resolving land compensation issues, including relocations, this will be the case in this situation. West Mulia development and production will initially provide the expansion in Ecocoal production that will take Arutmin from 12 Mtpa in 2011 to 25 Mtpa in 2014. West Mulia will provide up to 5.5 Mtpa through 2015 then 7 Mtpa through 2019, 10 Mtpa through 2022 then 12 Mtpa through 2026 and then reducing in annual production until reserves are depleted in 2032. The coal production schedule is shown in Table 5-2. Table 5-2 West Mulia Production Schedule
West Mulia Schedule Quantity Summary Total Waste ROM Coal Tonnage Strip Ratio Quality Summary ROM Ash ROM Inherent Moisture ROM Specific Energy ROM Total Moisture ROM Total Sulphur Units 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Mbcm Mt bcm/ tonne 2 1 1.4 18 5 3.9 23 5 4.5 22 6 4.0 20 6 3.6 31 7 4.5 34 7 4.9 37 7 5.3 34 7 4.8 39 10 3.9 44 10 4.4 34 10 3.4

% (adb) % (adb) kcal/kg (gar) % (gar) % (adb)

3.2 20.7

5.3 34.5

6.0 35.0

5.8 34.6

5.3 34.5

5.3 24.4

4.8 24.2

4.4 23.7

4.0 23.3

3.6 20.4

4.2

4.2

20.2 20.27

5,246 4,584 4,728 4,780 4,790 4,831 4,873 4,941 4,969 5,281 5,278 5,283

37.7 0.15

35.1 0.28

37.7 0.21

37.6 0.21

37.4 0.22

37.3 0.21

37.3 0.21

37.8 0.18

37.7 0.13

38.5 0.12

38.6 0.12

38.5 0.13

607

West Mulia Schedule Quantity Summary Total Waste ROM Coal Tonnage Strip Ratio Quality Summary ROM Ash ROM Inherent Moisture ROM Specific Energy ROM Total Moisture ROM Total Sulphur

Units Mbcm Mt bcm/tonne

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total 41 12 3.4 34 12 2.8 42 12 3.5 40 12 3.3 34 10 3.4 22 7 3.2 17 7 2.5 11 7 1.5 6 7 0.8 1 2 0.5 585 168 3.5

% (adb) % (adb) kcal/kg (gar) % (gar) % (adb)

4.1 20.6

4.2 20.5

4.4 20.6

4.6 20.5

4.6 20.5

4.3 20.4

5.0 20.4

4.8 20.4

4.6 20.4

4.2 20.6

4.5 22.8

5,237 5,248 5,223 5,223 5,234 5,232 5,240 5,247 5,251 5,257 5,127 38.3 0.15 38.3 0.15 38.0 0.16 38.1 0.15 38.2 0.14 37.9 0.15 38.0 0.15 38.3 0.15 38.3 0.14 38.3 0.16 38.0 0.16

The coal production schedule will require overburden production of 22 Mbcmpa increasing to a maximum of about 40 Mbcmpa when 12 Mtpa of coal is being produced. It is planned to mine West Mulia from the east to the west to allow time for the Block C village to be relocated. 5.2.7 Asam Asam Asam Asam contains Reserves of 133 Mt of Ecocoal and associated waste of 600 Mbcm. The Reserves are contained in two separate areas in the east and west of the deposit. Current operations are associated with the coal seams in the west. Issues associated with Asam Asam are land overlaps with the oil palm plantations and out of pit dumping from the western pit boxcut requiring an out of pit dump footprint that extends beyond the lease boundary. Asam Asam will also account for part of the increase in Ecocoal production from 2011 to 2014 with production increasing from 6 Mtpa to 10 Mtpa. Long term production varies between 8 Mtpa and 6 Mtpa and Reserves will be depleted by 2028 as shown in Table 5-3 and Graph 5-10. Table 5-3 Asam Asam Production Schedule
Asam Asam Quantity Summary Total Waste ROM Coal Tonnage Average Strip Ratio Quality Summary ROM Ash ROM Inherent Moisture ROM Specific Energy ROM Total Moisture ROM Total Sulfur Asam Asam Quantity Summary Total Waste ROM Coal Tonnage Average Strip Ratio Quality Summary ROM Ash ROM Inherent Moisture ROM Specific Energy ROM Total Moisture ROM Total Sulfur Unit Mbcm Mt bcm/t % (adb) % (adb) kcal/kg (gar) % (gar) % (adb) 2011 33 6 5.4 3.0 23.8 5,011 2012 38 7 5.4 4.0 22.3 5,050 2013 38 9 4.2 3.5 22.9 5,028 2014 38 10 3.7 3.4 23.8 4,972 2015 36 10 3.6 3.4 24.5 4,911 2016 36 10 3.5 3.3 24.6 4,887 2017 36 9 4.0 3.4 24.8 4,847 2018 36 8 4.4 3.7 25.5 4,796 2019 36 8 4.3 4.1 25.0 4,825 2020 36 9 4.2 4.0 24.6 4,871

35.3 0.32

34.7 0.37 2021 36 7 5.2 4.5 22.9 4,930 34.3 0.21

34.8 0.30 2022 36 7 5.4 6.3 22.2 4,840 33.7 0.19

35.1 0.24 2023 36 5 6.8 4.5 23.4 4,889 32.9 0.18

35.5 0.19 2024 36 5 6.6 7.6 22.6 4,733 31.7 0.18

35.6 0.16 2025 34 6 5.3 7.2 23.3 4,705 30.5 0.14

35.6 0.15 2026 25 6 4.0 6.3 23.1 4,770 31.1 0.15

35.7 0.17 2027 21 6 3.3 11.5 21.7 4,448 32.1 0.19

35.4 0.21 2028 12 3 4.0 3.8 23.6 4,967 33.5 0.26

35.2 0.25 Total 600 133 4.5 4.6 23.7 4,866 34.3 0.21

Unit Mbcm Mt bcm/t % (adb) % (adb) kcal/kg (gar) % (gar) % (adb)

608

Graph 5-10 Asam Asam Production Forecast

The overburden production required to achieve this level of coal production will increase from 33 Mbcmpa to a maximum of 38 Mbcmpa and average 35 Mbcmpa for the period 2015 to 2024. 5.2.8 Sarongga Sarongga is a new mining area in the Batulicin region containing sub-bituminous coal. It has higher TM (42%) and lower CV than Ecocoal. The Reserve is 144 Mt with associated overburden of 209 Mbcm. Development of Sarongga is part of the Arutmin increase in sub bituminous coal production to 25 Mt by 2014. Sarongga is planned to commence production in 2012 with 2 Mtpa increasing to 5 Mtpa by 2014 and then to 10 Mtpa by 2020. Reserves will be depleted by 2030. The production schedule is shown in Table 5-4 and Graph 5-11. Table 5-4 Sarongga Production Schedule
Sarongga Schedule Unit Quantity Summary Total Waste Mbcm ROM Coal Tonnage Mt Average Strip Ratio bcm/t Quality Summary ROM Ash % (adb) ROM Inherent Moisture % (adb) ROM Specific Energy kcal/kg (gar) ROM Total Moisture % (gar) ROM Total Sulfur % (adb) Sarongga Schedule Unit Quantity Summary Total Waste Mbcm ROM Coal Tonnage Mt Average Strip Ratio bcm/t Quality Summary ROM Ash % (adb) ROM Inherent Moisture % (adb) ROM Specific Energy kcal/kg (gar) ROM Total Moisture % (gar) ROM Total Sulfur % (adb) 2012 4 2 1.8 5.9 30.1 4,227 41.5 0.09 2022 15 10 1.5 7.6 28.0 4,166 41.7 0.10 2013 5 3 1.6 6.5 29.8 4,235 42.4 0.09 2023 12 10 1.2 7.1 28.4 4,145 42.3 0.10 2014 11 5 2.2 7 29.3 4,251 40.9 0.09 2024 11 10 1.1 7.2 28.3 4,106 42.7 0.10 2015 11 5 2.2 7.2 29.2 4,242 40.9 0.09 2025 10 10 1.0 7.3 28.3 4,115 42.4 0.10 2016 7 5 1.5 7.1 29.2 4,209 41.3 0.09 2026 10 10 1.0 7.2 28.4 4,143 42.0 0.10 2017 6 5 1.3 8 28.1 4,222 40.9 0.09 2027 13 10 1.3 7.1 28.4 4,196 41.4 0.09 2018 8 5 1.5 7.9 28.1 4,209 41.0 0.09 2028 15 10 1.5 9.6 26.8 4,149 40.3 0.10 2019 8 5 1.5 7.8 28.1 4,205 41.1 0.09 2029 18 10 1.8 5.5 27.2 4,397 41.5 0.14 2020 16 10 1.6 7.4 28.2 4,195 41.5 0.09 2030 11 9.5 1.2 5.2 26.6 4,486 42.2 0.11 2021 18 10 1.8 7.9 27.8 4,215 41.1 0.09 Total 209 145 1.4 7.2 28.1 4,213 41.6 0.10

609

Graph 5-11 Summary Production Sarongga

Overburden removal will increase from 4 Mbcmpa in 2012 to a peak of 18 Mbcmpa averaging around 14 Mbcmpa over the life of the deposit. 5.3 Reconciliations Runge has recently reviewed detailed coal reconciliation work carried out at KPC and Arutmin. These reconciliations are done on a regular basis and demonstrate a very good correlation between the geological model and the surveyed mine quantities. This reconciliation work could be classed as industry best practices and provides additional level of comfort in the geological models, which are the key basis for estimating Resources and Reserves plus are critical in the mine planning process. MINING OPERATIONS KPC Mining Operations The KPC operations are all open pit and they use a number of different mining methodologies for different operating areas, from strip mining; where waste from the mining area is hauled to dump locations outside of the pit boundary to haul back mining, where waste is hauled back into mined out voids and a combination of both methods. The current mining process consists of the following elements: Settling ponds are constructed prior to areas being cleared Clearing of the pit areas takes place in advance of the mining areas; Once an area has been cleared the topsoil and subsoil is removed prior to the main mining operations. This topsoil and subsoil is currently stockpiled separately in dedicated soil dumps or dumped directly onto areas ready for rehabilitation. The stockpiles will be rehandled when necessary and placed on the prepared dump areas; 85% of the overburden is blasted before it is excavated; Overburden is removed with hydraulic excavators in both shovel and backhoe configurations and loaded into large mining rear dump trucks which transport the waste to the appropriate dump areas along specifically designated haul roads between the working face and the waste dumps; Within the pit working areas the waste removal is carried out on a number of different mining bench levels to expose multiple seams; The pit floors, haul roads and dumping areas are maintained by fleets of motor graders, bull dozers and water trucks.

6. 6.1

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After the bulk of the waste is removed, a thin layer of waste material immediately overlying the coal is selectively cleaned off by smaller excavators to minimise coal dilution from waste material as well as restricting coal losses during the mining process. Coal is removed by hydraulic excavators and loaded into large coal dump trucks, where it is transported to the designated ROM stockpiles; and Water within the pit area is controlled through the use of pumps, from where it is pumped into settlement/sediment ponds on the surface.

The KPC overburden removal fleet currently consists of 35 hydraulic excavators greater than 350 tonne and around 300 dump trucks greater than 150 tonne in capacity. For the coal mining operations a fleet of 16 hydraulic excavators and 68 dump trucks is used. These fleets are supported by auxiliary fleet of bulldozers, graders, drills and water trucks. The KPC fleet is maintained by KPCs maintenance facilities which in turn are supported by a large presence on site of the various Original Equipment Manufacturers, (OEM), Indonesian dealers, e.g. Liebherr, Hitachi, Komatsu and Caterpillar. The KPC fleet is well maintained and well supported. As production increases KPC intends to manage the majority of this increase with their own fleet, which will mean significant increases in fleet sizes. KPC understands the critical risks of achieving the forecast production capacity includes being able to plan far enough in advance the equipment requirements, allowing for long lead times in equipment delivery and maintaining their current operator and mechanical personnel recruitment and training programs. Provided these critical risks are properly managed, Runge is of the opinion that KPC will meet the production targets set for its own equipment. In addition to KPCs own fleet, KPC operates three major mining contracts with PT Pamapersada Nusantara (PAMA), PT Thiess Contractors Indonesia (TCI), and PT Darma Henwa (PTDH). PAMA and TCI are two of the largest mining contractors in Indonesia, while PTDH has operated in Indonesia since the early 1990s. PAMA currently operates in the Pelikan area, TCI in Melawan and PTDH in Bengalon. All three contracts are very similar with respect to terms and conditions and scope of work, they all are total service provision contracts for delivery of ROM coal to their respective nominated delivery point. The scope of work entails: land clearance, topsoil and overburden removal, coal mining, coal loading and hauling, water management, provision of ancillary equipment, repair and maintenance of in-pit roads, disposal roads and coal haul roads, and mobilisation and demobilisation.

The TCI contract is a life of mine contract, which was executed in late 2003, for nominally 10 Mtpa, although they are scheduled to mine at an average rate of approximately 11.7 Mtpa for the next 5 years. The PAMA contract was executed in 2004 and was for 10 years. The latest schedule from KPC indicates that they will operate to at least the end of 2015 and will mine on average 14 Mtpa. KPC entered into a Bengalon life of mine contract with PTDH in 2004, and KPC has PTDH scheduled to operate at a rate of up to 13 Mtpa over the next five years. The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive. The commercial terms are in line with expected contract rates for Indonesia. PAMA and Thiess have historically performed and both have the necessary size to manage and meet their forecast production requirements. PTDH have historically managed a production rate of slightly below only a 6 Mtpa. 611

KPC is well aware of the current production limitations of PTDH and is evaluating its options with respect to ensuring that the production levels from Bengalon meet the current targets. 6.2 Arutmin Mining Operations 6.2.1 Overview All Arutmin mine sites are operated by mining contractors with Arutmin providing site management and administration. The contractual arrangements in place vary from site to site and are dependent on the time at which contractual arrangements were entered into. In all instances mining contractors provide all the physical mining services from land clearing through to barge loading. All Arutmin operations employ similar mining methodology to KPC. Mining contracts and mining plant and equipment capacity is currently in place for 212 Mbcm of overburden removal and 24 Mt of ROM coal in 2011. Based on the Arutmin LOM plan, overburden removal capacity of a maximum of 273 Mbcm and maximum coal mining capacity of 41 Mt will need to be in place by 2014. 6.2.2 Satui including Karuh Mining at Satui is carried out by TCI under an Alliance agreement with Arutmin, whereby TCI is remunerated for providing all services necessary to deliver product coal onto barges at Satui for a fixed price at a nominated Strip Ratio. Mining at Karuh is conducted by local contractor BWM. At Satui TCI currently operates a fleet of hydraulic excavators and off highway dump trucks for overburden removal with installed capacity of 55 Mbcm per annum. The excavation fleet of 17 pieces in total comprises: 2 x Liebherr 995 excavators 3 x Liebherr 994 excavators 3 x Hitachi Ex 3600 excavators 7 x Hitachi Ex 2500 excavators 2 x Hitachi Ex 1900 excavators

In 2014 it is planned to increase the overburden removal capacity to 67 Mbcmpa with the addition of 4 excavators comprising 3 x Hitachi Ex 2500 excavators 1 x Liebherr 994 excavator

Runge believes the current fleet of overburden removal excavators and those planned for 2014 have the capacity to deliver the overburden planned in the Satui production schedule. 6.2.3 Senakin Mining at Senakin is provided by two mining contractors BUMA and TCI. BUMA operates under a schedule of rates contractual arrangement and has an installed overburden removal capacity of 23 Mbcmpa comprising 6 excavators consisting of: 4 x Komatsu PC 2000 excavators 2 x Komatsu PC 1250 excavators

TCI also operates under an Alliance agreement with Arutmin at Senakin. Thiess is remunerated for providing all services necessary to deliver product coal onto barges at Senakin port for a fixed price at a nominated Strip Ratio. TCI has installed overburden removal capacity of 63 Mbcmpa comprising 14 excavators consisting of: 5 x Hitachi Ex 3600 excavators (1 new in 2011)

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2 x Liebherr 994B excavators 1 x Liebherr 9350 excavator 3 x Liebherr 9250 excavators (1 new in 2011) 3 x Hitachi Ex 1900 excavators (1 new in 2011)

Runge believes the current fleet of overburden removal excavators and those planned for 2011 have the capacity to deliver the overburden planned in the Senakin production schedule. 6.2.4 Batulicin Mining at Batulicin is carried out by two contractors, PT Cipta Kridatama, (CK), and BWM. Both Contractors provide full mining services under schedule of rates contracts to deliver coal to the ROM crusher at the Batulicin port. CK operate in Ata Pit 3, Mangalapi, Saring and Sarongga and Mereh with installed overburden removal capacity of approximately 23 Mbcmpa. A fleet of 15 excavators is employed consisting of: 1 x Liebherr 994 excavator 1 x Liebherr 9250 excavator 7 x Cat E385 excavators 2 x Cat E345 excavators 1 x Cat E330 excavator 1 x RH 120 excavator 1 x RH 40 excavator 1 x Komatsu PC 1250 excavator

BWM operate in Ata Pit 1 with installed overburden removal capacity of about 4 Mbcmpa. A fleet of 4 excavators is employed consisting of: 4 x Komatsu PC 400 excavators 1 x Komatsu PC 300 excavator

Overburden removal capacity at Batulicin will need to increase to 36 Mbcmpa by 2016 as mining moves into and concentrates on the Mereh Pits and Ata Pit 2. Arutmin has yet to confirm the contractors to undertake the planned production schedule in the Mereh Pits and Ata Pit 2 after the completion of mining in Ata Pit 3, Mangalapi and Mereh Sungai Pit. The existing contractors may be given the opportunity of negotiating extensions of their existing capacity in these new mining areas with the additional 13 Mbcmpa included in the negotiations. Alternatively Arutmin may competitively tender all future work in Ata Pit 3 Mereh Pit Ulin and Meranti. 6.2.5 East Mulia East Mulia mining is carried out by TCI under an Alliance agreement with Arutmin. Thiess is remunerated for providing all services necessary to deliver product coal onto barges at the port of Muara Satui for a fixed price at a nominated Strip Ratio. At East Mulia Thiess operate a fleet of hydraulic excavators and off highway dump trucks for overburden removal with a current installed capacity of about 15 Mbcm. The excavation fleet of 6 excavators in total comprises: 3 x Liebherr 994 excavators 3 x Hitachi Ex 2500 excavators

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In 2015 it is planned to increase the overburden removal capacity to 20 Mbcmpa with the addition of 4 excavators comprising: 1 x Hitachi Ex 2500 excavator 1 x Liebherr 994 excavator

Runge believes the current fleet of overburden removal excavators and those planned for 2014 have the capacity to deliver the overburden planned in the East Mulia production schedule. 6.2.6 Asam Asam Mining at Asam Asam is carried out by PTDH under a schedule of rates mining agreement with Arutmin. PTDH is remunerated for providing all services necessary to deliver product coal to the Asam Asam CPP for a fixed price at a nominated Strip Ratio. At Asam Asam PTDH operate a fleet of hydraulic excavators and off highway dump trucks for overburden removal with a current installed capacity of about 33 Mbcm in 2011. The excavation fleet of 14 pieces in total comprises: 7 x Komatsu PC 1250 excavators 4 x Hitachi Ex 2500 excavators 3 x ZX450 excavators

In 2012 it is planned to increase the overburden removal capacity to 38 Mbcmpa with the addition of: 2 x Hitachi Ex 2500 excavators

Runge believes the current fleet of overburden removal excavators and those planned for 2012 have the capacity to deliver the overburden planned in the Asam Asam production schedule. 6.2.7 West Mulia Local contractors using small equipment in the Komatsu PC 300 and 400 size range are mining 1.5 Mbcm of overburden and 1.1 Mt of Coal at West Mulia in 2011. Arutmin has tendered for the long term provision of 22 Mbcmpa increasing to 40 Mbcmpa of overburden removal capacity required for the production of 4.5 Mt of ROM coal in 2012 increasing to 12 Mtpa ROM coal in 2023. This tender needs to be awarded in 2011 to ensure the West Mulia production increase planned to commence in 2012 can be achieved. 6.2.8 Sarongga Arutmin will need to tender for the long term provision of 4 Mbcmpa increasing to 18 Mbcmpa of overburden removal capacity required for the production of 2 Mt of ROM coal in 2012 increasing to 10 Mtpa ROM coal in 2020. This tender needs to be awarded in 2011 to ensure the Sarongga production increase planned to commence in 2012 can be achieved. 6.3 Coal Quality Management A detailed coal quality control system has been implemented at both KPC and Arutmin. Coal quality data is measured at the working mine face and throughout the coal handling process. Coal qualities and quantities are measured and reconciled on a regular basis. The coal quality is monitored at various steps throughout the coal chain. Coal quality control includes: sampling each exposed coal seam in the workings; daily physical checks of the coal mining practices to ensure that the mining contractors are adhering to the required quality standards;

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overseeing coal recovery and dilution control; daily production meetings between KPC and contractors to advise which coal seams to mine and coal to deliver to meet sales quality requirements; regular sampling of the coal as it is crushed and conveyed to the product stockpiles; coal stockpiles at the individual ports are segregated based on the coal category; sampling of product coal as it is loaded onto ships and barges at the ports.

Both KPC and Arutmin use the services of superintending contractors who have fully equipped laboratories at the ports. Runge is of the opinion that KPC and Arutmin manages the coal quality control process to appropriate international standards. 7. 7.1 COAL HANDLING FACILITIES KPC Coal Handling Facilities The KPC coal handling facilities follows: Sangatta Coal Handling Facilities comprising ROM stockpiles, crushing plant, washplant and overland conveyor. Tanjung Bara coal stockpiling and re-handling facility plus ship loader and barge loader. Bengalon ROM stockpiles, crushing plant, product stockpiles and barge loader.

KPCs current coal handling facilities are adequate to meet the 2011 coal production forecast. As coal production increases, KPCs crushing, barge loading, and ship loading capacity must also increase. 7.1.1 Sangatta Coal Handling Facilities The existing Sangatta coal handling facilities, (CPP), consist of six coal crushing lines: Crushing Line 1 consists of a 1,400 tph Gunlach feeder breaker and double roller crusher Crushing Line 2 consists of a 1,400 tph Gunlach feeder breaker and double roller crusher Crushing Line 3 is used for clean Prima coal and consists of a 900 tph reciprocating plate feeder and double roller crusher Crushing Line 4 is used for clean Prima coal and consists of a 1,500 tph feeder breaker and double roller crusher Crushing Line 5 is used for dirty Prima coal and consisting of a 1,400 tph feeder breaker and double roller crusher. Coal from this line is feed into the washplant, and its capacity is set at 600 tph, same as the washplants capacity Crushing Line 6 consists of a 2,250 tph feeder breaker and Stamler sizer A dense medium cyclone (DMC) coal beneficiation plant (or washplant) is used to process predominantly Prima coal from the top and bottom of the seams which has a higher ash component from the mining process. The 600 tph washplant receives coal from Crushing Line 5 and washes the 0.5 to 50 mm coal in a dense medium cyclone with the fine coal, i.e. coal between 0.1 to 0.5 mm in size, washed in spirals. The coal recovery of washing plant is around 70%. The moisture content of washed coal is reduced in a centrifuge before it is mixed with clean crushed Prima coal in a 70,000 t capacity stockpile. Stockpile and Reclaim facility; after the crushing and washing process coal is placed onto a series of product stockpiles, where the majority of which is reclaimed onto a single overland conveyor. A central control room is used to manage the reclamation process from a quantity and quality perspective.

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The majority of the coal from Sangatta is transported to the Tanjung Bara port on a 13 km long single stage overland conveyor (OLC), which has a speed of 8.7 m/s and operates at around 4,200 tph. Currently around 6 Mtpa of coal is transported from the Sangatta to the port by truck. This current arrangement has a current total capacity of around 38 Mtpa. At the Tanjung Bara Port Facility (TBCT), coal from the OLC transfers to coal through a 4,500 tph capacity stacker to a one of a number of product stockpiles, depending on grade. The total port stockpile capacity is currently 1.2 Mt. The coal transported by truck is directly dumped onto the product stockpiles. Coal is then reclaimed from the product stockpiles onto a reclaim conveyor which feeds a trestle conveyor and ship loader. This reclaim system was recently upgraded from 4,000 to 7,500 tph capacity, giving an annual capacity of around 40 Mtpa. The shiploader can accommodate up to Cape size vessels. There is also a 2,000 tph barge loader at Sangatta, coal from which is barged a couple of kilometres to a deep water floating transfer/shiploading facility. Currently this barging arrangement is capable of handling around 8 Mtpa. 7.1.2 Bengalon Coal Handling Facilities ROM coal from the Bengalon operation is hauled by 80 t capacity trucks approximately 22 km to the Lubuk Tutung coal handling facility. There is a small ROM stockpile at Lubuk Tutung but the majority of the coal is directly fed into the coal handling plant. The facilities consist of a 2,500 tph Stamler feeder breaker and sizer which feeds the coal onto two radial product stockpiles. The reclaim coal from these stockpiles is fed onto a 400m long 2,000 tph barge loading conveyor. A dredged channel enables 8,000 t capacity barges to continually operate and transfer the coal to floating cranes located offshore, where Panamax size ships are loaded. Some coal is also barged to Sangatta and blended with the coal from the Sangatta barging operations. 7.1.3 Expanded Facilities and Capacity KPC is planning on constructing a number of new facilities plus increasing the capacities of a number of existing facilities in order to have the ability to produce at a rate of 70 Mtpa. The planned work is summarised as follows: Duplication of the OLC and develop an additional product stockpile and reclaim facility at TBCT; Install new crusher facilities at Melawan and an overland conveyor between Melawan and the Sangatta CPP; Increase the on-site powerhouse capacity; Install new crusher facilities at Bendili and a northern overland conveyor; Install a 2nd shiploader at the TBCT; Upgrade the coal washplant at the Sangatta CPP Upgrade the Bengalon Lubuk Tutung coal handling facilities Develop access to the Bengalon Pits B & C areas Develop a Bengalon ship loading facility, and Install an OLC at Bengalon

A summary construction timetable is provided in Table 7-1.

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Table 7-1 KPC Construction Schedule

43 MTPA 48 MTPA 58 MTPA 70 MTPA 70 MTPA

2009 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

TBCT Shiploader Upg 40 Mtpa Power Expansion 2 x 18MW Power Expansion 1 x 18MW Melawan OLC/Crusher @ 4.000 tph Northern OLC/Crusher @ 4.000 tph

Duplicate OLC @ 4.000 tph ~ 30 - 32 Mtpa

Conv to BLV @ 9 Mtpa 2nd Shiploader ~ 30 - 40 Mtpa + 4th Stockpile

Upgrade B gln LTT Facility to ~ 1 M tpa 2

Bengalon OLC @ 12 Mtpa

Upgrade Coal Wash Plant - Sanga a Logis c, Workshop, Road, Water, Building Infrastructures

Mine Equipment and Support Equipment

Overburden Crusher and Conveyor

Construction work commenced in June 2010 on duplicating the OLC and developing a new 600 kt product stockpile with stacker and reclaiming facilities, which will feed to the existing ship loader. These new facilities will have a capacity of 30 Mtpa. A new surge bin will be installed at the existing Sangatta CPP and coal from the existing stockpiles will be able to feed into this bin. This bin will then load coal onto a single stage conveyor which will run on the southern side and adjacent to the existing OLC. The new port stockpile facilities are located adjacent to the existing stockpiles. The expected timeline for the completion of these facilities is by mid-2012. In late 2010 construction commenced on the Melawan OLC system. This consists of two crusher lines located in the Melawan area and a 9 km overland conveyor connecting to the Sangatta CPP. Currently all coal from Melawan is transported by truck to the Sangatta CPP. This facility will have a capacity to produce 30 Mtpa upon completion. Construction work on this facility is expected to be completed in late 2012. As at Melawan, it is planned to install two crusher lines at Bendili and a 4.6 km long overland conveyor to the Sangatta CPP. As part of this development a new 200 kt product stockpile and reclaim facility will be developed at the Sangatta CPP. In order to have sufficient power capacity on site to meet the requirements for KPCs infrastructure expansion plus replace some of the existing temporary diesel power gensets, KPC will install additional power generation facilities, with the work planned in two stages: The first stage will consist of constructing 2 x 18 MW powerplants at Tanjung Bara, adjacent to the existing facility. Design work for these powerplants is well advanced. In the second stage, an additional 18 MW powerplant will be constructed.

The existing Bengalon Lubuk Tutung facilities have a production capacity of 9 Mtpa. These facilities will be upgraded to handle 12 Mtpa.

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A 12 Mtpa coal crushing facility will be constructed at Bengalon Pits B and C, an OLC will then transport coal to the Bengalon port. Construction activities will also include the development of a 700 kt capacity product stockpile at Lubuk Tutung along with stacker and reclaimer facilities. A new trestle conveyor and shiploader will also be constructed. A 50 m long bridge connecting the Pit A area and the yet to be developed Pits B and C at Bengalon mine will be built across the Lembak River. This bridge will be a concrete and steel structure and will be designed to carry 120 t capacity haul trucks and low beds, (equipment used to transport heavy mining equipment) with a carrying capacity of around 250 t. KPC has been reviewing the necessary infrastructure works to increase its capacity since 2004. The processes used by KPC in identifying its requirements and selection of facilities is sound and supported by detailed engineering and feasibility studies. It is expected that KPC will continue with this approach and further refine its future requirements over time. Major construction contracts which have been let to date, i.e. the duplicate OLC and Melawan facilities, and the control processes put in place by KPC have been reviewed and are suitable to meet their specified requirements. Overall Runge believes that the infrastructure expansion program as specified by KPC as being reasonable. 7.2 Arutmin Coal Handling Facilities 7.2.1 Satui and East Mulia Satui coal is transported about 27 km and East Mulia product coal is hauled about 7 km by haul trucks to the port of Muara Satui. Here the coal is crushed, stockpiled and then reclaimed and loaded to barges. Muara Satui has two fixed coal crushing plants of 1,000 tph and 750 tph capacity and a mobile coal crushing plant with 500 tph capacity for an annual capacity of about 10.2 Mt as advised by Arutmin. Runge believes that these three crushers have the capability of delivering more output than this. For 5,500 operating hours per annum these three crushers should be able to produce 12.4 Mtpa. Barge loading capability at Muara Satui consists of 4 feeder reclaimers fed by bulldozers or front end loaders feeding a 3,000 tph barge loader. A second barge loader fed by a front end loader through a hopper has a 925 tph capacity. Arutmin have advised the barge loading capacity at Muara Satui is 13 Mtpa. Runge agree with this assessment. Based on the production schedules advised by Arutmin for Satui and East Mulia Runge is satisfied that the fixed plant, facilities and infrastructure at Muara Satui has the capacity to handle the envisaged levels of production. 7.2.2 Senakin Senakin ROM coal requires washing to produce a saleable product. Senakin has two washplants to undertake this task, a Jig Plant at east Senakin and a Dense Medium Plant (DMP) at West Senakin. The nameplate capacity of these two plants is 4.8 Mtpa of product coal that requires plant feed of about 6.2 Mtpa with a plant yield of 78% being achieved. Coal mined in 2012 2014 is above Senakin washplant nameplate capacity of about 6.2 Mtpa. This will require some adjustment in the mining schedule to either reduce waste removal capacity, resequence the excavation to a slightly higher strip ratio in those years or adjust mining downwards to match the washplant feed capacity and let the uncovered coal accrue as pit inventory in those years. Senakin product coal is hauled from the washplants to either the Sembilang barge loading port (from the Jig plant) or the Air Tawar 2 barge loading port (from the DMP). Both Air Tawar 2 and Sembilang have barge loading conveyor capacity of 1,500 tph and therefore sufficient capacity to handle annual product coal production of 4.8 Mt from Senakin.

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7.2.3 Batulicin and Sarongga Batulicin ROM coal is hauled from the pits to Batulicin Port area where it is crushed, stockpiled and then reclaimed to barge. The port has a single crusher, single stockpile and single barge loading reclaim and conveyor. The Batulicin Port is contractor operated and has an annual capacity of about 3 Mtpa. Runge is satisfied that the Batulicin Port has the capability of handling the planned production bituminous production from the Ata, Mangalapi and Mereh operations. This port does not have the capacity to handle the additional production planned from the Sarongga mine in the region and a new facility will be required to handle the production planned from Sarongga. 7.2.4 Asam Asam ROM coal from Asam Asam is trucked from the pit and handled through a series of Coal Preparation Plants (CPP). These plants are planned to be upgraded to a single CPP at the pit head with capacity of 12 Mtpa. Crushed product coal will then be conveyed around 10 km by overland coal conveyor (OLC) to the existing barge loading trestle conveyor and barge loader. The recently completed barge loading trestle conveyor and barge loader has a capacity of 2,500 tph and an annual capacity of 12 Mtpa. This planned and installed CPP, OLC and barge loading capacity is in line with the planned long term production from Asam Asam and Runge believes it will be able and adequate to meet the planned production. 7.2.5 West Mulia There is limited infrastructure in place at third party ports to handle current levels of production and planned 2011 production from West Mulia. Arutmin plans to build a Coal Preparation Plant (CPP) at West Mulia to crush and stockpile coal and then convey by overland coal conveyor this coal to a new barge conveyor and associated barge loader. Estimated time of completion is June 2012. This facility will be similar to that already constructed or under construction at Asam Asam. The West Mulia CPP, OLC and Barge loader are planned to have a capacity of 12 Mtpa. 7.2.6 Coal Handling and Ship Loading The minimum processing and transport requirements for Arutmin coal represent a major cost advantage. At the barge ports coal is loaded onto Arutmins fleet of 8 custom-built, self-discharging barges which have capacity of either 7,000 dwt or 3,500 dwt. From this point coal travels either direct to domestic and regional customers, or to Arutmins North Pulau Laut Coal Terminal (NPLCT). Senakin barges travel 45 km to NPLCT, a 24-hour round trip, while Satui, Mulia, Asam-asam and Batulicin barges travel 130 km, a 40-hour round trip. NPLCT contributes substantially to Arutmins cost competitiveness as a deep-water port near the four Arutmin mines and is designed to receive four barges simultaneously. Coal is loaded by mechanised conveyors and a rail-mounted coal-loader which travels the full length of the vessel which allows stationary loading. The current NPLCT barge offloading capacity is approximately 14 Mtpa which matches its ship loading capacity of roughly the same amount, equivalent to approximately 160 ships and 1,700 barges per year. The plan is to construct a continuous barge unloader at Satui so that flat top barges can be used to transport coal from the Arutmin sites to NPLCT. 7.2.7 Infrastructure Construction Contracts The major construction contracts for the OLCs port and barge unloader have been let. These contracts and the control processes put in place by Arutmin have been reviewed and are suitable to meet their specified requirements.

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Overall Runge believes that the infrastructure expansion program as specified by Arutmin as being reasonable. 7.3 Arutmin Barge Port to Customer Logistics 7.3.1 Overview Arutmin product coal is delivered to customers in one of three ways: Barged to NPLCT where the product coal is stockpiled then reclaimed and loaded to ocean going vessels. Barged to offshore transhipment points where the product coal is transferred from barges to ocean going vessels. The transfer is generally affected by Geared and Grab vessels or by Floating Crane from barge to Mother Vessel. Barged direct to the customer.

7.3.2 Direct Barging Coal barged directly to customers is mainly sub bituminous coal for the domestic Indonesian market comprising supply to PLN power stations from Asam Asam. This avenue of transport by direct barging will grow to about 10 Mtpa when all supply contracts with PLN are being fulfilled. There is also some coal sold directly to other Indonesian industry like the cement industry that is directly barged. 7.3.3 North Pulau Laut Coal Terminal (NPLCT) The minimum processing and transport requirements for Arutmin coal represent a major cost advantage. NPLCT contributes substantially to Arutmins cost competitiveness as a deep-water port near the four Arutmin mines. The NPLCT facility consists of barge inloading, stockpiling, reclaiming from stockpile and shiploading. NPLCT in its current configuration has a capacity of about 14 Mtpa. It is product coal inloading constrained in its current configuration. At the mine site barge ports coal is loaded onto Arutmins custom-built fleet of selfdischarging barges which have capacity of 8,000 dwt, 7,000 dwt or 3,500 dwt. Senakin barges travel 45 km to NPLCT, a 24-hour round trip, while Satui, Mulia, Asam Asam and Batulicin barges travel up to 130 km, with an associated round trip of up to 40 hours. At NPLCT the barges arrive at one of its four barge inloading berths. Coal is discharged from the barge inloading berths at up to 2,000 tph from each berth with two barges able to discharge simultaneously for an inloading rate of up to 4,000tph. Discharged coal can be either bypassed directly through the stockyard to the vessel loading or sent to stockpile via the 4,000 tph stacker. The stockyard capacity at NPLCT is about 500,000t. Coal is reclaimed from the stockpiles by a 4,500 tph bucket wheel reclaimer and sent via the trestle conveyor to the 4,500 tph travelling shiploader. Vessels of up to 120,000 t cape size can be loaded at NPLCT. Arutmin is also looking at options of increasing the barge inloading capacity at NPLCT so that the annual throughput can be increased up towards 20 Mtpa which is believed to be the ultimate shiploading capacity of the port in its current trestle conveyor and shiploader configuration. This would further take advantage of NPLCTs low cost competitiveness. 7.3.4 Transhipment Transhipment locations are located offshore from the Arutmin barge ports along the South Kalimantan coast where water depth and wind and wave conditions are suitable. Product coal for transhipment is loaded at the barge ports onto flat top barges of 5,000 up to 8,000 dwt capacity.

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The barges are shuttled to the offshore loading point and loaded to the Mother Vessel by either the Gear and Grabs of the Mother Vessel or by a Floating Crane from the barge to the Mother Vessel. Vessels of Handy size, Panamax and top up of Cape size are generally loaded through these trans-shipment methods. 8. 8.1 SUPPORT INFRASTRUCTURE KPC Support Infrastructure In order to support the current KPC operation, facilities at KPC consist of: Power generation facilities located at TBCT o o o o o 2 x 5 MW coal fired power plants 3 x 2.3 MW diesel fired gensets Temporary 6.4 MW diesel fired generating facility Diesel generators for the Lubuk Tutung facility Various smaller diesel generators for remote facilities

Water supply and water treatment facilities Cargo jetties at TBCT and Lubuk Tutung Numerous warehouses for spare parts, tyres and lubricants Explosive storage facilities and magazines at Tanjung Bara, Sangatta and Bengalon Numerous fuel storage tanks with greater than 20 million litres of capacity and associated distribution facilities Maintenance workshops including o o o 12 adequately sized workshops for maintaining the mining equipment Light vehicle workshop 3 workshops for maintaining the various fixed coal handling facilities

Comprehensive road network, with: o o Unsealed suitable designed road network within the mines operational areas Non-pit road network outside the mine area

Offices and buildings including: o o o o Office complex at the Sangatta for operational management and administration Training facility Office complex at Tanjung Bara to support the TBCT activities Numerous Pit offices to directly support mining operations.

Accommodation facilities consisting of o o Housing complexes at Tanjung Bara Mining camps at Tanjung Bara and Swarga Bara

Major medical clinic in Sangatta An airport at Tanjung Bara.

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Various Fire stations and emergency response stations

In addition to the KPC facilities a major town, Swarga Bara is located near Sangatta. All of the facilities have been suitable designed and constructed to support the size of the operation at KPC plus attract and retain suitably skilled staff. KPC plans to continually increase the size and make additions to the facilities as production increases. 8.2 Arutmin Support Infrastructure In order to support the current Arutmin operations, facilities at each of the mine sites consist of: Power generation facilities consisting of o o o o Diesel generators at each of the main mine industrial areas Diesel generators at each of the Barge loadouts Diesel generators at each of the Senakin washplant sites Various smaller diesel generators for remote facilities

Water supply and water treatment facilities Cargo jetties at each of the barge loadout sites Numerous warehouses for spare parts, tyres and lubricants Explosive storage facilities and magazines at Senakin, Satui and Batulicin Numerous fuel storage tanks with greater than 10 million litres of capacity and associated distribution facilities. Fuel is generally barged to Arutmin sites and received into fuel farm tanks located in areas adjacent to the coal stockpiles at the barge loadouts. Fuel is then trucked or piped to other storage tanks located nearby the minesite industrial areas for further distribution around the mine site. Maintenance workshops including o o o o adequately sized workshops and workshop bays for maintaining the mining equipment light vehicle workshop workshops and associated workshop bays for maintaining the various fixed coal handling facilities field workshops, service bays and fuel bays located in the vicinity of the operating pits

Comprehensive road network, with: o o Unsealed suitably designed road network within the mines operational areas Non-pit road network outside the mine area

Offices and buildings including: o Office complexes for operational management and administration

Training facilities Clinic and ambulance station Numerous Pit offices to directly support mining operations.

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o o o

Accommodation facilities consisting of single persons accommodation at each mine site Helipads at each mine site and regional airports at Kota Baru and Banjarmarsin Various Fire stations and emergency response stations

All of the facilities have been suitably designed and constructed to support the size of the operation at each of the mine sites plus attract and retain suitably skilled staff. Arutmin plans to continually increase the size and make additions to the facilities as production increases particularly in the Ecocoal mine sites of Asam Asam, Mulia and Sarongga. Arutmin mine sites are also nearby major townships in South Kalimantan such as Kotabaru, Batulicin and Sungai Danau. These townships provide many offsite facilities, accommodation and support for the workforce of the Arutmin mines. 9. 9.1 FINANCIAL MODEL KPC Financials 9.1.1 KPC Historical Operating Costs The historical operating costs of KPCs operation for the period 2007 2010 are shown in Table 91. They are shown in total US$ and also in unit rates against sales tonnage. Table 9-1 KPC Historical Operating Costs (FOB Basis)
YEAR 2007 2008 2009 2010 E $M $/t $M $/t $M $/t $M $/t 39.7 35.8 38.8 40.0 995 25.0 1,153 32.2 1,229 31.7 589 14.7 0.0 829 20.7 0.0 171 4.3 0 0.0 0 0.0 0.0 55 1.4 0 0.0 0 0.0 0.0 14 0.3 88 2.2 122 3.4 146 3.8 142 3.6 56 1.4 70 2.0 93 2.4 112 2.8 1,139 28.7 1,345 37.6 1,468 37.9 1,571 39.3 100 2.5 144 4.0 132 3.4 162 4.1 67 1.7 25 0.7 25 0.6 17 0.4 0 0.0 76 2.1 133 3.4 133 3.3 36 0.9 80 2.2 45 1.2 80 2.0 13 0.3 0 0.0 10 0.3 0 0.0 216 5.4 325 9.1 345 8.9 393 9.8 1,356 34.1 1,671 46.7 1,813 46.8 1,964 49.1

Item Coal Sales Quantity (Mt) KPC Mine Cost Contractor Mine Cost Deferred Stripping Provision Sangatta Coal Chain & Port Bengalon Port & Barge Administration Depreciation and Amortization Total Cost of Goods Sold Marketing and Sales Commissions Freight Management Fee Marketing Logistics and Other Despatch and Demurrage Total Expenses Grand Total

Note:

(1) No historical split of operating costs (mining, coal chain etc.) was provided. (2) Difference in totals could occur due to rounding.

The historical and forecast cost trend is shown in Graph 9-1. The figure also shows the trend in the major components of KPCs operating costs, namely, mining costs, coal chains and administration, depreciation, marketing, and other expenses.

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Graph 9-1 KPC Historical & Forecast Operating Cost Trend

The operating costs associated with KPCs production increased from $34.10/t in 2007 to $46.70/t in 2008. This equates to a $12.60/t or 37% overall increase in one year. Most of this increase is attributable to a combination of an increase in fuel price and mining costs. Sales and marketing costs also increased by $3.70/t. This was driven by higher sales commissions on a $/t basis, (the fee is based on a % of the revenue and as the product split varies the unit amount on a $/t basis also varies), and management fees which increased due to the arrangement between Bumi and Tata Power Company Limited, (TATA), the other shareholder of KPC and Arutmin. 2008 was a year of higher than average cost increases being experienced by the mining industry in general, driven primarily by a higher oil price of $147 per barrel driving up fuel prices and upward pressure being applied to contractor rates as a result of higher input costs from fuel and commodities. The cost increases experienced by KPC were in line with those experienced by the coal mining industry in Indonesia. 9.1.2 KPC Forecast Operating Costs The 5 year (2011 2015) operating costs forecast for KPC is shown in Table 9-2. These forecast operating costs are shown in US$ millions total and in US$/t of sales tonnage. The production forecast is in line with the 2010 Strategic Plan update.

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Table 9-2 KPC Forecast Operating Costs (FOB Basis)

YEAR 2011 2012 2013 2014 2015 $M $/t $M $/t $M $/t $M $/t $M $/t 46.4 58.0 65.0 70.0 70.0 541 11.7 895 15.4 1,001 15.4 1,080 15.4 1,083 15.5 1,017 21.9 981 16.9 1,039 16.0 1,094 15.6 1,138 16.3 0.0 54 14 146 136 1,908 211 164 133 57 0.0 565 2,473 0.0 1.2 0.3 3.2 2.9 41.1 4.6 3.5 2.9 1.2 0.0 12.2 53.3 0.0 1.1 0.7 1.6 3.7 39.4 4.9 3.9 2.3 1.8 0.0 12.8 52.2 0.0 1.0 0.7 1.4 3.2 37.6 4.8 3.8 2.1 1.7 0.0 12.3 49.9 0.0 0.9 0.6 1.3 3.1 37.0 4.7 3.8 1.9 1.7 0.0 12.1 49.1 0.0 0.9 0.6 1.3 1.5 35.9 4.7 3.7 1.9 1.7 0.0 12.0 47.9

Item Coal Sales Quantity (Mt) KPC Mine Cost Contractor Mine Cost Deferred Stripping Provision Sangatta Coal Chain & Port Bengalon Port & Barge Administration Depreciation and Amortization Total Cost of Goods Sold Marketing and Sales Commissions Freight Management Fee Marketing Logistics and Other Despatch and Demurrage Total Expenses Grand Total

63 43 90 215 2,287 282 226 133 102 0.0 743 3,029

62 44 90 207 2,444 310 248 133 112 0.0 803 3,247

63 44 90 217 2,588 330 264 133 119 0.0 847 3,434

63 41 90 102 2,516 326 261 133 117 0.0 837 3,352

Difference in totals could occur due to rounding.

The operating cost is forecast to decrease from $53.30/t in 2011 to $47.90/t in 2015 or by 11% overall. The major assumptions used in developing the forecast operating cost trend are as follows: Overburden Removal and Coal Mining Costs The forecast trend is for overburden removal and mining cost to decline. This is due to the average KPC strip ratio declining as higher strip ratio (higher quality) coal is replaced with lower strip ratio (lower quality) coal. Other Mining Other mining costs are forecast to remain relatively flat over the next three years with a slight increase in depreciation and amortisation costs. Sales & Marketing Sale and marketing expenses are forecast to decline over the next 5 years as management fees decline. 9.1.3 KPC Capital Cost Estimates An overview of the capital cost estimate for 2011 to 2015 was provided by KPC, as can be seen in the below Table 9-3. Table 9-3 KPC Summary Capital Cost Estimates 20112015 (US$M) Item KPC Mining Operations Contractor Mining Operations Sangatta Coal Chain & Port Bengalon Administration Total

Unit

2011

2012

2013

2014

2015

$M $M $M $M $M

77.1 0.7 5.6 1.7 10.4

29.8 0.7 5.6 1.7 5.0

15.0 1.3 5.6 2.1 1.0

47.5 1.3 5.6 2.1 1.0

38.8 1.3 5.6 2.1 1.0

625

$M

95.5

42.8

25.0

57.5

48.8

The KPC capital forecast for the five year period from 2011 to 2015 is $269 million. The majority of capital will be spent on additional and replacement equipment to increase coal production to 70 Mt per annum. KPC leases mobile equipment and this cost is not included in the capital forecast. The forecast includes an allowance for $6 million of sustaining capital in 2012. The capital forecast is reasonable and reflects the planned production increase at KPC. 9.2 Arutmin Financials 9.2.1 Arutmin Historical Operating Costs The historical operating costs of Arutmins operation for the period 2007 2010 are shown in Table 9-4. They are shown in total $ and also in unit rates against sales tonnage. Table 9-4 Arutmin Historical Operating Costs (FOB Basis)
YEAR 2007 2008 2009 2010E $M $/t $M $/t $M $/t $M $/t 18.1 15.7 19.3 20.1 362 20.0 438 27.8 681 35.3 557 27.7 42 2.3 40 2.6 44 2.3 112 5.6 6 0.3 8 0.5 7 0.4 8 0.4 3 0.2 2 0.2 47 2.4 54 2.7 16 0.9 44 2.8 102 5.3 102 5.1 429 23.7 533 33.9 880 45.6 833 41.5

Item Coal Sales Quantity (Mt) Mining Costs Coal Chains, Ports & Admin Depreciation Marketing Operating Expenses Total

Difference in totals could occur due to rounding.

The historical and forecast cost trend is shown in Graph 9-2. The figure also shows the trend in the major components of Arutmins operating costs, namely, mining costs, coal chains and administration, depreciation, marketing, and other expenses. Graph 9-2 Arutmin Historical & Forecast Operating Cost Trend

The operating costs associated with Arutmins production have increased from $27.50/t in 2007 to $45.6/t in 2009. This equates to a 52% overall increase over two years. More than two-thirds of the increases between 2007 and 2009 is attributable to a combination of an increase in fuel price and mining costs. Increased mining costs were attributable to higher unit rates for contract miners and a higher average strip ratio in 2009 (9.3) compared to 2007 (7.5). 626

2008 was a year of higher than average cost increases being experienced by the mining industry in general, driven primarily by a higher oil price of $147 per barrel driving up fuel prices and upward pressure being applied to contractor rates as a result of higher input costs from fuel and commodities. The cost increases experienced by Arutmin were in line with those experienced by the coal mining industry in Indonesia. 9.2.2 Arutmin Forecast Operating Costs The 5 year (2011 2015) operating costs forecast for Arutmin is shown in Table 9-5. These forecast operating costs are shown in US$ millions total and in US$/t of sales tonnage. The production forecast is in line with the 2010 Strategic Plan update. Table 9-5 Arutmin Forecast Operating Costs (FOB Basis)
YEAR 2011 2012 2013 2014 2015 $M $/t $M $/t $M $/t $M $/t $M $/t 23.3 32.5 37.5 43.5 44.0 698 29.9 906 27.9 1,009 26.9 1,104 25.4 926 21.0 132 9 69 109 1,016 5.6 0.4 3.0 4.7 43.6 158 34 97 126 1,321 4.9 1.1 3.0 3.9 40.7 167 36 110 130 1,452 4.4 1.0 2.9 3.5 38.7 175 35 122 133 1,569 4.0 0.8 2.8 3.1 36.1 176 30 124 131 1,387 4.0 0.7 2.8 3.0 31.5

Item Coal Sales Quantity (Mt) Mining Costs Coal Chains, Ports & Admin Depreciation Marketing Operating Expenses Total

(Note: Difference in totals could occur due to rounding)

The operating cost is forecast to decrease from $40.20/t in 2011 to $30.50/t in 2015 or by 32% overall. The major assumptions used in developing the forecast operating cost trend are as follows: Overburden Removal and Coal Mining Costs The forecast trend is for overburden removal and mining unit costs to decline. This is due to the average Arutmin strip ratio declining as higher strip ratio Senakin and Satui production is replaced with lower strip ratio Mulia/Asam-Asam production. Other Mining Port, barging, and administration unit costs are forecast to decrease over the next 5 years. This is due to infrastructure additions and economies of scale. Sales & Marketing Sales and marketing expenses are forecast to remain flat, on a unit cost basis, over the next 5 years. 9.2.3 Arutmin Capital Cost Estimates The capital cost estimate for Arutmins expansion includes coal transport infrastructure, power production, and the development of new mining areas (e.g. Saronnga). A summary of these capital cost estimates is shown in Table 9-6. Table 9-6 Arutmin Summary Capital Cost Estimates (US$M) Item Mining Operations Coal Chain & Port Administration Total

Unit

2011

2012

2013

2014

2015

$M $M $M

0.0 23.9 2.5

0.0 0.0 2.5

2.1 37.7 2.0

0.0 2.0 2.0

1.4 45.2 2.0

627

$M

26.4

2.5

41.8

4.0

48.6

Budget allowances for expansion capital and sustaining capital have been based on current project experience both in terms of equipment and contractor costs, and include allowances for inflation above 2010 pricing. While individual upgrades have not been examined in detail, costs and plant performance parameters have been based on current actual data, and appear in the correct order of magnitude relative to duties required. Capabilities of existing plant and equipment suggest planned works will be adequate to achieved forecast production rates. The capital cost estimate for Arutmins expansion includes coal hauling roads, power production, and the development of new mining areas. The total expansion capital required for 2011 to 2015 is estimated to be $123 million. Arutmin has agreements with third parties that will construct several infrastructure projects. Arutmin will pay for the use of this infrastructure on a toll basis. The cost of this infrastructure is not included in the capital forecast. The forecast includes sustaining capital for years 2011 and 2012. The capital forecast is reasonable and reflects the planned production increase at Arutmin. 10. 10.1 HUMAN RESOURCES Organisation Structure Bumis corporate organisation structure follows a typical Indonesian PT company structure. The organisation is run by a Board of Directors (BOD) who is overseen by a Board of Commissioners (BOC). The Chief Executive Officer (CEO) leads the management team that reports to the BOD. The management team consists of six Directors who report to the PD. Their areas of responsibility are Internal Audit, Investor Relations, Operations, Business Development and Finance and Legal & Compliance. Each Director has a number of Divisions reporting to them and the CEO has also Legal, Human Resources, Marketing, Corporate Governance and Special Projects reporting directly to him. The incumbents of Bumis organisation structure are physically located either in Jakarta office or at the projects. Bumi Organisation Chart
PT BUMI RESOURCES Tbk.
Organisation Structure

Board of Comissioner

Board of Directors

Chief Executive Ofcer Special Project

Internal Audit

Investors Relation

Chief Operating Ofcer

Business Development

Chief Financial Ofcer

Legal, HR and GA

Marketing

Corporate Governance Ofcer

Corporate Secretary Corporate Communicatio

PT. Kaltim Prima Coal PT. Arutmin Indonesia

PT. Gorontalo Minerals PT. Citra Palu Minerals Gallo Oil (Jersey) Ltd BUMI Mauritania

Finance, Accounting and Treasury and Corporate Finance Financial Analyst

Legal Human Resources General Affairs

Domestic Sales and BUMI Export Sales Sales Operations (KPC) Coal Technology

Governance Risk Management

The KPC operation is led by its own Board of Directors which reports to the Bumi Board. The KPC CEO is responsible for the overall operation at KPC and is assisted by a Chief Operating Officer, a Chief Financial Officer and a number of General Managers (GM). The GMs are responsible for Human Resources, Mine Development, External Affairs, Marketing, Processing and Infrastructure, Mining Operations, HS and E, Mining Support, Contract Mining, Business Improvement, Head of Project Expansion. The Arutmin organisation has a head office based in Jakarta where the CEO heads the management team. The CEO is assisted by the CFO and a number of General Managers (GM) 628

responsible for functional areas such as Operations, Mineral Resources Contracts and Projects, Human Resources and External Affairs, Legal and Marketing. Each Arutmin site has a Manager who reports to the GM Operations. The site management team consists of a number of Department Heads covering their functional areas of responsibility. Since the Arutmin sites are generally managing contractors there is an emphasis on these areas as well as the provision of services covering engineering and survey as well as specific areas of Arutmin responsibility such as barging, Government Relations and the statutory role with the Mine Department. Bumi has successfully been operating its assets for a number of years, which is a reflection of the experience and capability of both its corporate management and asset management teams. Runge see that there is no reason why the situation will change as production increases. 10.2 Manning Levels 10.2.1 KPC Manning At the end of 2010 KPC had just over 5,000 direct employees, in addition to KPC employees there were around 16,000 contractor and labour hire employees. The total number of employees, both KPC and contractors will increase as production expands to a peak of around 24,000 employees, both KPC and Contractor, in 2011 and 2012, after which there is a slight reduction in manning numbers to around 22,500. Providing that KPC develops its supporting infrastructure as planned plus both KPC and its contractors continue with their successful recruitment and training programs, Runge believes that they should meet these manning targets. 10.2.2 Arutmin Manning Manpower reported at the end of December 2009 associated with Arutmins operations was 677 employees. The number of Arutmin employees at 677 is in line with the numbers expected to be employed by a 20 Mtpa owner which is undertaking the functions of services, contractor management and port owner operator. Arutmin engages mining contractors whose manning levels will be significantly larger than Arutmins. The contractor employee numbers were not provided to Runge. In order to meet planned production increases, Arutmin must recruit train and retain skilled personnel. Their ability to do this will be a key driver in their ability to meet planned production forecasts. 11. 11.1 ENVIRONMENT AMDALS The Analisis Mengenai Dampak Lingkungan or Environmental Impact Assessment (AMDAL) status of the Operating Pits at the Relevant Asset is provided below. It is noted that AMDALs remain valid until the end of the CCOWs for the production levels set out in the AMDALs. 11.1.1 KPC AMDAL The current KPC AMDAL was approved on April 21, 2005 by the Bupati Decree Letter No. 255/540/BUP-KUTIM/V/2005. This AMDAL approved a production increase in Sangatta and Bengalon mines from 24 Mtpa to 48 Mtpa. A revised KPC AMDAL outlining the mine plan and associated environmental management plan for Sangatta and Bengalon mine production expansion from 48Mtpa to 70Mtpa was approved by the Head of the Environmental Agency of Kabupaten Kutai Timur which is stipulated on Approval Letter No. 529/660.1/1.2/LH/V/2009 dated on May 18, 2009.

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11.1.2 Arutmin AMDAL The Analisis Mengenai Dampak Lingkungan or Environmental Impact Assessment (AMDAL) status of the Operating Pits at the Relevant Asset is as follows: Satui & Karuh AMDAL was approved by the Central AMDAL Committee of Energy and Mineral Resources Department through Decree No: 3878/28/SJN.T/2000, dated on 21 September 2000. This AMDAL approved the production up to 5Mtpa in Satui and Karuh. NPLCT has an AMDAL approval for 104 Ha by the Minister of Transportation through Decree No. SK.8/LT.504/PHB-99 dated on 25 June 1999. The Batulicin AMDAL was approved by the Bupati as stated on the Letter of Approval No. 660/072/Bapedalda on 10 April 2003 for production up to 6 Mtpa. East Senakin AMDAL was revised in 1995 and approved by the Central AMDAL Committee of Energy and Mineral Resources Department on the Approval Letter No: 4419/0115/S.JT/1995 for 3.6Mtpa production. AMDAL for Asam Asam & Mulia was approved by the Governor of South Kalimantan on 15 August 2002 through the decree No. 0329 Tahun 2002 for 6 Mtpa production.

Runge is advised that the current Arutmin AMDAL approval letters are as shown on the Table 111: Table 11-1 Arutmin AMDAL approval update LOCATION Senakin Timur Satui-Kintap-Karuh Asam Asam Mulia NPLCT Batulicin Bangkalaan REF.NUMBER No.188.45/217/KUM 2009 No. 188.44/0426/KUM/2010 No. 188.44/0425/KUM/2010 No. 8/LT 504/PHB-99 No. 114/03 No. 378/05 DATE 1 May 2009 30 Sep 2010 30 Sep 2010 25 Jun 1999 15 Dec 2003 7 Sep 2005

Arutmin has advised the most recent AMDAL approval letters cover the planned production increases at all sites, with the exception of Saronnga. A new AMDAL will be required for Saronnga prior to production commencing. 11.1.3 Environmental Management Plans Both KPC and Arutmin have well established a number of environmental management plans, systems and processes. The management of both organisation have socialized throughout their respective site workforces the importance of the environmental management programs. The programs deal with key issues such as: rehabilitation of disturbed areas, water management, and waste material disposal.

KPC KPCs Environmental Management Systems (EMS) is ISO 14001 accredited. PTRI was provided with copies of KPCs 2011 Environmental Management Plan, summaries of recent external audits, and copies of recent site inspections conducted by government agencies. External audits are conducted by SGS. Audit results from 2010 provided to PTRI contained zero non-conformities and recommended KPC retain ISO 14001 accreditation. Results of government inspections indicate no material environmental issues have been identified. There is evidence that issues raised are actioned and closed out after inspection by KPC and government personnel.

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KPCs 2011 Environmental Management Plan indicates approximately 25% of their disturbed area is rehabilitated. KPC forecasts this percentage to steadily increase year on year until mine closure in 2026. KPC has identified that some of their overburden contains potentially acid forming (PAF) material. They have an ongoing system to test, identify, separate, and monitor PAF material within their concession. The identification of PAF material is still ongoing, with a planned program to collect and test 180,000 samples in 2011. The management of PAF material will be to contain it by engineered cover, and monitor downstream water quality. Surface water from overburden dumps containing PAF material will be channelled to sediment ponds, where ongoing monitoring and treatment, if necessary, will take place. The EMS that is in place at KPC is pro-active and internationally accredited. Arutmin Arutmins Environmental Management Systems (EMS) at each site is ISO 14001 accredited since May 2010. An environmental report is submitted to the Regency Environmental Department (BAPEDALDA) every quarter as specified in the AMDAL. To ensure that the organisations EMS is implemented Arutmin has an annual internal audit based on the standards in ISO14001. The findings are documented and reported to the management. The non-conformances are followed up with evidence and supporting documents before being closed. In addition, an annual external audit is conducted by Sucofindo International Certification Services (Sucofindo). Non-conformances are documented. Arutmin composes a corrective action plan and confirmed by Sucofindo. Evidence that each corrective action has been implemented is recorded by Arutmin and submitted to Sucofindo for acceptance. Upon acceptance by Sucofindo, there will be a panel review for approval and the nonconformance is closed. Upon approval Sucofindo will give the certificate. The EMS that is in place at Arutmin is pro-active and internationally accredited. To manage the air quality issues, referring to AMDAL, Arutmin monitors Total Suspended Particulate (TSP)/dust using hi-volume sampler. The monitoring is completed in accordance with Government Regulation (PP) no 41/1999 regarding to Air Pollution Control. PTRI was provided with 2010 air quality monitoring results for Satui, Senakin, and NPLCT. Results indicated dust was below threshold values in 2010. A review of the data provided by KPC and Arutmin indicates no material environmental issues have emerged from the internal and external audits, incident reports, or reports to government. 11.1.4 Mine Closure The new mining law of Indonesia enacted at the beginning of 2009, Ministry of Energy and Mineral Resources decree no 18 of 2008 Mine Closure Plan, requires mine closure plans, along with annual mine plans, to be submitted during the work program and budget process. Mine closure plans for both KPC and Arutmin have been submitted to the Central Government Department of Energy and Mineral Resources. Apart from need to meet the regulatory requirements these mine closure plans are compiled to: create safe and stable landforms, progressively rehabilitate disturbed areas to achieve a sustainable land use, ensure that throughout the mines life, at mine closure and post closure: o o adequate water management practices are put in place, environmental performance is monitored during progressive rehabilitation activities,

631

provide mine closure cost estimates, and allow for community and stakeholders consultation in planning for mine closure, to ensure that their interests are considered.

Both KPCs and Arutmins plans are comprehensive and address the key requirements. They also layout the ongoing monitoring requirements, expected land forms, and land usage upon mine closure. The plans are based on rehabilitating all disturbed areas or transforming areas and facilities into infrastructure which will benefit the community. The mine closure plans will continually evolve as the mines further develop. Providing that KPC and Arutmin continue addressing the environmental and social matters in the same manner which they have prioritised these issues in the past, they will mitigate their exposure to long-term environmental liabilities. 12. 12.1 SAFETY Safety Management Plan and Policy The safety statistics of Bumi are reported on a monthly basis and an annual basis. The key mine site statistics reported are: Total man-hours worked. Numbers of Accidents. The number of accidents reported is divided into categories of minor injuries, major injuries and fatalities. Number of Lost Days. The total number of lost work days due to work related incidents. Number of Property Damage cases, fire cases, near misses. Indices such as the Lost Time Injury Frequency Rate (LTI FR) which measure the safety performance of the organisation.

12.2

KPC Safety Performance and Statistics During 2009 there were a total of 32 LTIs and 1 fatality at KPC. The LTI FR for the year was 0.56 which was the reversal of a long term downward trend in the LTI FR statistic since 1996 to the end of 2010 are as shown in Graph 12-1.

632

Graph 12-1 KPC Safety Statistics

In 2010 year to date as at July there had been 11 LTIs and 1 fatality. The LTI FR year to date 2010 is 0.33, which is an improvement on 2009 and returning to the values of recent years prior to 2009. 12.3 Arutmin Safety Performance and Statistics In 2007 there was 1 fatality and 4 LTIs recorded across Arutmin operations. The LTI FR for the year was 0.27. During 2008 there was only 1 LTI and no fatality recorded that improve the LTI FR to 0.04. During 2009 there were 7 LTIs recorded across the Arutmin operations, 3 in January, 1 in February, 2 in March and 1 in October. During the course of 2009 the rolling 12 month average of the LTI FR started in January at 0.17 peaked at 0.28 in March and finished the year in December at 0.24. In 2010 Arutmin recorded 3 LTIs and no fatality across the Arutmin operations and the LTI FR for 2010 is 0.1. Table 12-1 Arutmin Safety Statistics Year 2007 2008 2009 2010 0.27 0.04 0.24 0.10 4 1 7 3 1 0 0 0

Remark LTI FR LTI Fatality 12.4

Pendopo Safety Performance and Statistics Pendopo is a non-operating site and work to date has predominantly been that associated with exploration, and Pendopo has advised that there has been no major safety incident, fatality or LTI to date. COMMUNITY Community Relations & Development Policy Bumi has proactive community relations programs in place at KPC and Arutmin. The programs are aimed at community development and empowerment and are sensitive to the needs of the local communities in the surrounding areas of mining activities. These community programs have

13. 13.1

633

been in place since production commenced and both mines have good understandings with respect to community expectations. They provide support to the community through programs such as: Education and training programs, Public Health, Infrastructure, and Agricultural business programs.

These programs are aimed at improving the quality of life and competence of the people in order to enhance the autonomy of the societies, especially in preparing for mine closure. The operations have also socialised to the local governments and surrounding communities their planned expansions to provide information and obtain feedback etc. Apart from the regulatory requirement to consult local that local communities with respect to the mine closure plans Bumi also considers it good social responsibility practices to discuss their production plans, (at a high level), with the communities. 13.2 Land Access Both operations have active land compensation programs. These programs are based on acquiring access to land required for the mines development, well in advance of mining and supporting activities. For example KPC acquired around 6,000 Ha in 2009 and 2,000 Ha in 2010, with an ongoing plan of 900 Ha in 2011. The government is formally involved in the acquisition process, for record keeping and to provide assistance associated with any issues that may arise, such as overlapping or unclear land ownership, high prices, village administrative boundaries, and land speculators. These issues have on occasions affected the operations by way of temporary road or area closures. To date, they have been minor, have not had a major impact on production and have been resolved relatively quickly. There have been instances where third parties, sometimes referred to as squatters, have occupied areas of concession. In these cases where KPC and Arutmin believed that these third parties have no valid claim the issues have been resolved or are in the progress of being resolved, either through direct negotiation with the party or with the assistance of the appropriate governmental department or through a formal legal process. Both KPC and Arutmin have well established specific community development departments, which proactively deal with the land access issues, both with the government and communities and have sound and transparent working relationships with all stakeholders. These departments coordinate their activities with the planning departments and the senior management on the sites, in order to target priority areas for land access and to provide feedback to the planning sections. It is through this approach that the entities have been able to resolve most land access issues, well in advance of the operations. In 2008 the KPC production was affected by a forestry status issue over part of the operating areas. This issue stemmed from a dispute from a third party, which claimed KPC had mined in an area which the third party had forestry rights over, without the appropriate permission. KPC believed that they did have the right to mine through the area and after a couple of months the matter was resolved by a formal process involving the different governmental departments associated with the issue, in KPCs favour. Bumi management well understands the potential risks in with land access and they ensure that it receives the appropriate attention. The key mechanism which both KPC and Arutmin utilise in order to minimize the impact of land access is that they have been and will continue to be able to produce coal from multiple locations throughout their concessions, which gives them the ability to shift production if some areas become inaccessible.

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There are over the KPC and Arutmin leases areas classed as production forest and limited production forest. Based on documents provided and advise given by KPC and Arutmin, they have obtained the necessary land borrow permits to permit operations through these forest areas. 14. 14.1 KEY FINDINGS & OPPORTUNITIES Key Findings Runge has reviewed the Relevant Assets and concludes from this review: no material flaws, errors or omissions on the technical aspects of the Relevant Assets were discovered during the review; the technical information reviewed is considered reasonable and has been prepared by professionals using appropriate software and industry standards; the geological and geotechnical understanding is of a sufficient level to support short and medium term planning as appropriate; the mine plans appropriately reflect geological and geotechnical understanding and account for predicted mining hazards; the mining contractors (either in place or planned) are suited to the mine plans and support a significant portion of production levels forecast; the assumptions used in estimating coal and waste production volumes, mining losses and dilutions are appropriate and reasonable; coal handling and other infrastructure including barge and port are capable of supplying appropriate quality products to satisfy the export markets at the forecast volumes; environmental issues are being well managed and there are no issues that could significantly impede production; the assumptions used in estimating operating costs are appropriate and reasonable, covering the spectrum of mining, processing, coal transport, and site administration associated in getting the coal to the point of sale; capital costs used in the financial models reflect the mine plans, development and construction schedules and the forecast production levels; and the drivers of the production and cost forecasts are understood by management and are receiving the management focus required.

Runge is of the opinion that: The KPC and Arutmin assets of Bumi: o o Have a credible track record of producing coal at forecast quantities and qualities; Have long term mine plans, which contain forward schedules for more than 10 years and allow for the mining of coal predominantly classed as Reserves;

The Resource and Reserve estimates of the Relevant Asset have been estimated in accordance with internationally accepted standards; Closure plans have been completed in accordance with the 2009 Mining Law; Mining contracts are not yet in place to cover the planned expansion of production. Additional contractor or owner coal mining capacity is required to achieve the forecast production levels;

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Infrastructure planning associated with the strategic expansion appears to have been completed to conceptual level. The next level of infrastructure planning to project specification level is required to ensure timely construction according to program; While the production forecasts and expected equipment capabilities allow for weather conditions normally expected in Indonesia, higher than average rainfall may lead to greater than planned production delays, affecting the actual production levels.

14.2

Opportunities There are a number of areas within the Assets which have identified in situ coal quantities and Inferred Resources. As exploration work continues and further strategic development matters are addresses, some of the coal identified will then likely be converted to Reserves. It could be beneficial to put in place tender packages associated with the planned production expansion that will allow Mining Contractors to tender for these packages. This will create a competitive environment amongst mining contractors when submitting tender proposals.

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APPENDIX A QUALIFICATIONS AND EXPERIENCE

Jack Standa Consulting Mining Engineer BSc (Mining Engineering), MSc (Geotechnical Engineering), MBA Jack has over 20 years experience in the international mining industry with significant experience in technical reviews, audits, due diligence assessments and valuation of mining assets. Jack has sufficient experience of this style of mineralisation and coal deposit to qualify him as a Competent Person (as defined in the 2004 Edition of the JORC Code). Bill Park Consulting Engineer, Manager Runge Group Bachelor of Science (Geology), 1970,Bachelor of Economics, 1978, Member, Australian Institute of Geoscientists (MAIG) Bill has over 35 years experience in coal projects, including the past 20 years in Indonesia. He has undertaken roles as project manager and geologist specialising in coal mine management, mine development, project evaluation, feasibility and exploration in both open cut and underground coal mining. He has had extensive overseas experience in Indonesia, the Philippines and New Zealand including recent experience in international coal trading. Gregory Eisenmenger Executive Consulting Engineer BE (Civil) MAusIMM Greg has more than 30 years experience in the mining industry in both contract and owner operated projects and has been involved in the mining industry in Indonesia for over 10 years. His specific management capabilities are drawn from involvement in the management of large mining contracts in open cut coal and in-house exploration programs, and project development involving project definition, tendering, evaluation, award and construction supervision. Michael Trainor Business Executive BE (Mining) MAusIMM Michael is based in Jakarta has worked in the mining industry for over 25 years, in both the coal and hard rock resource sectors, throughout Australia, South America and Indonesia, where he is currently based. The majority of Michaels employment has been either directly with large mining contractors or with major mining houses managing operations involving contractors. Michael has extensive experience in negotiating and managing contracts, (from mining to infrastructure and supply arrangements), estimating, project evaluation, operations management and corporate financing. Kevin Holm Associate Executive Consultant Kevin has gained a wide experience in the mining industry, from deep underground gold and platinum mining to underground and open cut coal mining. Kevin has held production as well as planning positions, in junior and senior management roles. Operational mine experience has been in open cut coal mining in South Africa, Australia and Indonesia.

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APPENDIX B GLOSSARY OF TERMS

% adb AN assets attributable resources, reserves bcm calorific value cash costs percent air dried basis ammonium nitrate coal mines, infrastructure, port and projects That part of the resources/reserves in which Bumi has an economic interest bank cubic metres or the in-place volume of waste material overlying the coal before being disturbed the heat of combustion of a unit quantity of coal. The gross calorific value includes all heat of vaporisation of water the operating costs of the business that include mining, processing, distribution and overheads, but exclude depreciation, amortisation tax and interest an operating mine (open cut) producing coal a machine for crushing coal to smaller size the contamination of the coal by surrounding rock during mining angle which the strata makes with the horizontal dislocation of strata typically by vertical displacement free on board gross as received basis for coal energy on a total moisture basis Mining method where waste material is transported in pit past the coal operations to be dumped in voids Inherent Moisture These are resources for which data distribution is such that the continuity of the grade or coal seam thickness cannot be confidently interpreted. There is insufficient data to apply technical, economic or mine planning. Consequently these resources do not support reserve assessment. The nature of the geology and data availability allows a reasonable level of confidence in estimating the resources. Mine planning and economic assessment can be applied for reserves estimates. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee Kilocalories per kilogram Kilogram Kilometre, equivalent to 1,000 metres Kilovolt, equivalent to 1,000 volts Kilovolt ampere

coal mine, (pit) crusher dilution dip fault FOB gar Haul back IM Inferred Resources

Indicated Resources

JORC Code

kcal/kg kg km kV kVA

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kWh LOM m m2 M Ml Mt Mtpa Marketable Reserves Mining Reserves Measured Resources

Kilowatt-hour The remaining life of mine until reserves are depleted metre Square metre million Megalitre, equivalent to 1,000 litres million tonnes million tonnes per annum The tonnage that will be available for sale after beneficiation, if any, from the ROM production Coal Reserves Resources over which the distribution and quality of data allows the estimation of resources to a high level of confidence There is no reasonable doubt to the determination. This is the highest level of resource confidence. Megawatt or one million watts Measured and/or indicated resources which are not yet proven but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions measured resources for which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions A laboratory determination of moisture, volatile matter, ash and fixed carbon an estimate of run of mine reserves which is the sum of Proved and Probable Reserves under the JORC Code run-of-mine being coal as mined, including mining losses and dilution before beneficiation Specific Energy (also Calorific Value), Line along which the strata is horizontal, perpendicular direction to dip the volume of waste material to remove (bcm) per tonne of coal mined A fold in the strata in a concave shape with the limbs at a higher level coal used in generating steam for electricity production Total Moisture Tonnes per hour Total sulphur material lacking sufficient grade to be economic. Generally used for rock material above and between the coal seams

MW Probable reserves

Proved reserves

proximate Recoverable Reserves ROM SE strike strip ratio syncline thermal coal TM tph TS waste

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PT Berau Coal Energy Tbk. & Vallar PLC

Minerals Experts Report Berau Coal
February 2011

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24 February 2011

The Directors and Commissioners PT Berau Coal Energy Tbk. Recapital Building, 5th Floor Jl. Adityawarman 55 Kebayoran Baru Jakarta 12160 Indonesia

The Directors Vallar PLC 12 Castle Street St Helier Jersey JE2 3RT Dear Sirs, MINERALS EXPERTS REPORT PT BERAU COAL ENERGY ASSETS This Minerals Experts Report, (MER), has been prepared by PT Runge Indonesia (Runge) at the request of PT Berau Coal Energy Tbk., (PTBC), and Vallar PLC, (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Vallar in Indonesia; specifically the PTBC coal assets located in East Kalimantan, Indonesia. The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed listing of shares of Vallar, (the Prospectus). The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment and capital and operating costs estimates. This report, which summarises the findings of our review, has been prepared in accordance with the requirements set out in the United Kingdom Financial Services Authority Prospectus Rules and the European Commissions Regulation on Prospectuses No. 890/2004 published by the Committee of European Securities Regulators (CESR) with respect to the listing of mineral companies. a) The details of the reserves: i. Mineral Resource and Mineral Reserve estimates in this MER are reviewed in detail and are compliant with the requirements of the reporting guidelines of the 2004 Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (The JORC Code). ii. b) Details are shown in Sections 2.3, 2.4 and 2.5 as well as associated tables.

The expected period of working of those reserves: i. This is shown in Life of Mine Plan discussion in Section 2.7 as well as associated tables.

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c)

An indication of the periods and main terms of any licenses and concessions: i. These are shown in Section 2. Indications of the progress of actual working: i. All four mines are in operation and expected to continue in that state. A discussion of the operating history for each mine is shown in Section 2.6 and associated tables. The forecast operating scenarios are as described in (b) above. ii. The state of working of the exploration properties is shown by the current exploration budget in Sections 2.12 through 2.24, as well as the individual property status discussion throughout these Sections.

d)

e)

An explanation of any exceptional factors that have influenced (a) to (d) above: i. In Jack Standas opinion, there are no exceptional factors that have influenced (a) to (d). The assets are subject to normal mining and exploration risks as summarized in Sections 2.31. Runge understands Vallar holds interest in other key Indonesian assets, specifically, PT Bumi Resources Tbk. This other asset of Vallar have been reviewed and summarised in a separate report by Runge.

Substantiation of the existence of the resource A visit to the sites and the observation of operations as well as an analysis of drilling results, resource and reserve statements, mine plans and management reports supplied to the competent persons by the directors, substantiates the existence of the resources. Limitations, exclusions and reliance on information The ability of PTBC and its operations to achieve operational, quality and financial targets is dependent on factors beyond the control and anticipation of Runge and its associates. These factors include mining and geologic conditions, the capabilities of the management and staff at the operations, variations in market conditions, changes in mining legislation as well as new industry developments and innovations. This MER specifically excludes all legal issues, land titles and agreements except if they have a direct influence on technical and operational issues or costs. There has been no formal environmental review other than the review of permits and management reports. There has been no valuation of fixed or mobile assets and equipment (i.e. no appraised value). Runge has accepted source documentation but cannot verify its accuracy. In areas where no data has been provided, Runge has used its professional judgement to make comment. Independence Runge has received fees for the preparation of this MER in accordance with normal consulting practices. The fees received for the work are not contingent on the success of the prospectus or the proposed listing of shares of Vallar. Neither Runge, nor any of its directors, staff or sub consultants who have contributed to this report has any material interest in PTBC and/or Vallar or the operations under review. Drafts of this report were provided to PTBC, but only for the purpose of confirming the accuracy of factual material and the reasonableness of assumptions relied upon in the report.

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Consent Runge hereby gives consent for the inclusion of this MER in the prospectus as well as reference to and use of Runge name in the prospectus, subject to Runge having first consented in writing to the content and context. Reliance This report has been prepared by Runge at the request of PTBC and Vallar. For the purposes of Prospectus Rule 5.5.3R(2)(f) Runge is responsible for this report as part of the prospectus and declares that it has taken all reasonable care to ensure that the information contained in this report is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in accordance with Item 1.2 of Annex I and 1.2 of Annex III of the Prospectus Directive Regulation. Runges opinion as expressed in this MER is effective at the date of this report. Parameters used in assessing the assets are shown in the report. Some of these parameters can vary significantly and changes could alter Runges opinion subsequent to the date of this MER. The information, conclusions, opinions, and estimates contained herein are based on: (a) (b) (c) information available to Runge at the time of preparation of this report. assumptions, conditions, and qualifications as set forth in this report. data, reports and opinions supplied by the Company and other third party sources.

Save as set out herein, Runge does not guarantee the validity or accuracy of conclusions or recommendations based on information supplied by third parties. The report is intended to be read as a whole, including the Executive Summary and sections should not be read or relied upon out of context. Notes on Terms All years referred to in the report are year ending 31 December unless otherwise stated and all currency is United States Dollars ($) unless otherwise stated. Glossary of Terms A glossary of terms used in this report is included in Appendix B. Signatory The signatory to this MER is Mr. Jack Standa, BSc (Mining Engineering), MSc (Geotechnical Engineering), MBA, MAusIMM and is an employee of Runge. Jack has over 20 years experience in the international mining industry with significant experience in technical reviews, audits, due diligence assessments and valuation of mining assets. Jack has sufficient experience in this type of coal deposit and operation plus is also qualified as a Competent Person for estimating Reserves (as defined in the 2004 Edition of the JORC Code) for this type of coal deposit. Mr. Standa has been assisted in this MER by suitably qualified mining engineers in Mr. Chris Smith (BE (Mining), MBA, MAusIMM) and Mr. Michael Trainor (BEng in the Division of Mining, MAusIMM) plus suitable qualified geologist Mr. William Park, (BSc (Geology), BEcon, MAIG). Yours Sincerely,

Jack Standa Operations Manager PT Runge Indonesia 643

MINERALS EXPERTS REPORT BERAU COAL

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IMPORTANT INFORMATION ABOUT THIS DOCUMENT

1. Our Client This report has been produced by or on behalf of PT Runge Indonesia, (Runge), solely for PT Berau Coal Energy Tbk. and Vallar PLC (jointly the Client). 2. Client Use The Clients use and disclosure of this report is subject to the terms and conditions under which Runge prepared the report. 3. Inputs, subsequent changes and no duty to update Runge has created this report using data and information provided by or on behalf of the Client and Clients agents and contractors. Unless specifically stated otherwise, Runge has not independently verified that data and information. Runge accepts no liability for the accuracy or completeness of that data and information, even if that data and information has been incorporated into or relied upon in creating this report (or parts of it) The conclusions and opinions contained in this report apply as at the date of the report. Events (including changes to any of the data and information that Runge used in preparing the report) may have occurred since that date which may impact on those conclusions and opinions and make them unreliable. Runge is under no duty to update the report upon the occurrence of any such event, though it reserves the right to do so.

4. Mining Unknown Factors The ability of any person to achieve forward-looking production and economic targets is dependent on numerous factors that are beyond Runges control and that Runge cannot anticipate. These factors include, but are not limited to, site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalize the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. Any of these factors may substantially alter the performance of any mining operation.

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EXECUTIVE SUMMARY ES1 Commissioning Entity and Purpose of Report This report, the Mineral Experts Report (MER), dated February 2011, has been prepared by PT Runge Indonesia (Runge) at the request of PT Berau Coal Energy Tbk (PTBC) and Vallar PLC (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Vallar in Indonesia; specifically PTBC. The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed acquisition of Berau (the Prospectus). The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment and capital and operating costs estimates. ES2 Location and Relevant Asset The Relevant Asset of PTBC is a First Generation Coal Contract of Work, No. DU 424 Kaltim, currently in the Exploitation stage. The Project covers a total area of 118,400 ha and includes three active production areas (Lati, Binungan and Sambarata) with areas of 6,985 ha, 12,130 ha and 15,600 ha respectively. PTBC has one area in pre-development (Binungan Block 8-10 (Kelay)), and a number of other areas in varying stages of exploration, (Kelay, Gurimbang, and Punan). PTBCs Relevant Asset is located approximately 300 km North of Samarinda, in Berau Regency of East Kalimantan Province, Indonesia and adjacent to the town of Tanjung Redeb. ES3 Coal Resources and Reserves The JORC Code provides minimum standards for public reporting of Resources and Reserves to the investment community. A JORC Code Compliant Resource and Reserve Report (JORC Report), dated May 2010, has been prepared by Runge. The total estimated Coal Resources, as at 31st December 2009, is 1,413 million tonnes (Mt). This total includes 327 Mt of Measured category, 690 Mt of Indicated with the balance of 396Mt as Inferred. The insitu coal is typically of sub-bituminous rank, with coal quality varying across the project area. Higher quality coal occurs within the central part of the project area (Sambarata and Binungan) with lower quality in the outer-lying Lati blocks. Total Moisture (TM), as received (ar), varies from 14.0% in Sambarata (Block A) to 24.8% in Lati (Seams PQRT). Calorific Value (CV), gross as received (gar), varies from 6,170 kcal/kg in Sambarata (Block A) to 5,069 kcal/kg in Lati (Seams PQRT), Ash typically ranges from 2.9% to 6.7%, air dried basis (adb) and Total Sulphur (TS) is variable and ranges from 0.5% to 2.2% (adb). A number of modifying factors were applied to the Resources in calculating the Coal Reserves. Only coal within economic pit limits plus above geological and geotechnical confidence depths were included in determining the Coal Reserves. Additional checks were made in verifying that the mining and geotechnical parameters also used in estimating the Reserves, as recommended by PTBC, were considered as being reasonable by the Competent Person. Based on this approach a total of 346 Mt of Open Cut Coal Reserves were estimated comprising 146 Mt of Proved Reserves and 200 Mt of Probable Reserves. The Reserves, on average, have the following as received (ar) characteristics: Total Moisture 23.1%, Ash 4.9 % (ar), Total Sulphur 0.8 % (ar), and Calorific Value 5,130 kcal/kg (gar).

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ES4

Mine Plans and Production The existing pit limits of the Relevant Asset were determined by PTBC through either a pit optimisation or incremental strip ratio review process. In March 2010, PTBC has produced a Strategic Life of Mine Plan based on the Coal Reserves stated as of the end of December 2009. In late 2010, a detailed five year plan was developed by PTBC. Production volume has been scheduled through the detailed five year mine plan, 2011 to 2015, and then by Strategic Planning for the period 2016 to 2026 for Lati, Binungan, and Sambarata. Gurimbang mine planning was completed via spreadsheet extrapolation. PTBC estimates production increasing from the actual level of 17.4 Mt in 2010 to a peak of 31 Mt in 2014. In Runges opinion the 2011 production forecast of 20 Mt is achievable. Continued expansion beyond 2011 will require well planned development of additional working areas to accommodate the necessary additional equipment and timely addition of coal transport infrastructure.

ES5

Production History PTBC has steadily increased coal production over the life of the project. Historic production is shown in Table ES.1.1 Table ES 1.1 PTBC Historic Coal Production
Area Lati Binungan Block 1-4 Block 5-6 Block 7 Sambarata Block A Block B1 Block B W Block B E Total 1992 Mt 0.0 0.0 1993 Mt 0.1 0.1 1994 Mt 0.3 0.3 1995 Mt 0.6 0.1 0.7 1996 Mt 0.9 0.2 1.1 1997 Mt 1.4 0.4 1.8 1998 Mt 1.3 0.9 2.2 1999 Mt 1.8 1.5 3.3 2000 Mt 2.2 2.7 4.9 2001 Mt 3.0 3.4 0.4 6.8

Area Lati Binungan Block 1-4 Block 5-6 Block 7 Sambarata Block A Block B1 Block B W Block B E Total

2002 Mt 3.1 3.5 0.6 7.2

2003 Mt 3.5 2.9 0.5 0.5 7.4 2004 Mt 5.0 1.8 1.9 0.4 9.1 2005 Mt 5.2 0.9 2.1 1.0 9.2 2006 Mt 6.4 0.2 0.9 2.0 1.1 10.6 2007 Mt 7.2 0.5 0.7 2.1 1.3 11.82 2008 Mt 7.6 0.7 0.6 2.7 1.4 0.1 13.1 2009 Mt 8.1 0.8 0.6 2.9 1.0 0.9 14.3 2010 Mt 10.4 0.7 0.7 2.8 0.5 1.9 0.1 0.3 17.4 Total Mt 68.1 2.9 21.8 17.2 8.2 2.8 0.1 0.3 121.3

ES5

Operating and Capital Costs The operating costs associated with PTBCs production have increased from $23.40/t in 2007 to $34.10/t in 2009. This equates to a 46% overall increase over two years. The majority of this increase is attributable to a combination of an increase in fuel and contractor mining on account of Strip Ratio (SR) increasing and average contractor mining rates increasing. The cost increases experienced by PTBC were in line with those experienced by the coal mining industry in Indonesia. The operating cost is forecast to increase from $39.30/t in 2010 to $48.50/t in 2014 or by 23% overall. The forecast operating costs are reasonable and reflect the forecast strip ratios and anticipated contractor unit rates.

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The total capital required for 2011 to 2015 is estimated to be $460.6 million. Total Project investment capital expenditures of $193.9 million are expected for 2011 to 2015. Land improvement cost of $ 36.1 million is estimated and other capital costs of $ 61.9 million are estimated. Total Project investment, land improvement capital and other capital is estimated to be $ 291.9 million for 2011 to 2015. The capital forecast is reasonable and reflects the planned production increase at PTBC, as well as the planned increase in Reserves to meet the production forecast. ES6 Key Findings Runge has reviewed the Relevant Asset and concludes from this review: no material flaws, errors or omissions on the technical aspects of the Project were discovered during the review; the technical information reviewed is considered reasonable and has been prepared by professionals using appropriate software and industry standards; the geological and geotechnical understanding is of a sufficient level to support short and medium term planning as appropriate; PTBC has a detailed exploration strategy to support long-term production increases; the mine plans appropriately reflect geological and geotechnical understanding and account for predicted mining hazards; PTBCs mining contractors (either in place or planned) are suited to its mine plans and support a significant portion of production levels forecast; the assumptions used in estimating coal and waste production volumes, mining losses and dilutions are appropriate and reasonable; coal handling and other infrastructure including barge and port are capable of supplying appropriate quality products to satisfy the export markets at the forecast volumes; environmental issues are being well managed and there are no issues that could significantly impede production; the assumptions used in estimating operating costs are appropriate and reasonable, covering the spectrum of mining, processing, coal transport, and site administration associated in getting the coal to the point of sale; capital costs used in the financial models reflect the mine plans, development and construction schedules and the forecast production levels; and the drivers of the production and cost forecasts are understood by management and are receiving the management focus required.

Runge is of the opinion that: The PTBC assets: have a credible track record of producing coal at forecast quantities and qualities; have long term mine plans which contain forward schedules for more than 10 years, and allow for the mining of coal predominantly classed as Reserves; The Resource and Reserve estimates of the Relevant Asset have been estimated in accordance with the JORC Code. The scheduled coal tonnage for the strategic expansion of 432 Mt is greater than the current Coal Reserve of 346 Mt. PTBC anticipates future drilling and subsequent delineation of mineable coal will verify this increase in total production.

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Mining areas not currently developed but included in the Mine Plan, (Gurimbang, Punan and Kelay), require environmental approval (AMDAL) before development can proceed. Close attention will need to be paid to the development of Binungan Parapatan Block given its close proximity to the village of Tanjung Redeb. A closure plan has been completed in accordance with the 2009 Mining Law. Mining Contracts to cover the planned expansion of production in 2011 have been secured by PTBC in December 2010. Buma shall have additional contract capacity in Lati and shall have new contract capacity in Binungan, for the next five years. Infrastructure planning associated with the strategic expansion appears to have been completed to conceptual level. The next level of infrastructure planning to project specification level is required to ensure timely construction according to the program. While the production forecasts and expected equipment capabilities allow for weather conditions normally expected in Indonesia, higher than average rainfall may lead to greater than planned production delays, affecting the actual production levels.

ES7

Opportunities Infill drilling of the entire Lati Sub-basin so that all identified coal resources can be categorized to Indicated status will be beneficial. There is potential for in situ coal quantities at the Relevant Asset to be upgraded to Resources category and subsequently to Coal Reserves. Put in place tender packages associated with the planned production expansion that will allow Mining Contractors to tender for these packages. This will create a competitive environment amongst mining contractors when submitting tender proposals. Select and award mining contracts to rationalize exposure to PTBC with Mining Contractors. For an operation planning to produce 30Mtpa at a Strip Ratio of 8:1 a minimum of 3 contract packages of 10Mtpa coal production and 80Mbcm of overburden production would be considered prudent. The next stage of infrastructure planning to Project Specification level will allow capital cost estimates to be obtained from construction contractors on an expression of interest basis. This will provide a capital cost estimate with a higher level of confidence than the estimate in the financial model and such estimate may be lower than currently provided. This level of planning will also facilitate construction being achieved within the required timeline.

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TABLE OF CONTENTS
MAPS 1. INTRODUCTION 1.1 Purpose of Report 1.2 Scope of Work 1.3 Site Inspections, Data Review and Report Preparation Team 2. RELEVANT ASSET 2.1 Asset Overview 2.1.1 Location 2.1.2 Asset History 2.1.3 Project Layout 2.2 2.3 2.4 2.5 2.6 2.7 Geology Overview 2.2.1 Coal Quality Coal Resources Reserves Estimated Reserves Coal Production Life of Mine Plans 2.7.1 Overview 2.7.2 Lati LOM Plan 2.7.3 Binungan LOM Plan 2.7.4 Sambarata LOM Plan 2.7.5 Gurimbang LOM Plan 2.7.6 Kelay LOM Plan Five Year Mine Plans 2.8.1 Five Year Mine Plan Overview 2.8.2 Lati 5 Year Mine Plan 2.8.3 Binungan 5 Year Mine Plan 2.8.4 Sambarata 5 Year Mine Plan 2.8.5 Gurimbang 5 Year Mine Plan Annual Mine Plans Monthly and Weekly Operating Plans Reconciliations Mining Contracts 2.12.1 Mining Contracts Overview 2.12.2 BUMA Lati Mining Contract 2.12.3 BUMA Binungan Block 7 Mining Contract 2.12.4 SIS Sambarata Coal Mining Contract 2.12.5 SIS Binungan Mining Contract 2.12.6 Ricobana Lati Mining Contract 2.12.7 RML Sambarata B East Mining Contract 2.12.8 Madhani Sambarata B West Mining Contract Overburden Removal 2.13.1 Lati Overburden Removal 2.13.2 Sambarata Overburden Removal 2.13.3 Binungan Overburden Removal Page No. 653 664 664 664 667 667 667 667 667 668 668 669 670 671 671 672 673 673 675 675 676 676 676 676 676 677 678 679 680 680 680 680 681 681 681 682 683 683 684 684 685 686 686 686 686

2.8

2.9 2.10 2.11 2.12

2.13

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2.14

Coal Mining 2.14.1 Lati Coal Mining 2.14.2 Sambarata Coal Mining 2.14.3 Binungan Coal Mining Coal Quality Management 2.15.1 Overview 2.15.2 Quality Control Practices 2.15.3 Coal Quality Control 2.15.4 Blending Coal Handling Facilities Lati Coal Handling Facilities 2.17.1 Existing Facilities and Capacity 2.17.2 Expanded Facilities and Capacity Binungan Coal Handling Facilities 2.18.1 Existing Facilities and Capacity 2.18.2 Expanded Facilities and Capacity Suaran Coal Handling Facilities 2.19.1 Existing Coal Handling Facilities and Capacity 2.19.2 Expanded Facilities and Capacity Sambarata Coal Handling Facilities 2.20.1 Existing Facilities and Capacity 2.20.2 Expanded Facilities and Capacity Gurimbang Coal Handling Facilities 2.21.1 Expanded Facilities and Capacity Barging Offshore Transshipment Facilities Other Infrastructure 2.24.1 Power Generation 2.24.2 Fuel Handling Facilities Financials 2.25.1 Historical Operating Costs 2.25.2 Forecast Operating Costs Capital Cost Estimates 2.26.1 Lati 2.26.2 Sambarata 2.26.3 Parapatan 2.26.4 Binungan 2.26.5 Suaran Port 2.26.6 Kelay 2.26.7 Tanjung 2.26.8 Gurimbang Organisational Structure 2.27.1 Manning Levels Environment 2.28.1 AMDALS 2.28.2 Environmental Management Plans 2.28.3 Mine Closure

Page No. 687 687 687 687 688 688 688 688 688 689 689 689 690 690 690 690 691 691 691 691 691 692 692 692 692 693 693 693 693 694 694 695 697 698 698 699 699 699 700 700 700 701 701 702 702 703 704

2.15

2.16 2.17

2.18

2.19

2.20

2.21 2.22 2.23 2.24

2.25

2.26

2.27 2.28

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Safety 2.29.1 Safety Management Plan and Policy Community 2.30.1 Community Relations & Development Policy 2.30.2 Land Access Key Findings Opportunities Qualifications and Experience Glossary of Terms Supporting Technical Data

Page No. 705 705 705 705 707 707 708 709 710 712

2.31 2.32 Appendix A Appendix B Appendix C

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1. 1.1

INTRODUCTION Purpose of Report This report, the Mineral Experts Report (MER), dated February 2011, has been prepared by PT Runge Indonesia (Runge) at the request of PT Berau Coal Energy Tbk (PTBC) and Vallar PLC (Vallar). The scope is to undertake an independent technical review of the relevant geological, mining and infrastructure assets of Vallar in Indonesia; specifically PTBC. The MER is to be included in a prospectus proposed to be published by Vallar in connection with the proposed acquisition of Berau (the Prospectus). The purpose of the report is to provide a technical opinion as to the accuracy and reasonableness of the information supporting the assets. The focus of the review is on the technical aspects of the assets; including geology, Resources and Reserve Statements, mine plans, production rates, infrastructure, environment and capital and operating costs estimates.

1.2

Scope of Work The Scope of Work, (SOW) includes the following Services: State the full name, address and professional qualification of the competent person and if the competent person is a firm or company, of the relevant partner or director; State that the existence of natural resources is substantiated by evidence obtained from the competent persons site visits and observation and is supported by details of drilling results, analyses or other evidence and takes account of all relevant information supplied to the competent person by the directors; and Be in the form of a letter and should be provided on your companys headed paper and include the full name of your firm, its address and the name and professional qualifications of the partner or director of your firm who will produce or supervise the production of the MER; Explain the background to your instruction by PTBC and its advisers; Explain the purpose and objectives of your investigation; Detail of the persons who carried out the independent technical review, their capabilities, relevant experience and independence; and Confirm that expressions defined in any pathfinder Prospectus or Prospectus (if any), as the case may be, have the same meaning as in the MER. It is expected that the MER will not be subject to any caveats or disclaimers that limit the scope of the information being produced to enable an investor to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of PTBC.

Description of Reserves A description of: o The nature and extent of PTBCs rights of exploration and extraction and a description of the properties to which the rights attach. Details of the duration and other principal terms and conditions of the concessions including relevant legislation, environmental and rehabilitation requirements, abandonment costs and any necessary licenses and consents including planning permission; The geological characteristics of the occurrence of the reserves, the type of deposit, its dimensions and quality; and The methods to be employed for exploration and extraction, and where appropriate the mineral and metallurgical processes to be employed.

o o

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Maps and plans Maps, sections and plans demonstrating for each major property or field its location, the nature and extent of workings thereon and its principal geological characteristics; and Surface location plan showing wells, platforms, pipelines, bore holes, sample pits, trenches and other evidence.

Reserves A statement in respect of PTBCs reserves giving: o o o o An estimate of the volume, tonnage in place and grades, as appropriate, each split between proven and probable reserves; The method by which the reserves were estimated; The expected recovery and dilution factors; Where appropriate, mineral processing and metallurgical recovery factors and grades, with evidence in support thereof, or recovery factors with respect to mineral reserves in place on a deposit by deposit basis, together with the expected period of working; The expected extraction tonnage or volume; and Where relevant, processing volumes or tonnages together with the other principal assumptions relating to forecast revenues and operating costs.

o o

If there are mineral resources which have not been sufficiently appraised to demonstrate them as proven or probable reserves, a separate statement of such mineral resources, which may not include any quantified information other than in respect of such mineral resources which have been appraised as measured, indicated and inferred mineral resources, in which case quantified information with regard to tonnage (or volume) and grade may be included in the statement.

Long term prospects Details of any mineral resources and assets relevant to the long term future of PTBC and the potential for PTBC to increase their reserve and resource base Nature of evidence A statement of: o o o o The nature of any geophysical and geological evidence used in the estimation of reserves; Summarised details of this evidence including information on quality control procedures; The results of drilling and sampling, stating the number of holes drilled, sample pits or trenches and their location, with a description of their current status; and The names of the organisations that carried out the investigation and analysis.

Production schedule A statement in relation to PTBCs or, where relevant, to the consortium to which it belongs giving: o o The production policy, including production rates of sites, mines and wells where production has already been commenced; The estimated production rates relating to new mines, or reworkings, or new drilling, or work-overs;

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o o o o o

Comment on the feasibility of managements production plans; An estimate of the working lives and degree of depletion of each major property; An assessment of the expertise of the technical staff being or to be employed; An indication of the bases on which these estimates have been arrived at; and Historic production/expenditures an appropriate selection of historic production statistics and operating expenditures over a minimum of a three year period per operating asset.

Commencement of working The date(s) on which commercial extraction by PTBC was commenced, or is expected to commence, on each major property; Progress of workings An indication of the progress of actual working, including analysis (both in narrative and numerical form) of previous exploration, development and extraction carried out on the relevant properties or fields; Plant and equipment Commentary on the type, extent and condition of plant and equipment which is of material significance to PTBCs operations and which is currently in use on PTBCs major properties or fields; Information on additional plant and equipment which will be required to achieve the forecast rates of extraction (including an estimate of the relevant costs and of the cost of maintaining and repairing all plant and equipment); and Comment on the quantum and reasonableness of the directors forecasts of development capital expenditures.

Environmental, Social and Facilities An assessment of o Environmental closure liabilities inclusive of biophysical and social aspects, including (if appropriate) specific assumptions regarding sale of equipment and/or recovery of commodities on closure, separately identified; Environmental permits and their status including where areas of material non-compliance occur; and Commentary on facilities which are of material significance

o o

Infrastructure, a discussion of location and accessibility of the property, availability of power, water, tailings storage facilities, human resources, occupational health and safety.

Operating costs Comment on the quantum and reasonableness of the directors forecasts of the operating expenditures. Special factors A statement setting out any additional information required for a proper appraisal of any special factors affecting the exploration or extraction businesses of PTBC, including difficulties of access to, or in recovery of, mineral reserves on properties where PTBC has extraction rights, and special circumstances, such as difficulties in transporting or marketing the extracts which may affect the commercial viability of the project, or an appropriate negative statement

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Other An indication of the periods and main terms of any licenses or concessions and the economic conditions for working those licenses or concessions; and Any other information or analysis required by the UKLA.

Note that the environmental work is not a detailed environmental review and is to be based on a review of PTBC supplied documentation. 1.3 Site Inspections, Data Review and Report Preparation Team The mine site was inspected by Runges Chris Smith. Mr. Smith has 22 years experience in the mining industry in open cut and underground coal operations and consulting. Runges Bill Park, Michael Trainor, Jack Standa and Riki Tardo Siagian contributed in the review of the available data. 2. 2.1 RELEVANT ASSET Asset Overview The Relevant Asset of PTBC is a First Generation Coal Contract of Work, No. DU 424 Kaltim, currently in the Exploitation stage. The Project covers a total area of 118,400 ha and includes three active production areas (Lati, Binungan and Sambarata) with areas of 6,985 ha, 12,130 ha and 15,600 ha respectively. PTBC has one area in pre-development (Binungan Block 8-10 (Kelay)), and a number of other areas in varying stages of exploration, (Kelay, Gurimbang and Punan). 2.1.1 Location PTBCs Relevant Asset is located approximately 300km North of Samarinda, in Berau Regency of East Kalimantan Province, Indonesia and adjacent to the village of Tanjung Redeb. The project location is shown on Figure 1. The project has access via a provincial highway to Samarinda, the Provincial Capital to the South and to the city of Tanjungselor to the North. The Kalimarau airport is located approximately 10km West of Tanjung Redeb, which is used by Indonesia national airline carriers to provide regular daily flight services to other East Kalimantan cities including Samarinda and Balikpapan. Two major rivers, Sungai Kelay and Sungai Segah flow through the concession and join to become known as Sungai Berau which flows out to the sea. These waterways are also used as a means of access to the site by boat. 2.1.2 Asset History The Berau Coal Project was awarded on 26 April 1983 as Contract No. J2/Ji.DU/12/83. The Contract is known as a First Generation Coal Contract of Work. The original concession area available for general prospecting was 487,217 ha. On 18 March 1986 in accordance with the conditions of the Coal Contract of Works exploration permit DU 424 was issued over 243,126.5ha or 49.9% of the original concession area. Exploitation permit No.DU1572, was granted for Lati on 2 November 1995, covering an area of 6,985ha and lasting for a period of 30 years. The granting of the Lati exploitation permit occurred after Lati production had commenced in 1993. Subsequently the Binungan exploitation permit was granted on 8 July 1996 covering an area of 12,130ha and lasting for a period of 30 years. This was followed by the granting of an exploitation permit for the Sambarata area covering 15,600ha on 16 October 2000. On 7 April 2005 the status of the concession was confirmed as a Production area comprising the Lati, Binungan and Sambarata areas totalling 34,715 ha with the remaining

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area of the concession, 83,685 ha under an exploration permit and comprising of Lati, Binungan Sambarata, Kelay, Gurimbang and Punan areas. The combined production area and exploration area of the Relevant Asset is 118,400 ha. 2.1.3 Project Layout The Project Layout is shown on Figure 2. Two major rivers the Sungai Segah and the Sungai Kelay flow through PTBCs concession from a south westerly direction and join to form the Berau River at Tanjung Redeb. The Berau River flows easterly out to the sea. To the south of the Berau River system is another river system called the Pantai River system. It also flows eastwards out to the sea. The Lati area is a geological basin in the northeast of the concession, and north of the Berau River. Gurimbang area is south of the Lati area and south of the Berau River. To the west of Lati and the township of Tanjung Redeb are the Sambarata mining areas of Block A, Block B and Block B1. These mining areas are north of the Segah River in this area. Further to the west of Sambarata is the Punan area. South of Tanjung Redeb and extending towards the south west are the mining areas of Parapatan, Binungan and Kelay respectively. These mining areas are bounded on their northern limits by the Kelay River. Current mining operations are at Lati Pit, Sambarata Pits in Block A, Block B1, Block B East & Block B West and Binungan Pits in Blocks 3-7. Coal Processing Plants (CPP) are located adjacent to the Berau River at the southern end of Lati Pit, adjacent to the river Sungai Segah at the southern end of Sambarata Block A, to the east of Binungan Block 5 mining area and at Suaran which is located on the river Sungai Suaran some 30km east of the Binungan CPP. Barge loading ports are located at Lati on the Berau River adjacent to the Lati CPP, at Sambarata on the river Sungai Segah adjacent to the Sambarata CPP and at Suaran on the river Sungai Suaran adjacent to the Suaran CPP. The transshipment point where ship loading occurs is at Muara Pantai which is offshore from the Pantai River delta and is located some 50 km from the Suaran barge loading port, 75 km from the Lati barge loading port and some 100 km from the Sambarata barge loading port. 2.2 Geology Overview The Project occurs within the Berau sub-basin of the Tarakan Basin with coal seams occurring within the Berau Formation. The Berau sub-basin is structurally controlled and is structurally complex. The Lati area is a shallow-dipping synclinal basin with dips up to 15 degrees on the flanks of the structure. The Sambarata (Blocks A and BC) and Binungan (Blocks 5-10) areas form the eastern and southern rim of a regional, steeper-dipping structurally complex basinal structure with dips typically ranging up to 45 degrees. The Sambarata (Block B1) and the Binungan (Parapatan Block and Blocks 1-4) areas lie on a smaller synclinal structure on the eastern flank of the regional structure. Typical cross-sections across the project are shown on Figures 3 to 6. The Berau Formation is reportedly up to 600 m in thickness with more than 100 identified coal seams and sub-seams (seam splits). There is a high degree of variability of the coal seam thicknesses between the different seams, from 0.1 m to 23.2 m thick. Seam thickness stated within this report is apparent thickness, i.e. based on drill intercepts and not true thickness. Seam splitting commonly occurs and seam subcrops are locally affected by burn zones. The average apparent thickness of a number of main seams for each area is shown on Table 2.1.

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Area Block Lati PQRT

Table 2.1 Main Seam Apparent Thicknesses by Area Thickness (m) Seam Average Maximum Minimum P Q R T L E M H T F L H R Q EL D K J J H ELL CU F2 E Z H 2.6 2.4 3.1 2.4 1.9 1.9 5.2 8.7 9.7 4.9 5.9 5.2 2.9 3.4 2.2 3.2 2.1 1.8 3.2 1.6 3.2 3.0 3.9 5.5 8.9 3.5 4.7 4.5 5.4 4.1 5.6 3.0 6.9 11.2 23.2 8.6 7.2 7.7 3.3 3.7 3.7 3.4 5.4 2.1 4.3 3.1 5.5 6.6 5.4 8.2 14.4 6.1 0.2 0.1 0.1 0.2 0.2 0.2 0.9 4.9 1.8 0.7 2.1 1.3 0.6 2.1 0.2 2.8 1.1 0.6 0.8 0.1 0.5 0.3 0.6 1.9 3.6 1.4

Other Seams Sambarata Block A Blocks BC Block B1 Binungan Parapatan Blocks 1-2 Blocks 3-4 Blocks 5-6 Block 7 East Block 7 West Block 8

Generalised stratigraphic columns for each area showing seam nomenclature, seam and interburden thickness are shown on Figures 7 to 9. Lati, Sambarata and Binungan areas have been subject to detailed drilling (drill lines at 100 200 m spacing) over active and proposed mining areas with wider exploration drilling (300 m spacing) in pre-development areas (Kelay). Drilling has been conducted in a number of stages since 1984. Drilling has been typically shallow, (less than 80 m), with limited deeper drilling (up to 190 m). Geophysical logging of holes has been standard practice throughout all drilling programmes. The geological database and geological models are of a good standard and that the level of confidence of data is adequate for Coal Resource estimates to be reported in accordance with JORC guidelines. 2.2.1 Coal Quality Coal quality data is available for a large number of drillholes. Typically PTBC has drilled a twinned hole close to a pilot open hole and selectively cored the intersected coal seams. The drill density and distribution of coal quality holes is appropriate for Coal Resource reporting to JORC guidelines. Samples were typically analysed for Total Moisture (TM), Inherent Moisture (IM), Ash Content (Ash), Total Sulphur (TS), Calorific Value (CV) and Relative Density (RD) with a significant number of samples also analysed for Hardgrove Grindability Index (HGI), Ash Fusion Temperatures (AFT) and Sodium content. Sample preparation and sampling was done in accordance with the appropriate international standards by PT Geoservices and Sucofindo laboratories.

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The in situ coal is typically of sub-bituminous rank, with coal quality varying across the project area. Higher quality coal occurs within the central part of the project area (Sambarata and Binungan) with lower quality in the outer-lying Lati blocks. TM, as received (ar), varies from 14.0% in Sambarata (Block A) to 24.7% in Lati (Seams PQRT). CV, gross as received (gar) varies from 6,170 kcal/kg in Sambarata (Block A) to 5,069 kcal/kg in Lati (Seams PQRT), Ash typically ranges from 2.9% to 6.7%, air dried basis (adb) and TS is variable and ranges from 0.5% to 2.2% (adb). Average coal qualities for all areas and sub-blocks are summarised in Table 2.2. Table 2.2 Summary of In Situ Coal Quality by Block
TM % Area Block (ar) Lati Seams PQRT 24.8 Seams A to O 23.2 Sambarata Block A 15.7 Block BC 15.5 Block B1 20.5 Binungan Parapatan 21.3 Blocks 1-2 15.9 Blocks 3-4 16.8 Blocks 5-6 20.5 Block 7 West 18.8 Block 7 East 22.5 Block 8 25.8 Weighted Average 22.4 IM % (adb) 18.9 18.1 12.5 12.2 16.3 15.2 12.2 13.2 16.7 15.1 17.5 16.6 16.5 Ash % (adb) 4.4 5.4 2.9 3.3 4.1 4.2 4.0 4.3 3.5 6.7 4.3 5.9 4.8 TS % (adb) 1.25 2.04 0.40 0.94 0.86 0.69 2.24 0.80 0.46 0.90 0.47 0.40 0.97 CV kcal/kg (adb) (gar) 5,468 5,425 6,241 6,200 5,767 5,831 6,177 6,033 5,691 5,642 5,529 5,390 5,615 5,069 5,104 6,009 5,973 5,476 5,412 5,921 5,781 5,434 5,403 5,199 4,801 5,224 RD g/cc (adb) 1.35 1.37 1.30 1.33 1.31 1.31 1.33 1.32 1.30 1.34 1.32 1.35 1.34 Na2O % (adb) 6.9 2.7 6.0 2.8 3.9 9.4 0.8 4.7 12.0 2.8 7.2 3.5 4.8

(Note: Coal quality is weighted average of the Measured & Indicated category coal from the geological model).

2.3

Coal Resources The parameters applied in the estimation of Coal Resources are as follows: no geological losses were applied, no minimum coal seam thickness was applied, maximum thickness of parting included in seam thickness is 0.1 m, Coal Resources above elevation (RL) minus 150 m were estimated. Coal Resources were excluded within mined out boundaries and remaining coal underlying backfill waste dumps was also excluded, Coal Resources were limited by the lease boundary, and estimates by seam have been rounded to the nearest 50 kt for Measured, 100 kt for Indicated, and 200 kt for Inferred.

The Coal Resource estimate is 1,413 million tonnes (Mt) to an elevation (Reduced Level, RL) cut-off of minus 150 m. This total includes 327 Mt of Measured category, 690 Mt of Indicated with the balance of 396 Mt as Inferred.

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Coal Resources by area and sub-block are summarized on Table 2.3 below: Table 2.3 Coal Resources Summary by Block Coal Resources (Mt) Measured Indicated Inferred Total 103 33 2 50 29 35 19 6 6 13 32 0 327 97 89 1 54 35 38 22 3 10 22 70 248 690 63 71 0 69 4 21 21 1 0 1 19 126 396 263 193 3 173 68 94 62 10 16 36 121 374 1,413

Area Block Lati Seams PQRT Seams A to O Sambarata Block A Block BC Block B1 Binungan Parapatan Blocks 1-2 Blocks 3-4 Blocks 5-6 Block 7 West Block 7 East Block 8 TOTAL

(Note: Estimate has been rounded to reflect accuracy).

2.4

Reserves A JORC Code Compliant Resource and Reserve Report (JORC Report) has been completed by Runge and estimates Resources and Reserves as at 31st December 2009. The Appendices provide an overview of the process taken in determining the JORC Code compliant Open Cut Coal Reserves and the checks undertaken. A summary of the key parameters are also provided. Estimated Reserves A total of 346 Mt of Open Cut Coal Reserves, were estimated comprising 146 Mt of Proved Reserves and 200 Mt of Probable Reserves. Coal Reserves by area are summarised in Table 2.4 and 2.5. Table 2.4 Open Cut Coal Reserves Area Lati Sambarata Binungan Total Coal Reserves (Mt) Proved Probable Total 59 91 150 35 18 53 52 91 143 146 200 346

2.5

(Note: Minor differences in totals shown in table above, due to rounding).

Coal Resources are reported inclusive of Coal Reserves (that is, Coal Reserves are not additional to Coal Resources). The coal is sold as a Run Of Mine (ROM) product; hence Marketable Reserves will equal Coal Reserves.

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Table 2.5 Reserve Quality

Area Block Lati Seams PQRT Seams A to O Sambarata Block A Block BC Block B1 Binungan Parapatan Blocks 1-2 Blocks 3-4 Blocks 5-6 Block 7 West Block 7 East Block 8 (Kelay) TOTAL Reserves (Mt) 133 18 0 20 33 19 7 1 1 9 61 45 346 TM % (ar) 24.9 23.9 14.9 18 20.3 21.8 15.7 17.6 20.1 20.3 22.4 25.1 23.1 IM % (adb) 19.0 19.0 11.5 14.24 16.2 15.4 12.3 13.7 16.7 16.4 17.4 16.4 17.4 Ash % (ar) 5.0 4.4 3.1 2.88 3.5 5.2 4.7 5.7 4.3 5.1 5.4 5.9 4.9 TS % (ar) 1.10 1.60 0.30 0.42 0.80 0.54 2.16 0.40 0.50 0.40 0.50 0.40 0.80 CV kcal/kg (gar) (adb) 5,000 5,140 6,080 5690 5,520 5,260 5,850 5,580 5,380 5,330 5,120 4,820 5,130 5,390 5,470 6,320 5950 5,800 5,690 6,090 5,840 5,610 5,590 5,450 5,370 5,510

Graph 2.1 PTBC Historical Production

2.6

Coal Production PTBC has a track record of year-on-year production increases as seen in Graph 2.1 and Table 2.6.

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Table 2.6 PTBC Historic Coal Production

Area Lati Binungan Block 1-4 Block 5-6 Block 7 Sambarata Block A Block B1 Block B W Block B E Total Area Lati Binungan Block 1-4 Block 5-6 Block 7 Sambarata Block A Block B1 Block B W Block B E Total 1992 Mt 0.0 0.0 1993 Mt 0.1 0.1 1994 Mt 0.3 0.3 1995 Mt 0.6 0.1 0.7 1996 Mt 0.9 0.2 1.1 1997 Mt 1.4 0.4 1.8 1998 Mt 1.3 0.9 2.2 1999 Mt 1.8 1.5 3.3 2000 Mt 2.2 2.7 4.9 2001 Mt 3.0 3.4 0.4 6.8

2003 Mt 3.5 2.9 0.5 0.5 7.4 2004 Mt 5.0 1.8 1.9 0.4 9.1 2005 Mt 5.2 0.9 2.1 1.0 9.2 2006 Mt 6.4 0.2 0.9 2.0 1.1 10.6 2007 Mt 7.2 0.5 0.7 2.1 1.3 11.82 2008 Mt 7.6 0.7 0.6 2.7 1.4 0.1 13.1 2009 Mt 8.1 0.8 0.6 2.9 1.0 0.9 14.3 2010 Mt 10.4 0.7 0.7 2.8 0.5 1.9 0.1 0.3 17.4 Total Mt 68.1 2.9 21.8 17.2 8.2 2.8 0.1 0.3 121.3 3.5

2002 Mt 3.1

0.6 7.2

PTBC has forecast to steadily increase production to a maximum rate of approximately 31 million tonnes per annum (Mtpa) in 2014. Coal production in 2011 is estimated to be 20 million tonnes. PTBC advises that mining contracts to cover the planned expansion of production in 2011 have been secured by PTBC. 2.7 Life of Mine Plans 2.7.1 Overview In May 2010 Runge, in cooperation with PTBC, produced a document titled PT Berau Coal Operations Strategic Life of Mine Plan which was the basis of the current Life of Mine Plan (LOM). The LOM is based on the reported Reserves, stated as of the end of December 2009. Table 2.7 Shows the ROM coal quantities as of the end of December 2009 used by PTBC in developing their Strategic LOM Plan. Table 2.7 Strategic Plan ROM Coal Quantities (May 2010) Mining Area Lati Binungan Sambarata Total

Quantity Mt 129 126 63 318

Table 2.7 shows a total of 318 Mt is considered available as economic recoverable coal to be scheduled over the 24 year period 2010 2034.

In October 2010 PTBC has updated this Strategic LOM Plan by completing a detailed five year plan for the period 2011 to 2015. Total coal production over the life of mine also increased to 464 Mt. PTBC anticipates future drilling and subsequent delineation of mineable coal will verify this increase in total production. These revisions in coal production have now been incorporated into the Life of Mine Plan production schedules outlined in this section. 673

The Five Year Mine Plans are updated annually by PTBC. The current Five Year Mine Plans were generated by PTBC in the second half of 2010. Production volume has been scheduled over the 16 year period 2011 to 2026 through a detailed five year mine plan, 2011 to 2015, and then by Strategic LOM planning for the period 2016 to 2026 for Lati, Binungan, and Sambarata. Gurimbang mine planning was completed via spreadsheet extrapolation. The Five Year Plan and Strategic LOM Plan production schedule is shown in Table 2.8. Table 2.8 Strategic LOM Plan Production Schedule (October 2010)
2011 Area Mt Lati 11.6 Binungan 4.6 Sambarata 4.2 Gurimbang 0.0 Kelay-Punan 0.0 Total 20.4 2012 Mt 13.0 6.6 4.7 0.05 0.0 24.3 2013 Mt 13.2 8.1 5.5 0.4 0.3 27.6 2014 Mt 13.2 10.0 5.8 0.5 1.3 30.8 2015 Mt 13.0 9.3 5.9 0.5 2.7 31.4 2016 Mt 14.0 8.0 4.5 1.0 2.5 30.0 2017 Mt 14.0 8.0 4.5 1.0 2.5 30.0 2018 Mt 14.0 8.0 4.5 1.0 2.5 30.0 2019 Mt 14.0 8.0 4.5 1.0 2.5 30.0 Total Mt 217.5 118.4 68.6 12.4 46.8 463.8

2020 Mt 14.0 8.0 4.5 1.0 2.5 30.0 2021 Mt 14.0 7.5 4.5 1.0 3.0 30.0 2022 Mt 14.0 7.25 4.5 1.0 3.25 30.0 2023 Mt 14.0 6.5 4.5 1.0 4.0 30.0 2024 Mt 14.0 6.2 3.8 1.0 5.0 30.0 2025 Mt 14.0 6.0 2.25 1.0 6.75 30.0 2026 Mt 14.0 6.0 0.5 1.0 8.0 29.5

Area Lati Binungan Sambarata Gurimbang Kelay-Punan Total

The Strategic LOM Plan shows production increasing from the actual level of 17.4 Mt in 2010 to a peak of 31.4 Mt in 2015. While this increase in production is achievable, it is subject to detailed planning which may subsequently demonstrate that there can potentially be issues in meeting these targets. It is a key objective of PTBC to continue to prove up additional coal Reserves in new mine areas at Kelay, Gurimbang and Punan and in existing mine areas in order to sustain production at 30 Mtpa beyond 2017, as economic recoverable coal from the mature pits of Lati, Binungan and Sambarata are sequentially depleted. Additional mining and coal transport capacity will be required to meet the forecast increase.

The life of mine plans are well prepared, address the key technical issues, and key technical parameters required. The presentation of the mine plans has been completed in a professional manner. The key driver in the derivation of the LOM production schedule is development of the various pits at production rates that allow for the blending of coal to produce a range of saleable products that maximises the value from the recoverable coal quality of the deposits. The objective is generally to maximise product coal energy while ensuring that three other key coal quality parameters (Total Sulphur, Na2O in ash, and Ash Fusion temperatures) are within acceptable customer limits. To achieve this objective PTBC has established four Product Brands that allow various seams from the same pit or from different pits to be blended in proportions to achieve these Product Brand specifications.

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The Product Brand specifications are shown in Table 2.9. Table 2.9 Product Brands & Specifications Products Item Unit Mahoni Mahoni-B Agathis Sungkai Total Moisture % (ar) 18.0 22.5 26.0 26.0 Inherent Moisture %(adb) 13.5 16.0 18.0 18.0 Calorific Value kcal/kg (adb) 5,900 5,740 5,650 5,500 Calorific Value kcal/kg (gar) 5,600 5,300 5,100 5,000 Ash Content % (adb) 5.1 4.5 4.8 5.0 Total Sulphur % (adb) 0.70 0.87 0.89 0.99 Volatile Matter % (adb) 39.3 38.5 38.2 38.0 Fixed Carbon % (adb) 42.1 41.0 39.0 39.0 Hardgrove Grindability Index 45.0 45.0 46.0 47.0 Ash Fusion Temperature (reducing) Initial Deformation C 1,150 1,110 1,080 1,050 Softening C 1,180 1,130 1,140 1,110 Hemispherical C 1,230 1,170 1,190 1,125 Fluid/flow C 1,280 1,210 1,230 1,150 Analysis of Ash Constituents (adb) % 37.08 27.73 28.57 24.66 SiO2 Al2O3 % 18.20 14.53 18.90 14.26 Fe2O3 % 14.58 13.79 15.04 11.89 CaO % 7.04 12.13 8.01 13.59 MgO % 4.12 4.72 4.15 4.89 TiO2 % 0.78 0.78 0.66 0.72 Na2O % 4.00 7.30 4.00 7.20 K2O % 1.00 0.73 0.88 1.76 Mn3O4 % 0.10 0.10 0.17 0.16 P2O5 % 0.62 0.75 0.54 0.52 SO3 % 12.47 17.44 19.08 20.34 Runge has not reviewed whether the pit development sequences and the relative rates of development of each pit have in fact lead to the optimum value being derived from the mineable deposit. 2.7.2 Lati LOM Plan The Lati LOM Plan consists of the production volume from the detailed five year mine plan scheduled over the period 2011 to 2015 and from the Strategic LOM Plan for the period 2016 to 2026. The LOM coal production exceeds the mineable tonnes estimated from the pit shells designed during the recent JORC Reserve estimate. PTBC advises that additional drilling is planned in the Lati area to further define mineable tonnes to maintain the life of Lati operations until 2026. Lati annual coal production is forecast to increase from 10.4 Mt in 2010 to 14 Mt in 2016. 2.7.3 Binungan LOM Plan The Binungan LOM Plan consists of the production volume from the detailed five year mine plan scheduled over the period 2011 to 2015 and from the Strategic LOM Plan for the period 2016 to 2026. Binungan production is from 6 mining blocks known as Binungan 1-2, Binungan 3-4, Binungan 5-6, Binungan 7 East, Binungan 7 West, and Parapatan. Binungan Blocks 8-10 (Kelay) forecast production is shown separately in Section 2.6.6.

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Binungan annual coal production is forecast to increase from 4.2 Mt in 2010 to 10.9 Mt in 2014. Additional mining and coal transport capacity will be required to meet the forecast increase. 2.7.4 Sambarata LOM Plan The Sambarata LOM Plan consists of the production volume from the detailed five year mine plan scheduled over the period 2011 to 2015 and from the Strategic LOM Plan for the period 2016 to 2026. Sambarata production is from 4 mining blocks known as Sambarata A, Sambarata B East, Sambarata B West and Sambarata B1. Sambarata annual coal production is forecast to increase from 2.7 Mt in 2010 to 6.0 Mt in 2015. 2.7.5 Gurimbang LOM Plan The Gurimbang LOM plan consists of the production volume from spreadsheet extrapolation being scheduled over the period 2012 to 2026 at a maximum rate of 1 Mtpa. 2.7.6 Kelay LOM Plan The Kelay LOM plan consists of the production volume from the detailed five year mine plan scheduled over the period 2013 to 2015 and from the Strategic LOM Plan for the period 2016 to 2026 at a maximum rate of 8 Mtpa. 2.8 Five Year Mine Plans 2.8.1 Five Year Mine Plan Overview Five year mine plans have been completed by PTBC in the second half of 2010 for Lati, Binungan, Sambarata, and Gurimbang pits. Lati, Binungan and Sambarata were subdivided into Blocks and Pits, with a schedule completed for each. Gurimbang was scheduled by spreadsheet extrapolation. The process that has been used in the development of the five-year mine plans identified above is as follows: The mineable coal quantities within the economic pit shells have been quantified in blocks. These blocks have been used to develop the mineable model and derive a three dimensional spreadsheet of quantities. The block quantities have been scheduled in a logical mining sequence consistent with the pit development plan i.e. subcrop development along strike and then down dip to pit shell limits to excavate an initial boxcut. This waste is hauled to out of pit dumps. Coal associated with this excavation is mined concurrently seam by seam. Haulback mining advance is then established along strike which allows waste to be hauled back inpit to backfill prior excavation areas. The excavation sequence and dumping sequence are subsequently determined along with the waste and coal haul distances. The waste removal sequence, waste dumping sequence, and coal extraction sequence have been outlined in three dimensional stage plans. Suitably sized equipment fleet are selected along with estimates of annual operating hours which take account of such factors as plant availability, utilisation and operating delays.

The five year mine plans have been soundly developed by qualified people. The process followed and the outputs produced are what would be expected for a five year mine plan. The documentation and presentation of the results of the 5 year mine plans are of a high standard.

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2.8.2 Lati 5 Year Mine Plan Pit Design There are eleven pits designed to represent the economically mineable quantities for the Lati Pit, they are Pit T, West, East 1, East 2, E1, E2, E3, E4, L1, L2 and L3. Pit West and East (1&2) consist of P, Q and R seam, Pit T the T Seam, the E pits the E to K seam groups, and the L pits the L to O seam groups. The geometry associated with each pit design is determined by the geotechnical criteria applicable for each pit. This criteria includes highwall, lowwall and sidewall overall slope angles and individual slope angles and berm widths for each overall slope. Pit Quantities for Scheduling The pit reserve was calculated in blocks with dimensions of 100m along strike, 50m down dip, and a bench height of 10m in vertical elevation. Each block is projected off the lowest coal seam floor at the overall geotechnical slopes as outlined in this report. Pit Development Schedule The Lati 5 year pit development schedule is derived in accordance with the overall Company LOM development strategy of production rates that allow for blending of coal to take place. The blending is planned to produce a range of saleable products that maximises the value from the recoverable coal quality of the deposits. A material mass balance has been estimated for overburden removal and associated haul distances estimated. Annual stage plans have been produced demonstrating the pit development and overburden dumping sequences. Lati 5 year Production Schedule The Lati 5 year Production Schedule is shown in Table 2.10. Table 2.10 Lati 5 Year Production Schedule 2011 2012 2013 2014 LATI Waste (Mbcm) Coal Exposed (Mt) Coal Mining (Mt) Mine Strip Ratio (bcm:t) Waste Distance (m) Coal Distance (m) TM (ar) IM (adb) Ash (adb) VM (adb) FC (adb) TS (adb) CV (adb) Na2O (%) AFT IDT RED (deg) AFT FLOW (deg) 98 12 12 8.2 1,800 15,100 25.6 19.0 4.9 38.1 37.9 1.2 5,434 5.6 1,069 1,139 120 13 13 9.6 2,300 16,900 25.9 19.2 4.7 38.2 37.7 1.4 5,434 5.03 1,066 1,149 130 13 13 10.0 2,400 18,100 25.6 19.3 4.7 38.4 37.5 1.5 5,435 5.3 1,059 1,141 130 13 13 9.9 2,100 18,900 25.5 19.3 4.9 38.2 37.6 1.5 5,422 5.4 1,051 1,135

2015 130 14 13 9.6 2,300 19,700 25.9 19.3 5.0 37.9 37.7 1.4 5,382 5.1 1,060 1,131

Total 608 64 63 9.5 2,200 17,900 25.7 19.2 4.9 38.2 37.7 1.4 5,421 5.3 1,061 1,139

Over the 5 year period 40% of coal mined is from Pit West, 32% Pit East, 19% Pit L, 4% Pit E and 5% from Pit T.

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2.8.3 Binungan 5 Year Mine Plan Pit Design There are 19 pits designed to represent the economical mineable reserves for Binungan which are: Pit D2, Pit D, and Pit K of Binungan Block 1-2, Pit K and Pit F of the Binungan Block 3-4, Pit H4, Pit S and Pit V of Binungan in Block 5-6, Pit E, Pit H, Pit C, and Pit C3 of Binungan Block 7 Pit K1, Pit M1, Pit N1, and Pit Q of Binungan Parapatan Block, and Pit Z, Pit X, and Pit V of Binungan Block 8 (Kelay).

Mining of the Binungan Block 1-2 pits will commence in 2012, while Binungan Block 8 (Kelay) will start in 2013. The geometry associated with each pit design is determined by the geotechnical criteria applicable for each pit for highwall, lowwall and sidewall overall slopes and individual slope angles and berm widths for each overall slope. Pit Quantities for Scheduling The pit reserve was calculated in blocks with dimensions of 50 m along strike x 50 m down dip and 10 m vertical elevation, with the exception of Binungan 7 with block dimensions of 100 m x 100 m x 10 m. Each block is projected off the lowest coal seam floor at the overall geotechnical slopes as outlined above. Pit Development Schedule The Binungan 5 year pit development schedule is derived in accordance with the overall PTBC LOM development strategy of production rates that allow for blending of coal to take place. The blending is planned to produce a range of saleable products that maximises the value from the recoverable coal quality of the deposits. A material mass balance has been estimated for overburden removal and associated haul distances estimated. Annual stage plans have been produced demonstrating the pit development and overburden dumping sequences. Binungan 5 year Production Schedule The Binungan 5 year Production Schedule is shown in Table 2.11. Table 2.11 Binungan 5 Year Production Schedule (Including Kelay) 2011 2012 2013 2014 2015 42 5 4 9.1 2,300 10,500 21.7 16.4 5.0 39.2 39.3 0.6 5,571 5.6 1,106 1,209 63 7 7 9.6 2,500 11,700 22.2 16.6 5.2 39.1 39.1 0.5 5,551 5.9 1,097 1,200 70 8 8 8.3 2,200 13,200 22.2 16.4 5.4 39.19 39.1 0.7 5,547 5.1 1,107 1,215 75 11 11 6.6 1,900 14,300 23.0 16.3 5.6 38.9 39.1 0.7 5,497 4.3 1,113 1,222 87 12 12 7.3 1,800 15,900 24.0 16.9 5.6 39.2 38.3 0.6 5,403 3.5 1,120 1,229 Total 338 42 42 7.9 2,100 13,800 22.8 16.6 5.4 39.1 38.9 0.6 5,497 4.6 1,111 1,218

Binungan Waste (Mbcm) Coal Exposed (Mt) Coal Mining (Mt) Mine Strip Ratio (bcm:t)

Waste Distance (m) Coal Distance (m) TM (ar) IM (adb) Ash (adb) VM (adb) FC (adb) TS (adb) CV (adb) Na2O (%) AFT IDT RED (deg) AFT FLOW (deg)

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The proportion of Binungan coal production in the 5 year total is 29% which is in line with the LOM requirement. 2.8.4 Sambarata 5 Year Mine Plan Pit Design There are 11 Pits designed to represent the economical mineable reserves from Sambarata Pit over the next 5 years. They are: Sambarata Block A, Sambarata Block B1, Sambarata Block B East Pits C, C1, F, F1, F2 and I, and Sambarata Block B West Pits T1, T2, and T3.

The geometry associated with each pit design is determined by the geotechnical criteria applicable for each pit for highwall, low wall and sidewall overall slopes and individual slope angles and berm widths for each overall slope. Pit Quantities for Scheduling The pit reserve was calculated in blocks with dimensions of 50 m down dip x 50 m along strike and 10m vertical elevation. Each block is projected off the lowest coal seam floor at the overall geotechnical slopes as outlined above. Pit Development Schedule The Sambarata 5 year pit development schedule is derived in accordance with the overall Company LOM development strategy of production rates that allow for blending of coal to take place. The blending is planned to produce a range of saleable products that maximises the value from the recoverable coal quality of the deposits. A material mass balance has been estimated for overburden removal and associated haul distances estimated. Annual stage plans have been produced demonstrating the pit development and overburden dumping sequences. Sambarata 5 year Production Schedule The Sambarata 5 year production schedule is shown in Table 2.12. Table 2.12 Sambarata 5 Year Production Schedule 2011 2012 2013 2014 2015 Sambarata Waste (Mbcm) Coal Exposed (Mt) Coal Mining (Mt) Mine Strip Ratio (bcm:t) Waste Distance (m) Coal Distance (m) TM (ar) IM (adb) Ash (adb) VM (adb) FC (adb) TS (adb) CV (adb) Na2O (%) AFT IDT RED (deg) AFT FLOW (deg) 46 4 4 11.0 2,000 9,200 19.9 15.2 5.8 39.6 39.4 0.9 5,712 3.0 1,138 1,254 51 5 5 10.8 1,800 10,100 19.6 14.8 5.9 39.8 39.6 0.8 5,746 3.0 1,163 1,277 51 6 6 9.2 1,500 11,000 19.4 14.8 5.8 39.9 39.5 0.8 5,741 2.9 1,150 1,273 51 6 6 8.7 1,500 12,000 20.4 15.5 5.6 39.5 39.3 0.5 5,679 3.9 1,140 1,276 51 6 6 8.5 1,200 12,400 20.8 15.8 5.8 39.3 39.1 0.7 5,619 5.2 1,133 1,267

Total 250 27 26 9.5 1,600 11,100 20.0 15.2 5.8 39.6 39.4 0.8 5,696 3.7 1,144 1,270

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Over the 5 year period, less than 1% of coal production is from Sambarata Block A (mined out in 2011), 59% is from Block B1, 15% from Block B East, and 26% from Block B West. The Sambarata proportion of coal production in the five year plan total is 19%, in line with the LOM proportion requirements. 2.8.5 Gurimbang 5 Year Mine Plan Pit Design Exploration drilling is ongoing for the Gurimbang deposit. Detailed geological modelling and pit designs have not been completed. Pit Quantities for Scheduling The waste and coal production from Gurimbang is conceptual, and has been estimated using a spreadsheet scheduler. Detailed pit designs, incorporating strips and blocks, will be completed in 2011. Gurimbang 5 year Production Schedule The Gurimbang 5 year production schedule is shown in Table 2.13. Table 2.13 Gurimbang 5 Year Production Schedule 2011 2012 2013 2014 2015 Gurimbang Waste (Mbcm) Coal Mining (Mt) Mine Strip Ratio (bcm:t) 0.5 0.05 10.0 4.0 0.4 10.0 4.0 0.5 8.0 4.0 0.5 8.0

Total 12.5 1.45 8.6

The Gurimbang proportion of coal production in the five year plan total is 1%, in line with the LOM proportion requirements. 2.9 Annual Mine Plans The 2011 annual mine plan has been developed for each of the above mine areas. Each of the mining areas has been scheduled in monthly increments, with the waste and coal quantities determined from estimates of the equipment capacities. The annual mine plans are well prepared, address the key technical issues and parameters required for such a document. The presentation of the annual mine plans has been completed in a professional and high standard manner. 2.10 Monthly and Weekly Operating Plans Monthly and weekly operating plans are the responsibility of the mining contractors for each working area and pit. The basis of the monthly plan, outlined in weeks, is the annual plan and the basis of the weekly plan, outlined daily, is the monthly plan. A Product Quality & Inventory Control meeting involving both PTBC site personnel and head office personnel from marketing and logistics is held every second week. These meetings focussed on the execution of the mine plan ensure timeliness of ship loading in order to minimise demurrage costs and to minimise product coal quality pricing adjustments of the cargo loaded on the customers ships. 2.11 Reconciliations Runge was provided with a copy of a quantity reconciliation undertaken by PTBC and was advised that these reconciliations do occur on a regular basis. Quantity reconciliations will outline the actual quantities of waste volumes excavated as measured by survey compared to the waste quantities calculated from the mineable model.

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Coal quantity reconciliations will trace coal tonnages back from shipped tonnes through the coal chain to coal volume excavated in the pit. This will allow coal volume and tonnage excavated in the pit to be compared and reconciled with coal volume and tonnage in the geological and mineable deposit models. Reconciliation data provided by PTBC indicate modeled overburden and coal quantities compare favorably to actual. 2.12 Mining Contracts 2.12.1 Mining Contracts Overview All mining operations at PTBCs Relevant Asset are undertaken by mining contractors. PTBC currently engages five mining contractors; PT Bukit Makmur Mandiri Utama (BUMA), PT Saptaindra Sejati (SIS), PT Ricobana Abadi (Ricobana), PT Riung Mitra Lestari (RML), and PT Madhani Talatah Nusantara (Madhani). BUMA works in both the Lati pit and Binungan Block 7 pits. SIS works in Binungan Block 14 pits and Block 5-6 pits and in the Sambarata Pits of Block A and Block B1. The mining contracts of BUMA and SIS are total service provision contracts with a single unit rate (SUR) for delivery of ROM coal mined at an agreed Strip Ratio to a nominated point of delivery. Ricobana works in Lati (in a separate location from BUMA), Madhani in Sambarata B West, and RML in Sambarata B East. The mining contracts of Ricobana, Madhani, and RML are double rate contracts with a unit price for overburden removal ($/bcm) and a unit price for coal mining ($/tonne). BUMA mining contracts for Lati pit and Binungan Block 7 pits have a duration until 2018. The contracts however are defined on a rolling 5 year basis and are updated annually for volume and price. The last update and amendment of the BUMA mining contracts was in November 2009. The SIS mining contracts in Sambarata cover the pits in Block A and B1 with durations extending between 2011 and 2012. The contracts are updated annually for volume and price within the originally defined contract duration and volumes. The last update and amendment of the SIS Sambarata mining contracts was July 2010. The SIS mining contracts in Binungan cover the pits in Binungan Blocks 1-4 and Blocks 5-6 pits with durations until 2010. The contracts are updated annually for volume and price within the originally defined contract duration and price. The last update and amendment of the SIS Binungan mining contracts was in July 2010. PTBC is currently negotiating with SIS to extend the Binungan contract. The Ricobana contract in Lati and the RML contract in Sambarata B East have duration until 2014. The Madhani contract in Sambarata B West has duration until 2015. The unit rates reviewed in the contracts are reasonable and similar to known unit rates at other Indonesian coal mining operations. 2.12.2 BUMA Lati Mining Contract The BUMA Lati contract is a total service provision contract for delivery of ROM coal to the nominated delivery point. The scope of work entails: land clearance including logging, topsoil and overburden removal, coal mining, coal loading and hauling to the Coal Processing Plant (CPP), water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and mobilisation and demobilisation. 681

The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive and easy to understand for both parties to be able to fulfil their contractual obligations without consistently being in dispute. The commercial terms are in line with expected contract rates for Indonesia. The key aspects of the BUMA Lati contract last amended in November 2009 are: A Single Unit Rate (SUR) for coal delivery from Lati pit to the Lati CPP. The strip ratio associated with the single unit rate for coal delivery is defined. Adjustments to the SUR are made for variations in fuel prices. The overburden rate has been calculated based on 10% of overburden removal being achieved by dozer pushing. The risk in this assumption rests with the contractor. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

2.12.3 BUMA Binungan Block 7 Mining Contract The BUMA Binungan Block 7 contract is a total service provision contract for delivery of ROM coal to the nominated delivery point, the Binungan Coal Processing Plant and then coal haulage of the processed coal from the Binungan CPP to Suaran Port. The scope of work entails: land clearance including logging, topsoil and overburden removal, coal mining, coal loading and hauling to the Binungan CPP, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and mobilisation and demobilisation.

The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive and easy to understand for both parties to be able to fulfil their contractual obligations without consistently being in dispute. The key aspects of the BUMA Binungan Block 7 contract last amended in November 2009 are: A Single Unit Rate (SUR) for coal delivery. The strip ratio associated with the single unit rate for coal delivery is defined. Adjustments to the SUR are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

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BUMA Coal Haulage Binungan CPP to Suaran Port BUMA is contracted to haul product crushed coal from the Binungan CPP to Suaran CPP. The haulage distance is 30 km. Coal is hauled by B Double trailers of 2 x 60 t or 120 t total capacity. There is no contract variation for haul distance. There is a monthly variation calculated for fuel price adjustment. 2.12.4 SIS Sambarata Coal Mining Contract The SIS Sambarata mining contract covers two working areas Block A, and Block B1. It is a total service provision contract for delivery of ROM coal to the nominated delivery point, the Sambarata Coal Processing Plant. The scope of work entails: land clearance including logging, topsoil and overburden removal, coal mining, coal loading and hauling to the Sambarata CPP, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and mobilisation and demobilisation.

The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive and easy to understand for both parties to be able to fulfil their contractual obligations without consistently being in dispute. The key aspects of the Sambarata contract last amended in July 2009 are: A Single Unit Rate (SUR) for coal delivery. The strip ratio associated with the single unit rate for coal delivery is defined. Adjustments to the SUR are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

2.12.5 SIS Binungan Mining Contract The SIS Binungan mining contract covers the pits within two working areas Block 3-4 and Block 56. It is a total service provision contract for delivery of ROM coal to the nominated delivery point, the Binungan Coal Processing Plant. The scope of work entails: land clearance including logging, topsoil and overburden removal, coal mining, coal loading and hauling to the Binungan CPP, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and mobilisation and demobilisation.

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The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive and easy to understand for both parties to be able to fulfil their contractual obligations without consistently being in dispute. The key aspects of the Binungan contract last amended in July 2009 are: A Single Unit Rate (SUR) for coal delivery. The strip ratio associated with the single unit rate for coal delivery is defined. Adjustments to the SUR are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

2.12.6 Ricobana Lati Mining Contract The Ricobana Lati mining contract is a total service provision contract for delivery of ROM coal to the nominated delivery point. The scope of work entails: land clearance, topsoil and overburden removal, coal mining, coal loading and hauling to the ROM, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and mobilisation and demobilisation.

The obligations of the contractor and the mine owner are outlined in detail in the contract so as to minimise uncertainty regarding obligations and hence contractual disputes. Runge has viewed these contractual obligations and believes them to be suitably comprehensive and easy to understand for both parties to be able to fulfil their contractual obligations without consistently being in dispute. The key aspects of the Lati contract signed in June 2010 are: A rate for coal delivery from Lati pits to the ROM on a $/tonne basis. A rate for overburden removal from Lati pits on a $/bcm basis. Adjustments to the unit rates are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

2.12.7 RML Sambarata B East Mining Contract The Riung Mitra Lestari (RML) Sambarata mining contract covers the pits within the Sambarata B East site. The contract period is from July 2010 to December 2014. RML production for 2010 was approximately 350,000 t coal. Runge understands the contract volume is currently being negotiated, and PTBC expects 2011 coal production from RML to be 500,000 t.

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PTBC has advised the following contract terms: land clearance, topsoil and overburden removal, coal mining, coal loading and hauling, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads.

The key aspects of the Sambarata contract last amended in June 2010 are: A rate for coal delivery from Lati pits to the ROM on a $/tonne basis. A rate for overburden removal from Lati pits on a $/bcm basis. Adjustments to the unit rates are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary. Coal haulage one way distance is defined and the unit rate adjusted if actual haulage distances vary.

2.12.8 Madhani Sambarata B West Mining Contract The PT Madhani Talatah Nusantara (Madhani) Sambarata mining contract covers the pits within the Sambarata B West site. The contract period is from September 2010 through December 2015. Madhani production for 2010 was approximately 100,000 t coal. The contract volume is currently being negotiated, and PTBC expects 2011 coal production from Madhani to be 1,000,000 t. PTBC has advised the following contract terms: land clearance, topsoil and overburden removal, coal mining, water management, provision of ancillary equipment, repair and maintenance of inpit roads, disposal roads and coal haulroads, and

The key aspects of the Sambarata contract last amended in June 2010 are: A rate for overburden removal from Lati pits on a $/bcm basis. Adjustments to the unit rates are made for variations in fuel prices. Overburden one way haul distance is defined and the unit rate adjusted if actual haulage distances vary.

Although the contract provided indicates coal loading is part of Madhanis scope of work, no unit rate for the coal loading was provided.

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2.13

Overburden Removal Overburden removal in the operating pits is carried out by the Mining Contractors using conventional hydraulic excavator and off highway dump trucks. Overburden from the planned faces is excavated by hydraulic excavators operating in backhoe mode from the top of the bench and loaded into dump trucks operating on the floor of the bench. The trucks haul the waste from the bench face along formed and maintained haulroads to the dump locations. The haul roads are built in insitu or dumped material and are temporary to semi-permanent in terms of duration of use. They are maintained by graders and water carts to facilitate good hauling conditions. 2.13.1 Lati Overburden Removal BUMA as mining contractor is responsible for Lati overburden removal. A mixed fleet of hydraulic excavators is deployed by BUMA comprising 360 t size Hitachi EX3600, 250 t size Hitachi EX2500, Komatsu PC 2000, PC1800, PC1250 and PC400. Dump truck sizes are Komatsu HD785 100t and Articulated Dump Trucks, (ADT) 30 t capacity. In 2010, mining contractor Ricobana began production in the Lati area utilising Komatsu PC 2000 and PC1250 excavators. In 2009 overburden moved by the BUMA fleet was 69.6 Mbcm. Through November 2010 overburden moved was 70.7 Mbcm, which is on target to achieve the annual plan. Overburden moved in 2010 has been aided by the addition of mining contractor Ricobana. Lati forecast overburden removal for 2011 is 98 Mbcm of which 87 Mbcm is contracted to BUMA and Ricobana. Buma and Ricobana have adequate capacity to meet this forecast; however, an additional 11 Mbcm of capacity must be added to achieve the total forecast. PTBC is actively pursuing this additional capacity. As the overburden removal requirement in Lati increases in line with the planned expansion, additional equipment will be required to be procured and deployed by BUMA and Ricobana, or by adding a third contractor to Lati. 2.13.2 Sambarata Overburden Removal SIS as mining contractor has been responsible for Sambarata overburden removal. A mixed fleet of hydraulic excavators is deployed by SIS comprising Komatsu, PC 1250 and PC 400 machines and Hitachi EX850 machines. Dump truck sizes are Komatsu HD 465 of 60 t capacity and ADT of 30 t capacity. In 2010, mining contractors Madhani and RML began work in Sambarata B West and B East respectively. Madhani is utilising Komatsu PC 2000 and PC1250 excavators and RML Komatsu PC1250 excavators. In 2009, overburden moved was 18.7 Mbcm. Through November 2010, overburden moved by SIS was 22.5 Mbcm. Through November 2010, overburden moved by Madhani and RML was 1.1 Mbcm each. Sambarata forecast overburden removal for 2011 is 46 Mbcm. SIS, Madhani, and RML have adequate capacity to meet this forecast. As the overburden removal requirement in Sambarata increases in line with the planned expansion, additional equipment will be required to be procured and deployed by SIS, Madhani, and RML. 2.13.3 Binungan Overburden Removal SIS as mining contractor is responsible for Binungan Overburden Removal in the Pits of Block 3-6 and Pit H4. A mixed fleet of hydraulic excavators is deployed by SIS comprising Komatsu, PC 1250 and PC 400 machines and Hitachi EX850 machines. Dump truck sizes are Komatsu HD 465 of 60 t capacity and ADT of 30 t capacity. BUMA as mining contractor is responsible for Binungan overburden removal in the Pits of Block 7. A mixed fleet of hydraulic excavators is deployed by BUMA comprising 250 t size

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Hitachi EX2500, Komatsu PC 2000, PC1800, PC1250 and PC400. Dump truck sizes are Komatsu HD785 100t and ADT 30 t capacity. In 2009, overburden moved was 35.8 Mbcm. In 2010, overburden moved by SIS was 12 Mbcm and overburden moved by BUMA was 24 Mbcm. Binungan forecast overburden removal for 2011 is 42 Mbcm. SIS and BUMA have adequate capacity to move 37 Mbcm. PTBC is planning to add contractors to Binungan Block 7 Pit H and Parapatan in order to increase overburden removal capacity to 42 Mbcm. As the overburden removal requirement in Binungan ramps up in line with the planned expansion, additional equipment will be required to be procured and deployed by BUMA and SIS, or with the addition of other contractors. 2.14 Coal Mining The coal mining operation at the Relevant Asset involves coal roof cleaning, coal getting from the body of the coal seam and coal floor cleaning. Coal losses associated with roof and floor cleaning are set at 0.07 m and 0.10 m respectively. PC 200 sized excavators with straight edge buckets are used to clean the coal roof of the dipping coal seams after they have been exposed by the overburden removal equipment. The main body of the coal seam is excavated by hydraulic excavators (PC 400 size) operating in backhoe mode and loading into 30 t dump trucks. The floor is also cleaned with the straight edge bucket PC 200 size machine. Coal is then either hauled to the surface and Pit ROM stockpiles where each seam is stockpiled separately, or hauled directly from the pit to ROM stockpiles at the CPP. 2.14.1 Lati Coal Mining In 2009, Lati coal mining was 8.1 Mt. For the 11 months to November 2010, coal mining was 9.4 Mt. The increase in coal production was achieved by the addition of mining contractor Ricobana and increased production from BUMA. As coal production ramps up in line with the planned expansion by PTBC, additional coal mining equipment will need to be purchased and deployed by BUMA. BUMA has deployed single trailers (1x 60 t vessels) for coal haulage from Pit ROM stockpiles to the Lati CPP. PTBC has adequate supplies of burnt mudstone available from overburden mining operations to use as road surfacing material for the main coal haulage road. The condition of the coal haul road is able to be maintained in good order to facilitate all weather coal hauling. In addition, PTBC is planning to chip and seal the haul road in 2012 and 2013. 2.14.2 Sambarata Coal Mining In 2009, Sambarata coal mining was 1.9 Mt. Through November 2010, coal mining was 2.4 Mt. The increase in production was achieved by adding contractors RML and Madhani as well as increased production from SIS. As coal production ramps up in line with the planned expansion by PTBC, additional coal mining equipment will need to be purchased and deployed by the contractors. PTBC has adequate supplies of burnt mudstone available from overburden mining operations to use as road surfacing material for the main coal haulage road. The condition of the coal haul road is able to be maintained in good order to facilitate all weather coal hauling. 2.14.3 Binungan Coal Mining In 2009, Binungan Coal Mining was 4.0 Mt. Through November 2010, coal production was 3.9 Mt.

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As coal production ramps up in line with the planned expansion by PTBC, additional coal mining equipment will need to be purchased and deployed by SIS and BUMA. Additional length of haul road will also need to be built associated with the development of Parapatan Area which is essentially an extension and replacement of the Binungan Block 1-6 Pits. PTBC has budgeted capital to build the haul roads and install bridges. 2.15 Coal Quality Management 2.15.1 Overview Coal quality management is an integral part of the daily operation of a business where coal is produced from multiple seams, from multiple pits in three current mining areas. 2.15.2 Quality Control Practices Three main coal quality control practices are in place at the Relevant Asset when excavating mineable coal seams: clean the roof of each coal seam before mining in the pit and allow for coal roof losses of 70 mm, clean the floor of each coal seam when mining in the Pit and allow for coal floor losses of 100 mm, and during the cleaning of the roof and floor of each mineable coal seam allow for dilution of 20 mm at the roof interface and the floor interface to occur.

These allowances are regarded as best practice in the mining of thin coal seams in a steeply dipping environment. The coal quality practices of PTBC are reasonable. 2.15.3 Coal Quality Control The coal quality between the seams within the pits varies. PTBC does have a coal quality control system on site and current coal quality control measures include the following: regular sampling of each exposed coal seam in the operations, regular production meetings between PTBC and the mining contractor, coal sampling: o o o of the product stockpile: as it is loaded onto barges and again, as it is transferred onto ships.

2.15.4 Blending In each pit coal is mined from an individual coal seam and transported to the ROM stockpile where it is either stockpiled separately or stockpiled as a composite with other designated coal seams from the same pit. The stockpiled ROM coal is then processed through the CPP and stockpiled in the product coal stockpile. A second level of blending can occur at this point by proportional blending of feed to the CPP from more than one ROM stockpile. A third phase of blending can take place during barge loading, where product coal from more than one product coal stockpile type can be reclaimed in predetermined proportions. A fourth and final phase of blending can take place during ship loading where predetermined barge numbers of product coal from the three production areas Lati, Binungan and Sambarata are delivered to the ship loading area. The barges are then discharged either separately into the ship holds or as a blend into the ship holds. The blending practices engaged in by PTBC are common in Indonesia. The practices engaged require a sound knowledge of the input coal qualities of each seam from each 688

pit. The blending practice is inherently coarse because packets of coal are mixed together, the packet size being the loader bucket size, dump truck body size or ship loading grab size that is delivering the coal to the mixing point. Where coal delivered to the mixing point is discharged to a conveyor and then is discharged from the conveyor into a stockpile a further degree of blending or mixing takes place. The ultimate homogeneity of the product depends to some extent on the number of opportunities that the coal has to blend at places like discharge points from hoppers to conveyor belts, discharge points from conveyor belts to stockpiles via various stockpile construction arrangements e.g. travelling trippers and chevron stockpile construction and reclaim methods from stockpiles back to conveyors e.g. full face reclaiming. Runge has not reviewed the variability of planned quality with time or with various batches of an overall total cargo being prepared. 2.16 Coal Handling Facilities PTBCs coal handling facilities can be summarized into six groups: Lati Coal Handling Facilities comprising ROM coal handling and stockpiles, crushed coal handling and stockpiling and barge loading. Binungan Coal Handling Facilities comprising ROM coal handling and stockpiles, crushed coal handling and stockpiling and truck loading. Sambarata Coal Handling Facilities comprising ROM coal handling and stockpiles, crushed coal handling and stockpiling and barge loading. Suaran Coal Handling Facilities comprising processed product coal inloading and stockpiling, stockpiled product coal reclaiming and barge loading. Barging of product coal from the barge loading ports to the transshipment point offshore. Offshore transshipment facilities to transfer product coal from the barges to the Mother Vessel.

PTBCs current coal handling facilities are adequate to meet the 2011 coal production forecast. As coal production increases, PTBC crushing, barge loading, and ship loading capacity will be increased. 2.17 Lati Coal Handling Facilities 2.17.1 Existing Facilities and Capacity The existing coal handling facilities at Lati consist of three coal crushing lines, Crusher 1 of 750 tph capacity, Crusher 2 of 750 tph capacity, and Crusher 3 of 750 tph capacity. The Crusher 1 and 2 lines consist of dump hopper pockets to receive coal from 30t rear dump coal trucks, primary double roll crushers of 750 tph capacity, secondary double roll crushers of 750 tph capacity, and roller screens of 750 tph capacity. The Crusher 3 dump hopper pocket allows the use of side tipping B Double trailers discharging 120 t. Crusher line Crusher 1 discharges via a 750 tph transfer belt to a 1,000 tph radial stacker. Crusher 2 transfers via a 750 tph transfer conveyor to a 1,000 tph radial stacker. The Crusher 3 crushed coal is discharged by overhead skyline conveyor and tripper to the crushed product coal stockpile with capacity 1,500 tph. An underground reclaim conveyor from line 1 conveys reclaimed stockpile coal at 1,500 tph to the barge loading conveyor. The underground reclaim conveyor from line 2 conveys reclaimed stockpile coal at 1,500 tph to the barge loading conveyor. The barge loading conveyor has a capacity of 1,500 tph.The underground reclaim conveyor from line 3 conveys reclaimed stockpile coal at 2,000 tph to the barge loading conveyor.

689

The current ROM stockpile capacity in front of Line 1 and 2 is 100,000 t and the product crushed coal stockpile capacity associated with radial stackers 1 and 2 is 180,000 t. ROM stockpile capacity associated with Line 3 is 100,000 t and crushed product coal stockpile capacity is 200,000 t. Based on 5,500 annual operating hours the current capacity of crusher and stacker lines 1 and 2 is 8.25 Mtpa (5,500 hrs x 1,500 tph) and the barge loading system is 8.25 Mtpa (5,500 hrs x 1,500 tph). The crushing and stacking capacity of line 3 is 4.1 Mtpa (5,500 hrs x 750 tph) and the barge loading capacity is 11 Mtpa (5,500 hrs x 2,000 tph). The current Lati crushing and stockpiling capacity is12 Mtpa and barge loading capacity is 19 Mtpa. 2.17.2 Expanded Facilities and Capacity An expansion of the Lati coal handling facilities is planned for 2011 and 2012. A fourth crushing line and transfer conveyor will be completed in 2011. Crusher 4 will have a capacity of 1,000 tph. The barge loading conveyors will be modified and upgraded to (2 x 2,000) 4,000 tph capacity. ROM stockpile capacity associated with Line 3 will be increased by 100,000 t and crushed product coal stockpile capacity will be increased by 200,000 t. Capital cost estimates for the crushing plant, stockpile area, transfer conveyor and barge loading conveyor are $14 million. Based on 5,500 annual operating hours the increase in coal crushing and stacking capacity will be 5.5 Mtpa (5,500 hrs x 1,000 tph) and the increase in the barge loading system will be 2.75 Mtpa (5,500 hrs x 500 tph). On completion of this expansion in 2012, crushing and stockpiling capacity will increase by 5.5 Mtpa to 17.5 Mtpa and barge loading capacity will increase by 5.5 Mtpa to 21.75 Mtpa. These capacities are adequate to handle the planned production expansion from Lati Pit. 2.18 Binungan Coal Handling Facilities 2.18.1 Existing Facilities and Capacity The existing coal handling facilities at Binungan consist of two coal crushing lines, of 750 tph capacity each. The lines consists of a dump hopper pocket to receive coal from 30t rear dump coal trucks, primary double roll crushers of 750 tph, screening plant, and secondary double roll crushers of 750 tph. The crusher lines discharges via either of two stacking belt conveyors rated at 1,500 tph to the crushed coal stockpile. An underground reclaim conveyor from line 1 conveys reclaimed stockpile coal at 1,500 tph to the truck loading conveyor which discharges to an overhead bin through which trucks are loaded. The trucks loaded are B Double trailers of 120 t capacity consisting of 2 x 60 t vessels. The current ROM stockpile capacity is 60,000 t and the product crushed coal stockpile capacity is 25,000 t. Based on 5,500 annual operating hours the crushing, stockpiling and truck loading capacity of the existing facilities at Binungan is 8.25 Mtpa (5,500 hrs x 1,500 tph). 2.18.2 Expanded Facilities and Capacity A new crushing plant will be installed to receive coal from Binungan Blocks 9 and 10. This will increase crushing capacity by 8.25 Mtpa for a total crushing capacity of 16.5 Mtpa. Capital cost estimates for the new crushing plant are $4 million. This capacity is adequate to handle the production expansion planned for Binungan.

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2.19

Suaran Coal Handling Facilities 2.19.1 Existing Coal Handling Facilities and Capacity The Suaran facility stockpiles and handles coal delivered from the Binungan operations. Crushed coal is transported from Binungan by B Double side tipping trailers of 2 x 60 t capacity and discharged directly into a 120 t dump hopper. From there the coal is conveyed by an overhead skyline conveyor tripper system of 1,500 tph capacity and stockpiled. The stockpile capacity is 200,000 t. Track dozers are used to spread and later reclaim the coal. Coal is fed by two underground feeders on to a 1,500 tph overland conveyor for transport to the barge loader. Barges are loaded at the rate of 1,500 tph for transport 50 km offshore to the ship. A dust suppressing agent is added to product at Suaran. The loading system is equipped with belt weighers, automatic sampling plant and metal detectors. Power is supplied from the local grid system, with backup diesel generator sets on standby. Based on 5,500 annual operating hours the stockpiling and barge loading capacity of the current arrangement at Suaran is 8.25 Mtpa (5,500 hrs x 1,500 tph). The entire operation appeared in good mechanical and structural condition, well maintained and operated. 2.19.2 Expanded Facilities and Capacity An expansion and upgrade of the coal handling facilities at Suaran is being planned to receive (inload) up to 70% of coal barged from Sambarata and to inload trucked ROM coal production from Binungan and Kelay. Suaran will be upgraded to accomplish blending of coal prior to barge loading rather that solely relying on blending of cargo at the shiploading point as is the case now. The expansion and upgrade comprises: Upgrade of the barge loading conveyor to 2,000 tph Barge inloading facility of 2 x 2000 tonne per day grabs capacity and overland conveyor back to the stockyard of 750 tph Coal receiving, stockyard and stacking facility from barge inloading of 750 tph capacity Upgrade of the existing 1,500 tph coal receiving and stockyard facility The expanded capacity of Suaran will therefore become barge inloading 4 Mtpa, truck inloading 16.5 Mtpa (5,500 hrs x (1,500 tph +1,500 tph)) and barge loading 16.5 Mtpa (5,500 hrs x 3,000 tph).

Capital cost estimates to construct the barge inloading facility; the coal receiving, stockpile, and stacking facility; as well as upgrading the barge loading conveyor are $66 million. These capacities are adequate to handle the production expansion planned for this facility. 2.20 Sambarata Coal Handling Facilities 2.20.1 Existing Facilities and Capacity Facilities at Sambarata were originally built and operated under contract. On that basis and although very sound with no threat to long term operation, some aspects of the design appear to be of a marginally lesser standard than those of other site installations.

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The Sambarata facility consists of a 500 tph truck receival and crushing facility and 750 tph crushed coal stacking conveyor. The ROM coal stockyard capacity is 20,000 t and the crushed coal stockyard capacity is 50,000 t. Reclaim to the barge loading conveyor and barge loading conveyor capacity is 1,000 tph. Based on 5,500 annual operating hours the capacity of the existing coal crushing and stockpiling facility is 2.75 Mtpa (5,500 hrs x 500 tph) and the barge loading capacity is 8.25 Mtpa (5,500 hrs x 1,500 tph). Maintenance condition was good and maintenance demands over coming years should not be unduly different from those of the other plants and barge loaders. There is a sample preparation laboratory on site, from where samples are dispatched to a regional laboratory for analysis. Electricity is generated on site by diesel generator sets. 2.20.2 Expanded Facilities and Capacity The expansion planned for Sambarata coal handling facilities includes: New 750 tph coal crushing New stacking conveyor 1,000 tph.

Under these arrangements the coal crushing and stockpiling capacity will be 6.9 Mtpa (5,500 hrs x 1,250 tph) and the barge loading capacity 8.25 Mtpa (5,500 hrs x1,500 tph). Capital cost estimate to construct the coal crushing and stacking conveyor is $7 million. These capacities are adequate to handle the planned production expansion associated with Sambarata. 2.21 Gurimbang Coal Handling Facilities 2.21.1 Expanded Facilities and Capacity Coal production from Gurimbang is forecast to begin in 2012 with coal sales beginning in 2013. PTBC has forecast capital expenditures for the period 2013 to 2015 to install coal crushing, stockpiling, and barge loading facilities. Gurimbang coal production is estimated to reach 500,000 tonnes per annum by 2014. Capital cost estimate to install the coal crushing, stockpiling, and barge loading facilities is $8 million. 2.22 Barging A total of 36 barges are used to transport coal from the three loading terminals to the transhipment point at Muara Pantai. Lati is able to load 7,000 tonne barges, Sambarata 5,000 tonne barges, and Suaran 7,000 tonne to 10,000 tonne barges. Sambarata barge load is limited by river condition and by air draft below a bridge under which the barges must pass. Barges are currently employed on a time charter arrangement, which is a satisfactory commercial arrangement in times of low freight rates being encountered at the moment. Runge has not conducted a barge productivity simulation to verify or otherwise barge production capability. Such a calculation would be dependent on the arrival patterns of ships during the course of the month and the transhipment method being deployed. As production expands additional barges will be required to meet the annual production plan including barges to transport coal from Sambarata to Suaran.

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2.23

Offshore Transshipment Facilities Ships are loaded offshore of the Relevant Asset at Muara Pantai transshipment point. The transshipment point is 75 km from Lati Port, 50 km from Suaran Port and 100 km from Sambarata Port. Transshipment from barge to Mother Vessel is by either: geared vessels using their own gear and grabs or hired grabs, floating crane loading ungeared vessels, Semi-Submersible Transshipper (SST), or Floating Offshore Transfer Platform (FOTP).

Currently, floating cranes account for 33% of shipments, FOTP account for 29% of shipments, geared vessels account for 25% of shipments, and the SST 13% of shipments. As production expands additional ship loading capacity will be required. This can be accommodated if shipments are allocated to geared and grab vessels. If the vessels are ungeared then additional Floating Crane, SST or FOTP capacity will need to be utilized. 2.24 Other Infrastructure 2.24.1 Power Generation Power for the CPP operated facilities at Lati is provided from the local electricity grid which operates 2 x 7 MW coal fired power stations. Lati CPP is backed up by a 4 x 550 kva and 2 x 500 kva diesel powered generators at the site. Power for the CPP operated at Sambarata is provided by 2 x 550 kva and 1 x 500 kva diesel powered generators. Suaran CPP power is provided from the local grid and backed up by 5 x 550 kva diesel powered generators. Binungan CPP power is provided from the local grid backed up by 2 x 550 kva diesel powered generators. 2.24.2 Fuel Handling Facilities Fuel handling facilities are located at each of the Lati, Suaran and Sambarata barge loading ports. Fuel barge berthing facilities allow loaded fuel barges that have been dispatched from Balikpapan to berth and be discharged. The fuel is piped to fuel storage tanks located on land adjacent to the fuel barge discharging berths. From the fuel storage tanks in the on-land fuel farm, fuel tankers are loaded and fuel transported by road to fuel storage tanks in fuel farms located adjacent to each mining area.

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2.25

Financials 2.25.1 Historical Operating Costs The historical operating costs of PTBCs operation for the period 2005 2008 are shown in Table 2.14. They are shown in total $ and also in unit rates against sales tonnage. Table 2.14 Historical Operating Costs (FOB Basis) Year 2007 2008 2009 Item $M $/t $M $/t $M $/t Coal Sales Quantity (Mt) 12.1 13.0 14.1 Overburden Removal & Coal Mining 143 11.9 203 15.6 243 17.3 Fuel Adjustment 16 1.3 58 4.4 22 1.6 Total Mining Cost 159 13.2 260 20.0 266 18.8 Coal Hauling (Binungan) Depreciation & Amortisation Barging Transhipment Demurrage Other Mining and Shipping Costs Total Freight/Handling & Other Costs(1)

4 0.4 5 0.4 10 0.7 6 21 6 4 0.5 1.7 0.5 0.3 2.3 5.7 7 30 8 17 28 95 0.6 2.3 0.6 1.3 2.2 7.3 8 32 13 1 27 90 0.5 2.3 0.9 0.1 1.9 6.4

28 69

Royalty 43 Selling & marketing 4 General & Administration 13 Total Expenses 61 Grand Total 289

23.9 450 34.6 481 34.1 3.6 0.4 1.1 5.1 70 7 18 95 5.4 0.5 1.4 7.3 92 10 23 125 6.5 0.7 1.7 8.9

(1) Does not include marine costs associated with sales made on CIF basis. (2) Difference in totals could occur due to rounding.

The historical cost trend is shown in Graph 2.2. The figure also shows the trend in the major components of PTBCs operating costs, namely, Overburden and Coal Mining, Freight Other Production, Freight & Handling and Expenses (Royalty, Inventory Change, Selling & Marketing, General & Administration).

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Graph 2.2 Historical Operating Cost Trend

The operating costs associated with PTBCs production have increased from $23.40/t in 2007 to $34.10/t in 2009. This equates to a 46% overall increase over two years. The largest year on year increase occurred between 2007 and 2008. The year on year increase was $10.70/t or a 45% increase. More than 50% of this increase is attributable to a combination of an increase in fuel price (with the fuel adjustment cost increasing by $3.10/t) and mining costs (with overall mining cost increasing by $3.70/t) on account of Strip Ratio (SR) increasing from 7.84 bcm/t to 8.06 bcm/t and average contractor mining rates increasing from $1.54/bcm to $1.95/bcm. 2008 was a year of higher than average cost increases being experienced by the Mining Industry in general, driven primarily by a higher oil price of $147 per barrel driving up fuel prices and upward pressure being applied to contractor rates as a result of higher input costs from fuel and commodities. The cost increases experienced by PTBC were in line with those experienced by the coal mining industry in Indonesia. 2.25.2 Forecast Operating Costs The 5 year (2010 2014) operating costs forecast for PTBC is shown in Table 2.15. These forecast operating costs are shown in $ millions total and in $/t of sales tonnage. The production forecast is in line with the 2010 Strategic Plan update. Table 2.15 Forecast Operating Costs (FOB Basis)
Year 2010 2011 2012 2013 2014 Item $M $/t $M $/t $M $/t $M $/t $M $/t Coal Sales Quantity (Mt) 17.1 20.0 23.0 27.0 30.0 Overburden Removal 238 13.7 315 15.7 408 16.9 459 16.8 455 14.4 Coal Mining 33 1.9 43 2.1 53 2.2 64 2.3 73 2.3 Fuel cost 98 5.6 150 7.5 199 8.3 233 8.5 234 7.4 Total Mining Cost 368 21.2 508 25.4 660 27.4 756 27.6 762 24.1

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Year 2010 2011 2012 2013 2014 Item $M $/t $M $/t $M $/t $M $/t $M $/t Coal Hauling (Binungan) 11 0.6 12 0.6 15 0.6 22 0.8 27 0.9 Depreciation & Amortisation 10 0.6 15 0.8 23 1.0 28 1.0 42 1.3 Barging 38 2.2 47 2.3 56 2.3 65 2.4 74 2.3 Transhipment 20 1.2 30 1.5 35 1.5 42 1.5 48 1.5 Demurrage 13 0.7 6 0.3 7 0.3 8 0.3 9 0.3 Other Mining and Shipping Costs 39 2.3 54 2.7 69 2.9 80 2.9 83 2.6 Total Freight/Handling & Other Costs(1) 131 7.5 165 8.2 205 8.5 246 9.0 283 9.0 Royalty 119 Selling & marketing 31 General & Administration 29 Total Expenses 179 Grand Total Consensus Fuel Price ($/ltr) General Inflation (%) 678

39.3 947 46.8 1,193 50.3 1,382 51.0 1,464 0.70 5.0 0.76 5.0 0.76 5.0 0.76 5.0

6.9 172 8.6 211 8.7 247 9.0 275 8.7 1.8 63 3.2 77 3.2 90 3.3 100 3.2 1.7 39 1.9 41 1.7 43 1.6 45 1.4 10.3 274 13.7 328 13.6 380 13.9 419 13.3 48.5

0.76 5.0

(1) Does not include marine costs associated with sales made on CIF basis. (2) Difference in totals could occur due to rounding.

The operating cost is forecast to increase from $39.30/t in 2010 to $48.50/t in 2014 or by 23% overall. The projected operating cost trend as well as that of the major components is shown on Graph 2.3. Graph 2.3 Projected Operating Cost Trend

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The major assumptions used in developing the forecast operating cost trend are as follows: Overburden Removal and Coal Mining Costs The production quantities and SR applying to the production quantities are from PTBCs five year plan. Mining contract rates are taken from Company assumptions and feedback with increases based on anticipated contract renegotiations. Apart from the increase in contractor rates seen in 2007 to 2008, this is a reasonable assumption based on historical trends in a low inflation environment. Fuel adjustment costs are associated with a base fuel rate of $0.76/litre in 2011. The fuel rate is not escalated in the following years. Transport & Logistics Costs Barging costs estimated in 2011 are $2.30/t. In the period up to 2015 these costs are adjusted as required for general inflation and distance. The transshipment costs refer to the costs associated with using the SST, Floating Crane, or geared vessel to load the mother vessel. About 80% of the production is planned to be transshipped via SST or Floating Crane in 2011. The unit rate of transshipment is estimated to be $1.50/t in 2011. Demurrage is expected to be $0.70/t in 2011 dropping to $0.30/t is subsequent years. Other Expenses Expenses include Royalty applied at the rate of 13.5% to revenue minus sales commission and transport & freight charges. A handling fee of 2.5% of the calculated royalty is allowed as a company deduction. Selling and Marketing expenses include commissions (1% of 45% of sales revenue), bank charges, employee costs and others. These costs are estimated to be $3.20/t in 2011. General & Administration expenses comprise; Salary, wages and employee benefits, Community relations, community development, Community Donations, and Other Costs estimated in 2011 to be $1.90/t. The forecast operating costs are reasonable and reflect the forecast strip ratios and anticipated contractor unit rates. 2.26 Capital Cost Estimates The capital cost estimate for PTBCs strategic expansion includes PPE investment, consisting of expansion capital and sustaining capital, land improvement and other amounts. A summary of these capital cost estimates is shown in Table 2.16. Table 2.16 Summary Capital Cost Estimates (US$M) 2011 2012 2013 2014 2015 35.2 43.7 63.8 40.6 10.5 11.4 9.8 8.5 4.7 1.6

Description Project investment Land improvement Equipment and routine operating investment Sub total property plant and equip. Exploration and development Grand Total Capex

Total 193.9 36.1

21.9 68.6 37.7 106.3

10.0 63.5 41.0 104.5

10.0 82.4 35.2 117.6

10.0 55.3 27.5 82.8

10.0 22.1 27.4 49.4

61.9 291.9 168.8 460.6

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Budget allowances for expansion capital and sustaining capital have been based on current project experience both in terms of equipment and contractor costs, and include allowances for inflation above 2010 pricing. While individual upgrades have not been examined in detail, costs and plant performance parameters have been based on current actual data, and appear in the correct order of magnitude relative to duties required. Capabilities of existing plant and equipment suggest planned works will be adequate to achieved forecast production rates. The total expansion capital required for 2011 to 2015 is estimated to be $460.6 million. Total Project investment capital expenditures of $193.9 million are expected for 2011 to 2015. Land improvement cost of $36.1 million and other capital costs of $61.9 million are estimated. Total Project investment, land improvement capital and other capital is estimated to be $291.9 million for 2011 to 2015. Exploration and development capex is estimated to be $168.8 million over the five year period, for a grand total capital estimate of $460.6 million from 2011 to 2015. The capital forecast is reasonable and reflects the planned production increase at PTBC, as well as the planned increase in Reserves to meet the production forecast. Details of the facilities planned are outlined below. 2.26.1 Lati The planned Lati facilities include the below items, with capital amounts outlined in Table 2.17. Chip and seal haul road over 2011 to 2013. Line 4 new crusher and transfer conveyor completed in 2011. Line 5 new crusher and transfer conveyor completed in 2013. Replacement of Lines 1 and 2 crushers along with limited upgrade works in 2011. Allowances have been made to increase port and river capability to take 7,000 tonne barges by year 2012, with a further dredging allowance in year 2013. Improvement of office and warehouse. Table 2.17 Lati Capital Forecast (US$M) 2011 2012 2013 2014 0.07 3.5 3.5 4.1 1.4 1.0 3.1 1.0

Lati Hauling Road Crushing Plant and Stockpile 1.1 Reclaim and Barge Loading 4.7 Dredging 0.02 Others (beaching point, warehouse, office etc) 2.1

2015 0.6

Total 7.1 8.3 6.1 2.6

2.2

4.3

2.26.2 Sambarata The planned Sambarata facilities include the below items, with capital amounts outlined in Table 2.18. Addition of a 750 tph crusher and transfer conveyor and additional stockpile, 2011/2012. Improvement of office, beaching point and warehouse.

698

Table 2.18 Sambarata Capital Forecast (US$M) Sambarata 2011 2012 2013 2014 2015 Hauling Road Crushing Plant and Stockpile 4.0 3.0 Reclaim and Barge Loading Others (beaching point, warehouse, office etc.) 1.5 0.2

Total

7.0

1.7

2.26.3 Parapatan The planned Parapatan facilities include the below items, with capital amounts outlined in Table 2.19. Expenditure has been allowed to construct a coal haul road to the Binungan coal processing plant and for the construction of a bridge over the Kelai river. Improvement of office, beaching point and warehouse.

Table 2.19 Parapatan Capital Forecast (US$M) Parapatan 2011 2012 2013 2014 2015 Hauling Road 1.1 4.1 0.2 3.8 4.0 Others (beaching point, warehouse, office etc) 0.2 1.5

Total 13.2

1.7

2.26.4 Binungan The planned Binungan facilities include the below items, with capital amounts outlined in Table 2.20. Expenditure on upgrading bridges at five locations along the coal haul road. Renew the existing 2 x 750 tph coal crushing lines and transfer conveyor. Table 2.20 Binungan Capital Forecast (US$M) 2011 2012 2013 2014 2015 0.06 1.3 1.8 2.0 0.1 0.2 1.6 1.8

Binungan Hauling Road Crushing Plant and Stockpile

Total 5.2 3.7

2.26.5 Suaran Port The planned Suaran Port facilities include the below items, with capital amounts outlined in Table 2.21. Coal haul road Binungan to Suaran upgrade. New ROM stockpile. New barge unloading and stockpiling facilities to rehandle a portion of the coal from the smaller Sambarata barges. New overland and barge loading conveyor of 2,500 tph. Upgrade of the existing overland conveyor and barge loading conveyor to 2,500 tph. Improvement of culverts along haul road and new fuel station.

699

Table 2.21 Suaran Port Capital Forecast (US$M) Suaran Port 2011 2012 2013 2014 2015 Hauling Road 9.0 ROM & Stockpile 0.04 Reclaim and Barge Loading 0.3 11.0 37.2 17.5 Others (beaching point, warehouse, office etc) 5.0 3.2

Total 9.0 0.04 66.0

8.2

2.26.6 Kelay The planned Kelay facilities include the below items, with capital amounts outlined in Table 2.22. Coal haul road and access road extension of 5km from Binungan Block 7 and associated bridge. Two new 750 tph crusher lines, coal stacking conveyor of 1,500 tph and truck loading conveyor of 1,500 tph. Provision of office building including mess and power house for power supply. Table 2.22 Kelay Capital Forecast (US$M) 2012 2013 2014 2015 1.0 2.0 0.4 0.2 5.7 8.8

Kelay 2011 Hauling Road 0.02 Crushing Plant and Stockpile Others (beaching point, warehouse, office etc)

Total 3.4 14.7

1.3

1.3

2.26.7 Tanjung The planned Tanjung facilities include the below items, with capital amounts outlined in Table 2.23. Consultants associated with construction program of 2011 2015. Head office rearrangement and upgrade. Table 2.23 Tanjung Capital Forecast (US$M) 2011 2012 2013 2014 0.4 0.8 1.2 0.4 0.4 4.9 3.8

Tanjung Consultant Building

2015 0.05

Total 2.9 9.1

2.26.8 Gurimbang The planned Gurimbang facilities include the below items, with capital amounts outlined in Table 2.24. Coal haul road and access road construction. 500 tph coal crushing plant and stockpile. 1,000 tph barge loading conveyor. Barge loading port. New office including mess, warehouse and power house for power supply.

700

Table 2.24 Gurimbang Capital Forecast (US$M) Gurimbang 2011 2012 2013 2014 2015 Hauling Road 0.05 1.4 3.2 Crushing Plant and Stockpile 0.06 1.7 3.9 Reclaim and Barge Loading 0.01 0.4 1.0 Port 0.05 0.2 0.4 Others (of beaching point, warehouse, office etc) 0.01 0.3 0.6 2.27

Total 4.6 5.7 1.4 0.6

0.9

Organisational Structure PTBCs corporate organisation structure follows a typical Indonesian PT company structure. The organisation is run by a Board of Directors (BOD) who is overseen by a Board of Commissioners (BOC). The President Director (PD) leads the management team that reports to the BOD. The management team consists of six Directors who report to the PD. Their areas of responsibility are Human Relations & General Affairs, Marketing & Transport, Operations, Corporate Support, Finance, and Legal & Compliance. Each Director has General Managers of Divisions reporting to them. Managers of Departments report to the General Managers of Divisions. Sometimes Divisions are broken into Sub Divisions where the number of functions associated with a Division is large. PTBCs organisation structure is shown in Table 2.25. The incumbents of PTBCs organisation structure are physically located either in Jakarta office or the project office in Tanjung Redeb. Based upon discussions with senior PTBC personnel and a review of senior executive experience, the management is capable of operating assets of PTBCs size and complexity. 2.27.1 Manning Levels Manpower reported at the end of November 2010 associated with PTBCs project was 8,392 employees of which778 were PTBC employees and 7,614 were contractors. The number of PTBC employees at 778 is in line with the numbers expected to be employed by a 17 Mtpa owner which is undertaking the functions of services, contractor management and CPP owner operator. The contractor employee numbers of 7,614 are also in line with the numbers that would be expected of a 17Mtpa producing mine where the main contractor functions are total service mining contracts and barging and ship loading contracts. In order to meet planned production increases, PTBC must recruit train and retain skilled personnel. Their ability to do this will be a key driver in their ability to meet planned production forecasts.

701

Table 2.25 Organisation Structure

2.28

ENVIRONMENT 2.28.1 AMDALS The Analisis Mengenai Dampak Lingkungan or Environmental Impact Assessment (AMDAL) status of the Operating Pits at the Relevant Asset is as follows: Lati

The current Lati AMDAL was approved on 6 February 2008 by the Decree of the Regent of Berau, Decree No 42 2008. This AMDAL approved a production increase at Lati from 5 Mtpa to 7.5 Mtpa. A revised Lati AMDAL outlining the mine plan and associated environmental management plan for Lati mine production expansion from 7.5 Mtpa to 15 Mtpa was approved by Decree No 421 dated 29 July 2009 by the Regent of Berau.

702

Binungan The current AMDAL for Binungan Area was approved by Decree No 43 dated 6 February 2008 by the Regent of Berau. The approved AMDAL provides for Binungan production to increase from 2 Mtpa to 5Mtpa. The AMDAL covers an area of 16,623.49ha associated with Binungan Area. PTBC is completing a feasibility study to increase Binungan production up to 17 mtpa. This includes the Parapatan and Kelay blocks of Binungan. The Binungan AMDAL will be revised accordingly and PTBC anticipates submitting this revision in 2012.

Sambarata The current AMDAL for Sambarata Area was approved by the Minister of Energy and Mineral Resources on 14 February 2000 by Letter No. 527/28/SJN.T/2000. The AMDAL covers an area of 14,750 ha with a total production target stated at the time of 151 Mt at a Strip Ratio of 7.5:1. The maximum annual production target was 5.56 Mtpa. AMDAL updates or new AMDALS will be required for: The planned production increase from Binungan/Parapatan from 5 Mtpa up to 7 Mtpa. Based on current planning this will be required in 2012. Binungan Block 8-10 (Kelay) area development with a planned production level of 6 Mtpa. This will be required by 2012. Gurimbang area development with a planned production level of 2 Mtpa. This will be required by 2013. Suaran upgrade to accommodate barge inloading and expansion in barge loading capacity to 21 Mtpa. This can be completed in phases in line with the project timeline but should be completed in total by 2015.

2.28.2 Environmental Management Plans The environmental management plans are outlined in the Annual Environmental Work Plan and Budget presented to the Department of Energy and Mineral Resources each year. PTBC reports actual results against this work plan every quarter. Environmental Management Systems in place at PTBC include the Berau Coal Green Mining System which is an internal incident reporting mechanism. Data recorded on incident reports includes the type of incident, date, location, description, corrective actions, and person responsible. In addition, an annual external audit is conducted by Bureau Veritas. Non-conformances are documented and corrective actions agreed. A corrective action plan is developed by PTBC and confirmed by Bureau Veritas. Evidence that each corrective action has been implemented is recorded by PTBC and sent to Bureau Veritas for acceptance. Upon acceptance by Bureau Veritas, the non-conformance is closed. The environmental management system in place at PTBC is pro-active and internationally accredited. Environmental audits are performed routinely, environmental incidents are reported, and environmental monitoring reports are provided to the government. A review of the data provided by PTBC indicates no material environmental issues have emerged from the internal and external audits, incident reports, or reports to government. In the key performance index area of rehabilitation the status is shown in Table 2.26.

703

Table 2.26 Environmental Performance 2010

Location Lati Description Unit Disturbed area ha Reclamation ha Reclamation ratio Rec. ratio plan Revegetation ha Revegetation ratio Rev.ratio plan Disturbed area Reclamation Reclamation ratio Rec. ratio plan Revegetation Revegetation ratio Rev.ratio plan Disturbed area Reclamation Reclamation ratio Rec. ratio plan Revegetation Revegetation ratio Rev.ratio plan Disturbed area Reclamation Reclamation ratio Rec. ratio plan Revegetation Revegetation ratio Rev.ratio plan ha ha 68% 68% ha 36% 35% ha ha EOY 2009 2,474 1,746 71% 957 39% 1,957 1,335 68% 67% 696 36% 35% 633 436 69% 204 32% 5,063 3,517 69% 1,857 37% Cumulative Area Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 2,483 2,515 2,529 2,554 2,577 2,615 2,655 2,669 2,945 1,767 1,780 1,793 1,804 1,816 1,818 1,826 1,836 1,840 71% 71% 71% 71% 70% 70% 69% 69% 62% 71% 70% 70% 70% 69% 68% 68% 67% 67% 965 969 999 999 1,008 1,022 1,032 1,041 1,046 39% 39% 40% 39% 39% 39% 39% 39% 36% 38% 38% 38% 37% 37% 36% 36% 35% 35% 1,964 1,341 68% 67% 705 36% 36% 649 444 68% 69% 208 32% 32% 5,096 3,552 70% 69% 1,878 37% 37% 1,971 1,345 68% 67% 715 37% 35% 660 453 69% 68% 211 32% 32% 5,146 3,577 70% 69% 1,895 37% 36% 1,991 1,359 69% 66% 728 37% 35% 677 464 69% 68% 212 31% 32% 5,197 3,616 70% 69% 1,939 37% 36% 2,010 1,381 69% 66% 737 37% 35% 695 477 69% 67% 215 31% 31% 5,259 3,662 70% 68% 1,950 37% 36% 2,016 1,391 69% 66% 750 37% 35% 713 497 70% 67% 217 30% 31% 5,306 3,705 70% 68% 1,975 37% 35% 2,035 1,401 69% 65% 754 37% 35% 727 514 71% 67% 225 31% 31% 5,377 3,732 69% 67% 2,001 37% 35% 2,051 1,417 69% 65% 760 37% 35% 756 535 71% 66% 231 31% 31% 5,462 3,778 69% 67% 2,024 37% 35% 2,054 1,422 69% 761 37% 791 566 72% 66% 234 30% 30% 5,514 3,824 69% 66% 2,035 37% 35% 2,085 1,442

Binungan

762

Sambarata

ha

834 595 71% 66% 240 29% 30% 5,864 3,877 66% 66% 2,048 35% 34%

Berau Coal

ha ha

ha

On a Project to Date basis 66% of the disturbed area at the Relevant Asset has been reclaimed and 35% revegetated. The reclamation and revegetation ratios have declined in 2010. This can be expected for an operation that is increasing production by enlarging existing pits. This is due to an increase in the amount of overburden that must be hauled ex-pit, and the subsequent delay in back-filling of the active pit. As PTBCs annual production levels, the backfilling of active pits will become routine, and an increase in the reclamation ratio should be expected. The PTBC life of mine plan details, on an annual basis, the quantity of waste dumped expit and inpit. By following this plan, PTBC will maximize the amount of waste placed in-pit and the reclamation ratio will return to pre-production expansion levels. Water Management PTRI was provided with PTBCs standard operating procedures for water treatment, water quality sampling, and testing of water pH levels. PTBC designs sediment ponds to capture and treat all surface water runoff from disturbed areas. PTRI was provided with results of water quality testing completed by PTBC during 2010. Parameters tested are pH, Total Suspended Solids (TSS), Manganese (Mn) content, and Iron (Fe) content. For pH, the target standard is between 6 and 9. For TSS, the maximum standard is 400 mg/L. For Mn, the maximum standard is 4 mg/L. For Fe, the maximum standard is 7 mg/L. In 2010, PTBC met the water quality standards in every month. 2.28.3 Mine Closure The new mining law of Indonesia enacted at the beginning of 2009 requires mine closure plans to be submitted with annual mine plans submitted during the work program and budget process. Mine closure plans were submitted to the Central Government Department of Energy and Mineral Resources on 29 June 2009. Following feedback from the government, a revised mine closure plan was completed in February 2010.

704

PTBC is implementing the land use development in accordance with that described in the closure plan and the Kabupatan Berau spatial plan. The mine closure plan recommends disturbed areas are reclaimed and re-vegetated either with forest, agricultural land use, and recreational land use or water reservoir. Local community input was sought and integrated during the development of the mine closure plan. Post mining land use at Lati will include recreational land use with a final void (water body), forestry, and agro forestry. Infrastructure such as offices and port facilities may remain to aid the sustainable development of the local economy. Post mining land use at Binungan will include forestry, agro forestry, and recreation, due to the proximity to local community. Post mining land use at Sambarata will include civil settlement (school, housing), forestry, agro forestry, and water body. PTBC can mitigate the potential post-mining impacts by implementing the decommissioning and reclamation activities as outlined in the approved mine closure plan. 2.29 SAFETY 2.29.1 Safety Management Plan and Policy The safety statistics of PTBC are reported on a monthly basis and an annual basis. The key mine site statistics reported are: Total manhours worked. On a monthly basis for the approximately 8,400 employees, equates to about 2,500,000 manhours. Numbers of Accidents. The number of accidents reported is divided into categories of minor injuries, major injuries and fatalities. Number of Lost Days. The total number of lost work days due to work related incidents. Number of Property Damage cases, fire cases, near misses.

Calculated indices reported are the frequency rate (FR) and severity rate (SR). For calendar year 2009 the FR was 0.05, and the SR 0.90. For 2009, the safety performance achieved PTBCs highest level, the Gold Standard. Year to Date November 2010 statistics for FR and SR are 0.04 and 1.21 respectively (Gold Category) with over 22,000,000 manhours recorded. By PTBCs own standards the safety performance has achieved the Gold Standard 4 out of the last 5 years. 2.30 COMMUNITY 2.30.1 Community Relations & Development Policy PTBC has a proactive community development program in place and is sensitive to the needs of the local communities in the surrounding areas of mining activities. PTBC implements its community development program through the Yayasan Dharma Bhakti Berau Coal trust which was established in 1998. The trust works with Local Government and local communities to develop programs that deliver on four main pillars, namely: education and knowledge, health and nutrition, environment and culture, and social contribution and economy.

705

These programs are designed to support the development of local entrepreneurship, environmental awareness and for the provision of public facilities and infrastructure. PTBC plans that the communities in the vicinity of the project will be self-reliant post mining. PTBC has divided the operational area of the community program into six areas: Lati area: Desa Sambakungan, Melati Jaya, Merancang Ulu, Merancangllir, Pulau Besing and Batu-batu. Binungan 1 area: Desa Pegat Bukur, Inaran, Bena Baru and Rantau Panjang. Binungan 2 area: Desa Tumbit Melayu, Tumbit Dayak and Long Lanuk. Binungan 3 area: Desa Suaran, Tanjung Perangat, Sukan, Gurimbang. Sambarata area: Desa Tasuk, Birang, Maluang, Samburakat, Teluk Bayur and Rinding. Head office area: Tanjung Redeb, Gunung Tabur and Sambaliung.

The community development program established by PTBC had two stages; giving and involving. The first stage (giving) started in 2000 and was conducted for the period of five years. The next stage is the involving period where the program approach is conducted by focusing on community based development including the methods of identification, planning, realisation and monitoring. Some activities which have been conducted in the involving stage are: Recruit Local Community Organizer (LCO). Re-check the objective of program in the villages. Socialisation and introduce PTBCs community development program particularly in involving stage. Community mapping which was self-conducted by the local community. Asses and build a Social Community committee to be allocated for managing the community development activity in the village level. Organize community program through PRA method by improving the welfare of people. Establish and strengthen community group to improve the economy of community. Establish and strengthen micro/village financial committee for distributing the community development program fund in village level. Establish the consultative forum as part of communication between stake holder, government, legislation and other parties to monitor and evaluate the program so it can give the feedback in organizing and implementing the community development program.

For the 9 months to September 2010, PTBC contributed to community programs in the following areas: Education Health and Nutrition Environment and Culture Social and Economy $400,000 $70,000 $5,000 $500,000

PTBC also has allocated the cost in the development of facility and infrastructure of $500,000.

706

2.30.2 Land Access PTBC aims to have 5 years of land access secured in advance of its mine plan. PTBC has advised that some areas from the 2011 production plan have not been secured. These areas include areas within Binungan Block 7 East and Binungan Parapatan. PTBC estimates remaining land in Binungan Block 7 East will be acquired in February 2011. PTBC has scheduled a small amount of production from Binungan Parapatan in 2011 (100,000 tonnes). Any potential land issues in Parapatan in 2011 will not have a material impact upon 2011 target coal production. In Indonesia, land access is an important consideration in mine planning and production forecasting. Issues with land access have been known to cause material impacts upon coal production at other coal mining sites within Indonesia. PTBC understands these risks and they receive appropriate attention from senior management. In addition, PTBCs strategy of operating from multiple locations throughout the concession gives them the ability to shift production if some areas become inaccessible. In Indonesia, areas of production forest require special permits for coal mining operations to take place. Based upon data provided by PTBC, the concession area contains minimal areas of production forest. Production forest issues do not appear to have a material impact upon forecast production. 2.31 Key Findings Runge has reviewed the Relevant Asset and concludes from this review: no material flaws, errors or omissions on the technical aspects of the Project were discovered during the review; the technical information reviewed is considered reasonable and has been prepared by professionals using appropriate software and industry standards; the geological and geotechnical understanding is of a sufficient level to support short and medium term planning as appropriate; PTBC has a detailed exploration strategy to support long-term production increases; the mine plans appropriately reflect geological and geotechnical understanding and account for predicted mining hazards; PTBCs mining contractors (either in place or planned) are suited to its mine plans and support a significant portion of production levels forecast; the assumptions used in estimating coal and waste production volumes, mining losses and dilutions are appropriate and reasonable; coal handling and other infrastructure including barge and port are capable of supplying appropriate quality products to satisfy the export markets at the forecast volumes; environmental issues are being well managed and there are no issues that could significantly impede production; the assumptions used in estimating operating costs are appropriate and reasonable, covering the spectrum of mining, processing, coal transport, and site administration associated in getting the coal to the point of sale; capital costs used in the financial models reflect the mine plans, development and construction schedules and the forecast production levels; and the drivers of the production and cost forecasts are understood by management and are receiving the management focus required.

707

Runge is of the opinion that the PTBC assets: have a credible track record of producing coal at forecast quantities and qualities; have long term mine plans which contain forward schedules for more than 10 years, and allow for the mining of coal predominantely classed as Reserves; The Resource and Reserve estimates of the Relevant Asset have been estimated in accordance with the JORC Code. The scheduled coal tonnage for the strategic expansion of 432 Mt is greater than the current Coal Reserve of 346Mt. PTBC anticipates future drilling and subsequent delineation of mineable coal will verify this increase in total production. Mining areas not currently developed but included in the Mine Plan, (Gurimbang, Punan and Kelay), require environmental approval (AMDAL) before development can proceed. Close attention will need to be paid to the development of Binungan Parapatan Block given its close proximity to the village of Tanjung Redeb. A closure plan has been completed in accordance with the 2009 Mining Law. Mining Contracts to cover the planned expansion of production in 2011 have been secured by PTBC in December 2010. Buma shall have additional contract capacity in Lati and Darma Henwa shall have new contract capacity in Binungan, for the next five years. Infrastructure planning associated with the strategic expansion appears to have been completed to conceptual level. The next level of infrastructure planning to project specification level is required to ensure timely construction according to program. While the production forecasts and expected equipment capabilities allow for weather conditions normally expected in Indonesia, higher than average rainfall may lead to greater than planned production delays, affecting the actual production levels.

2.32

Opportunities Infill drilling of the entire Lati Sub-basin so that all identified coal resources can be categorized to Indicated status will be beneficial. There is potential for in situ coal quantities at the Relevant Asset to be upgraded to Resources category and subsequently to Coal Reserves. Put in place tender packages associated with the planned production expansion that will allow Mining Contractors to tender for these packages. This will create a competitive environment amongst mining contractors when submitting tender proposals. Select and award mining contracts to rationalize exposure to PTBC with Mining Contractors. For an operation planning to produce 30 Mtpa at a Strip Ratio of 8:1 a minimum of 3 contract packages of 10 Mtpa coal production and 80 Mbcm of overburden production would be considered prudent. The next stage of infrastructure planning to Project Specification level will allow capital cost estimates to be obtained from construction contractors on an expression of interest basis. This will provide a capital cost estimate with a higher level of confidence than the estimate in the financial model and such estimate may be lower than currently provided for in the financial model. This level of planning will also facilitate construction being achieved within the required timeline.

708

APPENDIX A QUALIFICATIONS AND EXPERIENCE

Jack Standa Consulting Mining Engineer BSc (Mining Engineering), MSc (Geotechnical Engineering), MBA Jack has over 20 years experience in the international mining industry with significant experience in technical reviews, audits, due diligence assessments and valuation of mining assets. Jack has sufficient experience of this style of mineralisation and coal deposit to qualify him as a Competent Person (as defined in the 2004 Edition of the JORC Code). Bill Park Consulting Engineer, Manager Runge Group Bachelor of Science (Geology), 1970, Master of Science (Qualifying), 1973, Diploma in Indonesian Language, 1976, Bachelor of Economics, 1978, Member, Australian Institute of Geoscientists (MAIG) Bill has over 30 years experience in coal projects, including the past 16 years in Indonesia. He has undertaken roles as project manager and geologist specialising in coal mine management, mine development, project evaluation, feasibility and exploration in both open cut and underground coal mining. He has had extensive overseas experience in Indonesia, the Philippines and New Zealand including recent experience in international coal trading. Gregory Eisenmenger Executive Consulting Engineer BE (Civil) MAusIMM Greg has more than 30 years experience in the mining industry in both contract and owner operated projects and has been involved in the mining industry in Indonesia for over 10 years. His specific management capabilities are drawn from involvement in the management of large mining contracts in open cut coal and in-house exploration programs, and project development involving project definition, tendering, evaluation, award and construction supervision. Michael Trainor Business Executive BE (Mining) MAusIMM Michael is based in Jakarta has worked in the mining industry for over 25 years, in both the coal and hard rock resource sectors, throughout Australia, South America and Indonesia, where he is currently based. The majority of Michaels employment has been either directly with large mining contractors or with major mining houses managing operations involving contractors. Michael has extensive experience in negotiating and managing contracts, (from mining to infrastructure and supply arrangements), estimating, project evaluation, operations management and corporate financing. Chris Smith Executive Consultant BE (Mining), MBA, MAusIMM Chris has worked in the coal mining industry in Australia for over 20 years. The majority of Chriss employment has been with major mining houses managing technical and production teams at a range of open cut operations. Chris has recent experience in project management of greenfield and brownfield open cut operations through the environmental, government and corporate approvals process from exploration through to feasibility and execution.

709

APPENDIX B GLOSSARY OF TERMS

% adb AN assets attributable resources, reserves bcm calorific value cash costs percent air dried basis ammonium nitrate coal mines, infrastructure, port and projects That part of the resources/reserves in which PTBC has an economic interest bank cubic metres or the in-place volume of waste material overlying the coal before being disturbed the heat of combustion of a unit quantity of coal. The gross calorific value includes all heat of vaporisation of water the operating costs of the business that include mining, processing, distribution and overheads, but exclude depreciation, amortisation tax and interest an operating mine (open cut) producing coal a machine for crushing coal to smaller size the contamination of the coal by surrounding rock during mining angle which the strata makes with the horizontal dislocation of strata typically by vertical displacement free on board gross as received basis for coal energy on a total moisture basis Mining method where waste material is transported in pit past the coal operations to be dumped in voids Inherent Moisture These are resources for which data distribution is such that the continuity of the grade or coal seam thickness cannot be confidently interpreted. There is insufficient data to apply technical, economic or mine planning. Consequently these resources do not support reserve assessment The nature of the geology and data availability allows a reasonable level of confidence in estimating the resources. Mine planning and economic assessment can be applied for reserves estimates Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee Kilocalories per kilogram Kilogram Kilometre, equivalent to 1,000 metres Kilovolt, equivalent to 1,000 volts Kilovolt ampere

coal mine, (pit) crusher dilution dip fault FOB gar Haul back IM Inferred Resources

Indicated Resources

JORC Code

kcal/kg kg km kV kVA

710

kWh LOM m m2 M Ml Mt Mtpa Marketable Reserves Mining Reserves Measured Resources

Kilowatt-hour The remaining life of mine until reserves are depleted metre Square metre million Megalitre, equivalent to 1,000 litres million tonnes million tonnes per annum The tonnage that will be available for sale after beneficiation, if any, from the ROM production Coal Reserves Resources over which the distribution and quality of data allows the estimation of resources to a high level of confidence There is no reasonable doubt to the determination. This is the highest level of resource confidence Megawatt or one million watts Measured and/or indicated resources which are not yet proven but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions measured resources for which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions A laboratory determination of moisture, volatile matter, ash and fixed carbon an estimate of run of mine reserves which is the sum of Proved and Probable Reserves under the JORC Code run-of-mine being coal as mined, including mining losses and dilution before beneficiation Specific Energy (also Calorific Value) Line along which the strata is horizontal, perpendicular direction to dip the volume of waste material to remove (bcm) per tonne of coal mined A fold in the strata in a concave shape with the limbs at a higher level coal used in generating steam for electricity production Total Moisture Tonnes per hour Total sulphur material lacking sufficient grade to be economic. Generally used for rock material above and between the coal seams

MW Probable reserves

Proved reserves

proximate Recoverable Reserves ROM SE strike strip ratio syncline thermal coal TM tph TS waste

711

APPENDIX C SUPPORTING TECHNICAL DATA

List of File Name ADV_JA_03703_Berau_MER Financial Copy of PWC-Capex 2011-2015 detail master plan r1.xlsx Copy of Runge Real case 23Dec2010.xlsx Realisasi comdev.doc Licence & Permits overlap konsesi.pdf Operations C 3 earthmoving contract status1.xls Berau Coal Energy Tbk Organization Structure.xls Berau Coal in Brief.pdf C 3 earthmoving contract status1.xls Copy of mining production Y10 update-from Mr. arif1.xls Copy of mining production.xlsx Mining Contractor update from Pak Arya.xlsx mining production Y10 update.xlsx Mining Recovery semester 1 2010_all.xls Production summary as of September 2010.xls Safety Performance & Manpower.xlsx Shipment 2010 (2).xls Shipment 2010.xls SPK Madhani.pdf SPK_RML.PDF Geology 5yr plan budget GD_2010.xls Plan Activity 2011 Final.xlsx Mine Planning 5YP Summary 5YP Berau Coal FINAL.part01.rar Summary 5YP Berau Coal FINAL.part02.rar Summary 5YP Berau Coal FINAL.part03.rar Summary 5YP Berau Coal FINAL.part04.rar Summary 5YP Berau Coal FINAL.part05.rar Summary 5YP Berau Coal FINAL.part06.rar Summary 5YP Berau Coal FINAL.part07.rar Summary 5YP Berau Coal FINAL.part08.rar Summary 5YP Berau Coal FINAL.part09.rar Summary 5YP Berau Coal FINAL.part10.rar Copy of Summary 2011 DD.xls Safety & Environment DOK II-ALL-11-3.7.5_Pengelolaan Limbah.pdf DOK III-IK-ALL-05-3.7.5 IK Pengukuran pH air menggunakan pH meter.pdf DOK III-IK-ALL-93-3.7.5 IK Pengambilan Sampel Air Settling Pond.pdf Environmental Mgt Brief Berau.pdf environmental performance Q3 2010.xlsx

712

sterling 140707