KPC SDR07 EngPrint8102008

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SUSTAINABLE

DEVELOPMENT

REPORT

2007

MORE THAN MINING

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SUSTAINABLE

DEVELOPMENT

REPORT

2007

WAKAROROS. A unique painting of Dayak Basap, a฀tribe฀from฀East฀Kutai.฀It฀is฀also฀called฀“Sitting฀

Banyan฀Tree”.฀This฀painting฀represents฀lowered฀trees฀or฀creeping฀roots฀whose฀lowers฀will฀attract฀bees฀

because of their plentiful flower essence, so it will result into abundant honey. PUBLISHED BY : PT Kaltim Prima Coal

PATRON : Endang Ruchijat (Chief Executive Officer)

ADVISORS : KPC EXECUTIVES, R. Utoro฀(Chief฀Operating฀Officer)฀•฀Ashok Mitra (Chief Financial Officer) •฀Rod Bridges/ Bambang Saptono฀(Mining฀Operation)฀•฀Shane Bennett (Development) •฀M. Sumali฀(Processing฀&฀Infrastructure)฀•฀Richard Schloss฀(Mining฀Support)฀•฀Pratikto (Commercial)฀•฀Herlan Siagian฀(Marketing)฀•฀Yulianti Subian฀(Finance)฀•฀Sam Alwi Alkaaf

(Human฀Resources)฀•฀Khudori฀(Health,฀Safety฀&฀Environment)฀•฀Ilda Harmyn (Contract Mining) •฀Simon Scott฀(Procurement)฀•฀Chris Lauritzen (Planning and Development)

EDITOR IN CHIEF : Harry Miarsono, GM External Affairs & Sustainable Development

EDITORS : Danny K. Wardhana฀(Superintendent฀Project฀Monitoring฀&฀Control฀•฀Zulfatun Mahmudah (Supervisor฀Media฀&฀Public฀Communication)฀•฀Hernowo Bayu S/Ricky Santana (Reporting Consultant)฀• Louise G. Pessireron฀(Manager฀Project฀Management฀&฀Evaluation)฀•฀Wijayono Sarosa, Manager Community Empowerment

PROOFREADER : Shane Bennet

CREATIVE & LAY OUT : Parjo (Specialist Desktop Publishing)

CONTRIBUTORS : Danny K. Wardhana฀(Superintendent฀Project฀Monitoring฀&฀Control)฀• Elistyandari (Senior Engineer฀Environment)฀•฀Imanuel Manege฀(Manager฀Environment)฀•฀Posman Sirait (Manager Learning฀Development฀HR)฀•฀Dewi Rachmayanti฀(Specialist฀Training฀HR)฀• Hendy Ferdian (Senior฀Business฀Analyst)฀•฀Heru Mashudi฀(Supervisor฀Purchasing)฀•฀Ikhsan Yuzarly (Safety฀Statistician)฀•฀Haryadi Wardono฀(Manager฀Occupational,฀Health฀&฀Safety)฀•฀Priono Saptawan฀(Superintendent฀Reporting฀&฀Analysis฀–฀Mining฀Optimization)฀•฀Louise G Pessireron (Manager฀Project฀Management฀&฀Evaluation)฀•฀Wawan Setiawan (Superintendent Community Supports)฀•฀Yuliana Datu Bua฀(Superintendent฀Community฀Health฀&฀Education)฀•฀Nurul Karim (Superintendent฀Agribusiness฀and฀Conservation)฀•฀Ubaedillah Sirri (Superintendent Public Communications)฀•฀Pramono Triwahyudi฀(Superintendent฀Local฀Business฀Development)฀•฀ Kusuma Sari฀(Superintendent฀Health฀Safety฀and฀Environment฀–฀Technical฀Affairs)฀•฀Rio Supin (Manager฀Accounting฀&฀Tax)฀•฀Juli Transtuti฀(Superintendent฀Financial฀Reporting)฀•฀Tulus Siregar฀(Manager฀Compensation฀&฀Benefits)฀•฀Makin Perdana Kusuma (Human Resources Manager)฀•฀Suriadi฀(Superintendent฀Employee฀Communication)฀•฀Jamik Yulianto (Specialist Marketing฀Administration)฀• Djoko Soelistiono (Superintendent Export Marketing)

INTERNAL AUDITOR : Tim Internal Audit Sustainable Report KPC TRANSLATOR : PA CSR Consultant

EXTERNAL REVIEWER : PA CSR Consultant EXTERNAL AUDITOR : SGS Indonesia

EDITORIAL ADDRESS : External Affairs & Sustainable Development PT Kaltim Prima Coal

M2 Building, Mine Site

Sengata, Kutai Timur, Kalimantan Timur Indonesia

฀ ฀ ฀ Telp.฀62฀549฀52฀1451฀•฀Fax.฀62฀549฀52฀1701

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NOTES FROM THE EDITORS

“More than Mining”฀is฀the฀sustainable฀development฀report฀for฀PT.฀Kaltim฀Prima฀Coal฀(KPC).฀It฀ provides a summary of our performance in the production of coal from the 1st_{of January to the 31}st of December 2007. As in the previous year’s report, this report also provides data and information that might be useful for stakeholders to get to know and learn about the company’s performance in more detail.

We฀ deliberately฀ chose฀ the฀ title฀ “More฀ than฀ Mining”฀ to฀ emphasize฀ that฀ KPC’s฀ activities฀ are฀ not฀ just about mining and producing coal, but also cover activities in the economic, social and environmental฀spheres.฀This฀may฀be฀more฀widely฀known฀as฀“good฀mining฀practice”฀because฀we฀ firmly believe that our mining activities should lead to direct and indirect benefits to the community around the mining area. Direct benefits derive from KPC community development activities, whereas indirect benefits come from the economic multiplier effect of regional activities, such as local purchases and taxes paid, development of local business, domestic procurement, employee salaries and others.

In formulating this year’s report, we have followed the Global Reporting Initiative (GRI) that we have used as guidelines since 2003. The difference is that for this year we have used version 3.0, known as G-3. To ensure that a high level of accuracy, accountability, and transparency have been maintained, KPC requested an external review to be conducted by PA CSR Consultant; also an external audit that was conducted by the independent verification and certification body SGS. This report incorporates SGS inputs from our previous annual reports, and additional indicators within the framework of G-3 that are in line with the scope of a mining company.

This sustainable development report was completed in the middle of the second quarter of 2008 to fulfill the principle of timeliness and to reduce the number of Report Amendment Request (RAR) and Outstanding Information Requests (OIR). This is part of our improvement efforts, in line with SGS’ recommendations over the previous year’s report.

Lastly, we would like to thank all stakeholders who have supported KPC’s sustainable development program for their inputs, suggestions, ideas and criticisms. We would also like to thank all the contributors for their efforts to complete this report.

If you have any criticisms, comments, suggestions or questions regarding the data and information provided in this report, please address them to:

External Affairs & Sustainable Development Division

PT. Kaltim Prima Coal M2 Building – Mine Site Sengata, East Kutai, East Kalimantan 75611 INDONESIA

Tep. +62 549 521451 Fax. +62 549 521701 e-mail : info@kpc.co.id

website: www.kaltimprimacoal.co.id

We wish you a pleasant read.

The Editors

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FOREWORD FROM THE CHIEF

EXECUTIVE OFFICER

We offer our prayers and thanks to the Almighty God who has given His blessings to us so that we passed the year 2007 well. The safety was marred as the beginning of the year a single fatality accident occurred resulting in the loss of one of our mining partners.

As in the previous year, weather at the beginning of 2007 was unvaforable for production activities. Heavy rainfall contributed to a failure to achieve production targets, both in terms of overburden removal and coal production. However, the amount of coal stock was quite high at the end of 2006; therefore our shipments and sales activities ran well.

The hope that the weather would improve during the middle and second half of 2007 as in previous years did not materialize. The heavy rainfall persisted well into the third quarter which contributed to the low level production in that quarter. The weather improved at the beginning of the fourth quarter and we managed to catch up with the overburden removal and coal production. This could be seen in the increased stockpile tonnages at the Pit, ROM or port.

Overall there were a number of achievements in 2007. In the field of health, work safety and the environment there was an improvement in performance compared to 2006 in which the LTIFR was 0.45. During 2007, the LTIFR per million hours worked was 0.27 with only 12 LTI (but included one fatality).

In December 2007, the audit to obtain OHSAS 18001: 2007 certification was completed with a satisfactory result. KPC is the first mining company to obtain this certification from SGS. In the environmental sector we also obtained an extension of our ISO 14001certification.

The total production of overburden in 2007 was around 1.4% below the planned target despite the fact that production level from KPC and its contractors in Sengata were above target. This deficit was caused by the performance of PT Darma Henwa in Bengalon which was well below plan.

Coal productions from KPC, PT Pamapersada Nusantara and PT Darma Henwa were slightly below plan, whereas coal production from Thiess was on track. Total production of coal in 2007 reached 36.3 million tons or 12.6% below the target of 41.6 million tons.

Coal sales were 7.6% below target (sales were 39.7 million tonnes compared with the plan of 43.0 million tonnes). In 2007, the sales of Prima coal, Pinang coal, and Melawan coal were 26.5%, 5.1% and 11.1% below plan respectively.

In 2007 we managed to complete the negotiation between the management and the Workers Unions of the Prima Perkasa or Collective Labor Agreement for the period of 2007 to 2009. A process to select a strategic partner was also completed during the year, with Tata Power Company (Tata) of India becoming a strategic partner, with a share ownership of 30% in PT Arutmin Indonesia (Arutmin) and PT Kaltim Prima Coal (KPC) assets. This resulted in a change of membership in the Boards of Directors (BoD) and Board of Commissioners (BoC), where Tata now has two representatives in both the BoD and BoC. Tata’s management also placed one Chief Financial Officer (CFO) at Arutmin and at KPC.

In an effort to reduce costs and to remain competitive in the coal mining industry, several relocations of contractors took place. Thiess moved from Pit J to Melawan, while Pama moved from Bendili to Pelikan, with KPC taking over the mining at the vacated locations. The shiploader upgrade process has also been started with the expectation that it will be operational by the second quarter of 2009. The tender process for the Melawan Crushing Plant/Western OLC and new power plant with systems expansion has also been approved by the BoD.

Another important event that occurred in 2007 was the scarcity of tires for medium sized trucks (100 to 150 tonnes). It was found that even when the goods were available in the market, the price had increased drastically. In addition, the price of diesel for mining industry has increased this year.

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Activities to maintain and improve good relations with the regional government and local community around the operation area are conducted continuously. KPC’s programs for sustainable development have given benefit and improved the economic, social, and environmental outlook for more than 10,000 people. Farmers, fishermen, breeders, teachers, students, craftsmen, business people, house wives, and other community members have all benefited.

As in previous years, these programs are a form of Corporate Social Responsibility which covers seven program fields. These fields are: agribusiness development, education and training, community health and sanitation, Koperasi (Co-Op) and small business development, infrastructure improvement, nature and culture preservation, and improvement local institutions. Efforts have also been made to get involved in a global program of Millenium Development Goals (MDGs). The implementation of this program has been performed by a third party. The results were reflected in awards given by the Coordinating Minister for Social Welfare of the Republic of Indonesia, the Indonesian Institute of Accountant, and Metro TV.

The company has also been paying close attention to the improvement of the skills of its employees in order to maintain an efficient operation. This is done through training programs held internally and externally. The end goal of all of these efforts is ensuring that the company can remain competitive especially with the challenges likely in years to come, more so than those experienced in 2007.

All results that we have achieved are of course thanks to the hard work of all employees and staffs. Therefore, on behalf of the leadership team, I would like to thank everyone for their contributions. Let us continue to improve our performance within a safe working environment to ensure the success of KPC in facing an even more challenging year of 2008.

Endang Ruchijat

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ABOUT THIS REPORT

More Than Mining is the theme of the 2007 Sustainable Development Report. This report does not only present the company’s commitment and performance in operating the coal mine, but also explains about how the company has provided social, economic, and environmental benefits through partnership with the community and other stakeholders throughout the year. Operational performance is enhanced through the implementation of the Good Corporate Governance principles and mining practices that consistently refer to high health and workplace safety standards. In addition to this, the company is committed to implementing a sustainable community development program by actively implementing all activities in line with the programs planned in 2007. The program originates from the efforts to fulfil the mandate of the 2005 Environmental Impact Assessment (AMDAL) in the social and economic sectors. Furthermore, the implementation is also incorporated into the long term strategic plan for the the community around the mining area, in particular with regards to the potential mine closure in 2021.

Three key points of sustainability are:

•฀ The฀net฀beneit฀of฀economic฀activities฀must฀take฀into฀account฀as฀a฀consequences฀of฀the฀social฀ relations and environmental impact that will emerge;

•฀ In฀ utilizing฀ resources,฀ the฀ company฀ must฀ take฀ into฀ account฀ the฀ needs฀ and฀ expectations฀ of฀ future generations;

•฀ The฀government,฀ industries฀ and฀ members฀ of฀ the฀ society฀ must฀ work฀ together฀ to฀ harmonize฀ these needs.

By continuing to implement high safety, work health, environmental and community health standards, and forming partnerships with the government and local community, KPC is trying to establish long term economic and social development.

This report portrays KPC, including its mining locations, production activities, marketing, health, work safety, environment as well as the level of engagement and participation of stakeholders in those production activities. It also portrays the policies and social programs that have been and will be conducted. All data presenting in this report reflects our efforts towards sustainable development.

Goal of Formulating this Report

This report aims to show our commitment as one of the biggest coal mining companies in Indonesia to the stakeholders and the community. It also demonstrates the transparency of our company’s performance in the economical, social and environmental sectors. The report also shows changes that occurred throughout 2007. The report is based around the principles of accuracy, completeness and reliability. Through the process of internal and external audits we aim to guarantee that those three principles are embedded in this report which is written in line with the 2006 Global Reporting Initiatives (GRI) standard.

Besides the fulfillment of the important parameter indicators in the GRI G-3 standards, the company’s commitment in preparing the 2007 sustainable development report is reflected in the company staff’s training in the use of this reporting system. The training in GRI standards helped to form a solid data contribution team with support from the company’s top management. The staff, who are also contributors, were given additional understanding about reporting principals and explanations about indicator parameters which were their references in the production of this report.

An external party assured the validity of the content of this report in order to present accurate and reliable data.

We hope this report can be easily understood, clearly portrays our performance and will be of benefit to the readers.

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Approach to the Reporting System

This year’s report gives more emphasis on the reporting of the performance of our programs in achieving sustainable development. The data required in the GRI indicators is still presented in statistical form.

Structure of the Sustainability Report This sustainability report is formulated in the following sequence: •฀ Collection฀of฀performance฀data฀for฀2007

•฀ Collected฀data฀veriied฀by฀manager฀to฀ensure฀accuracy •฀ Team฀of฀editors฀analyze฀the฀data฀and฀formulate฀the฀draft฀report •฀ Draft฀report฀edited฀by฀Editor฀in฀Chief

•฀ Report฀observation฀by฀external฀reviewer฀to฀observe฀the฀level฀of฀compatibility฀of฀the฀report฀ compared to GRI’s regulations

•฀ Editors฀edit฀the฀report

•฀ Edited฀report฀sent฀back฀to฀the฀contributor •฀ Internal฀audit฀is฀conducted

•฀ Findings฀from฀internal฀audit฀followed-up฀for฀the฀report’s฀inal฀draft •฀ Report฀submitted฀to฀independent฀assuror฀for฀audit

What we report:

•฀ Economic,฀ social฀ and฀ environmental฀ performance฀ as฀ required฀ in฀ the฀ GRI฀ indicators.฀ This฀ year’s report only presents main parameters that are relevant to KPC’s mining activity, •฀ Changes฀that฀occurred฀in฀2007.

•฀ Operational฀activities฀as฀required฀in฀the฀GRI฀indicators.

•฀ Operational฀activities฀that฀are฀regulated฀by฀the฀law฀or฀other฀regulations. •฀ Additional฀indicators฀in฀GRI.

•฀ Indicators฀in฀GRI฀Mining฀and฀Metal฀Sector฀Supplement.฀

Report writing

Editing Draft

Final Draft

Internal Audit

External Review

External Audit

Final Repoprt Relevant departments

provide data of production,

environ-mental, social and finance performance

KPC

Objectives

& Targets

Monthly

Report

Quarterly

Report

GRI

indicator

KPC Sustainable

Development

Report

Internal

External

(Limited)

External

(stakeholder)

Scale of issues

related to KPC Operation

Picture฀1.฀Approach฀to฀Reporting฀System

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Report Assurance

As in the case of our previos reports, the 2007 report was also audited based on second level scoring by an indepent party to improve the realibility of our report. The second level scoring covers:

1. Evaluation on the accuracy of the report; 2. Gap analysis against GRI parameters;

3. Assessment by means of a scoring system/percentage system with regards to GRI requirements

Improvements requested by the audit team in the previous year’s report have been made. It is believed that this GRI 2007 report would be graded at the level of B+.

Basic Guidelines

This report was developed by referring to the 2006 Global Reporting Initiative (GRI) version 3.0 or also known as the G3 Reporting Standard. References showing compliance towards GRI guidelines can be seen on page 66 to 70.

Scope of Report

This report covers all aspects of the operational performance in KPC’s mining areas and the changes that have occured throughout 2007, including a change in ownership of the company’s shares, financial concerns and production result. As we have mentioned previously, this report refers to the 2006 Global Reporting Initiative version 3.0.

Independent Verification

The contents of this report have been verified by SGS Indonesia, an international company that specializes in handling environmental, social and sustainability reporting certification and verification. SGS Group is a pioneering company in the field of inspection, testing and verification and operates in 140 countries.

Their statement of verification on the accuracy and transparency of this report is included on the last page of this report.

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2007 AWARDS

During 2007, KPC was given a number of awards from both government and non governmental organizations in the fields of work health and safety, the environment and community development. The awards are as follows:

Work Health and Safety:

•฀ OHSAS฀18001:2007฀certiication฀for฀Workplace฀Health฀and฀Safety฀Management฀System฀from฀ the SGS Certification Body

•฀ Zero฀ Accident฀ Award฀ from฀ the฀ Minister฀ of฀ Labor฀ and฀ Transmigration฀ (for฀ ESD,฀ HSE,฀ and฀ Commercial Divisions)

Environment:

•฀ Extension฀of฀the฀ISO฀14001฀Certiicate฀until฀September฀24th_{2010 by SGS Certification Body} •฀ The฀Best฀Environment฀Organizer฀Award฀from฀the฀Governor฀of฀East฀Kalimantan฀and฀Provincial฀

Assembly in January 9th_2007.

•฀ “Proper฀Emas”฀(Gold฀Level฀for฀Environment)฀from฀the฀Governor฀of฀East฀Kalimantan฀in฀June฀ 20th_{฀2007(Sengata฀site)฀which฀is฀the฀eighth฀“Proper฀Emas”฀in฀a฀row฀since฀2000.}

•฀ “Proper฀Biru”฀from฀the฀Governor฀of฀East฀Kalimantan฀(Bengalon฀site)฀in฀June฀20th_2007. •฀ Prime฀Certiicate฀for฀Coal฀Mining฀Activity฀-฀Reclamation฀Implementation฀Field Community Development:

•฀ A฀Community฀Empowerment฀Award฀from฀the฀Coordinating฀Minister฀for฀Social฀Welfare฀of฀the฀ Republic of Indonesia in May 24th_2007.

•฀ Millenium฀Development฀Goals฀(MDGs)฀award฀for฀the฀category฀of฀eradication฀of฀HIV฀/฀AIDS฀and฀ other infectious diseases from the UN Special Representative for the Millenium Development Goals.

•฀ The฀ Best฀ Sustainability฀ Reporting฀ award฀ in฀ the฀ 2007฀ Indonesian฀ Sustainability฀ Reporting฀ Award organized by the Indonesian Institute of Accountant.

•฀ Received฀Appreciation฀Award฀for฀Customer฀Awareness฀from฀PLN฀(National฀Electric฀Company)฀ on July 16th_{2007, category: helping PLN to overcome electricity power crisis.}

Picture฀2฀Sertiikat฀OHSAS฀18001:฀2007฀ ฀ ฀ Picture฀3.฀KPC฀CEO฀received฀MDGs฀Award

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ABOUT KPC

KPC is a mining company located in East Kutai Regency, established with notary act No. 28 on March 9, 1982 and legalized by the Justice Minister of the Republic of Indonesia by Decision Letter No. Y.A.5/208/25 on March 16, 1982 and announced in the State Gazette of the Republic of Indonesia on July 30, 1982 No. 1 Supplement No. 967. At the start of the operation in 1992, KPC was a foreign investment company owned by the British Petroleum International Ltd. (BP) and Conzinc Rio Tinto of Australia Ltd. (Rio Tinto) with a 50% share ownership each. Following Act No. 9 dated August 6, 2003 and the Proof of Reporting from the Justice and Human Rights Minister of the Republic of Indonesia No. C-UM. 02 01.12927 dated August 11, 2003, shares in KPC owned by BP and Rio Tinto were diverted to Kalimantan Coal Ltd. and Sengata Holding Ltd. On October 18, 2005, in line with Notary Act No. No 3 dated October 18, 2005, these companies were acquired by PT. Bumi Resources Tbk. Under Notary Act No. 34 dated May 4, 2007; shareholders of PT. Kaltim Prima Coal diverted 30% of their shares to Tata Power (Mauritius) Ltd.

Under on the Coal Contract of Work Agreement (PKP2B) signed on April 8, 1982, the government granted permission for KPC to conduct exploration, production and marketing of coal from the agreement area until 2021. The contract of work area covers a 90,960 Ha area in East Kutai Regency, in the province of East Kalimantan.

KPC’s Management

The mining operation is supported by a management team of professionals who are competent in their own field and have more than ten years experiences in the relevant fields. There is no independent member in KPC management’s member. The structure of KPC’s management team at the time of writing was as follows:

Chief Executive Officer Endang Ruchijat

Chief Operating Officer R. Utoro

Chief Financial Officer Ashok Mitra

GM Development/Planning & Development Division Chris Lauritzen/Shane Bennet GM Human Resources Division Sam Alwie Alkaaf

GM External Affairs & Sustainable Development Division Harry Miarsono GM Contract Mining Division Ilda Harmyn

GM Marketing Division Herlan Siagian

GM Finance Division Yulianti Subian

GM Mining Operation Division Rod Bridges / Bambang Saptono GM Health, Safety & Environment Division Khudori

GM Mining Support Division Richard Schloss GM Processing and Infrastructure Division M. Sumali

GM Procurement/Supply Chain Division Simon Scott/Pratikto

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Strategy and Approach of Sustainable

Development

KPC’s฀ Sustainable฀ Development฀ Approach฀ is฀ conducted฀ by฀ following฀ the฀ motto฀ “More฀ than฀ Mining”.฀This฀is฀the฀inspiration฀behind฀the฀implementation฀of฀sustainable฀community฀development฀ programs which are envisaged to continue as post mining activities. More than Mining has become a way to approach social, economic, and environment programs conducted by the company to guarantee that KPC’s mining operation is not just extracing non-renewable natural resources, but also conducting environmental impact mitigation efforts and providing a renewable resource (the community) by maintaining good relationship with stakeholders. The programs are conducted with the objective of improving society, community and government institutions abilities, by increasing their efforts and by working on the cultural atmosphere for the benefit of the community in the KPC operational surrounding.

KPC’s business challenge of achieving its vision as a world-class coal supplier is not only limited by how to determine how coal production can fulfill the market (and world) coal demand, but also on how KPC performs and is actively involved in conducting its social responsibilities by preserving the environment and building up the independency of the local economy. This is a very important issue because the level of dependency of the East Kutai community on the coal mining sector is still quite high (data from East Kutai’s Statistical Agency shows a dependency level of 82%). Upon realizing this fact, KPC initiated programs that will support the independence of the local community economy in line with the mine closure program. It is expected that with guided program implementation, the community’s dependency on the mines can be reduced to 5% by 2025 (see฀Picture฀4). Therefore, the concept of local economic development is geared towards the principles of partnership, community participation, and empowerment.

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PT฀K AL TI M฀P RI M A฀CO AL฀•฀S us ta in ab le฀D ev el op m en t฀R ep or t฀2 00 7 Type of concession license

Date of signing

Activity stage Mineral Effective period Total area Location/ Address of Head Office

Coal Contract of Work Agreement (PKP2B Contract No.J2/i.D4/16/82)

8 April 1982

Production operation (SK Penciutan Produksi No.940.K/20.01/DJP/1999 dated December 24th 1989)

Coal

30 years since production stage approved (January 1st ₁₉₉₂₎

90.938 Ha (D4KW96PB0363)

PT. Kaltim Prima Coal, Mine Site Building, Sengata, Kabupaten Kutai Timur, Kalimantan Timur

Shareholders

Work force

Coal production

Net sales

Royalty paid in 2007 Community expenditure commitment Environmental cost

65% PT. BUMI Resources 30%, Tata Power Company, 5% Kutai Timur Energi

Permanent employees (3659), ‘Fixed term’ employees (164), ‘Fixed term’ non establishment employees (23)

36,34 million tons Prima: 18.76% Pinang: 61.89% Melawan: 19.35%

USD 1,285 million

USD 228,95 million

5,000,000 USD

(15)

Picture฀4.฀KPC’s฀Long฀Term฀Sustainable฀Development฀Implementation฀Strategic฀Planning

Within the boundaries of the first stage in the five-year planning process KPC is conducting a program to identify land and spatial planning options as well as review the development of agriculture and fisheries in locations within and outside the mining area. This review and associated studies are being conducted to understand the community’s support capacity and to identify the potential for the development of renewable resources.

KPC’s commitment to become a development partner for the community and the government has been welcomed in a positive manner. Through existing public organizations, the community and the government have entrusted the company’s representatives to take part in the development of public policies. Such organizations include: the Indonesian Farming Group Association (HKTI), the Indonesian National Sports Committee (KONI), the Indonesian Youth National Committee (KNPI), the Chamber of Commerce and Industry (KADIN), the Regional Research Council, the Regional Agribusiness Development Program (GERDABANGAGRI), and the Multi Stakeholders Forum for Corporate Social Responsibility (MSH-CSR). In addition, KPC is also an active member of the Corporate Forum on Community Development (CFCD), the Indonesian Business Link (IBL), the Indonesian Mining Association (API), and the Indonesian Coal Mining Association (APBI).

As a world class coal supplier, KPC continuously conducts environmental projects to minimize the environmental impact of the mining operation. The environmental preservation program is integrated with the Environmental Management System (SML), in line with ISO 14001. All potential impacts are identified to develop operational control from planning through to mine closure. Aside from the need to minimise the environmental impacts around the mining area, KPC also conducts various environmental programs on a larger scale, through the TNK (Kutai National Park) partner program, and the Tree Bank in cooperation with the Ministry of Environment.

Stakeholders Engagement

We understand that KPC’s success to date is not determined solely on the basis of production, but also by the participation and engagement of the company’s stakeholders. KPC always attempts to be a good neighbor for the community around KPC’s mining area. Being a good neighbor can be seen as KPC’s wish to become a partner that is able and ready to help the community in finding answers over problems related to the fulfillment of requirements of the community around the current mining area as well as for future generations, so that independence and a better quality of life for the local community can be achieved. This strong commitment is incorporated in the company’s HSE and Sustainable Development Policy signed by KPC’s President Director. Cooperation with stakeholders is conducted with different approaches, adjusted to the interests of the company and the stakeholders themselves.

2005-2010 Agriculture development study Intensive training Fisheries study Land identification Spatial study Potential analysis Mining 65%

Non Mining 35%

2010-2015 Study implementation Agriculture development Utilization of rehab land Agriculture development Mining 50%

Non Mining 50%

Mining 35% 2015-2020 Agriculture development Fisheries industry Services Development of agribusiness technology

Non Mining 65%

Mining 5% 2021-2025 Development of agriculture industry Services Development of agribusiness export

Non Mining 95%

(16)

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• •

• • • • • • •

• • •

•

PT Kaltim Prima Coal’s management and employees are committed to achieving excellent performance and continual improvement in the areas of Occupational Health, Safety, Environment (HSE) and Sustainable Development (SD).

In doing this, Kaltim Prima Coal (KPC) commits to:

• Comply with all applicable Government legislation and other requirements.

• Meet the requirements of all stakeholders, including employees, the local community, Government, shareholders and customers.

• Plan, measure and report on HSE objectives and targets.

• Review and update HSE targets on a regular basis.

• Commission regular independent audits of HSE performance.

• Achieve continual improvement in all aspects of HSE management.

• Implement SD concepts through its involvement with the local communities.

• Continue to support corporate social responsibility efforts based on inter-dependency and sustainability.

• Establish and maintain good relationships with the local communities and government based on transparency, mutual trust and mutual respect.

HEALTH AND SAFETY MANAGEMENT

KPC commits to provide a working environment in which KPC and contractor employees can perform their work free from serious injury and illness. Management will implement a safety management system that provides the means to continually identify, control, and reduce the risk of serious injury or illness from work related tasks.

Safety must be given priority in all aspects of the company’s operations. All parties, including KPC and contractor employees, have a shared responsibility to work in a safe manner in accordance with KPC occupational health and safety standards and procedures. They also have a responsibility to develop and motivate safe behavior.

ENVIRONMENTAL MANAGEMENT

KPC commits to effectively manage the environmental impacts resulting from its operations. This includes:

• Preventing pollution.

• Returning all mined areas to a safe, stable and productive state.

• Maintaining biodiversity

Environmental impacts must be considered in all aspects of the company’s operations, and all KPC and contractor employees must act in an environmentally responsible manner. To achieve these outcomes, KPC will implement an environmental management system that includes management plans, standards and procedures that apply equally to KPC and its contractors.

SUSTAINABLE DEVELOPMENT POLICY

KPC actively participates in sustainable development initiatives which are based on the integration and balance of economic, environmental and social priorities. To achieve this KPC will:

• Remain the supplier of affordable energy and a contributor to the alleviation of poverty, improved health, and better quality of life.

• Perform community empowerment programs to encourage regional economic development based on local potential.

• Build and maintain partnerships with local communities, governments and other stakeholders using mutual trust and mutual respect principles.

The management of KPC commits to providing the leadership, resources and support to achieve these HSE and Sustainable Development outcomes.

HEALTH, SAFETY, ENVIRONMENTAL

AND SUSTAINABLE DEVELOPMENT POLICY

NALIN RATHOD

President Director 01 September 2007

ENDANG RUCHIJAT

Chief Executive Officer 01 September 2007

� KPC Policy 2006�1/BR/Information System/M3

(17)

Interaction with stakeholders is conducted to identify economic, social, and environment problems which have impacts on mining process. Local community (religious/community/youth figure): by conducting social mapping, study of socio-economic and environment impacts, consultation forum, local labor development. Local Entrepreneurs: training, business consultation with Kadin, Hipmi, and local contractor. Academic: study/research, seminar/discussion, consultation with Mulawarman University, ITB, UGM, IPB, and ANU. Research Institution: research activity and consultation in farming development with Lolit Jeruk, Balitro. NGOs (local, national, international): cooperation in community development, health service with PMI, Indonesian Business฀Link,฀Wawasan,฀GTZ,฀Interplast฀International,฀Uplift฀International,฀SkyJuice฀Foundation฀ Australia, International Chambers of Commerce, and Asian Accountant Institute. International donor institution: cooperation in area development with Ford Foundation, British Council, Unicef, World Bank, International Chamber of Commerce, and AusAID. Government (regional, province, and center): consultation with related government’s agencies in regional and provincial government, related department (ESDM, KLH, BKPM, Fund, etc), permit application, discussion about development concept. Contractors/Suppliers: Bid and contract process, performance review with custodian, HSE introduction, ISO 14001 audit, OHSAS 18001, consultation and discussion. Customers: Site visit for RFP(Request for Proposal), coal requirements, bid process, market analysis. Employee: performance evaluation, satisfaction survey, ISO 14001socialization, safety, OHSAS 18001, social and sports activity, health and education program, consultation with union. Investor: inviting for site visit, and conducting road show customers’ countries.

[image:17.652.134.590.427.727.2]

Due to the importance of the engagement of stakeholders in KPC’s operations, various formal and informal communication forums have been created and conducted. Through these meetings, efficient and effective communication is enabled allowing KPC’s strategic vision and mission in sustainable community development to be realized and to accomplish the targets. Communication forums with stakeholders can be seen in table฀1.

Table 1. Communication Approach with Stakeholders

No 1 2 3 4 5 6 Stakeholder

Religious figures, local elders and community around the mining area

Regional government Central government Mining contractors Union Buyers Communication Approach

Religious and community elders forum and participation

Partnership Team

Informal meeting

KPC-Contractor Forum for HRCR (Human Resources & Community Relations)

Bi-party Cooperation Agency (LKS)

Coal Trans Forum

Frequency

Every four months, or as required

As required

Every two months

As required

Annualy

Result

One Gate Policy on local work force, blasting socialization, and mine water treatment management

Formulation of: 2005 Community Development program, activities implementation mechanism, monitoring, evaluation and reporting system, organization of sustainable development program, and networking between agencies at the regional government level to support the implementation of programs that have been developed.

- Approval from the Central Government regarding permit/license

- Discussion on Government Regulation in Lieu of Law (Perpu)

- Anti Poaching Agreement - Standard Recruitment Procedure

- Synergy of community empowerment programs

Improvement of bonus scheme and annual salary increase

Update of latest information on world coal market

(18)

Picture฀6.฀KPC’s฀Mining฀Outhority฀Area

Our Coal Production

KPC produces three main qualities of coal – Prima, Pinang and Melawan. In 2007, overall coal production reached 36.34 million tonnes.

Prima Coal is one of the highest quality coals being traded on the international market. This coal is a highly volatile bituminous coal with high calorific value, very low ash content, moderate sulfur content, and relatively low total moisture level. Prima Coal is also a bright and lustrous coal with high vitrinite content.

Pinang Coal is similar to Prima Coal, but has a higher moisture level and lower energy. Melawan Coal is an ultra-clean sub-bituminous coal with very low sulfur and ash content. Prima and Melawan Coal are produced in Sengata, whereas Pinang Coal is produced in both Sengata and Bengalon pits.

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West Kalimantan

East Kalimantan

Central Kalimantan

South Kalimantan

BONTANG SAMARINDA

BALIKPAPAN

EAST KUTAI REGENCY EAST KALIMANTAN PROVINCE

BONTANG

PT Kaltim Prima Coal Lease Area = 90,938 Ha East Kutai

Regency

Our Mining Operation

In its 15 years of operations, PT KPC has combined its financial strength with operational expertise and strong commitment to protect the environment in order to provide long-term benefits for the regional community.

During 2007 KPC mined coal from eight open pits, seven from the Sengata region and one in the Bengalon region. Four pits were mined by KPC and four others by contractors – PT Thiess Contractors Indonesia, PT Pamapersada Nusantara and PT Darma Henwa. Thiess operated in the West Melawan Pit while Pama operated the Bendili Pit before moving to Pelikan. Darma Henwa operated the Bengalon Pit A. Mining activities in Sengata and Bengalon operational areas produced around 352.3 MBCM overburden and 38.2 million tonnes of coal in 2006

(19)

[image:19.652.232.578.125.703.2]

The quality of each type of coal can be seen in the following tables.

Table 2. Prima Coal Quality

PRIMA INDICATIVE COAL QUALITY Tipical

TOTAL MOISTURE % as received 10.5

PROXIMATE ANALYSIS % air dried basis

Moisture 5.0

Ash 5.0

Volatile Matter 41.0

Fixed Carbon 49.0

CALORIFIC VALUE kcal/kg

Air dried 7,100

Gross as received 6,689

Net as received 6,389

HGI 46

ULTIMATE ANALYSIS (daf) %

Carbon 80.0

Hydrogen 5.50

Nitrogen 1.60

Sulfur 0.67

Oxygen 12.2

SULFUR (adb) % 0.60

CHLORINE (adb) % <0.01

PHOSPHORUS (db in coal) % 0.009

ASH FUSION TEMPERATURE ?C Reducing

Initial Deformation 1,200

Hemispherical 1,300

Flow 1,350

ASH ANALYSIS (% in ash)

SiO2 56.0

Al2O3 24.5

Fe2O3 9.5

CaO 1.70

MgO 2.00

TiO2 1.10

Na2O 0.50

K2O 2.20

P2O5 0.40

SO3 + others 2.10

SIZING

Above 50mm 2.0

Under 2mm maximum 15.0

According to ISO methods, except HGI to ASTM standard method

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[image:20.652.233.570.103.644.2]

Table 3. Pinang Coal Quality

PINANG 6150 GAR INDICATIVE COAL QUALITY Tipical

Moisture 9.0

Ash 5.5

Fixed Carbon 45.5

Air dried 6,546

HGI 45

Carbon 78.5

Hydrogen 5.50

Nitrogen 1.60

Sulfur 0.70

Oxygen 13.7

SULFUR (adb) % 0.60

Initial Deformation 1150

Hemispherical 1250

Flow 1300

SiO2 53.0

Al2O3 23.5

Fe2O3 9.0

CaO 3.10

MgO 2.70

TiO2 1.00

Na2O 0.60

K2O 2.10

P2O5 0.36

SO3 + others 4.6

SIZING

Above 50mm 2.0

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[image:21.652.233.581.97.653.2]

Table 4. Melawan Coal Quality

MELAWAN A INDICATIVE COAL QUALITY Tipical

Moisture 18.0

Ash 3.0

Fixed Carbon 41.0

Air dried 5,735

HGI 42

Carbon 75.6

Hydrogen 5.40

Nitrogen 1.51

Sulfur 0.25

Oxygen 17.3

SULFUR (adb) % 0.20

Initial Deformation 1,150

Hemispherical 1,200

Flow 1,230

SiO2 36.0

Al2O3 13.9

Fe2O3 14.8

CaO 12.70

MgO 8.60

TiO2 0.80

Na2O 0.70

K2O 1.70

P2O5 0.20

SO3 + others 10.6

SIZING

Above 50mm 2.0

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Coal Market

Sales of KPC coal in 2007 reached 39.72 million tonnes. Based on the type of coal, 3.41% is Prima variety, 70.60% is Pinang variety, and 25.99% is Melawan variety.

Graphic฀1.฀Coal฀Sales฀by฀Product

Sales were mostly directed to the international market demand, which was 93.1% out of the total sales. Geographically, Asia Pacific remains the biggest market. Detail of sales by region can be seen in the following graphic:

Pinang, 70.60%

Melawan, 25.99%

Prima, 3.41%

Asia Pasific, 82.30

Indonesia, 6.87%

America, 4.59%

Europe, 6.24%

Graphic฀2.฀Coal฀Sales฀by฀Region

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Health and Work Safety

KPC is committed to the health and safety of its employees. Various regulations have been implemented฀to฀reach฀this฀purpose.฀The฀basic฀safety฀standard,฀known฀as฀the฀“Golden฀Rules”฀has฀ been implemented since the past few years.

A number of employees are specifically assigned to handle this issue. 248 employees or around 1.6% out of the total 15,506 employees of KPC and contractors are responsible for this work. In addition there are 150 health and safety representatives among the KPC employees distributed through each division and operational department.

KPC’s health and safety (HSE) program performance in 2007 started with a fatal incident involving one of our contractor’s employees. However, many satisfying goals were achieved in 2007, including the significant decline of Lost Time Injury Frequency Rating (LTIFR) by 30% from 0.45 in 2006 to 0.27 in 2007, and the decline of the number of incidents from 20 in 2006 to 12 in 2007 with a similar amount of work hours in both years.

Graphic฀3.฀Lost฀Time฀Incident฀in฀2007

Of a total 12 lost time incidents, 25% (3 out of 12) involved KPC’s employees while 75% (9 out of 12) involved contractors’ employees (including 1 fatal incident). The causal factors of the accidents are varied but the most frequent ones are not following procedure or analizing working safety.

The incidents encouraged KPC to conduct further training programs to prevent and control risks and to help employees and their families to prevent accidents. Training sessions that were conducted included: HSE Inductions, Job Safety Analysis, Fatigue Management for employees, Change Management, Accident Investigation (Basic and Advanced), Risk Assessment, CPR, First Aid, Conducting Safety Talks, Working at Heights, Working Near Water, Working in Confined Spaces, Escort Training, Fire Extinguisher Training, Fire Warden Training, Prinasa, Prinutama etc. In addition to training KPC also conducted various health and safety campaigns including: daily safety message broadcast through Radio GWP 100.2 FM, Health and Safety Citizens Bulletin, Health and Safety Banners etc.

Meanwhile, medical treatment data of KPC employees in 2007 showed no employees were ill due to industrial reasons; and that illnesses were mainly caused by external factors.

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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

(24)

0 10,000 20,000 30,000 40,000 50,000 60,000

Number

of

Participants

2000 2001 2002 2003 2004 2005 2006 2007

HSE Training All Training Numbers

The number of HSE training participants in 2007 reached 30,726 employees (54% out of the total participants for all training) and 104,358 training hours (42% out of the total hours for all training). The comparison between HSE training and all training can be seen in graphic฀4. It can be seen that Health and Safety training commitment for employees is very high.

Graphic฀4.฀HSE฀Training฀Hours฀&฀All฀Training฀2000-2007฀฀฀฀฀฀฀฀

0 50,000 100,000 150,000 200,000 250,000 300,000

Training H

ours

2000 2001 2002 2003 2004 2005 2006 2007

HSE Training All Training

Graphic฀5.฀Number฀of฀Training฀Participants฀2000-2007

To ensure the support from all lines of staff in KPC in the various Health and Work Safety (HSE) programs, several important items have been incorporated in the Prima Perkasa Collective Labour Agreement between the Management of PT. KPC and the Workers/Labors Unions.

On December 27, 2007, KPC obtained the OHSAS 18001: 2007 certificate following an audit conducted by a team from the SGS Certification Body Jakarta. The certificate is an acknowledgement that KPC’s Prima Nirbhaya Health and Work Safety Management System have fulfilled the international specifications for OHSAS 18001:2007.

349 people or 75.4% of the total members of the Security Units in Group4 and Global Arrow attended training on human rights.

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0 500 1000 1500 2000 2500

1 employee age

age 18-20 age 20 - 40 age 40 - 55 age > 55

Supply Chain, 107

PID, 310

Mining Support, 761

Mining Operation, 2029

Marketing, 55

IT, 21 HR, 42

HSE, 97

Finance, 34

ES,D 65

Development, 174

Contract Mining, 22

Employee Benefits

KPC employed 3,744 employees in 2007 from multiple regions across Indonesia. The majority of the employees were employed in the Mining Operation Division (2,029 people), which is in line with KPC’s core business as a coal mining company and as a world-class operator.

Graphic฀7.฀Composition฀of฀Employees฀by฀Age

The total number comprise 3,730 Indonesian employees and 14 expatriate employees. The percentage of expatriate employees is 0.0037%

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Graphic฀6.฀Composition฀of฀Employees฀by฀Division

[image:25.652.251.551.426.722.2]

The composition of the point of hired of the employees can be seen in Table฀5. It can be seen that most of the employees came from Sengata. Based on the employee demographic composition, It can be seen that most of the employees are in a productive age of 20 – 40 years old, in amount of 2,507 employees (see฀Graphic฀7).

Tabel. 5 Employee composition based on point of hired

No Point of hired Amount

1 Overseas 14

2 Jakarta 331

3 Samarinda 174

4 Balikpapan 321

5 Sengata 2.760

6 Other Indonesia 130

(26)

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Table. 6 Employees composition based on Indonesian and foreign employees

No Division Employee composition

Indonesian Expatriate

1 Chief Executive Officer 2 0

2 Chief Financial Officer 4 1

3 Chief Operating Officer 1 0

4 Contract Mining 22 0

5 Development 185 3

6 Director of Finance 1 1

7 External Affairs & Sustainable Dev 65 0

8 Finance 34 0

9 Health, Safety and Environment 97 0

10 Human Resources 42 0

11 Information Technology 21 0

12 Marketing 52 3

13 Mining Operations 2029 0

14 Mining Support 757 4

15 Processing and Infrastructure 309 1

16 Procurement 1 0

17 Supply Chain 107 0

18 Technical Director 0 1

Total 3730 14

KPC has spent USD 59,308,054 on all employees. USD 43,783,414.54 being allocated for the payment of salary, premium leave and overtime, whereas USD 10,375, 873.97 was for bonuses and holiday allowances. USD 2,512,620.21 was allocated for medical treatments and insurance while 713,237.95 was for travel and medical check ups. USD 1,922,907.36 is for Jamsostek/Astek and pension fund.

One of the company benefits that has a high level of involvement and attention from all employees is฀the฀“Safety฀Voucher”฀system.฀This฀beneit฀serves฀to฀remind฀and฀encourage฀all฀employees฀of฀the฀ importance of Work Safety for themselves, their co-workers, and the overall working environment. The benefit is given to all employees whose contribution allowed the achievement of the required working hour targets with no LTIs or fatalities. All employees receive the same value for the voucher regardless of position.

Employee remuneration is based on the company’s performance and an annual salary survey. Each฀ year฀ the฀ company฀ conducts฀ a฀ “salary฀ survey”฀ with฀ similar฀ companies฀ with฀ the฀ help฀ of฀ a฀ consultant or by benchmarking against other mining companies on a similar level to KPC. To maintain฀“internal฀equity”฀the฀company฀determines฀the฀employee’s฀remuneration฀in฀line฀with฀the฀ employee’s level of responsibility within the company.

Compared to the East Kutai Regency’s Minimum Wage for the coal sector of Rp 1.15 million, since July 2007, KPC’s employee’s minimum salary was Rp 1,378,000 or 20% higher. Whereas compared to the Regional Minimum Wage of Rp 766,000, KPC paid 80% higher.

For employees who have reached the retirement age, the company provides a pension benefit based on the KPC retirement fund regulations, years of service bonus, transportation cost for return to area of origin or to a maximum of Jakarta with a third class ship fare, and finally severance payment (less than five years of service means employee will receive two times their basic salary, between five and ten years service employees will receive three times their basic salary, and more than ten years service will receive four times their basic salary).

(27)

Picture฀7.฀Business฀development฀in฀patchouli฀farming

Routine monitoring programs in cleared/acquired land with related parties such as security and the Regional Police have occurred. This routine observation is meant to prevent conflict and land reclaiming from the community. By using this observation technique early detection of irresponsible party’s efforts in small scale mining can be achieved.

In Muara Wahau resettlement has occurred. The process involves extensive interaction with the community. Before the relocation was conducted, a social study and analysis was performed, allowing the process to run smoothly. Studies are conducted by experts in the social field, so that the result can be justified.

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[image:27.652.249.584.390.571.2]

The company’s concern towards employee’s children is shown by the fact that KPC also provides educational assistance. The amount of assistance offered is shown in Table฀7.

Table. 7 Educational Assitance for Employee’s Children Level of Education Annual Assistance

Elementary School Rp. 1,000,000,-

Junior High School Rp. 1,250,000,-

High School Rp. 1,500,000,-

University Rp. 3,250,000,-

Land Provision and Observation

Land acquisition for mining activity is a critical step. If the land is not available in time the mining process will be delayed or stopped. In 2007, 1,864 Ha land has was cleared. The land clearance process for mining has been conducted due to good communications with the local community to get the best results using a persuasive approach as mentioned in the land clearance SOP. If this SOP cannot achieve the right result, legal proceedings may be taken.

(28)

Post Mining Program

Using the framework of the mining closure program which is due in 2021, KPC has initiated the following steps:

a. On November 23rd_{2004, KPC conducted meetings with related stakeholders. The purpose} was to find the aspirations of the stakeholders regarding the use of mined and reclaimed areas.

b. The result from the meeting with the stakeholder became the basis for the conducting of research into the use of mined area options such as plantations, farming, breeding, fisheries and water resources.

c. The research has been conducted since 2004 in cooperation with the Mulawarman University, the Bogor Farming Institute (IPB) and BPPT.

d. The research was especially related to the use of reclaimed areas for plantations such as oil palm, natural rubber, castor trees and breeding/fisheries in sedimentation ponds. The water in the void spaces (old pits) is still under review in the study with BPPT. The purpose of the research is to find the potential for water in the voids to meet community needs.

e. The results of the research will be presented to stakeholders (planned in 2009) to measure responses, and then obtain approvals and permits. The permits will be the guides used conducting reclamation up until and after the mining period.

f. At the same time the Life of Mine Plan will be prepared as a guideline for the conducting of reclamation progressively.

g. Mining reclamation areas will be divided into two zones:

•฀ Protection zone. Various trees from tropical rain forest environments will be planted. It is KPC’s duty to return these zones to their previous condition.

•฀ Zone for community purposes. These zones will give additional income for local communities after the closure of the mine. If this process can be done during the mining operations, it will give immediate benefits to the community.

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THE QUALITY OF OUR PRODUCT

Product Responsibility

As part of the company’s commitment to produce a quality product, monitoring of the coal quality is a very important component in the planning, implementation, monitoring and control process of coal mining, preparation and transportation process. The Quality Control Team monitors the process 24 hours per day to ensure that there will be no rejected product.

At the time of this report being published there has never been a complaint from a customer regarding negative impacts resulting from the use of our product. The continued extending of contracts indicates that the customers are satisfied that our products are of sufficient quality. Since KPC product is coal, product packaging is not conducted.

Customer Satisfaction

Most KPC customers are power generation companies. KPC has products and the qualities that can match many power plant designs around the world. One of the factors that contribute to our customer satisfaction is that KPC’s transportation cost is lower than that of other producers, due to the proximity of the port to the mine and the strategic location of Indonesia. KPC is acknowledged as a reliable coal supplier with a competitive pricing policy. The quality and size of the coal resources and the ability to load large bulk carriers from its own world class terminal enabled KPC to build a diverse portfolio for long term contracts. These are the backbones of KPC’s business.

KPC also pays attention to after sales service through: 1. Coal Quality and Quantity Management

2. Technical marketing to support customers. KPC’s Technology Department provides technical assistance to end customers in the handling and burning of coal, and is actively involved with consumers to ensure that the coal quality meets the requirements.

The Coal Quality Management division is an important part of KPC’s entire operation. Several targets that have been established for coal quality management are:

1. Optimizing production and demand schedule 2. Optimizing resources,and

3. Ensuring all shipments to consumers are within specification

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In addition, KPC’s Marketing Division has sent samples to buyers according to sales contract requirements, to independent parties if requested by customers; and also to reputable coal sampling and testing organisations in order to obtain reliable data on the quality of each product.

The complete system is as follows;

Loading to Vessel Stockpiling + Blend

Production Coal Mining ROM Models

Pit Designs

Geological Models Bore coal quality data_{In situ quality & quantity}

Mine plan

Quantity & design cut offs for saleable coal

As mined quality quantity Production schedules

Selective mining practices Clean coal production

Crushed coal quality & quantity Sampled & test on hourly basis

Quality control feedback to mining operations

Stockpile management practices Blend to meet contractual specifications Properly blended product coal

Independent inspection company Sampling & testing

Draught survey

Certificates of analysis & wight

Marketing Communication Program

KPC’s Marketing Team maintains communication with and visits all customers as requested. Through these visits, KPC’s Marketing Division can maintain good relations with the consumers and also potential consumers. For long-term consumers, yearly price negotiations are also conducted. Communications are done through email, fax, phone and on-site visits.

Attendance as participants or speakers in workshops and conferences help support KPC’s marketing efforts in selling and promoting products around the world.

The majority of sales are done under the following terms: Free on Board (FOB), Cost and Freight (CNF/CFR), Cost, Insurance and Freight (CIF), and sometimes with Delivered ex Ship (DES).

Breach of Consumer’s Privacy

Until the time of publishing there has never been a complaint from customers related to a breach of their privacy. A system ha