Corporate Governance

Risk Management

Work performance of coal industry provokes uncertainty for the industrial persons. Therefore, the situation demands the Company to be able to identify, assess, analyze, and also mitigate risk potentials as early as possible. In facing business risk, the Company must be able to adapt by having careful and anticipative attitude. Well-prepared plan with right execution will support the Company in maintaining its condition at any situations. In managing risk, the Company must provide updated and objective information to every management level in order to be able to identify and mitigate the risk as well as deciding the strategic steps. The Company has identified several risk profile, but not necessarily limited to potential risk in the future. Several risk profiles are mentioned below:

The risk of coal price fluctuation

The Company income depends on the sale price which is referred to the fluctuated world coal price index. The Company sells the majority of the coal production plan to highly qualified buyers according to fixed price contract.

The risk of fuel price

The Company faces fuel price as the result of fluctuating fuel price and fluctuating cost of fuel price provided by the Company to the mining contractors. The increase of fuel price might be less beneficial for the business profit and company profit margin. Besides, the Company performs value protection transaction of required number of fuel.

The risk of interest rate

The risk of interest rate of cash flow is a risk where future cash flow of finance instrument fluctuates as a result of the change of interest rate in the market. The exposure today is from the long term loan of the syndicate bank loan with floating interest rates. This potentially promotes risk for the Company cash flow. The Company manages the interest rate risk by utilising interest rate cap instrument during the period of syndicate bank loan. Through this instrument, the Company will be able to limit the exposure towards floating interest rate in particular degree.

Weather risk

Weather situation in some mining concession areas of the Company can affect the mining activities of the Company significantly. All concession area of the Company are located in the Eastern Kalimantan, which are areas under the great influence of seasonal weather. Generally, dry weather situation occurs in the second and third quarter. This provokes more conducive situation for mining while high rainfall index occurs from November to March. The Company temporarily terminates production process in concession areas in raining condition for safety reason.