Annual Report 2007

Farewell Letter from the President Director Please see page 50 www.antam.com Annual Report ASX:ATM • IDX:ANTM For the Year 2007

10 Reasons Generating to Invest in Antam 2007 Annual Report Annual 2007 Higher Returns for aBetter Future

Net Profit Surges 231% Please see Review of Operations, page 69

Nickel Exports Increase Significantly Please see page 71

PT ANTAM Tbk

Head Office Gedung Aneka Tambang Jl. Letjen TB Simatupang No. 1 Lingkar Selatan, Tanjung Barat Jakarta 12530, Indonesia Cash Soars 317%; Antam is Poised Tel : (62-21) 789-1234 (62-21) 781-2635 to Invest and Grow Please see Fax. : (62-21) 789-1224 pages 63, 80 E-mail: [email protected] I n v e s t o r A l e r t ! You need to look here. It’ll only take three minutes... Why Diversified. 1Vertically- 2 Gold. Nickel. Integrated. Bauxite. A great mix. Indonesian. For more information please see Our Products and How We Make Them, page 105. Experienced. For more information please see Detailed Description of Antam, page 103.

4 Low cost operations 5 Unique position to (current cash costs lower ferronickel for ferronickel are costs through fuel average). conversion. For more information please see Cost of Sales, page 74. For more information please see Cash Costs and Cost Reduction Program, page 77.

Exciting project 8 pipeline, to move 9 Targeted gold downstream into acquisition more value-added program. For more information please see processing activities. Acquisitive Growth Projects, page 83. For more information please see Organic Growth Projects, page 81. Why Antam? Gold. Nickel. 3 Large high quality reserves Bauxite. and resources of nickel A great mix. and bauxite. For more information please see Exploration and Reserves, page 96.

6 Industry-beating 7 Possible margins and ferronickel returns. production For more information please see Our Competitors, page 109. increase over

For more information please see Cash Costs and next few years. Cost Reduction Program, page 77. For more information please see Production Volume Targets, page 45.

10 Big dividends, lots of cash and strong financial position to make investments. For more information please see For more information please see Financial Review, page 61. Acquisitive Growth Projects, page 83.

2 0 0 7 A n t A M A n n u a l R e p o r t www.antam.com

It is the mission of this annual report to create a clear and positive picture of the company without distorting the truth, to keep our stakeholders informed.

If there is ANY part of this report that requires further clarification, please do not hesitate to send our IR team an email ([email protected], [email protected], [email protected], [email protected]). We actually prefer to have an ongoing dialogue with you and hopefully this report is only the beginning...

2007 Antam Annual Report www.antam.com Table of Contents

The Investment Case for Antam Iron, Nickel Contained in Pig Iron 83 10 YEAR FINANCIAL HIGHLIGHTS 4 Acquisitive Growth Projects 83 WHY WE DO WHAT WE DO: OUR MISSION AND VISION 7 Capital Expenditure Plans 84 WHO WE ARE: ANTAM DESCRIBED 8 Blue Sky: Existing Minority- AN AMAZING YEAR OF GROWTH 10 Stake Joint Ventures OUTPERFORMING OUR PEERS 12 PT Nusa Halmahera Minerals 92 DELIVERING SIGNIFICANT SHAREHOLDER RETURNS 13 PT Galuh Cempaka 93 2007: A GREAT YEAR (CALENDAR OF SIGNIFICANT EVENTS) 14 PT Cibaliung Sumberdaya 93 OUR STRATEGY 16 PT Dairi Prima Mineral 94 OUR RESERVES 17 PT Weda Bay Nickel 94 A WELL GOVERNED STATE-OWNED ENTERPRISE 18 Exploration and Reserves EXTERNAL RECOGNITION AND CERTIFICATION 19 Summary Tables of Reserves and Resources 96 EXCITING PROJECTS 20 Nickel 97 OUR RISKS AND CHALLENGES 22 Detailed Nickel Reserves and Resources Table 98 THE OUTLOOK 23 Gold Detailed Gold Reserves Table 100 MAP OF OPERATIONS AND PROJECTS 24 Bauxite Antam Shares and Shareholders Detailed Bauxite Reserves and Resources Table 101 Market Overview 28 NOTEs TO RESERVES and resources estimations 102 Shareholders Information 28 Detailed Description of Antam Total Shareholder Returns 30 HOW WE MAKE OUR MONEY 104 Dividend Policy 31 OUR STRATEGY TO GROW 104 Investor Relations 32 OUR STRUCTURE 105 Investor Perception Survey 34 OUR PRODUCTS AND HOW WE MAKE THEM 105 Direct Feedback From You 35 OUR CUSTOMERS AND MARKET SHARE 108 Q&A with Our Largest Shareholder 36 OUR COMPETITORS 109 Dear Shareholder OUR COUNTRY AND GOVERNMENT 110 LETTER from the board OF COMMISSIONERS 38 OUR INDUSTRY 110 COMMISSIONERS’ STATEMENT 41 swot analysis 112 LETTER FROM the BOARD OF DIRECTORS 42 Risk Management DIRECTORS’ STATEMENT 49 HOW WE MANAGE RISK 114 FAREWELL LETTER FROM CEO 50 Risk Statement 115 Antam’s People Corporate Governance of Antam THE MANAGEMENT 52 Assessment of Antam’s Corporate Governance Report 118 Board of Commissioners’ Biographies 53 Statement on the Status of Corporate Governance 120 Board of Directors’ Biographies 55 Practices Q&A WITH THE BOARD OF DIRECTORS 56 Reports from the Commissioner-Level Board 125 OUR HUMAN RESOURCES 58 Committees Adoption of the ASX Corporate Governance Principles Financial Review: Higher Profits 140 ABRIDGED FINANCIAL STATEMENTS 62 and Recommendations Adoption of the Indonesian Code of Good Corporate Total Consolidated Assets 63 143 Governance Total Consolidated Liabilities 64 Sustainability Report Capital Structure and Access to Capital 65 STAKEHOLDERS’ Involvement 146 cash flows 66 Environmental Performance 146 hedging activities 67 Social Performance 147 Review of Operations: Antam Funds a Local Craftsman 148 Generating Higher Output Antam to Purchase Green Energy 149 DETAILED PRODUCTION AND SALES TABLE 70 Sales and Segment Information 71 auditing antam SIGNED LETTER ATTESTING TO VERITY OF FINANCIAL Production and Sales 71 152 STATEMENTS Cost of Sales 74 OPINION LETTER FROM Ernst & Young 153 Net Income 76 CONSOLIDATED FINANCIAL STATEMENTS Cash Costs and Cost Reduction Program 77 154 Licensing 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 159 Performance Measurement and Outlook 78 Contact Us Investing For A Better Future key personnel and business units 197 institutions and supporting professionals 198 OUR FUTURE TARGETS 80 glossary 199 ORGANIC GROWTH PROJECTS 81 corporate identity 202 alumina 81 IR CONTACT INFO AND CALENDAR 203 nickel 82

www.antam.com 2007 Antam Annual Report The Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority- Case for Antam and Shareholders Dear Shareholder Antam’s People Higher Profits Generating Higher Output for a Better Future Stake Joint Ventures

Financial Highlights

Billion Rupiah

Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007/2006 %

Net Sales 1,021.91 966.15 1,566.15 1,735.22 1,711.40 2,138.81 2,858.54 3,251.24 5,629.40 12,008.20 113

Cost of Sales 450.75 547.73 860.28 1,122.93 1,280.48 1,471.91 1,497.70 1,827.14 2,887.94 4,794.96 66

Gross Profit 571.16 418.42 706.03 612.29 430.92 666.90 1,360.83 1,424.10 2,741.47 7,213.24 163

Earnings Before Interest, Tax, Depreciation and Amortization 386.54 392.47 661.63 262.81 364.96 466.18 1,317.77 1,394.60 2,778.43 7,724.80 178

Income from Operations 475.33 318.02 537.28 126.29 247.42 447.98 1,096.57 1,099.77 2,403.69 6,796.09 183

Interest Expense 54.56 29.04 25.42 19.00 13.20 16.73 2.20 25.56 141.96 74,315 (48)

Net Income 299.36 234.34 383.16 118.91 177.40 226.55 810.25 841.94 1,552.78 5,132.12 231

Outstanding Shares (‘000) 1,230,769 1,230,769 1,230,769 1,230,769 1,907,692 1,907,692 1,907,692 1,907,692 1,907,692 9,538,460 400

Adjusted Net Income per Share (Rp)* 31.38 24.57 40.17 12.47 18.60 23.75 84.95 88.27 162.79 538.04 231

Adjusted Dividend per Share (Rp)* 13.40 9.44 20.09 6.23 6.88 7.72 29.62 30.01 65.12 - -

Total Assets 1,976.84 2,055.25 2,516.34 2,577.32 2,525.03 4,326.85 6,042.64 6,402.71 7,290.91 12,037.92 65

Total Liabilities 589.85 598.01 757.00 890.63 843.86 2,543.33 3,600.18 3,373.07 3,009.30 3,273.12 9

Total Long Term Debt 367.03 251.61 236.88 171.86 80.90 1,664.64 2,072.45 2,593.66 1,829.78 1,474.30 19

Total Stockholder’s Equity 1,376.35 1,447.65 1,750.31 1,680.48 1,675.48 1,783.51 2,442.47 3,029.64 4,281.60 8,763.58 105

Net Working Capital 472.13 452.50 763.04 874.30 827.99 2,100.12 2,064.93 1,308.11 2,138.09 6,249.28 192

*Calculations of Net Income per Share and Dividend per Share from 1998 to 2006 are adjusted using 2007’s post stock-split outstanding shares of 9,538,459,750.

Our performance for the last 10 years As our Net Sales CAGR exceeded our We pay generous dividends. The has been consistent and robust. costs CAGR, we posted Net Income CAGR of our dividend payment per The Compound Annual Growth Rate CAGR of 37% from 1998-2007. share increased by 49% from 1998 (CAGR) of Net Sales from 1998 to to 2006. 2007 is 31%, while Cost Sales CAGR during the same period is 30%.

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“We have consistently delivered industry-topping performance and growth.”

Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007/2006 %

Return on Average Investment 23.51% 19.94% 27.10% 5.70% 9.55% 11.17% 31.70% 32.33% 45.41% 81.99% 81

Return on Average Equity 23.95% 16.60% 23.96% 6.93% 10.57% 13.10% 38.35% 30.77% 42.48% 78.69% 85

Return on Average Assets 16.73% 11.62% 16.76% 4.67% 6.95% 6.61% 15.63% 13.53% 22.68% 53.11% 134

Current Ratio 298.58% 254.96% 253.93% 292.69% 293.09% 568.03% 326.33% 267.83% 281.27% 447.41% 59

Total Liabilities to Equity 42.86% 41.31% 43.25% 53.00% 50.37% 142.60% 147.40% 111.34% 70.28% 37.35% (47)

Total Liabilities to Assets 30.17% 29.10% 30.08% 34.56% 33.42% 58.78% 59.58% 52.68% 41.47% 27.19% (34)

Gross Margin 55.89% 43.31% 45.08% 35.29% 25.18% 31.18% 47.61% 43.80% 48.70% 60.07% 23

Operating Margin 46.51% 32.92% 34.30% 7.28% 14.46% 20.95% 38.36% 33.83% 42.70% 56.60% 33

Net Margin 29.29% 24.26% 24.46% 6.85% 10.37% 10.59% 28.34% 25.90% 27.58% 42.74% 55

Operating Cashflow 539.65 218.86 825.48 385.51 250.16 481.18 768.95 742.34 1,711.30 4,835.91 180

Capital Expenditure 398.61 142.57 98.82 90.11 103.30 635.99 1,364.36 1,436.16 85.61 197.16 130

Free Cashflow 141.04 76.29 726.66 295.41 146.86 (154.80) (595.41) (693.82) 1,625.69 4,638.74 189

Exchange Rate (Rp/US$)** 10,224 7,848 8,405 10,256 9,316 8,570 8,935 9,712 9,167 9,136 0

Gold Price (US$/t.oz)** 294.26 278.87 279.18 271.35 310.57 364.06 409.87 446.14 604.65 697.09 15

Nickel Price (US$/Lb)** 2.09 2.74 3.92 2.71 3.08 4.37 6.27 6.45 10.96 16.85 54 **Annual Average of Daily Spot Price.

In line with our consistent performance, Our Total Liabilities to Assets jumped Our free cash flow turned negative in we posted Return on Average Equity significantly in 2003 due to the 2003 as we constructed FeNi III, our CAGR of 14% from 1998 to 2007. bond issuance to finance FeNi III. latest expansion mode. In 2006, our In 2005 we started to buy back the free cash flow turned positive again as bonds in the open market. In 2006, FeNi III construction came to an end. we fully redeemed the bond before maturity due to the cancellation of Indonesia-Mauritius Avoidance of Double Taxation Agreement.

RETURN ON AVERAGE OPERATING CASH FLOW DEBT TO EQUITY EQUITY 79 (Billion Rupiah) (%) (%)

4,835 93 85

42 38 65 31

1,690 31 13 769 742 481 10

03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 The main measurement of value The operations were producing A supreme performance achieved creation, our 2007 ROE beat most substantial free cash and prepared with little to no debt. other peers. Antam for the next phase of growth.

EARNINGS BEFORE INTEREST, REVENUE PER SEGMENT OPERATING INCOME TAX, DEPRECIATION (Billion Rupiah) PER SEGMENT 303 AND AMORTIZATION (Billion Rupiah) 6,968 (Billion Rupiah)

158

1,163

10,687

205 188 7,725 2,524 690 4,734

190 166 169 80 589 1,221 526 1,118 2,778 112 2,472 554 2,167 154 1,318 1,395 1,473 415 466 -25 -10 -12 -21 -102 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07

Nickel Gold Others Nickel Gold Others

Antam’s EBITDA soared as cash Higher prices and higher volumes caused revenue from Nickel is the main income earner. Never seen before gushed from the operations. nickel to soar. nickel prices caused income to reach new heights.

Vision 2010 To be a mining company of international standards with a competitive advantage in the global market.

Mission

• To provide high quality products of nickel, gold and industrial minerals with the utmost concern for work safety and health as well as environmental conservation. • To operate in the most efficient manner (low cost operations). • To maximize shareholder and stakeholder value. • To enhance employees’ welfare. • To participate in efforts to improve the social welfare of communities in the vicinity of the mining areas.

We are a diversified, Indonesian, state-owned, vertically integrated, mining and metals company. Our DIVERSE PRODUCT MIX main strengths are our low cost operations, our vast high quality reserves of nickel and bauxite, our 1% strong financial structure, our nearly forty years of experience, our location in mineral-rich Indonesia, 9% our vast acreage of licensed exploration territories, and our loyal and dedicated staff. Our main 1% commodities are nickel, gold and bauxite. With a recent nickel expansion and due to price increases, most of our revenues are now related to nickel. Our main goal is to create shareholder value by getting bigger and better and doing it in a sustainable and correct way. Our main strategy is to extract as much value as possible from our existing reserves by moving downstream from exporting ore into processing 41% 48% activities. We are also keen to diversify away into other commodities as long as there is a good return and a match with our business. In general we are only interested in Indonesian assets as the returns are higher and we can benefit from our domestic knowledge and experience.

We currently produce and export around 5.5 – 7 million wet metric tons of nickel ore, around 17,000 – 18,000 tonnes of nickel contained in ferronickel, 100,000 – 115,000 troy ounces of gold, 700,000 Ferronickel – 800,000 ounces of silver and 1.2 – 1.5 million wmt of bauxite. As our strategy is implemented in Nickel Ore the upcoming years we expect to see ore exports come to a halt, with our ferronickel production Gold increasing and the commencement of alumina production, which uses bauxite as ore feed. In Bauxite general we have amongst the lowest operating costs in the business, except for our ferronickel operations. Ferronickel costs have come up due to the removal of national fuel subsidies and rising Silver international prices. However, we will convert to a lower cost fuel and regain our low cost position.

Our customers are mostly long term and bluechip international companies, located in North Asia Our upcoming investments will diversify our and Europe. About half of our gold and silver is sold domestically. revenue away from the current dominance of nickel. We are financially prudent and like to have very little debt and large cash holdings. Only when the time is right will we leverage the balance sheet to invest and grow.

We are 65% held by the Indonesian government, with the other 35% held by the public. Most of the public investors are long term large, foreign institutional investors. Although recently the amount of domestic institutional, as well as retail investors, has been increasing.

EXPORT ORIENTED*

Rp5,793billion Europe Taiwan Korea India Japan

Ferronickel

Rp125billion S Rp4,769billion China e a Japan it p r Eastern Europe n o o l i

t m

e i

G te old xi Bau

Rp1,034billion Rp130billion Singapore Japan Indonesia Jewelers China *The graphic depicts sales revenues by product and destination

2007 Antam Annual Report www.antam.com Exploration Detailed Corporate and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us

1 2

Nickel is a metallic element which is sold in many forms such as cathode, granules, shots and ingots. About 85% of metallic nickel is used in combination with other metals to make what are known as alloys. Nickel-containing alloys are highly regarded for their superior combinations of toughness, strength, and corrosion resistance, and their ability to retain these properties at extremes of temperature. About 65% of nickel is used to make stainless steel which is the ideal base material for commercial applications. Stainless steel is used in cutlery, industrial equipment, structural alloys in automotive and aerospace assembly and building material in skyscrapers and other large buildings.

Gold is a precious metal which, for many centuries, has been used as money, as a store of value and in jewelry. Modern industrial uses of gold include dentistry and electronics.

Reference: Wikipedia

4 4 5 1. Jet engines rely on the sturdiness and non corrosive characteristics of nickel plated stainless steel material.

2. The Chrysler Building was made using 316L stainless steel and is a testament to the anti-corrosive properties of high quality 300 series stainless steel.

3. The second most important usage of nickel is batteries, a key growth area.

4. Antam’s .9999 fine gold is internationally accredited.

5. The heat resistant nature of nickel protects and strengthens the engine block.

An Amazing Year of Growth

By all accounts 2007 was an amazing year. Due to a substantial increase in our output of nickel contained in ferronickel (despite a leak at FeNi III smelter) and almost doubling our nickel ore exports in combination with record breaking nickel prices, we produced more cash, made more profit, created the largest margins, than we ever have before. We will look back at 2007 as the year that laid the foundation for the next expansion. As well as increasing profits, 2007 was also an amazing year in terms of breaking into the Chinese nickel ore market and in terms of forging new alliances and partnerships with China. We signed many agreements, some of which we acknowledge will come to nothing, but offer the best way to ensure we are finding the best partners and executing the best development plans for our large reserves and resources.

While we do not expect 2008 will be as profitable as 2007, it will be equally as important in terms of executing our growth plans and make important investments to grow, such that in three to five years time the profit levels of 2007 will not be considered amazing, they will be considered normal. We generated amazing returns in 2007 so we can build a better future for tomorrow.

Production and Sales Unit 2006 2007 2007/2006 (%) Production Volume

Ferronickel metric ton Ni 14,474 18,532 28 Saprolite Nickel Ore wmt 3,493,961 6,744,383 93 Gold kg 2,873 2,791 (3) t.oz 92,367 89,733 (3) Sales Volume

Ferronickel metric ton Ni 13,389 17,723 32 Saprolite Nickel Ore wmt 3,375,466 6,463,977 91 Gold kg 1,458 5,000 157 Soaring Chinese nickel demand pushed t.oz 46,876 160,754 157 Antam’s nickel ore sales up by 91% year on year.

2007 Antam Annual Report www.antam.com Exploration Detailed Corporate and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us 11

An Amazing Year of Growth

REVENUES AND PROFITS soar REVENUES AND PROFITS HIGHLIGHT 12,008 12,000

11,500 11,000

10,500

10,000

9,500

9,000

8,500

8,000

7,500

7,000

6,500

Rp Billion 6,000

5,500

5,000 5,132 4,795 4,500

4,000

3,500

3,000

2,500

2,000

1,500 Net Sales 1,000 Cost of Sales 500

0 Net Income 2003 2004 2005 2006 2007

Often we are unfairly assumed to be an underperformer. Perhaps this is due to the sometimes poor image of Indonesian state-owned enterprises as being sluggish, lacking competence and perhaps corrupt. As well, the ramp up of our FeNi III smelter has experienced a couple of setbacks with a leak in 2006 and a leak in 2007. Every new furnace leaks, and ramp ups to optimal capacity will take many years, but the expectations were high and many assumed FeNi III would quickly reach full capacity. As well, as we find the best partners and plans for developing our vast reserves into the most value creating operations, we have signed many agreements, some of which expired, leaving some to suggest all we do is sign non-binding agreements and we need to speed up our development projects.

Some have said our excellent profit growth over the past couple of years is simply due to the unexpectedly high nickel prices; that we had gotten lucky.

The reality is that over the past number of years, well before the commodity boom began and during the construction period of FeNi III, we have consistently outperformed our peers, who also were beneficiaries of high commodity prices. The numbers, as you can see below, speak for themselves. Our plan is to continue to deliver industry beating performance.

Key Ratios Top 40 Global Indonesian Antam Companies Mining Companies 2005 2006 2005 2006 2005 2006 2007 Ebitda Margin 37% 44% 43% 41% 41% 49% 64% Net Profit Margin 23% 27% 23% 23% 26% 28% 43% Return on Equity* 26% 33% 37% 39% 31% 42% 79% Debt to Equity 32% 36% 49% 47% 40% 31% 10% *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period. Source: PricewaterhouseCoopers, Antam

Key Ratios Australian Miners Indonesian Antam Miners Average 10 years Average 10 years Average 10 years (1997-2006) (1997-2006) (1997-2006) Ebitda Margin NA 39% 35% Net Profit Margin 12% 16% 20% Return on Equity* 12% 19% 22% Debt to Equity NA 115% 37% *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period. Source: PricewaterhouseCoopers, Antam

What it all boils down to for most investors is the shareprice and dividend performance of their different investments, something that is reflected in the calculation of total shareholder returns.

We had a record year in terms of generating total shareholder returns, which increased to 180% or Rp2,920.12. Our shareprice rose 176% to end the year at Rp4,475. This compares with total shareholder returns of 126% or Rp910.01 in 2006. As in the preceding two years, our share price outperformed the Indonesian Stock Exchange, every major international index and all major mining indices.

As in every year since listing on the Indonesian Stock Exchange in 1997, we returned value to our shareholders by way of a generous cash dividend. We paid a cash dividend in the amount of Rp621 billion, or 40% of our net profits after tax for the year ended December 31st, 2006.

5 Year Quarterly Share Price and Trading Volume

Share Price Volume Rp Rp million 5,000 9,000

4,500 8,000

4,000 7,000 3,500 6,000 3,000 5,000 2,500 4,000 2,000 3,000 1,500 2,000 1,000 Trading Volume 1,000 500 0 0 Share Price 2003 2004 2005 2006 2007 2008

PER SHARE DATA

2006 2007 Change %

Earnings Per Share* 162.79 538.08 231

Dividend Per Share* 65.116 To be decided in AGM - EPS hiked more than double in line with robust production and sales as well as a Average Price Earning Ratio 11.7 9.0 -23 strong commodity market. *Retroactive effect after stock split.

SOME OF OUR ANALYSTS: Analyst and Media Coverage (2006 in parenthesis) Adam Worthington Macquarie Reports Analysts Press ASX Bloomberg Bloomberg Daisy Suryo Merrill Lynch Releases Fillings Articles Terminal Andreas Bokkenheuser UBS “Entries” Cherie Khoeng Deutsche Bank Ahmad Solihin CLSA Buy Hold Sell 19(20) 23(16) 61(43) 275(229) 577(541) Isnaputra Iskandar Danareksa 35(27) 15(33) 15(17) Jerome Jovellana Mandiri Achmad Syafriel Bahana Stefanus Darmagiri UOB Yusuf Ade Winoto DBS Ricardo Silaen Kim Eng Major Shareholder: Shares in Issue 9,538,459,750 David Fergusson Citigroup Government of Indonesia (65%) Ami Tantri JP Morgan Market Capitalization Rp42.7tn Substantial Shareholders: Haider Ali Credit Suisse (US$4.54 billion) MS + Co Inc CA (3%) Rania Rahmundita CIMB Share Price Range Rp1,400-5,050 Christine Salim Samuel Final Dividend Payment Date: Norico Gaman BNI Average Share Price Rp2,742 July 6th, 2007 Felix Sindhunata Mega Capital Trading Volume 21.17 billion Final Dividend Amount: Adrian Rusmana HD Capital Rp325.58/share (Rp65.116/share after stock split) Average Daily Volume 86 million Triwira Juniarta NISP A$0.215428/CDI (A$0.0430856/CDI after stock split)

2007: A Great Year

February 5th February 12th Over twenty companies January 29th Antam sends aids to participate and there February 23rd FeNi III commercial flood victims in Jakarta. are 3 winners. Antam Antam and BHP Billiton operations begins. holds tender to sell 2 establish alliance to develop million wmt of nickel ore Halmahera nickel deposit. to China.

March 12th June 5th Antam and partners form May 30th Antam raises saprolite June 18th joint venture company for Antam pays cash nickel ore reserves and Antam lowers power the Tayan chemical grade dividend of Rp621 billion resources by 61% to load of FeNi III smelter alumina project. or Rp65.116 per share 180 million wmt. due to small metal leak. (adjusted for stock split).

Share Price Rp

5,000 1,200

1,000 4,000

1 800 2 3,000 3 4 600 2,000 400

1,000 200

0 0 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08

2007 Antam Annual Report www.antam.com Exploration Detailed Corporate and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us 15

July 12th August 1st Antam stock split at a Mining activities at ratio of 5:1. Pongkor gold mine August 26th September 6th continue to run at Antam switches on FeNi Antam and UC Rusal sign normal level after III smelter following the a heads of agreement to mining accident. completion of partial develop bauxite deposit in repairs. Indonesia.

September 11th September 21th September 21st Antam appoints Antam to lower its nickel Antam sends aids to October 31st Macquarie as financial power cost by up to 8- earthquake victims in Antam signs an agreement advisor to advise and 10% through the use of Bengkulu and West with Tsingshan of China to assist in relation to 15MW low impact hydro Sumatera. conduct a feasibility study Antam’s project pipeline power plant. as well as in relation to of jointly developing a acquisition advisory. stainless steel facility.

MOST READ BLOOMBERG NEWS 1 June 4, Antam Studies Plan to Triple Nickel Output by 2012

2 June 5, Indonesia May Take Back Parts of Coal, Metal Areas 3 June 19, Aneka Tambang Smelter Has Second Leak; Keeps Target Volume 4 June 21, Indonesia May Change Mining Law to Suit Investors Rp million 5 July 17, Indonesia Rules Out Ore Export Ban, Consider Taxes 5,000 1,200

1,000 4,000

800 3,000 5 600 2,000 400

1,000 200

0 0 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08

Our strategy is as effective as it is simple. We will create maximum shareholder value by continuing to diversify horizontally into other commodities where suitable, while also continuing to focus on those commodities we know best, which are nickel, gold and bauxite. We will diversify through an active exploration program and through strategic acquisitions.

We will also maintain a diversity of customers so as to not be overly reliant on any one market. We will also continue to diversify vertically by moving downstream in order to increase the value- added of our operations. While some of the bigger international mining companies have claimed they will now start to move upstream, they are moving from now lower margin refining back into smelting, or from packaging to refining. We are moving downstream to the first level of processing where the increased value is substantial. Later on, if it makes good business sense, we will move further downstream, such as from ferronickel to stainless steel. We have focused on nickel, gold and bauxite in the past and this has proven to be a winning combination. Our results in 2007 are largely due to the increased value that came from moving more downstream by building additional ferronickel capacity.

We will continue to be a low cost operator and holder of large reserves and resources and continually strive to improve in these areas. We will also continue to not overly burden our balance sheet and take a prudent approach to making investments, which must generate a return of at least 15%.

Cash Cost, Production Cost and Average Selling Price Unit 2006 2007 2007/2006(%) Cash Cost Ferronickel US$/lb 4.40 5.55 26 Saprolite Nickel Ore US$/wmt 20.15 20.32 1 Gold US$/t.oz 283.93 383.10 35 Production Cost Ferronickel US$/lb 6.00 6.99 17 Saprolite Nickel Ore US$/wmt 20.32 20.48 1 Gold US$/t.oz 375.36 481.74 28 Average Selling Price Ferronickel US$/lb 10.12 16.16 60 Saprolite Nickel Ore US$/wmt 55.36 82.43 49

Gold US$/t.oz 611.59 702.63 15 Our ferronickel cash cost rose due to higher ore feed costs and higher fuel prices. We will lower costs by converting to a lower cost fuel.

Without reserves, a mining company is nothing. Unlike other businesses, the life of a mining company can be very easily determined, based solely on the size and quality of its reserves. Our reserves are the basis of our strategy. All the other strategies stem from the decisions we make about how we can create the most value from our existing large reserves and resources. The reserves of our gold, one of our three core commodities, are dwindling and so we are actively seeking to discover or acquire more gold. Without having good knowledge of your reserves, subsequent planning will be misguided. For this reason, and also to fulfill a listing requirement of the ASX, every year we estimate our reserves according to the JORC Code, which is determined by the Australasian Institute of Mining and Metallurgy.

Mineral Resources and Ore Reserves (‘000 wmt)*

Commodity Quantity Change (%)

2006 2007

Saprolite Nickel 179,850 180,900 1

Limonite Nickel 185,150 214,200 16

Gold 3,863 3,973 3

Bauxite 84,400 81,600 (3)

Proved and Probable Reserves (‘000 wmt)*

Commodity Quantity Change (%)

2006 2007

Saprolite Nickel 63,900 55,100 (14)

Limonite Nickel 51,450 50,150 (3) The 14% decrease of nickel reserves is largely due to production. The 13% decrease Gold 2,882 3,026 5 of bauxite reserves is due to a portion being reclassified as indicated resources. Bauxite 84,400 73,100 (13) *Based on the Competent Person’s report. Figures as per December 31, 2007 (inferred resources were included in gold estimation). Please see detailed tables in the Exploration and Reserves section.

We take corporate governance extremely seriously. Firstly, because we believe good corporate governance is a good business decision. Especially for a mining company in Indonesia, behaving in a clear, consistent, fair, accountable, responsible way will yield the highest and most durable profits. As well, important aspects of the business, such as raising capital, to finding partners, to securing favourable terms with our suppliers can all benefit from being a well governed company.

Secondly, it’s simply about operating ethically; about doing the right thing, about making good profits, but also about giving back to the communities we operate, in ways other thanjust generating economic development. We want to be a partner with the communities we are in and work together with them for the best possible outcomes.

Annual Report Award 2006

• Ranked 1st Overall

• Ranked 1st SOE Non Finance Category

League of American Communication Professionals (LACP) 2006 Vision Awards Annual Report Competition

• Platinum Winner (Materials Category)

• Gold Winner (Best In-House Report Category)

• Ranked 11th from over 2,500 international entries

Asia’s Best Companies 2007 – FinanceAsia

• Best Managed Company (rank 6th)

• Best Corporate Governance (rank 5th)

• Best Investor Relations (rank 2nd)

• Most Committed to a Strong Dividend Policy (rank 6th)

Ranked in the 50 Top Reports from around the world as compiled in the Annual Report on Annual Reports, the international contest run by Europe’s E.Com, the only Indonesian firm to do so.

The Best Corporate Governance Practices in the Small/Mid Cap Category in Asia/ Pacific by Technical Criteria - IR Global Rankings

Top Performing Listed Company – Investor Award 2007

Overall Third Best Company in Indonesia – Corporate Governance Poll 2006 – Asiamoney

Gold Medal in 2007 International Conference on Quality Control Circles, Beijing.

Exciting Projects

Organic Growth Projects

Project Product Location Volume Status Operational Year PT Indonesia Chemical Alumina Chemical Grade Alumina Tayan, West Kalimantan 300,000 tpa - ICA formed in March 2007 2010 or 2011 - Updating BFS, EPC selection and financing SGA Bintan Project Smelter Grade Alumina Bintan Island, Riau 400,000 – 600,000 tpa Not Feasible Terminated SGA Mempawah Project Smelter Grade Alumina Mempawah, West Kalimantan 1.0 million tpa - JVA negotiations, Feasibility studies 2011 SGA Munggu Pasir Project Smelter Grade Alumina Munggu Pasir, West Kalimantan 1.2 million tpa - Agreement signed in September 2007 – - JVA negotiations, Feasibility studies Mandiodo NCPI Project Phase 1: NCPI Mandiodo, Southeast Sulawesi _ - JVA negotiations, Feasibility studies 2010 Phase 2: Stainless Steel Obi NCPI Project Phase 1: NCPI Obi Island, North Maluku 7,500 tpa of Nickel - Agreement signed in October 2007 2012 Phase 2: Stainless Steel Contained in Pig Iron - JVA negotiations, Feasibility studies Krakatau Iron Project Sponge Iron South Kalimantan 300,000 tpa - JVA negotiations, Feasibility studies 2010 Pearl Nickel Project 1) Ferronickel Halmahera Island, North Maluku 1) 30,000 tpa - 50,000 tpa of FeNi - Agreement signed in February 2007 1) 2012 2) Nickel Cobalt 2) 60,000 tpa of nickel cobalt - JVA negotiations, Feasibility studies 2) BFS by 2012 • Note: this table is for illustrative purposes only as the feasibility studies are still being conducted for many of these projects and as such many aspects were not final • NCPI = Nickel Contained in Pig Iron • EPC = Engineering Procurement and Construction • BFS = Bankable Feasibility Study • JVA = Joint Venture Agreement • TPA = Tons per annum

With large cash reserves following a recent expansion of our nickel volumes and thanks to a strong nickel price, we are ready to make new investments for our next phase of growth. With average annual nickel prices likely softening in the next couple of years and with little production growth if any in 2008, we feel it is imperative for our shareholders to also look carefully at our growth in the next three to five years.

With large reserves of nickel and bauxite we are investing, often together with experienced international partners, for a better future. This means moving downstream to create more value from our reserves. We want to squeeze as much value as possible from our reserves, which means careful planning and execution. Currently we have smelter and chemical grade alumina projects building on our bauxite reserves, with Chinese, Japanese, Russian and European mining and metal companies. We have a massive nickel project with BHP Billiton, which will likely use both phyrometallurgy and more advanced hydrometallurgy, to best process our largest nickel deposit, at Buli, North Maluku. We have two Nickel Contained in Pig Iron projects, with Tsingshan and Jindal which would use simple blast furnaces to process our low grade nickel ore into NCPI and then if feasible, move further downstream into stainless steel. We have a sponge iron project with PT Krakatau Steel. We will also invest in cost reduction, to convert from high cost diesel, to either coal, hydro or natural gas, and create a substantial cash cost reduction.

On the acquisition side, we are looking to acquire gold assets in Indonesia to replenish our dwindling gold reserves and as part of the strategy to maintain diversity, we have made a joint takeover bid for Herald Resources Ltd of Australia, which owns 80% of a lead/zinc project called PT Dairi Prima Mineral.

This table shows a summary of some of our exciting projects. More details are provided inside in our “Investing for a Better Future” chapter.

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Organic Growth Projects

Acquisitive Growth Projects Company Product Project Name/ Volume Status Location Herald Resources Ltd Lead/Zinc PT Dairi Prima At full rate: As of April Mineral, North 1m tonnes of 2008, Sumatra throughput for 7 takeover years (320,000 bid was in tonnes of process concentrate and, 175,000 tonnes of metal) Various Targets Gold Various, Indonesia – Identify target in 2008 PT Borneo Edo Bauxite West Kalimantan – – International PT Mega Citra Utama Bauxite West Kalimantan – –

The mining business is inherently risky. This is even more so when operating in a country like Indonesia which is going through many fundamental economic and political changes. Risks that we are constantly aware of include price volatility of our main products, higher international oil prices, currency rate fluctuations, operational disruptions and regulatory risks associated with licensing and permits as well as the revision of the mining law.

The mining business also has many challenges. It is a capital intensive, slow yielding business and many different moving parts must be controlled to make a viable mining and metals project come to profitable operation. One of our main challenges right now is regaining our position as a low cost producer of ferronickel. Although we produce our other products at low cost, because of the removal of national fuel subsidies we have seen the cash cost of ferronickel climb consistently higher. As at the end of 2007, we were still in the top quarter of the industry cost curve. We therefore plan to soon convert to a lower cost fuel, such as coal, hydro or natural gas.

ANTAM’S PRODUCTION COSTS 2006 (%)* 2007 (%)* Materials 19 27 Ore Mining 15 17 Fuel 17 12 Labor 14 9 Depreciation 14 9 Royalty 4 5 Materials were the largest cost component inline with higher nickel output and increased *Of total production costs ore feed costs.

2007 NICKEL INDUSTRY COST CURVE (2007$)

14.0

12.0

10.0

8.0

6.0 PT Aneka - Pomalaa

4.0

2.0 C1 Cash Cost ($/lb Ni) 0.0 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 -2.0

-4.0

-6.0 Copyright Brook Hunt 2008 Production (kt Ni)

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The Outlook

INVESTOR ALERT! After a period of growth and We are often asked about specific targets we are aiming for cash collection, 2008, while not in the next one, three or five years. In general, we can say in great in terms of revenue growth, will be an important our pursuit of creating maximum shareholder value, we are year for investing in significant long term constantly striving to become bigger, better, more diversified growth and sustainable. We feel it is slightly reckless to give anything more than our volume targets beyond the year ahead. We make forecasts for commodities and fuel prices. Therefore, while we forecast expected revenues, profits and margins for the year ahead, we do not have specific targets. We take this approach as the mining business is a complicated one, with many moving and sometimes uncontrollable parts.

LME Price (US $/lb)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 13.20 10.96 7.50 4.75 4.35 5.00 5.80 8.00 7.50 8.20 8.80 9.50

Source: Brook Hunt

Production Volume Targets Product 2007 Actual 2007 Target 2008 Target % Change Nickel contained in 18,532 tonnes 20,000 tonnes 17,000 tonnes - 8% Ferronickel Nickel Ore 7,112,870 wmt 5.5 – 5.8 million wmt 5.8 million wmt - 18% Gold 2,791 kg 3,000 kg 2,980 kg + 7% Bauxite 1,251,247 wmt 1.5 million wmt 1.5 million wmt +20%

Bloomberg Consensus Estimates (in Rupiah unless otherwise noted) 2008: The Year To Date 12/2008 12/2009 • January 29th - We announce our AUD$2.50 joint takeover bid with Zhongjin, for Australian miner, EPS 399.032 308.681 Herald Resources Ltd (HER). Cash Flow Per 444.684 436.702 • January 31st – We announce that the Ministry of SOEs, as well as the management of HER, Share support our takeover bid for HER. Dividends Per 189.693 140.060 • February 14th – We clarify rumours that we were going to buy a minority stake in PT Freeport Share Indonesia. The Minister of SOEs had only commented he supported our buying into PTFI. Sales 9.4 trillion 8.4 trillion • March 7th – We lodge the Bidders Statement related to the HER takeover.

Net Income 3.8 trillion 3.2 trillion

Return on Equity 42% 30%

Net Debt - 5.8 trillion - 7.9 trillion

Price/EPS 7.7 10

Price/Cash Flow 6.9 7.0

Dividend Yield 6.2 4.6

Source: Bloomberg, as at April 8, 2008, based on number of estimate ranging from 11 to 16.

Operations (100% Antam) Antam’s Projects

Type Location Strategic or Majority Stake Development Projects Head Office and Geology Unit 1 Bauxite Mine Kijang 1 Tayan Chemical Grade Alumina (CGA) Antam 49% Gold 2 Gold Factory Cikotok 2 SGA Munggu Pasir Antam 49% Nickel 3 Gold Mine Cikidang 3 Pearl Project (FeNi IV and Hydromet) Antam 50% Iron Sands 4 Irons Sands Mine Kutoarjo 4 Tsingshan Nickel and Stainless Project Antam 60% Bauxite 5 Irons Sands Mine Lumajang 5 PT Borneo Edo International Antam 60% Diamond and Base Metal 6 Precious Metal Refinery Jakarta 6 PT Mega Citra Utama Antam 80% 7 Gold Mine and Factory Pongkor 7 SGA Mempawah Antam 55% 8 Nickel Mine and Smelters Pomalaa 8 Sponge Iron with Krakatau Steel Antam 34% 9 Nickel Mines Tanjung Buli, Mornopo, Gee

Certain Minority Stake Joint Venture Projects 14 Malaysia 9 PT Nusa Halmahera Minerals* Antam 17.5% 10 PT Cibaliung Sumberdaya Antam 10.25% 11 PT Sorikmas Mining Antam 25% 12 PT Gag Nickel Antam 10%

MARTABE 13 PT Weda Bay Nickel Antam 10% (Gold Deposit owned I N D O N E S I A 14 PT Dairi Prima Mineral Antam 20% by Oxiana that Antam 15 PT Galuh Cempaka* Antam 20% considered investing in) 5 1 *currently operational 11 9

9 C 7 3 5 13 SONORO 1 (Gas field owned by 2 6 Medco) 1.200 Km POSO LAKE D (Potential Hydro 4 8 Power Plant) 12 E B 15 450 Km A

8 POMALAA TIMUR (PT Inco-owned property and Antam source of 1 million GRASBERG 6 wmt of nickel ore 7 SENGKANG (PT Freeport Indonesia (Gas field owned by per year) 10 2 3 owned mine that Antam Energy Equity Epic considered investing in) F (Sengkang)) 4

BATU HIJAU (Newmont-owned mine that Antam considered investing in) Antam’s Promising Exploration Areas

Prospect Location A Nickel Bahubulu, Tapunopaka, Mandiodo B Nickel Morowali C Nickel Buli, Gee HEAD OFFICE GOLD AND REFINING BAUXITE AND IRON SANDS NICKEL AND REFINING D Gold Gunung Patah Tiga E Gold Seblat Assets Rp5,618 billion Assets Rp707 billion Assets Rp212 billion Assets Rp5,501 billion Sales - Sales Rp1,163 billion Sales Rp158 billion Sales Rp10,687 billion F Gold Papandayan Employees 282 Employees 740 Employees 175 Employees 1,504 Note : Antam had other active exploration areas not indicated on this map.

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Operations (100% Antam) Antam’s Projects

Certain Minority Stake Joint Venture Projects 14 Malaysia 9 PT Nusa Halmahera Minerals* Antam 17.5% 10 PT Cibaliung Sumberdaya Antam 10.25% 11 PT Sorikmas Mining Antam 25% 12 PT Gag Nickel Antam 10%

9 C 7 3 5 13 SONORO 1 (Gas field owned by 2 6 Medco) 1.200 Km POSO LAKE D (Potential Hydro 4 8 Power Plant) 12 E B 15 450 Km A

BATU HIJAU (Newmont-owned mine that Antam considered investing in) Antam’s Promising Exploration Areas

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Antam Shares and Shareholders Market Overview 28

Shareholders Information 28

Total Shareholder Returns 30

Dividend Policy 31

Investor Relations 32

Investor Perception Survey 34

Direct Feedback from You 35

Q&A with Our Largest Shareholder 36

Market Overview The year 2007 was a strong yet volatile year for participants in the global capital markets driven by continuing and seemingly unstoppable growth of China, ever higher commodity prices and a fast acting, accommodating Federal Reserve, combined with rising oil prices increasingly global fears over the subprime mortgage crisis in US, the subsequent credit crisis and fears of recession in the West. Although turbulent, most bourses around the world performed well, especially in emerging markets.

The Indonesian Stock Exchange (IDX) also posted a significant increase of 52% to 2,746, only beaten by China’s bourses and was the region’s third best performer. The IDX had a market capitalization of Rp1,995 trillion with an average daily value to Rp4.3 trillion in 2007. The top three sector performances were mining, agriculture and property. One important factor in the strong performance of the IDX, and a new phenomenon in 2007, was the huge increase in domestic institutional and domestic retail investors. Local investors caused daily trading volumes to soar, significantly improving liquidity and higher valuations.

Antam’s Shares Since 1997, Antam’s shares have traded on the Indonesian Stock Exchange (IDX - formed by the merger of the Jakarta Stock Exchange and Surabaya Stock Exchange in 2007). Besides a Main Board member, the company is also a member of the Jakarta Mining Index, LQ 45 (45 most liquid shares of the exchange) and the Jakarta Islamic Index.

Antam is also listed on the Australian Securities Exchange (ASX - resulting from the merger of the Australian Stock Exchange and the Sydney Futures Exchange in December 2006). Antam’s shares were listed with exemptions on the ASX in 1999 and the listing was augmented to a full ASX Listing in 2002. The purpose of Antam’s listing is to subject the company to more stringent standards of transparency and disclosure, in particular for reporting the annual estimation of mineral resources. Antam’s securities are traded as Chess Depository Interests (CDI) where one CDI represents five underlying common shares, with each fully convertible into the other. In 2007, 120,250 CDIs were traded with modest trading activities.

Corporate Action: Stock Split At an Extraordinary General Meeting on May 30th, 2007, Antam’s shareholders approved management’s proposal of a stock split at ratio of 1 share with a nominal value of Rp500.00 per share to 5 new shares with a nominal value of Rp100.00 per share.

The purpose of the stock split was as follows: 1. to increase trading liquidity. 2. to improve distribution of share ownership by creating a less expensive unit price that is more appealing to small and retail domestic investors. 3. to help create market capitalization growth.

Share Chronology Overview

Description Number of preferred Number of common stocks Number of Total Shares stocks (A Series) (B Series) common stocks (B Series) The Government of RI The Government of RI Public Nominal Value Rp500 per share 1. Initial Public Offering (IPO) in 1997 1 799,999,999 430,769,000 1,230,769,000 2. Bonus Shares* in 2002 1 1,239,999,999 667,691,950 1,907,691,950 Nominal Value Rp100 per share 3. Stock split** in 2007 1 6,199,999,999 3,338,459,750 9,538,459,750 * During Extraordinary General Meeting of Shareholders on June 19,2002 it was resolved to issue a bonus share from the capitalization of additional paid-in capital using a ratio wherby ownership of 100 shares warrants receipt of 55 new shares. On July 30, 2002, Antam approved the issuance of 676,922,950 new B Series in the amount of Rp338 billion from 1997 IPO. ** The Extraordinary General Meeting of Shareholders on May 30, 2007 approved of the split of nominal value of stock split at ratio 1 share with nominal value of Rp500.00 per share to 5 new shares with nominal value of Rp100.00. As result of stock split, total of issued and fully paid capital was 1 preferred stock (Dwiwarna) owned by The Government of Indonesia and 9,538,459,749 ordinary (common) stocks.

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SHARE OWNERSHIP SUBSTANTIAL SHAREHOLDERS AS PER DECEMBER 31, 2007

No. Shareholders Shares % 1 Government of the Republic of Indonesia 6,200,000,000 65.00 2 Ms + CO INC Ca 244,212,136 2.56 3 Jpmorgan Chase Bank Na Re Norbax Inc 219,222,500 2.30 4 Investor Bank and Trust Company (West) 157,556,000 1.65 35 % 2007 65 % 5 The Northern Trust S/a Avfc 97,197,000 1.02 % 6 Pt Jamsostek (Persero) - Jht 61,000,000 0.64 7 Pertamina Pension Fund 58,173,125 0.61 8 Ssb 2d09 Ssga Emerging Markets Fund-2144 43,707,500 0.46 9 Liu Siauw Kie 40,500,000 0.42

Government 10 Pt Taspen 40,387,500 0.42 11 Rennier Latief 38,500,000 0.40 Public 12 Ssb S/a Zv96 Daily Active Emer. Mkts Sec 38,480,000 0.40 13 Rd Fortis Infrastruktur Plus 36,380,000 0.38 14 Ssb Ps1o Pacific Select Fund Emerging Ma 36,082,950 0.38 15 Cb London S/a Hauck and Aufhaeuser Banqu 32,519,500 0.34 16 Pt Jamsostek (Persero) - Non Jht 32,500,000 0.34 17 Fortis Ekuitas -89763.4000 32,344,500 0.34 18 Bank of New York 32,316,275 0.34 19 Kim Eng Securities, PT 30,000,000 0.31 20 Ssb 2r26 Sanford C. Bernstein Fund, Inc. 29,168,000 0.31

Shareholder Composition of Holders owning less than 5% of Antam’s Shares as per December 31, 2007

Type of Investor Domestic Foreign

Number of Shares Number of Holders Number of Shares Number of Holders

Retail 872,770,195 19,934 11,835,750 180

Institutional 884,981,381 695 1,568,872,424 217

TOTAL 1,757,751,576 20,629 1,580,708,174 397

Share Price Performance vs Jakarta Composite Index in 2007 Share Price Index Rp

6,000 3,000

5,000 2,500

4,000 2,000

3,000 1,500

2,000 1,000

1,000 500 IDX

0 0 ANTAM Jan Jun Dec

Quarterly Share Price Movement* PUBLIC SHAREHOLDERS COMPOSITION 2006 2007 (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Highest (Rp) 935 1,210 1,180 1,690 2,370 3,250 2,875 5,050 27.2 23.1 28.7 30.4 16.6

Lowest (Rp) 705 730 860 1,090 1,400 2,390 1,875 2,600 9.3 4.4 6.9 3.0 Closing (Rp) 870 925 1,100 1,600 2,370 2,510 27,75 4,475 1.9 9.1 3.4 5.0 3.3 2.7 Volume (Billion) 1.97 2.38 1.64 1.06 3.69 5.16 4.09 8.23

112.4 247.8 158.9 562.2 Average Value Traded (Billion) 27.3 37.3 26.8 25.0 65 65 65 65 65 *Adjusted share price after stock split in 2007.

Stock began trading with the new nominal value at the continuous auction market on July 12th,

2007. Please see the Share Chronology Overview Table for more details. 03 04 05 06 07

Total Shareholder Returns Government Retail Investors Antam’s share price (adjusted) increased 176% from Rp1,620 to Rp4,475 while total shareholder Institutional Investors Foreign returns in 2007 increased to a once again hefty 180% compared to the 126% of 2006. The average trading value reached Rp264.1 billion while trading volume booked 21.17 billion shares. Antam’s market capitalization increased 187% to Rp43 trillion (US$4.6 billion) or 2.2% of total IDX market capitalization and was the 12th largest listed company.

Distribution Schedule (including holders of CDIs)

Number of Shares Held Total Shares Number of Holders 1 - 1,000 1,306,050 1,644 1,001 - 5,000 21,648,050 6,403

5,001 - 10,000 29,597,875 3,501 10,001 - 100,000 276,857,623 7,665 100,001 - 1,000,000 439,937,475 1,516 > 1,000,000 8,769,112,677 298 TOTAL 9,538,459,750 21,027

In 2007, Antam’s share price performed better than the indices of most international stock exchanges, such as the Dow Jones, S&P 500, FTSE 100 and ASX All Share Mine which Antam outperformed by 158%, 165%, 169% and 86%, respectively. However, due to the strong cumulative performance of the mining sector in Indonesia, Antam underperformed the Jakarta Mining Index by 19%. Antam still beat the IDX Jakarta Composite Index by 85%. Furthermore, based on a Bisnis Indonesia list published on March 31st 2008, Antam created the largest sales growth and net profit increase amongst the largest 10 non-bank public companies listed on the IDX, beating mining and other companies.

Total Shares and Composition of Shareholders The authorized capital of the company (after stock split action) was Rp3.8 trillion comprising 1 Dwiwarna (Golden) series A preferred share and 37,999,999,999 common shares with a nominal value of Rp100 per share. The issued and fully paid-up capital was Rp954 billion consisting of 1 Dwiwarna (Golden) series A preferred share owned by the Government of the Republic of Indonesia and 9,538,459,749 ordinary shares. 65% of the issued capital or 6,200,000,000 shares were owned by the government, while 35% of the issued capital or 3,338,459,750 shares were publicly traded.

At the end of 2007, the largest public shareholder was MS + CO INC CA with a 2.56% ownership. Unlike prior years in which most of the free floating shares were traditionally owned by foreign institutional

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Number of Holders of Each Class of Security and Associated Voting Rights

Security Class Number Voting Right/Privileges

Preferred Stock 1 • Can request EGM (A Dwiwarna Share) • Appoints candidates and approves of Commissioners and Directors elected at AGM/EGM • Cannot transfer preferred stock to another holder • Can only be owned by the Republic of Indonesia • Must approve decision to issue equity

Common Stock 9,538,459,749 • Each share equals one vote at AGM/EGM (B Shares) • Holders of more than 10% can request AGM/EGM, and request agenda items

AGM = Annual General Meeting of Shareholders EGM = Extraordinary Annual General Meeting of Shareholders

investors, local investors accounted for 18.4% of Antam’s free float while foreign investors held 16.6%. Based on shareholder composition, the top 5 biggest shareholders were long-term foreign institutional investors. Foreign institutional investors collectively held 16.4% of Antam’s total shares, while local individual investors held 9.15%, local limited companies held 4.95%, local mutual funds held 1.82% and local pension funds held 1.55%.

Dividend Policy The company’s dividend policy is to distribute a cash dividend to the shareholders at least once a year. Since 1997, the dividend policy has been to use a minimum payout ratio of 30% of net profit after tax, unless the Annual General Meeting of Shareholders (AGM) determines otherwise. The company’s average dividend payout ratio for the past 5 years is 34.8% and since 1997 IPO the average dividend payout is 39.4%.

The AGM held in May 30th, 2007 decided Antam must pay a 40% dividend payment of the net profit (payout ratio) of 2006, amounting to Rp621.11 billion or Rp65.116 per share (adjusted for stock split), a significant increase compared to the dividend on earnings of 2005 of Rp286.26 billion or Rp150.05 per share (equivalent to Rp30.01 post stock split). The ex dividend date was June 22nd, 2007 for the continuous auction market, the recording date for dividend payment was June 26th, 2007 and the dividend payment occurred on July 6th, 2007.

Realization of the Utilization of Funds Obtained from the Initial Public Offering as per December 31, 2007 In 2004, Antam had fully utilized the Rp556 billion raised from the 1997 IPO. Please see table below for more details on the utilization of funds obtained from the Initial Public Offering.

Utilization of Net Proceeds from the Initial Public Offering (as of December 31, 2007)

Utilization Amount (%) Amount Realized (Million Rp) (Million Rp)

FeNi III Expansion 73 406,152 381,646

Construction of Coal-fired Power Plant 9 50,074 -

Replacement and Modernization of FeNi I 8 44,510 127,998

Repayment of Certain Indebtedness to Bank BDN 5 29,243 29,243

Development of the Logam Mulia Refinery 5 26,394 17,486

Total 100 556,373 556,373

32 Investor Relations

The main objective of the IR department is financial: to help lower the company’s cost of capital. Essentially two thirds finance and one third communications, Antam’s IR attempts to achieve this goal by creating understanding about Antam in the capital market and by raising the profile and recognition of Antam amongst the investment community. By creating ongoing dialogues with targeted shareholders we strive to boost Antam’s credibility and to successfully bridge management and investors.

Antam endeavors to constantly improve transparency and disclosure to attract investors in the competition for capital. We are dedicated to providing information that can be compared to peers and delivered in a timely and balanced manner. While we may feel we are well known, we recognize for the vast majority of the international capital market we are unknown. Through proactive targeted campaigns we hope to become amongst the world’s best known and most credible mining companies.

Similar to 2006, the Investor Relations department is under the Corporate Secretary, which reports directly to the President Director. IR works with all the Directors, all departments and business units. The synergies between IR and all the different levels and divisions of Antam are vital in order to understand the facts of the company and to communicate feedback from the capital market to management. Without good internal disclosure we cannot have good external disclosure.

During 2007, Antam’s work included investment conferences run by international brokers in Jakarta, Singapore, Hong Kong, Bangkok and New York. Antam also conducted non-deal road shows to Singapore, Hong Kong, London, Edinburgh, Boston, Washington, New York and San Franscisco. Antam participated in two Indonesian Stock Exchange investor day

INCREASED BETTER TRANSPARENCY ACCOUNTABILITY

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From left to right: events, conducted numerous one-on-one meetings with local and foreign analysts, a site Participation at an Investor Day. visit for international conference participants in Jakarta to see Logam Mulia, advertising Extraordinary General Meeting of Shareholders, in print and television, and daily IR emails and phone calls. It was noticeable how many Jakarta, 2007. more international investors came to Jakarta, and also how international brokers opted to Antam won the Top Performing listed Company during Investor Awards 2007. organize conferences in Jakarta rather than, or in addition to, taking Indonesian corporates President Director Dedi Aditya Sumanagara in traveling conferences abroad. (on right) collects an award from Investor Magazine for best listed company. Unlike past years when we set numerous goals, Antam’s IR goal for 2008 is simply to improve the volume and quality of contact with new investors. We want to become more proactive and to target more investors. In order to achieve this we are revamping the website, maintaining our level of advertising but building multi-pronged campaigns around specific events, improving our email Newsalerts, conducting more meetings, roadshows and conferences and improving the quality of reporting by better addressing specific financials. By choosing and focusing on this simple goal for 2008, we hope to more effectively improve various other areas, and achieve other sub-goals, of our investor relations.

For us the annual report is not a regulatory requirement, but is the most important investor communication tool. However, there is always more information required. So we kindly ask you contact us. We want to hear from you!

BETTER INCREASED INCREASED PERFORMANCE COVERAGE SHAREHOLDER VALUE

34 Results of our March 2008 Investor Perception Survey

We held an online survey at the beginning of 2008, called the Antam Investor Perception Survey. We do this so we can make sure that you are getting the information you need and have an accurate perception of the company. Effective communication is a two way street and we wish to hear from you as part of an ongoing dialogue.

What are your two most important considerations in makinG a decision to invest?

Response Percent

Dividend Yield 29.9%

Earnings Per Share 32.6%

Free Cash Flow 15.6%

Revenue projections 22.6%

Competitive advantage and 32.9% sector trends

Capital Appreciation 12.3%

Management and Planning 32.6%

Outlook 17.3%

Fundamentals 45.8%

Other (please specify) 2.3%

Select Two to describe why one would invest in Antam

Response Percent

Emerging Market 17.0%

Mining 40.8%

Long-term 27.3%

Indonesian/Asian 13.8%

Dividend/Value 16.6%

Capital Appreciation/Growth 28.0%

Commodity 31.6%

Solid fundamentals 32.6%

Management and Planning 13.8%

Other (please specify) 0.4%

Select One to describe Antam’s Very Good Good Average Needs Poor Improvement

Management Team 23.4% (65) 54.0% (150) 18.3% (51) 3.6% (10) 0.7% (2)

Strategic Plans 24.3% (68) 48.3% (138) 20.0% (56) 5.7% (16) 0.7% (2)

Corporate Governance 20.1% (56) 52.5% (146) 19.8% (55) 6.1% (17) 1.4% (4)

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Here, as well as throughout the pages of this annual report, are Direct Feedback some excerpts of the feedback to one of the questions we asked in our online Investor Perception Survey 2008. The question was: “If you could tell Antam’s management one thing, what would from that be?” The full results are available on our website. Thanks to those who participated and congratulations to the participant You... who won the 10g gold bar from Logam Mulia.

FEEDBACK FROM Please do not say “we will acquire A/B/C mining company” without realization since many people do not believe the management anymore. Sorry once again I do not mean to put the management down, just a recommendation.

FEEDBACK FROM In maintaining Antam’s stock price in 2008, as nickel prices will be relatively lower compared to 2007, it would be effective if Antam could give a dividend of at least 75% from year 2007 net profit. This strategy would also be good for the government as the main owner of Antam to meet their cash inflow requirements for 2008.

FEEDBACK FROM Seek other resources of gold by acquisition and quickly implement your plans.

FEEDBACK FROM Antam’s quarterly report that it files to the Australian Stock Exchange is usually filed on the last day of the following month. How about targetting for 3 days before the end of the month?

FEEDBACK FROM Do not ever issue quarterly earnings guidance, the self-imposed benchmarks that drive executives to sacrifice long-term strategy for a short-term payoff. Disregard the speculator’s interest.

FEEDBACK FROM Your company’s must be more efficient in production related to the high price of fuel (energy). Antam must improve its performance to survive in this highly competitive sector.

FEEDBACK FROM Look for new revenue sources and increase diversification. Maintaining free cashflow is a higher priority than profit.

FEEDBACK FROM Engage more with the press.

FEEDBACK FROM Need to be more proactive on executing some of the many deals under consideration. Antam sometimes seems very slow at bringing new businesses to fruition and may miss opportunities.

FEEDBACK FROM On the outlook side, Antam is diversified. But on the revenue side, nickel is still the key catalyst. To ensure investor faith, management must continue to deliver promises that convince public investors about its development in metal markets, especially to diversify the lines of business (eg. gold & bauxite). The glitches with FeNi lll, however, will leave a scratch on the perception of Antam’s ability to sustain performance.

36 Q&A with Our Largest Shareholder

Interview with Mr. Roes Aryawijaya, Deputy State Minister of State-Owned Enterprises in Mining, Strategic Industry, Energy and Telecommunications.

How do you see Antam and the current Indonesian mining industry? Antam posted significant results in 2007 with record breaking sales and profit figures. Antam was able to capitalise on the positive momentum from the commodity boom by expanding its output. We admit the Indonesian mining industry still faces huge challenges in the middle of the euphoria of the global mining industry. I believe, however, Antam was able to utilise the available opportunities well.

What are your concerns regarding Antam? I think management should pay extra attention to the trend of increased production costs. Cost reduction will keep the competitiveness of the company in the midst of the M&A trend in the global mining industry. As well, Antam needs to increase the competencies of its human resources as well as its processing abilities. This will ensure fast adoption of the current mining technology and trends.

In 2008, the term of Antam’s Board of Directors as well as several members of the Board of Commissioners comes to an end. As a majority shareholder, how does the government see this? A change in management is normal. The government is concerned with the future and development of Antam and hope the change of management can take Antam in an even better direction. The current management was able to create Antam as one of the largest contributors to the state budget from the company’s dividends. On behalf of the government as the majority shareholder, we would like to thank management for its contribution during its term of service.

The government always strives to select the best people for top management positions based on existing laws and regulations. We conduct fit and proper tests as part of the selection process. The process comprises several stages such as formulation of a long list and a short list, psychological tests and interviews. Several factors that we view include work experience, competency, dedication and integrity.

Thank you very much for the interview. Lastly, what are your expectations of Antam? I would like to remind management that all efforts must focus on how to increase the corporate and shareholders’ value which in turn will improve the welfare of the Indonesian people. Management needs to accelerate growth projects, both organically and inorganically, not only with a prudent and professional approach but also based on good corporate governance principles. I hope that inline with the realisation of these projects, the fundamentals of the company will be stronger so as to increase the long term value for the company and its shareholders.

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Dear Shareholder Letter from the Board of Commissioners 38

Commissioners’ Statement 41

Letter from the Board of Directors 42

Directors’ Statement 49

Farewell Letter from the CEO 50

Letter from the Board of Commissioners 38

“Antam’s fundamentals are now stronger to face any challenges and Antam is more experienced to make profits from existing and future opportunities.”

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39 Dear Shareholder,

In 2007, Antam maximized profit from high commodities prices by increasing the output of its upstream and downstream products of nickel ore and ferronickel.

Inline with increased production and sales, Antam posted a Rp5.13 trillion net profit, a record breaking figure in the 39 year history of Antam. To maintain the continuity of the corporate development, we encourage the Board of Directors to start new projects which are built on the vast reserves of nickel ore and bauxite, both high grade and low grade. As well, we continue to support management’s efforts to increase and find new reserves and resources to support continuous corporate development.

We urge the Board of Directors to concentrate on moving downstream to more value added products, which incorporate the smelting and refining process, as the company is currently supported by a strong cash position. Such developments can be realized by working with more experienced partners so as to create more added value and more jobs.

The recent trend in the mining industry is of increased acquisition activities. Acquisition opportunities might also be feasible for Antam with its solid cash position as well as strong support from external parties.

Given the numerous development projects Antam currently has, management must prioritize and decide which project should go ahead first.

Although the company performed well financially, the Board of Commissioners realises Antam still faces challenges in terms of the implementation of corporate governance, human resources competencies, increasing production costs and environmental management.

As such, we continue to encourage the implementation of good corporate governance at Antam. The Corporate Policy Manual (CPM) serves as a guideline and reference for the implementation of corporate governance at Antam, which can help to ensure better corporate performance and business sustainability.

The corporate policy manual is the guideline for the company’s regulations, guidelines and policies.

During the 39th anniversary of Antam on July 5th, 2007, we signed a committment to corporate governance and a personal commitment to the Code of Conduct. The signing of both documents marks Antam’s commitment to consistently and continuously implement the principles of GCG and adhere to a proper code of conduct, which the Board of Commissioners realises are key success factors for a well functioning company.

In 2007, Antam’s Commissioner-level committees performed their duties and roles well. Antam has five Commissioner-level committees, the Good Corporate Governance (GCG) Committee, Risk Management Committee, Audit Committee, Nomination, Remuneration and HR Development Committee and Environment and Post Mining Committee. The composition of the committee members changed with the addition of new members for the Good Corporate Governance (GCG) Committee, Nomination, Remuneration and HR Development Committee and Environment and Post Mining Committee. We hope the performance of the committees will improve with the addition of the new members.

In 2007, there was a change in the composition of the Board of Commissioners. Mr. Yap Tjay Soen, Antam’s Independent Commissioner, tendered his resignation. The resignation follows Mr. Yap Tjay Soen’s appointment as an Independent Commissioner of PT Bank Mandiri Tbk in which he is required to follow Bank Indonesia Rule No. 8/4/PBI 2006 on Good Corporate Governance. Antam extends its gratitude and thanks for Mr. Yap Tjay Soen’s contribution during his term at Antam.

40 The Board of Commissioners also reminds the management that Antam’s human resources are a strategic asset, which must be managed and developed in a good and integrated management system. Antam’s human resources philosophy is to recruit, develop and keep the best human resources. The largest challenge for Antam’s human resources mangement is to develop a work force which meets international standards. To achieve this, management needs to have a Human Resources Charter and Human Resources Masterplan which serve as the guidelines and methodologies to develop and implement policies, programs and development plans to create excellent individuals.

The Human Resources Masterplan will be the guideline for human resources, both in human resources management and learning and assessment. The plan will incorporate human resources processes, such as employee recruitment, development, remuneration and benefits, industrial relations and employee dismissal.

The year of 2007 marks the 10th anniversary of Antam becoming a publicly listed company. We feel the exposure to the scrutiny and rules of the domestic and international capital markets has improved the performance of Antam.

We realise that Antam is no longer one of the low cost ferronickel producers. There are a few factors which contribute to this, some of which are uncontrollable such as the rise of oil prices. However, other factors can be managed better. We note that despite the relatively high production costs, ferronickel was the top earner for the company.

This is why the Board of Commissioners continuously supports the Board of Directors’ cost reduction program. We appreciate management’s efforts to make a breakthrough in lowering cash costs, especially by finding a cheaper energy source and to lower the use of oil to generate electricity.

We also ask the Board of Directors to improve internal controls and risk management to eliminate any mismanagement which may add extra costs to the company and to anticipate any risks as early as possible.

In relation to corporate social responsibility and environmental management, the Board of Commissioners continuously reminds the management to pay more attention to the firms responsibilites in terms of the physical, social, economic, and cultural aspects of community and regional development.

The Board of Commissioners is hopeful Antam will be successful in achieving the top environmental management level of Green from the Company Performance Rating Program (PROPER) by 2010.

The Board of Commissioners is assured that with 39 years of experience, Antam’s fundamentals are now stronger to face any challenges and that Antam is more experienced to make profits from existing and future opportunities. All of these, with a better internal control system and with the support of our stakeholders, will create a better future.

Finally, the Board of Commissioners would like to extend its gratitude for the support and cooperation from the Board of Directors, employees and other stakeholders in making Antam a bigger and better company.

Yours sincerely,

Board of Commissioners

Ir. Wisnu Askari Marantika President Commissioner

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Letter from the Board of Directors 42

“We were able to maximize the value out of our assets to succeed in our main goal of creating considerable shareholder value.”

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43 Dear Shareholder,

It is my great pleasure to report, on behalf of all the Board of Directors, that the year 2007 was one of the best years ever in the 39 years the company has been incorporated. When we judge our performance we look at EPS growth, return on equity and margins and in each case it was a great year. Thanks to the boom in commodity prices, in particular for nickel, as well as increased production volumes, we had a fantastic year in 2007 in terms of generating a large cash position from our substantial free cash flows to lay the foundation for the next stage of growth. We were able to maximize the value of out of our assets to succeed in our main goal of creating considerable shareholder value. With our strong performance, which we aim to continue, we are poised for growth and ready to create a better future in terms of growth, efficiency, value creation, profitability as well as other aspects important to all of our stakeholders.

Generating Higher Returns Total Shareholder Returns We had a record year in terms of generating total shareholder returns, which increased to 180% or Rp2,920.12. Our shareprice rose 176% to end the year at Rp4,475, after hitting an all time high of Rp5,050, with a market capitalization of Rp42.7 trillion (US$4.5 billion). The average shareprice was Rp2,742. This compares with total shareholder returns of 126% or Rp910.01 in 2006. As in the preceding two years, our share price outperformed the Indonesian Stock Exchange (formed after the merger of the Jakarta and Surabaya Stock Exchanges), every major international index and all major mining indices. As well, as in every year since listing on the Indonesian Stock Exchange (IDX) in 1997, we returned value to our shareholder by way of a generous cash dividend. We paid a cash dividend in the amount of Rp621 billion, or 40% of our net profits after tax for the year ended December 31st, 2006. The cash dividend was equivalent to Rp65.12 per share (or Rp325.58 per share prior to the 5:1 stock split in July 2007). We will continue to increase the value to shareholders by way of cash dividends in the years ahead.

Profitability Our audited consolidated net sales rose 113% to Rp12,008 billion, and with only moderate increases in operating costs, our consolidated net profit for the year ended December 31st, 2007 surged 230% to Rp5,132 billion (US$562million), with the EPS also increasing 230% to Rp538.08 from the Rp162.79 of 2006. Not only due to the record breaking high international nickel prices, but also due to volume expansion and subdued cost increases at our ferronickel and nickel ore operations, we had a year of record profitability. Our profit performance exceeded that of the top ten non-bank companies on the IDX and our net margin of 43% was the best in the Indonesian mining sector, as well as most comparable international mining companies.

Returns and Debt Despite our equity position increasing due to large influxes of free cash flow by 105% to Rp8,764 billion, and without taking on any additional debt, we were still able to significantly improve our industry-beating return on average equity to a significant 79%, up from 36% in 2006. Knowing ROE is the ultimate indicator of management’s ability to create value, we are delighted with such high returns and recognize the challenge lay in continuing to maintain this performance.

Some shareholders have criticized us for not maintaining a fixed gearing ratio, or ratio of debt to equity, as they would prefer to see us leverage the balance sheet to grow and generate returns. In 2007, we further reduced our debt to equity to 10%. However, most of our projects are still at the feasibility stage and we do not believe in pre- financing our projects. We are generating substantial returns without having to overly burden the balance sheet. We will maintain our prudent policy regarding the capital structure of the company, which is to continually reduce debt until capital expenditure plans have been finalized and debt funding is required. We will always maintain a healthy cash position and a robust balance sheet.

Margins Our margins improved significantly, again beating past records, with the gross margin increasing to 60%, the operating margin increasing to 57% and the net margin rising to 43%.

44 Comparatively Stronger During 2007 we met and communicated with many of our valued shareholders, investors and analysts. We found that some investors claimed our superior performance in 2007 was because we had gotten lucky due to the commodity boom and that a super strong nickel price had bailed out a potentially poor operational performance due to the leak at our FeNi III smelter. This is an easy assumption to make as sometimes investors have a negative perception about the efficiency and ability of Indonesian state-owned enterprises. However, and at the risk of being defensive, I must point out the facts tell a different tale. The reality is we outperformed our peers in the Indonesian, Regional and International mining sectors, looking at general mining or more specifically at nickel. And this outperformance didn’t just occur in 2007, but in many cases over the preceding five years, before the commodity boom began, and during the construction and ramp up of our new smelter FeNi III. In almost every performance measurement category, whether it is sales growth, historical return on equity, or historical margins, we have consistently equaled or beat other beneficiaries of the commodity boom.

While we never anticipated the nickel prices would soar to such heights, and we recognize the role high prices played in the performance of the company, we also must acknowledge we made a strategic decision to develop and maintain nickel as one of our key commodities. Mining is a difficult business and while unfortunate, operational setbacks will occur. It is known amongst builders and designers that every new smelter needs a couple of years before it can be run at optimal capacity.

Our Strategy We feel the performance in 2007 is confirmation our growth strategy is working. Our strategy is as effective as it is simple. We will create maximum shareholder value by continuing to diversify horizontally into other commodities where suitable, while also continuing to focus on those commodities we know best, which are nickel, gold and bauxite. We will diversify through an active exploration program and through strategic acquisitions.

We will also maintain a diversity of customers so as to not be overly reliant on any one market.

We will also continue to diversify vertically by moving downstream in order to increase the value-added of our operations. While some of the bigger international mining companies have claimed they will now start to move upstream, they are moving from now lower margin refining back into smelting, or from packaging to refining. We are moving downstream to the first level of processing where the increased value is substantial. Later on, if it makes good business sense, we will move further downstream, such as from ferronickel to stainless steel. We have focused on nickel, gold and bauxite in the past and this has proven to be a winning combination. Our results in 2007 are largely due to the increased value that came from moving more downstream by building additional ferronickel capacity.

We will focus on mines and deposits in Indonesia as not only do we benefit from our knowledge of Indonesia, but the industry in general has higher returns than elsewhere. However we will actively seek international partnerships with world class mining companies to best develop our vast reserves in the most efficient, profitable and correct way. We will engage the rise of China and increasingly India by seeking to form partnerships with Chinese companies, viewing China as an opportunity not a threat. We will continue to be a low cost operator and holder of large reserves and resources and continually strive to improve in these areas. We will also continue to not overly burden our balance sheet and take a prudent approach to making investments, which must generate a return of at least 15%.

Operations: Increased Volumes and Some FeNi III Teething Problems Our operations performed well in 2007. After all, it was the 28% increase in contained nickel production to 18,532 tonnes (including 1,400 tonnes of toll smelting) and the 93% increase of saprolite nickel ore production, which together with higher nickel prices, caused our profits to increase so substantially.

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45 Production Volume Targets

Product 2007 Actual 2007 Target 2008 Target % Change to 2007 Actual

Nickel contained in Ferronickel 18,532 tonnes 20,000 tonnes 17,000 tonnes - 8%

Nickel Ore 7,112,870 wmt 5.5 – 5.8 million wmt 5.8 million wmt - 18%

Gold 2,791 kg 3,000 kg 2,980 kg + 7%

Bauxite 1,251,247 wmt 1.5 million wmt 1.5 million wmt +20%

* in general Antam sells what it produces. For nickel ore Antam buys higher quality ore feed from a third party located closer to the FeNi facility. For gold, Antam sells double what it produces through trading activities.

Ferronickel However, it is also true that due to a leak that occurred on FeNi III on June 16th, 2007, we did not achieve the previously stated target range of 20,000 – 22,000 tonnes. While disappointing we understand there will always be problems during the ramp up period of a new smelter. FeNi III, which began commercial operations on January 29th, 2007 after a three year construction period, has already been a great investment for us and has generated good returns on the US$153 million contractor cost. The repairs were completed in August, were covered by the warranty and we ramped up the unit to a safe 25 megawatts, or roughly 60% of capacity. We will continue to slowly ramp up the furnace and determine the optimal operating conditions and as always keep you informed with timely disclosures. However for 2008, unless we are able to safely raise the average power load above the 25 megawatts as at the end of 2007, we expect to produce 17,000 tonnes, before any toll smelting. If we are able to safely and steadily raise the power above 25MW in the years ahead, our annual production volumes will increase above 17,000 tonnes.

All of our ferronickel is sold to stainless steel manufacturers, with about half being sold to Europe. The price is calculated according to the international spot price. In 2007, the achieved selling price rose 56% to US$16.16 per pound, due mainly to continuing strong demand growth from China and a lack of significant new supply. We experienced some softening in demand due to the “de-stocking” program carried out starting in the summer months by mills in Europe in order to lower demand. We also experienced some shipping difficulties related to the lack of cargo space, however not significant enough to impact on our sales volumes.

Nickel Ore To offset lower ferronickel production, we decided to raise saprolite ore exports. Saprolite is a laterite ore and is generally processed using phyrometallurgy (or heat based smelting technology) to make ferronickel and other intermediary nickel products. The most significant development with our nickel ore exports was our substantial entrance into the Chinese market. We have for many years sold 2.5 million wet metric tons of high grade saprolite to the Japanese and over the past four years around 1 million wmt of saprolite to the Eastern Europeans. At the end of 2006 we began to see demand from China for our laterite ore, which they were already buying from the Philippines and New Caledonia and were feeding into existing blast furnaces (a simple furnace which unlike an electric arc furnace does not require a power plant). Normally used to make pig iron from low grade iron ore, the Chinese firms are now using laterite to make nickel contained in pig iron (NCPI).

When we held a tender to sell 2.0 million wmt of saprolite in February 2007, twenty different Chinese firms were represented, and three were chosen. We took the opportunity presented by the Chinese demand and we decided to ramp our exports higher and ended up exporting 3.6 million wmt of saprolite to the Chinese, from combined total exports of 6.9 million wmt. The demand from China for the ore was very strong, as the high nickel prices made the high cost blast furnaces very profitable. If nickel prices were to fall below the marginal cost of operating the typical Chinese blast furnace, demand would fall. As one of the major costs is transporting the laterite ore to the blast furnace, many firms, including Antam are considering building such a facility at an ore site in Indonesia. Given there might be some slackening demand from the Chinese blast furnace operators, we are conservatively forecasting nickel ore exports of 5.5 – 5.8 million wmt for 2008. We view the entrance into China as evidence of our ability to meet new demand and find new customers and markets. It does not contradict

46 our stated strategy of moving downstream into processing as the ore we sold to the Chinese is not ore we would otherwise process ourselves.

Our Improving Corporate Governance We are pleased to see that our corporate governance improved in 2007, which an independent reviewer has attested to. For us good corporate governance is a system that needs to be executed consistently and continuously to achieve sustainable growth through management practices based on the principles of transparency, accountability, responsibility, independency and fairness.

Some significant instances of governance improvements that took place in fiscal year 2007 include the finalization of the Corporate Policy Manual, the performance review of individual executive directors and of board-level committees, and the writing of our corporate sustainability report according to the principles of international standards of reporting on such issues.

A Better Future Robust Financial Position and Ready to Grow We are in a very strong financial position. As at the end of 2007, we had cash of Rp4,744 billion, a 317% increase over 2006, and long term debt had decreased 35% to Rp700 billion. With credit rating agencies reviewing our financial structure for possible upgrades, our access to capital has never been better and we are poised for growth. We are ready to leverage our balance sheet and make suitable high return investments to create a better future, in terms of not only profit growth but also in terms of a better future in general for all of our stakeholders.

We believe we are well positioned to maximize the benefits of this amazing commodity boom that we are in, given our fortunate position as a government-owned entity in a mineral rich country such as Indonesia and we see many years of profitable and sustainable growth ahead. We have delivered industry-beating performance for the past five years and we intend to do so for the next five years.

We want to encourage our shareholders to take a long term view. Mining is a slow yielding and long term investment. Many of our shareholders have been with us for several years and they know the value taking a long term view can bring. We have just finished a phase of growth and have been building the foundation for the next phase of growth. As such, we are no longer about volume growth over the next twelve months, and due to the softening nickel prices no longer about higher prices as our main value driver.

We have a very low debt to equity and the free cash flows will continue in 2008. In 2007, our interest bearing debt to equity ratio decreased to 10% from 31% in 2006 while our free cash flow grew to Rp4,639 billion. We had operating cash flows of Rp4,836 billion and capital expenditures of Rp197 billion. It is these cash flows and other forms of funding that will pay for the various organic and acquisitive growth projects, which together with international mining companies, will develop Antam’s vast, high quality nickel and bauxite reserves.

Upcoming Organic Projects: Cash to Flow in Next Three to Five Years Antam has large reserves and wishes to develop these reserves to maximum benefit. Antam will seek partnerships with international mining companies when such a tie up will create more value. In doing so, Antam will often sign several non-binding agreements with different parties to conduct feasibility studies. Often these agreements will not result in an formal joint venture but they are the standard means by which to find the best partner and to develop the best plans to develop mineral reserves.

All of the projects below did not have fixed capital expenditure plans as at the end of 2007, but development plans will soon be finalized. These projects represent some of our long term value creation possibilities.

On September 11th, 2007 we appointed Macquarie as our corporate financial advisor to advise and assist us in relation to Antam’s project pipeline as well as in relation to acquisitions.

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47 Tayan Chemical Grade Alumina with Japanese On March 12th, 2007 we announced the formation of a joint venture company called Indonesia Chemical Alumina to study the feasibility of building a chemical grade alumina (CGA) plant to develop a portion of our large deposits of bauxite reserves at Tayan, West Kalimantan, Indonesia. The formation of ICA, with Japanese partners followed the signing of the joint venture agreement of the Tayan project in March 2006. At the end of 2007 ICA had made progress in short-listing an engineering, construction and procurement contractor (Kawasaki) and in negotiating the financing with the export credit agency, known as the Japanese Bank for International Cooperation. Construction is expected to begin in 2008, with output commencing at the end of 2010 or 2011. ICA is expected to produce 300,000 tonnes of CGA for sale to Japanese and Indonesian markets.

West Kalimantan Smelter Grade Alumina with Rusal On September 6th, 2007 we signed a Heads of Agreement with UC Rusal of Russia to jointly develop bauxite deposits in Indonesia. The agreement called for feasibility studies to be conducted on the possibility of producing 1.2 million tonnes of SGA per year. Using bauxite reserves not required for the CGA project, the SGA project with Rusal is still in preliminary stages. We had been looking at different Chinese partners, such as Chalco and Xinfa, to develop SGA on Bintan Island, but those plans did not eventuate as we did not have the same perception of the project.

West Kalimantan with Hangzhou Jinjiang Group of China As Antam did not continue the plan with Xinfa, Smelter Grade Alumina development has moved to West Kalimantan. At Mempawah, Antam began an SGA project with a new partner, Hangzhou Jinjiang Group, China. Antam aims for about 55% ownership of the project. The initial estimated cost is around US$800 million – US$1 billion and the plant may process 1 million tonnes of SGA per year. Antam expects the Bankable Feasibility Study will be completed in 2008.

Obi Island Nickel/Stainless with Tsingshan In October 2007, we signed an agreement with Tsingshan Holding Group Co. Ltd of China to conduct a feasibility study of jointly developing an integrated stainless steel facility at our laterite ore concession at Obi Island, North Maluku, Indonesia. The study will consider a project which consists of a power plant, an NCPI or ferronickel plant and a stainless steel plant and will determine the capacity and the investment amount of the facility.

The basic idea in the first stages is to mimic the blast furnaces that are operating in China, but lowerthe operating costs by eliminating the cost of transporting ore to China. The main bottle neck is getting coking coal and/or coke, which is currently not produced in Indonesia.

Pearl Nickel Project at Buli with BHP Billiton On February 13th 2007 we signed a Heads of Agreement establishing an alliance with BHP Billiton to investigate the joint development of an extensive nickel laterite resource on Halmahera Island, Indonesia. This project may include the next ferronickel expansion, FeNI IV, to process our saprolite reserves and may include the use of hydrometallurgy to process our low grade limonite reserves.

Cost Reduction Fuel is up to 50% of the cost of producing ferronickel. Currently we use expensive diesel fuel to power our operation, as we used to be subsidized. The plan to reduce costs in the future is to convert to a less expensive fuel.

On September 21st, 2007 we signed a five year Power Purchase Agreement with Tamboli Energy for the Pomalaa ferronickel facility to use up to 15 megawatts of power from a nearby run-of-river power plant. The construction is expected to take 18 months and the cheaper power will lower Antam’s ferronickel power costs by 8-10%.

While not a significant cost reduction, it demonstrates Antam’s commitment to converting to a lower cost fuel. As well, as a renewable energy source, it will slightly reduce Antam’s carbon footprint.

48 The major cost reduction will come in the next two years when we will convert to either natural gas, hydropower or coal. As at the end of 2007, we were completing feasibility work on a system called a Smart Predictive Line Controller, made by Hatch Ltd, that would allow the use of normally unsuitable coal.

Acquisitions We will also use our strong financial position and increased access to capital to make targeted and high return acquisitions that diversify our portfolio away from nickel.

For most of 2007 our focus was on making gold acquisitions, to benefit from a good price outlook, operational synergies, natural hedging and in order to replenish our dwindling gold reserves, of which we have about 6 - 7 years remaining. While we are still committed to finding suitable gold acquisitions, we value diversification and if we find a suitable acquisition in another base metal, we will take that opportunity.

At the end of 2007 we were making plans with its Chinese partner, Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd to make a takeover bid for Herald Resources Ltd. Herald owns a lead zinc project in Indonesia which we want to majority own, with Zhongjin as the operator, so as to maximize value. As at the date of publishing this annual report, we were still in the midst of our takeover bid.

We also have several minority stakes in joint ventures around Indonesia. These projects now represent potential value for Antam as they become further developed and the commodity boom continues. Two of these projects are currently operating, with the PT Nusa Halmahera gold operation run by Newcrest paying a hefty annual cash dividend, which amounted to Rp155 billion in 2007.

Challenges and Risks The main challenges we face are related to the poor regulatory environment in Indonesia due to regional autonomy, the advent of local regents granting licenses for major mining projects and the lack of a revised mining law. We hope the new mining law will soon be passed. Despite this, with our nearly forty years of experience we are well placed to handle these challenges.

Another concern we face is the risk of global recession and the knock on effect to commodity prices. While we do believe in the long term strength of commodities and the huge demand related to the emergence of China and India, there could be period of price decreases which could seriously impact on margins. Unlike other ferronickel players however, we have the ability to convert to a lower cost fuel, which we expect to implement in hopefully 2-3 years time.

The other concern is we need the appropriate technology to process our limonite. While blast furnaces can achieve this when nickel prices are high, it is not certain whether they can do so when prices fall. As well, blast furnaces can pose an environmental problem.

Another challenge is to operate in a more sustainable and environmentally-friendly fashion. This is due to the reality that corporate social responsibility is not only the right thing to do, but it makes good sense from a business perspective.

Thank You I would like to take this opportunity to thank all of our stakeholders for supporting Antam as it has become a renowned and leading Indonesian mining and metals company. I would also like to thank all of our stakeholders for supporting me during my two five year terms at Antam and I wish my successor all the best in leading Antam to its better future.

Ir. Dedi Aditya Sumanagara President Director

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Dedi Aditya Sumanagara: 10 Years as CEO 50

Jakarta, April 11th, 2008

Re: Farewell

Dear Shareholders and Other Stakeholders:

It is with a mix of sadness and delight, pride and humility that I must now say goodbye. It has been my honor and privilege to serve at Antam for these past 33 years, and as the President Director for “It has been a the past ten years. As I can only serve as President Director for two five year terms, it is now time for me to hand over the post to a new President Director. wonderful ride here Armed with my engineering degree in Mining Exploration from Bandung’s Institute of Technology, at Antam. Of course I joined Antam’s Geology Division in 1975. In 1988 I became the Head of the Geology Unit, which I did for four years, when I was appointed in 1992 as the Head of the Gebe Nickel mine. In 1994, there were bumps I became Antam’s Director of Development and in 1997, the year Antam became a publicly listed company, I was appointed Antam’s President Director. along the way, but It has been a wonderful ride here at Antam. Of course there were bumps along the way, but in the end I can say I am proud of what we achieved during my time here, especially as the President Director. in the end I can say

I have to say, listing our stock on the capital market and opening up the company to the scrutiny I am proud of what of savvy investors was one of the best things we did to improve the performance of our company. So I would like to especially thank all of our esteemed investors, shareholders, analysts, bankers, we achieved during brokers and other capital market participants for their constant inquiry and examination. Although it was not always fun to hear your feedback, it was necessary and it has helped Antam get to my time here.” where it is today.

The succession process is underway, and is being coordinated by the Ministry of State-owned Enterprises together with our Remuneration and Nominations Committee. Their choice of candidate must be ratified by our shareholders at our General Meeting of Shareholders in June 2008. I am confident that whomever comes in to replace me will be the right person for the job and will lead Antam to become even bigger and better.

I wish everyone all the best in the future, it has been my pleasure to work with you and to get to know so many of you over the years.

With warm regards,

Dedi Aditya Sumanagara

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Antam’s People The Management 52

Board of Commissioners’ Biographies 53

Board of Directors’ Biographies 55

Q&a with the Board of Directors 56

Our Human Resources 58

The Management

From left to right : Prof. Dr. Ir. Irwandy Arif, M.Sc., Ir. Supriatna Suhala, M.Sc., Ir. Wisnu Askari Marantika, Ir. Suryo Suryantoro, M.Sc.

Ir. Wisnu Askari Marantika Komisaris Utama

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Board of Commissioners 53

Ir. Wisnu Askari Marantika President Commissioner Joined Antam as President Commissioner in 2004. Graduated with a degree in Electrical Engineering, Bandung Institute of Technology (ITB) in 1976. Previously held various key positions at PT Telkom Tbk such as Engineering Director (1992-1995), Technology & Planning Director (1995-1996), Senior Staff of President Director (1996-1997), and Senior Advisor to the Board of Commissioners (2003-2004). He had executive positions in various companies such as President Director of PT Elektrindo Nusantara (1997-2000), President Commissioner of PT Komselindo (1998-1999), President Commissioner of PT Indosat Tbk (2000-2002), President Director of PT Infoasia Sukses Mandiri (2003-2006) and Commissioner of PT Infokom Elektrindo (2005-2007). Currently the Vice President Commissioner of PT Infoasia Teknologi Global Tbk.

Ir. Suryo Suryantoro, M.Sc. Commissioner Joined Antam as a Commissioner in 1999. Graduated with a degree in Mining Engineering, Bandung Institute of Technology in 1974, and received a Master of Science degree in Geology and Mineral Exploration from the School of Geology, University of New South Wales in 1984. Followed numerous management training sessions such as Sepadya (1989), Sespanas (1993) and Lemhanas (2003), Geophysics training at KUL-Belgium (1975), mineral exploration satellite data processing at USGS-USA (1986), mineral exploration at Western Australia School of Mines (1989). He began his career at the Department of Mines and Energy as Expert Staff of Gephysics Exploration at the Directorate of Geology (1974-1978), Section Head of Computer Data Processing at Directorate of Mineral Resources (1979-1988), Sub Directorate Head of Geophysics Exploration and Drilling at Directorate of Mineral Resources (1989-1995), Secretary at the Directorate General of Geology and Mineral Resources (1995-1999), Director General of Geology and Mineral Resources (1999-2001), Coordinator of Senior Advisors to the Minister of Energy and Mineral Resources (2001-2003), Head of Education and Training Agency for Energy and Mineral Resources (2003-2006). He was Inspector General of the Ministry of Energy and Mineral Resources (2006-2007).

Ir. Supriatna Suhala, M.Sc. Commissioner Joined Antam as a Commissioner in 1999. Graduated with a degree in Mining Engineering, Bandung Institute of Technology in 1975, and received a Master of Science degree from School of Mines, The University of New South Wales, Sydney, Australia in 1986. He held various key positions at the Department of Energy and Mineral Resources such as Head of Mineral Technology Research and Development Centre (1995-1997), Director of Mining Engineering at the General Mining Directorate General (1998-1999), Head of Foreign Coordination Bureau (1999-2001), Inspector at the Inspectorate General (2001-2003), Head of Research and Development Centre for Energy and Electricity (2004-2005) and Head of General Bureau of the Department of Energy and Mineral Resources (2006-2007).

Prof. Dr. Ir. Irwandy Arif, M.Sc. Independent Commissioner Joined Antam as an Independent Commissioner in 2004. Graduated with a degree in Mining Engineering, Bandung Institute of Technology in 1976, and received a Master of Science from Industrial Engineering Department, Bandung Institute of Technology in 1983. Inginieur Expert en Mine (1987). Diplome d’Etude Approfondie (1988) and Doctor (1991) from Ecole des Mines de Nancy, France. A professor of Mining Engineering at Bandung Institute of Technology in 2003. He held various key positions at the Bandung Institute of Technology such as the Head of Mining Planning Laboratory (since 1992), Chairman of the Mining Engineering Department (1995-1998), Vice to the Dean of Academic, Faculty of Mineral Technology and Geological Science (1998-2002), Secretary of Internal Control Unit (2002-2003), Head of the Internal Control Unit (2003-2004), Dean of the Faculty of Mineral Technology and Geological Science (2004-2005). Chairman of the Council Commission of the Academic Senate (2005-2007) and since 2006 until present he is the Chairman of the Internal Commission of the Board of Trustee of the Bandung Institute of Technology.

Ir. YapTjay Soen, MBA Independent Commissioner Graduated with a degree in Engineering, McGill University, Canada, in 1976, and received a Master in Business Administration in 1980. Held various positions at Citibank Indonesia (1980-1988), Director at PT Toyota Astra Motor (1989-1992), President Director of PT Astra Sedaya Finance (1992- 1993), Chief Executive Officer of PT Astra International Auto 2000 Group and affiliated companies (1993 -1998), Chief Operating Officer of Asia Food & Properties, Singapore (1998-1999), and Deputy President Director (Finance, Accounting and Investor Relations) at PT Bank International Indonesia Tbk (1999-2001), Independent Commissioner of PT Bank BNI Tbk (2004-2005). President Director of PT Tuban Petro Chemical Industries (2002-2007) and Independent Commissioner of PT Bank Mandiri Tbk since 2005. Independent Commissioner of Antam from 2002 until May 2007.

From left to right : Ir. Syahrir Ika, MM., Ir. Darma Ambiar, MM., Ir. Dedi Aditya Sumanagara, Kurniadi Atmosasmito, SE., MM., Ir. Alwin Syah Loebis, MM.

Ir. Wisnu Askari Marantika Komisaris Utama

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Board of Directors 55

Ir. Dedi Aditya Sumanagara President Director Joined Antam in 1975. Graduated with a degree in Mining (Exploration) Engineering, Bandung Institute of Technology in 1974. Held various key positions at Antam for 13 years before becoming General Manager of the Geomin Unit (1988-1992), General Manager of the Gebe Nickel Mining Unit (1992-1994) and Director of Development (1994-1997). President Director since 1997.

Ir. Darma Ambiar, MM. Director of Development Joined Antam in 1982. Graduated with a degree in Mine Metallurgy Engineering, Bandung Institute of Technology in 1981 and received a Master degree in Management from Prasetya Mulia. Held various key positions at Antam for 21 years before becoming the Head of Strategic Planning for Research of Mining Authority (2003). Director of Development since 2003.

Kurniadi Atmosasmito, SE., MM. Director of Finance Joined Antam in 1980. Graduated with degree in Management, from the Krisnadwipayana University in 1986 and received a Master degree in Management, LPMI in 1998. Held various key positions at Antam for 22 years before becoming the Head of Internal Audit (2002-2003). Director of Finance of Antam since 2003.

Ir. Alwin Syah Loebis, MM. Director of Operations Joined Antam in 1983. Graduated with a degree in Chemical Engineering, Bandung Institute of Technology in 1983 and received Master degree in Management from Prasetya Mulia. Held various key positions at Antam for 20 years before becoming the Deputy Director of the Nickel Unit (2003). Director of Operations since 2003.

Ir. Syahrir Ika, MM. Director of HR & General Affairs Joined Antam in 1998. Graduated with a degree in Animal Husbandry, University of Nusa Cendana Kupang in 1983 and received a Master degree in Management from University of Trisakti, Jakarta in 1995. Held various key positions in the Ministry of Finance since 1985. Assistant of Antam’s Board of Commisioners (1998-2001) and a member of the Audit Committee since 2001. Director of General Affairs and Human Resources since 2003.

Q&A with the Board of Directors

Isn’t ramping up ore exports contrary to your growth strategy? What do you think are the chances that Indonesia will merge the state’s interests in mining to create the Integrated Resource Company (IRC)? What’s the latest on the mining law? Increasing our ore exports is not contrary to our stated growth strategy of moving downstream into more processing activities. The reason for this is because the increase is of a low grade nickel ore that we would not otherwise process ourselves. By meeting the demand for this ore from Chinese blast furnaces, to make nickel contained in pig iron, we capitalized on the hot nickel market conditions and boosted revenues significantly, while still safeguarding our high grade ore for later value-adding processing activities. It is difficult to say if or when the Integrated Resource Company will become a reality, as it involves multiple groups and Ir. Dedi Aditya Sumanagara government departments. I support the idea of the IRC as long as it will create value for President Director shareholders. The suggested revisions to the mining law are in their final stages, with the final hurdle being how to manage the transition period; I am cautiously optimistic the new mining law will be passed in 2008.

Some people complain that the pace of Antam’s development is not fast enough or focused, what do you say to that? Those within the mining community and those that understand us well know our pace of development is not slower than others. We just finished a massive ferronickel expansion and have been simultaneously preparing for the Tayan chemical grade alumina expansion, which is next in line, as well as doing feasibility work on several other projects. There are many changes that are occurring in Indonesia, economically and politically. While we support positive national development, it has slowed the pace of new mining investment in the country. We expect this will improve soon. There are so many moving parts that must be brought into alignment to make a mining project feasible and beneficial for the Ir. Darma Ambiar long term. We would be foolhardy to go ahead with a project until we had explored every Director of Development avenue of development, ensured we had the best partners and mitigated as much as possible the numerous risks. Our shareholders that have held us for three to five years know we can deliver growth.

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Antam has virtually no debt thanks to the huge cash flows and your debt repayment programs. However, why not maintain a certain amount of leveraging to maintain growth and improve ROE? Being financially prudent is an important part of our strategy to meet our objective of increasing shareholder value. While we realize that increasing leverage could improve ROE, our ROE has actually been better compared to our peers despite our low debt level. We also acknowledge that when the time is right, we will need a certain amount of debt to help boost our growth and expansion. We will study any debt proposal very carefully to ensure that our capital structure will remain healthy. We will not pre-finance any project. We will only increase our debt to finance a project after we are sure that such a project will take off. Kurniadi Atmosasmito, SE, MM. Director of Finance

Antam always says it’s human resources are its best asset. Yet there’s a common negative perception that SOE employees underperform. What’s your take on this? That’s a good question. Such a perception is understandable given the culture of SOE employees is often associated with being slow and underperforming. We have made cultural and values change as top priorities. We have corporate values called PIONIR or Self Development, Integrity, Harmony and Reputation and continuously socialise the concept. To improve the employees’ performance, we implement the performance based management system, a remuneration system which is based on position and performance as well as the Balanced Score Card System.

We aim to achieve HR Excellence which includes factors such as going beyond expectations, building partnerships and environmental awareness. We also develop our employees by implementing the Junior Specialist Development Program (JSDP) for new employees, Antam Ir. Syahrir Ika, MM. Director of HR & General Affairs Specialist Development Program, Antam Leadership Development Program (ALDP) for senior managers, and Antam Management Development Program for middle managers. I believe the negative perception on SOEs employees will gradually change. We only need to ensure the performances of SOE employees are on par with their private colleagues.

FeNi III unfortunately leaked again in June. How well do you think the operations performed in 2007? Overall I’d say 2007 was yet again a great year. Even though the unexpected FeNi III leakage was disappointing this is common during the ramp up period. Every new smelter has its own specific characteristics and challenges, which for FeNi III included new technology and a much bigger capacity. On the other hand, FeNi I and II performed well, due to stable operations and higher grade ore feed. Despite problems with FeNi III, we still were able to increase production of ferronickel by 28%. We also increased nickel ore production 63% while keeping cost increases to a minimum. Our revenue performed even better with 113% growth on the back of higher sales volumes except for bauxite, together with higher nickel and gold prices. I believe Ir. Alwin Syah Loebis, MM. Director of Operations 2007 formed a solid basis for our next phase of growth.

Our Human Resources

BOARD OF COMMISSIONERS

BOARD OF DIRECTORS

58 Corporate Secretary Internal Audit

• Information Technology Group • Environment and Post Mining • Supply Chain Management Group • Learning and Assessment • Marketing and Customer Support Group • Program Management Office • Operations Controlling • Risk Management • Tokyo Representative • Corporate Strategic Development Group • Human Resources Management • Legal and Compliance • Accounting and Budgeting • Corporate Social Responsibility Group • Treasury and Financial Engineering

Precious Nickel Gold Bauxite Metals Unit Geomin Subsidiaries SBU SBU SBU Refinery Unit

Strategy and Management We regard our human resources as one of our most important assets. The focus of our human resources strategy is to continuously improve our work force through the recruitment of young and highly skilled graduates, increased training, selective workforce reductions (right-sizing) and improvement of worker satisfaction and productivity through better alignment between performance and compensation.

2003 2004 2005 2006 2007 Permanent* 3,421 3,305 3,239 2,749 2,716 Right sizing - selectively reducing our total Temporary 126 129 217 209 136 workforce - is one of our strategies to Total 3,547 3,434 3,209 2,958 2,852 increase efficiency and improve employees’ welfare and productivity. *Note: The data is consolidated permanent employee figures of Antam Tbk and its subsidiaries.

Despite hiring young and highly skilled graduates in 2007, our permanent work force decreased 1.2% to 2,716 due to retirements. We also reduced our temporary workers substantially to increase efficiency. To improve our work force’s productivity and welfare, we plan to selectively reduce our total workforce further to 2,566 by 2009.

Out of our total 2,716 permanent employees in 2007, about 15% are university graduates while about 6% are university graduates with engineering backgrounds, an improvement compared to 2006 figures when only 13% of our permanent employees were university graduates andonly 4.4% were university graduates with engineering backgrounds. In line with our expansion plans, we target 10% of our permanent employees having engineering degrees by 2009.

Training and Assessment Spearheaded by our Learning and Assessment Unit, we continuously enhance our employees’ competencies and skills to improve overall productivity and performance. The unit’s activities in 2007 included among other things organizing leadership and technical competency development programs, conducting benchmarking studies and coordinating internships at other mining companies. The unit is also undertaking a feasibility study to implement an IT system that will integrate assessment results, competency model, learning system, and talent management. In 2007, we spent Rp28 billion on employee education and training, an increase of 8% compared to 2006. This amount is 0.5% of Antam’s net profit and 4% of Antam’s employee cost. The average training expense per employee was Rp9.8 million, an increase of 11% compared to 2006.

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EMPLOYEES EDUCATION Employee Productivity (%) Due to increased sales of our products, increased production of our most important products, higher commodity prices and a smaller workforce, the productivity of our employees increased 0.04 2.00 7.11 5.96 in 2007. Compared to 2006, net profit per employee increased 241% to Rp1.8 billion per person, 59 13.00 2,00 6.74 operating profit per employee increased 188% to Rp2.4 billion per person, ferronickel production 4.66 per employee increased 33% to 6.5 tonnes nickel in ferronickel per person and saprolite production per employee increased 100% to 2,365 wmt per person. Gold production per employee remained 2007 % relatively flat at 0.98 kg per person as the slight decrease of gold production was compensated by the smaller workforce.

2005 2006 2007 60.49 Number of Employees 3,209 2,958 2,852 Operating Profit (Rp Million) / Employee 354 828 2,383 Master Degree Engineering 0.04 Net Profit (Rp Million) /Employee 262 527 1,799 Master Degree Non Engineering 2.00

Bachelor Degree Engineering 5.96 Saprolite Production (wmt)/Employee 1,062 1,181 2,365 Bachelor Degree Non Engineering 6.74 FeNi Production (Tons) / Employee 2.29 4.89 6.50 Associate Degree 4.66 Gold Production (Kg) / Employee 0.91 0.97 0.98 High School 60.49 Junior High School 13.00 Succession Planning Elementary School 7.11 With the implementation of a performance based evaluation system in 2007, our succession planning program to objectively select leaders for our strategic units and corporate departments is expected to be better executed. Employees with superior managerial and leadership qualities will be directed to fill-in strategic leadership positions, while those with superior technical qualities will 0.70 2.57 14.03 9.47 be developed as technical professionals and specialists.

6.63 Employees Welfare 2010 7.52 Besides basic remuneration, we provide housing subsidies, transportation allowances, healthcare, % life insurance, remote site allowance, union membership and social insurance for all permanent workers. Our total employee cost increased 13% to Rp726 billion in 2007. During the year, there were no base salary increases. Employee annual year end bonuses also remained at maximum of nine times of monthly base salaries. However, there was 4% increase in cost living adjustment 59.04 (COLA) across the board as well as other increases in healthcare services, allowances and other Master Degree Engineering 0.70 indirect employee costs. Master Degree Non Engineering 2.57 Bachelor Degree Engineering 9.47 Labor Relations Bachelor Degree Non Engineering 6.63 We have built strong relations with our labor in order to create a positive work atmosphere, to Associate Degree 7.52 develop job security and to ensure the continuity of operations. We view the workers’ union as our High School 59.04

Junior High School 14.03 partner in terms of developing our human resources. The majority of our employees are members Elementary School 0.00 of the Aneka Tambang Worker Union (Perpantam), the company’s largest labor union. Some employees at Pomalaa are also members of the All Indonesian Workers Union (SPSI).

Pension Policy We possess a defined benefits pension plan, which is managed by the Antam Pension Fund and funded by contributions from the company and our employees. In 2007, our pension and other post-retirements obligations amounted to Rp644 billion, a slight decrease from Rp688 billion in 2006. In addition to the pension program, the company also provides support for health services after retirement for eligible retirees and their family members, which is managed by the Antam Pensioners Health Foundation for those who joined us before 1 May 2005 and by an insurance company for those joined after 1 May 2005. Total expenses related to post-employment such as pension benefits, medical and other benefits amounted to Rp221 billion in 2007.

“Human Resources are ourvaluable valuable assets. assets. They are not costs.”

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Financial Review Abridged Financial Statements 6 2 Total Consolidated Assets 6 3

Total Consolidated Liabilities 6 4

Capital Structure and Access to Capital 6 5 Cash Flows 6 6 Hedging Activities 6 7

ABRIDGED FINANCIAL STATEMENTS*

CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2007 AND 2006 (Expressed in thousands of Rupiah) INVESTOR ALERT! 2007 2006 Our balance sheet is CURRENT ASSETS very strong, we are cash Cash and cash equivalents 4,743,875,109 1,138,182,108 rich and we have very Trade receiveables - third parties - net 1,680,059,742 900,832,982 low level of debt. We are Inventories 1,319,084,300 947,389,575 poised for growth. 62 Prepaid taxes 79,547,752 125,056,053 Total Current Assets 8,048,099,750 3,317,602,798 NON-CURRENT ASSETS Fixed assets - net 3,022,621,934 3,346,302,819 Total Non-Current Assets 3,989,817,172 3,974,539,449 Total Assets 12,037,916,922 7,292,142,247 CURRENT LIABILITIES Trade payables - third parties 76,242,814 123,976,561 Accrued expenses 452,007,002 331,881,431 As we generated higher revenues and profits, Taxes payables 988,002,464 422,840,281 our cash position strengthened considerably. Total Current Liabilities 1,798,816,747 1,179,515,758 NON-CURRENT LIABILITIES Long term liabilities, net of current maturities We continued to reduce our debt in 2007. - investment loans 700,145,667 1,070,373,333 However, to support our future growth we Total Non-Current liabilities 1,474,300,753 1,829,784,347 are prepared to increase our debt, without EQUITY sacrificing our healthy capital structure. Total retained earnings 7,785,189,070 3,304,895,096 Total Equity 8,763,578,938 4,281,602,475 Total Liabilites AND Equity 12,037,916,922 7,292,142,247

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006 (Expressed in thousands of Rupiah, except for basic earnings per share) 2007 2006 Net Sales 12,008,202,498 5,629,401,438 Cost of Sales (4,794,958,334) (2,887,935,682) We posted a tremendous increase in revenues due to higher commodities prices and higher GROSS PROFIT 7,213,244,164 2,741,465,756 sales volumes. Operating Expenses (417,152,629) (337,772,143) OPERATING INCOME 6,796,091,535 2,403,693,613 Other Income 505,557,104 (183,804,896) PROFIT BEFORE INCOME TAX 7,301,648,639 2,219,888,717 Our net income increased 231% as our revenue Income Tax Expense (2,169,528,312) (667,111,070) growth far exceeded our cost growth. NET INCOME 5,132,460,443 1,552,777,307 Basic Earnings per share 538.08 162.79

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006 (Expressed in thousands of Rupiah) 2007 2006 With such a strong operating cashflow, we are in a position to invest for a better future. Cash Flow from Operating Activities Receipts from customers 11,228,975,738 5,191,490,441 Payment to suppliers (4,276,517,673) (2,432,364,432) Payments for tax (1.669.356.114) 573,816,628 Net Cash Provided from Operating Activities 4,835,907,373 1,711,300,253 CASH FLOWS FROM INVESTING ACTIVITIES Payment for fixed assets (197,164,105) (85,609,977) Exploration and development expenditures (194,731,380) (120,386,019) Dividends received 155,016,088 7,080,484 Net Cash Used in Investing Activities (262,350,439) (190,652,524) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term borrowings (461,822,712) (1,759,283,363) Payments of dividends (621,110,923) (286,285,227) Net Cash Used in Financing Activities (1,113,989,181) (962,567,950) *These statements are highlights and not full financial statements.

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Total Consolidated Assets In 2007, our total consolidated assets increased significantly, growing 65% to Rp12,038 billion mainly due to increased current assets which rose mostly due to much higher cash receipts. Our non-current assets did not contribute to the total assets growth as no significant new fixed asset investments were made and increases in deferred exploration and development expenditure and deferred tax assets were offset by lower net fixed assets due to depreciation.

2005 2006 2007 63 Return on Average Assets 14% 23% 53% Return on Average Equity 31% 42% 79% Return on Average Investment* 32% 45% 82%

*EBIT/Avg. (LT Debt + Equity)

BALANCE SHEET PER DIVISION

Business Division 2005 2006 2007

Assets Assets ROA Assets Assets ROA (Rp billion) (Rp billion) (%) (Rp billion) Growth (%) (%)

Nickel 4,549 4,716 54 5,501 16.65 131

Gold/Silver/Refinery 655 688 26 707 2.76 44

Others 105 104 (37.5) 212 103.85 (48)

Head Office* 1,094 1,785 (63) 5,618 215.09 (40)

TOTAL 6,403 7,292 21 12,038 65.11 43

*Antam accounts for all cash holdings at Head Office, yet no income is attributed to Head Office.

Current Assets Our current assets increased 143% to Rp8,048 billion as cash and cash equivalents grew 317% to Rp4,744 billion, accounting for 59% of total current assets. The increase of current assets amounted to Rp4,730 billion due largely to the Rp3,606 increase of cash, which was 76% of the current assets growth. Trade receivables and inventories also contributed to the growth. At the end of 2007, the US dollar/Rupiah exchange rate increased 4% to Rp9,419 such that Rp146 billion of the increase in cash was the effect of foreign exchange fluctuations. In 2006, the movement of the exchange rate had the opposite effect.

With this strong cash position, we are ready to make growth investments. We placed Rp4,384 billion of cash in time deposits and dual currency deposits, 93% of it in US dollars and 7% in Rupiah at several local and international banks with a range of annual interest rate deposits from 4.40% - 6.25% US dollars which were generally higher than in 2006 until rates were cut at the end of the year. The trend was the same for Rupiah rates which ranged from 7.50% - 10.25%.

Under our policy, our short term investments have to consist of a minimum 30% in time deposits, maximum 15% in dual currency deposits, swaps and repurchase agreements, maximum 15% in mutual funds, maximum 10% in corporate bonds and maximum 15% in SBI (Indonesian Treasury Bills). We are conservative regarding our financial management and in the last a couple of years, we have only invested in time deposits and dual currency deposits as we view these two instruments as the safest instruments although they might not provide the highest returns. Dual currency deposits are reported as time deposits although in practice we usually place about 15% of our

short term investments in the form of dual currency deposits. While we consider SBIs as very safe, the instrument is only available in Rupiah while substantially all of our revenues and cash are US dollars. We believe our conservative approach, while limiting the upside, is the best approach in If you could tell Antam’s view of potential downturns. management one thing, what would that be? As collected from Antam’s 2008 Investor Perception Survey 2005 2006 2007 2007 Change (%) Current Ratio 2.7 2.8 4.5 60 64 Working Capital (billion) 1,308 2,138 6,249 192 The management Trade receivables also contributed to the increase in current assets, climbing 86% to Rp1,680 has done a superb billion due to higher receivables with Avarus AG (ferronickel agent in Europe), Pohang Iron & Steel job, especially in Co (ferronickel), Raznoimport Nickel (UK) Limited (nickel ore) and Mitsui & Co (ferronickel). Our achieving such trade receivables included new customers such as Zhejiang Grand IMP and Sino Add (Singapore) a great income PTE Ltd. Our allowance for doubtful accounts was insignificant and we believe it is sufficient to increase. cover losses from the non-collection of the accounts.

Our inventories rose 39% to Rp1,319 billion due to the 64% increase in products inventory, which are accounted for at the lower of cost or net realizable value. Ferronickel inventory rose 85% to Rp457 billion inline with the higher cost of production of ferronickel. We also booked a 95% increase in gold and silver inventories to Rp172 billion as we increased gold trading activities from third parties, including from retail customers. Inventories of gold and silver were insured against the risk of physical damage and theft under blanket policies.

Non-Current Assets Our non-current assets slightly increased from Rp3,975 billion to Rp3,990 billion as increases in deferred exploration, development and tax expenditures were not offset by decreased fixed assets net of accumulated depreciation. We did not acquire significant new fixed assets as the significant expenditures on the most recent expansion came to an end when commercial operations of FeNi III began in the beginning of 2007. We increased our investments in shares of stock up 51% to Rp55.8 billion consisting of Rp13.5 billion for PT Indonesia Chemical Alumina (Tayan Chemical Grade Alumina project), Rp35.7 billion for PT Nusa Halmahera Minerals (gold mine operated by Newcrest), Rp5.8 billion for PT Cibaliung Sumberdaya (gold mine under development by Austindo) and Rp836 billion for the new investment in a 5% stake of PT Mega Citra Utama, a mining exploration company. We consolidated the investment of a 60% stake in PT Borneo Edo International, a mining license holder for bauxite exploration in West Kalimantan, which occurred in September 2007. Our deferred exploration and development expenditure increased 30% to Rp487 billion, deferred tax assets rose 86% to Rp309 billion and other non-current assets rose 227% to Rp85 billion.

Total Consolidated Liabilities Our total consolidated liabilities increased 9% to Rp3,273 billion due to higher current liabilities which rose 52% compared to 2006 to Rp1,799 billion or 55% of total consolidated liabilities. Due partly to debt reduction, our non-current liabilities decreased 19% to Rp1,474 billion.

Current Liabilities Our current liabilities increased to Rp1,799 billion mainly due to higher taxes payable, which increased 134% to Rp988 billion and accrued expenses which rose 36% to Rp452 billion. Taxes payable increased inline with higher taxable income. Accrued expenses increased due to

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the significantly higher raw material costs and services fees. Accrued raw material purchases amounted to Rp141 billion and we paid Rp131 billion for mining and transportation services fees.

Our total trade payables decreased 38% to Rp80 billion mainly due to the elimination of a payable position for nickel ore bought from PT Inco Indonesia. Of total trade payables, 76% were owed in Rupiah and 70% were due within 30 days.

The total current maturities of investment loans decreased 17% to Rp220 billion, consisting of 65 a reduction in the current maturity from PT Bank Central Asia Tbk (BCA) to Rp126 billion and a reduction in the current maturity from PT Bank Mandiri (Persero) Tbk (Mandiri) to Rp94 billion. On December 21st, 2006, we withdrew US$71 million from the BCA loan and US$50 million from the Mandiri facility to help refinance the remainder of our outstanding USD bonds, issued in 2003. Both credit facilities have a repayment period of five years, starting from June 2007 until December 2011. Each facility has an interest rate of SIBOR 3 months plus 1.5%. On February 2007, we entered an interest rate swap agreement with Barclay Capital for the Mandiri loan at a fixed rate of 6.75% and with BCA for the BCA loan at fixed rate of 6.61%. The average interest rate in 2007 was 6.83%.

Debt Ratios

2005 2006 2007 Comparison (%)

2006/2005 2007/2006

Net Debt/EBITDA 0.93 0.07 (0.50) (92.5) (807.2)

EBITDA/Financial Charges 8.53 13.49 99.26 58.1 653.8

Non-Current Liabilities In 2007, due to debt repayment, we lowered our non current liabilities 19% to Rp1,474 billion. Our long term debt decreased 35% to Rp700 billion. We lowered total debt 31% to Rp920 billion. For the first time in many years we reduced our pension and other post-retirement obligations, which “Our access to capital decreased 6% to Rp644 billion due to lower post-employment medical, and other post-retirement and pension benefits. has been good Total Consolidated Stockholders’ Equity and is improving. Our total consolidated stockholders’ equity rose 105% to Rp8,764 billion due to the 136% increase in retained earnings to Rp7,785 billion. We had appropriated Rp2,653 billion of retained earnings. Various banks have The significant increase in retained earnings is due to significantly higher net income generated by increasing production and higher commodity prices. expressed their Capital Structure and Access to Capital interests to provide The increase in stockholders’ equity, coupled with our debt repayments, resulted in the strengthening of our debt to equity ratio to 10% in 2007 from 31% in 2006. As such, if necessary, we are financial support for in the position to increase our debt to support our growth plans organically as well as through acquisitions. Our access to capital has improved tremendously and many banks approached us our growth plans.” offering debt financing support for our growth plans. We are studying their offers carefully. We will not over-leverage ourselves and will maintain a healthy capital structure.

Cash Flows Due to increased production and sales volumes and higher prices, our cash flows from operations surged to a record high. Our nickel contained in ferronickel sales volumes increased 31% following the commencement of commercial operations of the third smelter, FeNi III, nickel ore sales volumes INVESTOR ALERT! increased 60% due to strong demand from China and gold sales increased 50% due to stable Our operating cash flow surged to a record high due production combined with increased trading activities. Due mostly to strong demand from China, to increased production as well as muted global supply increases, the achieved selling prices for all of our main products and sales volumes as well as higher prices. 66 increased. The prices for nickel contained in ferronickel rose 56%, saprolite nickel ore rose 49% and gold rose 15%.

With few capital expenditures, amounting to only Rp197 billion, we were very much cash flow positive, as in 2006, and cash holdings grew as we completed our latest growth phase. Our free cash flow in 2007 grew significantly to Rp4,639 billion. In 2005 we generated negative free cash flows of Rp569 billion, as it had been since 2003, in line with expenditures made to more than double ferronickel production capacity with the construction of FeNi III. With the significant 317% build up in cash holdings to Rp4,744 billion, we are ready to pursue opportunities to enhance shareholder value, such as making acquisitions, investing in expanding and upgrading operations, paying dividends and further lowering debt.

Dividend Payout

2004 2005 2006 Change % We pay generous dividends. Our dividend policy is to pay a minimum 30% and since Payout Ratio 35% 34% 40% 18% our IPO, we have paid 39.4%. Cash Dividend (Rp billion) 282.50 286.30 621.11 117% Cash Dividend per share (Rp)* 29.62 30.01 65.12 117%

*Adjusted for the 5:1 stock split of July 2007.

Cash Flows From Operating Activities In 2007, our net cash receipts from operations rose Rp3,990 billion, or 182% to Rp6,183 billion. The increase is primarily due to the 116% increase in receipts from customers, which rose Rp5,191 billion to Rp11,229 billon. Our payments to suppliers increased Rp1,845 billion or 76% to Rp4,277 billion and payments to commissioners, directors and employees increased 48% to Rp793 billion. The greater pace of increase for customer receipts compared to payments to suppliers and for management and employees enhanced the rate of growth for net cash receipts.

Despite higher interest income and lower interest payments due to larger cash holdings and higher US dollar interest rates, our net cash provided by operating activities did not increase at the same pace of net cash receipts due to a significantly larger payment for tax. Our cash flow for interest income rose 306% to Rp126 billion while interest payments, due to loan repayment, lowered 62% to Rp78 billion. Our tax payments increased Rp1,095 billion or 191% to Rp1,669 billion, due to tax paid on our much higher taxable income. Cash flows from operating activities rose 183% to Rp4,834 billion.

Cash Flows Used In Investing Activities Our cash flows used in investing activities increased 37% to Rp262 billion. The increase is mainly due to higher acquisitions of property, plant and equipment as well as exploration and development expenditure. In 2007, we spent Rp197 billion, an increase of 129% or Rp111 billion, on acquisitions of property, plant and equipment, of which most were for maintenance at Pomalaa

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ferronickel facilities and Pongkor gold mine. As well, we ramped up investment on exploration and development 63% to Rp195 billion with the largest portion being spent on exploration drilling for nickel at Sangaji and Pulau Obi, North Maluku. These increases were not offset by our dividend income, related to our 17.5% stake in a gold company run by Newcrest Ltd called PT Nusa Halmahera Minerals, which rose 2,114% to Rp155 billion.

Cash Flows Used in Financing Activities In 2007 we made smaller, yet still significant, repayments of long term borrowings, which in total 67 decreased 74% to Rp462 billion. Our total long term debt decreased 35% to Rp700 billion. However, due to a much larger dividend payment, our cash flows used in financing activities increased 16% to Rp1,114 billion. In line with higher net income in 2006, our cash flows for payment of dividends rose 117% to Rp621 billion.

CAPITAL EXPENDITURES AND FREE CASH FLOWS

2005 2006 2007 2007 Change (Rp billion) As FeNi III began its commercial operations in (Rp billion) (Rp billion) (%) early 2007, we had few capital expenditures Operating Cash 742 1,711 4,836 183 during the year. Our free cash flow in 2007 therefore grew significantly. We are in the position Total Capital Expenditures 1,311 (47) 197 (519) to enter our next growth phase to further improve Free Cash Flow (569) 1,758 4,639 164 our future.

Hedging Activities Our hedging activities are conducted to protect a portion of our budgeted revenues, according to budgeted price assumptions and to an amount not exceeding 30% of the forecast annual production of nickel, gold, and of monthly working capital.

We did not undertake any commodity hedging activities in 2007 in view of the high nickel and gold prices during the year.

We conducted foreign currency hedging transactions to protect our working capital needs in 2007 as our main revenues are in US dollar while a large portion of our costs are in Rupiah. Under our If you could tell Antam’s foreign currency hedging policy, we can hedge up to an amount not exceeding 30% of our monthly management one thing, working capital requirements of around US$30-45 million a month, using derivative instruments what would that be? which provide In The Money strike rates which are more attractive than the forward rates. However As collected from Antam’s 2008 Investor Perception Survey the strike rates are only valid as long as the spot rates do not trade at or below the pre-determined knock-out rates upon maturity.

To improve We also purchased interest rate swaps to hedge our interest obligations by converting floating performance rates to fixed rates. and increase diversification In 2007, most of our hedging transactions were favorable as the exchange rates fluctuated mostly above the pre-determined knock-out rates upon maturity and interest rates fluctuated above the in mining fixed rates. As a result, we booked Rp15 billion of gains due to hedging transactions. commodities, do not just focus on gold and nickel.

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Review of Operations: Generating Higher Output Detailed Production and Sales Table 70

Sales and Segment Information 71

Production and Sales 71

Cost of Sales 74

Net Income 76

Cash Costs and Cost Reduction Program 77

Licensing 78

Performance Measurement and Outlook 78

Production and Sales

Unit 2003 2004 2005 2006 2007 2007/2006 (%) Production Volume Ferronickel Ibs Ni 19,693,870 17,515,706 16,177,502 31,909,670 40,856,018 28 metric ton Ni 8,933 7,945 7,338 14,474 18,532 28 Production of nickel, Antam’s main commodity, Nickel Ore reaches an all time high as FeNi III enters • Saprolite wmt 3,306,733 3,152,420 3,408,252 3,493,961 6,744,383 93 the operational phase and nickel ore sales • Limonite wmt 1,088,696 943,056 672,548 859,871 368,487 (57) Total Nickel Ore wmt 4,395,429 4,095,476 4,080,800 4,353,832 7,112,870 63 increased inline with higher demand. Gold t,oz 134,258 119,437 93,589 92,367 89,733 (3) kg 4,176 3,715 2,911 2,873 2,791 (3) Silver t,oz 918,525 887,050 791,051 767,631 775,669 1 kg 28,570 27,591 24,605 23,876 24,126 1 Bauxite wmt 1,262,705 1,330,827 1,441,899 1,501,937 1,251,147 (17) Iron Sands wmt 245,409 89,664 21,901 - - - Sales Volume Exports 70 Ferronickel lbs Ni 19,550,570 17,390,501 15,397,366 29,518,382 39,072,480 32 metric ton Ni 8,855 7,888 6,984 13,389 17,723 32 Nickel Ore • Saprolite wmt 2,244,434 2,546,339 3,025,841 3,375,466 6,463,977 91 • Limonite wmt 1,087,141 1,373,786 1,060,240 933,668 443,390 (53) Total nickel ore exports increased due to Total Nickel Ore wmt 3,331,575 3,920,125 4,086,081 4,309,134 6,907,367 60 strong demand out of China. Gold t.oz 66,872 51,278 38,201 46,876 120,405 157 kg 2,080 1,595 1,188 1,458 3,745 157 Silver t.oz 856,058 171,922 375,192 260,357 530,487 104 kg 26,627 5,347 11,670 8,098 16,500 104 Bauxite sales continue well past the planned Bauxite wmt 1,093,965 1,325,559 1,617,566 1,536,542 975,009 (37) Iron Sands wmt - 103,328 23,268 - - - closure of the Kijang mine due to strong demand for the previously uneconomic ore. Domestic Sales Ferronickel lbs Ni 28,660 19,842 664 - - - metric ton Ni 13 9 4 - - - Gold t.oz 88,702 72,587 78,804 60,508 40,381 (33) kg 2,759 2,258 2,451 1,882 1,256 (33) Silver t.oz 356,833 670,576 583,634 416,899 335,943 (19) kg 11,099 20,857 18,153 12,967 10,449 (19) Iron Sands wmt 108,555 107,933 23,268 - - - Sales Revenue Total Exports million Rp 1,823,322 2,513,839 2,860,412 5,220,497 11,661,423 123 US$ ‘000 213,473 278,829 390,823 571,479 1,278,536 124 Total Antam Revenue million Rp 2,138,811 2,858,538 3,251,235 5,629,401 12,008,202 113 Note: Iron sands operations have been transferred to Antam’s subsidiary PT ARI. The contribution of iron sands is negligible to Antam.

Cash Cost, Production Cost, and Average Selling Price Unit 2003 2004 2005 2006 2007 2006/2007 (%) Cash Cost Ferronickel US$/lb 3.16 3.35 3.91 4.40 5.55 26 FeNi cash costs did not decrease following Nickel Ore the operation of FeNi III as Antam opted to • Saprolite US$/wmt 13.94 15.12 14.80 20.15 20.32 1 • Limonite US$/wmt 4.91 7.32 7.44 8.67 11.26 30 buy more expensive ore feed from PT Inco Gold US$/t.oz 175.50 183.46 252.94 283.93 383.10 35 to safeguard reserves. Bauxite US$/wmt 9.73 8.00 8.48 10.32 13.44 30 Iron Sands Rp/wmt 117,924 333,044 - - - - Production Cost Ferronickel US$/Lb 3.37 3.63 4.30 6.00 6.99 17 Nickel Ore • Saprolite US$/wmt 14.42 15.49 19.77 20.32 20.48 1 • Limonite US$/wmt 5.21 7.58 7.52 8.72 11.52 32 Gold US$/t.oz 235.29 259.27 336.35 375.36 481.74 28 Bauxite US$/wmt 10.31 8.23 8.74 10.83 13.90 28 Iron Sands Rp/wmt 124,683 350,718 - - - - Avg. exchange rate Rp/US$ 8,504 8,935 9,712 9,167 9,136 - Average Selling Price Ferronickel US$/lb 4.06 6.23 6.45 10.12 16.16 60 The prices of all of our products increased. Nickel Ore • Saprolite US$/wmt 28.38 42.35 44.64 55.36 82.43 49 • Limonite US$/wmt 14.96 16.47 19.06 31.48 26.52 16 Gold US$/t.oz 364.32 411.97 446.14 611.59 702.63 15 Silver US$/t.oz 4.93 6.64 7.27 11.83 13.64 15 Bauxite US$/wmt 10.93 11.36 11.91 13.60 14.58- 7 Iron Sands Rp/wmt 86,374 150,120 105,180 - - - Note: Iron sands operations have been transferred to Antam’s subsidiary PT ARI. The contribution of iron sands is negligible to Antam.

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SALES AND PRODUCTION

Ferronickel (Ton Ni) 18,532 17,723 4 9 7 8 4 3 , , 4 3 1 1 3 8 3 6 5 7 9 8 , , 4 9 8 8 8 8 9 8 3 8 , , 3 9 7 7 , , 7 6

Production Sales 71 03 04 05 06 07 Production increases following the ramp up of FeNi III.

Saprolite (High Grade) (wmt) 6,744,383 6,463,977 1 2 6 6 3 5 9 6 3 , 0 2 4 1 , 7 3 , 2 , 4 8 9 5 4 6 , 8 0 4 7 , 0 , 2 4 9 3 5 , 3 3 , 5 3 , 2 3 3 1 3 3 , 0 , 4 ,

3 Sales and Segment Information 6 3 3 4 4 , 5 , 4 2

4 In 2007, inline with increased production of ferronickel and nickel ore, as well as with higher 2 , 2 commodities prices, sales grew by 113% to a record Rp12,008 billion from Rp5,629 billion in 2006. Ferronickel production rose 28% and accounted for 48% of our sales. Higher demand of nickel ore boosted exports by 63% and contributed 41% of our sales. As revenue from nickel grew, the nickel segment contributed 89% of our total sales in 2007, compared with 84% in 2006. Production Sales Total sales from the nickel segment amounted to Rp10,687 billion, up 126% compared to 2006. 03 04 05 06 07 Despite lower gold production due to lower grades, sales of gold increased 50% inline with gold We increased ore exports, thanks to demand for low trading activities conducted by our Logam Mulia precious metals refinery. As with gold sales, grade ore we would not sales of silver increased, and including income from Logam Mulia, revenue from the gold segment process ourselves. increased 68% to Rp1,163 billion. The nickel and gold segments made up 99% of total our sales.

Gold (Kg) Production and Sales Ferronickel 9 3 8 , 5,000 6 4 Production of ferronickel rose 28% to 18,532 tonnes of nickel contained in ferronickel as Antam 7 3 1 , 5 9 5 4 1 3 8

, began commercial operation of the FeNi III smelter at the beginning of the year. Ferronickel 7 6 0 , , 3 4 3 3 1 3 3 , 1 7

3 production also included 1,410 tonnes of toll smelting, conducted on our behalf by European and 9 8 , , 2 2 2,791 Japanese companies. In 2007, our FeNi I and FeNi II smelters produced 4,946 tonnes and 6,861 tonnes, respectively. The higher outputs from both smelters were due to stable operations as well high grade ore feed from PT Inco’s East Pomalaa deposit. We did not need to blend much of Production PT Inco’s ore with our own ore as consumption from the FeNi III smelter was lower than expected. Sales Our FeNi III smelter produced 5,315 tonnes in 2007. From its commissioning period in 2006, the 03 04 05 06 07 Gold sales volumes jump due FeNi III smelter has produced 8,650 tonnes of nickel in ferronickel, and had already generated a to trading activities. significant return on the original US$153 million EPC cost.

In 2007, our ferronickel production was 7% lower than our target of 20,000 tonnes due to a metal leak that occurred June 16th 2007. Due to the leak, Antam shut down the FeNi III smelter for partial repairs for 3 months and switched the smelter back on at the end of August 2007. To ensure a safe and stable operation, Antam plans to operate the smelter at 32MW, less than the maximum power load of 42MW. Leaks and set backs are unfortunate but are normal during the ramp up period of a new smelter. Once the optimal operational parameters have been determined Antam may slowly raise the power level and output, thus increasing output in the years ahead above the 17,000 tonne target of 2008.

In 2007, we consumed 1,310,207 wmt of saprolite nickel ore as feed for our ferronickel smelters, at an average ratio of 77 wmt of ore to one tonne of nickel contained in ferronickel. We used 325,781 72 wmt of saprolite from our own mines at Pomalaa and Halmahera Island and 984,426 wmt from PT Inco’s East Pomalaa deposit.

Ferronickel sales in 2007 amounted to 17,723 tonnes of nickel contained in ferronickel. Our ferronickel is sold as either high carbon, or low carbon ferronickel. High carbon ferronickel is generally used for making 200 series stainless steel, which contains less nickel and is a lower quality product and less resistant to corrosion, although it can also be mixed to produce higher quality 300 series. European customers took 52% of sales while Korean and Taiwanese customers accounted for 28% and 14% of volumes respectively. Ferronickel sales were lower than production as Antam experienced difficulties in securing shipping cargo space, due to high costs and availability of marine transportation. We sell our ferronickel CIF (cost, insurance and freight). As well, ferronickel sales were lower due to softening demand in Europe, due to inventory destocking activities undertaken by stainless steel producers, in their attempts to lower nickel prices which reached an all time high in May 2007. European mills only began to enter the market to buy nickel towards the end of 2007.

The price we charge for our ferronickel is based on the international London Metal Exchange daily spot price. The normal duration of a shipment’s journey to Europe is about a month. For Asian customers, the shipment period is shorter, with cargo arriving after 7 to 10 days. To support and assist ferronickel to Europe, we use an agent, Avarus AG. The agent assists, among other things, in arranging delivery from ports to buyers and arranging the necessary shipping documentation. If you could tell Antam’s Currently, Europe is our largest market for ferronickel. management one thing, what would that be? As collected from Antam’s 2008 As ferronickel sales volumes increased 32% and our average achieved selling price rose 60% to Investor Perception Survey US$16.16 per pound, or US$35,627 per tonne, our ferronickel sales revenue increased by 113% to Rp5,793 billion. The price was slightly lower than the average of the spot price on the LME, due to our using a one month trailing average. Be transparent Nickel Ore in the decisions, In 2007 Antam ramped up nickel ore production to meet stronger demand, especially from China. be more efficient, Nickel ore production increased 63% to 7,112,870 wmt with nickel ore sales of 6,907,367 wmt. avoid corruption Around 51% of our nickel ore sales went to Chinese pig iron producers which used the ore as feed (and emphasize for their blast furnaces to produce nickel contained in pig iron for sale to domestic stainless steel producers. Generally 3-5% nickel, NCPI is different from ferronickel, which is about 20% nickel. that to the lowest We sold the low grade saprolite ore to the Chinese with the high grades going to our long term level in the Japanese and Eastern European customers. Boosting ore sales to China is not contrary to our organisation).

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SALES DESTINATION strategy of moving downstream into processing as we sold the Chinese the low grade saprolite ore we would not otherwise have processed ourselves, as we prefer to use the high grade nickel 7 12 ore for ferronickel processing at Pomalaa.

2005 2006 With nickel ore sales of 6,907,367 wmt far exceeding our targeted range of 5.5-5.8 million wmt, and % % together with a higher average achieved selling price, nickel ore sales revenues increased 144% to

3 Rp4,894 billion. The average price of saprolite, which is sold FOB (free on board), increased 49% 93 88 to US$82.43 per wmt.

2007 In 2007, we held a tender for the additional 2,050,000 wmt of low grade nickel ore. Three Chinese % companies won the contracts. We initially expected nickel ore sales to reach 5.5 to 5.8 million wmt, but due to strong demand out of China as nickel prices dramatically increased and in order 97 73 Export to offset lower ferronickel production due to the leak of FeNi III, we were able to exceed the top Domestic end of our target by 19%.

The price of our nickel ore is calculated differently than our ferronickel. Although still based on the LME spot price, our nickel ore prices also account for the moisture content and the grade. For SALES BREAKDOWN our long term Japanese customers, as well as our European customers, our nickel ore contracts 6 4 12 usually lasts for 3-4 years. The new Chinese contracts have a duration of one year. All of Antam’s 30 18 contracts are regularly rolled over. We meet with our customers each year to review sales volumes

2005 2006 as well as the grades and associated discount to LME. We have a representative office in Tokyo to % % support and assist nickel ore sales, as well as to act as a liaison office. 35 1 49 46 10 Gold Inline with a 6% lower gold grade of 9.29 grams per ton (gpt) compared to 2006, and despite 48 3% higher gold ore production of 389,885 wmt, production of gold metal was 3% lower at 2,791 41 2007 % kg (89,733 troy oz). This was slightly lower than the target of 3,000kg. Gold sales volume rose 50% to 5,000 kg (160,754 troy oz) as our precious metals refinery unit, Logam Mulia, conducted extensive gold trading. In 2007, 44% of gold sales volumes came from trading gold bought from

Feronickel Gold third parties, such as retail outlets and individuals. Although lower margins than selling our own Nickel Ore Bauxite gold, the trading activities contributed to higher sales revenues. With higher volumes and a 15% higher average achieved selling price of US$702.63 per troy ounce our gold revenues increased 72% to Rp1,034 billion.

REVENUE DENOMINATION A byproduct of the gold refining process, sales of silver increased 28% to 26,949 kg (866,430 1 troy oz) and generated Rp108 billion in revenue. The average selling price of silver rose 15% to US$13.64 per troy ounce.

2005 2006 Revenue from precious metals refinery services for other gold companies, such as PTNusa % % Halmahera Minerals, increased 60% to Rp29 billion in 2007.

99 100 Bauxite Demand for the low quality, high silica bauxite still remining at the nearly depleted Kijang mine 2007 % decreased in 2007. As such our bauxite production volume of 1,251,247 wmt did not quite make the target of 1.5 million wmt. Bauxite sales decreased 37% to 975,009 wmt, generating Rp130 billion in sales revenue. The price of our bauxite, with is sold FOB, rose 7% to US$14.58 per wmt, 100 although almost half of the other bauxite producers. Not expected to have been producing past US$ Portion 2005, due to tight supplies and strong demand, the Kijang mine continues to operate by selling IDR Portion

what a few years ago was uneconomical ore. We are currently revising our mine closure and post COST, SALES AND PRICE mining programs, which we expect to commence in the next few years. Ferronickel US$/lb 16.16 16 Cost of Sales Inline with increased production as well as higher materials costs, our cost of sales increased 14 66% to Rp4,795 billion. The top five components of our cost of sales, materials used, ore mining service, fuels, labor costs and depreciation, accounted for 74% of our total cost of production. 12

10.12 Materials Used 10 Our cost of materials used accounted for 27% of the total cost of production. In 2007, the cost of 8 materials used increased 126% to Rp1,379 billion as Antam ramped up ferronickel production with 6.99 the start of commercial operations of the FeNi III smelter. The largest component of materials used 6.23 6.00 74 6 6.45 5.55 is ore feed for our ferronickel smelters. Another important consumable is anthracite/coal which is 4.06 4.30 used as a reductor in the furnace. Limestone, which is used to reduce the acidity of the calcine, 4 3.63 3.37 4.40 3.91 is now a much smaller component of materials used. Materials used also includes bricks, spare 3.16 3.35 parts and equipment. 2

0 In 2007, 94% of our ferronickel ore feed came from the PT Inco East Pomalaa deposit. Antam 03 04 05 06 07 annually sources 1,000,000 wmt of saprolite nickel ore (+/- 10%) from PT Inco. The agreement Saprolite (High Grade) lasts until mid-2008 and Antam plans to extend the agreement. As the price of PT Inco’s ore is US$/wmt 82.43 correlated to the international LME spot price, the price of PT Inco’s ore increased significantly 80 in 2007, thereby pushing our ferronickel cash cost higher than expected. Given the Inco ore is 70 much more expenisve than the cost of producing our own ore, if we used more ore feed from our own nickel mines, the ferronickel cash cost would have been much lower. However, we decided 60 to use the ore feed from PT Inco in order to conserve our own saprolite nickel reserves, to lower 55.36 the cost of ore mining services and to free up extraction capacity to increase exports to meet 50 strong demand from China for low grade ore we would not process ourselves. Also, even with the 42.35 44.64 correlation to the LME spot price, given ore is only one cost component of ferronickel production, 40 due to higher LME prices the margins on our ferronickel continued to widen throughout 2007 despite using PT Inco’s ore. The extra revenue earned from using the freed up extraction capacity 30 28.38 to boost ore exports to China more than offset the increased ferronickel production cost. Although 19.77 20.32 20.48 20 20.32 20.15 dissapointing given we had hoped to deliver lower cash costs following the commercial operations 14.42 15.49 13.94 15.12 14.80 of FeNi III, we feel buying ore from PT Inco is the best decision. In 2007, the cost of feronickel 10 ore feed from our Pomalaa mine amounted to US$12 per wmt while the cost of sourcing ore feed from our Mornopo mine amounted to $23 per wmt. The ore from Mornopo is more expensive as it 0 03 04 05 06 07 includes the cost of barging the ore from North Maluku to Southeast Sulawesi. In 2007, the cost of Gold transporting ore to Pomalaa for ore feed amounted to Rp8 billion. The consolidated average cost US$/t.oz 702.63 of ore feed from our mines and PT Inco’s East Pomalaa deposit reached US$55 per wmt compared 700 with US$26 per wmt in 2006. 611.59 600

500 481.74 Ore mining fees 411.97 446.14 Inline with Antam’s plans to move downstream into processing, and as a cost saving measure, we 400 364.32 383.10 336.35 375.36 outsource most of our ore extraction to mining contractors. In 2007, our ore mining fees increased 300 235.29 283.93 81% to Rp863 billion due to significantly higher nickel ore production, as well as due to higher 259.27 200 252.94 contractor costs. Ore mining fees accounted for 17% of the total cost of production. The largest 175.50 183.46 component of ore mining services was for nickel ore mining, which accounted for 90% of the total 100

ore mining services cost, followed by bauxite and gold mining fees which accounted for 9% and 0 03 04 05 06 07 1% of the total cost, respectively. Contractor costs increased due to generally rising costs and Average Selling Price Production Cost Cash Cost

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NET MARGIN Royalties Payable to the Government (%) 43 Tariff Payable from Sales Revenue Base Calculation

Saprolitic Nickel Ore 5% metal

Limonitic Nickel Ore 4% metal

Gold 3.75% metal

28 28 Silver 3.25% metal 26 Iron Sands 3.75% concentrate

Bauxite 3.75% washed bauxite 11 75 higher fuel prices. Ore mining services would have been higher if we had not sourced most of our ore feed from PT Inco. Some of Antam’s contractors are related to Antam in that they are owned 03 04 05 06 07 by Antam’s Pension Fund. However, the prices for their services are contracted and determined at A relatively lower increase of an arm’s length basis, and are comparable to Antam’s other non-related contractors. Antam’s cost of sales boosted Antam’s net margin to 43%. Fuel Inline with higher nickel contained ferronickel production, as well as due to higher international fuel prices, our fuel cost increased 23% to Rp636 billion and contributed 12% to our cost of production. Around 98% of our fuel consumption was attributed to the ferronickel operation at Pomalaa. In 2007, the cost of electricity to generate power for the ferronickel operation amounted to US 11 cents per kilowatt hour (KWH), an increase of 22% compared to the electricity cost in 2006 of US 9 cents per KWH. Higher fuel costs were also due to higher consumption of coal which increased 24%. Coal is burned under the rotary kiln to pre-heat the treated ore (calcine) before it is introduced to the smelter.

In order to produce 1 tonne of nickel in ferronickel, we will normally require about 9,000 litres of fuel.

Since 2005 we have been switching our main source of diesel fuel from the higher priced Industrial Diesel Oil (IDO) to the lower priced Marine Fuel Oil (MFO). In 2007, Antam used around 20,000 litres of IDO and around 136,000 litres of MFO. IDO was less than 13% of our overall diesel fuel consumption in 2007. The main strategy to lower our production costs is to convert to a less expensive fuel such as coal, hydro or natural gas.

Labor Costs Labor costs, which include salaries, wages, bonuses and employee benefits, increased 9% to Rp484 billion and accounted for 9% of our total cost of production. The increase is largely due to INVESTOR ALERT! increased salaries which took effect in mid-2006 despite the lower number of employees of 2,716 Antam expects significant cost reduction in 2 years time in 2007 compared to 2,749 in 2006. The largest component of labor costs was health benefits for as Antam switches to a less retirees which accounted for 21% of the labor cost, followed by bonus payments and remote area expensive energy source incentives which were 20% and 10% of the labor cost respectively.

Depreciation Inline with the start of commercial operations of FeNi III in early 2007, depreciation charges increased 7% to Rp455 billion. Depreciation at our ferronickel facilities in Pomalaa contributed

78% of our total depreciation cost. Depreciation at Pongkor facilities was the second largest component attributing to 21% of our total depreciation costs in 2007. If you could tell Antam’s management one thing, Transportation what would that be? Our transportation cost amounted to Rp123 billion, 45% higher compared to 2006 inline with higher As collected from Antam’s 2008 Investor Perception Survey ore exports and higher fuel prices. Ore transportation contributed 55% of the total transportation cost while ore loading accounted for 41%. The transportation cost includes costs associated with the shipment of ore, ore loading, machinery mobilisation, as well as costs associated with logistics of loading and unloading. Antam does not include the cost of transporting ore feed to Pomalaa in Antam’s the transportation cost. The cost of transporting ore feed is included in materials used. management is quite cooperative Toll Smelting Sevices 76 with the public. Our toll smelting services, which accounted for 6% of Antam’s cost of production, increased 1,624% to Rp319 billion in 2007. We increased toll smelting to compensate for the loss of We expect the production due to the June 2007 leak from FeNi III and subsequent reduced power load at FeNi III management once it resumed operation on August 26th, 2007 after partial repairs. In 2007, we conducted toll to keep sharing smelting with Pamco Japan as well as via our agent, Avarus AG in Europe. For toll smelting, we information ship our nickel ore to third party smelters to be processed into ferronickel and then distributed to and all revenue our customers. We pay the cost associated with toll smelting which includes, among other things, projections of refining charges, freight, and insurance. In 2007, there was not much smelting capacity available Antam. due to the strong demand for nickel. As such on certain occassions we also had to give the toll smelter a share of the profit from the sale of the ferronickel.

Gross Profit Despite the higher costs of sales, our gross profit increased 163% to Rp7,213 billion as the growth of our sales outpaced the increase in cost of sales. Our gross margin widened 23% to 60% in 2007 from 49% in 2006.

Operating Expenses and Profit Our operating expenses rose 24% to Rp417 billion, and accounted for 8% of our total costs (cost of sales plus operating expenses). The increase is mainly due to the 18% increase in general and administrative expenses to Rp348 billion. The largest component of general and administrative expenses was salaries which increased 23% to Rp209 billion and accounted for 60% of the total general and administrative expenses.

Our operating profit increased 183% to Rp6,796 billion, which resulted in a significant jump of operating margin to 57% in 2007 from 43% in 2006.

Other Income and Net Income In 2007, Antam booked other income of Rp506 billion compared to other expenses of Rp184 billion in 2006 due to higher interest income, higher dividend income, and lower interest expenses. Antam generated interest income of Rp126 billion, a 301% increase over 2006, as our cash position increased 317% to Rp4,744 billion. Our dividend income increased 117% to Rp140 billion due to increased profits of PT Nusa Halmahera Minerals (NHM), our gold joint venture with Newcrest Ltd. Due to a larger US dollar cash position, the repayment of our US dollar bonds, and a weaker Rupiah, we booked a foreign exchange gain of Rp181 billion as opposed to Rp58 billion loss in 2006.

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Antam received settlements for claims made for compensation due to the late delivery of FeNi III from Mitsui & Co., Ltd and Kawasaki Heavy Industries, Ltd for Rp 78 billion. Antam also received a Rp8 billion settlement for insurance claims related to the 2005 breakdown of FeNi II.

In 2007, Antam generated net income of Rp5,132 billion (US$562 million), a significant 230% jump over our net income in 2006. As a result, our net profit margin also widened significantly to 43% in 2007 from 28% in 2006.

Cash Cost and Cost Reduction Program The cash costs of production increased for all of our products due to higher materials, labor and transportation costs, similar to other players in the industry. Despite increases in our cash costs, Antam remained a competitive low cost producer - with the exception of ferronickel. 77

Our ferronickel cash cost increased 26% to US$5.55 per pound largely due to the higher price of nickel ore feed sourced from PT Inco and higher fuel prices. The largest component of ferronickel cash cost was materials with a 58% contribution, followed by depreciation with a 21% contribution. The largest component of the materials cost was fuel and PT Inco’s ore, each contributing 43%. The third largest component of the ferronickel materials cost was consumables with an 8% contribution.

2007 NICKEL INDUSTRY COST An international metal consultant based in London estimated that the average world’s nickel cash CURVE (2007$) cost stood at US$4.15 per pound in 2007. The cash cost of the lowest ferronickel producer at around

14.0 US$2.10 per pound with the cash cost of the highest ferronickel producer at close to US$7.00 per 12.0 pound. To lower the ferronickel cash cost, we plan to convert to a less expensive fuel such as 10.0 hydropower, coal or natural gas. Currently studies are underway to find the best energy source for 8.0

6.0 PT Aneka - Pomalaa Antam and management hopes a decision can be made soon. At the end of 2007, coal was the 4.0 “front runner” in terms of which fuel Antam would convert to. Studies were coming to an end on 2.0 C1 Cash Cost ($/lb Ni) 0.0 a process called a Smart Predictive Line Controller, by Hatch Ltd, which would make using coal 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 -2.0 suitable for the demanding high energy ferronickel smelters. -4.0

-6.0 Copyright Brook Hunt 2008 Production (kt Ni) Both our limonite and bauxite cash costs increased 30% to US$11.26 per wmt and US$13.44 per wmt respectively mainly due to lower production in 2007 which resulted in higher cost per unit as well as due to higher ore mining costs. Our saprolite cash cost increased slightly to US$20.32 per wmt. Our gold cash cost, which is not offset with any “silver credits” increased 35% to US$383.10 per ounce due to higher fuel prices. Our silver is produced as a byproduct of the gold production process and sold to silversmiths in Indonesia.

As a first step in lowering our ferronickel cash cost, in 2007 Antam signed a power purchase agreement with PT Tamboli Energy (Tamboli) for the supply of 15MW peak load capacity of electricity to our Pomalaa ferronickel facilities (representing about 15% of the power required to produce ferronickel at full capacity) from Tamboli’s run-of-river hydropower plant. Following the commencement of the hydropower purchase in 2009, it is expected we could lower the ferronickel power cost by up to 8-10% which will result in a savings of up to 3-4% of our ferronickel cash cost.

Licensing From 1998 to 2000, there was a change on the political landscape, which brought in new legislation, which is generally non-conducive to mining. Since the beginning of 1998, Indonesia has been If you could tell Antam’s going through a major transition from a strong, centrally controlled government to one of greater management one thing, what would that be? regional autonomy and decentralized government. This creates a lot of uncertainty and risk as As collected from Antam’s 2008 certain policies overlap and are difficult to understand and old legislation needs to be updated. Investor Perception Survey Based on a recent Indonesia mining industry survey the top areas for improvement in the mining industry are the conflicts between mining operations and forestry regulations as well as duplication and contradictions between central and regional government regulations. Antam has been performing well. I For Antam, similar with other mining companies, there is an increasing trend of challenges in think there is still 78 relation to mining licenses. Unlike past years, the recent boom in the commodities prices has enticed many new players to come into the market, hence making it more competitive in obtaining much room for mining licenses. We view that such challenges are manageable as we continue to work closely with improvement. One the local governments and surrounding communities to ensure a close and good relationship. area that I think needs attention Performance Measurement and Outlook is the quality of Antam uses production volumes as the key measurement of performance. As opposed to the work force. I commodity or fuel prices, production volumes are the most controllable by management. Sales believe this needs volumes, meanwhile, are generally a function of production volumes. The company is considered to to be reviewed to be performing well if it meets or exceeds production targets. In 2007, nickel contained in ferronickel improve efficiency. production amounted to 17,122 tonnes, or 18,532 tonnes including toll smelting, short of the internal If the costs could target of 20,000 tonnes. After FeNi III leaked in June 2007 and went down for repairs, we revised our be reduced, Antam target to 16,000 tonnes. Meanwhile, a surge in nickel ore demand from China pushed our nickel ore will become one production to 7.1 million wmt, exceeding our target of 5.85 million wmt. Gold production, however, was slightly below the target of 2,980 tons, achieving only 2,791 tons. Due to lower demand, bauxite of the lowest cost production amounted to 1.25 million wmt, also lower than the internal target of 1.5 million wmt. producers.

For 2008, we expect ferronickel production to reach 17,000 tonnes of nickel contained ferronickel. Depending on demand from China, we expect nickel ore production to reach around 6 million wmt, while our gold production is expected to reach 2,980kg.

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Investing for a Better Future Our Future Targets 80

Organic Growth Projects 81

Alumina 81

Nickel 82

Iron, Nickel Contained in Pig Iron 83

Acquisitive Growth Projects 83

Capital Expenditure Plans 84

Given that Antam has just completed a growth phase, culminating in the switch on of our new smelter FeNi III in January 2007 and the subsequent ramp up, with minor setbacks, of FeNi III, and in combination with the likelihood of softer annual average nickel prices, the outlook for 2008 is INVESTOR ALERT! that Antam’s revenues and profits will not reach the same pace of growth as in 2007, if there is any We are now in a great position to grow, supported by strong growth at all. Indeed, our revenues may decrease in 2008. financial performance and huge nickel and bauxite deposits However, instead of volume growth, 2008 will be about preparing for and investing in the next phase of growth. After accumulating a large cash position by the end of 2007, which grew 317% to Rp4,744 billion (over US$521 million), thanks in part to the extra nickel volumes provided by FeNi III, Antam is ready to invest for a better future. We have huge reserves of nickel and bauxite, many thousands of hectares of licensed exploration and excavation properties throughout Indonesia and with well planned and well executed organic and acquisitive investments and projects we will create significant value from our assets in the years to come.

80 Our Future Targets: Bigger and Better, Diversified and Sustainable We are often asked about specific targets we are aiming for in the next one, three or five years. In general, we can say in our pursuit of creating maximum shareholder value, we are constantly striving to become bigger, better, more diversified and sustainable. Please see the Letter from Board of Directors and the Detailed Description sections for more discussion on our strategy. We feel it is slightly reckless to give anything more than our volume targets beyond the year ahead. We make forecasts for commodities and fuel prices. Therefore, while we forecast expected revenues, profits and margins for the year ahead, we do not have specific targets. We take this approach as the mining business is a complicated one, with many moving and sometimes uncontrollable parts.

While we do not have a specific leveraging target, we will always seek to minimize our debt obligations. We do not have specific return on equity target, but we will not invest if the ROE is lower than 15% or lower than our Weighted Average Cost of Capital. While we do not have a specific target, we will always endeavor to achieve the lowest WACC possible, so as to lower our hurdle rate. We do not have a specific target as regards our market capitalization but we will always attempt to inform the market accurately and in a timely manner so that our valuation reflects our true value as accurately as possible.

Production Volume Targets

Product 2007 Actual 2007 Target 2008 Target % Change Nickel contained in 18,532 tonnes 20,000 tonnes 17,000 tonnes - 8% Ferronickel Nickel Ore 7,112,870 wmt 5.5 – 5.8 million wmt 5.8 million wmt - 18% Gold 2,791 kg 3,000 kg 2,980 kg + 7% Bauxite 1,251,247 wmt 1.5 million wmt 1.5 million wmt +20%

*in general Antam sells what it produces. However, for nickel ore Antam buys higher quality ore feed from a third party located closer to the FeNi facility. For gold, Antam sells double what it produces through low margin trading activities.

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Organic Growth Projects – Extracting Maximum Value from Our Existing Reserves It is our organic projects that will create significant value in the next three to five years. Although not valued by most of our shareholders as we did not have specific capital expenditure plans by the end of 2007, we believe the organic development of our vast reserves with various projects has tremendous potential and real progress was made in 2007 towards making these projects become a reality.

ALUMINA – Maximizing Value from our Bauxite Reserves Chemical Grade Alumina PT Indonesia Chemical Alumina (Antam: 49%), Tayan, West Kalimantan PT Indonesia Chemical Alumina (“ICA”) is a joint venture company established in March 2007 to study the feasibility of building a chemical grade alumina plant at Tayan, West Kalimantan. Chemical grade alumina is about 10% of the overall alumina market and is used for many industrial and commercial purposes such as toothpaste, ceramics and high-density disks. The formation of the joint venture company follows the signing of a joint venture agreement in March 2006. The 81 JVA followed many years of negotiations, which were made more difficult due to the tremendous political and economic challenges Indonesia went through following the economic crisis and downfall of Suharto in 1998. Antam’s share in this project is 49% with an option to increase its ownership to 51% in the future while the other three partners own the remaining 51%, and consist of Showa Denko KK (SDK) of Japan 30%, Straits Trading Amalgamated Resources Private Limited of Singapore (STAR) 15% and Marubeni Corporation of Japan 6%.

During 2007, ICA continued to negotiate with sponsors and related parties in terms of shareholder structure and financing. ICA also worked to update a bankable feasibility study (BFS) conducted by Mizuho in 2003 and to finalize the selection of the Engineering, Procurement and Construction (EPC) contractor, including scope of work, project costs and cost distribution. The original BFS estimated annual output of 300,000 tonnes of chemical grade alumina, a project cost of around $220-$250 million and a project internal rate of return of over 15%. Due to higher costs since 2003, the estimated project cost will escalate; although it is expected ICA can still make a satisfactory return given that alumina prices have also risen. The Japan Bank for International Cooperation (JBIC) is expected to finance the project. Finalizing the loan agreement process will heavily depend on finalizing the EPC selection, of which Kawasaki was a front-runner.

Field work in 2007 and early 2008 included completion of the road access from the jetty to the alumina plant site, infrastructure land clearance and construction of the temporary office and base camp. Upcoming work includes preparation of the land, jetty, administration building and washing plant, road access opening, relocation and mine land clearance. We hope ICA will begin production in late 2010 or early 2011.

Smelter Grade Alumina Antam has for many years studied the idea of using a portion of its bauxite to develop a smelter grade, or metallurgical grade, alumina facility. SGA is used to make aluminum and is much more of a commodity than CGA. Whereas SGA is easier to market, CGA has higher margins and lower capital costs. However, CGA is a niche market requiring specialized knowledge. Given Antam had good partners for CGA and the exorbitant scale and costs once thought necessary to develop SGA, we always focused on developing our bauxite reserves by producing CGA.

SGA Bintan Project, Bintan Island with Chinese Companies With the higher prices and strong demand, in 2006, it began to look feasible to also build an SGA facility. We considered building on Bintan Island with domestic license holders and Chinese offtakers and partners, such as Chalco and Xinfa. The plan to build on Bintan fell through when we felt our partners might be more interested in exporting the bauxite than in building an SGA facility in Indonesia. Antam’s Kijang bauxite mine is located on Bintan Island and was meant to have been 82 shut down many years ago. The high demand from China for even the low quality bauxite meant Antam could delay shutting down the facility. However, this ore, and the ore of surrounding license holders was deemed to not be feasible for an SGA facility.

SGA Mempawah Project, West Kalimantan with Hangzhou Jinjiang Group of China As Antam did not continue the plan with Xinfa, the Smelter Grade Alumina development has moved to West Kalimantan. At Mempawah, we began an SGA project with a new partner, Hangzhou Jinjiang Group, China. Antam aims for about 55% ownership of the project. The initial estimated cost before feasibility study is around US$800 million – US$1 billion and the plant may process one million tonnes of SGA per year. Antam expects the Bankable Feasibility Study will be completed in 2008.

SGA Munggu Pasir Project, West Kalimantan with UC Rusal of Russia In September of 2007 we signed a Heads of Agreement with UC Rusal, Russia’s largest aluminum company, to explore possibilities to develop bauxite deposits and build a SGA processing plant in West Kalimantan, Indonesia. Following the outcome of a feasibility study, the proposed project may process 3.6 million wet metric tons (wmt) of washed bauxite per year into 1.2 million tonnes of SGA per year. The initial estimated project cost may be about US$1.2– US$1.5 billion and Antam is likely to take a 49% stake in this project with UC Rusal owning the remaining 51%. Feasibility studies will be conducted to determine the investment cost, location, technology, environment and other important aspects prior to the initial phase of development.

NICKEL – Maximizing Value from our Nickel Reserves Pearl Nickel Project, Buli, Halmahera, North Maluku, with BHP Billiton Although the next phase of organic growth will be from alumina, additional nickel output is still very much apart of Antam’s future. The Pearl project is the name given to the investigation being conducted by Antam and BHP Billiton to jointly develop Antam’s extensive nickel laterite resources at Buli. The alliance, formalized by a Heads of Agreement signed in February 2007, will investigate the development of pyrometallurgical and hydrometallurgical processing routes for the Buli deposit on Halmahera Island and other ore bodies.

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This move is in line with our strategy to move into higher technology and downstream metals processing activities. This strategic alliance with BHP Billiton is also expected to mitigate the cost and risk of developing mineral deposits. In 2007 we moved towards the formation of a joint venture company for the alliance. Antam and BHP Billiton expect the joint venture agreement will be completed in 2008.

IRON, NCPI – Maximizing Value from Low Grade Ore with a Blast Furnace In 2006 we began to get excited about the prospect of extracting iron from our low grade nickel reserves at Obi Island, which has a high iron content, and began a joint investigation with an Eastern European firm. The project, called the Obi Island Iron Cap project, was subsequently deemed unfeasible. With prices rising higher and with the advent of Chinese production of nickel contained in pig iron (NCPI), we shifted our development focus. In 2007, demand from China for low grade nickel ore surged as pig iron producers began to use their blast furnaces to make NCPI rather than just pig iron. NCPI contains about 3-5% nickel, while ferronickel is about 20% nickel. Although inexpensive and easy to build or convert and not requiring a power plant, the marginal 83 cost of production was still high due the largest cost component, that of ore transportation. For this reason we began to look for ways to build our own blast furnace next to our mine site at Obi and improve the efficiency by effectively eliminating the ore transportation costs.

Obi NCPI Project, Obi Island, North Maluku with Tsingshan In October 2007, we signed an agreement with Tsingshan Holding Group Co. Ltd of China to conduct a feasibility study of jointly developing an integrated stainless steel facility at Antam’s laterite ore concession at Obi Island, North Maluku, Indonesia. The study will consider a project which consists of a power plant, an NCPI (or ferronickel) plant and a stainless steel plant and will determine the capacity and the investment amount of the facility. Antam and Tsingshan will form a consortium to conduct the feasibility study, to apply for mining permits and prepare the ancillary agreements. The cost of the feasibility study and the other preparatory work will not exceed US$2 million. Under the agreement, a joint venture company will only be incorporated upon satisfactory result of the feasibility study, which will have to be completed by August 2008.

Acquisitive Growth Projects – Diversifying Our Assets and Replenishing Gold With the large cash position that we accumulated at the end of 2007 and with more substantial free cash expected, we will make acquisitions to grow and diversify. In 2007 we appointed Macquarie to assist us, among other things, in determining the best acquisitions. Our acquisition targets were focused on gold, in view of the diminishing reserves of our Pongkor gold mine but also on diversifying away from nickel, which following the expansion accounted for 89% of revenues in 2007.

Takeover Attempt of Herald Resources Ltd – Owner of Lead/Zinc in Sumatra At the end of December 2007, we decided we would make a counter bid to takeover an ASX- listed company called Herald Resources Ltd, from Australia, whose biggest asset was its 80% ownership of PT Dairi Prima Mineral, a lead/zinc project in Indonesia. Herald has for many years been our partner in PT Dairi Prima Mineral (note: the project is explained in more detail in the Minority Stake JV section of this report), of which we had 20%. However, we decided we could

create more value by partnering with China’s Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. and so made a joint bid with Zhongjin to takeover Herald. Zhongjin had for forty years successfully run If you could tell Antam’s a lower grade, and deeper mine in South China, compared to the mine at Anjing Hitam that Dairi management one thing, Prima is developing. As of April 2008, the takeover process was still underway. what would that be? As collected from Antam’s 2008 Investor Perception Survey Bauxite Reserves Acquisitions PT Borneo Edo International (Antam: 60%) and PT Mega Citra Utama (Antam: 80%) Antam continues to explore potential reserves and resources in Indonesia. Due to regional autonomy Maintain high we experienced increased domestic competition for mineral prospects. As such, during 2007 and quality products. early 2008, Antam conducted acquisitions of two exploration stage companies, PT Borneo Edo Perform International (“BEI”) and PT Mega Citra Utama (“MCU”) in West Kalimantan with ownership of expansions 60% and 80%, respectively. Both companies hold mining licenses for bauxite exploration with carefully. Give interesting prospects. We will finalize legal documentation requirements and conduct detailed dividends from exploration activities. unused cash. 84 Capital Expenditure Plans Antam’s capital expenditures in 2007 were minimal and mostly for routine expenditures. Antam spent Rp197 billion for the nickel division and Rp95 billion was spent on the gold division. Antam had budgeted Rp931 billion for capital expenditures in 2007, but many of the development expenditures were not realized or postponed.

In 2008, Antam has budgeted Rp2.5 trillion, or US$280 million for capital expenditures. Of that amount, Rp423 billion will be for routine expenditures, Rp1.7 trillion for development projects, Rp100 billion for deferred expenditures and Rp318.5 billion for strategic alliances. The actual amount spent will vary depending upon the progress of the development projects.

If Antam’s joint takeover bid of Herald is successful, Antam will spend much more than the $30 million allocated for acquistions. Antam and its partner have made an offer for Herald via a joint venture called Tango Mining (Antam 40%) which values the company at just over US$500 million.

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Capital Expenditures (in billions of Rupiah)

Antam’s capex plans Routine Capex Rp423 (US$46.5m) are subject to change Nickel division Rp258 Gold division Rp127 and do not include the Precious Metals Refinery Rp8 Geomin (exploration) Rp20 possible investment Head Office Rp11 Bauxite division Rp0.5 for the takeover of Development Capex Rp1,697 (US$186m) Herald Resources Ltd, Optimalization of FeNi III Rp170 Basic design DC-Furnace Rp10 nor the possible gold Tapunopaka Project Rp12 Development of Tapunopaka nickel mine Rp77 acquisition. Nickel contained in Pig Iron Project, Mandiodo Rp308 85 Tayan Chemical Grade Alumina Rp174

Mempawah Smelter Grade Alumina (West Kalimantan) Rp83

Antam Nickel Joint Venture, Pearl Project (FeNi IV/Hydromet) Rp325

Obi Island Mine Development Rp106

Energy Alternative (one of hydropower, natural gas or coal) Rp124

Development of Mempawah bauxite mine Rp7

Development of Pakal Island nickel mine Rp203

Development of Mandiodo nickel mine Rp8

Sponge Iron Project Rp81

IT development Rp9 Deferred Expenditures Rp100 billion (US$11m) Strategic Alliances Rp318.5 (US$35m)

Capital contribution to Cibaliung gold project Rp45.5

Acquisition of mining companies Rp273 TOTAL Rp2,538 (US$280m)

Our Projects: “Just a Bunch of MOU’s?”

Organic Growth Projects

Project Product Location Partner(s) Antam % Volume Project Cost Other Status

PT Indonesia Chemical Chemical Grade Tayan, West Kalimantan Marubeni, Showa Denko 49% with option to 300,000 tpa Up to US$350 million - While project costs have soared - ICA formed in March 2007 Alumina Alumina (Japanese) and STAR increase to 51% over initial estimates, so to have - Updating BFS, EPC selection and (Singapore) alumina prices financing

SGA Bintan Project Smelter Grade Alumina Bintan Island, Riau Chinese Companies such 51% 400,000 – 600,000 tpa US$250 million - - Unable to come to agreement on Not Feasible as Xinfa, Chalco US$400 million bauxite exports - Ore deemed not feasible at Bintan

SGA Mempawah Project Smelter Grade Alumina Mempawah, Hangzhou (China) 55% 1.0 million tpa US$ 800 million - – - JVA negotiations, Feasibility studies West Kalimantan 1 billion

SGA Munggu Pasir Project Smelter Grade Alumina Munggu Pasir, UC Rusal (Russia) 49% 1.2 million tpa US$1.2- – - Agreement signed in September 2007 West Kalimantan US$1.5 billion - JVA negotiations, Feasibility studies

Mandiodo NCPI Project Phase 1: NCPI Mandiodo Jindal (India) 70% US$600 million - JVA negotiations, Feasibility studies Phase 2: Stainless – 86 Steel

Obi NCPI Project Phase 1: NCPI Obi Island, North Maluku Tsingshan (China) 60% 7,500 tpa of Nickel Contained $150 million to - While building at mine mouth - Agreement signed in October 2007 Phase 2: Stainless in Pig Iron $230 million reduces transportation costs, - JVA negotiations, Feasibility studies Steel coking coal is a challenge - Prior plans for the Obi Iron Cap project were cancelled

Krakatau Iron Project Sponge Iron South Kalimantan Krakatau Steel 34% 300,000 tpa US$65 million – - JVA negotiations, Feasibility studies

Pearl Nickel Project 1) Ferronickel Halmahera Island, North BHP Billiton 50% 1) 30,000 tpa – 50,000 tpa of 1) US$1 billion - Part 1 will likely process FeNi - Agreement signed in February 2007 2) Nickel Cobalt Maluku FeNi 2) US$3 billion using pyrometallurgy - JVA negotiations, Feasibility studies 2) 60,000 tpa of nickel cobalt - Part 2 will likely process nickel cobalt using hydrometallurgy • Note: this table is for illustrative purposes only as the feasibility studies are still being conducted for many of these projects and as such many aspects were not final • NCPI = Nickel Contained in Pig Iron • EPC = Engineering Procurement and Construction • BFS = Bankable Feasibility Study • JVA = Joint Venture Agreement • TPA = Tons per annum

Despite our strong performance in 2007, we realise we cannot get complacent and that building Acquisitive Growth Projects reliable expansion projects to sustain growth remains absolutely critical. We must ensure Company Product Project Name/Location Partner(s) Antam % Volume Other Status sustainable profits so when commodity prices decline we can continue generating thecash needed to repay our debts, finance our growth and pay dividends. Herald Resources Ltd Lead/Zinc PT Dairi Prima Mineral, Zhongjin (China) 40% in Herald At full rate: 1m tonnes Reserves and As of April 2008, North Sumatra (20% in Dairi) of throughput for 7 Resources of 15.3 takeover bid was years (320,000 tonnes million tonnes in process of concentrate, 175,000 (grading 13.4% Zn In 2007, some analysts complained there was no significant progress being made as regards our tonnes of metal) and 7.8% Pb) growth projects, and only the signing of non-binding Memorandums of Understanding (MOUs) that Various Targets Gold Various, Indonesia – – – Macquarie acting as Identify target in would expire after one year, as some already had. This view was somewhat true, in that no ground advisor 2008 breaking activities were conducted in 2007. However, we view signing these preliminary agreements PT Borneo Edo International Bauxite West Kalimantan 60% Acquired for the as a vital first step and feel there was indeed significant progress made in relation to our projects. – – bauxite resource _ potential PT Mega Citra Utama Bauxite West Kalimantan 80% Acquired for the Given the long term, capital intensive, slow yielding nature of mining and metals processing, we – – bauxite resource – must be prudent in choosing our partners, technology, locations, offtakers, suppliers, advisors potential

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Organic Growth Projects

Project Product Location Partner(s) Antam % Volume Project Cost Other Status

SGA Mempawah Project Smelter Grade Alumina Mempawah, Hangzhou (China) 55% 1.0 million tpa US$ 800 million - – - JVA negotiations, Feasibility studies West Kalimantan 1 billion

Mandiodo NCPI Project Phase 1: NCPI Mandiodo Jindal (India) 70% US$600 million - JVA negotiations, Feasibility studies Phase 2: Stainless – Steel 87

Krakatau Iron Project Sponge Iron South Kalimantan Krakatau Steel 34% 300,000 tpa US$65 million – - JVA negotiations, Feasibility studies

Acquisitive Growth Projects

Company Product Project Name/Location Partner(s) Antam % Volume Other Status

Herald Resources Ltd Lead/Zinc PT Dairi Prima Mineral, Zhongjin (China) 40% in Herald At full rate: 1m tonnes Reserves and As of April 2008, North Sumatra (20% in Dairi) of throughput for 7 Resources of 15.3 takeover bid was years (320,000 tonnes million tonnes in process of concentrate, 175,000 (grading 13.4% Zn tonnes of metal) and 7.8% Pb) Various Targets Gold Various, Indonesia – – – Macquarie acting as Identify target in advisor 2008 PT Borneo Edo International Bauxite West Kalimantan 60% Acquired for the – – bauxite resource _ potential PT Mega Citra Utama Bauxite West Kalimantan 80% Acquired for the – – bauxite resource – potential

and financiers. We form partnerships with many groups as part of the process of finding the best way to create value by developing our reserves. We have the reserves, we have the capital, but we must not make hasty decisions. Jointly conducting the pre-feasiblity work as called for by the If you could tell Antam’s management one thing, various MOUs that we sign is the best way to start the development of mineral our properties. what would that be? As collected from Antam’s 2008 Over the past couple of years we have been discovering the best way to form benefical alliances Investor Perception Survey with China. Signing MOUs allows us to begin working together with the Chinese counterparty, which in some cases has never ventured outside of China, to ensure we match. As was the case with two MOUs related to the joint development of some of our bauxite reserves, sometimes we find each party has different ideas about the partnership. Do not feel satisfied with what In February 2007, we signed a Heads of Agreement to establish an alliance with BHP Billiton to you have achieved. investigate the joint development of an extensive nickel laterite resource on Halmahera Island. Benchmarking Following the signing of the joint venture agreement of the Tayan project in March 2006, on April with other mining 26, 2007 we established a joint venture company, called PT Indonesia Chemical Alumina. Toward companies in 88 the end of the year we signed a Heads of Agreement with UC RUSAL of Russia to jointly develop order to measure bauxite deposits in Indonesia. As well, we also signed an agreement with Tsingshan Holding Group competitiveness Co. Ltd of China to conduct a feasibility study of jointly developing an integrated stainless steel will take you to a facility at Antam’s laterite ore concession at Obi Island, North Maluku. All of these are part of our higher level. strategy of building and adding value to our reserves to sustain profitable growth.

However, we are the first to admit that an MOU is only a small step in project development, and there is still much to do to get our projects realized and create the future value we are encouraging our shareholders to focus on. Constant challenges we must deal with for all of our projects include remote locations, poor infrastructure, higher costs, lack of, or too expensive contractors and service providers, and regulatory uncertainty in the form of licensing issues.

Minerals are often in areas that are very difficult to gain access to, which can cause problems. Limited infrastructure means escalation of project costs as well as difficulty in logistics distribution.

Escalation of material prices have pushed project costs to soar beyond initial expectations. For example, in 2003, a bankable feasibility study for the Tayan project had the project cost at US$220 million. Following hikes in material prices inline with increased commodity and oil prices, the project cost has increased by around 100%. However, we expect that higher alumina prices will maintain a healthy return on investment.

As well, significant industrial growth in the Middle East, China and India has pushed demand for contractors to spike and many are short of resources. Hence, there is difficulty in finding credible and experienced contractors.

In Indonesia, project delays are sometimes attributable to the issue of regulatory uncertainty and specifically getting the necessary licenses. Although all of our projects do not have any issues with current required licenses, some of them might be affected by the bureaucracy and politics of gaining other licenses or license renewal. This could mean expensive delays to projects.

Despite all of these challenges we remain confident about our future. We are committed in expediting the pace of work on various projects, as well as addressing the outstanding issues and ensure on time completion of the projects.

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Comments from Heads of Our Development Projects

With this section we hope to introduce and allow you to hear from some of the people responsible for our development projects.

Dolok Silaban President Director, PT Indonesia Chemical Alumina, Antam’s joint venture in the Tayan project “Difficulty in securing contractors. This is a major cause for the delay. The spike in energy prices made the oil and gas industry very attractive and lured many investors to the industry. Contractors were stretched and other industries became somewhat of a second priority for them.”

Arifianto Sobana Tiammar Chief of Project Manager - Smelter Grade Alumina and Iron “The lack of infrastructure and difficulty in logistics put upward pressure on the projects cost. In addition, production and marketing these new products for us also pose challenges. Project delay is also caused by the uncertainties on issues related to mining licenses.”

Tato Miraza Project Group Leader - Nickel and Energy Development Project “The increase of energy costs impacts largely on the capital expenditures. The requirement of using high technology in nickel processing also adds some time in selecting the right partner. The larger size of the production capacity will deliver economies of scale. However, we need more energy, time and the appropriate partner to realize the plans. Remote location also creates difficulties in bringing in facilities and human resources.”

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91 Blue Sky: Existing Minority-Stake Joint Ventures PT Nusa Halmahera Minerals 92

PT Galuh Cempaka 93

PT Cibaliung Sumberdaya 93

PT Dairi Prima Mineral 94

PT Weda Bay Nickel 94

This chapter discusses only those joint ventures with which we have a minority stake. Generally speaking these joint ventures were formed prior to the economic crisis, downfall of Suharto and subsequent boom in emerging and commodity markets. Antam was a very different company 10-15 years ago. At If you could tell Antam’s that time we had limited access to capital and had yet to list our shares on a stock exchange, a much management one thing, smaller balance sheet with little cash and, like today, a large number of exploration licenses all across what would that be? As collected from Antam’s 2008 the Indonesian archipelago. In order to minimize the “risk capital” of exploring these properties and to Investor Perception Survey maximize the likelihood of developing a mine, we formed several partnerships with international mining companies. In most cases, in return for prior exploration work, our local experience and knowledge and the mining license, we would acquire a non-controlling free carried interest in the joint venture, with an option to acquire more at some later stage. As Indonesia has been going through tremendous Good disclosure economic and political changes, it is only recently that these projects are making significant advances, and prudent capital with most still at the exploration and development phase. However, one of the projects, PT Nusa management are key Halmahera (gold), has been operational since 1999 and another, PT Galuh Cempaka (diamonds) began exporting in 2006. We view some of these joint ventures as having significant upside, both in terms of drivers of a lower the upcoming likely commencement of operations and/or as an investment. cost of capital.

Minority Stake Joint Ventures

No. Company Product/ Contract of Work Antam Shares Location Partner Status Commodity (CoW) Free Carried Investments Option (including Loan in shares Carried, if any) 1. PT Nusa Halmahera Gold 6th Generation - 17.50% - Halmahera, North Newcrest Singapore Production Minerals Maluku Holding Pte Ltd, 92 subsidiary of Newcrest (ASX Listed) 2. PT Galuh Cempaka Alluvial Diamonds 7th Generation 20% 10% Banjarbaru & Tanah Gems Diamond Ltd Production Laut, South Kalimantan (LSE Listed) 3. PT Cibaliung Sumber Gold Mining License - 10.25% - Cibaliung, Banten Austindo Resources Development Daya Corporation NL, Australia (ASX Listed) 4. PT Dairi Prima Mineral Lead/ Zinc 7th Generation 20% - - Dairi & Pakpak Bharat, Herald Resources Construction North Sumatera (ASX Listed) 5. PT Weda Bay Nickel Nickel 7th Generation 10% - 15% (after BFS Halmahera, North Weda Bay Minerals Pre-feasibility completion) Maluku (TSE Listed), study 15% (after 14 a subsidiary of Eramet years operation) 6. PT Gag Nikel Nickel 7th Generation 25% - 7% Sorong, Papua BHP Asia Pacific Pre-feasibility Nickel Pty Ltd, a study subsidiary of BHP Billiton 7. PT Sorikmas Mining Gold & Base 7th Generation 25% - 15% Mandailing - Natal, Aberfoyle Pungkut Exploration Metal North Sumatra Investment Pte Ltd 8. PT Gorontalo Minerals Gold & Base 7th Generation 20% - - Bolaang Mongondow, PT Bumi Resources No Activities Metal South Sulawesi 9. PT Sumbawa Timur Gold & Base 7th Generation 20% - - Sumbawa Aberfoyle Pungkut No Activities Mining Metal Investment Pte Ltd 10. PT Pelsart Tambang Gold 7th Generation 15% - - Kota Baru, Tanah Pelsart International No Activities Kencana Bumbu, Banjar, Tanah NL, Australia Laut, South Kalimantan 11. PT Bima Wildcat Gold & Base 7th Generation 15% - 10% Minahasa. North Bornite Pte Ltd CoW Minahasa Metal Sulawesi terminated

PT Nusa Halmahera Minerals (Antam: 17.5%) PT Nusa Halmahera Minerals (“NHM”) is a joint venture company owned 82.5% by ASX-listed Newcrest Mining Limited and 17.5% by Antam located in the Gosowong area of Halmahera, North Maluku. We do not have an option to increase our share ownership at NHM. NHM commenced production at Kencana underground mine, located 1 km south from the Gosowong open pit mine, in March 2006. In 2007, NHM produced 373,673 ounces of gold as a result of increased production at Kencana although in the fourth quarter, a reduction in processed ore resulted in lower gold production. Cash costs for the six months to 31 December 2007 reached US$220 per ounce with a total production cost of US$320 per ounce.

For development and exploration activities, NHM conducted the Gosowong Extension Project, including underground access, plant modifications and construction of additional site infrastructure, which potentially will add significant value and increase its production life by around five years. Feasibility work will be conducted on the US$80 million project during 2008 with implementation

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scheduled for 2009. During 2007, NHM paid total dividends to Antam of US$15,168,812.34. On 16 April 2007, NHM shareholders approved to increase issued and paid up capital to 2,976,562 shares (US$25,000,000.00). The increase was funded from a special dividend payment. Antam’s portion in the increase was US$520,898.00 and deducted from total dividends paid to Antam. We value NHM as a successful joint venture project and closely monitor NHM exploration and development activities to improve reserves and resources and prolong the mine life. NHM has produces tremendous investment returns for us, and is an example of what Antam’s other minority-stake joint venture projects can become.

93 PT Galuh Cempaka (Antam: 20%) PT Galuh Cempaka (“Galuh Cempaka”) operates the Cempaka alluvial diamond mine located in South Kalimantan. Our ownership of 20% free carried shares includes an option to increase by 10%. On June 2007, BDI Mining Corp, the former majority shareholder, with 80% interest, was acquired at a net cost of US$80 million by Gem Diamonds Limited, a diamond producer listed on the main board of the London Stock Exchange.

The alluvial deposits at the Cempaka Mine consist of the Danau Seran and Cempaka paleochannels. The former has been mined since the commencement of operations in 2004 and is almost depleted. It is significantly smaller but of a higher grade than the Cempaka channel. Minor gold and platinum is present in the diamondiferous gravels in both channels.

During the year of 2007, Galuh Cempaka produced approximately 23,034 carats of diamonds and 16.8 kg of gold and platinum concentrates. Galuh Cempaka sold approximately 10,410 carats of diamonds valued at US$2.27 million or US$218 per carat in the first half 2007, prior to the BDI Mining acquisition by Gem Diamonds. In January 2008, 15,000 carats were sold through a tender with an average price of US$331.00 per carat. We did not plan to exercise the option and continue to observe PT Galuh Cempaka’s production and development.

PT Cibaliung Sumberdaya (Antam: 10.25%) The Cibaliung project located at Banten is operated by PT Cibaliung Sumberdaya (“CSD”), a joint venture company between Antam (10.25% interest with no option to increase) and Austindo Resources Corporation NL, a public company listed on the ASX (89.75% interest). In 2007, CSD resumed decline development with total development now in excess of 550 meters. CSD also conducted full mobilization of the refurbishment work and moving the gold processing plant to the site. The first gold pour is now expected within the second quarter of 2008. CSD indicated costs may increase up to US$21.6 million excluding the impact of higher fuel prices. CSD now is reviewing funding alternatives to complete the development of the Cibaliung Gold Project. CSD also conducted limited exploration activities.

Currently we are evaluating ownership at CSD and are studying the best alternatives on the additional funding needs required by CSD during 2006-2008.

PT Dairi Prima Mineral (Antam: 20%) The Dairi Project is held by PT Dairi Prima Mineral (“DPM”) under a 7th generation Contract of Work between DPM and the Government of Indonesia. DPM is a joint venture operating company owned 80% by Herald (through Gain & Win Pte. Ltd.) and 20% by Antam.

In developing the Dairi Project, Herald has, in conjunction with Antam, made significant progress by completing a positive definitive feasibility study, securing social and environmental and construction approvals and was at the end of 2007 awaiting a forestry use permit before proceeding with the full development of the Anjing Hitam deposit.

Herald has stated it has secured the major approvals required to develop and exploit the Anjing Hitam deposit apart from the forestry use permit. DPM is currently awaiting approval from the Ministry of Forestry regarding this permit. Herald has stated the Minister of Forestry already has the authority to grant the permit, but notwithstanding this, has been instructed that a Presidential Regulation is required to be obtained before the approval will be granted.

Herald has indicated that upon receipt of the forestry permit, should it be granted and subject to any further conditions that may be required to be met, it will complete final land acquisitions and progress the construction of mining and other facilities. This is expected to take approximately 18 to 21 months from receipt of the permit.

As a partner in DPM since its inception, we identified a compelling opportunity to take a majority 94 stake in the Dairi Project. This opportunity is inline with our strategy to grow in a considered way and INVESTOR ALERT! to diversify away from nickel. We made a joint cash offer of AUD2.50 per share, with our On 29 January 2008, we made a joint cash offer with Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd partner Zhongjin, to acquire (“Zhongjin”), to acquire Herald Resources Ltd for A$2.50 per share, or A$505 million (US$448 million). Herald Resources Ltd which owns 80% of the lead zinc Zhongjin is a Chinese metals and mining company, which is principally engaged in the mining and Dairi Project processing of lead, zinc and other non-ferrous metals and owned 38% by Guangdong Rising Assets Management Co. Ltd., a state-owned enterprise under the Guangdong Provincial Government.

Due primarily to Zhongjin’s considerable operational expertise in lead/zinc mining and our considerable experience operating in Indonesia as a major mining company, Antam is well placed to draw on significant synergies with Zhongjin by jointly developing the Dairi Project. Antam and Zhongjin established a joint venture called Tango Mining Pte Ltd for the specific purpose of carrying out the cash offer transaction. This transaction will give Antam a combined majority stake in the Dairi Project (through our investment in Tango combined with our current 20% direct interest).

PT Weda Bay Nickel (Antam: 10%) PT Weda Bay Nickel is a nickel joint venture company between Antam (10% free carried interest) and Weda Bay Minerals Inc. (90% interest), a onetime Toronto Stock Exchange listed company and since 2006, a subsidiary of Eramet S.A. The project is located in Central Halmahera of North Maluku. We have a right to increase our interest up to 15% from additional stocks issued by PT Weda Bay Nickel after completion of a bankable feasibility study at a price of development costs incurred with respect to the operations up to date on which the production decision is made. Antam also has an option to increase ownership between 5-15% after the 14th year of production.

In 2007, the joint venture completed several important development stages. The technical parameters were validated by pilot tests carried out on the hydrometallurgical process developed by Eramet at its research centre in Trappes on ore from Weda Bay. The resource level was confirmed through exploration at more than 4 million tonnes with a higher degree of knowledge. A real-scale mining test was carried out.The final decision to proceed with the project for 60,000 tones of nickel capacity will be made in 2009. We had not yet considered exercising our option as feasibility studies still continue, although we were encouraged and we expect positive results in 2008.

Exploration and Reserves 95 Summary Tables of Reserves and Resources 96

Nickel 97

Detailed Nickel Reserves and Resources Table 98

Gold Detailed Gold Reserves Table 100

Bauxite Detailed Bauxite Reserves and Resources Table 101

Notes to Reserves and Resources Estimations 102

One of our competitive advantages as a mining and metals processing company is our high quality reserves and resources all across Indonesia (please see “Notes to Reserves and Resources “We own high Estimations” on page 102 for more details of how mineral reserves and ore resources are defined). Antam views exploration activities a fundamental basis to support our corporate growth strategy. quality mineral Planning is so much more effective when it is based upon solid and reliable data. For almost a decade, we have followed the JORC Code issued by The Australasian Institute of Mining resources and ore and Metallurgy for the estimation of our reserves and resources, as submitted in the form of a Competent Person’s report in compliance with the requirements of our listing on the Australian reserves of nickel, Securities Exchange. We understand that the highest standard of reserves and resources estimations reporting, especially in this current commodity boom, is an absolute necessity. The gold and bauxite JORC Code along with other standards such as the SAMREC Code (South Africa), Reporting Code (UK / Ireland / Western Europe), CIM Definition Standards and Guidelines (Canada), SME Guide in Indonesia and (USA) and Certification Code (Chile) are well-known standards and accepted globally. We believe our report is fully comparable to other mining companies which adopt such standards. constantly continue to accelerate Mineral Resources and Ore Reserves (‘000 wmt)*

Commodity Quantity Change (%) discovery of new 2006 2007 Saprolite Nickel 179,850 180,900 1 prospects in Limonite Nickel 185,150 214,200 16 order to support Gold 3,863 3,973 3 Bauxite 84,400 81,600 (3) current operations 96 Proved and Probable Reserves (‘000 wmt)* and upcoming Commodity Quantity Change (%)

2006 2007 projects.”

Saprolite Nickel 63,900 55,100 (14)

Limonite Nickel 51,450 50,150 (3)

Gold 2,882 3,026 5

Bauxite 84,400 73,100 (13) *Based on the Competent Person’s report. Figures as per December 31, 2007 (Inferred resources were included in gold estimation). Please see detailed tables in this section.

The Geomin Unit is Antam’s exploration division and conducts all of Antam’s exploration activities including geological exploration, geophysical investigation, surveying, drilling, lab analysis, data processing and arranges required licenses from general investigation to the exploitation phase. The current challenges for Geomin are accelerating the discovery of new prospects and the extension and/or expansion of mining licenses.

If you could tell Antam’s management one thing, what would that be? Establish good corporate governance As collected from Antam’s 2008 Investor Perception Survey and Antam shall be one of the biggest mining companies in Asia.

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Antam continued to focus on nickel, gold and bauxite exploration in 2007. Exploration expenditure reported by Geomin, excluding joint ventures increased 32% to Rp125 billion. Antam spent Rp91 billion on nickel exploration, Rp26 billion on gold and Rp8 billion on bauxite. Geological and drilling activities significantly contributed to the expenditure. Antam has increased the 2008 exploration budget 7% to Rp134 billion, inline with higher revenues in 2007 and attempts to acquire new prospect areas permits and licenses. Antam also considered other interesting mineral prospects to support current operations and projects.

The estimations shown in the tables on page 96 describe the amount of resources and reserves fully owned by Antam. The tables do not include mineral resources and reserves jointly held with partners.

Nickel Generally, all of Antam’s lateritic nickel resource estimates, both saprolite nickel (Ni ≥ 1.8% and Fe < 25%) and limonite nickel (Ni ≥ 1.2% and Fe ≥ 25%) increased in 2007, mostly due to accelerated and detailed exploration activities at several prospects, particularly at Buli and Obi, to support nickel development projects. However, our nickel reserves estimates decreased mostly due to strong production in 2007. Antam maintained the same cut off grade as used in 2006 to estimate the ore reserves and mineral resources.

Nickel exploration activities were focused in Southeast Sulawesi and Halmahera, including Buli (and surrounding areas) and Obi island which focused on supporting current nickel operations and for nickel development projects.

97 Antam also continued to conduct nickel exploration at Morowali Regency of Central Sulawesi, particularly at Tangofa, Buleleng, Witaponda I, Witaponda II, Witaponda III, Bungku Tengah and Bungku Barat. In 2007, Antam did not upgrade nor estimate mineral prospects in these areas as more detailed exploration activities were required.

As at December 31, 2007, Antam’s total proved and probable reserves estimation for saprolite ore decreased 14% to 55.10 million wmt. For limonite reserves, the estimation slightly decreased 3% to 50.15 million wmt. Antam’s total measured and indicated resources for nickel saprolite ore increased 8% to 125.80 million wmt while limonite nickel resources increased 23% to 164.05 million wmt.

Details of some of the changes to Antam’s nickel reserves and resources estimations based on location are at page 98.

Southeast Sulawesi In 2007, Antam conducted exploration activities at Southeast Sulawesi, particularly at the Pomalaa nickel mine, Bahubulu Islands, Tapunopaka and Mandiodo. Antam also focused on exploration of new discoveries in several prospects such as Pandua, Baunaga and Lalindu.

We continued to work on mine design at Tapunopaka as mining activities will be carried out soon. We mobilized heavy equipment and infrastructure preparation including road and stockyard. As well, Antam was in the process of obtaining subsequent permits and making other arrangements following the approval of the exploitation license.

Nickel

Location Reserves Resources

Classification Saprolite Limonite Classification Saprolite Limonite

wmt Ni wmt Ni wmt Ni wmt Ni Cut Off Grade Cut Off Grade Cut Off Grade Cut Off Grade (‘000) (%) (‘000) (%) (‘000) (%) (‘000) (%)

Pomalaa Proved Ni ≥ 1.8% 2,000 1.9 - - - Measured ------

Probable ------Indicated ------

TOTAL - 2,000 1.9 - - - TOTAL ------

Bahubulu Proved ------Measured Ni ≥1.8% & Fe <25% 8,400 2.3 Ni ≥ 1.2% & Fe ≥ 25% 5,250 1.5

Probable ------Indicated Ni ≥1.8% & Fe <25% 10,000 2.3 NI ≥ 1.2% & Fe ≥ 25% 20,600 1.5

TOTAL ------TOTAL - 18,400 2.3 - 25,850 1.5

Tapunopaka Proved ------Measured ------

Probable Ni ≥ 1.6% & Fe <25% 3,800 2.0 Ni ≥1.2% & Fe ≥ 25% 9,950 1.6 Indicated ------

TOTAL - 3,800 2.0 - 9,950 1.6 TOTAL ------

Mandiodo Proved ------Measured - - - Ni ≥ 1.2% & Fe ≥ 25% 5,450 1.5

Probable ------Indicated Ni ≥ 1.8% & Fe <25% 5,700 2.2 Ni ≥ 1.2% & Fe ≥25% 21,600 1.5

TOTAL ------TOTAL - 5,700 2.2 - 27,050 1.5

TOTAL - 3,800 2.0 - 9,950 1.6 - 24,100 2.2 - 52,900 1.5

Tanjung Buli Proved Ni ≥ 1.8% & Fe< 25% 10,600 2.2 - - - Measured ------

Probable Ni ≥ 1.8% & Fe< 25% 6,500 2.2 Ni ≥ 1.2% & Fe ≥ 25% 12,100 1.5 Indicated ------

TOTAL - 17,100 2.2 - 12,100 1.5 TOTAL ------

Gee Proved Ni ≥ 1.8% & Fe< 25% 1,000 2.1 - - - Measured ------

Probable ------Indicated ------

TOTAL - 1,000 2.1 - - - TOTAL ------

Pakal Proved ------Measured ------

Probable Ni ≥ 1.8% & Fe< 25% 13,500 2.4 Ni ≥ 1.2% & Fe ≥ 25% 17,800 1.5 Indicated ------

98 TOTAL - 13,500 2.4 - 17,800 1.5 TOTAL ------

Sangaji Proved ------Measured Ni ≥ 1.8% & Fe < 25% 12,500 2.2 Ni ≥ 1.2% & Fe > 25% 13,200 1.4

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 56,800 2.2 Ni ≥ 1.2% & Fe > 25% 46,900 1.4

TOTAL ------TOTAL - 69,300 2.2 - 60,100 1.4

Mornopo Proved Ni ≥ 1.8% & Fe <25% 14,200 2.1 - - - Measured ------

Probable Ni ≥ 1.8% & Fe <25% 3,500 2.2 Ni ≥ 1.2% & Fe ≥ 25% 10,300 1.4 Indicated ------

TOTAL - 17,700 2.2 - 10,300 1.4 TOTAL ------

P1 Proved ------Measured ------

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 3,800 2.4 Ni ≥ 1.2% & Fe > 25% 1,650 1.4

TOTAL ------TOTAL - 3,800 2.4 - 1,650 1.4

P8 Proved ------Measured ------

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 1,650 2.2 Ni ≥ 1.2% & Fe > 25% 1,050 1.3

TOTAL ------TOTAL - 1,650 2.2 - 1,050 1.3

Buli Area TOTAL - 49,300 2.2 - 40,200 1.5 - 74,750 2.2 - 62,800 1.4

Kawasi Proved ------Measured Ni ≥ 1.8% & Fe < 25% 2,400 2.2 Ni ≥ 1.2% & Fe ≥ 25% 1,250 1.5

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 18,400 2.2 Ni ≥ 1.2% & Fe ≥ 25% 27,550 1.5

TOTAL ------TOTAL - 20,800 2.2 - 28,800 1.5

Mala-Mala Proved ------Measured ------

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 5,050 2.1 Ni ≥ 1.2% & Fe ≥ 25% 12,650 1.5

TOTAL ------TOTAL - 5,050 2.1 - 12,650 1.5

Haul Sagu Proved ------Measured ------

Probable ------Indicated Ni ≥ 1.8% & Fe < 25% 1,100 2.1 Ni ≥ 1.2% & Fe ≥ 25% 6,900 1.5

TOTAL ------TOTAL - 1,100 2.1 - 6,900 1.5

Obi Area TOTAL ------26,950 2.2 - 48,350 1.5

GRAND TOTAL - 55,100 2.2 - 50,150 1.5 - 125,800 2.2 - 164,050 1.5

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99 Geologists prepare to conduct As at December 31, 2007 total reserves and mineral resources of saprolite nickel ore in Southeast exploration drilling. Sulawesi decreased 5% to 29.9 million wmt while limonite did not change from 62.85 million wmt.

Buli (and surrounding areas), Halmahera, North Maluku In the Buli area, Antam has three nickel mines, Gee Island, Mornopo and Tanjung Buli and the prospects areas of, Pakal and Sangaji. The reserves and resources in this area contribute significantly to Antam’s total nickel reserves and resources. Antam continued to do extensive exploration to support upcoming projects and also current mining operations.

In 2007, Antam conducted drilling using spacing of 25 meters, 50m and 100m at Sangaji and drilling spaced at 50m at Mornopo. As a result of detailed exploration activities, Antam was able to increased limonite resources at the Buli area. As at December 31, 2007 the total reserves and mineral resources of saprolite nickel ore at Buli decreased 9% to 124.05 million wmt while limonite nickel ore reserves and resources increased 6% to 103 million wmt.

Obi Island, Halmahera, North Maluku In 2007, Antam focused on exploration activities at Obi Island mainly to increase indicated resources at several prospect areas such as Kawasi, Mala-Mala and Haul Sagu. As a result of detailed exploration activities, estimations of both saprolite and limonite at Obi Island increased. As Antam plans to conduct mining activities in the area soon, Antam began to mobilize heavy equipment and develop infrastructure and also processed required authorizations. As at December 31, 2007 total resources of saprolite nickel ore at Obi Island increased 117% to 26.95 million wmt while limonite nickel resources increased 91% to 48.35 million wmt.

Gold Gold exploration in 2007 continued to focus on new discoveries and more detailed reserve estimations. Mining activities continued at Pongkor underground gold mine located at West Java. If you could tell Antam’s management one thing, Given the strategic importance of gold to act as a natural hedge to Antam’s heavy exposure what would that be? to nickel, Antam increased gold exploration activities at Pongkor and other prospects within As collected from Antam’s 2008 Investor Perception Survey Indonesia. It is estimated the mine life of Pongkor will last six to seven years.

Exploration activities at Pongkor continued particularly at Kubang Cicau, Ciurug, Ciguha Timur, Nirmala and Malasari. Antam discovered various mineralizations and as result of detailed I strongly exploration activities could slightly increase gold reserves. recommend you keep fighting to We focused on prospect areas within Indonesia, such as Muaramanderas of Jambi, Papandayan of acquire Herald West Java, Gembes of East Java, West Sulawesi and Southeast Sulawesi. Antam also conducted initial exploration activities in Aceh, North Sumatra and Central Java. Resources and Newmont due to Antam hopes for some encouraging mineralizations to be revealed at those areas. As at positive signals December 31, 2007, total reserves and resources at Pongkor excluding inferred resources from the market. increased 5% to 3.026 million wmt with an estimated 743,000 contained ounces of gold and 8.2 million contained ounces of silver.

GOLD

Location Reserves Resources Classification Gold Ore Classification Gold Ore wmt Mean Grade Metal (oz) wmt Mean Grade Metal (oz) 100 (‘000) (g/t) (‘000) (‘000) (g/t) (‘000) Au Ag Au Ag Au Ag Au Ag Pongkor Proved 405 11 107 130 1,263 Measured+Indicated – – – – – Probable 2,621 7.8 89 613 6,938 Inferred 947 5.9 78.4 163 2,148 GRAND 3,026 8.22 92 743 8,201 TOTAL 947 5.9 78.4 163 2,148 TOTAL

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Bauxite Antam conducted bauxite exploration activities at existing prospects of the Kijang mine (and surrounding areas) of Bintan Islands, Tayan and Munggu Pasir of West Kalimantan. Over 90% of our total bauxite reserves and resources estimations were from West Kalimantan.

BAUXITE

Location Washed Bauxite Classification Reserves Classification Resources wmt T-SiO2 R-SiO2 Al203 wmt T-SiO2 R-SiO2 Al203 (‘000) % % % (‘000) % % % Wacopek Proved 2,200 14 7.4 51.5 Measured - - - - Probable - - - - Indicated 8,500 16.9 8.7 51.9 TOTAL 2,200 14 7.4 51.5 TOTAL 8,500 16.9 8.7 51.9 Tayan Proved 9,300 20.1 4.1 47.3 Measured - - - - Probable 21,600 12.0 3.7 47.5 Indicated - - - - Munggu Pasir Proved - - - - Measured - - - - Probable 40,000 10.3 3.2 46.6 Indicated - - - - TOTAL Tayan and 70,900 12.1 3.5 47 - - - - Munggu Pasir GRAND TOTAL 73,100 12.2 3.6 45.6 8,500 16.9 8.7 51.9

Total washed bauxite reserves and resources estimations from Kijang, Tayan and Munggu Pasir prospects decreased 3% to 81.6 million wmt inline with bauxite production in 2007. Due to challenges affecting the area/location containing our bauxite reserves and resources, Antam reclassified probable reserves at Kijang to indicated resources. Antam maintained reserves estimations at West Kalimantan for both Tayan and Munggu Pasir in preparation for several alumina projects in the vicinity. 101

If you could tell Antam’s management one thing, what would that be? As collected from Antam’s 2008 Investor Perception Survey

Always remember the Triple Bottom Line (Profit, People, and Planet) in running your daily business operation, so that your business can be more balance and sustainable.

Notes to Reserves and Resources Estimations

Pursuant to the JORC Code, a ’mineral resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the earth’s 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 mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. The term mineral resource covers mineralization which has been identified and estimated through exploration and sampling and within which ore reserves may be defined by the consideration and application of technical, economic, legal, environmental, social and governmental favors.

An ’indicated mineral resource’ is that part of a mineral resource for which tonnages, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. The estimate is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed. An indicated mineral resource indicates a lower level of confidence than that applying to a measured mineral resource.

A ’measured mineral resource’ is that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenchers, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and/or grade continuity.

An ’ore reserve’ is the economically mineable part of measured or indicated mineral resource. Ore reserves are those portions of mineral resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the persons making the estimates, can be the basis of a viable project after taking account of all relevant metallurgical, economic, marketing, legal, environmental, social and governmental factors. The estimate includes diluting materials and allowances for losses which 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. 102 These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore reserves are subdivided in order of increasing confidence into probable ore reserves and proved ore reserves.

A ‘proved ore reserve’ is the economically mineable part of a measured mineral resource. The estimate includes diluting materials and allowances for losses which may occur when the material is mined. Approximate assessment, 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.

A ’probable ore reserve’ is the economically mineable part of an indicated, and in some circumstances measured mineral resource. The estimate includes diluting materials and allowances for losses which 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. A probable ore reserve indicates a lower level of confidence than a proved ore reserve.

The data on the reserves and resources included in this Annual Report is based on and accurately reflects information that has been compiled by Mr. Trenggono Sutioso. Mr. Sutioso is a permanent employee of the Company a member of the Australasian Institute of Mining and Metallurgy and has the appropriate experience to be considered a Competent Person as defined in the JORC Code. However, the reserves and resources information contained in this Annual Report has not been independently verified and any independent verification may produce variation, which may be material. Unless otherwise indicated, these reserves and resources data do not include that of the Company’s joint venture. This information is a summary of the Company’s reserves and resources as at December 31, 2007, for simplification measured and indicated resources have been combined.

31 December 2007 Trenggono Sutioso

2007 Antam Annual Report www.antam.com Exploration Detailed Corporate and Reserves Description of Antam Risk Management Governance of Antam Sustainability Report Auditing Antam Contact Us

Everything you need to know to get started on analyzing and understanding Antam Detailed Description of Antam How We Make Our Money 104

103 Our Strategy To Grow 104

Our Structure 105

Our Products and How We Make Them 105

Our Customers and Market Share 108

Our Competitors 109

Our Country and Government 110

Our Industry 110

SWOT Analysis 112

How We Make Our Money We make our money by profitably exploring, discovering, excavating, processing and refining mineral deposits and then selling them around the world and have been doing so for four decades If you could tell Antam’s management one thing, since our inception in 1968. what would that be? As collected from Antam’s 2008 Investor Perception Survey Our success could be attributed to our vast reserves and resources, our proven ability to locate and develop those deposits, our ability to construct and operate sustainable processing facilities, our ability to develop long-term relationships with world class customers, our commitment to Good Corporate Governance (GCG) and our prudent financial management. Antam’s management is Our Strategy to Grow quite cooperative Our strategy to grow and meet our objective to enhance shareholder value is by focusing on what with the public. we do best, creating and maintaining sustainable growth and operations, and maintaining our We expect the financial strength. management to

We have cultivated a significant expertise in the business of exploring, discovering, extracting, keep disclosing processing and marketing of nickel, bauxite and gold products. While we will continue to focus the information on this core business, we may consider entering other mining businesses if we are presented with and all the revenue very attractive opportunities in such segments. projections of Antam. We create and maintain sustainable growth and operations through various means. To safeguard and replenish our reserves we invest risk capital annually of about 3-5% of our previous year export revenues. As exploration is a risky undertaking, we also form strategic alliances with leading global mining companies to mitigate this risk. By so doing we will also obtain new technology and increase our sources of financing alternatives.

We continue to move further downstream into processing activities to add value. We will also

104 expand our processing capacity in order to maximize output, increase cash generation and lower unit cost through economies of scale. In order to further control our cost, we will continue to find new sources of energy that are cheaper than our current diesel-based energy. Meanwhile, we will maintain a diversified customer base to avoid any dependence on asingle market.

In view of our strong balance sheet and cash rich position we will undertake acquisitions to speed up our growth. We appointed Macquarie in 2007 to help us conduct due diligence work on several gold acquisition opportunities in Indonesia.

We are committed to conducting the above undertakings in environmentally and socially responsible manners. By adhering to international standards of environmental management and by treating our work force and the surrounding communities respectfully, we will minimize business interruptions and ensure safe and sustainable operations.

Maintaining a robust financial foundation through a strong balance sheet and healthy liquidity has always been a top priority. By generating as much cash as possible we ensure sufficient funds to finance growth, pay dividends and repay debts. Strong cash, sound capital structure and easy access to capital will maintain our financial flexibility and provide us with protection in the event of falling commodities prices and other external pressures.

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Engineers monitor Power Plant No. 3.

Our Structure Our group consists of PT Antam Tbk (Antam), three wholly-owned subsidiaries, one 80% owned subsidiary and one 60% owned subsidiary.

PT ANTAM Tbk 105

Antam Finance Ltd. Antam Europe BV PT Antam PT Borneo Edo PT Mega Citra (Mauritius) (100%) (Netherlands) (100%) Resourcindo (99.98%) International (60%) Utama (80%)

PT Antam Resourcindo operates our iron sands business in Kutoarjo, Central Java, and our near- exhausted gold mine in Cikotok, West Java. Antam Finance Ltd (Mauritius) and Antam Europe BV (Netherlands) are finance-related companies used for our corporate bonds issuance. With the bond redemption in December 2006, these two subsidiaries are in the process of being liquidated. We have conducted all the necessary administrative requirements for the liquidation. In September 2007 we acquired a 60% interest in PT Borneo Edo International (BEI), an exploration stage company with a mining authorization for bauxite exploration in West Kalimantan. In January 2008, we increased our 4% ownership in PT Mega Citra Utama (MCU), an exploration stage company with a mining authorization for bauxite exploration in West Kalimantan, to 80%.

Our Products and How We Make Them Our products are ferronickel, high grade nickel ore (saprolite), low grade nickel ore (limonite), gold, silver, bauxite and iron sands. Our main services are precious metals refining and geological services. These products are produced through our Strategic Business Units (SBUs) which function as profit centers.

Exploitation Licenses* Nickel Location No. Exploitation Licences Area (Ha) Expiration Date Status Pomalaa KW.98PPO213 1,584 15-07-2010 Production (Southeast Sulawesi) KW.98PPO214 2,372 15-07-2010 Production KW.98PPO215 599 15-03-2009 Production KW.98PPO216 3,759 15-03-2009 Production Maniang Decree of Kolaka 195 10-02-2008 Production (Southeast Sulawesi) Regency No. 27 Tahun 2003 Bahubulu and Decree of Kendari 6,213 06-05-2028 Development Tapunopaka Regency (Southeast Sulawesi) No. 161 Tahun 2005 Buli Area KW.97PPO443 39,040 08-01-2019 Production (North Maluku) Obi Island KW.97PPO464 9,528 10-03-2028 Development (North Maluku) TOTAL NICKEL 63,290 GOLD and SILVER Location No. Exploitation Licenses Area (ha) Expiration Date Status Pongkor (West Java) KW.98PPO138 6,047 20-04-22 Production TOTAL GOLD 6,047 BauXITE Location No. Exploitation Licenses Area (ha) Expiration Date Status Kijang KW.96PPO346 2,988 13-12-09 Production (Bintan Island) KW.96PPO359 1,098 13-12-09 Production Tayan KW.98PPO183 36,410 01-09-20 Development (West Kalimantan) TOTAL BAUXITE 40,496 *These tables show exploitation licenses only and do not include all mining licenses.

Nickel SBU Our nickel SBU, which operates one nickel mine and three ferronickel smelters in Southeast Sulawesi (Pomalaa) and three nickel mines in North Maluku (Gee, Tanjung Buli and Mornopo), 106 produces and exports high grade nickel ore with a minimum 1.8% nickel content (saprolite), low grade nickel ore with a 1.2% minimum nickel content (limonite) and ferronickel, which is in the form of either high-carbon or low-carbon and is generally 20% nickel and just under 80% iron. INVESTOR ALERT! The majority of our saprolites are exported, of which the higher grades are exported to Japan and In 2007, our nickel reserves and resources consisted of Eastern Europe and the lower grades to China. Some portion of our saprolites are used as feedstock approximately 181 million wmt for our ferronickel production. In 2007 the majority of limonites were exported to China while a of saprolites and 214 million wmt small portion were exported to Macedonia . In 2007, our nickel reserves and resources consisted of of limonites. approximately 181 million wmt of saprolites and 214 million wmt of limonites.

Ferronickel is produced using an energy intensive pyrometallurgical process where one tonne of ferronickel is produced by smelting about 75-80 tonnes of saprolites. Ferronickel is sold to customers in Europe, Japan, Korea, Taiwan, India and China in the form of ingot (bars) or shots (pellets).

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Our ferronickel smelters, FeNi I and Feni II have a name plate capacity of 5,500 tons per annum If you could tell Antam’s each and FeNi III has an optimal capacity of 14,000 tonnes per annum. We have decided operating management one thing, FeNi III at its nameplate capacity of 15,000 tonnes per annum, if operated at a full power load of 42 what would that be? MW while using 2.38% nickel grade, is potentially unstable. The entire Pomalaa facility is powered As collected from Antam’s 2008 Investor Perception Survey by our 102 MW dual-fired power plant, which is run using MFO oil. Currently, the power plant is jointly maintained and operated with Wartsila of Finland.

Go Go Go Win the Gold SBU and Precious Metals Refinery SBU Herald Resource Bid. Our Gold SBU mines gold ore and smelts it into gold dore bullions. The bullions are then refined by our Precious Metals Refinery SBU to produce pure gold and silver bars and coins. Silver is produced as a by product and as such, its production cost is included in the production cost of gold. The gold and silver bars and coins are then sold to domestic and foreign buyers, mostly jewelry makers. The purity of our gold and silver is internationally accredited by the London Bullion Market Assocation (LBMA).

Gold ore is mined at Pongkor, West Java, an underground gold mine that was discovered by Antam’s Geomin geology division and opened in 1993. Pongkor has a nameplate capacity of 5 tonnes, or 5,000 kg (161,000t.oz), of gold per year. In the last a couple of years, however, we have targeted about 3,000 kg (96,600t.oz) of gold and 22,000kg of silver per year, from ore production of about 400,000 wmt ore per year due to softer than expected mine tunnel walls and lower than expected grades. Antam has about 6 - 7 years of gold and silver production left from Pongkor’s estimated 3.03 million wmt of ore reserves with 743,000 contained ounces of gold and 8.2 million contained ounces of silver.

Logam Mulia, Indonesia’s only precious metal refinery, has a capacity of 75 tons of gold per year and 275 tons of silver per year. Only about 30% of the capacity is utilized due to the declining supply from third party miners in view of dwindling gold investment in Indonesia. Historically more

than half of Logam Mulia’s income was derived from refining service for third parties. Our planned 107 gold mine acquisition, if realized, is expected to boost its capacity utilization.

SBU Other Minerals Antam’s other minerals SBU produces bauxite and iron sands.

We are Indonesia’s longest running producer of bauxite, the raw material for production of alumina. Our bauxite ore is mined from open pits at Kijang, Riau, and is exported to alumina producers in Japan and China. We export about 1 - 1.5 million tonnes of bauxite per year.

Kijang mine had reached the end of its reserve life. However, exports continued from Kijang, as Antam’s customers in China were willing to take delivery of the lower quality bauxite which was previously considered not fit for sale.

Our largest bauxite reserves are located at Tayan, West Kalimantan. In line with our strategy to move downstream, we will not export the ore but will develop CGA and SGA plants with international partners. We have around 82 million tons of bauxite reserves and resources, (excluding reserves and resources owned by PT Borneo Edo Indonesia and PT Mega Citra Utama). At current extraction rate, these reserves and resources will last for several decades.

The iron sands business has not been an important money earner for us and in 2005 it was turned over to our subsidiary, PT Antam Resourcindo.

SBU Exploration - Geomin Our exploration business unit, Geomin, mainly focuses on finding new gold discoveries and on estimating our reserves of nickel and bauxite more accurately. Unit Geomin is a cost center If you could tell Antam’s management one thing, although it may conduct services for third parties. Unit Geomin will work together with international what would that be? partners as required by head office to meet the terms of joint venture agreements. As collected from Antam’s 2008 Investor Perception Survey

Our Customers and Market Share Our customer base is diversified and we are not dependent upon a single customer or country. The majority of Antam’s products are exported to long term, loyal and blue chip international Too much companies in Western Europe and East Asia. acquisition news but limited 2007 CUSTOMER INFORMATION funding thus PRODUCT CUSTOMER-LOCATION QUANTITY we’re doubting Saprolite Pacific Metals (PAMCO)-Japan 977 (‘000 wmt) Sumitomo Metal Mining (SUMICO)-Japan 686 management will Nippon Yakin Kogyo-Japan 363 realize its plans. Raznoimport Nickel-Europe - Ukraina 814 Via AVARUS-Europe - Macedonia 415 Various Spot Buyers such as: Zhejiang Yuan Tong; Premiere Asian Investment; Ang Been Malacca; Kam Wah Company, etc-China 1,741 Minmax Resources Holding-China 686 China MCC Int’l Economic and Trade-China 413 Tsingshan Holding-China 370 TOTAL Saprolite 6,464 Limonite Zhejiang Grand Imp & Exp-China 300 (‘000 wmt) Pilar Banyu Mas Hongkong-China 75 Via AVARUS-Europe - Macedonia 68 TOTAL Limonite 443 FeNi Pohang Iron & Steel (POSCO)-Korea 5,061 (TNi) Via Avarus for Thyssen Krupp Nirosta, Avesta Polarit, Outokompu, Arcelor-Mittal, ALZ BV-Europe - Germany, Belgium,UK, etc 9,142 Ni-Met Metals & Minerals Inc-India 300 108 Yieh United Steel Corporation (YUSCO)-Taiwan 2,503 Nisshin Steel; Nikkinko Trading, Mitsubishi Corp-Japan 717 TOTAL FeNi 17,723 Gold Standard Bank Plc-Singapore 3.75 (Tonnes) Various Jewellers - retail-Indonesia 1.25 Total Gold 5.00 Silver CYS Cheung Yong Sam Enterprise Pte; Ltd-Singapore 16.50 (Tonnes) Various Jewellers - retail-Indonesia 10.45 Total Silver 26.95 Gold Refining Avocet Bolaang Mongondow-Indonesia 2.21 (Tonnes) Nusa Halmahera Mineral-Indonesia 11.28 Indo Muro Kencana-Indonesia 1.41 Antam Recourcindo - Antam-Indonesia 0.19 Pongkor - Antam-Indonesia 2.79 Gold Scraps-Indonesia 9.06 Total Gold Refining 26.94 Silver Refining Avocet Bolaang Mongondow-Indonesia 0.18 (Tonnes) Nusa Halmahera Mineral-Indonesia 12.78 Indo Muro Kencana-Indonesia 11.47 Antam Recourcindo - Antam-Indonesia 0.68 Pongkor - Antam-Indonesia 24.13 Silver Scraps-Indonesia 4.82 Total Silver Refining 54.06 Bauxite Showa Denko KK, Japan 316 (‘000 wmt) Chiping Xinfa Huayu Alumina Co.,Ltd-China 288 Nippon Light Metal Company.,Ltd-Japan 206 Sumitomo Chemical Company (SCC)-Japan 127 Alasaka Company Limited-China 38 TOTAL Bauxite 975

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Since 2004, we began to establish relationships with customers from Eastern Europe as many nickel smelters in Eastern Europe that were previously shutdown were being revived due to the high nickel prices. Antam further diversified its customer base by entering business relationships with companies in India and China

Our new Chinese customers purchase our lower grade saprolites to produce nickel contained in pig iron (NCPI) which is then sold to Chinese producers of low grade stainless steel. Although China has been a major source of demand growth for nickel in the past a couple of years, we will not over expose ourselves to China and will maintain our diversified customer base around the world.

Most of our sales agreements are based on volumes for one to three years and prices are determined by the international spot price. We also have two long term offtake agreements of 11 and 10 years from commercial operations of FeNi III, amounting to a combined annual total of 14,000 tonnes of nickel in ferronickel, with TKN of Germany and Posco of Korea. Sacks of ferronickel shot ready for export.

Our Competitors Our performance has been at par, and in some cases better, compared to other mining companies – other beneficiaries of the high commodity prices - in Indonesia and world wide.

Compared to the average of Indonesia mining companies, which include ourselves, other domestic companies and foreign companies operating in Indonesia, we have been utilizing less debt and more conservative capital structure. Yet, our margins and return on equity are comparable or higher than the average.

Compared to the top 40 global mining companies, our debt utilization has been a little bit more aggressive. However, we have been able to post much better margins and financial returns.

109 Key Ratios Top 40 Global Indonesian Antam Companies Mining Companies 2005 2006 2005 2006 2005 2006 2007 Ebitda Margin 37% 44% 43% 41% 41% 49% 64% Net Profit Margin 23% 27% 23% 23% 26% 28% 43% Return on Equity* 26% 33% 37% 39% 31% 42% 79% We surpassed our peers in terms of margins Debt to Equity 32% 36% 49% 47% 40% 31% 10% and returns. *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period. Source: PricewaterhouseCoopers, Antam

Key Ratios Australian Miners Indonesian Antam Miners Average 10 years Average 10 years Average 10 years (1997-2006) (1997-2006) (1997-2006) Ebitda Margin NA 39% 35% Net Profit Margin 12% 16% 20%

Our average 10 years debt to equity ratio is Return on Equity* 12% 19% 22% significantly much lower than those of our Debt to Equity NA 115% 37% Indonesian peers. *Antam calculates RoE as net income divided by the average equity, whereas PwC may use equity at the end of the period. Source: PricewaterhouseCoopers, Antam

Our Country and Government The regulatory environment for the mining business has becoming more complex as the country is undergoing a decentralization drive that commenced in the post-Soeharto era. There has been much confusion and excessive red tape due to overlapping authorities between the central and regional governments.

The draft mining law, which is currently being debated in parliament, is expected to provide some clarity on this issue once it is finally passed. Among the most salient features of this law would be the likely ban of ore exports to be implemented in stages within a transition period following the passing of the revised law. This will not impact us as we have been planning to stop exporting raw materials and moving toward downstream processing activities even if there were no such bans. We believe we will be the beneficiary of the law as the domestic companies who currently only sell ores will cease to become competitors and would instead become our suppliers of ores. However, it remains to be seen how effective the law enforcement will be.

Our Industry The nickel price reached around US$24.00 per pound in mid-2007 in view of strong demand from China, the stainless steel industry in general, production shortages and dwindling inventories. Nickel prices then dropped sharply in the second half of 2007 as stainless steel producers conducted de-stocking programs and stopped producing additional stainless steel partly to avoid having to buy nickel at very high prices. This nickel price correction was beneficial to nickel’s long term fundamentals as it prevented significant substitution from nickel, a shift that would be hard to reverse. The average international spot nickel price settled at US$16.90 per pound in 2007, still a historical high. As de-stocking programs were likely to begin coming to an end by the end of fourth quarter 2007 or beginning of 2008, which would push down international inventories tracked by the London Metals Exchange, while nickel supply shortages were expected to continue in the near future, mining analysts expect the nickel price to slightly recover in the early to middle part of 2008

110 although the average nickel price in 2008 would be lower at around US$12.50 – 15.00 per pound. Analysts expect long term nickel prices of around US$7.00 per pound, still much higher than the US$3.00 per pound forecasted only a couple of years ago.

After hovering around US$650-US$700 per troy ounce for the first eight months of 2007, gold prices began a sustained increase in September 2007. By the end of 2007, gold prices had reached around US$840 per troy ounce. The average gold price for 2007 was US$697 per troy ounce. The meteoric rise of gold prices could be attributed to among other things recessionary fears, inflation concerns, US Federal Reserve rate easing, dollar weakness and geopolitical concerns. As these factors are likely to remain in place in 2008, some mining analysts predict gold prices could break US$1,000 per troy ounce in 2008.

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Bauxite prices are determined over the counter and there are no benchmark prices of bauxite as “The nickel price they are not listed in the LME. Our bauxite average selling price increased 7% to US$ 14.58 per wet metric ton (wmt) in 2007 from US$13.60 per wmt. However, our prices were well below the correction in the prevailing global prices of above US$20 per wmt as our bauxite ores are of lower grade quality, coming as they are from the almost depleted Kijang mine. second half of 2007 The average price of Smelter Grade Alumina, which consumes around 90% of global bauxite was beneficial to production, decreased 12% to US$359 per tonne from US$407 per tonne in 2006 due to lower demand from aluminium smelters, especially in China, due to de-stocking activities. Chinese nickel’s long term alumina producers have cut production levels to reduce supply and stem the faltering prices and fundamentals as it in first quarter 2008 average SGA prices stood at US$394 per tonne. prevented significant In general the prices of Chemical Grade Alumina are 25-35% higher than the prices of SGA, as it is less of a commodity than SGA, is more of a speciality product and is a niche market. substitution.” Despite a slight increase in stock level in 2007, aluminum prices increased 3% to US$2,639 per tonne in 2007 from US$2,566 per tonne in 2006 partly due to inflow from hedge funds on the back of turbulent equity market, high oil prices, and weak US dollar. Power disruptions in South Africa and China caused aluminium prices to jump sharply to US$3,200 per tonne in early 2008. By the end of first quarter 2008 the power disruptions issue has settled down and mounting surpluses should keep prices under downward pressure. Aluminium prices however are still supported by rising energy prices and inflow from financial investors. Mining analysts expect aluminium price to hover around US$2,800 per tonne by mid 2008.

111

SWOT Analysis

STRENGTHS OPPORTUNITIES

• Our vast reserves and resources will generate cash and • High commodity price environment provides opportunities create value. Our nickel reserves and resources probably to extract and market products that were recently not stand among the top five largest in the world. Our proved economical to produce. nickel reserves, which are JORC compliant, contain about 1.83 million tonnes of nickel metal. For illustrative purposes • More and more international parties seek to form only, under current nickel prices, the value would be about partnerships with Antam. Future value will eventually be US$51 billion. realized from our solid strategic alliances with international partners. • Being 65% state-owned mining company provides us with a home field advantage in mineral-rich Indonesia. We are likely • Ample room to grow, internally and through acquisitions, to benefit in the event that the Government gives priorities to given the strong balance sheet, cash rich position and national mining companies. untapped mineral reserves and resources.

• Although majority owned by the state, we are committed to • As one of the few companies still using diesel to power good corporate governance. Creating shareholder value is our ferronickel smelters (given the company was previously objective. We are transparent and we treat our shareholders subsidized), there is still room to significantly reduce cash – majority and minority – equally. costs and regain our position as a low cost producer of ferronickel. • We are a vertically integrated mining company with expertise ranging from exploring, discovering, excavating, processing • As a State-Owned Enterprise, Antam will likely benefit from and refining mineral deposits to marketing them. domestic policies prioritizing national companies.

• Strong operational track record. With nearly four decades of experience, our company has proven its ability to locate and Threats and Challenges discover deposits through our exploration unit, Geomin. We have been profitably constructing and operating sustainable • Commodities are cyclical. Prices will go down someday as new processing plants as well. supplies come to the market and/or demand dries up. We have to mitigate this threat by becoming a very competitive low cost • Diversified customer base with long term relationships with producer in order to maintain margins and still make money. loyal blue chip companies. We are not over-exposed to any single market or region. • Threat of substitution. While there are no good substitutes for nickel in stainless steel production, manganese can be used • Financially prudent, we have a robust balance sheet and to make a lower quality 200 series stainless steel that may be strong cash position. We are poised to make investments used in more applications if prices remain too high. If the price and grow. remains too high for too long, stainless steel users may opt to use lower quality stainless steel and make more frequent • Head-quartered in a mineral rich archipelago where returns and replacements and repairs. This would amount to a seismic 112 margins of doing mining business are higher than average. shift in the way stainless is used, as high quality 300 series was always preferred given the overly high costs of corrosion.

WEAKNESSES • Interference by politicians and bureaucrats. We mitigate these interferences by being transparent and by playing by • Our ferronickel cost is relatively high due to the costly diesel the rules as stipulated by the Indonesian as well as Australian fuel used in our smelters. Once we convert to cheaper fuel, stock exchanges. targeted in 2010, we will regain our position as a low to middle cost ferronickel producer. • Increased licensing difficulties in view of decentralization drive. We mitigate this threat by continuously nurturing good • Relatively small size with small global market share compared relationships with the central and regional governments and to global mining players. Bargaining power towards large local communities as well as by explaining to them the virtues customers is not too strong. By leveraging our strengths and of taking longer views and investing in processing facilities. capitalizing the opportunities, we will have to grow as fast as possible to realize our vision of becoming a global company • Continuing high oil price environment. We have to mitigate by the next decade. this threat by converting to cheaper sources of energy as soon as possible. • Located in a non-investment grade country, our cost of capital is relatively more expensive compared to large global • Realizing our joint ventures with partners from China to jointly companies head-quartered in investment-grade countries. develop alumina processing facilities has been challenging Through continuously improving investor relations we try as their main interests are generally more about securing to create understanding about our company in the capital bauxite supplies than developing processing facilities. To market so that we are fairly and accurately valued, to help overcome these challenges we carefully negotiate the terms lower the cost of capital. and conditions of our agreements.

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Risk Management How We Manage Risk 114

Risk Statement 115

113

How We Manage Risk

Mining is a slow-yielding, capital intensive and risky business. It takes years and a large amount of capital to explore, discover and develop new mining sites and build smelting plants. The expenditures for exploration programs, known as “risk capital” might not be recoverable since there is no guarantee that such programs will result in discovery of mineable deposits. Meanwhile, it will take two to three years to develop smelting plants and they can further be delayed by disruptions or cost overruns, which are not uncommon in this industry.

Fully aware of the various risks we have to face, we proactively strive to improve our risk management capabilities. In 2003, we formed a commissioner-level Risk Management Committee with the task of creating a risk philosophy and approving risk policies formulated by the business units. In 2006, we further integrated and aligned the management of risk to our strategy by establishing an Enterprise Risk Management (ERM) unit that reports directly to our Board of Directors. The ERM unit’s tasks include among other things: 1) identifying, mapping, measuring and assessing risks based on the approved risk policies and related regulations; 2) ensuring proper coordination between various risk management functions within the company; and 3) ensuring that effective action plans are in place. Among the most critical risks faced by our company that we have to be aware of and if possible control are:

Country Risks: Substantially all of our assets and operations are located in Indonesia. We may be adversely affected by changes in the Government, Government policies, social instability or other political, economic, legal, regulatory or international developments in or affecting Indonesia such as terrorist activities, separatist movements, religious and ethnic clashes and tensions, demands of local governments and labour activism and unrests. The causes of the above risks are beyond our control. However, we are of the view that we know how to do business in this country very well, that we have a competitive advantage over others in operating a mining business in Indonesia, that the country is moving in the right direction, and that Indonesian country risks will eventually decrease rather than increase in the future.

Regulatory Risks: The decentralization drive in the post-Soeharto era has created regulatory uncertainties with regards to licensing, royalties and other permits and regulations. We manage risks related to mining licenses by maintaining very solid relationships with all levels of government from the central government to local leaders as well as with local communities. A possible solution to the regulatory risk is the draft mining law which will bring certainty (although not enforcement) to the issues miners face. One provision in the proposed law may curb the surge in low value-added ore exports out of Indonesia and while doing so cause us to forego a portion of our revenues. However, this clause is not likely be enforced immediately but applied in 3 to 5 years from the passing of the new law, in order to give companies like ours time to implement previously made plans to move downstream.

Operational Risks: Operational risks are risks that negatively impact our day to day business operations, the health and safety of workers, the environment and the surrounding community. These risks include among other things strike actions, non compliance towards standard operational procedures, illegal mining and failures in environmental management. To minimize these risks, we continuously train and educate our workforce, appoint world class contractors, implement a zero-accident policy, maintain good relations with workers and local communities, and maintain globally accepted environmental standards. To help ensure we meet international standards of management and environmental management, we are ISO-certified at our nickel and gold facilities and precious metal refinery.

Strategic Risks: Strategic risks are risks associated with strategic direction of the company. They are driven by uncertainties concerning company 114 policy, budget, or a change in stakeholder requirements. Strategic risks include project delays or unrealised projects, potential loss of opportunity in acquiring new business acumen and initiative development such as change management, and efficiency improvement initiatives and the potential of wrongfully selecting a strategic partner.

Commodity Price Risks Commodity prices are volatile and rise and fall in line with changes in supply and demand. Currently there is a strong risk that average annual nickel prices will fall from the peak of 2007. While our customer base is diversified and we are not dependent upon any single market, our revenue would still be negatively impacted by falling prices. To mitigate this risk we may conduct hedging activities, with the main goal of protecting our revenue budget. However, certain hedging positions may also cause us to forgo the upside potential in an increasing price environment. As well, we also maintain a “natural hedge” by having a diversity of revenue streams and products.

We feel commodity price risk is better managed by lowering our production costs. We are committed to replacing diesel fuel as our main source of energy with other less expensive fuel, such as natural gas, hydropower or coal. We recently signed a deal to acquire 15 megawatts from a run-of-river hydropower plant. We have also made efforts to lower costs by renovating and replacing older equipment, boosting production volumes and reducing the size of our workforce.

Currency Risks Our revenue and cash are substantially all in US dollars while the majority of our operating costs are in Rupiah. Although our debt is all in US dollars, we are generally adversely affected when the US dollar weakens against the Rupiah. To mitigate this risk we occasionally enter into hedging arrangements. Under our foreign currency hedging policy, we may only hedge to an amount not exceeding 30% of our monthly working capital requirements.

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Risk Statement

115

116 Mining is a slow yielding, capital intensive and risky business. Investors who take long investment horizons are likely to be the ones who will obtain the highest rewards.

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Corporate Governance of Antam Assessment of Antam’s Corporate Governance Report 118

Statement on the Status of Corporate Governance Practices 120 Reports from the Commissioner-Level Board Committees 125

Adoption of the ASX Corporate Governance Principles and Recommendations 140

Adoption of the Indonesian Code of Good Corporate Governance 143

117

Assessment of Antam’s Corporate Governance Report

Plaza ABDA, 10th & 11th Floor Jl. Jend. Sudirman Kav. 59 Jakarta 12190, Indonesia Phone: (62) (21) 5140 1340 Fax: (62) (21) 5140 1350 www,rsm.aajassociates.com

Board of Commissioners and Directors PT Antam Tbk.

We have assessed management’s assertions that the Gorporate Governance Statement of PT Antam Tbk. (Antam) for the year ended December 31, 2007 is presented in accordance with the 2nd edition of Australian Securities Exchange Corporate Governance Principles and Recommendations (2007 ASX CG Principles and Recommendations) issued by the ASX Corporate Governance Council. Antam’s management is responsible for the assertions.

The assessment was conducted through document reviews and interviews at Antam’s head office. We did not validate the information provided by management in the course of this assessment. It is the responsibility of Antam’s management to ensure that the information provided to us was in fact true, accurate, and up to date. We believe that our assessment provides a reasonable basis for our conclusion. Our conclusion does not provide legal determination on Antam’s compliance with specified requirements.

Our assessment concludes that management’s assertions referred to above is fairly presented in accordance with the 2007 ASX CG Principles and Recommendations, and is summarised below.

LAY SOLID FOUNDATIONS FOR OVERSIGHT AND MANAGEMENT Antam has established and adequately disclosed the respective roles and responsibilities of the Board Commissioners and the Board of Directors, that is clear, and includes a balance of authority to avoid excessive power of any single individual and enables a proper framework to assist in understanding the respective accountabilities and contributions of the Board of Commissioners and the Board of Directors, and of each executive director. Improvement opportunities include utilising a letter of appointment for newly appointed board members and the disclosure of the performance review of senior executives.

STRUCTURE THE BOARD TO ADD VALUE Antam has a board that collectively is able to discharge its responsibility as imposed by the prevailing laws and regulations, and add value to the company. Improvement opportunities exist in disclosure of the Board of Commissioners and its committees’ performance evaluation, and also in further elaborating the procedures for induction of new board members.

Ethical and Responsible Decision-Making Antam has conducted a sufficient effort in promoting ethical and responsible decisions, to comply with legal obligations, and 118 to consider reasonable expectations of their stakeholders. We noted that Antam has also established frameworks to support the ethical building within the organization, through refinement of its code of conduct, requirement of an annual statement to comply with the code of conduct, and a whistleblower mechanism. The code of conduct is posted at Antam’s intranet portal for internal socialisation, and at its website for external socialisation. Nevertheless, there are still areas for improvements to optimise the current practices and mechanism. Therefore, Antam needs to develop and conduct a formal program to regularly socialize the code of conduct and monitor its implementation. In addition, opportunity for improvements also exists to further refine the accountability of the whistleblower mechanism.

Safeguard Integrity in Financial Reporting Antam has put in place a structure of review and authorisation designed to ensure the truthful and factual presentation of the company’s financial statements, through establishment of an audit committee that has considerable involvement in assessing finance related aspects within Antam and by establishing a process to ensure the independence and competence of external auditors.

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Make Timely and Balanced Disclosure Antam has disclosed its financial and operational performance in a timely and balanced way; however it has not been done at the same level regarding its governance information. The policy regarding disclosure of information or its summary needs to be disclosed when finalised.

Respect the Rights of Shareholders Antam has provided frameworks, to empower shareholders in communicating with Antam and in participating in the General Meeting of Shareholders, and also access to information regarding the company’s operations, including financial information.

Recognise and Manage Risk Antam has developed a sound policy regarding the risk management and internal control system, and in identifying and managing its material business risks. However, Antam might lack a supporting structure to assist its policy, predominantly in the financial reporting risks.

Remunerate Fairly and Responsibly Antam has provided a framework to ensure that the level and composition of remuneration is sufficient and reasonable and linked to performance, to the extent that it does not go beyond the prevailing laws and regulations that govern Antam as a State Owned Enterprise in Indonesia.

Antam’s current level of adoption within each principle of the 2007 ASX CG Principles and Recommendations are as marked below.

ASX Principles Good Need Improvement Poor

Lay solid foundations for management and oversight.

Structure the Board to add value.

Promote ethical and responsible decision-making.

Safeguard integrity in financial reporting.

Make timely and balanced disclosure.

Respect the rights of shareholders. 119 Recognize and manage risk.

Remunerate fairly and responsibly.

Scale : Good represent outstanding practice or consistently good and full adoption of recommendation. Poor represent no adoption of recommendation whatsoever and need significantly improvement.

Amir Abadi Jusuf Chief Executive Partner

March 24, 2008

Statement on the Status of Corporate Governance Practices

Corporate Governance is a dynamic force that keeps evolving. PT Antam Tbk. (Antam) believes that Good Corporate Governance (GCG) is a system that needs to be executed consistently and continuously to achieve sustainable growth through a management practices system based on the principles of transparency, accountability, responsibility, independency and fairness.

Becoming a listed company in Indonesia in 1997 and in Australia in 1999 has also moved Antam forwards in continuously improving its corporate governance practices to optimise the value of the company for its shareholders by also taking into consideration the interest of other stakeholders. Nation-wide, as one of the largest state-owned enterprises (SOE), GCG implementation at Antam is sometimes used as example for other SOE; in due course this could also be beneficial to enhance market confidence which may promote investment flow and sustainable economic growth for the nation.

Some significant instances of GCG practices that took place in the fiscal year 2007 include the finalisation of corporate policy manual, performance review of individual executive directors and of board-level committees, continuing enterprise risk management implementation, corporate sustainability report, and development of policies to support improvement of its governance practices. Overall, Antam is continuously improving its governance practices compared to previous years, and the individuals within are enthusiastic to take necessary actions to improve it.

Even more, Antam is accelerating the adoption of the new 2007 ASX Corporate Governance Principles and Recommendations (2nd edition, year 2007) as suggested by the ASX Corporate Governance Council, and reports its corporate governance practices as assessed using the revised principles and recommendations.

Description of Antam’s governance structure and practice are provided below, including the adoption on ASX Corporate Governance Principles and Recommendations and Indonesia Code of GCG issued by the National Committee on Governance, during the fiscal year 2007.

GOVERNANCE STRUCTURE Based on the Indonesia Corporation Law No.40 of year 2007 (Indonesia Corporation Law), the organs of a company consist of the General Meeting of Shareholders (GMS), the Board of Commissioners (BOC), and the Board of Directors (BOD).

The management of a limited liability company in Indonesia uses a two board system, namely the BOC and the BOD, each of which has a clear authority and responsibility based on their respective 120 functions as mandated by the Articles of Association and laws and regulations. Based on the legal framework, the function of independent directors in a single-board system is represented by the function of the BOC in a two-board system.

General Meeting of Shareholders Board of Directors Board of Commissioners

Environment Corporate Risk Internal Audit Audit Nomination Risk Good Enviroment & and Post Secretary Management Unit Committee Remuneration Management Corporate Post-Mining Mining Unit Unit & HR Committee Governance Committee Development Committee

Certain management divisions work closely with related BoC-level committees

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General Meetings of Shareholders The GMS facilitates shareholders to make important decisions regarding their investment in If you could tell Antam’s Antam, by observing provisions in the Articles of Association and the rules and regulations. management one thing, Decisions taken in the GMS must be based on the long term interest of a company. The GMS and what would that be? or shareholders cannot intervene in the exercise of the duty, function and authority of the BOC and As collected from Antam’s 2008 Investor Perception Survey the BOD, without curtailing the authority of the GMS to carry out its rights in accordance with the Articles of Association and laws and regulations, including the replacement or termination of the members of the BOC and or the BOD. Decisions made in the GMS must be conducted properly Good disclosure and transparently by considering matters necessary to safeguard the long term interest, including and prudent capital but not limited to the appointment of members of the BOC and the BOD, approval on reports submitted by the BOC and the BOD, appointment of independent external auditors, appropriation management are of remuneration and dividends. key drivers of lower

cost of capital. The GMS has authorities that are not delegated to the BOC or the BOD, to the extent regulated by Indonesia Law. In the GMS forum, shareholders are entitled to obtain related information about the company from the BOD and or the BOC, to the extent that it is related to the agenda of the meeting and does not contradict the company’s interest. GMS does not have the authority to decide on certain matters, unless all shareholders are present and or represented in the GMS, and concurs with the agenda of meeting. Shareholders, individually or represented by a proxy are entitled to attend the GMS and use its voting rights in accordance with its shareholding. For the 2007 GMS, notices to inform and invite shareholders were sent in accordance with prevailing requirements, and published in three newspapers, in Bahasa Indonesia and English. The invitation notice and proxy form were also posted at Antam’s website. The agenda of the GMS was included in the notice. Shareholders that will attend the GMS can request the agenda and necessary supporting information from Antam; the articles of association also provide explanation as to the availability of procedures for shareholders to do so.

The Boards Members of the BOC and the BOD were appointed in the GMS. The BOC and the BOD, each of which has a clear authority and responsibility based on their respective functions, as mandated by the articles of association and laws and regulations, and further elaborated into charters of each respective board. Both have the responsibility to maintain the company sustainability in the long term. Accordingly, the BOC and the BOD must have the same perception regarding the company’s vision, mission and values. In providing the framework that support this, Antam has developed a company policy manual and a code of conduct that was signed by all members of the BOC and the BOD. The document clearly defined the vision, mission, and values of Antam; 121 the framework supporting Antam’s operation, which includes among others policies on strategy- making, organisation structure, corporate secretarial function, oversight and control system, risk management, ethical standards, communication mechanism, legal, operational, human resources, finance and accounting, information technology, procurement, and corporate social responsibility (CSR).

Collectively, the BOC and BOD has the expertise to discharge its mandate effectively, it is supported with members that have proper understanding of, and competence to deal with, the current and emerging issues of the business; exercise independent judgement; encourage enhanced performance of the company; and can effectively review and challenge the performance of management. Members of the BOC have various backgrounds in finance, engineering, mining and management; whilst four members of the BOD have more than twenty experience within the company, and one director previously held a position in the Ministry of Finance.

As at June 2007, one of the independent commissioners resigned from his position as a member of BOC, and two commissioners retired from the Ministry of Energy and Mineral Resources. Therefore the composition of independent board members has increased from 30% to 44% as at December 2007.

Board Name Independency Status Board of Commissioners Ir. Wisnu Askari Marantika (President Commissioner) Independent Ir. Suryo Suryantoro, MSc. Independent Ir. Supriatna Suhala, MSc. Independent Prof. Dr. Ir. Irwandy Arif, MSc. Independent Board of Directors Ir. Dedi Aditya Sumanagara (President Director) Not Independent Ir. Darma Ambiar, MM Not Independent Kurniadi Atmosasmito, SE, MM Not Independent Ir. Alwin Syah Loebis, MM Not Independent Ir. Syahrir Ika, MM Not Independent

The Board of Commissioners The BOC as an organ of the company, functions and is collectively responsible for overseeing and providing advice to the BOD and ensuring the company implements GCG. However, the BOC is prohibited from participating in making any operational decisions. Each of the members of the BOC, including the chairman, has an equal position. The duty of the chairman of the BOC as primus inter pares is to coordinate the activities of the BOC. The BOC is accountable to the GMS.

The BOC includes only non-executive directors defined by ASX and must have at least three members. The members of the BOC are appointed by shareholders at GMS. The composition and size of the board is determined by considering the vision, mission, and strategic plan of Antam to enable independent, effective, accurate, and timely decision making. Based on a GMS decision in

122 2003, the BOC consists of five members, with at least 2 independent commissioners, one of which act as the chair of the board. Throughout 2007, the BOC held a total of twenty four meetings, in which 12 meetings were internal meetings and 12 meetings were with the Board of Directors.

Board of Commissioners Shareholdings of Antam1 Number of Meetings Held: 24

Ir. Wisnu Askari Marantika -

Ir. Suryo Suryantoro, MSc. -

Ir. Supriatna Suhala, MSc. 282 500

Ir. Yap Tjay Soen, MBA2 -

Prof. Dr. Ir. Irwandy Arif, MSc. - Commissioners meet regularly to ensure effective supervision. 1 Number of shares owned as at 31 December 2007. 2 Resigned as at 1 June 2007.

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ASX Independency Criteria Ir. Wisnu Askari Marantika Ir. Suryo Suryantoro, MSc. Ir. Supriatna Suhala, MSc. Prof. Dr. Ir. Irwandy Arif, MSc.

Not a member of management. Comply Comply Comply Comply Free of any business or other relationship Comply Comply Comply Comply that could materially interfere judgment. Not a substantial shareholder of the company or an officer or associated Comply Comply* Comply* Comply directly with a substantial shareholder of the company. Not an employee or has previously been employed in an executive capacity by the company or another group member, Comply Comply Comply Comply at least in three years before serving the board. Not a principal of a material professional adviser or a material consultant to the company or another group member, or an Comply Comply Comply Comply employee materially associated with the service provided, at least 3 (three) years before serving the board. Not a material supplier or customer of the company or other group member, or an Comply Comply Comply Comply officer of, or associated directly or indirectly with a material supplier or customer. Does not have a material contractual relationship with the company or another Comply Comply Comply Comply group member other that as a director. Does not have any family ties and cross-directorship which may affect Comply Comply Comply Comply independency. Status Independent Independent Independent Independent *Comply as at 31 December 2007, effective on the retirement date of the individual from Ministry of Energy and Mineral Resources.

The role and responsibilities of the BOC is aligned with those stated in the company’s articles of association, and further described in the charter signed by all members of the board, with the latest update made on December 2007 and include: • Oversight on the management of the company by the BOD, and approval of the company’s development plans, the long-term and annual budgets, the implementation of the articles of association, GMS decisions, and prevailing laws and regulations; • Conduct specific tasks assigned to the BOC at the GMS; • Carry out tasks, authority, and responsibility in accordance with the article of association and prevailing laws and regulations;

• Review the annual report prepared by the BOD; 123 • Monitor effectiveness of GCG and CSR practices; • Determine Key Performance Indicators (KPI) of the BOD at the beginning of each year; • Conduct evaluations of the BOD’s performance; • Determine a transparent nomination, evaluation, remuneration system for the BOC, BOD and senior executives, by also considering the input from the Nomination, Remuneration, and Human Resources Development Committee (NRHRD Committee), to be recommended and approved by the GMS; • Continuously enhance competency and knowledge to enable professional management.

The performance evaluation of the BOC is to be conducted by the NRHRD Committee, using a self-assessment or peer evaluation system as decided in the BOC meeting, and the results is to be communicated to the GMS. The evaluation is to be conducted by using criteria stipulated in the company’s policy manual, such as attendance in board meetings and committee meetings. In addition, both individually and collectively, evaluation is to be conducted on the integrity. Knowledge and understanding of values, mission, vision and the company’s plans.

The actual performance evaluation of the BOC in 2007 was conducted by utilising the self- assessment system on the collective performance of each BOC committee by measuring the achievement of its annual plan. There is no specific performance evaluation conducted on the BOC, as each Commissioner, as part of its oversight role, is also a member of a committee. Performance evaluation for the BOC was not linked directly with BOD remuneration, as the remuneration was determined by the GMS, and calculated on a set proportion of the President Directors remuneration in accordance with a letter from Secretary of the Ministry of SOE No. S- 326/S.MBU/2002 dated 3 May 2003.

The Indonesian Law No.40 of year 2007 regarding Limited Liability Company states that the remuneration of the BOC is determined by the GMS. The BOC charter stipulates that remuneration for members of the BOC is provided based on a formula set by the GMS, which was previously reviewed by the NRHRD Committee, and the remuneration must not be based on the company’s performance. The BOC is not allowed to receive remuneration that is specifically related to its oversight function.

Position Monthly Remuneration Total Remuneration Annual Annual Remuneration Remuneration + Bonus Basic Allowance + Bonus Salary Housing Transportation Electricity & Monthly Annual 2007 2006 Communication President Commissioner 29,250 3,500 3,000 3,000 38,750 465,000 708,750 1,232,250 719,760 Commissioner 26,325 2,850 3,000 2,400 34,575 414,900 637,875 1,105,425 648,984 Note: Presented in IDR million

In 2007, the BOC attended trainings, seminars and conferences as participants and as presenters, on topics among others related to GCG, human resources, oversight of SOEs, and investing in mining. To bring an independent judgment to bear on board decisions, as stipulated in the BOC charter, whenever deemed necessary, the BOC has the right to obtain assistance from experts in performing its duties for a certain period of time at the company’s expense.

124 To support its oversight function, the BOC established five committees at the board level, that include the Audit Committee, the NRHRD Committee, the Risk Management Committee, the GCG Committee, and the Environment and Post-Mining (EPM) Committee. Each committee is chaired by a member of the BOC, and each committee’s roles and responsibilities are documented in a charter.

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Commissioner - Level Board Committees Name Committee Position Outside Antam GCG NRPSDM AUDIT RM LPT Ir. Wisnu Askari Marantika C Vice President Commissioner of PT Infoasia Teknologi President Commissioner Global Tbk. Ir. Suryo Suryantoro, MSc. C Inspector General of the Department of Energy and Commissioner Mineral Resources. Retired since December 1, 2007. Ir. Supriatna Suhala, MSc. C Executive Director, Indonesian Coal Mining Association Commissioner Ir. Yap Tjay Soen, MBA.* C President Director of PT Tuban Petrochemical Industries and Independent Commissioner Independent Commissioner of PT Bank Mandiri Tbk. Resigned as Independent Commissioner of Antam since June 1, 2007. Prof. Dr. Ir. Irwandy Arif, MSc. C Head of Internal Committee of the Board of Trustee of Independent Commissioner Bandung Institute of Technology Ir. A. Dohar Siregar M President Commissioner of PT Nusa Halmahera Minerals DR. Edison Panjaitan M Director of Postgraduate Program University of Bhayangkara Jakarta Raya Susy Pasaribu Tumangkeng M - Ir. Amir Faizal Suud M Former Senior Lecturer, Geology and Education Training Centre Department of Energy and Mineral Resources Nursaleh Adiwinata MSc. M Former Head of Education and Training Centre of Mineral and Coal Technology Ir. Nani Koespriani, MBA M Commissioner of PT Agung Automall & PT Agung Concern Dra. Nina Insania K. Permana, MM M Senior consultant at PT Binaman Utama PPM Jakarta, Senior Assessor of PPM, lecture at Lembaga Manajemen PPM and the Master’s program of Sekolah Tinggi Manajemen PPM Jakarta. Drs. Kanaka Puradiredja, Ak. M Ex Senior Partner of Public Accountant Firm Kanaka Puradiredja, Robert Yogi, Suhartono. Drs. Eddie M. Gunadi, QIA. M Senior Partner of Public Accountant Firm BDO Tanubrata, Sutanto, Sibarani and Chairman of FCGI. Edwar Nurdin, Ak. MA. M Sub Division Head of Verification and Accounting Ministry of State Owned Enterprises Alida Basir Astarsis, SE. Ak. M Senior Project Controller, PT Unilever Indonesia Tbk. Member of Audit Committee PT Total Bangun Persada Tbk. Sutirta Budiman, CFA M Advisor of Corporate Banking Division, PT Bank Negara Indonesia (Persero) Tbk. Dr. Ir. Bambang Setiawan M Secretary of Directorate General of Mineral, Coal and Geothermal. Prof. Dr. Ir. Made Astawa Rai M Deputy Minister Resources Development. The State Ministry for the Development of Disadvantaged Regions. 125 Ir. Gde Suratha, MSc. M Senior Researcher of Geotechnology and Development of Mineral and Coal Technology Dra. Siti Rafiah Untung M.Env.St M Senior Researcher of Mining Environmental of Research and Development Centre of Mineral and Coal Technology

Remark: C = Chairman GCG = Good Corporate Governance M = Member NRPSDM = Nomination, Remuneration and HR Development LPT = Environment and Post Mining RM = Risk Management *Resigned as of June 1, 2007

Report of the Audit Committee The main function of the Audit Committee is to assist the Board of Commissioners to perform its supervisory duties, which are to ensure that: 1. The publicized financial report has fulfilled the existing regulations, including the use of the proper accounting standards; 2. The business risk has been managed properly and sufficient internal controls are in place; 3. The business activity has been conducted ethically and according to the existing regulations; 4. The selection and appointment of the external auditor is according to the corporate needs and existing regulations; 5. Non audit services being performed by third party does not effect the independency of the external auditor, and; 6. The internal auditor has performed sufficiently.

In 2007, the main focus of the Audit Committee was to improve the performance of the internal auditor, by way of overseeing the development of the risk-based internal audit and suggesting necessary improvements to the internal auditor.

Besides efforts to improve the performance of the internal auditor, the Audit Committee and the Risk Management Committee also met to discuss important corporate issues such as activities related to the accounting process and formulation of financial statements, investment on projects with third parties and management of the pension fund.

In 2007, the Audit Committee held 24 meetings.

Name Independency Status Position No. of Meetings Attended

Prof. Dr. Ir. Irwandy Arif, MSc. Independent Chairman 23

Drs. Kanaka Puradiredja, Ak. Independent Member 20

Drs. Eddie M. Gunadi, QIA. Independent Member 18

Edwar Nurdin, Ak., MA. Not Independent Member 23

Alida Basir Astarsis, SE, Ak. Independent Member 16

Audit Committee Biographies (Not Including Member from BoC) 126 Drs. Kanaka Puradiredja, Ak. - Member Joined Antam’s Audit Committee in 2004. Graduated in Accounting from Padjadjaran University, Bandung in 1971. He was Managing Partner and Chairman of KPMG Indonesia for more than 20 yars and since 2000 until November 2007 was Senior Partner KAP Kanaka Puradiredja, Robert Yogi, Suhartono. Currently he is the Chairman of the Honorary Council of the Indonesian Accounting Association, Chairman of the Indonesian Audit Committee Association, member of the Honorary Council of Professionals in Risk Management Association and the member of the Supervisory Board of the Aceh Rehabilitation and Reconstruction Body.

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Audit Committee Biographies (Not Including Member from BoC)

Drs. Eddie M. Gunadi, QIA. – Member Joined Antam’s Audit Committee in 2004. Graduated in Accounting from University of Indonesia in 1975. He was in several finance positions at PT Pupuk Sriwidjaja. He was Finance Director of PT Mega Eltra (Persero) and President Director of PT Cipta Niaga (Persero). Currently he is a member of the Audit Committee at PT Bank Ekspor Indonesia and Partner KAP BDO Tanubrata dan Rekan and Chairman of Forum for Corporate Governance in Indonesia (FCGI) and member of the Honorary Council of the Indonesian Accounting Association.

Edwar Nurdin, Ak., MA – Member Joined Antam’s Audit Committee in 2004. Graduated from the State Accounting Academy in 1992 and graduated in 1995 in Applied Economics at University of Michigan, USA. He worked as public servant at the Department of Finance in 1985. Since 2006 until now he has worked at the Ministry of State Owned Enterprise as Head of Sub Division of Verification and Accounting.

Alida Basir Astarsis, SE, Ak. – Member Joined Antam’s Audit Committee in 2004. Graduated in Accounting from the Airlangga University in 1979. She worked at PT Astra Graphia Surabaya and started her career at PT Unilever Indonesia as Management Trainee in 1979 until her retirement as Group Audit Manager in December 2004. Since January 2007 she was a member of the Audit Committee of PT Total Bangun Persada.

GCG Commitee Report On September 1 2007, the composition of the GCG Committee changed with the addition of Susy Pasaribu, increasing the size of the committee to four people. The committee members are Wisnu Askari Marantika, Antam’s President Commissioner who serves as the Committee Chairman, and Dohar Siregar, Edison Panjaitan, and Susy Pasaribu who was the secretary of the Board of Commissioners of PT Telkom Tbk.

The GCG committee has the task and responsibility to assist the Board of Commissioners to ensure that GCG is the foundation of the company.

In 2007 the GCG Committee held 12 meetings. Six meetings were internal GCG meetings and six other meetings were held with the GCG Implementation Team.

In 2007, the new Articles of Association were passed which accommodates the latest GCG issues 127 such as the requirement for the Board of Commissioners to have an Independent Commissioner and the requirement for GCG implementation. Antam held a ane day GCG Workshop at the end of November 2007, which acted to encourage the completion of the revised Corporate Policy Manual. Members of the GCG Committee played roles in this workshop. The workshop discussed among other things, CSR issues and alignment of GCG perception within the company.

To ensure the implementation of the Code of Conduct, all Antam’s employees signed a Personal Commitment to the Code of Conduct during Antam’s anniversary on July 5, 2007.

Beginning in December 1, 2007, all of the board committees’ charters were revised in accordance to the new laws and regulations. Revisions were also made to the Charter of the Board of Commissioners and Board of Directors to accommodate new laws such as Corporate Law No. 40/2007 on Emissary Commissioner and CSR, and the requirement of Directorship training to improve the competency from the Capital Market and Financial Institution Supervisory Board.

Name Independency Status Position No. of Meetings Attended

Ir. Wisnu Askari Marantika Independent Chairman 12

Achmad Dohar Siregar Independent Member 12

Edison Panjaitan Independent Member 10

Susy Pasaribu Tumangkeng Independent Member 5

GCG Committee BIOGRAPHIES (NOT INCLUDING MEMBER FROM BOC)

Achmad Dohar Siregar – Member Graduated in Mining from the Bandung Insititute of Technology in 1973 and started his career at Antam. He went through numerous trainings both in Indonesia and abroad before he headed the Pongkor Gold Project in 1992–1994 and became the unit’s first general manager. He received the Development Medal of Honor from the President of Indonesia on August 11, 1997 as an appreciation of the development of the Pongkor Gold Project. Starting in 1996, he was Vice Chairman of the Privatization Team and then served as Antam’s Corporate Secretary. Currently he is also a member of the Indonesian Mining Experts, and President Commissioner of PT Nusa Halmahera Minerals. He also speaks frequently on GCG and Annual Reports in numerous workshops.

Edison Panjaitan – Member Joined Antam since 2004. Graduated from Faculty of Economics, Padjajaran University, Bandung, and continued his master’s degree at University of Pittsburgh, PA, USA in Development Economics and received doctoral degree in public policy from the same university. Currently he is the Director of Post Graduate Programs of Bhayangkara Jakarta Raya University.

Susy Pasaribu Tumangkeng – Member Joined Antam as member of the GCG Commitee since September 2007. She started her career 128 at Bank Danamon for 10 years and last served as Head of Training and Development in 1999. In 2000 she was the Secretary of the Deputy Minister of State-owned Enterprises of Mining, Strategic Industry, Energy and Telecommunication. In 2000 she was the Assistant Secretary of the Board of Commissioners of PT Indosat Tbk. and for four years from mid 2000 she served as the Secretary of the Board of Commissioners of PT Telkom Tbk. In 2006 she joined Antam as a Human Resources Advisor and currently is a member of the GCG Committee.

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Environment and Post Mining Committee The main task and function of the Environment and Post Mining Committee is to assist the Board of Commissioners to supervise the effectiveness of the environmental management and post mining activities in accordance to principles of good mining practices.

In 2007, the EPM Committee conducted reviews of the environmental management and post mining planning and its implementation, oversaw the compliance to existing laws and regulations, evaluated management’s policies on environmental management and post mining, revised the committee’s charter, and conducted site visit to business units and benchmarked to PT Newmont Nusa Tenggara. The committee held 12 internal meetings.

The EPM Commitee reviewed five environmental management and post mine planning and implementation programs of Pongkor and Cikotok gold mines, Cilacap and Kutoarjo iron sands mine, Kijang bauxite mine, and Pomalaa, Gebe, Buli, and Gee nickel mines.

The commitee viewed that in general the implementation of environmental management, mine closure and post mining activities in 2007 was better than previous years. Efforts and preparation to achieve PROPER Green from the Ministry of Environment increased significantly. It was expected that PROPER Green will be obtained by Pongkor gold mine in 2008, Pomalaa nickel unit in 2009 and all business units in 2010.

In 2007, the committee recommended the recruitment of environmental and post mining staff with proper qualification and in sufficient numbers. The committee also suggested the accelaration of the use of modern technology, formulation and implementation of standard operating procedure, working closely with universities and research centres, and to intensify coordination with local governments.

Name Independency Status Position No. of Meetings Attended

Ir. Supriatna Suhala, MSc. Independent Chairman 12

Prof. Dr. Ir. Made Astawa Rai Independent Member 10

Ir. Gde Suratha, MSc. Not Independent Member 12

Dra. Siti Rafiah Untung M.Env.St Not independent Member 3

129

ENVIRONMENT AND POST MINING Committee Biographies (NOT INCLUDING MEMBER FROM BOC)

Prof. Dr. Ir. Made Astawa Rai – Member Joined Antam in 2003. Graduated in Mining Engineering from Bandung Institute of Technology (ITB) in 1976. He received a degree of Ingenieur Expert en Techniques Minieres (1980), Diplome d’Etude Approfondie (1981), and Doctor (1984) from Ecole des Mines de Náncy France. He was professor of Mining Engineering of ITB in 2003. He has various experiences in mining and tunnel development as well as other various key positions at ITB. He was Deputy Junior Minister of Development Acceleration of Indonesia’s East Region in Development Resources (2001 – 2002), Deputy Minister of Development Acceleration of Indonesia’s East Region in Development Resources (2002 – 2005). Currently he is Deputy Minister of Less Developed Regions in Resources Development.

Ir. Gde Suratha, MSc. – Member Joined Antam in 2005. Graduated in Mining Engineering from Bandung Institute of Technology (ITB) in 1977, and received Master of Science in Geomechanics from ITB in 1993. He became a civil servant at the Centre of Research and Development of Mineral and Coal Technology holding various key positions such as Head of Geotechnic Laboratory, Head of Engineering and Design, Coordinator of Mining Geotechnolgy Group Program and becoming a senior researcher until now.

Dra. Siti Rafiah Untung M.Env.St - Member Joined Antam in September 2007. Graduated in Biology from ITB in 1976, and received Master of Environmental Studies from University of Adelaide in 1993. He became civil servant at the Centre of Research and Development of Mineral and Coal Technology as researcher in environmental fields and Senior Researcher.

Risk Management Committee The Risk Management Committee has a responsibility to assist the Board of Commissioners by giving independent and professional opinion to ensure the implementation of risk management principles at Antam.

In 2007, The RM Committee held 22 internal meetings with Antam’s management, in which the Audit Committee was also present at most of the meetings.

The main topics of discussion during the meetings were among other things, new projects, 130 formulation of financial statements, performance of Antam’s pension fund, audit from the state’s finance examination body, and compliance, code of conduct and litigation status.

In the first five months of 2007, the committee was comprised of Yap Tjay Soen, Independent Commissioner as Chairman and member, and Sutirta Budiman and Bambang Setiawan as committee members. From June 1, 2007 until July 31, 2007, the committee’s chair was held by Irwandy Arif, Antam’s Independent Commissioner, after which Antam’s President Commissioner, Wisnu Askari Marantika, became the Chairman of the Committee with Irwandy Arif as Vice Chairman inline with the resignation of Yap Tjay Soen.

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Name Independency Status Position No. of Meetings Attended

Ir. Wisnu Askari Marantika*) Independent Chairman 10

Prof. Dr. Ir. Irwandy Arif M.Sc**) Independent Vice 13 Chairman

Ir. Yap Tjay Soen, MBA***) Independent Chairman 6

Sutirta Budiman, CFA Independent Member 15

Dr. Ir. Bambang Setiawan Not Independent Member 18 No. of meetings = 22 Joint meeting between Risk Management Committee and Audit Committee: 21 times. *) Chairman of RM Committee as of 1 August 2007. **) Chairman of RM Committee, June 1, 2007 – July 31 2007 and Vice Chairman since August 1, 2007. ***) Resigned as Commissioner and Chairman of RM Committee as of June 1, 2007.

Risk Management Committee Biographies (NOT INCLUDING MEMBER FROM BOC)

Sutirta Budiman, CFA Graduated in 1981 with Bsc. (Hon.) in Electrical Engineering from Imperial College of Science, Technology and Medicine, London University, England. Started his professional career in 1982 by joining Citibank Executive Development Program. He held various positions at Citibank with the last position as Vice President and Senior Risk Manager. At the end of 1989, Sutirta was part of team which set up a new national private bank as Director of Risk Management. In 1993, he joined PT. Aneka Kimia Raya Tbk., as Group Finance Director. At the end of 1997, he became President Director pf PT. Asiana Multikreasi Tbk. Since the beginning of 1999, he has worked as a consultant specializing in risk management and corporate finance. He is also a member of Risk Oversight Committee of PT. Bank Negara Indonesia (Persero) Tbk. Since August 2005 and since June 2007, Sutirta has been an Advisor for Corporate Division for BNI.

Dr. Ir. Bambang Setiawan Member of the RM Committee since 2006. Graduated in Mining Exploration from ITB in 1976. He received doctoral degree in economics geology from Ecole Nationale Supérieure Des Mines de Paris in 1993. He started his career as expert staff in exploration at the National Atomic Agency (1976-1978) and held various key positions before being appointed as Program Director at the Directorate of Mineral, Coal and Geothermal (2005-2007). Since July 2007 he has been the Secretary of Directorate General of Mineral, Coal and Geothermal at the 131 Department of Energy and Mineral Resources.

Nomination, Remuneration and Human Resources Development Committee The Nomination, Remuneration and Human Resources Development (NRHRD) Committee has the tasks and responsibilities to assist the Board of Commissioners by giving a professional and independent assessment to ensure the nomination, remuneration and human resources development programs are in accordance with GCG principles.

The committee was comprised of five people with Antam’s commissioner as the chairman and member. At the end of August 2007, the committee had two new members, Ir. Nani Koespriani, MBA and Dra. Nina Insania K. Permana, MM.

In 2007 the committee held 22 meetings, with 8 internal meetings, 12 meetings with Antam’s Director of General Affairs and Human Resources and staff and 2 workshops with the Board of Commissioners and Board of Directors.

Name Independency Status Position No. of Meetings Attended Ir. S. Suryantoro, M.Sc. Independent Chairman 22

Ir. Amir Faizal Suud Independent Member 22

Nursaleh Adiwinata M.Sc Independent Member 20

Ir. Nani Koespriani, MBA Independent Member 6

Dra. Nina Insania K. Permana, MM Independent Member 7

In 2007 the committee oversaw and gave guidance in the formation of the new organisation structure, the formulation of job descriptions, and the 2010 Human Resources Master Plan.

The Committee has reviewed the calculation of salary, facility and other benefits for the Board of Directors and Board of Commissioners in 2007 based on the 2006 performance. The committee has also reviewed and gave suggestions in relation to the employees’ remuneration.

The committee views that the industrial relationship within Antam throughout 2007 was good and fair.

Nomination, Remuneration and Human Resources Development Committee Biographies (NOT INCLUDING MEMBER FROM BOC)

Ir. Amir Faizal Suud An NRHRD Committee member since September 2004. Graduated from Mining Engineering of ITB in 1976. He began his career at the Department of Energy and Mineral Resources as Head of Bali, West Nusa Tenggara and East Nusa Tenggara and East Timor Office (1992- 1999), Head of North Sumatra Office (1999-2001), Task Force Team of Regional Autonomy (2001-2004) and Senior Lecturer at the Geology Education and Training Centre (2002-2006). He has experience in education such as a lecturer in geology of Hasanuddin University Makassar (1978-1986), mining lecturer of Veteran RI University Makassar (1977-1991), and Dean of Faculty of Engineering UVRI Makassar (1986-1991). 132 Nursaleh Adiwinata, M.Sc. Has been a member of the NRHRD Committee since September 2006. Graduated from the Bandung Geology and Mining Academy in 1970 and Master’s program from University of Birmingham in 1981. After became Assistant Geologist of PT Alcoa Mineral of Indonesia (1971-1975), he held various positions at the Department of Energy and Mineral Resources before becoming Head of Training and Development of Mineral Technology (1998-2001) and Head of Training and Development of Mineral and Coal Technology (2001-2006).

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Ir. Nani Koespriani, MBA Joined NRHRD Committee on September 1, 2007. Graduated in Planology Engineering of ITB in 1980, and Graduate School of Business Administration, University of Denver Colorado, USA in 1986. Currently holds a position as Commissioner of PT Agung Automall, and various positions at Lembaga Manajemen PPM. She has experiences in management consulting such as in PT Medco Energi International, PT Indonesia Power, Dharmala Group and Rumah Sakit Islam Cempaka Putih. She is a lecturer in various workshops and programs held by PPM, Center of Inter University at University of Indonesia and Master’s Program of Banking and Finance at ITB.

Dra. Nina Insania K. Permana, MM Joined NRHRD Committee on September 1, 2007. Graduated in Psychology from Padjadjaran University in 1987 and has a Master’s degree in Management in HR from Sekolah Tinggi Manajemen PPM Jakarta in 1997. Currently she is a senior consultant at PT Binaman Utama PPM Jakarta, Senior Assessor of PPM, lecturer at Lembaga Manajemen PPM and the Master’s program of Sekolah Tinggi Manajemen PPM Jakarta.

The Board of Directors The BOD as a company organ, functions and is responsible collectively for the management of the company. Each member of the BOD can carry out his duty and take decisions in accordance with their respective assignments and authorities. However, the execution of tasks by each member of the BOD remains to be a collective responsibility. The position of each respective member of the BOD including the President Director (chairman of the BOD) is equal. The duty of the President Director as primus inter pares is to coordinate the activities of the BOD. The BOD is accountable to the GMS.

The BOD includes only executive directors and must have at least three members. The members of the BOD are appointed by shareholders at a GMS. Based on a GMS decision in 2003, the BOD consists of five members, one of which acts as the chair of the board. Throughout 2007, the BOD held a total of twenty two meetings.

Board of Directors Shareholdings Number of Meetings Held: 22 of Antam1

Ir. Dedi Aditya Sumanagara 275,000

Ir. Darma Ambiar MM 271,250 133 Kurniadi Atmosasmito, SE, MM 155,000

Ir. Alwin Syah Loebis, MM 310,000

Ir. Syahrir Ika, MM -

1Number of shares owned as at 31 December 2007.

The roles and responsibilities of the BOD are aligned with those stated in the company’s Articles of Association, and further describe in the charter that was signed by all members of the board, and Members of the Board was last updated on December 2007 and include: • Manage, administer and ensure the implementation of Antam’s goals, strategies, and policies to of Directors also meet achieve results, and continuously conduct activities that promote efficiency; • Manage and administer the company’s assets; informally on a daily • Prepare the long-term and annual budgets, and other plans related to the operation of the company and submit it to the BOC for approval; basis to keep updated • Ensure the implementation of GCG and CSR practices; • Ensuring the availability and effectiveness of internal control systems to safeguard the on the latest company company’s assets; • Maintaining confidentiality on material information; issues. • Implement Antam’s code of conduct; and • Continuously enhance competency and knowledge to enable professional management of the company.

In addition to the collective responsibility, each director function has its own roles and responsibilities.

President Director The President Director has the responsibility to coordinate, direct, and evaluate corporate and business units tasks to ensure accordance with the already established vision, mission, targets, strategy, policy and work program; to align internal initiatives and ensure the enhancement of the company’s competitiveness; to coordinate the operation of the internal audit, investor relations, public relations, internal relations, legal, and risk management functions, and to ensure compliance with laws and regulations; to coordinate, direct, and evaluate internalisation and consistent implementation of GCG principles and ethical standards within the company; to ensure the availability of corporate related information whenever required by the BOC.

Director of Operations The Director of Operations has the responsibility to coordinate, direct, and evaluate operational tasks related to production, marketing, work safety, environment, maintenance and reengineering, mining closure, and overseas representative offices; to develop efficiency and quality assurance programs, and ensure its consistent implementation; to ensure the availability of corporate related information whenever required by the BOC.

134 Director of Finance The Director of Finance has the responsibility to coordinate, direct, and evaluate operational tasks related to treasury, funding, accounting, budgeting, and information technology; to ensure the availability of funding for the company’s development programs; to ensure the availability of corporate related information whenever required by the BOC.

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Director of General Affairs and Human Resources The Director of General Affairs and Human Resources has the responsibility to coordinate, direct, and evaluate operational tasks related to organisation, human resources, continuing education, health, public service, community development, partnership and environmental programs, and CSR; to maintain sound relationships with governments and other stakeholders and ensure that the CSR activities are effective; to ensure the availability of corporate related information whenever required by the BOC.

Director of Development The Director of Development has the responsibility to coordinate, monitor, evaluate the development and implementation of Antam’s long-term plans; to coordinate, direct, and evaluate operational tasks related to exploration, research and development, feasibility studies, and construction projects for the company’s growth; to maintain sound relationships with strategic partners and develop new business opportunities; to ensure the availability of corporate related information whenever required by the BOC.

The delegation of authority among members of the BOD can be conducted with proxy, and delegation to senior management below the directors level as per the organisation structure, however this does not transfer the ultimate responsibility and accountability.

The performance evaluation of the BOD was conducted by the BOC based on pre-established KPI, and the result is to be communicated to the GMS. The evaluation for 2007 was conducted in November 2007 by using criteria such as the BOD collective performance in achieving targets set out in the long-term plan and annual budget, individual director performance in achieving KPI and targets as set in the plan, and the implementation of GCG both individually and collectively. The KPI include targets related to revenue growth, profitability, cost structure, solvability/leverage, sales, customer satisfaction, innovation, operational process, operational risk, regulatory and environmental process, integrated information technology, organisation climate, and employee skills and competency. In addition, the BOC is also evaluated on aspects of conflict of interests, knowledge and understanding of mission, vision, values, and the company’s plan and conformance with the Articles of Association, GMS and BOC decisions, and with prevailing laws and regulations.

Currently the performance evaluation is not linked directly with remuneration, as the remuneration was determined by the GMS, although the basis of proposing the remuneration to the GMS is by using a formula developed by the NRHRD Committee, in consideration of the market rate, the company’s earnings, return on assets, return on equity, achievement of KPIs, and in accordance 135 with the letter from Secretary of the Ministry of SOE No. S-326/S.MBU/2002 dated 3 May 2003. The Indonesian Law No.40 of year 2007 regarding Limited Liability Company states the remuneration for the BOD is determined based on the GMS decision, which can be delegated to the BOC and decided during a BOC meeting. The remuneration for the BOD is also stipulated in the BOD charter, which states the remuneration for members of the BOD is decided at the GMS by considering inputs from the BOC, and that the remuneration must be linked to performance, based on the evaluation performed by the BOC and by considering inputs from the NRHRD Committee.

Position Monthly Remuneration Total Annual Bonus Remuneration Remuneration Basic Allowance + Bonus Salary Housing Transportation Electricity & Monthly Annual 2007 2006 Communication President Director 65,000 14,000 2,500 4,500 86,000 1,032,000 1,575,000 2,737,000 1,805,400 Director 58,500 12,600 2,250 4,050 77,400 928,800 1,417,500 2,463,300 1,624,860 Note: Presented in IDR thousands.

In 2007, the BOD attended trainings, seminars and conferences as participants and as presenters, on topics, among others, related to GCG, human resources, oversight of SOEs, and CSR. In supporting its function, the BOD is assisted with a corporate secretary function, and has established a system of internal controls and risk management that is supported by the existence ethical standards, an internal audit function, and a risk management function.

Corporate Secretary The Corporate Secretary assists the BOD in maintaining sound relationships with regulators and capital market supporting institutions, investors, society and stakeholders, and to maintain business related information. The function of Corporate Secretary is to develop relationships strategy with stakeholders that can support the company’s activities, maintain the company’s reputation so as to increase the company’s value, fulfil the company’s responsibility to the capital market and shareholders according to prevailing laws and regulations, maintain good relationships with governments, investors, and the media; to manage internal and external communication, and direct subsidiaries in the company’s communication activities. Therefore, the responsibility of Corporate Secretary function lies in the three main areas of: • Investor relations and financial information management; • Public and Internal Relations; and • Administration of the corporate secretarial roles.

The function is responsible to manage information regarding the company’s profile, including financial aspects, in an actual, accurate, truthful, and timely manner, based on management of the market’s expectation with the purpose to increase company value. The Corporate Secretary is responsible for public relations services or media relations and acts as the Company spokesman to the public, mass media and capital market authorities.

In promoting effective communications with shareholders, Antam has developed a policy in which the Corporate Secretary is to regularly and consistently announce Antam’s quarterly and annual 136 performance and planning through the mass media and related institutions in compliance with applicable regulations. The communication policy is stipulated in the company policy manual. Furthermore, Antam is also following the Indonesia’s Capital Market & Financial Institution Supervisory Agency regulation No.X.K.1 of year 1996 regarding Disclosure of Information to the Public. The Corporate Secretary is supported by guidelines which details the information that need to be disclosed; the guidelines and rules related to the type of disclosure; and the format, contents and distribution of information.

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Access to information has been provided through Antam website at www.antam.com, which posts Antam’s annual report, quarterly activities report, monthly exploration reports, announcements made to Australian Securities (ASX), its share price on the ASX and IDX, and other news regarding Antam’s operation. In addition, Antam also provides a special corporate governance section on its website.

Antam has also drafted a one door policy on communication with the stock exchange authorities, investors and shareholders, public, media, and the government with regards to maintaining its status as a listed company on the Indonesian Stock Exchange (IDX) and ASX; to ensure the information given to shareholders and investors is factual; to ensure queries made are responded to in an appropriate manner. Furthermore, a disclosure policy has been drafted, which identifies who is responsible for the disclosure of different kinds of information; the criteria of a material information; and methods of disclosure; and deals with such topics as confidentiality, insider trading, authorised spoke person, misleading information and rumour management, communication with investment society, media, and regulators and electronic communications. These policies are to be finalised in 2008.

Ethical Standards To support ethical and responsible decision making, Antam has developed an ethics policy that was formalized in the company policy manual, and further elaborated in the code of conduct. The document was developed as a practical guideline for members of the BOC, the BOD, Committees, and all employees in interacting with all parties, to be used as basis in decision making process, and in supporting the creation of a positive working environment. Antam encourages observance of the standards and is committed to its implementation. Antam has obliged supervisors at each level to enure the code of conduct is adhered to in each of their areas. The code of conduct is applicable to all individuals that act on behalf of Antam, its subsidiaries and controlled affiliation, and also for business partners that interact with Antam. It was signed by all members of the BOC and BOD, which set the tone from the top as regards the commitment to set ethical standards at Antam. In supporting and maintaining confidence in Antam’s integrity, each individual is mandated to sign a Personal Ethic Statement on an annual basis. Furthermore, Antam has also established “Helpline Antam” as its whistleblower mechanism, which enables reporting to be made through telephone and email.

Antam has also established a policy concerning trading in the company’s securities by directors, senior executives and employees, which is available in the conflict of interest and confidentiality section at Antam’s code of conduct. Each individual, including directors and senior executives are prohibited to trade Antam’s share if they are privy to information that might have influence on share 137 prices, and approval from senior management is required prior to any such trading. A separate and more detailed policy and procedures regarding this issue has also been developed and planned will be finalised in 2008.

Internal Audit The Internal Audit’s role in supporting risk management practices at Antam, as stated in the company policy manual, is to asses the risk related to all business processes by considering the objective of each process, key risks of each process, and the performance indicator of each process. Furthermore, as stated in the internal audit charter, the unit conducts examinations to ensure that internal controls, risk management, and the implementation of GCG practices on processes within Antam has been conducted according to the prevailing regulations. The Internal Audit also provides consulting services and acts as a catalyst to assist management and the auditee in achieving their targets and objectives. As well, the unit acts as a competent partner to the Audit Committee in carrying its oversight function. The internal audit reports directly to the President Director, and is independent of the external auditors, this is aligned with the Standards of Internal Auditors issued by the Institute of Internal Auditors. During year 2007 the unit submitted fourteen audit reports to management. The Chief Audit Executive is appointed by the President Director in consideration of suggestions from the BOC, through its Audit Committee.

The scope of this unit covers a review of the company’s performance, GCG implementation, post- mining, remuneration, whistleblower reporting, and reporting of risks and implementation of risk management. The objective is to help ensure the effectiveness of internal control systems established by management, to the extent that risks have been identified and appropriately managed; to ensure the governance system with stakeholders has been appropriately managed; to ensure the operational, managerial, and financial information are timely and reliable; to ensure employees actions have been in accordance with the policies, standards, procedures, and prevailing laws and regulation; to ensure resources have been obtained and used economically and appropriately safeguarded; to ensure programs, plans, and objectives are met; to ensure quality assurance has been conducted and followed with continuous improvements; to ensure legal issues that have significant influence have been identified and appropriately managed. The unit developed an annual risk based audit plan consisting of issues and audit focuses. Currently, the audit focuses on key risks identified and mapped into Antam’s risk profiles by the Risk Management Unit.

Risk Management Antam has established policies for the oversight and management of material business risks as described in its company policy manual which will be further refined in 2008. The policy on risk management is used as a base to develop policies and in decision-making on aspects related to risk management. The policy describes risk management practices at Antam, which includes definition on the risk management philosophy, the objective of managing risk, general policy on managing risk, and the process of managing risk starting from establishing the context, risk 138 identification, risk analysis, risk evaluation, risk management, monitoring and review, andthe communication and consulting activities in risk management. An enterprise risk management (ERM) policy has also been developed, which is an elaboration from the company policy manual that provides more detailed explanation on the process of managing risks. The coverage of risk management processes described in the ERM policy is adopting the risk management framework in the Australian/New Zealand Standard for Risk Management – ANZ 4360.

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In addition, Antam has established a Risk Management (RM) Unit to help create a culture of risk awareness throughout the organisation by emphasising that risk is the business for everyone. The unit is responsible to identify, assess and manage significant risks at Antam’s strategic business units (SBUs), business units (BUs), Head Office unit, as well as subsidiaries, on approved risk policies and related regulations, to ensure proper coordination between various risk management functions within the organisation, and to ensure that effective actions are in place. The internal audit function has the responsibility to monitor compliance of the ERM policy as well as ensuring that the standard operating procedures are aligned with the ERM policy.

The RM Unit reports directly to the President Director, and functions to coordinate all risk management process within Antam by communicating strategic risks identified to the BOD and monitoring the progress of action plans on those risks, developing the company’s risk profile (risk register) and submitting it to the BOD and Risk Management Committee. The unit helps ensure that risks are on a tolerable level by continuously developing and monitoring the implementation of ERM policy and processes, ensuring the risk management practices are attainable and applied consistently throughout the organisation so that it can be assured that risks are on a tolerable level. Throughout 2007, the RM unit communicated regularly with the Risk Management Committee and submitted eleven reports regarding the status of risk management practices at Antam.

Performance Based Human Resources Management Antam applied a human resources management policy for employees below the BOD level, that includes a mechanism to set up long and short term work targets, work evaluation, and conflict resolution, which eventually will to be linked to remuneration. Work targets are designed to encompass the concept of SMART (Specific, Measurable, Achievable, Realistic and supported with Time frame for performance review). Antam has developed a performance evaluation system, “Sistem Manajemen Unjuk Kerja” (SMUK) for this purpose. The results of the performance evaluation is collectively agreed by the employee and his or her supervisor, and used as basis for an objective employees’ development program.

The company policy manual states that Antam values its employees, including senior executives, based on his or her competency and performances and this should be reflected in the compensation and benefits which are equal to similar companies, and in consideration of the financial ability of the company. The compensation provided by Antam is rewarded to employees based on position and responsibility, and on positive contribution of their performance. Rewards come in the form of salary, benefits, and other benefits required by the prevailing law or otherwise determined. Benefits in the form of facilities and or other non-cash benefits are also made to increase employees’ 139 wealth. In further ensuring a remuneration policy design that can motivate senior executives and other employees to pursue long-term growth and success, Antam is refining its remuneration policy in the company policy manual to be finalised in 2008. Rewards provided to employees should be designed to enable Antam to motivate human resources in achieving corporate objectives, and ultimately ensuring Antam’s employees are a competitive advantage.

Adoption of the ASX Corporate Governance Principles and Recommendations

A description of Antam’s corporate governance practices against the new ASX Corporate Governance Principles and Recommendations is provided below. Each principle is outlined and any departures from recommendation that is not appropriate to the company’s circumstance or is not in place during the fiscal year 2007 are provided with the reasons for its departure.

Principle & Recommendation Reference Adoption Remarks Full Partial 1. Lay Solid Foundation for the Board 1.1. Companies should establish the • Articles of Association W √ Members of the BOC and the BOD were appointed by the GMS, functions reserved to the board • BOC Charter W and no specific appointment letters for directors that set out and those delegated to senior • BOD Charter W the key terms and conditions relative to that appointment. The executives and disclose those notarised GMS minutes act as the basis of the appointment functions. and substitute the appointment letter. Although no specific information was stated regarding the key terms and conditions to that appointment, most of that information is available in the articles of association, charter, and company policy manual.

1.2. Companies should disclose • Company Policy Manual W I √ No disclosure was made in the fiscal year 2007 whether the the process for evaluating • Collective Agreement (PKB) I performance review for senior executives was conducted or the performance of senior not, as the process is still ongoing, and the requirement to executives. disclose it was just recommended in the new ASX Corporate Governance Principles and Recommendations. 1.3. Companies should provide • Annual Report W √ - information indicated in the Guide • www.antam.com to Reporting on Principle 1. 2. Structure the Board to Add Value 2.1. A majority of the board should • Articles of Association W √ Majority of board members are not independent. The minimum be independent. • Notarised GMS Meeting number of members for the BOD and BOC as required by the • Curriculum Vitae of Board Indonesian Law are at the same level, and therefore does not Members require a majority of independent directors. During the 1st half of 2007, Antam has not maintained the majority of independent board members requirement; however as at end of 2007; almost half of the board members (BOC and BOD combined) were independent and all members of the BOC were independent. 2.2. The chair should be an • BOC Charter √ The chair of the board is independent, however no regular independent director. • Notarised GMS Meeting assessment on the independency of each non-executive • Curriculum Vitae of Board director and timely disclosure was made to the market on Members changes of independent status. This is because the mechanism to regularly assess whether each non-executive directors is independent has not been established. 2.3. The roles of the chair should • Articles of Association W √ - not be exercised by the same • Notarised GMS Meeting individual. • Curriculum Vitae of Board Members 2.4. The board should establish • NRHRD Charter W √ - nomination committee. • Company Policy Manual W I 2.5. Companies should disclose • Articles of Association W √ No disclosure during the fiscal year 2007 on whether the process for evaluating the • BOC Charter W performance evaluation of the BOC and its committees has performance of the board, its • BOD Charter W taken place and whether it is in accordance with the process committees and individual • Company Policy Manual W I disclosed. This was because the performance reviews for directors. the committees (which reflected performance review of the 140 BOC members) has just been conducted in 2007, and it will be disclosed in the annual report, along with the performance reviews for the BOD.

No formal induction procedures in place to allow new directors to participate fully and actively in board-decision making at the earliest opportunity existed in the fiscal year 2007. Last members of the board were appointed at year 2004. Nevertheless, an induction was carried out, although no written policy and procedures had been developed at that time. Antam has now developed a policy for induction of new board members that will be finalise in 2008. 2.6. Companies should provide • Annual Report W √ - information indicated in the Guide • www.antam.com to Reporting on Principle 2.

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Adoption of the ASX Corporate Governance Principles and Recommendations

Principle & Recommendation Reference Adoption Remarks Full Partial 3. Promote Ethical and Responsible Decision Making 3.1. Companies should establish a code •Code of Conduct W √ During fiscal year 2007, Antam established two whistleblower of conduct and disclose the code •Company Policy Manual W I mechanisms; one administered by the BOC through the Audit or the summary of the code as to •Personal Ethic Statement Committee, and the other by the BOD through the Corporate the practices necessary to maintain •Audit Committee Standard Secretary. The latter still required clearer administration confidence in the company’s ethical Operating Procedure procedures, from documenting each report and ensuring proper integrity and to take into account analysis and reporting to the BOD and BOC, as well as what their legal obligations and the follow-up action is required. As a result, both whistleblower reasonable expectations of their mechanisms will be reviewed. stakeholders; and the responsibility and accountability of individuals for The Code of Conduct was published in mid-2007 and the reporting and investigating reports training and socialisation was conducted during launching. A of unethical practices. formal program of regular training and monitoring of compliance with the Code of Conduct had not been conducted. For the monitoring, it is expected each person will conduct their own monitoring as set out in the code of conduct. 3.2. Companies should establish •Code of Conduct W √ Antam has established a policy concerning trading in the a policy concerning trading in •Company Policy Manual W I company’s securities by Directors, Senior Executives and company securities by directors, employees, which is available in the Conflict of Interest and senior executives and employees, Confidentiality Section of Antam’s Code of Conduct. A separate and disclose the summary of that and more detailed policy and procedures regarding this issue policy. has also been developed and will be finalised and disclosed in 2008. 3.3. Companies should provide • Annual Report W √ - information indicated in the Guide to • www.antam.com Reporting on Principle 3. 4. Safeguard Integrity in Financial Reporting 4.1. The board should establish an audit • Audit Committee Charter W √ - committee. 4.2. The audit committee should be • Audit Committee Charter W √ - structured so that it consists only of • Audit Committee Standard non-executive directors, consists of Operating Procedure a majority of independent directors, • Curriculum Vitae of Audit is chaired by an independent chair Committee Members who is not chair of the board, and has at least three members. 4.3. The audit committee should have a • Audit Committee Charter W √ - formal charter. 4.4. Companies should provide • Annual Report W √ - information indicated in the Guide to • www.antam.com Reporting on Principle 4. 5. Make Timely and Balanced Disclosure 5.1. Companies should establish • Company Policy Manual W I √ Antam has written policies designed to ensure compliance with written policies designed to ensure • Corporate Secretary Work ASX listing rules disclosure requirements that formulate the compliance with ASX listing rule Guidance type of information need to be disclosed, internal notification disclosure requirements and to and decision-making concerning the disclosure obligation, the ensure accountability at senior roles and responsibilities of all parties in the disclosure context, executive level for that compliance process to promote and monitor compliance of disclosure, and disclose those policies or a measures to avoid emergence of false market, managing summary of those policies. confidentiality and media, and external communications; and its disclosure had not been made in the fiscal year 2007. Antam is now developing a Disclosure of Information Policy to be finalised in 2008 to ensure timely and balanced disclosure, and 141 the policy will be disclosed when available.

Timely disclosure on financial and operational information had been made, but the same had not been conducted regarding governance related information posted in the corporate governance section at Antam’s website because no regular updating was made on progress and improvements made in this area. Antam will be more active in updating this section in 2008. 5.2. Companies should provide • Annual Report W √ - information indicated in the Guide to • www.antam.com Reporting on Principle 5.

Principle & Recommendation Reference Adoption Remarks Full Partial 6. Respects the Rights of Shareholders 6.1. Companies should design • Company Policy Manual W I √ - a communications policy • BOC Charter W for promoting effective • BOD Charter W communication with shareholders • Corporate Secretary Work and encouraging their Guidance participation at general meetings and disclose their policy or a summary of that policy. 6.2. Companies should provide • Annual Report W √ - information indicated in the Guide • www.antam.com to Reporting on Principle 6. 7. Recognise and Manage Risk 7.1. Companies should establish • Company Policy Manual W I √ - policies for the oversight • BOC Charter W and management of material • BOD Charter W business risks and disclose a • Enterprise Risk summary of those policies. Management Policy 7.2. The board should require • Company Policy Manual W I √ - management to design and • BOC Charter W implement the risk management • BOD Charter W and internal control system to • Enterprise Risk manage the company’s material Management Policy business risks and report to it • Internal Audit Charter on whether those risks are being • Risk Management managed effectively. The board Committee Charter should disclose that management has reported to it as to the effectiveness o the company’s material business risks. 7.3. The board should disclose • Statement on the √ - that whether it has received Responsibility of Financial assurance from the CEO and Statements CFO that the declaration • Statement regarding the provided is founded on a sound Responsibility for the Risk system of risk management and Management and Internal internal control and that the Controls system is operating effectively in all material respects in relation to financial reporting risks. 7.4. Companies should provide • Annual Report W √ - information indicated in the Guide • www.antam.com to Reporting on Principle 7. 8. Remunerate Fairly and Responsibly 8.1. The board should establish a • NRHRD Committee Charter W √ - remuneration committee. 8.2. Companies should clearly • Company Policy Manual W I √ - distinguish the structure of non- • Notarised GMS Meeting executive directors’ remuneration from that of executive directors and senior executives. 8.3. Companies should provide • Annual Report W √ - 142 information indicated in the Guide • www.antam.com to Reporting on Principle 8. W Available in Antam website, at www.antam.com I Available in Antam intranet portal

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Adoption of the Indonesian Code of Good Corporate Governance

A description of Antam’s corporate governance practices against the Indonesian Code of GCG is provided below. This is the first year we provide this assessment on the adoption of this code.

Principle & Recommendation Adoption Remarks Full Partial 1. Good Corporate Governance Principles √ - GCG Principles need to be implemented on each business facet and within the entire company, and includes transparency, accountability, responsibility, independency, and fairness. These principles are necessary to attain a company’s sustainability by also considering the interests of stakeholders.

2. Business Ethics and Code of Conduct √ During the fiscal year 2007, the code of conduct was not To attain success in the long term, GCG implementation needs to applicable for shareholders, no requirements that prohibit be based on high integrity. Sets of values need to be developed that parties with conflict of interest to participate in discussions describes the morals of the company in conducting its business, which and decision-making process, no requirements on annual are then further elaborated into a code of conduct. certification of non-conflict of interest, and need ofan improvement on the accountability of the whistleblower mechanism. 3. Organs of the Organisation √ The framework and processes that can ensure the The GMS, the BOC, and the BOD have an important role in implementing effectiveness of design and operation of internal controls GCG effectively, by carrying their respective functions based on the had not specifically addressed the internal control over principle that each organ is independent in carrying out its duty, function financial reporting risks. and responsibility in the sole interest of the company. 4. The Rights and Role of Shareholders √ - Shareholders as owners of share capital have certain rights and responsibilities within the company in accordance with the laws and regulations and the articles of association of the company. 5. The Rights and Role of Other Stakeholders √ - Stakeholders, including employees, resource providers, and communities particularly in which the company operates, have an interest in the company and are directly affected by the strategic and operational decisions of the company. Therefore, the relationship between the company and its stakeholders needs be fair and equal, in accordance with the prevailing laws and regulations, and should be based on mutual arrangements applicable to each respective party. 6. Statement of GCG Implementation √ - A statement regarding the implementation of GCG and its report shall be made a part of the company’s annual report. In the event that the GCG Code has not been fully implemented, a company shall disclose the non-conformance aspects and the reasons for such. The statement shall comprise the structure and work mechanism of the BOC and the BOD, and other pertinent information regarding implementation of GCG. 7. Internalisation of GCG Practices √ - GCG shall be implemented in a systematic and continuous manner. Accordingly, it is necessary to have practical guidelines to be used as a reference in implementing GCG.

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Sustainability Report Stakeholders’ Involvement 146

Environmental Performance 146

Social Performance 147

Antam Funds a Local Craftsman 148

Antam to Purchase Green Energy 149

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This report is an abridged version of Antam’s Corporate Sustainability Report which contains our efforts in sustainable development in the fields of economics, environment and social.

We have prepared this report to portray our learning process from challenges and issues that we faced in 2007. The complete Corporate Sustainability Report is written based on the Global Reporting Initiative – GRI G3 and contains more than 80 pages.

For Antam, the word sustainable means that Antam has to fullfill its vision as a mining company with an international standard and competitive advantage in the global market as well as being able to benefit the community and environment where we operate.

To put further emphasis on our concerns to the environment and surrounding community, we have formed a Commissioner level committee to handle related matters to the environment, community development and post mining. In 2007, we had two fatal accidents at Buli and Pongkor. Incidents like these are why we are committed to improve the work and health safety management.

Corporate Governance and Management Systems As a dual listed company in Indonesia and Australia, compliance to the stock exchange regulations is a must. We are committed to adhere to the corporate governance implementation in all aspects of company’s operations and activities.

Most of our business units have implemented international standard management systems such as in quality management (ISO 9000) and environmental management (ISO 14001).

Stakeholders’ Involvement We fully understand the importance of the communication between us and our stakeholders. This is important to support our business activities from the strategic planning, implementation until the evaluation of corporate projects and initiatives. The ongoing mechanism to ensure an effective communication with our stakeholders include community development and community relations activities, shareholders’ meetings, Bipartit Forum with the union, Tripartit Forum, Development Planning Coordination meetings, annual report and press releases, consultative meetings with the government environmental agency, community welfare acceleration programs, partnership and community development programs, and many others.

Environmental Performance Antam’s commitment to proper enviromental management was reflected in the increased expenditure of environmental rehabilitation. In 2007, Antam’s environmental expenditure increased 146 6% to Rp43 billion compared to 2006.

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Clockwise, from left: In 2007, from a target of 231.8 hectares of land rehabilitation, Antam has rehabilitated 228.05

Antam helps by providing housing to hectares or 98% of the target. the surrounding community.

Antam provided water rafts and In the vicinity of Pomalaa and Pongkor, Antam started a water recirculation system, thereby personnel to rescue trapped community members during Jakarta’s heavy floods. reducing the amount of water taken from the earth. In 2007 Antam also started the Green Antam

School children at Antam’s Pomalaa program with the planting of 10,000 trees in the protection forest area of Angke Kapuk, Jakarta. The nickel business unit. program is conducted in cooperation with the Agriculture and Forestry Directorate of the Jakarta Provincial Government. Antam also conducted the “Antam Plants” program with the planting of 4,000 trees throughout Antam’s operation area. The effort is part of Antam’s commitment to reduce global warming.

Social Performance Antam is concerned with the welfare of the its employees as well as the surrounding community. Antam continued its efforts to improve the welfare of the surrounding community through the community development and partnership program and surrounding community programs. These

programs are focused on areas such as education, health, public infrastructure, places of worship, 147 natural disaster, nature conservation, and others. In 2007, Antam spent Rp37 billion on community

development, an increase of 12%. The largest community development expenditure was spent at the nickel mining unit accounting for 76% of total expenditure. In 2007, Antam spent Rp8 billion for the surrounding communities program while total expenditure for the partnership program amounted to Rp10 billion. Antam’s community development programs funded directly by the company included initiatives in education, health, infrastructure, and outsourcing. As well Antam participated in environmental and community development by providing 1% of net income to a government-run fund. Antam participated in a partnership program with local entrepreneurs by providing 1-3% of net income to a government-run fund.

Antam Funds a Local Craftsman

Name : udin Saputra, BEd.

Age : 30 years old

Address : nunggul village, Nanggung district, West Java

Occupation : Ivory Stone Craftsman

Although Udin has only officially partnered with Antam since 2006, Antam has given special attention to Udin since 2002 for his business and talent in the ivory stone craftsmanship. Since he was small Udin, who grew up in Pongkor area, has had a talent in the art of ivory stone carving, a stone which carries unique characteristics. He refined his artistic talent at art school in Yogyakarta. He is also a talented painter.

Udin first joined an exhibition with Antam in 2005, and he won second place for Best 148 Craftsmanship. In the INACRAFT exhibition in 2006, President Susilo Bambang Yudhoyono bought his work directly. Udin received the revolving partnership fund for Rp25 million from Antam.

“Partnering with Antam means expanding my market. As well, it can also develop the talent and art skills of local youngsters. I receive not only financial assistance but also moral and knowledge support.”

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Antam to Purchase Green Energy

In order to maintain and create sustainable business growth and operations, which is one of our strategies to grow and meet our objective to create shareholder value, we strive to conduct our operations as environmentally and socially sustainable as possible. The signing of Power Purchase Agreement (PPA) with PT Tamboli Energi (Tamboli) is an example of such efforts.

In September 2007, we entered into a PPA with Tamboli covering a supply of 15MW peak load capacity of electricity to our Pomalaa’s ferronickel facilities from Tamboli’s 4x5MW hydro power plant. The power plant, which is located at Kolaka area about 63 km from Pomalaa, will be in form of a Run of River (ROR) hydropower plant.

This type of hydropower plant is built on a river with a consistent and steady flow of water. Electricity is generated by diverting a portion of the water from the river to spin the power station’s turbines utilizing the natural flow and elevation drop of the river. The water will leave the power generating station and return to the river without altering the river’s existing flow or water level. As no or very minimal flooding at the upper part of the river is required, natural habitats are mostly preserved and there is no need to relocate people living around the river.

In contrast, man-made reservoirs of hydropower plants using man-made dams usually involve complex displacements of large number of populations living nearby. It may also produce substantial amounts of methane and carbon dioxide, the main components of greenhouse gas, as the results of decaying plants in the anaerobic environments in the flooded areas. Moreover, they also change the downstream river environments drastically. Dams slow the river and this change may cause damages to the ecological patterns. Another problem caused by dams is changes in the rivers temperatures. Reservoirs are warmer at the top and colder at the bottom. As water from the reservoirs, usually the colder water from the lower parts, is released to the downstream rivers, organisms depending on regular cycle of temperatures may perish and may endanger the aquatic populations of the river.

ROR hydropower is a source of renewable energy that does not emit greenhouse gases and is much friendlier to the environment compared to hydroelectric generators with man-made dams and reservoirs, let alone compared to thermal fuel power stations. We will therefore support any effort by Tamboli to obtain Certified Emission Reductions (CER) through Clean Development Mechanism (CDM) for its ROR hydropower plant.

The Tamboli PPA is not only environmentally sustainable, it is socially beneficial as well. By working together with Tamboli, a domestic company based in the island of Sulawesi, we are supporting the development of the businesses and economy in the regional area where we operate.

Last but not least, the signing of PPA with Tamboli makes good business sense. Although it only covers a small portion of our overall energy needs, it is an important step in our efforts to decrease our dependence on the more expensive diesel fuel as our main source of energy. Upon the commencement of the hydropower purchase at US$ 0.0565 / KWh in 2009, we expect to lower our ferronickel power cost by up to 8- 10%, which will result in a reduction of our ferronickel cash cost by up to 3 - 4%.

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2007 Antam Annual Report www.antam.com Auditing Antam Board of Directors’ Statement Regarding the Responsibility for the Consolidated Financial Statements 152 Independent Auditors’ Report to the Shareholders 153 Consolidated Balance Sheets 154-155 Consolidated Statements of Income 156 Consolidated Statements of Changes in Equity 157 Consolidated Statements of Cash Flows 158 Notes to the Consolidated Financial Statements 159-196 1. General 159 2. Summary of Significant Accounting Policies 163 3. Cash and Cash Equivalents 168 4. Restricted Cash 168 5. Trade Receivables – Third Parties 170 6. Inventories 171 7. Investment in Shares of Stock 171 8. Property, Plant and Equipment 172 9. Deferred Exploration and Development Expenditures 173 10. Deferred Charges 174 11. Trade Payables 174 12. Accrued Expenses 175 13. Taxation 175 14. Long-term Liabilities 178 15. Provision for Environmental and Reclamation Costs 180 16. Share Capital 180 17. Additional Paid-in Capital 181 18. Distribution of Income 181 19. Net Sales 182 20. Cost of Sales 183 21. Operating Expenses 183 22. Income from Penalty and Insurance Claim 184 23. Employee Costs 184 24. Pension and Other Post-retirement Obligations 184 25. Related Party Information 188 26. Basic Earnings per Share 189 27. Monetary Assets and Liabilities Denominated in Foreign Currencies 189 28. Segment Information 190 29. Significant Agreements, Commitments and Contingencies 191 30. Summary of Significant Differences between Indonesian Generally Accepted Accounting Principles (“GAAP”) and Australian GAAP 194 31. Revised Statements of Financial Accounting Standards 195 32. Subsequent Events 195 33. Economic Conditions 196 34. Reclassification of the Consolidated Financial Statements 196 35. Completion of the Consolidated Financial Statements 196 The Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority- Case for Antam and Shareholders Dear Shareholder Antam’s People Higher Profits Generating Higher Output for a Better Future Stake Joint Ventures

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www.antam.com 2007 ANTAM Annual Report The Investment Antam Shares Financial Review: Review of Operations: Investing Blue Sky: Existing Minority- Case for Antam and Shareholders Dear Shareholder Antam’s People Higher Profits Generating Higher Output for a Better Future Stake Joint Ventures

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