Tenement riskUntil the introduction of the new Indonesian Mining...

Tenement risk
Until the introduction of the new Indonesian Mining Law of 2009 (the ‘Mining Law’) and its subsequent implementing regulations, foreign ownership was not permitted in entities holding Indonesian mining tenements (kuasa pertambangan, or ‘KPs’). Consequently, the Company does not have any direct rights to the Tujuh Bukit Project tenements and the Tujuh Bukit IUPs (the form of mining licence which replaced the KPs under the new Mining Law) are held by PT IMN, the Company’s joint venture partner. Instead, the Company, through a number of contractual arrangements, with
PT IMN, has acquired an 80% economic interest in the Tujuh Bukit Project. Since the Company has no direct rights in the IUPs, it is reliant on the observance by PT IMN and its shareholders of the contractual arrangements in place, and of legislation not permitting requirements related to the tenements. Pursuant to the new Mining Law, the Company is currently in the process of restructuring its joint venture arrangements with its PT IMN such that PT IMN will be converted into a foreign capital investment company in which the Company, through a subsidiary, will ultimately hold a direct 80% interest and therefore a direct interest in the IUPs comprising the Tujuh Bukit Project. This restructuring process will require certain governmental approvals, which may include recommendations from the Bupati of Banyuwangi, BKPM (Indonesian investment Coordinating Board) and ESDM (Ministry of Energy and Mineral Resources) and there is no certainty that any such approvals
will be obtained.
In March 2012, the Indonesian government published government regulation 24 of 2012 which, inter alia, provides that the ownership participation of Indonesian entities or nationals in entities holding mining licences shall not be less than 51% after ten years of production. The terms of foreign-to-local divestment are not clearly stipulated and these terms may impact the economic profile of the Tujuh Bukit project.