Appendix A: Base Variables

PART A: GENERAL VARIABLES AND CONVERSIONS

General Variables Conversions

Percentage ownership of JV by GOI 30% Number of pounds per ton 2204.62
Discount rate (real) 6% Number of ounces per kilogram 32.1507
Sensitivity analysis range 5-10% Number of kilograms per ton 1000
Opportunity cost of unskilled labour as % of minimum wage 20% Exchange rate (Value in Rp of US$1) 2.5
% of income as 'contractors margin' earned as rent 25%
Import duty charged (for calculations of import market prices) 0%
Royalty rate on fob value of sales 2% Metal prices
Key for Company tax holiday for first 10 years (1=no tax holiday, 0=tax holiday) 1 Copper price (in $US per pound) 1.25
Company tax rate 30% Gold price (in $US per ounce) 290
Silver price (in $US per ounce) 5

PART B: INVESTMENT COSTS

PART B.1: INITIAL CAPITAL EXPENDITURE

Initial Capital Expenditure (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Comments
Imports 1,917,063 1,917,063 *Subject to 10% importy duty ad valorem
Local Materials - Locally manufactured materials 240,033 240,033
Local Materials - Contractors margins 55,392 41,544 *25% of market price is contractor margin
Local Materials - local skilled labour 18,464 18,464
Local Materials - local unskilled labour 55,392 11,078 *opp cost of unskilled labour is 20%
Labour - Expatriate salaries 260,625 260,625
Labour - Local managerial/professional wages 65,156 65,156
Labour - local skilled 195,469 195,469
Labour - local unskilled 130,313 26,063 *opp cost of unskilled labour is 20%
TOTAL - Initial Capital Expenditure 2,937,907 2,775,495

Details of Initial Capital Expenditure (2003-2005) provided in Table 1

Imports (US$000s) Local Materials (in Rp000's) Labour (in Rp000's)
Roads 11,800 48,750 81,250
Buildings 3,800 17,000 14,875
Wharf 3,275 6,750 6,750
Airstrip 950 2,656 5,313
Power Supplies 73,000 28,750 57,500
Facilities 18,000 75,000 125,000
Mining Equipment 470,000 71,875 71,875
Milling Equipment 83,000 27,000 13,500
Logistics Equipment 92,500 37,500 75,000
Other Equipment 5,500 7,500 7,500
Construction 5,000 30,000 105,000
Excavation 0 16,500 88,000
TOTAL in initial currency 766,825 369,281 651,563
TOTAL in Rp000's 1,917,063 369,281 651,563

Local Materials Composition Labour Composition

Locally manufactured materials 65% Expatriate salaries 40%
Contractors margins 15% Local managerial/professional wages 10%
Local skilled Labour 5% Local skilled 30%
Local unskilled Labour 15% Local unskilled 20%

Composition of Investment over Years

2003 25%
2004 45%
2005 30%

PART B.2: REPLACEMENT CAPITAL EXPENDITURE

Year 2009 Year 2009 Year 2013 Year 2013 Year 2017 Year 2017
Replacement Capital Expenditure (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Comments
Imports 16,530 16,530 20,660 20,660 12,398 12,398 *Subject to 10% importy duty ad valorem
Local Materials - Locally manufactured materials 8125 8125 16250 16250 8125 8125
Local Materials - Contractors margins 1875 1,406 3750 2,813 1875 1,406 *25% of market price is contractor margin
Local Materials - local skilled labour 625 625 1250 1250 625 625
Local Materials - local unskilled labour 1875 375 3750 750 1875 375 *opp cost of unskilled labour is 20%
Labour - Expatriate salaries 5000 5000 7500 7500 5000 5000
Labour - Local managerial/professional wages 1250 1250 1875 1875 1250 1250
Labour - local skilled 3750 3750 5625 5625 3750 3750
Labour - local unskilled 2500 500 3750 750 2500 500 *opp cost of unskilled labour is 20%
TOTAL - Replacement Capital Expenditure 41,530 37,561 64,410 57,473 37,398 33,429

Details of Replacement Capital Expenditure (2009-2017) provided in Table 2

Item 2009 2013 2017
Imported Equipment (in $US000's) 6,612 8,264 4,959
Local Materials (in Rp000's) 12,500 25,000 12,500
Installation (in Rp000's) 12,500 18,750 12,500
Imported Equipment (in Rp000's) 16,530 20,660 12,398
Total (in Rp000's) 41,530 64,410 37,398

Local Materials Composition Installation Composition (Labour)

Locally manufactured materials 65% Expatriate salaries 40%
Contractors margins 15% Local managerial/professional wages 10%

Page 1 of 9
 Appendix A: Base Variables

Local skilled Labour 5% Local skilled 30%

Local unskilled Labour 15% Local unskilled 20%

PART B.3: WORKING CAPITAL EXPENDITURE

Year 2004 Year 2004 Year 2005 Year 2005 Year 2020 Year 2020
Working Capital Expenditure (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Market Prices (in Rp000's) Efficiency prices (in Rp000's) Comments
Imported Equipment 16,500 16,500 27,273 27,273 -43,773 -43,773 *Subject to 10% importy duty ad valorem
Fuel 7,955 7,955 15,910 15,910 -23,865 -23,865 *Subject to 10% importy duty ad valorem
Local Materials - Locally manufactured materials 813 813 1,625 1,625 -2,438 -2,438
Local Materials - Contractors margins 188 141 375 281 -563 -422 *25% of market price is contractor margin
Local Materials - local skilled labour 63 63 125 125 -188 -188
Local Materials - local unskilled labour 188 38 375 75 -563 -113 *opp cost of unskilled labour is 20%
Total (in Rp000's) 25,705 25,508 45,683 45,289 -71,388 -70,797

Composition of Additions to Working Capital provided in Table 3

2004 2005
Imported Equipment (in US$000's) 6,600 10,909
Fuel (in US$000's) 3,182 6,364
Local Materials (in Rp000's) 1,250 2,500
Imported Equipment (in Rp000's) 16,500 27,273
Fuel (in Rp000's) 7,955 15,910
Total (in Rp000's) 25,705 45,683
Composition of Local Materials
Working Capital Composition (approximate only - not used in calcs) Locally manufactured materials 65%
Imported Equipment Spares 60% Contractors margins 15%
Fuel Supplies 35% Local skilled Labour 5%
Local Materials 5% Local unskilled Labour 15%

PART B.4: SALVAGE VALUES

Salvage Percentages Local Materials Composition Labour Composition

Mine & Mill Salvage value 10% Locally manufactured materials 65% Expatriate salaries 40%
Off-site infrastructure Salvage value 30% Contractors margins 15% Local managerial/professional wages 10%
Logistic & Other Equipment Salvage Value 20% Local skilled Labour 5% Local skilled 30%
Local unskilled Labour 15% Local unskilled 20%

Details of Initial Capital Expenditure (2003-2005) provided in Table 1

Imports (US$000s) Local Materials (in Rp000's) Labour (in Rp000's)
Roads 11,800 48,750 81,250
Buildings 3,800 17,000 14,875
Wharf 3,275 6,750 6,750
Airstrip 950 2,656 5,313
Power Supplies 73,000 28,750 57,500
Facilities 18,000 75,000 125,000
Mining Equipment 470,000 71,875 71,875
Milling Equipment 83,000 27,000 13,500
Logistics Equipment 92,500 37,500 75,000
Other Equipment 5,500 7,500 7,500
Construction 5,000 30,000 105,000
Excavation 0 16,500 88,000

Values of Capital in 3 salvage categories Imports (US$000s) Local Materials (in Rp000's) Labour (in Rp000's) Imports (in Rp000's)
Mine & Mill Value 553,000 98,875 85,375 1,382,500
Off-site infrastructure 115,825 208,906 395,688 289,563
Logistics and other equipment 98,000 45,000 82,500 245,000

Salvage Values Market Prices (in Rp000's) Efficiency prices (in Rp000's) Comments
Mine & Mill - imports 138,250 138,250 *Subject to 10% importy duty ad valorem
Mine & Mill - local materials - locally manufactured 6,427 6,427
Mine & Mill - local materials - contractors margins 1,483 1,112 *25% of market price is contractor margin
Mine & Mill - local materials - local skilled labour 494 494
Mine & Mill - local materials - local unskilled labour 1,483 297 *opp cost of unskilled labour is 20%
Mine & Mill - labour - expatriate salaries 3,415 3,415
Mine & Mill - labour - local managerial/prof 854 854
Mine & Mill - labour - local skilled 2,561 2,561
Mine & Mill - labour - local unskilled 1,708 342 *opp cost of unskilled labour is 20%
Offsite infrastructure - imports 86,869 86,869 *Subject to 10% importy duty ad valorem
Offsite infrastructure - local materials - locally manufactured 40,737 40,737
Offsite infrastructure- local materials - contractors margins 9,401 7,051 *25% of market price is contractor margin
Offsite infrastructure - local materials - local skilled labour 3,134 3,134
Offsite infrastructure - local materials - local unskilled labour 9,401 1,880 *opp cost of unskilled labour is 20%
Offsite infrastructure - labour - expatriate salaries 47,483 47,483
Offsite infrastructure - labour - local managerial/prof 11,871 11,871
Offsite infrastructure - labour - local skilled 35,612 35,612
Offsite infrastructure - labour - local unskilled 23,741 4,748 *opp cost of unskilled labour is 20%
Logistics/Other Equipment - imports 49,000 49,000 *Subject to 10% importy duty ad valorem
Logistics/Other Equipment - local materials - locally manufactured 5,850 5,850
Logistics/Other Equipment - local materials - contractors margins 1,350 1,013 *25% of market price is contractor margin
Logistics/Other Equipment - local materials - local skilled labour 450 450
Logistics/Other Equipment - local materials - local unskilled labour 1,350 270 *opp cost of unskilled labour is 20%
Logistics/Other Equipment - labour - expatriate salaries 6,600 6,600
Logistics/Other Equipment- labour - local managerial/prof 1,650 1,650
Logistics/Other Equipment - labour - local skilled 4,950 4,950

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 Appendix A: Base Variables

Logistics/Other Equipment - labour - local unskilled 3,300 660 *opp cost of unskilled labour is 20%
Total - salvage value from initial cost 499,422 463,577

PART B.5: DEPRECIATION ALLOWANCES

Depreciation of Initial Capital

Period for depreciation (in years) 15
Starting year for depreciation of initial investment 2006
Initial investment value in 2006 (in Rp000's, using market values) 2,937,907 *calculated in part B.1
Final salvage value in 2020 (in Rp000's) 0 Assume zero, not salvage value
Per year depreciation (using straight line method) 195,860

Depreciation of Replacement Capital

Period for depreciation (in years) 3
Salvage value 0
Replacement capital value in 2009 (in Rp000's, market value) 41,530 *calculated in part B.2
Per year depreciation (using straight line method) for 2010-2012 13,843
Replacement capital value in 2013 (in Rp000's, market value) 64,410 *calculated in part B.2
Per year depreciation (using straight line method) for 2014-2016 21,470
Replacement capital value in 2017 (in Rp000's, market value) 37,398 *calculated in part B.2
Per year depreciation (using straight line method for 2018-2020 12,466

PART B.6: REHABILITATION COSTS

Rehabilitation Cost (in Rp000's) 625000

Year of rehabilitation 2020
Annual real interest rate of sinking fund 7%
Starting year for operating expenses for tax purposes 2006
Number of years for sinking fund 15
Annual periodic payment into sinking fund -$24,871.64

PART C: PROJECT OUTPUT

PART C.1: MINING OUTPUT

Output Capacity Extraction Details

Output in Year 2006 (as percentage of full capacity) 25% Full capacity material extraction (in tons) 85,000,000
Output in Year 2007 (as percentage of full capacity) 50% Ore composition - Ore percentage 40%
Output in Year 2008 (as percentage of full capacity) 75% Ore composition - Waste percentage 60%
Output in Year 2009 (as percentage of full capacity) 100% Concentrate percentage in ore 2%
Percentage of copper in concentrate (by weight) 30%
Calculations: (in full capacity output) Percentage of gold in concentrate (by weight) 0.0025%
Ore tonnage (in tons) 34,000,000 Percentage of silver in concentrate (by weight) 0.004%
Waste tonnage (in tons) 51,000,000
Concentrate tonnage (in tons) 680,000
Copper weight (in tons) 204,000
Copper weight (in lbs) 449,742,480
Gold weight (in tons) 17
Gold weight (in ounces) 546,562
Silver weight (in tons) 27
Silver weight (in ounces) 874,499
Value of refined copper (in US$) $ 562,178,100
Value of gold (in US$) $ 158,502,951
Value of silver (in US$) $ 4,372,495
Total value of metals (in US$) $ 725,053,546
Total value of metals (in Rp000's) 1,812,634

PART C.2: COMMUNITY BENEFITS

Estimates from Expert

Percentage of annual overhead expenditure on Utilities & Community Services 30%
Value of annual overhead expenditure on Utilities & Community Services (in Rp1000's) 110,000
Value of additional benefit to offsite community (in Rp000's) 33,000

PART D: OPERATING COSTS

PART D.1: OVERHEAD COSTS

Composition of Overhead Costs provided in Table 4

Annual Overhead Costs (all in Rp000's) Expatriate Wages Local Skilled Local Unskilled Local Materials TOTAL
Administration 45,500 6,500 3,250 9,750 75,000
Management 49,500 5,500 - - 35,000
Transport & Engineering 54,000 27,000 13,500 40,500 15,000
Maintenance 18,000 7,500 1,500 3,000 410,000
Utilities 15,000 30,000 15,000 15,000 -
Community Services 3,500 7,000 14,000 10,500 -
Other - 3,000 3,000 9,000 100
TOTAL of annual overhead costs 185,500 86,500 50,250 87,750 535,100

Level of All Overhead Costs Attributed to new mining operating 50%

Annual Insurance Costs Market prices Efficiency Prices (in Rp000's)

Increase in Insurance Premium (pa) in $US000's 100 Local Materials Composition
Increase in Insurance Premium (pa) in Rp000's 250 250 Locally manufactured materials 65%

Page 3 of 9
 Appendix A: Base Variables

Contractors margins 15%

Annual Compensation Costs Market prices (in Rp000's) Efficiency Prices (in Rp000's) Local skilled Labour 5%
Annual compensation cost (from 2006 onwards) in Rp000's 30,000 15,000 Local unskilled Labour 15%
Compensation level compared to opportunity cost 2

Overhead Costs Summary (assume from 2004) Market prices (in Rp000's) Efficiency Prices (in Rp000's) Comments

Expatriate Wages 92,750 92,750

Local Skilled Labour 43,250 43,250
Local Unskilled Labour 25,125 5,025 *opp cost of unskilled labour is 20%
Local Materials - Locally manufactured materials 28,519 28,519
Local Materials - Contractors margins 6,581 4,936 *25% of market price is contractor margin
Local Materials - local skilled labour 2,194 2,194
Local Materials - local unskilled labour 6,581 1,316 *opp cost of unskilled labour is 20%
Total - overhead costs 205,000 177,990

PART D.2: MINING/MILLING COSTS

Composition of Mining and Milling Costs provided in Table 5

Mining and Milling Operating Costs Imports (US$000's) Imports (in Rp000's) Local Materials (in Rp000's) Expatriate Labour (in Rp000's) Skilled Labour (in Rp000's) Unskilled Labour (in Rp000's)
Mining - Fixed Cost 10,455 26,138 12,575 5,925 12,000 8,400
Mining - Variable Cost / 1000 ton material extracted 0.1230 0.3075 0.1479 0.0700 0.1424 0.1000
Milling - Fixed Cost 7,710 19,275 8,900 3,900 9,250 5,700
Milling - Variable Cost / 1000 ton ore 0.6235 1.5588 0.2618 0.1150 0.2735 0.1675

Local Materials Composition

Locally manufactured materials 65% Full Output Levels (for variable costs)
Contractors margins 15% Mining material extracted (in 1000 tons) 85,000
Local skilled Labour 5% Ore extracted (in 1000 tons) 34,000
Local unskilled Labour 15%

Mining & Milling Costs - Fixed Market Prices (in Rp000's) Efficiency prices (in Rp000's) Comments
Imports 45,413 45,413 *Subject to 10% importy duty ad valorem
Local Materials - Locally manufactured materials 13,959 13,959
Local Materials - Contractors margins 3,221 2,416 *25% of market price is contractor margin
Local Materials - local skilled labour 1,074 1,074
Local Materials - local unskilled labour 3,221 644 *opp cost of unskilled labour is 20%
Expatriate Labour 9,825 9,825
Skilled Labour 21,250 21,250
Unskilled Labour 14,100 2,820 *opp cost of unskilled labour is 20%
Total - Mining & Milling Costs (Fixed) 112,063 97,400

Mining & Milling Costs - Variable (based on FULL OUTPUT)

Imports 79,135 79,135 *Subject to 10% importy duty ad valorem
Local Materials - Locally manufactured materials 13,957 13,957
Local Materials - Contractors margins 3,221 2,416 *25% of market price is contractor margin
Local Materials - local skilled labour 1,074 1,074
Local Materials - local unskilled labour 3,221 644 *opp cost of unskilled labour is 20%
Expatriate Labour 9,860 9,860
Skilled Labour 21,403 21,403
Unskilled Labour 14,195 2,839 *opp cost of unskilled labour is 20%
Total - Mining & Milling Costs (Variable for FULL OUTPUT) 146,066 131,328

PART D.3: FREIGHT, TREATMENT AND REFINING COSTS

Freight Operating Costs

Freight to Japanese refinery (in US$ per ton of concentrate) 25
Freight to Japanese refinery (in Rp000's per ton of concentrate) 0.0625
Number of ton of concentrate (for full output capacity) 680,000
Cost of Freight (at full output capacity) in Rp000's 42,500

Treatment Operating Costs

Treatment of concentrate (in US$ per ton of concentrate) 95
Treatment of concentrate (in Rp000's per ton of concentrate) 0.2375
Number of ton of concentrate (for full output capacity) 680,000
Cost of Treatment (at full output capacity) in Rp000's 161,500

Refining Operating Costs

Copper
Refining cost per pound of copper produced (in US$) 0.1
Refining cost per pound of copper produced (in Rp000's) 0.00025
Number of pounds of copper produced (at full output capacity) 449,742,480
Cost of Copper Refining (at full output capacity) in Rp000's 112,436
Gold
Refining cost per ounce of gold produced (in US$) 5
Refining cost per ounce of gold produced (in Rp) 0.0125
Number of ounces of gold produced (at full output capacity) 546,562
Cost of Gold Refining (at full output capacity) in Rp000's 6,832
Silver
Refining cost per ouce of silver produced (in $US) 3
Refining cost per ouce of silver produced (in Rp) 0.0075
Number of ounces of silver produced (at full output capacity) 874,499
Cost of Silver Refining (at full output capacity) in Rp000's 6,559
Cost of Refining (at full output capacity) in Rp000's 125,826

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 Appendix A: Base Variables

Total Cost of Freight, Treatment & Refining (at full capacity) in Rp000's 329,826

PART D.4: ROYALTIES

Royalty Operating Costs

Royalty percentage (of fob of sales) 2% * from A: General Variables
Gross value of sales (at full output capacity) 1,812,634 * calculated in C.1
Cost of freight, treatment & refining in Japan (at full output capacity) 329,826
FOB value of sales (at full output capacity) 1,482,807
Royalty payments (at full output capacity) 29,656

PART E: FINANCE

Loan (debt finance) in US$ 500,000,000

Loan (debt finance) ins Rp000's 1,250,000
Year loan raised 2003
Fixed rate of interest on loan (in real terms) 7%
First year of repayment (*Interest free period until 2006) 2006
Number of years of payments as annuity 15
Total annual payments (principal + interest) -$137,243.28

Page 5 of 9
 Appendix B2: Case Two - No Import Duty

TABLE 2: PROJECT NET CASH FLOW

YEAR 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YEAR NUMBER 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Investment costs
Initial capital expenditure -734,477 -1,322,058 -881,372 499,422
Replacement capital expenditure -41,530 -64,410 -37,398
Working capital expenditure -25,705 -45,683 71,388
Rehabilitation -625,000
Total Investment -734,477 -1,347,763 -927,054 0 0 0 -41,530 0 0 0 -64,410 0 0 0 -37,398 0 0 -54,191

Operating Costs
Overhead Costs -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000 -205,000
Insurance -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250
Compensation -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000 -30,000
Mining & Milling Costs -148,579 -185,095 -221,612 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128 -258,128
Freight, Treatment, Refining -82,457 -164,913 -247,370 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826
Total Operating Costs 0 -205,250 -205,250 -466,286 -585,259 -704,232 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205

Revenues 453,158 906,317 1,359,475 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634

Net Cash Flow -734,477 -1,553,013 -1,132,304 -13,127 321,058 655,244 947,899 989,429 989,429 989,429 925,019 989,429 989,429 989,429 952,032 989,429 989,429 935,239
(Before Financing, Royalties & Tax)

5% 6% 7% 8% 9% 10%
Net Present Value = 4,283,742.9 3,622,355.6 3,037,597.6 2,519,622.6 2,059,976.4 1,651,383.8
IRR = 15.87%

** all figures in Rp000's

Page 1 of 4
 Appendix B2: Case Two - No Import Duty

TABLE 3: PRIVATE NET CASH FLOW

YEAR 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YEAR NUMBER 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
(i) Financing (from lender's viewpoint)
Principal
Loan -1,250,000 49,743 53,225 56,951 60,938 65,203 69,768 74,651 79,877 85,468 91,451 97,853 104,702 112,031 119,874 128,265
Interest
Loan 87,500 84,018 80,292 76,306 72,040 67,476 62,592 57,366 51,775 45,792 39,391 32,541 25,212 17,370 8,979
Net Financing Flows -1,250,000 0 0 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243

NCF(equity, pre-tax, pre-royalties) 515,523 -1,553,013 -1,132,304 -150,370 183,815 518,001 810,656 852,186 852,186 852,186 787,776 852,186 852,186 852,186 814,788 852,186 852,186 797,995

(ii) Taxes Liable

Revenues 0 0 0 453,158 906,317 1,359,475 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634
Operating Costs 0 -205,250 -205,250 -466,286 -585,259 -704,232 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205 -823,205
Rehabilitation Costs -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872
Depreciation on initial capital -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860 -195,860
Depreciation on replacement capital -13,843 -13,843 -13,843 -21,470 -21,470 -21,470 -12,466 -12,466 -12,466
Royalties -7,414 -14,828 -22,242 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656 -29,656
Interest on loans 0 0 0 -87,500 -84,018 -80,292 -76,306 -72,040 -67,476 -62,592 -57,366 -51,775 -45,792 -39,391 -32,541 -25,212 -17,370 -8,979
Profits (before tax) 0 -205,250 -205,250 -328,773 1,480 331,977 662,735 653,158 657,722 662,606 681,675 665,796 671,779 678,180 706,500 701,363 709,206 717,597
Taxes Liable 0 -61,575 -61,575 -98,632 444 99,593 198,821 195,947 197,317 198,782 204,502 199,739 201,534 203,454 211,950 210,409 212,762 215,279

(iii) Royalties Liable 7,414 14,828 22,242 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656

(iv) Equity (after tax and royalties)

Private Cash Flow to EPML 515,523 -1,491,438 -1,070,729 -59,152 168,543 396,165 582,179 626,583 625,213 623,748 553,617 622,791 620,996 619,076 573,182 612,121 609,768 553,060

(v) Dividents Payable

Provision for Rehabilitation 0 0 0 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872 -24,872
Provision for Depreciation 0 0 0 -195,860 -195,860 -195,860 -195,860 -209,704 -209,704 -209,704 -195,860 -217,330 -217,330 -217,330 -195,860 -208,326 -208,326 -208,326
Cash flow for purpose of calculating dividend 515,523 -1,491,438 -1,070,729 -279,884 -52,189 175,433 361,447 392,007 390,638 389,173 332,885 380,589 378,794 376,874 352,450 378,923 376,570 319,862
Dividend to pay to GOI (30%) 0 0 0 0 0 52,630 108,434 117,602 117,191 116,752 99,866 114,177 113,638 113,062 105,735 113,677 112,971 95,959

Private Cash Flow to Foreign Firm (IMC) 515,523 -1,491,438 -1,070,729 -59,152 168,543 343,535 473,745 508,980 508,022 506,996 453,752 508,614 507,358 506,014 467,447 498,444 496,797 457,102

TO IMC TO EPML
5% 6% 7% 8% 9% 10% 5% 6% 7% 8% 9% 10%
Net Present Value = 1,896,236 1,578,143 1,298,246 1,051,612 834,005 641,781 NPV= 2,709,552 2,314,458 1,966,211 1,658,772 1,386,959 1,146,308
IRR = 14.65% IRR = 17.71%

** all figures in Rp000's

Page 2 of 4
 Appendix B2: Case Two - No Import Duty

TABLE 4: EFFICIENCY CASH FLOW

YEAR 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YEAR NUMBER 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Investment costs
Initial capital expenditure -693,874 -1,248,973 -832,648 499,422
Replacement capital expenditure -37,561 -57,473 -33,429
Working capital expenditure -25,508 -45,289 70,797
Rehabilitation -625,000
Total Investment -693,874 -1,274,481 -877,937 0 0 0 -37,561 0 0 0 -57,473 0 0 0 -33,429 0 0 -54,781

Operating Costs
Overhead Costs -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990 -177,990
Insurance -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250 -250
Compensation -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000 -15,000
Mining & Milling Costs -130,232 -163,064 -195,896 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728 -228,728
Freight, Treatment, Refining -82,457 -164,913 -247,370 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826 -329,826
Total Operating Costs 0 -178,240 -178,240 -405,928 -521,217 -636,505 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794 -751,794

Revenues 453,158 906,317 1,359,475 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634 1,812,634
Benefit to Local Community 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000

Net Cash Flow -693,874 -1,419,720 -1,023,177 80,230 418,100 755,970 1,056,279 1,093,840 1,093,840 1,093,840 1,036,367 1,093,840 1,093,840 1,093,840 1,060,411 1,093,840 1,093,840 1,039,059

5% 6% 7% 8% 9% 10%
Net Present Value = 5,523,732 4,778,677 4,118,949 3,533,615 3,013,290 2,549,894
IRR = 19.29%

** all figures in Rp000's

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 Appendix B2: Case Two - No Import Duty

TABLE 5: REFERENT GROUP CASH FLOW

YEAR 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YEAR NUMBER 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
METHOD ONE: Efficiency - NRG Cash Flow (IMC + Foreign Lender)
Efficiency net cash flow -693,874 -1,419,720 -1,023,177 80,230 418,100 755,970 1,056,279 1,093,840 1,093,840 1,093,840 1,036,367 1,093,840 1,093,840 1,093,840 1,060,411 1,093,840 1,093,840 1,039,059
Private equity cash flow to IMC 515,523 -1,491,438 -1,070,729 -59,152 168,543 343,535 473,745 508,980 508,022 506,996 453,752 508,614 507,358 506,014 467,447 498,444 496,797 457,102
Foreign lender cash flow -1,250,000 0 0 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243 137,243
Total Referent Group Benefits 40,603 71,718 47,553 2,139 112,314 275,191 445,290 447,616 448,575 449,600 445,372 447,982 449,239 450,583 455,721 458,153 459,799 444,714
METHOD TWO: Disaggregated Benefits to Referent Group Members
(1) Government of Indonesia (GOI)
Import duties on initial capital expenditure 0 0 0
Import duties on replacement capital expenditure 0 0 0
Import duties on working capital expenditure 0 0 0
Import duties on mining/milling operating costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Import duties to government 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Corporate taxes to government from IMC 0 -61,575 -61,575 -98,632 444 99,593 198,821 195,947 197,317 198,782 204,502 199,739 201,534 203,454 211,950 210,409 212,762 215,279
Dividends paid to GOI (as 30% equity holding) 0 52,630 108,434 117,602 117,191 116,752 99,866 114,177 113,638 113,062 105,735 113,677 112,971 95,959
Royalties paid to GOI 0 0 0 7,414 14,828 22,242 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656 29,656
Total benefit to GOI 0 -61,575 -61,575 -91,218 15,272 174,465 336,911 343,206 344,164 345,190 334,024 343,572 344,828 346,172 347,341 353,742 355,389 340,894
(2) Local Contractors
Contractor's margins on initial capital expenditure 3,462 6,232 4,154
Contractor's margins on replacement capital expenditure 469 938 469
Contractor's margins on working capital expenditure 47 94 -141
Contractor's margins on overhead operating costs 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645 1,645
Contractor's margins on mining/milling operating costs 1,007 1,208 1,409 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611
Total benefit to local contractors 3,462 7,924 5,893 2,652 2,853 3,055 3,725 3,256 3,256 3,256 4,193 3,256 3,256 3,256 3,725 3,256 3,256 3,115
(3) Local Unskilled Labour
Labour rent on initial capital expenditure 37,141 66,854 44,569
Labour rent on replacement capital expenditure 3,500 6,000 3,500
Labour rent on working capital expenditure 150 300 -450
Labour rent on overhead operating costs 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365 25,365
Labour rent on mining/milling operating costs 17,340 20,823 24,307 27,790 27,790 27,790 27,790 27,790 27,790 27,790 27,790 27,790 27,790 27,790 27,790
Total benefit to local unskilled labour 37,141 92,369 70,234 42,705 46,188 49,672 56,655 53,155 53,155 53,155 59,155 53,155 53,155 53,155 56,655 53,155 53,155 52,705
(4) Offsite local community
External Benefit to offsite local community 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000
Annual Compensation Rent 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Total benefit to local community 0 33,000 33,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000
Total Referent Group Benefits 40,603 71,718 47,553 2,139 112,314 275,191 445,290 447,616 448,575 449,600 445,372 447,982 449,239 450,583 455,721 458,153 459,799 444,714
Check for consistency 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

5% 6% 7% 8% 9% 10%
Net Present Value = 3,585,398 3,264,222 2,978,904 2,724,861 2,498,155 2,295,400
IRR = unable to be calculated Err:523
Disaggregated Net Benefits
Government of Indonesia 2,345,408 2,107,900 1,897,553 1,710,868 1,544,841 1,396,890
Local Contractors 47,097 44,358 41,899 39,683 37,682 35,870
Labour rent 679,629 636,556 597,938 563,220 531,924 503,638
Offsite local community 513,264 475,408 441,514 411,090 383,708 359,002
Total Referent Gp 3,585,398 3,264,222 2,978,904 2,724,861 2,498,155 2,295,400

** all figures in Rp000's

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