PT. Bumi Resources Tbk.

In 2011, BUMI reached a new level of production, a new level of activity in the Board of Directors and a new level of global reach. Coal production has not stopped climbing and increased a further 5.4 million tonnes tonnes in 2011 to reach 65.9 million tonnes. Further plans are ready for each of the three operating mines to expand in 2012. With coal reserves currently at 3.2 billion tonnes, BUMI is poised to reach and surpass its goal of 100 million tonnes production by 2014.

Mine managements, as well as management at head office, are moving in synergy to steadily and prudently increase production while putting in mind with increased size comes the need for increased attention and sensitivity for reforestation and rehabilitation. BUMI stands very visible within Indonesia and indeed the world, and thus on both these issues on growth and regreening need perhaps a few more words.

BUMI in recognizing its leadership role within the Indonesian coal industry has put sufficient management in place and has developed the talent to insure that efforts put into the early planning stages provide successful outcomes. With better mining plans, costs have been kept in check, appropriate investments have been made in infrastructure and output is on a sustainable upward trajectory. The recently fully operational Enterprise Risk Management (ERM) has assisted decisionmakers at all levels with assessing and mitigating risk at all stages.

Engaging the local communities in the downstream economic opportunities of BUMI’s reforestation efforts has been enormously successful, both in providing the needed trees for replanting and for inviting these and other stakeholders to witness what a world class coal mining company does after the coal has been mined. Our cooperation with Orangutan Organization and other wildlife groups further entrenches the knowledge of the multiple benefits that our coal mining operations bring to the whole region. In 2011, KPC reclaimed post-mined area of 636.97 hectares, up from 501.74 hectares in 2010.

These efforts are done not only to satisfy regulation, and not only as sign of respect for people and their regulations environment, but these actions are taken to reflect the long term best interests of shareholders and customers. BUMI indeed has consistently kept shareholders and customers’ interests foremost in first creating mines of scale, with miners of expertise and fortitude and a secure and dedicated transshipment network from mine to port.

BUMI is proceeding on course to be recognized internationally as a major diversified global miner, serving global markets with a winning combination of low cost production, strategic location and world class management.

Financial Performance

This year’s discussion of financial performance is complicated by the introduction of a new accounting standard for the presentation of data in Jointly Controlled entities, PSAK 12. In the following description, the new GAAP requirement will be applied to 2010’s data to allow for comparison. Thus, revenue increased to US$ 4 billion in 2011 from US$ 2.92 billion in 2010.

The performance of KPC and Arutmin were both very good in 2011, with production reaching a new high of 65.9 million tonne and expansion plans in the works. Cost of production per ton produced was US$ 42,07 per tonne in 2011, or up from US$ 34,09 per tonne di tahun 2010, overburden removal was up 125.6 mbcm, and a stripping ratio steady at 12.01 bcm/tonnes mined.

Investment Strategy

BUMI’s model of compartmentalized growth was given new direction with the formation and listing of PT Bumi Resources Minerals Tbk late in 2010 by placing non-coal mining interests under this company. Opportunities to monetize BUMI’s holdings in BRM in 2011 were not pursued late in the year as growing uncertainty surrounding the European debt crisis dampened interest. Just as shareholders have expressed dismay over BUMI’s share price decline during the mid-year negotiations, management regrets the intervention of this negative sentiment. However, management will not be maneuvered into leveraging its assets at any sort of discount, and will steadfastly defend shareholder value in building up a strong array of mining properties. Meanwhile, management fully expects the share price to return to a balance valuation.

Having good timing in making acquisitions is perhaps an art as much as a science, but evaluations of any such acquisitions are better made in hindsight, as assets demonstrate their value only after coming on stream. Pendopo and Fajar coal properties acquired in early 2009. Currently Pendopo is at the development stage and coal mining operation preparation are underway, while Fajar produced 254,425 tonne of coal in 2011.

BUMI subsidiary BRM’s portfolio is an impressive mix of operational and long and short production opportunities in zinc, lead, molybdenum, copper, gold, and iron ore. While exploration has led to reserve and resource upgrades in copper, gold, and molybdenum, the zinc, lead and iron ore are expected to enter production in 2012. At this point, with income being generated after years of investment, BUMI’s strategic investment approach with its temporary use of debt financing will coalesce into a profitable suite of productive assets.

Nevertheless, BUMI is cognizant of the need to bring down interest costs and the early payment of US$600 million CIC tranche 1 was made two years early on 8 November 2011. Discussions are in progress to target tranches two and three for early repayment in 2012 and 2013. Further steps to bring down interest costs include repayment of the strategic US$ 251 million loan to our affiliate Berau Coal, through its parent PT Bukit Mutiara. We also fully expect to monetize a US$ 231 million short term investment in the first quarter of 2012.

BUMI’s investment in the NTT Batu Hijau gold and copper mine is proving itself as a long term investment in a valuable and productive mine. Our perseverance in the Gallo Oil exploration for oil and gas has repeatedly raised and dashed hopes with economically viable reserves just over the horizon. Expert opinion remains optimistic and financial assessments bear out continued exploration.

In total, management believes the early repayment of debt demonstrates good intent and that with making timely strategic acquisitions, BUMI can and will deliver on our promise to be a world class miner.

Governance

While the market was reacting unfavourably toward BUMI shares, and we believe reacted somewhat emotionally, shareholders at the October 2011 EGMS approved a buyback of 3.75% of shares. This buyback process over an 18 month period aims at providing full coverage for the US$375 million Convertible Bond maturing August 2014, but which may be called in 2012. This buyback also highlights management confidence in the vast undervaluation of the stock price.

This decision for the buyback, like all other major decisions, follows a consultative process from finance through the Board of Directors to the Commissioners and finally to the shareholders. In 2011, I personally noticed the strengthened effect of the 2010 enlargement of the Board of Directors. The division of responsibilities has, in combination with the new streamlined corporate structure, added momentum to bringing properties up and running and in investigating potential complementary properties.

One of the strengths of BUMI’s Board of Directors has always been its small size and rather informal lines of communication. While these mechanisms have continued in essence, the benefits of formality have always been recognized, and today, in response to BUMI’s greater size and complexity. Increased numbers of formal meetings bear witness to ensuring that decisions are fully discussed by all participants, and that decisions move smoothly through established communication channels more frequently.

The Board of Directors values the insights of the Commissioners, who reflect the experience, solid industry contacts and the depth of knowledge necessary to fully appreciate both the challenges and opportunities of BUMI’s growth strategy. Working both through the Board of Commissioners’ four committees and directly with Commissioners, both informally and at joint meetings, shareholder concerns are addressed, production plans are put forward and revised, expansion plans are evaluated with support of risk analyses, and ultimately the Company is able to generate income, profit and value in reserve.

Part of this value is rightly directed to stakeholders in communities surrounding our sites. This pursuit to ensure a sharing of empowerment from the earnings of the mines is administered by professionals in a dialogue with community leaders and local governments. BUMI welcomes the attention its programs generate and is proud of the awards that KPC’s Sustainability Report has earned consistently over the past five years. BUMI hopes to summarize all these programs and other Company efforts in its own Sustainability Report.

BUMI also expresses gratitude for the awards that have been achieved in 2011 for Safety, Enviroment and Investor Relations. Through Arutmin, BUMI received Aditama award for mining safety, and through KPC, BUMI received Indonesia Sustainability Reporting Awards, as well as PROPER National award from the Minister of Enviroment of Indonesia. In addition, BUMI’s excellent communications with the investment community is exemplified by receiving ‘Best Investor Relations Company” and “Best Investor Relations Professional” in Indonesia awarded by Corporate Governance Asia magazine which is an International Independent and credible institution, also has been awarded as Trusted Company based on its Governance assessments by SWA magazine and CGPI.

Looking Ahead

BUMI aims to lead sector growth with expansion of coal production to reach 100 million tonnes by 2014. For this to occur, a balanced infrastructure must be in place, and we are working towards this. Two aims are central in BUMI’s overall short term direction: to lower capital costs and increase asset utilization. A restructured capital structure will result in lower capital costs, and will reinvigorate profitability numbers. By bringing properties into production, asset utilization will increase, rounding out income diversification and serving to push earnings.

BUMI’s relation with affiliates in London does provide a marketing edge and increased company profile. However, this connection also highlights that BUMI is deeply involved in global trading patterns. Thus, it is not enough to recognize its diversified sales markets as these markets also respond to global economic shifts. BUMI is accordingly following closely global financial markets and energy demand trends. Through scenario planning, careful hedging policies and balanced long and spot sales positions, BUMI is ready to meet varied coal demand positions for energy production and remain profitable.

Appreciation

On behalf of the Boardof Directors, I would like to thank the our Directors and all our hard working staff who are growing this company. Also, I would like to thank our customers for their support and hope that we continue to meet your expectations. I would also extend a thank you to all other stakeholders who help BUMI reflect the best that a company can be.