LAND RECLAMATION

Reclamation of land throughout areas affected by the mining operation is carried out in a number of phases before, during and after mining operation ceases in each area. Initially top soil is removed prior to mining and either used to provide initial cover to overburden dumps on a progressive basis or is stored in topsoil banks for later placement. As overburden dumps are progressively built they are contoured to minimize slope levels and to follow the original contours as close as possible. During this period, drop structures and extensive water drainage systems are incorporated into the reclaimed areas to assist in erosion control as well as to direct water run-off into settling ponds to allow sediment separation and pH control prior to release into surrounding waterways. As soon as the filling and contouring work is completed planting is carried out, either manually or by using truck mounted seed spraying systems called hydro-seeding. This seeding work is carried out as soon as possible as this cover is essential in minimizing erosion while second stage planting is undertaken.

Manual planting is only for fast growing seedlings while hydro-seeding uses the seeds of grasses, covercrops (legumes) and fast growing plants mixed in containers with fertilizer, other additional material and water, and then sprayed on the surface of reclamation area ready for planting.

Once the revegation process is stable and there is sufficient cover to minimise the chance of erosion, slower growing secondary vegetation is planted including various timber species and crops which can enhance the soil while at the same time continuing to eliminate erosion through continued spreading of roots.

In some areas Adaro has provide rehabilitated land to local communities for agricultural purposes and to date Adaro has worked with these communities on a number of projects including cultivation of vegetables, orchards and other commercial crops. The company is also invoved in a number of research and development projects for better management of environmental rehabilitation particularly in developing various crops for the production of biodiesel. The largest of these is with Komatsu of Japan where 10 hectares of rehabilitated land has been planted with Jatropha whose seeds can be processed into biodiesel. A pilot scale refining plant is already under construction and will be producing biodiesel by mid 2011. This will be mixed with diesel fuel and used in heavy equipment in the mining operation.

WATER MANAGEMENT

Water quality and run-off control is a critical part of the environmental management of the mining operations to ensure that local streams and rivers are not contaminated and that soil erosion is eliminated. Adaro has implemented a comprehensive system of water run-off control and treatment to ensure that processed water meets the required environmental quality level.

Waste water from rainfall and ground water in the open cut mine areas is drained into specially prepared sumps and is continuously pumped from these into a permanent drainage system which feeds into high capacity ponds for containment before chemical processing. From there water is fed to a whole series of settling and treatment ponds which surround the mine area and now have a total land area exceeding 450 hectares with a water management capacity of 6 million cubic meters and are designed to handle the drainage water into the open cut mining areas that is generated by an annual rainfall of 3,000 mm.

In the main settling ponds, the water is is treated with flocculants and coagulants to remove suspended solids which separate and sink

to the bottom of the ponds. The clear water from this process then passes through treatment ponds where it is chemically treated to ensure correct chemical and pH balance before being released into local waterways.

Waste water which originates from coal stockpiles around the mining operations is fed into fine coal traps to release coal solids after which this water enters the main waste water treatment system for final processing.

Water quality monitoring is carried out through all phases of treatment with specific emphasis on pH, biochemical oxygen demand, turbidity, and iron sulphates.

Adaro has taken this water processing a step further by the establishment of an additional water treatment plant that is now producing drinking quality water and which is not only being used as drinking water by the company and contractors but is also being pumped through a pipeline installed by Adaro to a number of surrounding communities.

AIR QUALITY CONTROL

Adaro undertakes extensive and continuous air monitoring around the mining operations and along the entire length of the coal haul road to Kelanis to ensure that methods being used to control dust levels are effective at meeting all required regulations up to international standards and minimizing the impact on the local communities surrounding the operations.

Dust control within the mine and areas where coal is stockpiled is carried out primarily through water spraying from mobile tankers and fixed spraying points with frequency of watering being adjusted to take into account seasonal differences in rainfall. Additionally, agglomerating agents in solution are sprayed onto the static coal stockpiles at Kelanis as an additional form of dust control.

Since the sealing of the 75 kilometer coal haul road between the mine and Kelanis water dust levels have been effectively reduced to the point that no water spraying is required, however strict monitoring is still undertaken.

WASTE MANAGEMENT

Waste management focuses primarily on the handling and disposal of used oils, grease and other hydrocarbon products from workshops involved in any equipment maintenance and overhaul.

Each workshop has a concrete drainage system to carry these spilt oils to the oil trap system which holds them until they start to thicken. At this point, the lighter oils such as the kerosene and diesel are separated into a special tanks before being pumped into specially marked drums. Used oils including engine, gear and hydraulic oils are immediately collected and drummed after replacement and these

drums together with drums containing oil from the drainage system are placed in covered storage before being sold to third parties licensed by the Government to handle these wastes.

Solid wastes and garbage is collected from the operations in special containers and segregated into organic and recyclable waste and delivered to the local Government for disposal.

AN OUTSTANDING RECORD

In 2010, Adaro received the PROPER Award with Green Rating for the third consecutive year from the Ministry of the Environment in recognition of Adaro's management of its mining areas in an environmentally sensitive manner while prioritizing safety. This is the highest rating ever received by a coal mining company and is a testament to the Company's priority in maintaining the highest level of environmental management.

Adaro, Komatsu and United Tractors Execute a Basic Agreement Regarding Indonesian Bio Diesel Fuel Project

Jakarta, November 5th, 2009 --- PT Adaro Energy Tbk (President Director: Garibaldi Thohir) ("Adaro"), Komatsu Ltd. (President & CEO: Kunio Noji) ("Komatsu") and PT United Tractors Tbk (President Director: Djoko Pranoto) ("UT") have executed a basic agreement to jointly advance the Bio Diesel Fuel Pilot Project in Indonesia (the "Project").

In March 2010, Adaro, Komatsu, and UT will start the Project to produce Bio Diesel Fuel*1 ("BDF") from Jatropha*2 and other feedstock plants and operate Komatsu mining dump trucks (payload: 90-tonnes) class, "Komatsu Dump Trucks") fueled by the BDF at the Adaro coal mine in Kalimantan, Indonesia.

Komatsu will establish a BDF plant (production capacity: 1 to 2 tonnes/day) and a laboratory to ensure quality of the produced BDF on the Adaro coal mine. As a manufacturer, Komatsu will also render the standard warranty to Komatsu Dump Trucks fueled by the BDF produced from the Project.

Adaro will plant Jatropha and other feedstock plants on its reclamation areas and produce BDF from their seeds or fruits to be used by the Komatsu Dump Trucks operating at the Adaro coal mine.

UT, as the Komatsu distributor in Indonesia, will provide product support for the Komatsu Dump Trucks fueled by the BDF.

Notes:
*1 BDF is an alternative fuel to mineral diesel oil, produced from vegetable oil or waste food oil. Popular feedstock plants are soybeans, rapeseed and palm. It is regarded that BDF will not increase the amount of CO2 in the air because the feedstock plants absorb CO2 from the air while they are growing. *2 Jatropha is considered as one of ideal feedstock plants that produces oil from its inedible seeds and grows even on dry and less fertile soil.

Progress in 2010

The construction of BDF Plant was completed in February 2010 and the operation of biodiesel project has started since then.