Consistent with prior years, the community development investment remains focused in the areas of education, health and nutrition, environment and culture, and socio-economic contribution. Due to a change in regulation regarding corporate social responsibility funds, the 2013 investment was planned based on a year’s plan rather than a five-year plan that PT Berau has previously performed voluntarily.

The majority of PT Berau’s community contribution has been delivered through the Yayasan Dharma Bhakti Berau Coal Foundation (“YDBBC”) managed by employees of PT Berau. The YDBBC receives small levels of contribution from other parties but approximately 98% ($1.6m) was contributed by PT Berau in 2013 (98% in 2012).

As reported in 2012, PT Berau was undergoing discussions to consider measurement of inputs and outputs. In 2013, data was gathered for a socio-economic outcome based measurement model in order to track its contribution footprint to the local community in a holistic manner. The model used is illustrated as follows:

This model is adopted by international mining companies and is regarded as industry best practice. Similar to other companies adopting this model, PT Berau has been able to gather data on inputs and outputs. Outcome measurement remains as the next step for further development. We believe that not only can this model demonstrate our contribution to local stakeholders, it an also help us make better decisions through understanding our impacts better and how to deal with dilemmas that exist between competing activities.

This model has been piloted across three major community development projects. The 2013 progress on the three pilot projects are as follow:

Cocoa Agribusiness

This project was set up in 2009 to revitalise cocoa cultivation around five villages within the mining area. This initiative is intended to assist existing farmers to improve cocoa production in the region. In 2013, this project had 145 members and covers an area of 171 hectares.

The outcomes of the Cocoa Agribusiness project are:

• Successful performance of grafting techniques by participating communities to improve quality of harvest.
• Annual cocoa production increase from 400kg per hectare to national average production of 1,200kg per hectare.

Village Electrification

At the start of PT Berau’s operating activities, most of the villages within the mining area did not have access to electricity. In 1999, PT Berau established an electrification project to bring electricity access to villages within the mining area. Surveys were conducted at villages within the mining area to determine population and number of households in order to plan for electrification needs. This survey data is updated on a regular basis.

Initially, PT Berau’s village electrification project involved provision of generators and fuel assistance. From 2009, PT Berau contributed to the installation charges for connection to the national grid and, until the end of 2013, 1,203 households had been connected to generators and 660 households had been connected to the national grid.

The outcomes of the village electrification project are as follows:

• Enables religious classes and community activities at mosques and churches to be conducted.
• Rise in local cottage industries.
• Improved facilities at local community health centres as electrical appliances can be installed.
• Water treatment plants made available to provide clean water to households.

Local Community Cooperative

In 2010, PT Berau assisted local community members at Tasuk Village to establish Koperasi Bintang Harapan (“Koperasi”), a local cooperative which specialises in rental of transportation vehicles and providing non-skilled labour supply to subcontracted services at the mining area, such as waste management, mining activities and infrastructure projects. At the end of 2013, Koperasi had 553 members. Outlined below are some of the key outputs that certain members have achieved in the year.

The outcomes of the cooperative project are as follows:

• Stable income for Koperasi members and lower unemployment rate.
• Koperasi generates profits for distribution to its members.
• Increased quality of Koperasi management to administer its business activities

Community investment summary

(1). This includes monthly contributions to the Community Development Fund run through the YDBBC Foundation and in-kind contributions, e.g. fuel purchased for the village electrification project. Investment in infrastructure projects is excluded.

(2). This includes only those donations made through the External Relations team for community purposes and excludes donations where the primary objective is commercial or self-promoting. It includes donations made on an entirely voluntary basis, and some which are expected to be paid by PT Berau to the government where PT Berau can determine the amounts. The majority of donations made are voluntary payments.

Community development spending continues to support PT Berau’s “Four Pillars” programmes: Education ($0.6m), Health and Nutrition ($0.2m), Environment and Culture ($0.1m) and Socio Economic Contribution ($0.7m). Despite a long history of strong relations and ongoing engagement and investment there are continuing and increasing pressures for higher levels of contribution. It is not possible for PT Berau to meet all demands, and in particular those which are in addition to the agreed community development project commitments.

In August 2013, PT Berau and the Berau local government committed to a Memorandum of Understanding. This will impact the way that funds are administered to community organisations and the level of funding that is mandatory under local legislation. PT Berau has taken proactive steps to discuss the nature and level of funding with the local government, and how it will be disbursed across community development projects and donations.

Resettlement

There are occasions where our planned mining activities mean that communities need to be relocated. During 2013, we continued to work with three specific resettlement areas. We know that resettlement has a significant impact on communities, and we communicate with all stakeholders throughout the resettlement process to ensure that their needs and expectations are heard, understood and met, where possible.

The construction of houses was completed in July 2013 and other ancillary infrastructure is expected to be completed in July 2014. Following the completion of the houses, the resettlement of the local villagers is 100% complete at the Sambakungan neighbourhood and 95% complete at the two neighbourhoods in Meraang. Full resettlement is expected in 2014.

Engagement and consultation continued in 2013 to update the households on progress and to manage concerns that have been raised. The local village heads and village police are generally present at these sessions.

The resettlement has also brought the villagers closer to schools and community health centres (Puskesmas). PT Berau has also considered and will implement post-resettlement support in the four areas of existing community development projects.

As reflected in our Code of Conduct and HSEC Statement of Intent, environmental stewardship is an important objective for the Group. Mining has the potential to cause lasting damage to the local environment, and we recognise this sensitivity when planning and executing our mining operations. We are compliant with all relevant environmental legislation, and PT Berau has maintained ISO 14001 certification for all operations.