Section One

Dear Shareholder,

We, the Board of Commissioners (supervisory board), write this letter as part of our supervisory duties of the Board of Directors (executive board) based on the performance of
year 2004.

In order to make your company better governed, some changes occurred to the Board of Commissioners and its committees. The changes were made in order to ensure we can improve our performance as a board and therefore more effectively perform our duty as the supervisors of the Board of Directors. Following the Annual General Meeting of Shareholders of May 2004, a second independent commissioner was added to our five member board. As well, amendments were made to improve the Commissioners’ Charter and the Board of Directors’ Charter.

In performing our supervisory functions, each Commissioner chairs one of five committees and must ensure good corporate governance. The five board committees are our main tools to perform our supervisory function and they report directly to the Board of Commissioners. The committees advise the Board of commissioners with regards to audit, risk management, corporate governance, mine closure and nomination, remuneration and human resources. We improved the committees’ charters and in September 2004, given the changes to our board, reshuffled the membership of these committees.

Although much has been achieved with the committees, we realize there is still much work to do. However, with the recent changes, we are therefore looking forward to much more intensive supervision of the company’s management. For details on the membership and function of each one of these committees please see the corporate governance section of this annual report. 

In terms of the Board of Directors performance for 2004, in general, we are of the opinion that management has put Antam on the right track to sustain growth. We are of the opinion that although a company’s management needs to be continuously improved, the Board of Directors worked hard to improve the company’s foundations, with increased income, sustainable growth and a better competitive position. Management must however be wary of the higherfuel prices and increasing ferronickel production costs, along with the possibility of lower nickel and gold prices.

In 2004, Antam continued to pursue its strategy of focusing on its core business; of continuing to do what it does best. The focus was therefore on the profitable extraction and marketing of nickel, gold and bauxite. Management’s goal is to build on existing strengths to ensure long term profitability. We concur with this strategic direction of management.

Antam will optimize output to increase cash generation and lower unit costs. For this reason Antam was focused in 2004 on improving and expanding its ferronickel operation. Antam also found new customers for its nickel ore in the Ukraine.

Antam will always try and extract the most value from existing reserves by moving downstream into processing and refining. As such, in 2004, Antam’s management continued to focus on strengthening its strategic alliances to form joint ventures to develop a chemical grade alumina project at Tayan and towards long term, high tech, nickel developments in North Maluku.

Antam continued to use its strategy of maintaining financial strength as evidenced by using a portion of the large amount of cash generated in 2004 to lower its long term debt.