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  • 201395

    Clean Coal Day 2013 International Symposium

    Change for Clean Coal Business & Sustainable Coal Supply

    The diversification of supply source

    ITOCHU CORPORATION

    Chief Operating Officer Coal Nuclear & Solar DivisionChief Operating Officer, Coal, Nuclear & Solar Division Metals & Minerals Company

    Koichi KawaguchiKoichi Kawaguchi

  • ITOCHU Corporation

    Challenges in Coal Market and ITOCHU Approach

    ChallengesChallenges

    To secure Superior Coal Assets

    To establish Stable Supply Chain on economically

    To secure Superior Coal Assets

    To establish Stable Supply Chain on economicallyTo establish Stable Supply Chain on economically sustainable mannersTo establish Stable Supply Chain on economically sustainable manners

    ITOCHUs ApproachCentering on Australia(NSW/QLD) and investment to develop in Colombia and Indonesiato develop in Colombia and Indonesia.

    To expand existing Australian assetsTo make huge investment to Colombia/DrummondTo make huge investment to Colombia/DrummondTo establish stable transportation system from

    Indonesia/Central Kalimantan

    Copyright ITOCHU Corporation All Rights Reserved. 2

  • ITOCHU Corporation

    New Trend in Thermal Coal Market(Demand and Supply)

    Due to plenty of shale gas domestic

    SupplyDemandDecrease in Japan US and EU Due to plenty of shale gas, domestic

    demand in US sharply decrease.Colombian coal into US to decline.

    Decrease in Japan, US, and EUdue to economic growth slowdownand shift to low carbon energy.

    Competition in EU market to intensifyamong export coal ex US, Colombia, SA.Shift to Asian market where steady

    70% of new demand is coming from Asia, leaded by China and India.Major companies found SPR offices Shift to Asian market where steady

    demand is expected.PRB coal also heads to Asia, through west coast ports.

    Major companies found SPR offices for marketing hub.

    Chinese domestic market to start pCoupling with international market.

    Borderless Marketby coupling among Atlantic

    Copyright ITOCHU Corporation All Rights Reserved. 3

    by coupling among Atlantic, Pacific and Chinese Domestic markets.

  • ITOCHU Corporation

    New Trend in Thermal Coal Market(Atlantic and Pacific)

    US C l/D C l bi C l/IAtlantic Pacific

    US Coal/DecreaseLess competitive of Appalachian mines for EU market, due to high

    Colombian Coal/IncreaseExpanding each mine, backed up by high quality and low cost

    cost structure.

    Russian Coal/Decrease

    y g ystructure.

    South African Coal/KeepRussian Coal/DecreaseHigh cost and shortage in port capacity.

    South African Coal/KeepDemand decreasing in EU market. No port expansion plan.

    Th l f C l bi dShale gas revolution to kick out less-cost-competitive source.

    The supply from Colombia and South Africa into Asian market to increase.

    Copyright ITOCHU Corporation All Rights Reserved. 4

  • ITOCHU Corporation

    ITOCHU Approach Colombia

    Drummond Port

    Project Location

    ReservesReserves : 1.9 billion : 1.9 billion tonton

    ProductionProduction : : 30mtpa expanding up to 35mtpa30mtpa expanding up to 35mtpa

    Copyright ITOCHU Corporation All Rights Reserved. 5

    Mine LifeMine Life : more than 50 years: more than 50 years

  • ITOCHU Corporation

    ITOCHUs purpose for investment to Drummondp p

    Portfolio New supply source following Australia, Indonesia Hi h Q litHigh Quality Compliance in EU, US and Asia(low ash/sulpher) Dedicated Infrastructure Integrated coal supply chain(Mine/Rail/Port)

    Background & Strategy

    Long relationship with DrummondLong relationship with Drummond -Strong connection made from

    40+ years trade history created thi i t t t itthis investment opportunity.

    -Deepening the partnership withDrummond and jointly looking forinvestment opportunities globally.

    Copyright ITOCHU Corporation All Rights Reserved. 6

    photo Mina Prebbenow

  • ITOCHU Corporation

    ITOCHU Approach Indonesia

    MGM(MGM(MarundaMarunda GrahaGraha Mineral)Mineral)

    ReservesReserves: 100million ton: 100million tonIntermediateStockpile

    ProductionProduction: 1.8mtpa expanding: 1.8mtpa expandingup to 5mtpa. up to 5mtpa.

    Mine Mine LifeLife: : 30+ years30+ years

    SMM(SMM(SuprabariSuprabari MapanindoMapanindo Mineral)Mineral)

    ReservesReserves: 120million ton: 120million ton

    ProductionProduction: Up to 4mtpa in the future: Up to 4mtpa in the future

    TabaneoTransshipment point

    Copyright ITOCHU Corporation All Rights Reserved. 7

    ProductionProduction: Up to 4mtpa in the future: Up to 4mtpa in the future

    Mine LifeMine Life : : 20+ years20+ years

  • ITOCHU Corporation

    The purpose in development of MGM and SMM

    New Source Cornerstone in Indonesia L tiLocation Close to rapidly growing markets, China and IndiaCost competitive Low cost operation with high resilience for market

    conditions

    StrategyTo become a major supplierTo become a major supplier in Central Kalimantan-Build up know-how on development/operation of minedevelopment/operation of mine, through MGM/SMM experience.(e.g. barge transport system)Secure supply source more-Secure supply source more, liaising with existing and potential partners.

    Copyright ITOCHU Corporation All Rights Reserved. 8

    photo: Intermediate Stockpile

  • ITOCHU Corporation

    ITOCHU Approach Mongolia Tavan Tolgoi

    Tavan Tolgoi(TT) High quality coking coal.

    ITOCHU is the first company which delivered mongolian coal to Japan in 2006.

    A part of Erdenes TTs mine is underA part of Erdenes TT s mine is under international bidding process and ITOCHU organized Japanese consortium to make a bid.

    TavanTavan TolgoiTolgoi

    ReservesReserves : 7.4billion ton: 7.4billion ton

    Copyright ITOCHU Corporation All Rights Reserved. 9

    ProductionProduction : 15mtpa: 15mtpa

  • ITOCHU Corporation

    Challenges in coal supply countries and ITOCHUs Solutions

    Challenges in coal supply countriesDownturn of international market price.Development delay or suspension caused by resource

    t ti l b i li t d i t lprotection, labor issue, complicated environmental requirement process.

    Delay of infrastructure plan in developing countriesDelay of infrastructure plan in developing countries.

    ITOCHUs SolutionsT d OPEX/CAPEX i i ti tTo reduce OPEX/CAPEX in existing assets.To seek for new cost-competitiveness for long-term.To communicate well with government local resident andTo communicate well with government, local resident and

    operation site.To assist infrastructure development together with Japanese

    Copyright ITOCHU Corporation All Rights Reserved. 10

    p g pgovernment sectors.