OVERSEAS COAL ASSETS

ACQUISITIONS

Ajay MathurChief Executive Officer

INTERNATIONAL COAL VENTURES (P) LIMITED, New Delhi.

Coal is found in about 70 countries across the globe.

It is the most widely distributed fossil fuel in the world.

The proven reserve of are estimated to be about 860

billion Tonnes.

78% of world coal reserves are located in five countries.

INDIA ranks 5th in the world in terms of coal reserves

– 7.1%.

Other countries having significant share of coal reserves

are United States (28.9%), Russia (19%), China (13.9%)

and Australia (9.2%).

GEOGRAPHICAL DISTRIBUTION OF COAL

2

COAL RESERVES/ RESOURCES OF INDIA

Estimated Resource is 286 billion tonnes

(Thermal + Coking)

Proven Reserves are estimated at 113 billion tonnes

87% is Thermal Coal

About 35 billion tonnes of these are coking coal with

Proven reserves being half of it.

Prime coking coal is 4.61 Bt, mainly in Jharkhand

ICVL’S TARGET COUNTRIES

COKING COAL ASSETS AUSTRALIA USA CANADA MOZAMBIQUE NEW ZEALAND RUSSIA COLOMBIA MONGOLIA

THERMAL COAL ASSETS INDONESIA AUSTRALIA SOUTH AFRICA MOZAMBIQUE

5

ISSUES TO ADDRESS FOR ACQUISITIONS

• Difficulties in assessment of quality and size of the reserves, particularly Greenfield assets where decisions have to be taken based on borehole data.

• Difficult mining conditions which includes underground mining, gaseous deposits, faults and dikes, thin seams, high stripping ratios etc..

• High Capital expenditure involved in developing Greenfield assets which upsets the IRR of the project.

• Inadequate/constrained infrastructure for export in almost all geographies which includes rail network and port capacities.

• Resource nationalism in less developed countries and restrictive policy frameworks.

• Legal and environmental issues/ risks.• Vacillating government policies/ political risks.

6

FUTURE OUTLOOK

• New coal basins to become significant sources in the medium

term to long term

• Demand-Supply position to be largely matching

• Mongolia to become a major source for meeting China’s

requirements

• Prices likely to remain stable unless China resorts to sea borne

imports

• India may emerge as the largest importer of coking coal

• May also become the largest importer of thermal coal

TOP COAL PRODUCING COUNTRIES

COUNTRY PRODUCTION (Mt)

CHINA 3471

USA 1004

INDIA 585

AUSTRALIA 414

INDONESIA 376

RUSSIA 334

SOUTH AFRICA 253

GERMANY 189

POLAND 139

KAZAKHSTAN 117

7

TOP COAL EXPORTING COUNTRIES

COUNTRY STEAM(Mt)

COKING(Mt)

TOTAL EXPORT(Mt)

INDONESIA 309 0 309

AUSTRALIA 140 144 284

RUSSIA 110 14 124

USA 34 63 97

COLOMBIA 75 0 75

KAZAKHSTAN 72 0 72

CANADA 6 21 27

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COAL BASINS OF AUSTRALIA

AUSTRALIA

Queensland (Bowen Basin): premium quality hard coking coal. NSW has mostly low ash thermal coal. Coking coal - Low to mid volatile content; Low sulphur content Major good quality coking coal deposits are with the mining

majors. New coal formations prospective of having coking coal are yet

to be explored. High costs of acquisitions because premium expectations on

assets is high. Suitable investment climate. Operating costs are on the rise – material & labor costs (skilled

labor particularly for UG operations is becoming a challenge) Introduction of MRRT and Carbon tax. Constraints in ports and railway capacity.

USA

Large reserves of good quality metallurgical coal in Central Appalachia region but can be exported to India in the blended form.

Coal deposits characterized by thin seams. Well developed transport & support infrastructure. Favorable FDI policy. Availability of technology and human resource. Met coal trade can be competitive with large size

vessels and low cost of mining.

USA

MOZAMBIQUE

Moatize

Tete

Nacala

Chinde

Biera

Maputo

Emerging destination for sourcing coking coal to India.

Proven but limited coking coal reserves in Moatize Basin, Tete province

High in ash content & sulphur - Yield of HCC around 17% to 20% only.

Inadequate Rail and Port infrastructure- deterrent for new projects - Beira Port unable to handle Cap size vessels

Deep water port Nacala requires huge investment along with connecting rail link passing through Malawi.

Sena railway line operational with limited capacity.

MOZAMBIQUE

INDONESIA

Preferred destination for thermal coal sourcingOnly Central Kalimantan province has some semi-coking coal reserves which have Low ash and sulfur contents, high Volatile Matter and Vitrinite content (94%)Coal will not coke on its own - Only a good coal for blending

Underdeveloped rail infrastructure and other support

infrastructures but availability of river network.

Lowest freight cost to India.

Low cost of mining due to opencast –able reserves.

Non-transparent Resource & Reserve Estimates.

Political Risk and Regulatory Uncertainty.

INDONESIA

SOUTH AFRICA

Richards Bay

Maputo

Central Coal Basin(Witbank, Highveld & Ermelo Coalfields)

SOUTH AFRICA One of the preferred destination for acquisitions of thermal

coal assets after Indonesia and Australia. Only limited resources of coking coal are available in

Limpopo province most of which are in the initial exploration stages.

Coking coal quality yet to be ascertained.

Availability of technology and human resource.

TRANSNET - railway network, as well as RBCT has capacity constraint.

Other alternative routes for coal evacuation through Maputo to be explored.

Uncertainty over regulatory framework and political risks.

COLOMBIA

Huge coal deposits of both Thermal & Metallurgical grade over the northern & western regions

Coking coal deposits - Boyaca, Cundinamarca – Norte Santander regions

Coal quality is good with very low in sulphur & ash content and high heat value.Infrastructure is a big constraintFreight will always be higher due to distance.Law & order situation – insurgencyAdverse climatic conditions – Jan to August dry period followed by strong rains/ cloudbursts leading to floods

COLOMBIA

MONGOLIA

A land locked Sovereign country between Russia in north and China in south.Extreme climate with temperature ranging between (-)55°C to (+)45°C.Extensive unexploited mineral deposits including coal.High grade coking coal - 35% of coal reserve.sTavan Tolgoi coal deposits in South Gobi province has about 6.2 billion tonnes of coal reserves most of which is high grade quality coking coal.Evacuation of coal is a major issue as sea access via China (Tianjin) is 1344 kms and via Russia (Nakhodka) is 4037 kms. Dependence on the Trans-Siberian Highway for rail route.Underdeveloped infrastructure in power supply and water.Generally poor accessibility (marked by low road and rail density).

MONGOLIA

NEW ZEALAND

Large resources of Lignite, Sub-Bituminous & Bituminous coals

Production Centres located on the Waikato for domestic consumption, while west coast coking coal production is mainly for coal exports.

Low phosphorus, high heating value, mid to high volatile content.

Only suitable as A Blend Coking Coal. Coal seams are steeply dipping & highly faulted. Special method of mining - Hydraulic Mining. New Zealand Government owns about 50% of all coal

resources. State-owned Solid Energy is responsible for over 80% of

national production, with a number of smaller private coal mining companies producing the remainder.

NEW ZEALAND

RUSSIA

World’s second largest high quality recoverable reserves. All types of coals are available ranging from Lignite to high quality coking coal.Very low in ash and sulfur contents. Extreme cold conditions specially in Siberian region makes working difficult.Rail/ Ports are with the Govt.Low cost of production but very high cost of transportation both Inland as well as sea.Russia has one of the most highly skilled workforces in the world.

RUSSIA

27

CANADA

British Columbia - Coalfields

Coal deposits predominantly located in Western

Provinces of British Columbia, Alberta and

Saskatchewan.Met coal mainly in British Columbia.Good quality but normally low in fluidity makes coal as less preferred for recovery type coke ovens.Coals have a tendency for generation of micro fines.Freight cost are higher.

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CANADA

THANK YOU

BACK-UP

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TREND OF GOONYELLA MIDDLE SEAM MET COAL PRICES

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July

’04

– Ju

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5

July

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t'11

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Trend of Coking Coal Prices (USD/T)

HISTORICAL BEHAVIOUR OF INTERNATIONAL MET COAL PRICES

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HISTORICAL BEHAVIOUR OF INTERNATIONAL MET COAL PRICES

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