Developments in the Indian Coke and Steel Marketplace - Australian Hard Coking Coal from an Indian Perspective

Transcription

1 Developments in the Indian Coke and Steel Marketplace - Australian Hard Coking Coal from an Indian Perspective Arun Kumar Jagatramka Vice Chairman & Managing Director Gujarat NRE Coke Ltd (NSE: GUJNRECOKE) Chairman Gujarat NRE Minerals Limited (ASX: GNM)

2 Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by Gujarat NRE

3 Vision 2020 India on Steroids 100 million tons of steel (since scaled up to 200 million tons) and already talking about 300 million tons How do you project your steel production you are already in 2010 according to earlier estimates!

4 An important point to note In order to produce 100 million tons of steel, India will need to consume 100 million tons of steel which will come first is the million tons question

5 Though India is a low-cost producer, it is going to have a problem because of the fact that when you want to graduate from million tons to million tons that is what the growth rate is going to take us to another years you require lot of new innovations, lot of new thinking, you require a vision. - B. Muthuraman, MD, TATA STEEL

6 The New Era of steel making dawned in 1947 India had three units Two of them in the Private Sector (TISCO & IISCO) Total Capacity 1 million tons

7 China too had almost similar capacities (one million ton in 1949)

8 It took China 47 years to commission its first 100 million tons of steel capacity 5 years to commission the next 100 million tons And A mere two years to score its triple hundred. The rest is history!

9 India Today, India is the 5 th. largest crude steel producer in the world. In (Apri-Feb''08), production of Finished Steel was 46.9 million (annualised 51.1 million tons) as against 44.4 million tons in 2005/06 Steel Production target revised to 110 mt by , to 300 mt by 2020

10 Year million tons of steel

11 Additional Crude Steel Capacity being planned in India million tons SAIL 12.0 TATA STEEL 30.0 VIZAG 6.5 MITTAL 12.0 POSCO 12.0 ESSAR 11.0 JINDAL 20.6 BHUSHAN 3.1 OTHER (MISC) 7.0 Total 114.2

12 The world s who s who of steel making are waiting : Arcelor Mittal, the world's largest steelmaker, plans to set up two greenfield steel projects in India each with a capacity of 12 million tonne per annum (mtpa). Acerinox SA, the world's second-biggest stainless steelmaker, is joining hands with Japan's Nisshin Steel to build a steel plant in India. Tata Steel, the world's fifth largest steel maker, plans to double its capacity by 2015, by adding another 35 mt capacity. India's largest steel manufacturer SAIL is planning to increase its annual production of 12 mtpa to mtpa by Sinosteel Corp, China's second- biggest iron ore trader, plans to invest US$ 4 billion to build a 5 mt greenfield steel plant Posco which has already started work in Orissa.

13 All resources can be mobilised in the medium term Ports Vessels Material handling facilities Roads Railways Road rail linkages Ancillaries Trained manpower, including skilled labour

14 Except Coking Coal

15 1 MT of steel will require 0.6 MT of met coke 60 MT of coke requirement for 100 MT Or 100 MT Coking Coal required

16 Demand from Foundries, Soda Ash plants, Chemical Units Other Sectors not considered.

17 Potential sources : Established : Australia Canada USA China Emerging : Mozambique Indonesia South African Nations

18 But Except Australia Need to consider *ash content, *calorific values, *land locked mines, *transport bottle necks, *freight costs, *law & order problems

19 India centric issues Peculiarities of Indian psyche Tendency to buy in the spot market Dependence on China Herd mentality Lack of foresight leading to Inability of ensuring supply security

20 In 2004 among the Indian Secondary Steel Producers only Sesa Goa had captive coke plant (0.28mtpa) By 2007 more than 10 producers have gone in for captive plants ( 4 mtpa)

21 Captive Coke Plants in Secondary Steel Sector (million TPA) 2003/ /07 Sesa Kembla Coke Sathvahana Ispat 0.12 Jindal Vijaynagar 0.80 Lanco Ferro 0.12 Electrosteel Castings 0.12 Jindal Saw 0.15 JSPL 0.80 VISA 0.40 Neelachal 0.80 Jayaswal Neco 0.20 Total JV tie ups: Kalyani Steel with Gujarat NRE 0.32

22 Which means Distinct move away from Chinese dependence : (Coking coal import preferred over coke import as Chinese prices move defying logic) India to emerge as the second largest coke producer after China Coking Coal criticality to continue

23 Expected Indian Coke Consumption & Coking Coal Demand Projections (Conservatively based on additional 50 million tons of steel by 2012 and further 100 million tons by 2020) (million tons) year Coke Consumption Coking coal reqd Indian coal Nett import demand (equivalent coal)

24 Australia : Quality mines ready and rolling are hard to come by Ports are already congested Stiff Mining / Environmental legislation

25 Mozambique, Botswana, other African sources Mainly in the prospecting license stage Reserves have to identified and established Huge investment in infrastructure required Before mining can actually commence Note as opposed to a steel plant being set up in 2-4 years time, setting up a mine will require 6 8 years which means, 10 years to get the coal flow)

26 Coal Criticality

27 Coal Videsh (scouting for the last decade) Gujarat NRE Coke (2 mines in Australia, stake in NZ mine, other prospecting Co s) Tata Steel (Mozambique) Others

28 Gujarat NRE Coke Limited India s largest independent coke producer (Current capacity 1 MTPA By Dec MTPA)

29 GUJARAT NRE COKE LIMITED speed of thought A Snapshot GNCL is the largest independent producer of Metallurgical Coke in India and the only listed company in this sector with more than 60,000 shareholders Apr 08 Market Cap US$ 1 billion plus Profit earning and dividend paying company with strong financials and credit rating Met Coke capacity 1 million tons & being increased to 1.25 Million MTPA The only Indian company to have acquired captive coking coal mines outside India NRE No. 1 Colliery and NRE Wongawilli Colliery near Wollongong, NSW, (combined resources more than 550 million tonnes of Hard Coking Coal) NRE NO 1 IPO for AU $15 million oversubscribed. Currently listed with a market cap of AU $1 billion (Gujarat NRE Minerals Ltd ASX Code:GNM) Recently acquired Elouera Colliery from BHP Billiton and consolidated with NRE Avondale. Since renamed as NRE Wongawilli Colliery

30 GUJARAT NRE COKE LIMITED A Snapshot Contd speed of thought NZ $20 Million invested in Pike River for 400 KTPA of Ultra Low Ash Coal (a much sought after sweetener for blending with NSW Coal) Environment friendly Non recovery Coke batteries with heat recovery and Stamp Charging facility having ISO 9001:2000 certification Group has the potential to generate power from waste heat at Re / Unit Setting up waste heat recovery power plants of 30 MW Capacity by 2009 and further 30MW by Setting up Captive Jetty at Bellikeri, Karnataka and Railway Siding at Dharwad which would improve logistics and reduce cost Acquiring Six new dry bulk carriers on long term time charters with an option to buy. To be put in service progressively from 2010 onwards. Bagged several awards as Super performer, Highest wealth creator, Best Performing Mid sized company, environment & safety awards by various media houses

31 GUJARAT NRE COKE LIMITED speed of thought Shareholding Pattern Jagatramka Family 41% Mutual Funds & FIIs 41% Indian Public (60,000) 18% % Returns to Shareholders Investment of Rs. 1 million 1994 equals Rs 0.3 billion in March, 2008 Which translates to more than 49% YOY growth Listed on BSE & NSE Ticker Code: GUJNRECOKE BSE: Face Value : Rs. 10 per share Shares on Issue - As on 31/3/ million - On Conversion of warrants 14 million - On Conversion of 1 st FCCB issue 48 million - On Conversion of 2 nd FCCB issue 25 million Total as on 31/3/ million Current Market Price Rs. 153 Fully diluted Market Cap US $1 Billion +

32 GUJARAT NRE COKE LIMITED speed of thought GUJARAT NRE COKE LTD Operations HARD COKING COAL (NSW, AUSTRALIA) RESOURCES 560 MMT Gujarat NRE Minerals (ASX: GNM) NRE NO. 1 COLLIERY 300 MILLION MT NRE Wongawilli Colliery 260 MILLION MT *Proposed Facilities In Australia Waste Heat Recovery Power Plants Total Khambhalia* 15 MW Bachau* 15 MW Dharwad* 30 MW STEEL UNIT TMT BARS : MMTPA COAL WASHERY AT KHAMBALIA & Bachau* (0.75 MTPA each) 60 MW Wind Power 27.5 MW Being Commissioned 60 MW Total 87.5 MW LOW ASH METALLURGICAL COKE 1.25 MMTPA KHAMBALIA UNIT MILLION MTPA BHACHAU UNIT MILLION MTPA *DHARWAD UNIT MILLION MTPA BNCL (60%) DHARWAD UNIT MILLION MTPA In India

33 Cost Sheet of coke making Coking Coal CIF $300 Coke yield at 75% = $400 Conversion costs $ Coke cost $420 ===== Met Coke Price FOB China $ 600 CIF Indian ports $ 660

34 100% GUJARAT NRE COKE LIMITED Listed on NSE & BSE in India 13% Gujarat NRE Limited Pluton Resources Ltd 100% Wonga Coal Pty Ltd 10% Pike River Coal Ltd 15% Rey Resources Ltd Exploration tenements In Australia 85% Gujarat NRE Minerals Ltd Listed on ASX:GNM 100% Coal mine in New Zealand. Coal off-take For 400,000MT pa Exploration tenements In Australia, Chile & Peru NRE No MT Gujarat NRE Resources NL 100% Gujarat NRE FCGL Pty Ltd NRE Wongawilli 260 MT International Operations

35 GUJARAT NRE MINERALS LIMITED Listed on ASX Ticker Code: GNM Issue Price $0.50 per share (In July 07) Shares on Issue 801 million Pre takeover Issued against GUJ Options against GUJO 494 million 188 million 119 million Current Market Price $1.70 Fully diluted Market Cap AUS $1 Billion + 13 million INR unquoted options (50-75 cents and various expiry dates) are not shown above

36 GUJARAT NRE MINERALS LIMITED Shareholding Pattern: Holding Co. 85% Institutions 08% Corporate Bodies 05% Individuals 02%

37 GUJARAT NRE MINERALS LIMITED NRE No. 1 Colliery Acquired NRE No.1 Colliery in Dec 04 Production re-started in late 2005 using board & pillar mining Produced more than 0.8 million tons of coal and exported to India Four panels in operation in Bulli Seam One pillar extraction and three development units approx 0.6 million tons p.a. Acquired Gujarat NRE Resources, which owns NRE Wongawilli Colliery Wonga Mains project commenced to access Wongawilli Seam Working towards producing 4 Mt per annum by 2012

38 NRE No.1 Colliery Location & Logistics of Mine Location gives access to un congested Port Kembla currently operating at < 50% capacity

39 Wonga Mains roadway layout

40 NRE No.1 Colliery Wonga Mains Project

41 Conveyor Portal Face advanced to 204 meter mark Roof support on square steel set s to 146 m Continuous Miner 12CM11 has been removed in preparation for MB670 Roadway is being concreted

42 Rubber Tyre Vehicle Portal Face advanced to 290 meter mark Fully encapsulated 1.8m roof bolt support Mutsui S200 Roadheader in operation Intersect sill at 230m mark Currently cutting over the top of sill in preparation for Drill and Blast

43 Track Rail Portal Bulk earth works completed Portal entry formed Batter has been shot crete stabilized Production Commenced using 12CM11 16 steels stood

44 Sandvik MB607 Continuous Miner Arrived on site Wednesday 26th March 2008 Site build / commissioning to be completed by early May 2008 Risk Assessments and training to be completed early May 2008 Underground commissioned mid May 2008

45 Two Jug-O-0 LHD front end loaders have been commissioned

46 NRE No. 1 Mine Resources Statement Seam Measured (mt) Indicated (mt) Inferred (mt) Total (mt) Bulli Balgownie Wongawilli TOTAL

47

48

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50 Production Plans Modern Longwall Mine New coal clearance infrastructure 3500 tph capacity LW New CM fleet etc Year Ending RWC (mt) Mar Mar Mar Target Operating costs < $30/t RWC Mar Mar

51 Capital Investment Capital Investment Very low capital cost required to fully develop the mine $311 M will result in > 4mtpa capacity mine Current Status Wonga Mains commenced New CM on surface Finalizing new belt contract Item Amount ($M) Wonga Mains 101 Longwall 110 Washery etc 43 Miners etc 32 TOTAL 311

52 General Known geology Premium Hard Coking Coal Geotech issues mining under old workings. Local experience available. Reports being done. Increased CH4 levels to the West gas drainage planned. No Spontaneous Combustion

53 Gujarat NRE Minerals Readying to Ride the Road to Prosperity

54 GUJARAT NRE MINERALS LIMITED NRE Wongawilli Colliery Acquired Elouera from BHP Billiton in December 2007 Consolidated with NRE Avondale Consolidated Colliery renamed as NRE Wongawilli Colliery Development commenced in Feb 2008 Longwall operations to commence in April 2009 Mine is currently in production

55 NRE Wongawilli Colliery Infrastructure Surface Coal Handling Facilities - Railway, Bins, Stockpile, Decline Conveyor, Bathhouse, offices and car parking Underground Longwall, coal clearance, development equipment, transport fleet

56 NRE Wongawilli Colliery Location & Logistics of Mine (Old Elouera) NRE Wongawilli Colliery NRE AVONDALE (Old Avondale) Huntley Colliery

57 NRE Wongawilli Mine Resources Statement Seam Measured (mt) Indicated (mt) Inferred (mt) Total (mt) Bulli Wongawilli Tongarra TOTAL

58 Mine layout and LW11 block

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61 Bulli Seam Extraction

62 Production Plans Development for LW 11 commenced Feb 08. Year Ending RWC (mt) LW11 due to commence mid 09. Mar Mar nd CM due to start Q3 08 Mar Mar Mar

63 Capital Investment Capital Investment (based on concept plan) Very low capital cost required to fully develop the mine $175 M will result in > 4mtpa capacity mine Current Status Planning Commencing Item Amount ($M) Drifts 20 Longwall 35 Washery etc 37 Miners etc 31 Shafts 30 TOTAL 175

64 General Priority Exploration Detail mine planning Geotech very good No gas or spontaneous combustion Limitations due to dams

65 Logistics PKCT km transport distance NRE No. 1 Mine Trucks at present Have hauled to 3 mtpa Wongawilli Rail Have hauled to 2 mtpa PKCT Surplus capacity FY08 13mt export Capacity 18 MT Primary Bottleneck is on the stockyard Study underway now to increase capacity

66 Approvals PART 3A process commenced Primary Issues Urban communities Transport Stockpiles Washeries & emplacement Subsidence Impacts Southern Coalfields inquiry Non aggressive longwall extraction plan Avoided major creeks and dams

67 Summary Production underway at both mines Plan optimizing yet to be conducted hence upside potential. Labour available in tight market Low overheads small flexible company No marketing costs Very close to an unconstrained port Substantial resource base in both mines of Pure Hard Coking Coal Spread out risk with 2 mines in the same area

68 Gujarat NRE Minerals Ltd Raw Coal Production Profile No. 1 Wongawilli Total 1 0 Mar'09 Mar'11 Mar'13

69 Our philosophy Work hard Don t compromise Take calculated Risks Create Wealth Share : Tera Tujhko Arpan / keya lage mera? Be responsible for your actions (especially to the environment) Thank You