Developments in the Indian Coke and Steel Marketplace - Australian - - PowerPoint PPT Presentation

Arun Kumar Jagatramka Vice Chairman & Managing Director Gujarat NRE Coke Ltd (NSE: GUJNRECOKE) Chairman Gujarat NRE Minerals Limited (ASX: GNM)

Developments in the Indian Coke and Steel Marketplace

• Australian Hard Coking Coal

from an Indian Perspective

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

Disclaimer

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 !”

An important point to note “In order to produce 100 million tons of steel, India will need to consume 100 million tons

• f steel – which will come first is the million

tons question”

“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 35-40 million tons to 150-250 million tons — that is what the growth rate is going to take us to another 10-15 years — you require lot of new innovations, lot of new thinking, you require a vision.”

• B. Muthuraman, MD, TATA STEEL

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

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

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!

India

• Today, India is the 5 th.

largest crude steel producer in the world.

• In 2007-08 (Apri-Feb''08),

production

• f

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 2011-12, to 300 mt by 2020

Year 2020

300 million tons of steel

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 Additional Crude Steel Capacity being planned in India

million tons

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 24.98 mtpa by 2011-12.

• 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.

Ports Vessels Material handling facilities Roads Railways Road – rail linkages Ancillaries Trained manpower, including skilled labour

All resources can be mobilised in the medium term

Except Coking Coal

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

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

Potential sources :

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

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

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

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)

(million TPA)

2003/04 2006/07 Sesa Kembla Coke 0.28 0.28 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 0.28 3.79 JV tie ups:

Kalyani Steel with Gujarat NRE 0.32

Captive Coke Plants in Secondary Steel Sector

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

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)

158 75 27 21

Nett import demand (equivalent coal)

12 9 8 8

Indian coal

170 84 35 28

Coking coal reqd.

120 60 25 21

Coke Consumption

2020 2012 2007 2005 year

(million tons)

Australia :

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

Mainly in the prospecting license stage Reserves have to identified and established Huge investment in infrastructure required Before mining can actually commence

Mozambique, Botswana, other African sources

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)

Coal Criticality

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

Gujarat NRE Coke Limited

India’s largest independent coke producer (Current capacity – 1 MTPA By Dec’08 - 1.25 MTPA)

Growth @ speed of thought

GUJARAT NRE COKE LIMITED

GNCL is the largest independent producer of Metallurgical Coke in India and the

• nly 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

• f 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

A Snapshot

Growth @ speed of thought

GUJARAT NRE COKE LIMITED

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. 0.50 / Unit Setting up waste heat recovery power plants of 30 MW Capacity by 2009 and further 30MW by 2010. 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

A Snapshot Contd…

GUJARAT NRE COKE LIMITED

Growth @ speed of thought

Shareholding Pattern

Jagatramka Family 41% Mutual Funds & FIIs 41% Indian Public (60,000) 18%

• 100%

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: 512579
• Face Value : Rs. 10 per share
• Shares on Issue
• As on 31/3/2007

244 million

• On Conversion of warrants 14 million
• On Conversion of 1st FCCB issue 48 million
• On Conversion of 2nd FCCB issue 25 million

Total as on 31/3/1008 331 million

• Current Market Price
• Rs. 153
• Fully diluted Market Cap

US $1 Billion +

Growth @ speed of thought

GUJARAT NRE COKE LIMITED

GUJARAT NRE COKE LTD GUJARAT NRE COKE LTD

Operations… Operations…

HARD COKING COAL (NSW, AUSTRALIA)

RESOURCES 560 MMT

LOW ASH METALLURGICAL COKE

1.25 MMTPA

COAL WASHERY

AT KHAMBALIA & Bachau* (0.75 MTPA each)

Gujarat NRE Minerals (ASX: GNM)

NRE NO. 1 COLLIERY 300 MILLION MT NRE Wongawilli Colliery 260 MILLION MT

ST EEL UNIT T M T BA RS : 0 .3 1 1 M M T PA

*DHARWAD UNIT

• 0. 25 MILLION MTPA

BHACHAU UNIT

0.324 MILLION MTPA

KHAMBALIA UNIT

0.358 MILLION MTPA

BNCL (60%) DHARWAD UNIT

• 0. 324 MILLION MTPA

*Proposed Facilities Waste Heat Recovery Power Plants

Khambhalia* 15 MW Bachau* 15 MW Dharwad* 30 MW

Total 60 MW

Wind Power

27.5 MW Being Commissioned 60 MW Total 87.5 MW

In Australia In India

Cost Sheet of coke making

Coking Coal CIF $300 Coke yield at 75% = $400 Conversion costs $ 20

• Coke cost

$420 ===== Met Coke Price FOB China $ 600 CIF Indian ports $ 660

15% 85%

GUJARAT NRE COKE LIMITED

Listed on NSE & BSE in India

Pluton Resources Ltd Gujarat NRE Limited

Pike River Coal Ltd Rey Resources Ltd Wonga Coal Pty Ltd Gujarat NRE FCGL Pty Ltd Gujarat NRE Minerals Ltd Listed on ASX:GNM

100%

NRE Wongawilli 260 MT

NRE No. 1 300 MT

International Operations

Gujarat NRE Resources NL

Coal mine in New Zealand. Coal off-take For 400,000MT pa Exploration tenements In Australia, Chile & Peru Exploration tenements In Australia 13% 100% 10% 100% 100%

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 494 million Issued against GUJ 188 million Options against GUJO 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

GUJARAT NRE MINERALS LIMITED

Shareholding Pattern:

Holding Co. 85% Institutions 08% Corporate Bodies 05% Individuals 02%

GUJARAT NRE MINERALS LIMITED

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

• wns NRE Wongawilli Colliery

Wonga Mains project commenced to access Wongawilli Seam Working towards producing 4 Mt per annum by 2012

NRE No. 1 Colliery

Location gives access to un congested Port Kembla currently operating at < 50% capacity

NRE No.1 Colliery

Location & Logistics of Mine

Wonga Mains – roadway layout

NRE No.1 Colliery – Wonga Mains Project

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

Rubber Tyre Vehicle Portal

• Face advanced to 290

meter mark

• Fully encapsulated 1.8m

roof bolt support

• Mutsui S200

Roadheader in

• peration
• Intersect “sill” at 230m

mark

• Currently cutting over

the top of sill in preparation for Drill and Blast

Track “Rail” Portal

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

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

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

NRE No. 1 Mine NRE No. 1 Mine Resources Statement Resources Statement

113.79 71.97 28.71 13.11 Inferred (mt) Seam Measured (mt) Indicated (mt) Total (mt) Bulli 1.5 56.16 70.77 Balgownie 49.99 78.70 Wongawilli 102.65 174.62 TOTAL 1.5 208.8 324.09

Production Plans Production Plans

Modern Modern Longwall Longwall Mine Mine

– – New coal clearance infrastructure New coal clearance infrastructure – – 3500 3500 tph tph capacity LW capacity LW – – New CM fleet etc New CM fleet etc

Target Operating costs < $30/t RWC Target Operating costs < $30/t RWC

Year Ending RWC (mt) Mar 09 0.8 Mar 10 0.9 Mar 11 1.3 Mar 12 2.6 Mar 13 3.8

Capital Investment Capital Investment

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

General General

• Known geology

Known geology

• Premium Hard Coking Coal

Premium Hard Coking Coal

• Geotech

Geotech issues mining under old workings. issues mining under old workings. Local experience available. Reports being Local experience available. Reports being done. done.

• Increased CH4 levels to the West

Increased CH4 levels to the West – – gas gas drainage planned. drainage planned.

• No Spontaneous Combustion

No Spontaneous Combustion

Gujarat NRE Minerals Gujarat NRE Minerals

Readying to Ride the Road to Prosperity

• Acquired Elouera from BHP

Billiton in December 2007

• Consolidated with NRE

Avondale

• Consolidated Colliery re-

named as NRE Wongawilli Colliery

• Development commenced

in Feb 2008

• Longwall operations to

commence in April 2009

• Mine is currently in

production GUJARAT NRE MINERALS LIMITED

NRE Wongawilli Colliery

Surface

Coal Handling Facilities - Railway, Bins, Stockpile, Decline Conveyor , Bathhouse, offices and car parking

Underground

Longwall, coal clearance, development equipment, transport fleet

Infrastructure

NRE Wongawilli Colliery

Location & Logistics of Mine

NRE AVONDALE

Huntley Colliery

NRE Wongawilli Colliery

NRE Wongawilli Colliery

(Old Avondale) (Old Elouera)

NRE Wongawilli Mine NRE Wongawilli Mine Resources Statement Resources Statement

213 74 114 25 Inferred (mt) Seam Measured (mt) Indicated (mt) Total (mt) Bulli 8 33 Wongawilli 21 16 151 Tongarra 74 TOTAL 21 24 258

Mine layout and LW11 block Mine layout and LW11 block

Bulli Bulli Seam Extraction Seam Extraction

Production Plans Production Plans

Year Ending RWC (mt) Mar 09 0.3 Mar 10 1.64 Mar 11 1.77 Mar 12 1.51 Mar 13 2.25

• Development for LW 11

commenced Feb 08.

• LW11 due to commence mid

09.

• 2nd CM due to start Q3’08

Capital Investment Capital Investment

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

General General

• Priority

Priority

– – Exploration Exploration – – Detail mine planning Detail mine planning

• Geotech

Geotech very good very good

• No gas or spontaneous combustion

No gas or spontaneous combustion

• Limitations due to dams

Limitations due to dams

PKCT PKCT

Logistics Logistics

– – 15 15-

• 20 km transport distance

20 km transport distance

– – NRE No. 1 Mine NRE No. 1 Mine

• Trucks at present

Trucks at present

• Have hauled to 3

Have hauled to 3 mtpa mtpa

– – Wongawilli Wongawilli

• Rail

Rail

• Have hauled to 2

Have hauled to 2 mtpa mtpa

PKCT PKCT

– – Surplus capacity Surplus capacity – – FY08 13mt export FY08 13mt export – – Capacity 18 MT Capacity 18 MT – – Primary Bottleneck is on the stockyard Primary Bottleneck is on the stockyard – – Study underway now to increase capacity Study underway now to increase capacity

Approvals Approvals

PART 3A process commenced PART 3A process commenced Primary Issues Primary Issues

– – Urban communities Urban communities

• Transport

Transport

• Stockpiles

Stockpiles

• Washeries

Washeries & emplacement & emplacement

– – Subsidence Impacts Subsidence Impacts

• Southern Coalfields inquiry

Southern Coalfields inquiry

• Non aggressive

Non aggressive longwall longwall extraction plan extraction plan

• Avoided major creeks and dams

Avoided major creeks and dams

Summary Summary

• Production underway at both mines

Production underway at both mines

• Plan optimizing yet to be conducted

Plan optimizing yet to be conducted – – hence upside potential. hence upside potential.

• Labour

Labour available in tight market available in tight market

• Low overheads

Low overheads – – small flexible company small flexible company

• No marketing costs

No marketing costs

• Very close to an unconstrained port

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

Gujarat NRE Minerals Ltd Gujarat NRE Minerals Ltd Raw Coal Production Profile Raw Coal Production Profile

1 2 3 4 5 6 7 Mar'09 Mar'11 Mar'13

• No. 1

Wongawilli Total

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