Developments in the Indian Coke and Steel Marketplace ... presentation May,2008.pdf · Developments...

Arun Kumar JagatramkaVice Chairman & Managing Director

Gujarat NRE Coke Ltd (NSE: GUJNRECOKE)Chairman

Gujarat NRE Minerals Limited (ASX: GNM)

Developments in the IndianCoke 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 2020India 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 of 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

1947India 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

capacity5 years to commission the

next 100 million tonsAnd

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 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 2011-12, to 300 mt by 2020

Year 2020

300 million tons of steel

SAIL 12.0TATA STEEL 30.0VIZAG 6.5MITTAL 12.0POSCO 12.0ESSAR 11.0JINDAL 20.6BHUSHAN 3.1OTHER (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.

PortsVesselsMaterial handling facilitiesRoads

RailwaysRoad – rail

linkagesAncillaries

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 coke60 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 : AustraliaCanadaUSAChina

Emerging : MozambiqueIndonesiaSouth African Nations

But Except AustraliaNeed to consider

*ash content,*calorific values,*land locked mines,*transport bottle necks,*freight costs,*law & order problems

India centric issuesPeculiarities of Indian

psycheTendency to buy in the

spot marketDependence on China

Herd mentalityLack 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 0.28Sathvahana Ispat 0.12Jindal Vijaynagar 0.80

Lanco Ferro 0.12Electrosteel Castings 0.12Jindal Saw 0.15JSPL 0.80VISA 0.40Neelachal 0.80Jayaswal 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 meansDistinct 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)

158752721Nett import demand (equivalent coal)

12988Indian coal

170843528Coking coal reqd.

120602521CokeConsumption

2020201220072005year

(million tons)

Australia :Quality mines ready and rolling are hard to come by

Ports are already congestedStiff 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 thoughtGUJARAT NRE COKE LIMITED

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

A Snapshot

Growth @ speed of thoughtGUJARAT 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 LIMITEDGrowth @ speed of thought

Shareholding Pattern Jagatramka Family 41%

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

----------100%

Returns to ShareholdersInvestment of Rs. 1 million 1994 equals Rs 0.3 billion in March, 2008Which translates to more than49% 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 thoughtGUJARAT NRE COKE LIMITED

GUJARAT NRE COKE LTDOperations…

HARD COKING COAL (NSW, AUSTRALIA)

RESOURCES 560 MMT

LOW ASH METALLURGICAL COKE

1.25 MMTPA

COAL WASHERYAT KHAMBALIA

& Bachau* (0.75 MTPA each)

Gujarat NRE Minerals (ASX: GNM)

NRE NO. 1 COLLIERY300 MILLION MT

NRE Wongawilli Colliery260 MILLION MT

STEEL UNITTMT BARS : 0.311 MMTPA

*DHARWAD UNIT0. 25 MILLION MTPA

BHACHAU UNIT0.324 MILLION MTPA

KHAMBALIA UNIT0.358 MILLION MTPA

BNCL (60%)DHARWAD UNIT

0. 324 MILLION MTPA

*Proposed Facilities

Waste Heat Recovery Power Plants

Khambhalia* 15 MWBachau* 15 MWDharwad* 30 MW

Total 60 MW

Wind Power 27.5 MWBeing Commissioned 60 MW

Total 87.5 MW

In Australia In India

Cost Sheet of coke making

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

---------Coke cost $420

=====Met Coke Price FOB China $ 600

CIF Indian ports $ 660

15%

85%

GUJARAT NRE COKE LIMITEDListed on NSE & BSE in India

Pluton Resources LtdGujarat NRE Limited

Pike River Coal Ltd Rey Resources LtdWonga Coal Pty Ltd

Gujarat NRE FCGL Pty Ltd

Gujarat NRE Minerals Ltd

Listed on ASX:GNM

100%

NRE Wongawilli260 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 tenementsIn Australia

13%

100% 10%

100%

100%

GUJARAT NRE MINERALS LIMITED

Listed on ASXTicker Code: GNMIssue Price $0.50 per share (In July’07)Shares on Issue 801 million

Pre takeover 494 millionIssued against GUJ 188 millionOptions against GUJO 119 million

Current Market Price $1.70Fully 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 owns 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 CollieryLocation & 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 operation

• Intersect “sill” at 230m mark

• Currently cutting over the top of sill in preparation for Drill and Blast

Track “Rail” PortalBulk earth works completedPortal entry formedBatter has been shot crete stabilizedProduction Commenced using 12CM1116 steels stood

Sandvik MB607 Continuous Miner

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

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

NRE No. 1 Mine NRE No. 1 Mine Resources StatementResources 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 PlansProduction Plans

Modern Modern LongwallLongwall MineMine–– New coal clearance infrastructureNew coal clearance infrastructure–– 3500 3500 tphtph capacity LWcapacity LW–– New CM fleet etcNew CM fleet etc

Target Operating costs < $30/t RWCTarget 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 InvestmentCapital InvestmentCapital InvestmentCapital Investment

–– Very low capital cost required to fully develop the mineVery 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 StatusCurrent Status–– Wonga Mains commencedWonga Mains commenced–– New CM on surfaceNew CM on surface–– Finalizing new belt contractFinalizing new belt contract

Item Amount ($M)

Wonga Mains 101

Longwall 110

Washery etc 43

Miners etc 32

TOTAL 311

GeneralGeneral

Known geologyKnown geologyPremium Hard Coking Coal Premium Hard Coking Coal GeotechGeotech 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 CombustionNo Spontaneous Combustion

Gujarat NRE MineralsGujarat 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

SurfaceCoal Handling Facilities - Railway, Bins, Stockpile, Decline Conveyor ,

Bathhouse, offices and car parking

UndergroundLongwall, coal clearance, development equipment, transport fleet

Infrastructure

NRE Wongawilli Colliery

Location & Logistics of Mine

NRE AVONDALE

Huntley

Colliery

NRE WongawilliColliery

NRE Wongawilli Colliery

(Old Avondale)

(Old Elouera)

NRE Wongawilli Mine NRE Wongawilli Mine Resources StatementResources 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 blockMine layout and LW11 block

BulliBulli Seam ExtractionSeam Extraction

Production PlansProduction 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 InvestmentCapital InvestmentCapital Investment (based on concept plan)Capital Investment (based on concept plan)

–– Very low capital cost required to fully develop the mineVery 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 StatusCurrent Status–– Planning CommencingPlanning Commencing Item Amount ($M)

Drifts 20

Longwall 35

Washery etc 37

Miners etc 31

Shafts 30

TOTAL 175

GeneralGeneral

PriorityPriority–– ExplorationExploration–– Detail mine planningDetail mine planningGeotechGeotech very goodvery goodNo gas or spontaneous combustionNo gas or spontaneous combustionLimitations due to damsLimitations due to dams

PKCTPKCTLogisticsLogistics

–– 1515--20 km transport distance20 km transport distance

–– NRE No. 1 MineNRE No. 1 MineTrucks at presentTrucks at presentHave hauled to 3 Have hauled to 3 mtpamtpa

–– WongawilliWongawilliRailRailHave hauled to 2 Have hauled to 2 mtpamtpa

PKCTPKCT–– Surplus capacitySurplus capacity–– FY08 13mt exportFY08 13mt export–– Capacity 18 MT Capacity 18 MT –– Primary Bottleneck is on the stockyardPrimary Bottleneck is on the stockyard–– Study underway now to increase capacityStudy underway now to increase capacity

ApprovalsApprovals

PART 3A process commencedPART 3A process commenced

Primary IssuesPrimary Issues

–– Urban communitiesUrban communitiesTransportTransportStockpilesStockpilesWasheriesWasheries & emplacement& emplacement

–– Subsidence ImpactsSubsidence ImpactsSouthern Coalfields inquirySouthern Coalfields inquiryNon aggressive Non aggressive longwalllongwall extraction planextraction planAvoided major creeks and damsAvoided major creeks and dams

SummarySummary

Production underway at both minesProduction underway at both minesPlan optimizing yet to be conducted Plan optimizing yet to be conducted –– hence upside potential.hence upside potential.LabourLabour available in tight marketavailable in tight marketLow overheads Low overheads –– small flexible companysmall flexible companyNo marketing costsNo marketing costsVery close to an unconstrained portVery close to an unconstrained portSubstantial resource base in both mines of Pure Hard Coking CoalSpread out risk with 2 mines in the same area

Gujarat NRE Minerals LtdGujarat NRE Minerals LtdRaw Coal Production Profile Raw Coal Production Profile

0

1

2

3

4

5

6

7

Mar'09 Mar'11 Mar'13

No. 1WongawilliTotal

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