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Creating a Sustainable Mongolian Coal Mining Industry
Arshad Sayed,
President for Peabody
Mongolia and India
May 23, 2012
Presentation Overview
I. Coal Facts
II. Lessons from Other Coal Markets
III. Key Factors for a Sustainable World Class Coal
Mining Industry
IV. Peabody’s Best Practices in Coal Mining
V. Mongolia’s Future in the World Coal Market
2
I. Coal Facts
● Almost half of the world’s additional energy demand over the past
10 years was provided by coal
3 Source: IEA World Energy Outlook 2011
● Coal provides 30% of global primary energy needs
● Coal-fired power plants generate 41% of the world’s electricity (more than
any other fuel)
● Coal is a vital resource for industry as needed to produce 68% of the
world’s steel
4 Source: BP Statistical Review of World Energy 2011
I. Coal Facts
0
1,000
2,000
3,000
4,000
5,000
Coal Oil N. Gas Nuclear Hydro Other
I. Coal Facts – The World’s Fastest Growing Major Fuel
0%
10%
20%
30%
40%
50%
Coal NaturalGas
Hydro Oil Nuclear
48%
31%
13%
29%
7%
Source: BP Statistical Review of World Energy 2011; International Energy Agency, World Energy Outlook 2011 ‘Current Policies’ scenario. 5
Coal Grows 65% by 2035 to Become World’s Largest Energy Source
Growth 2000 – 2010 Growth to 2035
2009
2020
2035
II. Lessons from Other Coal Markets
● Coal provides a significant direct contribution to
economic development at local level, particularly in
developing countries
– Source of foreign hard currency earnings (from coal export)
– Way to save import costs
● Energy is central to sustainable development and
poverty reduction efforts
– Millennium Development Goals are not fully achievable without
clean, reliable and affordable energy from coal
6
II. Lessons from Other Coal Markets
7
Example from Hunter Valley, Australia
● Australian coal mining is now a blend of both the
traditional extractive industry and the new era of high-
tech knowledge-based economic activities
● Coal mining helps make Singleton - in the geographic
heart of the Hunter Valley - one of Australia's richest
locations:
– Average wage is A$48,000
– Contributes A$2.5 billion from coal, tourism and other industries
to the economy
– Population 22,500
III. Key Factors for a Sustainable World Class Coal Mining Industry
Sustainable coal mining means mining coal safely, profitably and in
socially and environmentally responsible ways, over a long period of
time so that the resource benefits not just this generation, but
generations to come as well.
Industry and company responsibilities to meet this goal:
● Adhere to world class standards and techniques in safety,
operations, environment and social responsibility
● Ensure the right mix of expertise, leadership, management,
reputation and financing
● Ensure best in class techniques to increase productivity and
resource recovery
● Continue advancing clean coal technologies
● Extract greater value from coals through coal conversion
8
Government’s responsibility:
● Provide a predictable, stable, and smart policy framework. Both on
the regulatory and tax policy aspects so as to guide development
and use of coal to reduce electricity production costs and minimize
environmental pollution
● Develop an infrastructure platform such that several reserves and
deposits can leverage this in order to avoid duplication and minimize
the environmental footprint
● Encourage through incentives a healthy relationship between
government, private sector, suppliers and contractors across the
value chain, universities and research institutes, and labor unions
● Ensure benefits flow to the community and GoM budget should
invest more in public goods that benefit all levels of the population
9
III. Key Factors for a Sustainable World Class Coal Mining Industry
10
Impact-based Model of Sustainable Development
Source: “WATER USE AND SUSTAINABLE DEVELOPMENT IN COAL MINING – A CASE STUDY FROM CENTRAL QUEENSLAND” by Robin Evans (Senior
Researcher, Sustainable Minerals Institute, UQ) Peter Roe (Manager – Environment, BMA Coal) Jim Joy (Director, Mineral Industry Safety and Health Centre,
UQ)
III. Key Factors for a Sustainable World Class Coal Mining Industry
IV. Peabody’s Best Practices in Coal Mining
11
OVERVIEW
• The world’s largest private-sector
coal company (129 years record)
o 251 million tons sold in 2011
o $8 billion in revenues
o 9 billion tons of coal reserves
o 27 billion tons of international resources
• Industry leaders for 40+ years
• Customers on six continents
• 30 mines (Surface/underground; U.S. and
Australia)
• Recognized globally for achievements in
safety, productivity and environmental
excellence
• Large-scale open-cut mining expertise
• Significant financial strength
• Historically recognized as “Fortune’s Most
Admired” and “Forbes 400 Platinum List”
company
Peabody’s Approach to Coal Resource Development
● Peabody has core competencies to share with
global partners:
– Best-in-class safety practices
– World-class mining expertise
– Proven record of environmental
stewardship
– Record of safety, environmental and
corporate leadership
– Global leadership in clean coal solutions
● Sharing these competencies could
have significant benefits for Mongolia:
– Improved safety practices
– Better utilization and recovery of resources
– Greater energy supply reliability
– More efficient methods of production
– Adoption of latest mining technologies
– Enhanced environmental preservation and sustainability in a local area and
communities
12
Peabody’s Best-in-Class Safety Practices
0
1
2
3
4
5
6
13
Safety Vision: Zero Incidents of Any Kind
Wh
ole
sale
Uti
liti
es
Co
al M
inin
g
Re
tail
Ag
ric
ult
ure
/Fo
res
try/F
ish
ing
/Hu
nti
ng
Ma
nu
fac
turi
ng
Tra
nsp
ort
ati
on
& W
are
ho
usin
g
Ed
uc
ati
on
& H
ealt
h S
erv
ices
Co
ns
tru
cti
on
Pe
ab
od
y 2
01
1
Leis
ure
& H
osp
ita
lity
Fin
an
cia
l
Info
rma
tio
n
Source: Peabody 2011 data; U.S. Department of Labor, Occupational Safety & Health Administration, 2010 data; Mine Safety and Health Administration,
2011 data.
Incid
en
ts P
er
200,0
00 H
ou
rs W
ork
ed
1.3
1.92
3.69 P
eab
od
y 2
01
0
2.71
World Class Open-Cut Mining Expertise
● Peabody is the largest
producer of open-cut mined
coal in North America
– 89% of Peabody’s volumes
sold were from open-cut mines
– 148 million tons were produced from
Peabody’s three mines in the Southern
Powder River Basin
– 20 open-cut mines in operation globally
● Peabody optimizes production
using multiple mining methods
– Cast blasting
– Draglines with dozer assist
– Truck and shovel with dozer assist
● Surface operations typically recover 90% to 96% of the coal resource
● Open-cut mines in the U.S. are commercially viable and competitive at stripping ratios of up
to 20:1
14
World Class Underground Mining Expertise
● Approximately 11% of Peabody’s tons sold are from 10 underground mines
● Peabody utilizes a wide range of underground mining methods, depending on the geology:
– Longwall mining
– Continuous miners with battery or cable shuttle cars for longwall development
– Continuous miner “super sections,” i.e., two continuous miners and four to seven battery cars for room and pillar mining
– Mobile roof supports and continuous miners for pillar extraction
● Peabody extracts coal from underground seams ranging in thickness from 40 inches to 12 feet
● Peabody strives for maximum resource recovery and coal preparation plan yields with results dependent on geology and customer requirements
– Peabody is the largest user of ash analyzers to monitor and blend coal quality among coal companies in North America
– Peabody uses proprietary software to monitor, optimize and blend coal qualities
15
Record of Safety, Environmental and Corporate Leadership
● Seven safety awards and 12+
employees honored
● Six environmental awards in
U.S., Australia and Asia
● U.S. Foreign Policy Association
Corporate Responsibility honors
● Recognition for leadership by
Chief Executive and Institutional
Investor magazines
16
30 Major Awards for Leadership in 2011
Big Sky Mine, Montana, USA
Ereen Mine, Bulgan
province, Mongolia
Peabody Completed Mongolia’s First Coal Mine Restoration Project
June 2009
May 2010
August 2010
17
Ereen Mine, Bulgan province, Mongolia
Global Leadership in Advancing Clean Coal Solutions
Peabody’s objectives:
● Work to eliminate energy poverty by ensuring that at least half of
new generation is fuelled by coal
● Replace 1,000 gigawatts of traditional coal plants with efficient,
advanced coal technologies
● Develop at least 100 major Carbon Capture and Storage (CCS)
projects around the world within the next ten years. This
complements the International Energy Association’s goal of
deploying more than 2,000 projects by mid-century
● Deploy significant coal-to-gas, coal-to-chemicals and coal-to-liquids
projects globally in the next decade, reducing our overdependence
on oil and natural gas
● Commercialize next generation of clean coal technologies to
achieve near-zero emissions
18
Clean Coal Projects in the United States, Australia and Asia
Global Leadership in Advancing Clean Coal Solutions (cont’d)
● China’s GreenGen, Australia’s COAL21 Fund
and U.S. FutureGen projects
● Australia’s Global Carbon Capture and Storage
Institute
● Consortium for Clean Coal Utilization
● U.S. Department of Energy National Carbon
Capture Center
● Clean coal conversion projects with China’s
Huaneng Group and Yankuang Group Co.,Ltd 19
V. Mongolia’s Future in the World Coal Market
Mongolia as “Energy Paradise”
It has the key ingredients for developing a world-
class sustainable coal industry:
● Rich coal resources and world-class coal deposits
● Good geographical location – next to key markets
● Vibrant democracy that expects greater accountability
from government and business
● Special respect for, and relationship with, nature and
environment as a result of being a nomadic nation
20