Australian Institute of Mining and Metallurgy,

Southern Queensland Branch

30 April 2015

Chief Executive, QRC

Green shoots, burning issues

Michael Roche

CONTENTS

QRC introduction 1 Queensland

resources sector context

Green shoots

Burning issues 2 3 4

• QRC is a not-for-profit peak industry association representing the commercial

developers of Queensland’s minerals and energy resources

• 78 full members – explorers, miners, mineral processors, site contractors, oil and

gas producers, electricity generators

• 193 service and associate members – the providers of goods or services to the

sector

• A multi-commodity, state-based advocacy body formed in 2003 as successor

to the Queensland Mining Council (itself a merger of coal, metals and gas

producers)

WHO IS THE QUEENSLAND RESOURCES COUNCIL?

78

full

members

– big and

small

158

service

members

35

associate

members

Aberdare Collieries

Adani Mining

Allegiance Coal

Altona Mining

Anglo American

Aquila Resources

Areva Resources Australia

Arrow Energy

Bandanna Energy

Beach Energy

Bengal Coal

BHP Billiton Cannington

BHP Billiton Mitsubishi Alliance

Caledon Resources

Cape Flattery Silica Mines

Carabella Resources

Carbine Resources

Carbon Energy

Carpentaria Gold

Civil Mining and Construction

Coalbank

Cockatoo Coal

ConocoPhillips Australia

Downer EDI Mining

Ensham Resources

ERM Power

Evolution Mining

Exco Resources

Glencore Coal

Glencore Copper

Glencore Zinc

Guildford Coal

GVK

International Coal

Investigator Resources

Isaac Plains Coal Management

Jellinbah Resources

John Holland

Kalimati Coal Company

Laramide Resources

Linc Energy

Lucas Group

Macmahon Holdings

Mastermyne

Metallica Minerals

Metro Mining

Millmerran Power Mgt

Minerals and Metals Group

Mitsubishi Development

Mitsui Coal Holdings

Moreton Resources

New Hope Group

Norton Gold Fields

Origin Energy

Paladin Energy

Peabody Energy

QCoal

QER

QGC

Queensland Coal Investments

Rio Tinto Alcan

Rio Tinto Coal Australia

Rockland Resources

Santos/TOGA

Senex Energy

Shell Australia

Sibelco Australia

Sojitz Coal Mining

Stanmore Coal

Summit Resources

Thiess

U & D Mining Industry (Aust)

Vale

Valiant Resources

Wesfarmers Resources

Westside Corporation

Whitehaven Coal

Yancoal Australia

We built THIS city on rock and COAL

#BrisbaneHiViz

QUEENSLAND RESOURCES TODAY

> Queensland #1 source of traded coking

coal

> Lead #2 in the world

> Zinc #3 in world

> Silver #6 in the world

> Bauxite #6 in the world

> Copper #12 in the world (#1 in Australia)

> Australia (with Qld CSG) world’s #2 gas exporter; potential #1 by 2020

COPPER $US2.5 BN

ZINC $US2.2 BN

ALUMINA $1.8 BN

SILVER $US0.9 BN

LEAD $US1.3 BN

GOLD $US1.4 BN

BAUXITE $0.8 BN

ALUMINIUM $1.2 BN

Source: BREE, IHS McCloskey

BLACK THERMAL COAL

$US4.9 BN

BLACK PRIME COKING COAL

$US16 BN

CSG $1.1 BN

2014 VALUE OF

PRODUCTION:

$AU34 BILLION

Green shoot #1: All Qld LNG plants exporting in 2015

43% of incremental gas demand from Asia 2012-18

QCLNG (2014) 8.5 MTPA (BG Group, CNOOC) * BG Group target of $AU94 billion

takeover bid by Shell

GLNG (2015) 7.8 MTPA (Santos, Petronas, Total,

Kogas)

APLNG (2015) 9.0 MTPA (Origin Energy,

ConocoPhillips, Sinopec) Queensland LNG helping Australia to

#1 LNG exporting nation by 2020

Green shoot #2: Bowen Basin poised to rebound

Green shoot #3: Surat Basin vote of confidence

Green shoot #4: Galilee Basin potential

Coal prices’ long journey south (since 2011)

Slowing of growth in China and continued poor economic performance in Europe that impacts steel

production and therefore coking coal demand. Coking coal prices flat-lining. Continued oversupply

of thermal coal in the seaborne market but recent trends see some uptick in spot prices. 12

Record coal exports – replacing price with volume

QUEENSLAND COAL EXPORTS (Mt) 2002 - 2015

Industry needs cost structure to withstand the cycle

‘We are struggling to survive and the current structure of the fixed costs on our industry i.e. take-or-pay on rail, port, power, water, accommodation etc. makes it very difficult to make a decision around 'survival' strategies.’

‘Moving from construction to operations phase it is imperative that we ensure the cost base of the business allows for a positive economic outcome.’

BUSINESS ENVIRONMENT – CEO SENTIMENT

QRC asks members: ‘To what degree will these macroeconomic factors adversely

impact upon the objectives of your organisation over the next 12 months?’

15

> Australia (Queensland) to remain leading exporter of coking coal (60% share)

> Coking coal trade grows to 40% of global production

> Queensland has coking coal inventory of 11 billion tonnes (4 billion suited to open-cut)

> Large suite of potential projects of high-quality coking

> Coal preferred fuel for power generation in Asia due to availability, economics

> India’s import demand to lift from 126MT (2013) to 429MT (2040)

> Major India interest in new Queensland thermal coal province, the Galilee Basin

> Chinese coal imports expected to level off by 2025, but above current levels

> Coal imports in ‘other Asia’ (e.g. Malaysia, Thailand, Vietnam, Philippines) trebles by

2040

> Before 2030 Australia regains position from Indonesia as leading coal exporter

* International Energy Agency Nov 2014

Queensland coal trade facts: 2014 World Energy Outlook*

Source: BP Statistical Review, Feb 2015

LONG TERM OUTLOOK

Global coal demand by key region

Inputs to power in China

Global demand fundamentals – electricity

Global demand fundamentals – steel marker

> Moderate copper recovery forecast with lower dollar and stockpiles

> Zinc well poised, ironically with closure of Century Zinc Mine, Qld

> Aluminium (and pre-cursors bauxite/alumina) expected to be among stronger performers

> Silver in holding pattern dictated by gold price

> Lead outlook ‘neutral’

> Uranium: world class deposits whose time will come if policy allows

Metals toughing it out with some bright spots

Queensland’s global competitiveness central to planning and outlook, but other major challenges beckon……

WORKING ALONGSIDE THE GREAT BARRIER REEF

> Great Barrier Reef a global icon – same size as Italy or Japan

> Reef export gateway for global minerals and energy provinces

> Exports (resources, rural, tourism) via 11 Reef trading ports valued at

$AU40 billion (2012)

> Resources sector goal sustainable development in a World Heritage site

> Australia at forefront of environmental management

Naturally occurring Hardy Reef in the Whitsunday Group.

Photographed by Australian Geographic and misrepresented

on Facebook as the start of dredging on the Great Barrier Reef, four days before the Abbott Government was elected to

government in Australia.

‘The coal port at Abbot Point is next to the World Heritage listed Great Barrier Reef Marine Park. Build a powerful narrative about the global importance of the Galilee Basin and use this to build a high profile public campaign, putting issue in national and international spotlight.’ ‘Disrupt and delay key projects and infrastructure while gradually eroding public and political support for the industry’

‘We need to change the story of coal. This means challenging the economics of coal’

ACTIVISTS UNITED AGAINST COAL AND GAS

23

ACTIVISTS’ GOAL TO CLOSE COAL/GAS PORTS

Australian Institute of Marine Science

27-year longitudinal study

October 2012

REEF 2050 PLAN: ABBOT POINT EXPANSION > Queensland Government has restarted

approvals process with dredging referral to

Commonwealth

> Expansion dredge spoil to be diverted to

non-sensitive port industrial land outside WHA

As long as it’s not coal:

That still means recklessly ripping up seabed and sending more

coal ships through the Reef. Greenpeace Australia-Pacific

The Queensland Government has withdrawn plans to

dump dredge spoil in the Caley Valley wetlands! The wetlands act as a natural filter for the Great Barrier

Reef. The fight's not over yet, with the mining industry still pushing for the port expansion. Australian Marine Conservation Society

‘While we welcome that the dredge spoil will not be dumped in the reef’s waters or wetlands, the dredging,

shipping and climate impacts of building the world’s largest coal port in this World Heritage Area remain.’ (Queensland) Greens Senator Larissa Waters

INDUSTRY AGENDA: PROMOTE ACCURATE DATA

0

100

200

300

400

500

600

700

800

900

1000

1994 1996 1998 2000 2002 2004 2005 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mtp

a

Year

Queensland coal exports (capacity): actual and trend growth vs Greenpeace

estimates

Actual Greenpeace Trend

Source: BREE, QRC estimates, Greenpeace 'Boom Goes the Reef'

CAGR 5.4%

CAGR 19%

CAGR 6%

1.3 billion people without electricity

2.7 billion choking on household fumes every day

UN PRIORITIES: ENERGY POVERTY AND CLIMATE CHANGE

Renewables still to deliver reliability and scale to lift billions out of poverty

Electricity demand dictates we must deploy more of what we have – coal, gas, uranium, renewables – and faster roll-out

of low emission technologies According to WHO, 4.3 million

people a year die from the exposure to household air pollution from solid fuels

QRC standing up for members

Australian Institute of Mining and Metallurgy,

Southern Queensland Branch

30 April 2015

Chief Executive, QRC

Green shoots, burning issues

Michael Roche