International Coal Scene at Mid-2011Donald K. Cooper

Global Director of Coal ServicesBehre Dolbear Group, Inc.

Society of Mining Engineers - NYC – 10 May 2011

“We Know the Business of Mining”

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This Evening’s Presentation 2011 “Coal Industry Lite”

Describe Behre Dolbear and its coal segment

Provide 35,000-ft. view of the industry Global production and consumption Markets Industry trends

Recap some recent Behre Dolbear engagements

Provide a few country “factoids”

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The Behre Dolbear Group Since 1911 – oldest mining consultancy on the globe

Started here in New York

Offices in eleven of the world’s most important cities

Full range of: Services Mineral commodities Locations Client types

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Behre Dolbear Coal Professionals 15 Senior Associates and Consultants – pure coal Almost 500 Man-years of commercial experience Former industry executives – not “consultants” All disciplines of the industry Coal experience spans the spectrums:

Peat to anthracite UK and Germany to Mozambique and Mongolia Surface–Underground–CBM–Gasification-Coal Waste

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Typical Coal Engagements

Exploration program management

Scoping, prefeasibility and feasibility studies

Resource and reserve re-categorizations

Advisories to regulatory agencies and exchanges HKEx, SEC, TMX, DOJ, IRS, MSHA, BLM, etc.

Independent technical reports to support IPOs/POs

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Typical Coal Engagements (cont.)

Merger and acquisition support Due diligence Valuations (and evaluations)

Governmental assistance Privatization/Monetization

Mining regulations

Litigation assistance and expert witness work

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Let’s Look at the Industry

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Corporate Growth ObjectiveWhere is Coal Found?Where is Coal Found?

World Coal Association – April 2011World Coal Association – April 2011

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Production

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How Do We Mine It?

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World Coal Production Found in ±100 Countries (35 are “Producers”)

“Reserves” for ±190 Years (±1.4 Trillion Tonnes)

2010 Global production = ±7.4 Billion Tonnes*

EXACTLY HOW MUCH COAL IS THAT?

*Various early estimates: ±2 or *Various early estimates: ±2 or 3%3%

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It’s a Long Trainload!

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Exactly How Long is That Train?

It’s a train that wraps the earth ±18 times

OR One that stretches to the moon and back

(almost)

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That’s a Very Long Trainload!

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Top Six Global Coal Producers – 2010*

China 3,680 Million USA 1,000 Million India 580 Million Australia 410 Million Indonesia 350 Million Russian Fed. 300 Million

*Early Approximations - Various Sources (±2 or 3%)*Early Approximations - Various Sources (±2 or 3%)

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Consumption

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Global Steel Global Steel ConsumptionConsumption

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MARKETS - PRICING

Why Doesn’t Behre Dolbear do Independent Price Forecasting?

(Because it makes us look too much like blindfolded drunks throwing darts!)

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" Concensus " Near-term Coal Pricing* Scenarios from 3Q 2010

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Premium Hard Coking Coal Semi-Soft Coking Coal Thermal Coal

*Australian Benchmark Prices

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Is There a Lesson Here?

Rely less on prognostication and crystal balls Give weight to historical cost-price relationships Consider average long-term trends in pricing Be sure to do some healthy sensitivity analysis

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Current “Contract” Coal Prices(1)

Hard Coking Coal: US$320 to US$350 per T (2) Soft Coking Coal: US$240 to US$265 per T (2)

Thermal Coal: US$130 to US$140 per T

(Forecasts made recently as Dec-2010 have gone bust)

(1) NOW “Quarterly” Australian Benchmark(2) ±35% to 45% increase QoQ

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Global Coal Movements – 2010*Global Coal Movements – 2010*

*Generalized - Annualized*Generalized - Annualized

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Recent Coal-Related Engagements Australia Botswana Brazil Canada China Colombia Germany India Indonesia

Mexico Mongolia Mozambique New Zealand Nigeria Philippines Russia USA Vietnam

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Australia BD doing its standard mix out of Sydney office Major news – Q’land flood impacts remain Still expected to be major export powerhouse Long-term challenges from

Indonesian thermal coal Mozambique met coal (Australian taxation fever is not helping much)

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China Currently the 2400 lb. gorilla on the globe Closing hundreds of mines - still @ 17% growth Word of some areas being declared “Rare” coal Steel glut inhibiting met coal usage (short-term) Behre Dolbear doing numerous:

Independent Technical Reviews to support IPOs Due diligence and evaluations Valuations and M/A assistance

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Colombia BD doing scoping studies and project due

diligence Two tiered industry by geography

Traditional thermal coal in Guajira peninsula (Potential) met coal in Boyaca, Cundinamarca, etc.

Proving up significant met coal resources Steeply dipping / difficult to mine Excellent coking characteristics Infrastructure and transport are near-term constraints

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India Population forecasted to overtake China’s by 2030 Tremendous demand growth “Ultra-Mega” steel producing projects underway Generally poor quality indigenous met coal supplies Outsourcing coal supplies all over the globe Equity and JV deals abound – steel and power companies Strong looks at Indonesia, Mozambique, USA, etc. BD currently doing Mozambique met resource reviews

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India Will Be (Is?) World’s Largest Coal ImporterIndia Will Be (Is?) World’s Largest Coal Importer

World Coal InstituteWorld Coal Institute

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Indonesia Forecast to be world’s fastest growing exporter Perhaps largest CAPEX increase for coal mines Sub-bituminous thermal coals, but:

Famous for ultra-low sulfur content Geographically well positioned for Oceana-Asia sales

BD doing numerous green field evaluations BD did share valuation to support major litigation

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Mongolia Burgeoning energy producer

YTD 2011 coal export value up 180% (YoY) YTD 2011 = 3.8 million T vs. 2.3 million T (YoY) Major low-cost surface mining projects

Infrastructure and transportation are issues BD doing a number of scoping level studies Just established a Mongolian subsidiary

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Mozambique Major attention - new coking coal sources – all export Major international players in Tete region

Moatize - - Vale Riversdale - - Rio Tinto/Tata/CSN

Challenges: coal quality and transport (Sena RR) Operators forecasting growth to 80 MTPY ! ! Concerns about infrastructure, lead time and ramp-up BD did full-scale review of Moatize for TWB/IFC

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Nigeria BD has worked in Nigeria since early 1990’s

Comprehensive mineral inventory US TDA coal resource and power demand study Prefeasibility study for small surface mine Currently in-country mine development advisors

30-year hiatus since demise of NNCC Finally looking at coal for electricity generation Woefully inadequate power grid

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Vietnam VINACOMIN BD did ITR for Issuance of High-Yield Bonds Forecasting 50% increase in annual production

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Thanks for Your Attention

Questions?