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Becoming Colombia’s Leading Independent Coal ProducerApril 2012
Becoming Colombia’s Leading Independent Coal ProducerApril 2012
TSXV: PAK
2
This presentation contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian securities laws concerning the business, operations and financial performance and condition of Pacific Coal, S.A. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to business plans and strategies of Pacific Coal; information with respect to the proposed subscription receipt financing of Pacific Coal; estimated production of the various projects of Pacific Coal; the benefits of the acquisitions and the development potential of properties of Pacific Coal; the future price of coal; estimates regarding mineralization and exploration results; the ability of Pacific Coal to achieve mining success consistent with management’s expectations; and expected levels of royalty rates, operating costs, and other costs and expenses. Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Corporation and its shareholders. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “target”, “will”, or similar words suggesting future outcomes or language suggesting an outlook. Forward looking statements are based on the opinions and estimates of management at the date the statements are made, as well as a number of assumptions made by, and information currently available to, the Corporation concerning, among other things, Pacific Coal’s ability to successfully complete the proposed subscription receipt financing; anticipated geological, operational and financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels of the Corporation’s assets, the ability to obtain financing on acceptable terms, the timely receipt of any required approvals and that there will be no significant events occurring outside of Pacific Coal’s normal course of business. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions, risks relating to international operations, fluctuating coal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of equipment or processes to operate as anticipated, and acquisitions not being integrated successfully or such integration proving more difficult, time consuming or costly than expected. Although Pacific Coal has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. Pacific Coal undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. This presentation uses the terms “measured”, “indicated”, and/or “inferred” mineral resources. United States investors are advised that while such terms are recognized by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. Unites States investors are cautioned not to assume that all or any part of mineral resources will ever be converted into mineral reserves. Inferred mineral resources have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.
DisclaimerForward Looking Statement
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Vision
Explore, expand and develop existing producing assets to increase efficiencies, reserves and production, while securing infrastructure capacity (La Caypa, Cerro Largo, CI Jam/Port of Barranquilla)
Seek opportunities to secure access to markets and ensure commercial flexibility
LEADING INDEPENDENT COLOMBIAN
COAL PRODUCER
Foster a corporate environment of responsible citizenship
4
Strategy
RAW MATERIAL PRODUCTION
(UPSTREAM)
MANUFACTURING/ PROCESSING (MIDSTREAM)
RETAIL/MARKETING(DOWNSTREAM)
• Upgraded coke production• Colloidal asphaltite in water (“CAW”)*• Colloidal coal in water (“CCW”)*• Pyrolysis
• Marketing of colloidal products to:• Power generation plants• Heavy oil producing companies and refineries
• Marketing of thermal coal• Marketing of coke
CAW/CCW plant• 50% equity interest• Carried interest for
50/50 JV
Pyrolysis plant• 100% equity interest
Vertical integration to secure market access in value-added product streams
• 100% ownership and control of La Caypa, Cerro Largo and La Tigra
• Company owns 92% of CI Jam
5
Capital Structure
Pacific Coal became a publicly listed company via RTO on March 14, 2011, making the Company the only independent, public coal producer in Colombia
Fully leveraged to rising interest in Colombian coal Strong sponsorship and institutional investor support As at January 31, 2012, 11.2 million shares have been purchased for cancellation under the normal
course issuer bid
(1) Expiry date March 14, 2016(2) Based on closing price of $0.355 on 3/20/2012(3) Includes finance leases
Pacific Coal (TSXV: PAK)
Shares outstanding: 322 million
Options (vested & exercisable) 35.8 million
Warrants outstanding with weighted avg. exercise price of $2.10(1) 75.1 million
Fully diluted: 437.2 million
Market cap (basic):Cash (September 30, 2011)Long-term debt (3) (September 30, 2011)Enterprise value
$114.3 million (2)
$14.3 million$32.0 million$141.7 million
6
Pacific CoalFully Funded Capex 2011-2012
Exploration = $10 mPending* = $9 m
Development = $15 mPending* = $2.5 m
Acquisitions = $125 mPending* = $15 m
Infrastructure = $17 mPending* = $13 m
Equipment = $15 mPending* = $5 m
• Drilling at Cerro Largo to update NI43-101
• Drilling, mapping and geophysics at La Tigra
• Drilling in Catatumbo• Drilling La Caypa for
underground mine design
• South pit expansion at La Caypa (Royalties)
• Paying Cerro Largo contract to Masering
• Paying Barranquilla Port outstanding debt
• Closing 86% Cerro Largo
• Blue ACF investment
• Completion of Coking Infrastructure
• Barranquilla Port setup
• Double body trailers (Trucks were acquired via leasing)
• Exploration drills• Equipment for South
Pit operations• Other equipment
* As at September 2011
7
Luis Arturo Carvajales (Chief Executive Officer) More than 20 years of experience in the mining industry, holding management positions in marketing, sales, logistics, and serving as legal counsel Most recently President / Legal Representative of Carbones Colombianos del Cerrejon S.A.
Miguel Velasquez (Chief Financial Officer) Over 25 years experience as Finance & Administrative Manager at companies in Colombia and at Colombian branches of Canadian companies
Peter Volk (General Counsel and Secretary)
Mr.Volk has acted as General Counsel and Secretary of PetroMagdalena Energy Corp., Pacific Rubiales Energy Corp., Gran Colombia Gold Corp., and Bolivar Gold Corp.
Jose Ignacio Noguera (Vice President, Public Relations & Corporate Social Responsibility)
A lawyer with over 20 years experience in the resource industry, holding positions as legal counsel, public affairs, government relations, and community relations. During the last 8 years, he was the Public and Government Affairs Manager of ExxonMobil
Investor Relations Advice and Support Provided by The Capital Lab Inc. Belinda Labatte, Principal Greg DiTomaso, Director Investor Relations and Special Projects
Executive Management Strong and Experienced Team
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Source: Management estimates*Annualized rate1 La Caypa produced 1,239,583 tonnes 20112 Cerro Largo produced 298,041 tonnes in 2011; Q1 production of 110,875 tonnes was prior to Pacific Coal acquisition of Cerro Largo
Well-positioned portfolio with diversified current and future production of steam coal, coke and asphaltite
Port of Santa MartaPuerto Brisa
1Port Barranquilla
Bogota
2
1
Medellin
Cali
3
1
2
3
4
Asset SummaryDiverse Portfolio of High Quality Coal Assets
4
5
5
9
2010A 2011A 2012E 2013E 2014E
Total Production
Cerro Largo
La Caypa
1.2
1.5
2.6-2.92.7-2.9
3.4-3.6
Source: Management estimates*Includes total production from Cerro Largo Q1/2011, before the acquisition closed
Thermal Coal Production Profile
Robust production growth from existing assets with additional greenfield and consolidation opportunities
Annu
al P
rodu
ction
(mill
ions
of t
onne
s)
10
2010A 2011A 2012E 2013E 2014E
CI Jam
Source: Management estimates
Coke Production Profile
High value coke operation with long mine life and coal to coke conversion of ~70%
Annu
al P
rodu
ction
in to
nnes
7,000
60,000-72,000
90,000-120,000
90,000-120,000
Operational adjustments during the first year of operations resulted in reduced production guidance for 2011 (7,000 t of coke)
These adjustments also allowed for infrastructure and capacity to be built up, resulting in longer-term production targets being achieved sooner
11
High quality steam coal production with attractive expansion and underground potential
(1) Source: Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010(2) Includes transportation, port, and administrative costs
La Caypa MineSignificant Thermal Coal Production
(1)
Location: • Guajira Department, Colombia• Adjacent to Carbones del Cerrejón mine, largest coal mine in South
America
Resource estimate: • 47.0 Mt of measured resource (1)
• 17.8 Mt of indicated resource (1)
Area: •300 hectares
Average BTU: • 12,264 (1)
Average Sulphur: • 0.69% (1)
Operations: • One open-pit mine currently operating₋ South pit expansion in development with expected start-up in 2012
and potential production of additional 1.0 Mtpa• One underground mine in exploration, expected development in 2013
2011 Production • 1,239,583 t
Projected Costs (2): • US$85/t
Avg Contract Price: • US$102/t in long-term contracts for 100% of production to 2013
Infrastructure: • Secured allocation at Santa Marta (250 km)• Expected additional capacity at Puerto Brisa, early-2012, reducing
freight costs by 40%-50%
Current strip ratio: • 6.59:1
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Extension of existing open pit to south of highwall with same premium coal characteristics as the primary pit with a similar CV Btu/lb
Straightforward integration into existing mining operations
Expected production start-up in 2012 with all permits in hand
South pit measured and indicated resources of 7.7 Mt(1)
South pit development to be concurrent with existing mining operations
Potential incremental production of 1.0 Mt per annum
La Caypa MineSouth Pit Expansion to Extend Mine Life
(1) Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010
SECTOR +400
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Mine planning underway based on 16 coal seams showing consistent thicknesses suitable for underground mining (average thickness ranging from 2.3 meters to 6.8 meters)
Measured and indicated resource of 53.6 Mt (1)
Potential thermal coal production to increase 0.8 – 1.0 Mtpa expected to commence in 2013
Existing pit provides underground access point with three contemplated levels to depth of 240 meters from pit bottom
Studies underway to determine optimum mining method and design; potential to become the largest underground coal operation in Colombia
Underground potential to drive resource expansion and continued growth in production(1)
ELEVATION: 0ELEVATION: 0
ELEVATION: -150ELEVATION: -150
ELEVATION: -300ELEVATION: -300
Level 1Cradle
Level 1Cradle
Level 1Level 1
Level 2Level 2
EXISTING OPEN PITEXISTING OPEN PIT
La Caypa MineUnderground Production to Drive Growth
(1) Source: Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010 and management projections
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Contains high volatile bituminous type B coal with high calorific values and low sulphur
Cerro Largo – La DivisaAcquisition of Significant Coal Production
(1) Source: Report titled “Independent Technical Report, Cerro Largo Mine” prepared by SRK Consulting and dated February 2011(2) Includes transportation, port, and administrative costs * Q1/2011 production of Cerro Largo was prior to Pacific Coal acquisition
Location: • Cesar Department, Colombia in the La Jagua de Ibirico coalfield
• Adjacent to licences owned by Drummond and Vale. Glencore is currently operating an open-pit mine on the adjacent La Jagua sector
Resource estimate: • 11.6 Mt – 21.2 Mt inferred (1)
Area: •488 hectares
Average BTU: • 12,000 (1)
Average Sulphur: • 0.78% (1)
Operations: • One open-pit mine currently operating
Projected Costs (2): • US$80/t, expected to lower US$2/year with improved efficiencies and strip ratio
2011 Production • 298,041*
Infrastructure: • Secured allocation at Santa Marta (250 km)• Expected additional capacity at Puerto Brisa in
early-2012, reducing freight costs by 30%-40%
Current strip ratio: • 20.64:1 (during ramp up)• Long-term mine plan has been implemented
15River Transport Coal Mine Coal Project Road PortsRiver Transport Coal Mine Coal Project Road Ports
Legend
Significant port and road infrastructure in place to support existing regional coal production
Colombia
Venezuela
Panama
Barranquilla
Cartagena
Cauca Rive
r
Magdalena Rive
r
Cartagena Port
Port of Santa Marta
La Caypa
Cerro Largo
La Tigra
Catatumbo
Puerto Brisa
BarranquillaPort
Puerto Bolivar
Regional InfrastructureProximity to Infrastructure Supporting Growth
CI Jam
Secured 1.8 Mtpa of stockpiling and shipping capacity at the Port of Santa Marta until 2013
Production trucked 250 km by paved highway to Santa Marta at a cost of approximately US$20-$23 per tonne from La Caypa and 280 km from Cerro Largo at a cost of approximately US$23-US$24
Expected capacity at Puerto Brisa provides alternative port location closer to both La Caypa and Cerro Largo with potential to reduce freight costs by 40%-50% and by 30%-40%, respectively
Puerto Brisa construction expected to be completed by Q1/2013, providing additional 35 Mt of specialized coal shipping capacity
16
Underground coking coal operation selling premium coke into high price environment
CI JamCoking Coal and Upgraded Coke Production
(1) Source: Report titled “SRK Technical Report Written To Be Compliant With NI 43-101 On Contract 7241, Boyaca, Colombia” prepared by SRK Consulting and dated August 2010(2) Includes transportation, port, and administrative costs
Location: • Samaca Municipality, in Department of Boyaca• 3,000 small HCC producers in the area
Resource estimate: • 2.8 Mt in situ (1)
Area: •52 hectares
Average BTU: • 13,800 with coking properties (1)
Average Sulphur: • 0.92% (1)
Operations: • Underground coking coal• Upgrading coking coal to coke
Projected Costs (2) : • US$210/t
2011 Production: • 7,000 tonnes of coke
Avg Market Price: • US$280/t
Infrastructure: • Well maintained roads to truck coke to domestic markets and to port terminals (800 km to Barranquilla)
Status: • Completed refurbishment of 160 beehive coking ovens• Completed refurbishment of coker infrastructure• Currently building additional 100 ovens to bring capacity to
120,000 tpa
17
Pacific Coal acquired a port concession situated on the Magdelena River near the Port of Barranquilla (approximately 5km from the Caribbean Sea) to be used to export coke, specialized coals, and bulk commodity products. Excess capacity at the port can be monetized by selling to other exporters
Pacific Coal plans to tender for engineering, construction and procurement by Q3/2012, expecting to have an early start on coal loading operations with a provisional set-up for Q3/2012
Port of BarranquillaInvesting in Long-Term Port Access for Coke
BARRANQUILLA CONCESSION
Main features of the final proposed scheme:
Two portable shiploaders
A pile supported concrete berth with 12 m water depth
Portable Stacker
Coal/Coke piles
Reclaim conveyor alongside the open stockpiles
Office/Maintenance building
FEL receiving hopper (rail mounted)
Overall average loading capacity of approximately 10,000 tonnes per day
BARRANQUILLA CONCESSION
18
Profile
La Tigra’s Asphaltite
Grahamite
Gilsonite
La Tigra outcrop
Location of La Tigra: • 80 km from Barrancabermeja
Area: •5,700 hectares
Operations: • Initial exploration drilling, mapping, trenching and geophysics commenced June 2011 with the objective of a NI 43-101 compliant report by Q3/2012
• Production start planned for Q1/2013
Infrastructure: • 70 km from Bucaramanga with paved roads between Bucaramanga and San Alberto
• 80 km from Barrancabermeja, the centre for petroleum refining and a port on the Magdalena River
Asphaltites are species of bitumen, dark-colored, comparatively hard and non-volatile solids, composed principally of hydrocarbons.
As of today in the La Tigra area, there is evidence for the presence of two different types of asphaltite: Grahamite and Gilsonite.
Management expects a significant resource at La Tigra to be confirmed with a National Instrument 43-101 compliant report – physical evidence on outcrops, oil seeps and 3 mines already in production in the area lead to optimistic forecasts on the existence of important asphaltite reserves.
19
La Tigra’s Asphaltite Applications
Colloidal Asphaltite in Water (“CAW”)
•Crushed asphaltite, suspended in water forming a colloid, can be used as fuel by power generators •PAK and Blue ACF are in the process of developing a pilot plant test for CAW at Babcock & Wilcox facilities in Ohio, USA •Trials on track at Babcock & Wilcox•Significant marketing opportunities as CAW can be sold as a fuel oil substitute•Management foresees strong market demand for CAW in Central America and the Caribbean
Colloidal Coal in Water (“CCW”) •Similar to CAW, but using coal instead of asphaltite •Blue ACF will conduct CCW trials at Babcock & Wilcox in May 2012
Proven Applications
Asphalt modifiers
•Oil drilling and mud additive•Metal casings•Paving/roofing asphalts•Paint resins
Pyrolysis •Extensively used technology at the industrial level•Converts asphaltite to valuable liquid and gas products, and pet coke•Pet coke is a by-product produced through pyrolysis•Prefeasibility study indicates excellent economics based on lab tests conducted with Colombia grahamite and gilsonite•High margin application, potential for substantial volumes•Feasibility study in progress in order to select the specific technology and to conduct pilot plant tests (100% PAK)
Applications in Evaluation Phase
PAK has investment option in the development of the CAW and CCW plants (50%)
20
Pacific Coal Health, Safety and Community
Health and Safety Mission: Achieve Health and Safety goals through stewardship, integrity, and empowerment
• The Company encourages its employees to participate actively in safety initiatives and prevention programs
• All of our employees take part in our community health programs as both volunteers and patients
The Company seeks to continuously reduce the number of workplace and operational safety incidents, with the ultimate goal of achieving the lowest accident frequency rates in the industry
• The Company seeks to work with partners with high health and safety policies and standards
• The Company strives for eco-friendly operations wherever possible, by forming strategic alliances with environmental corporations
• The Company maintains weekly updates of its safety performance indicators
Community Mission: Maximize shareholder value while fostering a corporate environment of responsible citizenship and respecting the interests of our stakeholders and members of the communities in which we operate
• The Company aligns its initiatives with the needs and activities of local governments, to contribute to the nation’s progress
• The Company works closely with non-profit organizations to maximize its community efforts
• The Company ensures responsible operations by minimizing wherever possible its impact on the environment
21
Pacific CoalAchievement Scorecard
Achieved In Progress
Completion of amended NI 43-101 at La Caypa and Cerro Largo O
Commencement of development of south pit expansion / O
Commencement surface work for underground at La Caypa
Implementation of integrated mine plan at Cerro Largo OTransition from Port of Santa Marta to Puerto Brisa, reducing freight costs by 30%-50%
O
Completion of refurbishment of 160 beehive coking ovens at CI Jam
Building additional 100 beehive ovens at CI Jam O
Commencement of exploration at La Tigra
Completion of NI 43-101 on La Tigra O
Development of Port of Barranquilla OCAW tests and trials CCW tests and trials O
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High-grade material of which global supply is permanently depleting and thus carrying premiums High quality coal characteristics – high BTU, low moisture, low ash, low sulphur Access to international markets via ports – improving efficiencies and cost reductions Opportunities to develop projects to access growth markets such as coking coal and asphaltite Strong operating team with a proven track record for project advancement
Strategically located, high-quality projects in a world-class jurisdiction with significant growth potential
Pacific CoalSummary
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APPENDIXAPPENDIXAPPENDIXAPPENDIX
24Source: Ingeominas Colombian Institute of Geology and Mining; Energy Information Administration; Reuters; Intierra
Colombia is the world’s 10th largest producer (76 million tonnes in 2009) and 4th largest exporter of coal
Coal represented 25% of total export earnings for Colombia in 2009
Colombia has one of the largest proven coal reserves in the world, with over 7 billion tonnes of recoverable reserves and 17 billion tonnes of potential reserves
Colombia’s estimated 2011 coal production is 85 million to 95 million tonnes
Pribbenow(Drummond)
Calenturitas(Glencore)
La Francia(Goldman Sachs)
El Descanso(Drummond)
La Jagua(Glencore)
Cerro Largo
LA GUAJIRA DEPARTMENT
CESAR DEPARTMENT
La Tigra
CI Jam
Catatumbo
Cerrejon(BHP/Xstrata/Anglo)
La Caypa
Colombia A World-Class Coal District
El Hatillo(Vale)
25
$0
$50
$100
$150
$200
$250
Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13
FOB Puerto Bolivar to Europe API#2 Price
Source: BP Statistical Review of World Energy and Bloomberg*Economist Intelligence Unit
Colombian Coal Production (Mt) DMTU Thermal Coal Price (FOB Puerto Bolivar)
Colombia A World-Class Coal District
Colombia is a significant coal mining region with 2012 production forecast to exceed 87 million tonnes*
Colombian Coal prices up over 60% since January 2010
2012
E*
26Source: Management estimates, Fraser Mackenzie research, and Bloomberg* Peers: Corsa Coal Corp., Forbes & Manhattan Coal Corp., Lipari Energy, and Xinergy Ltd.** Production sales as of most recent quarter on an annualized basis
Valuation MetricsOpportunity For Re-evaluation
As at March 20, 2012
27
Becoming Colombia’s Leading Independent Coal ProducerApril 2012
Becoming Colombia’s Leading Independent Coal ProducerApril 2012
TSXV: PAK
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