Nirmal Chandra Jha - International Coal Ventures Private Limited - India’s coal imports

India´s Coal Requirement and Import Prospects

Nirmal Chandra Jha Managing Director & CEO

ICVL`s Mozambique Operations July 27, 2015

Presentation Format

• India`s growth and coal requirement

• World coal reserves – Preferable Import markets

• China Growth Scenario affecting coal markets

• Focus on coking coal market

• Falling price of coal limiting choice of market.

• Mozambique coal prospects

• Intervention required from Government of Mozambique

• Conclusion.

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• Conclusion.

Driving Factors for India`s growth

• GDP to grow at 7-8% per annum.

– Demand for energy

– Demand for steel

– Demand for other raw materials

– Growth in the infrastructure sector : Rail; Road Highways; Power Transmission; Irrigation; Auto Industry etc

Successive capacity addition in Electricity Generation

Estimated Demand and Capacity Addition in Steel Sector

Coal Requirement for different Indian Industries

Million tonnes

Source: 12th Five Year Plan Document_Govt of India

Sectoral coal Demand, Availability and Gap in FY 2017 (Scenario I)

Million tonnes


Sectoral coal Demand, Availability and Gap (Scenarios I&II)

Million tonnes


FY 2017 FY 2017 FY 2022

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• Conclusion.

Sl. No.

Continent Anthracite &

Bituminous

Sub Bituminous

& Lignite

Total Percent of World Total

1 North America 112.8 132.2 245.0 27.5%

2 South & Central America

7.3 7.3 14.6 1.6%

3 Europe & Eurasia 92.5 218.0 310.5 34.8%

4 Middle East & Africa

32.7 0.2 32.9 3.7%

South Africa 32.1 - 32.1

Zimbabwe 0.5 - 0.5

Other Africa 1.0 0.2 1.2

Middle East 1.1 - 1.1

5 Asia Pacific 157.8 130.5 288.3 32.3%

6 Total World 403.2 488.3 891.5 100%

World Proved Coal Reserve Billion Tonnes

(End of 2014)

Source: World Energy Resources 2013 Survey, World Energy Council.

Distribution of proved coal reserves: 1994, 2004 and 2014 Percentage

Coal production/consumption by region Million tonnes oil equivalent

Production by region Consumption by region

Source: World Energy Resources 2013 Survey, World Energy Council.

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• Conclusion.

Source: ANZ Research, McCloskey Coal

Source: ANZ Research, China Customs

Source: ANZ Research, Bloomberg, McCloskey Coal

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• Conclusion.

Sectoral coal Demand, Availability and Gap in FY 2017 (Scenario I)

Million tonnes


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• Conclusion.

COKING COAL IN SEARCH OF ITS BASE PRICE??

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• Conclusion.

Available Coal Transport Facilities

ICVL TENEMENTS IN TETE-MAOTIZE AREA

PORTFOLIO OF ASSETS ACQUIRED

• Operating Mine: BENGA (5.3 MTPA Opencast mine)

65% ownership with ICVL

35% ownership with Tata Steel

• Coal transportation and shipping network for 1.6 MTPA, that

includes a CHPP (Throughput 5.3 MTPA).

• Concession And Exploration Licenses:

BENGA : 1 Concession & 1 License (65% ICVL)

ZAMBEZE : 1 Concession & 1 License (100% ICVL )

TETE EAST : 4 Licenses (100% ICVL)

CHANGARA : 3 Licenses (75% ICVL & 25% EMEM)

The Coal Chain System

26/07/2015 31

Customer Vessel Port Rail Rail loadout Mine

CURRENT OPERATIONS

33

Benga Mine

MINING AT BENGA

Benga mine commenced its operations from April

2012.

Present capacity - 5.3 MTPA RoM coal.

Seams numbered from B to N, in the upward

direction.

Current operations are in the south pit – seams

being mined are C, D & E

Present stripping ratio - 4.8 bcm/ tonne.

MINING AT BENGA

Coal production (January 2014 to December 2014

RoM Coal :3,972,572 tonnes

Coking coal :884,503 tonnes (10.5 % ash)

Thermal Coal :784,681 tonnes (26-28 % ash)

Serious problem of thermal coal disposal :

• No export market at current prices;

• No local market for consumption

• >2 million tonnes stocks

Contract Mining

High cost Mining contract – entered at a time when the

coking coal prices were at their peak levels in 2009-2011.

Contract valid till December 2015.

COAL HANDLING & PREPARATION PLANT

Throughput Capacity : 5.3 MTPA.

Present average yield:

Coking coal - 24.3%

Thermal Coal - 21.8%.

The Beira – Moatize Rail Line History

• 580km line Beira to Moatize • Built 1899 as freight and passenger line • Severely damaged in civil war 1975 – 1992 • No trains west of Sena for approx 20 years

until 2011 • Track rehabilitation funded by World Bank

and CFM started 2007 and completed 2012 • Present capacity 6 Mtpa. • Expansion underway to further increase the

line capacity • Capacity expected to reach 12 Mtpa

37

The Port – TCC8

• Project managed by Vale – Costs at US$201M – Operated by Cornelder through Nectar – Some aspects of design not ideal (Chute design)

– under modification

• Approximate capacity of 5Mtpa matched to rail • Could go upto 6 Mtpa with suitable matching

of forward and backward chain • Backactor/excavator unloading from rail

wagons • Berth restricted by channel (draught)

38

Particulars

Unit Mine-1 Mine-2 Mine-3 Mine-4 Mine-5 Mine-6 Mine-7 Mine-8 BENGA MINE

Mine OC OC UG UG UG UG UG UG OC

ROM Mtpa 14.52 13.33 10.70 12.2 2.50 6.60 5.75 7.00 4.0

Strip Ratio

bcm/mt 7.50 6.00 NA NA NA NA NA NA 4.9

Met Coal Yield

% 61% 68% 68% 65% 65% 77% 68% 69% 25%

Ash in Met Coal

% 8 8 8 8 8 8 8 8 10.5

OPEX US$/mt 79.03 74.81 90.62 77.60 104.64 75.14 105.29 83.82 267

Mining US$/mt 46.03 41.20 51.82 32.63 64.77 36.93 65.04 41.02 138.

CHPP US$/mt 6.62 6.50 7.04 8.57 8.76 6.31 9.76 8.30 22

Railing US$/mt 3.78 4.27 7.01 11.38 7.15 6.50 7.72 7.32 45

Port US$/mt 2.33 4.07 8.13 8.13 6.50 8.13 6.50 8.94 11

Overheads & others

US$/mt 20.28 18.78 16.61 20.95 19.90 21.32 18.70 22.30 51

High Cost of Operations in Mozambique Compared to Australia

DISPOSAL OF THERMAL COAL – A MAJOR CONCERN

Current Thermal coal stock at CHPP - Nearly 2 million tonnes

Thermal coal will also be generated in future though in lower proportion.

EOI from the Build-Own-Operate Investors has been invited for conversion of thermal coal into power and/ or ammonium nitrate for production of fertilizer and explosives.

Response lukewarm due to power offtake constraint.

DISPOSAL OF POWER GRADE REJECT COAL

Power Grade reject coal is currently stacked separately. This coal has enough heat value and can be utilized for generation for power through Fluidized Bed Combustion (FBC) or Circulating Fluidized Bed Combustion (CFBC) technology.

ICVL intends to invite BOO investors to set up such plants for generation of power under coal supply agreements.

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• Conclusion.

Constraints in viability of coal mining in

Mozambique

• Complex geology of Maotise coalfield warrants only opencast mining.

• Relatively higher stripping ratio (bcm/tonne ROM).

• Yield of coking coal low (20-25%).

• Highesst cost of mining and preparation of coking coal

• Inadequate Rail & Port capacity

• High cost of transport and shipping coal.

• Presently IVA (Value Added Tax) also a cost for the investors due to lack of refund of admissible amount.

• Lack of power transmission capacity.

Suggetsted help from the Government

• Create another coal terminal at Beira Port in a time bound manner.

• Facilitate creation of another Rail and Port corridor to enable higher size vessel loading through PPP mode in a time bound manner.

• Reduce Rail access charge on Sena Beira line at par with other countries.

• Relax community resettlement rules for presently unaffected people till the coal prices rise.

• Debar any further construction and grant of DUAT to people after the mining contract has been signed for any Concession area.

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• Conclusion.

Conclusions

• Growth of Indian economy opens huge potential for coal import – both coking and thermal grade.

• Geographical location of India restricts the import market to Asia Pacific and Africa.

• Suppliers of coal have to be price competetive. • Mozambique could place itself as a potential supplier of

both coking and thermal coal. • Present costs and infrastructure makes Mozambique coal

highly unviable. • Power transmission capacity needs to be enhanced to

enable power generation from thermal coal. • Government of Republic of Mozambique needs to help the

coal producers in the country by creating conducive atmosphere for opening more coal blocks with economic viability.

Thank You

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Nirmal Chandra Jha - International Coal Ventures Private Limited - India’s coal imports