Presentation to the Financial Community - Coal & Allied ... · Presentation to the Financial Community Half Year Results – 30 June 2011 Bill Champion 29 July 201129 July 2011 Mount

Coal & Allied Industries Limited

Presentation to the Financial CommunityHalf Year Results – 30 June 2011

Bill Champion

29 July 201129 July 2011

Mount Thorley WarkworthMount Thorley Warkworth

Mount Thorley WarkworthMount Thorley Warkworth

BengallaMount Thorley Warkworth

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Presentation outlinePresentation outline

Safety performance

Financial performance

Marketing

CostsCosts

Capital

Site performance

Infrastructure

Mount Pleasant

Projects

ChallengesBill ChampionManaging DirectorCoal & Allied Industries Limited

2 2011 Half year results presentation

Summary

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Safety performance....committed to providing a safe work environmentSafety performance....committed to providing a safe work environment

All Injury Frequency Rate Severity Frequency RateAll Injury Frequency Rate (per 200,000 hours)

Severity Frequency Rate (per 200,000 hours)

0.81

0 59

13.57

0.58 0.58 0.57 0.597.81

8.96

5.60

2.62

AIFR ratio:Number of injuries and illnesses per 200 000 hours

SFR ratio:N b f hift l t t i j i ill 200 000 h

2007 2008 2009 2010 2011 2007 2008 2009 2010 2011


Number of injuries and illnesses per 200,000 hours Number of shifts lost to injuries or illnesses per 200,000 hours

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Financial performance - overviewFinancial performance overviewHalf year ended 30 June 2011 HY11

100%HY10100%

Change%

HY11C&A share

HY10C&A share

Change%

Total overburden (Mt) 294.6 258.6 +14 227.4 197.0 +15

Total material moved (Mt) 312.7 272.0 +15 241.0 206.3 +17

Coal production (Mt) 13.2 12.0 +10 9.9 8.9 +11

Coal sales (Mt) 13.3 11.2 +18 9.9 8.4 +17

AUD$m

AUD$m

Change%

Revenue 1 165 929 +25Revenue 1,165 929 +25

EBITDA 321 706 -55

Net profit after tax excluding divestments 227 161 +41

Net profit after tax including divestments 227 498 -54

Ordinary dividends declared Cps Cps Change%

Interim 120 450 (73)


Earnings per share 263 575 (54)

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Revenue up 27 per cent driven by higher sales volumes and higher US dollar pricesRevenue up 27 per cent driven by higher sales volumes and higher US dollar prices

Net profit after tax excluding divestments

Sales revenue up 27% on HY 2010• Sales revenue up 27% on HY 2010

– 25% increase in volumes

– 25% rise in US dollar coal prices300

350

A$m

– Partially offset by strength of AUD and sales mix (lower proportion of semi soft sales)

• 17% increase in total material moved driving higher production costs

150

200

250

p

50

100

150

-161

HY 2010165

Price(73)FX

55 Volume

(58)Sales mix

(19)Production

costs

0 S&D

(6)Other

4 D&A

(2)Tax

227 HY 2011


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Market outlookMarket outlook

Thermal coal

• The first half of 2011 has been challenging with natural disasters affecting both supply and demand• The first half of 2011 has been challenging with natural disasters affecting both supply and demand.

• Overall demand in Japan now largely back on track but two stations still not operating.

• Tightening supply and demand conditions in the second quarter saw China re-enter the market, primarily for Indonesian and lower energy thermal coal.

• The outlook for the rest of 2011 is steady, with improved Australian supply matching the demand outlook.

Th h l l k i f 3%• The thermal coal market is forecast to grow ~3%

Semi soft

• Current steel demand means semi soft is more regularly being linked to the hard coking coal benchmark price.

• Strong supply from the United States of lower quality coking coals in recent months has impacted the semi soft section of the metallurgical coal market. Premium relationship to hard coking coal is softer.

• Newcastle exports of metallurgical coal 6 months to June are down 1.67 million tonnes, a 16 percent drop. Coal and Allied shipments were down 13 percent.

• The expected growth in steel demand over the next few years, especially in Asia, will continue to drive demand growth in semisoft.


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Relative Australian thermal coal market indices

• Chart depicts a range of coal indices and t ti ti i th A i i th t i i$130

$135

$140Newcastle relevant thermal coal prices

statistics in the Asian region that vary in price based on coal quality and destination

• ABS Newcastle is the actual weighted average price out of the port in month of $110

$115

$120

$125

$130

shipment reflecting quality delivered.

• Pricing point of coal tends to lead timing of shipping and realisation by 1 to 12 months.

$90

$95

$100

$105

$110

e (U

S$/t)

• South China FOB NEWC equivalent price is indicative of the price floor in the Pacific.

$70

$75

$80

$85

Pric

e

$65

Feb-

10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug-

10

Sep-

10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

globalCOAL NEWC Inde Apr Mar JPU Benchmark


globalCOAL NEWC Index Apr-Mar JPU BenchmarkABS Newcastle Monthly Price South China FOB NEWC Equivalent

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Coal & Allied’s thermal coal sales profile

100%

C&A Sales Profile

Index/SpotImpact of Japanese earthq ake & ts nami

80%

APR 11 - MAR 12

APR 10 - MAR 11

OCT 09 - SEP 10

OCT 10 - SEP 11

JUL 10 - JUN 11

earthquake & tsunami

60%

JAN 11 - DEC 11

JAN 10 - DEC 10

Legacy

40%

Non-JFY contract

20%

Non JFY contract periods – 20-30%

0%

Sep-10 Dec-10 Mar-11 Jun-11

8 2011 Half year results presentationQuarter ended

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Rising strip ratio driving up unit costsRising strip ratio driving up unit costs

• Production unit costs up 13% compared to HY 20107.0 Stripping ratios - C&A share

• Principally driven by 4% strip ratio increase

5.0

6.0

2008 2009 HY 2010 2010 HY 2011

$/total material moved (tonnes)

2.05 2.09 2.25 2.12 2.41

3.0

4.0

Bcm

/RO

M

• $/tmm increased 7% from HY 2010 due to increasing fuel, labour and contractor costs

1.0

2.0

0.0

2005 2006 2007 2008 2009 2010 HY 2011

Prime to ROM Total to ROM


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Ramp up phase pushing production costs higherRamp up phase pushing production costs higher

• Increased total material moved the main driver of increased production costs including labour/contractors, fuel and consumables/operating supplies during ramp up phase

Equipment hire &

600

A$m↑ explosives due to increased overburden removal

- ↑ heavy mobile equip fleet- 19% increase in fuel price

Equipment hire & contractor costs associated with ↑ maintenance activities

400

500

- ↑headcount (12%)- Timing of new labour

agreement signing

200

300agreement signing- Yearly salary increases

↑maintenance activities associated with additional HME

0

100

461 HY 2010

(3)Inventory

mvmt

24 Fuel

13 Consumables

& utilities

21 Explosives

& other operating supplies

23 Employee

costs

30 External services

569 HY 2011


supplies

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Capital investment positioning our mines for growthCapital investment positioning our mines for growth

9

Capital spend - C&A share

• Capital expenditure (C&A share) up by 118% to $197m (100% basis $250m)

• Principally driven by:183

222

9

57

– Purchase of heavy mobile equipment including trucks, excavators and ancillary equipment to support expansion projects

– Major overhauls on key digging equipment including dragline at MTW

122 123140

24

dragline at MTW

– Mount Pleasant land acquisitions ($40m)

2007 2008 2009 2010 H1 2011

PP&E Land Depreciation Half year capital spend


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2011 capital rises reflecting growth & reinvestment2011 capital rises reflecting growth & reinvestment

Capital $/saleable tonne- C&A share

• Development capital increase reflecting:

– Continuation of HVO and MTW latent capacity expansions

– Bengalla expansion$10

Bengalla expansion

– Mt Pleasant early construction costs including further land purchases

• Sustaining capital driven by:$7

– Further replacement of aged equipment

– Ongoing program of overhauling of major equipment and mine infrastructure to drive increased reliability

$8 $10

$5

$10

2008 2009 2010 HY 2011

Susta ining $/saleable tonne Development $/saleable tonne


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Hunter Valley Operations – 100%Hunter Valley Operations 100%

Key statisticsHY 11

100% basisHY 10

100% basis

Total overburden (mt) 130 108Total overburden (mt) 130 108

- Thermal (kt)- Semi-soft (kt)Total production

5,123696

5,819

3,6281,5445,172

Sales (kt) 5,810 4,993

Capex ($m) 98 63

• Highest quarterly coal output in 5 years, despite weather impacts in June

• Half year record for overburden removal

• Ramping up to 14Mtpa rate during 2012

• Carrington West extension approval in determination phase


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Mount Thorley Warkworth80% Mount Thorley, 56% Warkworth

Key statisticsHY 11

100% basisHY 10

100% basis

Total overburden (mt) 132 120

- Thermal (kt)- Semi-soft (kt)Total production (kt)

3,0161,5604,576

2,9641,1494,113

Sales (kt) 4,574 3,902

Capex ($m) 82 28

• Significant increase in overburden removal

• 35 per cent increase in semi-soft production – represented over 1/3 of total production

• Ramping up to 12Mtpa rate during 2012

• Warkworth extension approval in determination phase


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Bengalla Operations – 40%Bengalla Operations 40%

Key statisticsHY 11

100% basisHY 10

100% basis

Total overburden (mt) 33 31

Production- Thermal (kt) 2,835 2,705

Sales (kt) 2,878 2,313

Capex ($m) 30 4

• 5 per cent increase in saleable production

• Expansion project on track to hit 7.5Mtpa during H1 2012

• Feasibility study underway on second stage of expansion


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Infrastructure - Newcastle long term framework triggers port expansions

• Coal & Allied has port capacity to meet its growth plans across all sites, including Mount Pleasant

• Terminal capacity at PWCS and NCIG has expanded under long term framework and further expansions have been triggered:

– PWCS committed to 145 Mtpa due Q4 2012

– PWCS Terminal 4 triggered

F th NCIG i t i t d i 2011– Further NCIG expansion trigger expected in 2011

• New performance based, take-or-pay rail haulage agreement with Pacific National for up to 30Mtpa of annual capacity

• Long-term take-or-pay contract to be formalised with ARTC, aligning overall port, track and above rail capacity

• ARTC access undertaking agreement approved by the ACCC


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Mount Pleasant ProjectMount Pleasant Project

• Full feasibility study underway on 10.5Mtpa ROM operation

• Modification of development consent now in determination phase

• EPBC assessment – public exhibition period now complete

• Offset land acquisitions YTD 2011 - $40m

• Working to progress ancillary approvals – Environmental Protection Licence

• Targeting development decision in 2011

• First coal scheduled in 2014


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Coal & Allied is working progress its strong ongoing project pipeline g p g g g g p j p p

HVO Southern

• Exploration work underway to support Order of Magnitude studyp y pp g y

• Prefeasibility Study expected to commence during 2012

HVO Auckland

• Exploration Licence renewed• Exploration Licence renewed

• Seeking landholder agreements for drilling to underpin feasibility studies

Mount Thorley Warkworth underground optionsMount Thorley Warkworth underground options

• Order of Magnitude study completed

• Exploration programme under way to advance resource knowledge

• Prefeasibility study expected in H2 2012

Potential for increased proportion of semi soft production• Potential for increased proportion of semi soft production


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Coal & Allied is working to manage key challenges to our growth plans

• Carbon tax will impose a cost not faced by international competitors

– fundamental areas for improvement

– Coal & Allied well prepared to manage impactsCoal & Allied well prepared to manage impacts

– impact will be monitored as policy passes into legislation

• Final Minerals Resource Rent Tax legislation to fully reflect agreement with industry

• Land use conflicts and cumulative impacts from mining

• Availability of skilled labour and key mining inputs

• Ability of rail networks to keep pace with port development


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SummarySummary

• Solid result in first half 2011, driven by increased production despite weather impacts

• Coal & Allied is well positioned to deliver ongoing growth• Coal & Allied is well positioned to deliver ongoing growth

• Will see increasing production into 2012 from significant investment in overburden removal

• Strong pipeline of expansions, the Mount Pleasant Project and further open-cut and underground options

• Infrastructure now delivering greater certainty

• Strong market conditions into the future


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Documents

Presentation to the Financial Community - Coal & Allied ... · Presentation to the Financial Community Half Year Results – 30 June 2011 Bill Champion 29 July 201129 July 2011 Mount