Baby’s Day Out
India – Australia Relationship
Gujarat NRE – Proud to play our part
It is a fact that……
• Coking Coal is in severe short supply globally
• India does not have enough coking coal to sustain her steel dreams
• She has to depend on imports – primarily from Australia
• Other potential sources, like Mozambique are untested and about a decade away from commercial viability
Australia Has all the coking coal that INDIA Needs
- Huge potentials
- Short term
Bottlenecks
notwithstanding
We bought
The coking coal mines, once the world energy giants thought worked-out and not worth keeping
These century old mines
Have been transformed into new mines and have become one of the prime coking coal assets of NSW
Advantage Australia
Democratic traditions
Shared commonwealth traditions
English speaking population
Strong, stable Government where Rule of
Law prevails
Industry friendly, proactive bureaucracy
India has Law
China has Order
While
Australia has both Law & Order
We went there to procure raw materials
Identified the
immense
potential
I Stayed
Back to
become a
proud
“Indian
Australian”
And Australia taught me
The values of thinking and acting long
term
Long term in the off-take contracts
Long term in the shipping contracts
Long terms in establishing friendships
WHAT IS MORE IMPORTANT
Is the excellent support that we have received from both the federal government and the state government
Austrade did the initial handholding and is even today always a friend in need
The local state government of NSW has been very receptive to our investment and had been a great facilitator in the process of mine acquisition.
The mine expansion approvals and clearances are always handled in a transparent manner.
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GUJARAT NRE MINERAL RESOURCES LTD
A VERTICALLY INTEGRATED
GLOBAL RESOURCE PLAYER
In the most lucrative business of coking coal and met
coke whose supply is perennially short of rising
demand
Steady supply of hard coking coal of one of the best
qualities available globally – offsetting the volatility
in this commodity market
Diversified to petroleum in the resource rich
Australia
Experienced Management
Robust track record of rewarding shareholders
Our Strengths
Although India has large coal reserves it is very short of prime HCC
Domestic Coking coal is:-
o High ash
o Tends to have poor coke strength
o Requires imported high quality HCC for blending
o Not really suitable for PCI
Production of domestic coking coal has declined since 2004
Coke production has risen by almost 30% since 2004 and is poised to grow further
The future of India’s coking coal is Imports
FORECAST OF INDIAN COKING COAL
IMPORTS ( IN MT)
Source: various reports and internal estimates
INDIA AS A COKE EXPORTER
• Why India? At first glance not a natural coke exporter due to:
– Poorer quality coking coals
– Strong domestic demand growth
– Traditional significant coke importer
– Limited deep water ports
• However, some advantages
– Rapidly growing merchant coke producer
– Adoption of quick to build non recovery, heat recovery ovens
– In between Atlantic and Pacific markets
– Has already sold coke to Brazil, Japan, SE Asian and European countries
• Emerging Huge Void - In 2007 Chinese export was 15 Mt which got reduced to 12 Mt in 2008 and in 2009 it stood at just over an ½ Mt, recovering to ~3Mt in 2010
Coke Exports by Gujarat NRE
• Brazil
• France
• Japan
• Argentina
• SE Asian Countries
In addition to meeting the increasing domestic coke demand, Gujarat NRE
Coke has been tapping the opportunity in met coke export market – to fill in
the void created by global short supply
78%
9%
6%
4%3%
Brazil
France
Japan
Argentina
Slice 5
GNCL - A SNAPSHOT
Largest independent producer of Metallurgical Coke in India
Profit earning and dividend paying with strong financials and credit rating of AA- for long term borrowing and PR1+ for short term borrowing.
Met Coke capacity 1.434 MT, being increased to 4 MT by 2015.
The 1st Indian Company to have exported Met Coke from India and has a continuous export order book
Strong focus on the Environment with ISO 14001:2004 & OHSAS 18001:1999 certification
Rated one of the top 10 company by 10-years profit performance issued by Business Today on India’s Most Valuable Companies (Nov 2009 edition)
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GNCL OPERATIONS
HARD COKING COAL
(NSW, AUSTRALIA) RESERVES 125 MMT
RESOURCES 651 MMT
LOW ASH
METALLURGICAL COKE
1.434 MMTPA
Gujarat NRE Coking Coal Limited (ASX: GNM)
NRE NO. 1 – 92 (314) million tonnes
NRE Wongawilli – 33 (337) million tonnes
STEEL UNIT TMT BARS : 0.311 MMTPA
BHACHAU (Kandla) 0.504 MILLION MTPA
KHAMBALIA (Jamnagar) 0.358 MILLION MTPA
Waste Heat Recovery Power Plants
Khambhalia* 15 MW
Bhachau* 15 MW Dharwad* 30 MW Total 60 MW
Wind Power 87.5 MW
In Australia In India
Coal Washeries
Khambalia 0.75 Bhachau 0.75
Dharwad 0.90
* Under implementation
DHARWAD (Hubli) 0.572 MILLION MTPA
Sl. No.
Particulars % of Holding
1 Promoter Group 46.03
2 Banks, Mutual Funds & FIIs 19.75
3 Indian Public and others 34.22
Total 100.00
Listed on BSE & NSE
Script Code: • For Ordinary Equity Shares: BSE – 512579 ; NSE - GUJNRECOKE ISIN no. - INE110D01013
• For B Equity Shares (DVR Shares) : BSE – 570003; NSE - GUJNREDVR ISIN no. - IN9110D01011
SHAREHOLDING PATTERN
46.03%34.22%
19.75%
Promoter Group
Banks, Mutual Funds & FIIs
Indian Public & Others
THE SCALE OF THE DOMESTIC BUSINESS HAS INCREASED SIGNIFICANTLY…
0
200
400
600
800
1000
1200
1400
1600
1800
FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11
Turnover (in Rs cr)
211%
Cumulative 4 Years PAT
255.81
384.77 387.97 385.39 430.47
0
50
100
150
200
250
300
350
400
450
500
31st March 2007
31st March 2008
31st March 2009
31st March 2010
31st March 2011
PAT (in Rs Crores)
OUR INTERNATIONAL BUSINESS TOO, HAS GROWN SIGNIFICANTLY OVER THE LAST YEAR…
562
977
FY 09-10 FY 10-11
Turnover (in Rs cr)
106
-47
FY 09-10 FY 10-11
PAT (in Rs cr)
26
GUJARAT NRE COKING COAL LTD OVERVIEW
ASX listed hard coking coal producer
» Market capitalization of ~A$ 198.58 million
100% owner of two underground mines in NSW, Australia
» NRE No. 1 & NRE Wongawilli
JORC reserves of 125 Mt and resources of 651Mt
Majority of ROM coal sold under contract to major shareholder (Gujarat NRE Coke)
» Commercial terms based on market formula
Targeting to increase coal production to 6.0Mtpa by 2015
Wollongong
Kiama
Port Kembla
Port Kembla coal
loader 18 Mtpa Sutton
Forest
proposal
Berrima
Dendrobium
W. Tahmoor Appin
Westcliff Northcliff
Southern
Coalfield
NRE No. 1
NRE WONGAWILLI
BHP Illawarra
Coal
Peabody
Metropolitan
Xstrata
Tahmoor
Capital structure Key shareholders
1. Share price as at 6th January 2012
2. Net debt per the 2011 Annual report at 31 March 2011, calculated as total debt
less cash & short term investments
OWNERSHIP & CAPITAL STRUCTURE
Source: Yahoo Finance
Share price1 (A$) 0.20
Share o/s (m) 992.93
Undiluted Market Cap. (A $ m) 198.58
Net debt2 (A $ m) 134.4
Enterprise value (A $ m) 392.00
LTM share price performance
70.22
29.78 Gujarat NRE Coke Limited
Public
27
Trading multiples
EV / Resource 0.6x
EV / Reserve 3.1x
28
Located in the Southern Coalfields of NSW
» ~10km north of Wollongong
» ~16km from Port Kembla Coal Terminal
Premium quality hard coking coal
JORC reserves of 92MT and Resources of 314MT
» Targeting Wongawilli Coal Seam
Undertaking an upgrade of all mine infrastructure
Currently developing for longwall extraction with plans to
install longwall equipment in FY 2011/12
» Targeting 3.0 Mtpa production by 2015
In excess of 30 years potential mine life
Located in the Southern Coalfields of NSW
» ~20km south west of Wollongong
» ~14km from Port Kembla Coal Terminal
Premium quality hard coking coal
JORC reserves of 33Mt and resources of 337Mt
» Targeting Wongawilli Coal Seam
Currently undertaking longwall extraction from remnant
areas
Initiated new access driveage in support of new longwall
panels to the west & south
» Target production capacity to >3.0 Mtpa by 2015
In excess of 30 years potential mine life
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Excellent Rail – Road linkage
All product transported through
uncongested Port Kembla Coal terminal
Regional rail and port infrastructure
capacity of 18Mt
Gujarat NRE holds 16% equity in Port Kembla Coal Terminal and a seat on the Board.
Cash operating costs (pre Royalty), US $/t FOB Port Kembla
Coal Terminal for ROM coal (pre washing)
Bord & Pillar, Development ~ US $120/t
Longwall production
» @ 1.0 Mtpa ~ US $ 65/t
» @ 1.5 Mtpa ~ US $ 55/t
» @ 3.0 Mtpa ~ US $ 39/t
GROWTH PLAN – OPEX
NB: Costs normalised at long term exchange rate AUD:USD = 0.8
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GROWTH PLAN – CAPEX
Expansion Capex: circa $500 million
Current Status : NRE No. 1
» Will result in > 3 Mtpa capacity mine
» Wonga Mains development well advanced
» Tail Gate & Main Gate development advanced for LW installation in FY 2011/12
» 4 x New CM‟s purchased
» New 4,000 tph conveyor commissioned
» Order for new 3,500 tph Joy LW placed
Current Status : NRE Wongawilli
» Will result in > 3 Mtpa capacity mine
» Wonga South Portals started
» 2 x New CM‟s purchased
» Order for Joy LW upgrade placed
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• The two hard coking coal mines - Resources of
more than 650 million tonnes
• Valued in the range of US$ 3 to US$ 10 per
tonne by any valuation expert
• Implying such valuation parameters even at the
lower end of US$ 3 per tonne - we get a
valuation at US$ 2 billion for the two mines
The Value Unlocked – Potential Unlimited
• Such resource based valuations are
not reflected in the usual EPS or PE
calculations
• It is for us to make our own value
judgements
• At Gujarat NRE, we are growing
and there is no looking back
• It is only a matter of time when we
start reaping rich rewards
• In the mean time would never like
to trade off long term gain to ease
some short term jerks as we grow
GNCCL planned output by 2015
Poised to become one of the largest
Hard Coking Coal producers from Australia in 4-5 years
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We are in Australia
The only ASX-listed pure-play metallurgical coal
developer/producer
Positioned for significant production growth to 6 Mtpa by
2015
Attractive valuation metrics relative to other ASX coal
explorers, developers and producers
Received formal approval for mine development – installing Longwall in NRE No 1 mine as per schedule. Longwall mining to start in a few weeks
Longwall equipment being assembled on site:
Community is at the heart of development
Strong bonds with the Community
• Sponsor of various sporting
events
• Major sponsor of Cricket NSW
and South Coast Wolves
• Supporters and title sponsor of
the Wollongong NRE Hawks
National basketball league team
• A long term commitment to the
Light & Hope Clubhouse
Foundation for mental health
Commitment to the Community
The Oil Saga at Gujarat NRE
Two onshore exploration blocks namely
EP457 & EP458 covering an area of 10640
Sq. KM in Western Australia
Already completed detailed re-processing
and interpretation of more than 1800 line
km multiple vintage 2D seismic data
Environmental surveys and cultural
clearances are taking place
In the next phase, the outcomes obtained
so far would be confirmed by advanced
techniques like 3D seismic survey and
locations for drilling would be henceforth
finalized.
Rights issue of OFCBs by
GNMRL
Disclaimer
This communication is just an information for private circulation to the shareholders of Gujarat NRE Mineral
Resources Limited only and not an Investment advice or solicitation to any person in any jurisdiction to
invest in the Bonds and/or Equity Shares of Gujarat NRE Mineral Resources Limited
What are Optional Fully
Convertible Bond (OFCBs)
OFCBs are „hybrid instruments‟ comprising the features and benefits of both shares and bonds.
OFCBs as the name suggests are convertible bonds with a right / option to the bondholders that allow them to either redeem the bonds at the end of maturity period or exchange the bonds for equity shares of the company.
Upon such exchange, the debt obligations inherent in such bonds are discharged by the entity by issuing equity shares.
Evaluate GNMRL OFCB Rights issue
Bonds – 9-10%
Fixed Deposit – 9-10%
Fixed Maturity – 10-11%
Plans
GNMRL OFCB – >13%
RIGHTS ISSUE
Salient Features of the
Rights Issue of OFCB
Applicants Existing Shareholders of the Company
Issue Price (*) Rs 30,000 per Bond
Issue Opens on 26th December 2011
Issue Closes on 15th February 2012
Coupon Zero Coupon Unsecured Bond
Rights
Entitlement
1 Bond for every 1000 shares or part thereof held subject to a minimum of
1 Bond per shareholder
Maturity /
Redemption
Period
18 months from the deemed date of allotment
Salient Features (Contd…)
Redemption
Premium
Each OFCB shall carry a redemption premium of Rs 6000 (i.e. a
redemption value of Rs 36,000)
Deemed Date of
Allotment 16th February 2012
Conversion
Option
Applicants shall, during the currency of the bond, have the option to
convert 1 OFCB into 2000 fully paid equity shares of the Company once
in every Quarter
Purpose / end
use of funds
Investment in Metcoke business and expansion and modernization
plans of Gujarat NRE group
Investment in oil exploration business in Australia
Expenditure towards general corporate purposes.
(*) Early Bird Incentive : Rs 600 per bond for application money paid on or before 14th January 2012
(the same has been extended till 20th January 2012 on receiving numerous requests from the
shareholders) and Rs 300 per bond for application money paid on or before 28th January 2012.
Benefits of OFCBs
Choice of Wealth
Redemption Premium
Conversion of Bonds into Equity Shares of
the Issuer Company
Assured Lucrative
Redemption Premium
The issue offers an assured lucrative
redemption premium of Rs 6,000 / bond upon
a minimum investment of Rs 30,000 / bond
over a period of just 18 months which means
an annualized effective rate of return of more
than 13 %
Benefits of OFCBs (Contd…)
Option to Switch
Risk Profile
An investor has the option to switch over
to another class of instrument (i.e, from
bond to equity shares) based on his /her
preference and risk appetite.
Hedging Impact
An investor may prefer to hedge there
position against any downturn in the
market conditions by assured returns
being offered in the bonds.
Share Performance in last 1 month
Rise of 57% in GNCL share price as against 14% in Nifty evidences the
potential worth of Gujarat NRE group
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GNCL NIFTY
TIME FOR SOME QUIZZING!!!
Get a chance to win a trip for 2 to Sydney and
Wollongong, Australia
How would you like a trip for two (self and spouse) admiring
the scenic beauty of Sydney and an optional visit to our
coal mines in Wollongong, Australia.
Just answer few questions which relate to us or more
rightly you and 2 best entries get this unique opportunity to
win a trip to Sydney and Wollongong.
Last date of Submission: 15th February, 2012 (Wednesday)
Winners announced: 29th February, 2012 (Wednesday)
THANK YOU
Mr Arun Kumar Jagatramka Chairman and Managing Director
Gujarat NRE Mineral Resources Ltd
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