GUJARAT NRE SAILING AHEAD AMID TURBULENT TIMES

Transcription

1 GUJARAT NRE SAILING AHEAD AMID TURBULENT TIMES

2 Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by Gujarat NRE. To the maximum extent permitted by law, Gujarat NRE does not warrant the accuracy, currency or completeness of the information in this presentation, nor the future performance of Gujarat NRE group companies, and will not be responsible for any loss or damage arising from the use of the information. The information contained in this presentation is not a substitute for detailed investigation or analysis of any particular issue. Current and potential investors and shareholders should seek independent advice before making any investment decision in regard to Gujarat NRE or its activities

3 When did Man first think I shall dig the earth to sustain myself and my family?

4 Mining in the Stone Age The Neolithic Man mined flint, to make his tools and weapons. And for Hematite, to make red pigment ochre to decorate his caves

5 Ancient Egypt Ancient Egyptians mined malachite, turquoise, copper and gold for ornamentation, pottery and architecture.

6 Romans devised a novel method of hydraulic mining to improve upon the scale and scope of mining. Ancient Rome

7 Medieval Europe Iron Ore extraction was given a boost during the Middle Ages. The Crusades and other wars demanded an extensive and a well-equipped military.

8 The Time had come for Coal to take its rightful place in history, as the perfect raw material for Steel - which led the way into the modern world Industrial Revolution

9 With COAL we have the electricity that lights our houses, offices, malls and roads

10 COAL gives us the Power that Lights up our Lives

11 There is COAL In the Bridges that Connect US

12 In the cars that take us to our destinations In the planes that fly us In the ships & containers that ferry our cargo

13 The Pumps that water our agricultural fields are made of iron & steel with the help of coking coal And run on electricity generated from COAL power

14 The Wind mills are made of Steel with the help of coking coal

15 Even Solar energy cant be generated without using steel and thus, coal

16 From a safety pin to the tall buildings COAL influences our lives

17 Each Tonne of Steel that we see around us Has one tonne of coking coal in it

18 It is COAL that has powered our Industries for ages

19 Even the tooth paste of our daily use has coal And soda ash used in making washing powder is made with the help of coking coal

20 Without COAL $20 $60 $250 $80 $350 $12/lt The Items of our daily use would either become unavailable or too costly beyond the means of the ordinary citizen

21 Without COAL Jobs would be lost in thousands Unemployment would rise to humongous proportions

22 Without Coal Do we want to plunge into darkness?? And cut trees to give us light??

23 Without COAL Do we want to Roll Back the Wheels of Civilization??

24 Global Climate Change is a truth that we all must face but we need to ensure that facts and figures are not used to forcefully slaughter the human civilization in a fashion similar to the Y2K scare at the beginning of this millennium which turned out to be one of the biggest hoax calls in the modern era.

25 No Greenmail. No Eco Pornography. No sham. It is time to be more mature. For the sake of the Brotherhood of MAN

26 Think before you say No More Coal We would be cleaning our forests, ending our civilizations Without COAL

27 Love and Steel.

28 The story of 5 extraordinary women and the wars that paid tribute to their love

29 Helen of Troy The face that launched a thousand ships

30 Cleopatra Queen of Egypt Lover of Rome

31 Anarkali Love conquers fear.

32 Married in a bunker, she died by taking cyanide, but kept her love alive For the man that the world hates. Eva Braun

33 Karuwaki He pillaged Kalinga for her, only to renounce it all

34 All these 5 Love Stories led to Epic Wars & advanced use of Steel All the five wars that were fought in the backdrop of these epic love stories witnessed an improved usage of steel. From the Kalinga war in 3 rd century BC to the 2 nd World War in the 20 th century, all led to massive post war reconstruction and economic revivals The use of steel in weaponry also saw giant leaps in the chosen periods.

35 Be it at Peace or in War Civilizations have Grown on Steel The level of economic development is measured by the use of Steel It is Steel that is today pillaring the growth of China, India and other breakout nations

36 What is the India Story?

37 India on a Steeplechase To cross GDP of major developed economies Already crossed Australia s GDP (in 2010 current international $) in FY08 and Spain, Russia and Canada in FY 11 Likely to cross Brazil & UK in FY14, France in FY 15 and Germany in FY 17 Expected to arrive near Japan s level by FY 20 Source: D&B India

38 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Middle Class is on the rise India has huge untapped market potential..to be ignored by anyone at his own peril Discretionary Expenditure (52%) Share of Average Household Consumption Necessities 5 (48%) 42 Necessities (30%) Food, Beverages, and Tobacco Apparel Housing Utilities Household Products Personal Products & Services Transportation Communication Education & Recreation Health Care Discretionary Expenditure (70%) Source : McKinsey Global Institute India s middle class constitutes 50 million people at present. Likely to go up to 583 million people by 2025 Households that can afford discretionary spending likely to go up from 8 million at present to 94 million by 2025

39 * Coupled with it is demographic dividend and growing consumption levels Size of age group in 2007 (in million) Size of age group in 2050 (in million) Growth of age group ( in million) India United States Japan Germany United Kingdom France China Source: United Nations 2009* Telecom subscriber base (in millions) Automobile production (in millions) *Upto 31st Dec 2009

40 Rapidly Growing Middle Class will boost Disposable Income Middle Ascent class of as Indian a Middle percentage Class Percentage of population of population Source: Economic Times, PwC Analysis Source: IDFC Institutional securities, PwC Analysis

41 The next few decades would be the India story We are the protagonists - unfolding this play

42 Rich in mineral resources and has large reserves of primary metal ores such as iron ore, bauxite, chromium, manganese and titanium. Bauxite and iron ore deposits in India rank among the best in the world in terms of their quality and mine ability Raw material availability Conducive policy framework Unveiling of new mining policy. The govt is promoting investments India s burgeoning demand of minerals and metals to fuel its growing appetite. in manufacturing and infrastructure growth India s quest to become an Economic Power House Supporting Cost Framework Among the lowest labour & conversion costs worldwide. for the production of steel and alumina

43 Mining reserves in India Mineral Proven reserve in 2005 (million tonnes) Quality Bauxite 3290 The reserves consist primarily of Gibbsite whose conversion to alumina is less expensive Copper 1394 Low - metal content:1.2% as against world average of 2-3% Iron Ore Good; metal content 60% as against world average of 40-45% Lead - Zinc Ore 523 Good; metal content of 8-10% as against world average of 5% Manganese Ore 379 Medium; 35% metal content Chrome Ore 66 Good; 40-52%, Cr203 The market is valued at over $ 90 billion Source: FIMI, IBEF

44 Challenges in Indian mining industry scope of further growth Lack of adequate investment potential that can be tapped in future : Certain policy and procedural bottlenecks are coming in the way of major investment in this sector. However, certain reforms underway are aimed to mitigate these challenges that may attract future investments Inadequate database on mineral concessions: Better dissemination of information about areas available for different types of mineral concessions in India. Engaging the community : More community engagement would help in getting the required local assistance

45 Geological environment (in sq km) Gold: 1,12,000 Base Metal: 1,82,000 Diamond & Gemstone: 3,00,000 Iron ore: 4,000 Manganese ore: 4,600 Chromite ore: 2,500 Area covered by prospecting and future opportunities 20% to 30% of the potential area prospected; significant scope for prospecting and exploration in virgin areas Geological mapping and delineation of potential area 90% completed for hematite ore, 80% for manganese ore and 40% for chromite ore Platinum group of elements : 8,000 Coal: 48,500 Resource assessment carried out in early eighties Most areas covered under lease or forest; free areas may be taken up 1% to 2% area covered by prospecting; virtually an untapped field 70% explored up to 900 mt depth Lignite: 9,300 40% explored between the depth of 300 metres and 500 metres

46 Future Growth Drivers Huge demand growth Increase in per capita consumption of steel and aluminum Enhanced scope of new mining capacities in iron ore, bauxite, coal and gold Rapid growth of user industry to drive demand for metals and minerals

47 IMMENSE GROWTH POTENTIAL IN INDIAN STEEL SECTOR Domestic crude steel production grew at a compound annual growth rate of 8.4% in the last few years. 222 MoUs signed for planned capacity of around 276 MT by 2020 (challenge remains of how many translates into actual commissioning). Investments at stake are to the tune of $187 billion Increase in the demand of steel in India is expected to be 14% against the global average of 5-6%

48 Growth in steel consumption compared to GDP growth No Scenario Growth in GDP in the period Implied growth in steel consumption 1 Scenario 1 8.0% 9.1% 2 Scenario 2 8.5% 9.7% 3 Scenario 3 9.0% 10.3% 4 Scenario 4 9.5% 10.8% Expected to increase by around 9% (or little less than 9% under present circumstances) and can go up to >10% if the over all economic condition improves In developing phase, i.e. during infrastructure build-up period, the Steel growth to GDP >>1 failing to <1 as services surpass manufacturing and the infrastructure build is completed. India having a large service sector, the effect is likely to be more pronounced Source: Report on Working group on steel, Ministry of Steel, Govt of India, Nov 2011

49 Although India has large coal reserves it is very short of prime HCC Domestic Coking coal is characteristic of :- o o o o High ash Tends to have poor coke strength Requires imported high quality HCC Not really suitable for PCI Domestic coking coal production has remained essentially flat for the past 10 years Production has infact declined since 2004 Coke production has risen by almost 30% since 2004 and is poised to grow further

50 Million Tonnes Increasing Coking Coal Demand in Line with Crude Steel Production Steel Production Coking Coal Demand PCI Source: Report on Working group on steel, Ministry of Steel, Govt of India, Nov 2011

51 Import of coking coal (million tonnes) (RHS) Demand Supply Scenario in Coking Coal (in Million Tonnes) Demand of coking coal Production Import Source: Annual Report , Ministry of Coal, Govt of India

52 Million Tonnes IN ABSENCE OF ADEQUATE DOMESTIC PRODUCTION, DEMAND TO BE MET BY IMPORTS 100 India's Coking Coal Import Forecast (P) 2015 (P) 2017 (P) 2020 (P) Source: various reports and internal estimates

53 But From Where would all this Coking Coal Come From??

54 Australia Has all the coking coal that INDIA Needs This quest for coking coal has brought me to Australia which is today my second home

55 And Australia reinforced the strong Indian values in 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

56 GUJARAT NRE COKE LIMITED (GNCL) The Indian Parent Company

57 Gujarat NRE group - Strengths 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 Experienced Management Robust track record of rewarding shareholders Having a strong presence in Australia the coal capital of the world

58 GNCL - A SNAPSHOT Largest independent producer of Metallurgical Coke in India Profit earning and dividend paying with strong financials and credit rating Present Met Coke capacity of over 1.43 MT, being increased to 4 MT by 2015 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) 58

59 Gujarat NRE group s Operations HARD COKING COAL (NSW, AUSTRALIA) RESERVES 125 MT RESOURCES 651 MT Gujarat NRE Coking Coal Limited (ASX: GNM) NRE NO million tonnes NRE Wongawilli 337 million tonnes Waste Heat Recovery Power Plants Khambhalia* Bhachau* Dharwad* Total Wind Power 15 MW 15 MW 30 MW 60 MW 87.5 MW STEEL UNIT TMT BARS : MTPA Coal Washeries METALLURGICAL COKE MTPA KHAMBALIA (Jamnagar) MTPA BHACHAU (Kandla) MTPA DHARWAD (Hubli) MTPA Khambalia Bhachau Dharwad 0.75 MTPA 0.75 MTPA 0.90 MTPA In Australia * Under implementation In India

60 Global crisis st March st March st March st March st March st March st March st March st March st March

61 Selected Customers A diverse global customer base spanning a variety of industries Lowers any industryspecific risk Commercial terms with subsidiary are based on market price at arms length basis 61

62 Coke Exports by Gujarat NRE 78% Brazil Brazil France Japan Argentina SE Asian Countries 3% 4% 6% 9% France Japan Argentina South Africa In addition to meeting the increasing domestic coke demand, Gujarat NRE Coke has been tapping the opportunity in met coke export market

63 GUJARAT NRE COKING COAL LTD - OVERVIEW ASX listed hard coking coal producer 100% owner of two underground mines in NSW, Australia» NRE No. 1 & NRE Wongawilli JORC reserves of 125 Mt and resources of over 650 Mt The majority of unwashed coal is sold under contract to the Company s major shareholder (Gujarat NRE Coke) at market price on arms length term Berrima Sutton Forest proposal Xstrata Tahmoor Southern Coalfield NRE WONGAWILLI W. Tahmoor Appin Dendrobium Westcliff Northcliff Wollongong Kiama Peabody Metropolitan BHP Illawarra Coal NRE No. 1 Port Kembla Port Kembla coal loader 18 Mtpa Targeting to increase coal production to >5 Mtpa by 2016

64 NRE No.1 Colliery Development FYE March Asset Highlights JORC Reserves JORC Resources FYE 3/2012A Production FYE 3/2013E Production Mine Life Distance to Port Kembla Current Longwall Operations 92 Mt 315 Mt 0.3 Mtpa 1.1 Mtpa 30+ years 16 km Brownfield mine development strategically located in Southern Coalfields of NSW NRE No. 1 Colliery coal products known for high quality Extensive coal leases (64 sq km) include three coal seams Bulli Balgownie Wongawilli In FY 2012, NRE No. 1 Colliery operations focused on the installation and commissioning of longwall equipment surface upgrades NRE No. 1 Colliery longwall commenced production in April 2012 Targeting 3 Mtpa by 2016

65 NRE Wongawilli Colliery Development Current Longwall Operations Brownfield mine development strategically located in Southern Coalfields of NSW Extensive coal leases (141 sq km) targeting Wongawilli seam FYE March Acquired in December 2007 and commenced longwall operations in 2009 Asset Highlights Initiated new access driveage in support of new longwall panels to the west and south JORC Reserves JORC Resources FYE 3/2012A Production FYE 3/2013E Production Mine Life 33 Mt 337 Mt 0.8 Mtpa 1.4 Mtpa 30+ years By maximizing operational and production capability of the longwall equipment, targeting 2 Mtpa by 2016 Distance to Port Kembla 16 km

66 Port Kembla Coal Terminal Latent Capacity NRE Wongawilli 14 Km to Port Kembla NRE No Km to Port Kembla Source: Port Kembla Port Corporation. Port Kembla Coal Terminal ( PKCT ) proximity to mines provides significant cost savings through reduced transportation costs Located within 16 Km of NRE No.1 and 14 Km of NRE Wongawilli Collieries Existing road and rail infrastructure offers direct port access PKCT is currently not operating at full capacity Provides minimal delays in loading and dispatch of cargo Results in lower demurrage charges and reduced overall transportation costs Current capacity utilization of 13.8 Mtpa against rated capacity of 17.5 Mtpa Undergoing capacity upgrade targeting of up to 31 Mtpa in two stages Stage 1: Increasing throughput capacity from 17.5 Mtpa to 22.5 Mtpa Stage 2: Further infrastructure upgrade to between 28 Mtpa and 31 Mtpa

67 Longwall system on display as it was being assembled on site

68 Recent Achievements Highest quarterly coking coal production from Australian mines in Q Q coking coal increased by 32% in comparable year on year quarterly production 60% increase in comparable year on year half yearly production in H Sales increased by 34% in Q (486 thousand tonnes) over Q (363 thousand tonnes) Half Yearly Coking Coal Production in 000 tonnes 0 H H Longwall Development

69 We are in Australia The only ASX-listed pure-play metallurgical coal developer/producer Positioned for significant production growth to >5 Mtpa by 2016 Attractive valuation metrics relative to other ASX coal explorers, developers and producers

70 Advantage Australia Democratic traditions Shared commonwealth traditions English speaking population Strong, stable Government where Rule of Law prevails Industry friendly, proactive and transparent bureaucracy

71 However All that glitters is not gold The bottlenecks that exist Infrastructure & port development Slow mine development approval process Lack of coordination between various government departments and conflicting statements which sometimes create confusion in media & community New Taxes (Carbon Tax + MRRT) Mining Industry made the whipping boy

72 In pursuance of Environmental Activism We tend to forget. There is hardly any alternative to Coal

73 A Sustainable and qualified response to Global Climate Change is required without stopping development The mining industry is sensitive to the carbon emissions and is taking all the right steps A matured workable strategy needs to be designed so that we do not jeopardize development and at the same time address the challenge of climate change

74 THERE S A RIGHT WAY AND A WRONG WAY TO PROTECT THE ENVIRONMENT

75 ENVIRONMENTAL ACTIVISM MUST RECOGNISE THAT HUMANS ARE ALSO PART OF THE ENVIRONMENT

76 JOBS, LIFESTYLES & DREAMS WILL BE DESTROYED. IF WE RUSH TO A JUDGEMENT, IMPOSE JOB CUTS & KILL NEGOTIATIONS WITH AN ECONOMY ALREADY MIRED IN RECESSION

77 We must protect THE ENVIRONMENT while taking into account The needs of Society & the Community

78 Energy is the lifeblood of the world economy Over 85% of world energy need is met from CO2 emitting fossil fuels Mining generates hundreds of millions of jobs worldwide sustains the global economy Policymakers need to realise the negative consequences of radical environmental policies and global warming hysteria

79 There is much more to mining than meets the eye Mining generates hundreds of millions of jobs worldwide sustains global economy With mines & industry constrained, the world could revert back to dark ages EUROZONE CRISIS IS A LIVING EXAMPLE

80 A view from Other side of the fence

81 AT GUJARAT NRE We Produce Premium Hard Coking Coal Which is considered the Greenest variety of coal

82 NRE ENVIRONMENT IS OUR MIDDLE NAME (NATURAL RESOURCES ENVIRONMENT) We believe in giving back to The environment in Multiples of what We take from it

83 We believe that Employees are our biggest Asset And take them along in our Growth Path

84 Employee Safety has been our watchword Organise regular safety drills and workshops Specialized Focus on Safety Instituted an innovative Quarterly Chairman Safety Awards for all employees

85 Which makes us one of the largest employers of the region The NRE Family, over 500 employees and their families.

86 POWERING UP ILLAWARA The Company has a strong focus on strengthening its bonds with the community it operates in thereby reassuring its staff and the local community that it is committed to be a long term player and be a part in scripting the ongoing success in the region.

87 COMMUNITY IS AT THE HEART OF DEVELOPMENT Sponsor of various Sports events Major Sponsor of Cricket NSW Supporters and title sponsors of the Wollongong NRE Hawks NBL team One of the major employers of the Illawara region over 600 employees Generates multiple numbers of indirect employment

88 Strong Bonds with the Community

89

90 A Snapshot of our Longwall Open Day in Oct 2011

91 Building Bridges

92 Accolades Premier s NSW Export Awards The Australian Export Awards is a national awards program which recognizes and honors export excellence thorough innovation and commitment. The Company won the 2009 Premier s NSW Export Award in Minerals and Energy sector and became one of the finalists at National level. In April 2008, appointed honorary NSW Sydney Ambassador to India by the Premier of NSW This year declared as the Person of the Year 2009 by the Illawarra Mercury

93 Commitment to the Community

94 Commitment to the Community

95 THANK YOU Arun Kumar Jagatramka Executive Chairman Gujarat NRE Coking Coal Ltd 95