International Coal Trade: the race for Colombia

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Tripartner Trade Colombia Thermal Coal Client Debrief Jet.singh@TripartnerTrade.com Summer, 2010

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Tripartner Trade is an international trade & supply chain advisory firm Exclusive purchase mandate for a few selected utilities & trading companies based in China Procurement services to allow our clients to focus on their core business. We advise on international supply agreements for steam coal, petroleum coke & coking coal International portfolio of reliable, cost-competitive suppliers with solid growth prospects to help address our clients’ long-term resource needs We represent 1 client per deal in order to secure the most attractive price & payment terms We focus on win-win relationships to accrue benefits across the entire supply chain We offer finder fee agreements for all successful deals About Us Jet.Singh@TripartnerTrade.com Tripartner Trade 2

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Global Coal Market Strengthening Supply / Demand fundamentals Colombia exports to surpass Russia & South Africa The Race for Colombia Overview Infrastructure Top Suppliers Risk of supplier monopoly but emerging miners are gaining share Emerging miners are gaining share of exports against major MNC’s Profiles of dominant & emerging Colombian mining companies with access to rail + port capacity Strategies to ensure cost-competitive, growing supply in the years ahead Current offerings of Coal Supply Contracts Profiles of emerging miners (not resellers) with rail access + port capacity Supplier listing + key contact names / email addresses Listing of FOB & CIF offerings Contents Confidential & Privileged Tripartner Trade 3

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World Energy Consumption Confidential & Privileged 4 Tripartner Trade

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World Fuel Reserves Confidential & Privileged 5 Who owns fossil energy reserves & how long might they last? Tripartner Trade

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Asia will drive growth in worldwide electricity production Confidential & Privileged 6 Source: EIA, International Energy Outlook 2007 Avg. Annual Growth in Electricity by Region (2004 to 2030) Energy Demand Fundamentals Electricity growth heavily depends on availability of coal -- more so for emerging economies Tripartner Trade

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World Coal Consumption Confidential & Privileged 7 114.5 136.4 151.6 167.2 182.9 199.1 India & China to double thermal coal imports over the next 5 years Coal Consumption by Region (Quadrillion BTU per year) Source: Report #:DOE/EIA-0484(2007) Release Date: May 2007 Next Release Date: May 2008 : International Energy Agency, Coal Information 2007 Tripartner Trade

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World Coal Production (2009) Confidential & Privileged Tripartner Trade 8 Global Production Thermal 85% vs. Coking 15% Domestic Internationally Traded Thermal Coking Thermal Coking 6,200 million MT (est.) 5,250 million MT 950 million MT 4,650 million MT 600 million MT 625 million MT 225 million MT Source: IEA, Xstrata, McKloskey, Platts International Coal Report, Braemar Seascope Australia

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Average FOB Cost by Country Confidential & Privileged Tripartner Trade 9 Higher FOB prices have recently enabled Colombia mines to be cost competitive & reshape global coal trade flow patterns Source: Data provided by Xstrata

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Global Seaborne Coal Trade (2009) Confidential & Privileged Tripartner Trade 10 Source: International Energy Agency, Bramar Seascope Presentation at Coaltrans India, March 2010 World Coal Exports: 932 MM mt Colombia forecasted to achieve #3 status by 2011 / 2012 Significant export growth will come from Colombia Highly restricted growth for exports from Indonesia, Australia, Russia & South Africa until 2014 / 2015

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India’s explosive growth in coal imports will more than double over the next 5 years Coal India Ltd expects coal imports to increase 26% to 68 MM MT in 2010 Share of India’s electricity from coal-fired power stations will increase from 50% (today) to ~70% by year 2030 India’s share of global seaborne coal exports will reach 16% in 2015 and will surpass China’s 15% share China’s thermal coal imports forecasted to double over the next 5 years Xinhau News Agency reports domestic coal shortfall of 200 million MT by 2015 ~12% growth in thermal coal imports forecasted in 2010 to ~115 million MT 1.4 MM MT were imported from Colombia into China in Dec 2010 at avg CFR $107/MT (Reuters 1-15-2010) NASA projecting winter season in 2010/2011 to be comparable or colder to last year Other Asian economies continue to increase imports Japan, Korea, Tawian expected to show moderate growth Vietnam expected to import ~100 million MT by 2015 (from being net exporter in 2010) Australia, Indonesia, South Africa are already experiencing very slow growth in export volumes due to constraints in rail + port logistics until 2012 or beyond South Africa’s coal exports in 2010 likely to be lower than 2009 Stage set for Coal ‘Super-Cycle’ Confidential & Privileged Tripartner Trade 11 Sources: Sunday Times (South Africa), Platts International Coal Report, EIA, Transneft, Bloomberg

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Global Coal Market Strengthening Supply / Demand fundamentals Colombia exports to surpass Russia & South Africa The Race for Colombia Overview Infrastructure Top Suppliers Risk of supplier monopoly but emerging miners are gaining share Emerging miners are gaining share of exports against major MNC’s Profiles of dominant & emerging Colombian mining companies with access to rail + port capacity Strategies to ensure cost-competitive, growing supply in the years ahead Current offerings of Coal Supply Contracts Profiles of emerging miners (not resellers) with rail access + port capacity Supplier listing + key contact names / email addresses Listing of FOB & CIF offerings Contents Confidential & Privileged Tripartner Trade 12

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Colombia Thermal Coal Confidential & Privileged Tripartner Trade 13 Exports Colombia Thermal Coal Production has doubled over the last 10 years with aggressive growth supported by infrastructure + port capacity additions “Our least optimistic scenario is that total production will exceed 150 million MT in 2019” -- E. Monroy, Director, Colombia Ministry of Mines & Energy

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Colombia Thermal Coal Exports Confidential & Privileged Tripartner Trade 14 Exports by Region (Cerrejon) Exports to Asia (Cerrejon) Source: CMC presentation at Coaltrans Miami 2010

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Colombia Confidential & Privileged 15 Tripartner Trade 2nd highest population with 45 million (MM) 3rd largest destination of Foreign Direct Investment (FDI) 1st rank among Latin America countries for ‘Doing Business’ by World Bank(1) Ranked 37th worldwide Ranked 5th worldwide for category of ‘Protecting Investors’ Consistent performance & improvement since 2006 Only country in South America with consistent infrastructure investment over the last decade Colombia in South America Solid recovery forecasted from recent global economic downturn >5% economic growth rate from 2002 to 2007 and expected to remain robust 2.7% growth forecasted in 2010 Continuing progress in reducing public debt levels from 35% in 2004 to goal of 23.8% in 2020 2010 budget deficit of 3.1% GDP Special 30% deduction on tangible fixed income producing assets 15% income tax rate Economy Increasingly becoming a valuable trading partner Currently negotiating 19 International Investment Agreements with 39 countries Recent visit to China by government delegation promoting port & other investment opportunities Total exports of USD 41.1 BB (F.O.B.)2008 estimate Petroleum, Coffee, Coal, Nickel Steadily improving security & stability within country Last terrorist attack occurred in 2002 on Cerrejon railway Agreements in English are enforceable by court system

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Foreign Direct Investment Confidential & Privileged Tripartner Trade 16

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Colombia (II) Confidential & Privileged Tripartner Trade 17 Growing world wide demand for Colombia's mineral assets is a driving force for the Colombian economy Major world supplier of thermal coal Key player in the ferronickel market. Promising mining potential in basic & precious metals/gems Improvement in security situation lifting economic prosperity Annual Foreign investment surpassed $1 Billion (BB), an increase of ~400MM2003 Mining sector divided into 26 mining districts identified by government each offering a specific mineral product. Eastern & Southern regions earmarked for increased investment in Exploration & Production (E&P) Refining capacity of 323.000 barrels per day Energy & Mining ~6,500 million MT of recoverable coal reserves 2003 estimated Mostly high-quality bituminous coal, located in the north Small share of coking coal (~300,000 MT per month production) Relatively clean burning with Sulfur content < 1% Coal quality is very low in Nox emissions and will often capture a price premium from utilities needing to lower emissions Majority of reserves concentrated in the Guajira peninsula in the north and the Andean foothills in the interior. Coal

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Confidential & Privileged Tripartner Trade 18 Ports Atlantic Ocean Pacific Ocean Expansion of Panama Canal (completed in 2013) will ease freight costs into the Pacific Enabling passage of small capesize vessels of 130,000 – 140,000 MT Coal trade handled primarily by Bolivar, Santa Marta & Prodeco ports 11

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Infrastructure Confidential & Privileged Tripartner Trade 19 Ports were privatized in 1993 with greater competition & competitiveness than other Latin American countries Privatization has resulted in large & rapid productivity / efficiency improvements Port companies expanding investments to include infrastructure projects enabling further productivity improvements Bolivar port loading rate exceeds 40,000 MT per day Has never declared a force majeure Integrated mine, rail & port processes

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Rail Network Confidential & Privileged Tripartner Trade 20 Strong, consistent investment in railway networks will support coal production expansion Integrated mine, rail, port processes for Bolivar, Santa Marta Fenoco railway project transports >80 MM MT per year Between Santa Marta, La Loma, Cienaga and Chiriguana (Drummond), and La Dorada port on the Magdalena River (interior province of Caldas) Proposed railway tracks along the Magdalena corridor, a 192 km stretch that will link Drummond's La Loma mine with Cienaga on the coast, where a new port is planned. Rail Network Planned Projects Carare Railroad 555 km railway to increase coking coal transport capacity from Cudinamarca, Boyaca, Santander Port extensions include include Agua Dulce, Contecar, Peurto Neuvo New port construction planned for Peurto Bahia, TCVUEN currently seeking investors

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Infrastructure Confidential & Privileged Tripartner Trade 21 Projects & Investment by Sector Total Infrastructure Investment by Sector Consistent investment within Colombia’s infrastructure will provide for continuing capacity to increase exports Projects coming online in the near future

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Global Coal Market Strengthening Supply / Demand fundamentals Colombia exports to surpass Russia & South Africa The Race for Colombia Overview Infrastructure Top Suppliers Risk of supplier monopoly but emerging miners are gaining share Emerging miners are gaining share of exports against major MNC’s Profiles of dominant & emerging Colombian mining companies with access to rail + port capacity Strategies to ensure cost-competitive, growing supply in the years ahead Current offerings of Coal Supply Contracts Profiles of emerging miners (not resellers) with rail access + port capacity Supplier listing + key contact names / email addresses Listing of FOB & CIF offerings Contents Confidential & Privileged Tripartner Trade 22

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Dominant market share in Colombia Operate own rail & port Joint venture between Anglo-American, BHP Billiton, Xstrata Deposits are located in the Guajira region of northern Colombia. Open cut mines are the largest earthmoving operations worldwide. Approximately one million tonnes of material are moved every day, 365 days per year. Nearly 4,000 employees & 4,000 contractors Exports via Puerto Bolivar terminal w/ integrated rail line Cerrejon Strictly Confidential & Privileged Tripartner Trade 23 Source: CMC presentation at Coaltrans Miami 2010

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Cerrejon Confidential & Privileged Tripartner Trade 24

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Glencore Confidential & Privileged Tripartner Trade 25 Glencore’s Colombian Assets Coal operations comprise high-grade thermal coal mining operations and associated infrastructure Saleable reserve base > 250 million tonnes Two open pit coal mining operations Calenturitas: 14,000,000 MT Steam Coal (after ramp-up) La Jagua Mine: 7,000,000 MT Steam/PCI Coal (after ramp-up) Export port facilities at Puerto Zuñiga in the town of Santa Marta on the Caribbean coast of Colombia ~40% ownership share in railway linking Calenturitas and Puerto Zuñiga and proprietary rolling stock. Part of consortium investing in Peurto Neuvo expected to be operational in 2012/2013

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2 coal mines both located in Cesar province Pribbenow (La Loma) produces ~20 million tons El Descanso production will be increased from ~3 million tons of coal plans to ~25 million tons over the next three years Coal produced among lowest in sulfur & ash coal currently exported from Colombia Coal transported from the mine ~190 km by railcar on the renovated portion of the Colombian National Railroad System and National Highway directly to Puerto Drummond, the deep-water ocean port.  Capability to load all sizes of vessels from handy-size up to the largest capesize.  Heavy investment in production infrastructure over the last few years has allowed Drummond Ltd. to grow shipments from 1 million tons in 1995 to 21.7 million tons in 2009. Currently seeking investment partner to aggressively expand export capacity Drummond Confidential & Privileged Tripartner Trade 26

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Emerging Supplier #1 Confidential & Privileged Tripartner Trade 27 Recently announced plans to expand & develop 4 open-pit & underground mines Production capacity estimated >19 Million Metric Tonnes per year Tripartner Trade is currently discussing off-take agreements on behalf of our clients in China

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Emerging Suppliers #2 to #6 Confidential & Privileged Tripartner Trade 28 available upon request

Summary: Analysis of seaborne coal trade and Colombia's rising importance to Asia -- the race for Colombia.

Tags: analysis of seaborne coal trade and colombia's rising importance to asia -- the race for colombia.

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