Asian Mining Indaba, Singapore,

29th-31st October 2012

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Overview of Coal

A Fundamental Analysis

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Upcoming Core Consultants’ Report Titles

Quarterly Analysis of Trends in the Ferrochrome & Stainless Steel Industry Authored and Published by Core Consultants, reviewed by Andrew Jones

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Sino African Relations -An in-depth review of recent Chinese commodity deals and future strategy in Africa

A joint venture between Core Consultants & Beijing Axis-Available 2012

Structure

1 Overview of key Asian coal producers

2 Outlook for thermal coal

3 Outlook for metallurgical coal

China’s Coal Industry

6 China’s coal demand has increased by 251% to 3.24G tonnes in 2010 •Surpassed the US in 1986 as top consumer by volume •Making an effort to diversify energy supply, but nuclear programme slowed since Fuskishima •Population growth and economic development should see coal consumption doubling •Generation installation capacity increasing at more than 6% annually

Coal power units increasing by 5% annually

7 Coal generation to remain the main energy source

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2010 2015 2020 2025 2030

Cap

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Electricity generation capacity mixture in China by 2030

Coal Oil Hyrdo Gas Nuclear Wind Other

Indonesia

9 2000-2006 coal production more than double to 153m tonnes

Indonesian coal accounts for 50% of India’s imports

Indonesia produces a high-grade thermal coal with low ash

From 2000-2006 coal production increased to 153m tonnes from 77m tonnes

2008- Government set target production rate of 261m tonnes per annum

2010- produced over 300m tonnes

10 2000-2006 coal production more than double to 153m tonnes

Indonesian coal accounts for 50% of India’s imports

Indonesia produces a high-grade thermal coal with low ash

From 2000-2006 coal production increased to 153m tonnes from 77m tonnes

2008- Government set target production rate of 261m tonnes per annum

2010- produced over 300m tonnes

11 Consumption to increase 5 times by 2025

Gov. legislations to reduce coal exports and increase prices has impacted Indian power projects

Decision by Indonesian gov. to benchmark its coal against international prices prompted political intervention

Gov. mandated 24% of all coal production to be used domestically caused India power projects to be put on hold

Output expected to reach 485mt (2015), 680mt (2020), 955mt (2025)

Consumption to rise to 300mt (2025) from 60mt (2012)

Mongolia

13 Mongolia the fastest growing economy in the world

Huge potential to take diversify away from reliance on Australian production

Mongolia holds ~ $1.3trn in mineral deposits

FDI increased to $4.4bn (50% of the country’s GDP) in 2011- Mongolia

considered the fastest growing economy in the world

Mongolian coal is eating into Australia’s export market

Proven reserves of 12.2bn tonnes including 2bn tonnes of coking coal

Ytd until August- country produced 681m tonnes of coal, up 11.5% y.oy.

14 Today there are numerous active coal projects in Mongolia

Mongolian coal is growing as government fast tracks projects for use in domestic power stations

Number of active coal projects as well as ongoing exploration

Erdene Xstrata coal are exploring a 400,000 ha site in South Western Mongolio

Tavan Tolgoin (6.5m tonnes with LOM of 30 years)

Mark Group has two producing mines

South Gobi- 176m tonnes of proven and probable reserves

Ulaan Ovoo- 190,000 tonnes of thermal coal being sold to Russia from this mine

since 2011

Shivee Ovoo is a producing mine with capacity of 2m tpa and is presently

producing 1.2m tonnes

Thermal Coal

16 Prices been exceptionally weak despite high demand forecasts

Prices unsustainable and we expect rally by 1Q13

Chinese prices bottomed at

RMB 610/ t ($102/t) in July

now trading $5-6/t below

Newcastle coal delivered to

South East China

Global stocks are adequate

so countries are needing to

off-load

2010- produced over 300m

tonnes

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Ave 90% 100% FOB Price

17 Predictions of production cuts coming to light

Global production cuts should result in thermal coal price rally

Indonesia expect output decline by 30% PT Pesona Khatulistiwa Nusantara reduced output target by 30% Bumi Resources posted net loss Adaro cut production forecast by 4% Berau planning 1m t production cut Banpu announced 3m tonnes reduction

Australian projects scaled back US producer Alpha Natural Resources planning to cut 9% of its workforce which should reduce output by 16m tonnes

18 Unseasonal rains resulted in prolonged use of hydropower

End of monsoon season should see power stations restocking

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2010 2011 2012

China's monthly hydro power utilisation hours

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China's monthly coal-fired power utilisation hours

19 Maintenance of Daqin railway led to decline in inventory

South East China should begin restocking

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Daqin Railway monthly transportation volume

20 Prices should improve by the end of the fourth quarter

Expect prices to reach $105/tonne by end of 1Q13

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105110

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Thermal coal forecast

Forecast Forward curve (July 31st)

Metallurgical Coal

22 4Q12 benchmark prices fell $55/t from 3Q12 to $170/ tonne

Anticipation of increased output resulted in severe fall in benchmark prices over 4Q12

Distressed cargoes

BMA announced that they returned to full capacity

Limited port and rail capacity constraints

New supply expected to come from Anglo/Rio’s Benga mine in

Mozambique as well as added output from Mongolia

23 Strikes and poor weather impacted Australian production in 1H12

Operating costs average $190/t therefore prices unsustainable

Strikes and wet weather caused exports to decline

3Q12 BHP announced that they would lift force majeure

Coking coal output should increase to 1.8m t in 2H12

5.3m tonnes expected to be delivered by the big three

Prices unsustainable when compared with costs some

curtailments expected

24 Chinese steel mills reducing production

1.51

1.39

1.69

1.56

1.88

1.641.55

1.791.71

2.021.96

1.63

2.05

1.87

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Inventory days (coking coal)

25 Chinese imports rose 36% in the first 7 months

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Chinese coking coal import by country

Australia Mongolia Others

-30%

-20%

-10%

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Japanese imports of coking coal (m tonnes)

26 1Q13 negotiations will be higher than now

Average if $228/tonne in 2013 compared to $223/tonne in 2012

Low stock levels in China

Current prices in Australia on a par with producers’ costs

Japan reconstruction efforts

These factors will drive higher prices

Disclaimer • This document is for information purposes only. The information contained in this document has been

compiled from sources believed to be reliable. Whilst every effort has been made to ensure that the information is correct and that the views are sound, Core Consultants cannot be made liable for any loss, no matter how it may arise.

• Certain statements contained in this presentation constitute forward-looking statements. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from actual future forecasts. Investors are cautioned not to place undue reliance on these forward-looking statements

• Copyright Notice © Core Consultants, 2011. All rights reserved. No part of this publication (text, data or graphic) may be reproduced, stored in a data retrieval system or transmitted, in any form whatsoever or by any means (electronic, mechanical, photocopying, recording or otherwise) without obtaining Core Consultants’ prior written consent. Unauthorised and/or unlicensed copying in any part of this publication is in violation of the copyright law.

• Violators may be subject to legal proceedings and liable for substantial monetary damages per infringement as well as costs and legal fees. Brief extracts may be used for the purpose of publishing commentary or review only provided that the source is acknowledged.

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