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									Tripartner Trade

Colombia Thermal Coal
Client Debrief



Jet.singh@TripartnerTrade.com

                                Summer, 2010
  About Us
     • 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




Jet.Singh@TripartnerTrade.com            Tripartner Trade                                        2
  Contents
   1. Global Coal Market
               – Strengthening Supply / Demand fundamentals
               – Colombia exports to surpass Russia & South Africa

    2. The Race for Colombia
               – Overview
               – Infrastructure
               – Top Suppliers


    3. 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


   4. 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
Confidential & Privileged                  Tripartner Trade                                     3
  World Energy Consumption




Confidential & Privileged   Tripartner Trade   4
  World Fuel Reserves
 Who owns fossil energy reserves & how long might they last?




Confidential & Privileged          Tripartner Trade            5
   Energy Demand Fundamentals
    Asia will drive growth in worldwide electricity production

                             Avg. Annual Growth in Electricity by Region (2004 to 2030)




                             Electricity growth heavily depends on availability of coal
                                         -- more so for emerging economies

Source: EIA, International Energy Outlook 2007

 Confidential & Privileged                       Tripartner Trade                         6
   World Coal Consumption
    India & China to double thermal coal imports over the next 5 years

              Coal Consumption by Region (Quadrillion BTU per year)



                                                                                                      199.1
                                                                                    182.9
                                                                     167.2
                                                   151.6

                                    136.4
                  114.5




Source:
Report #:DOE/EIA-0484(2007) Release Date: May 2007 Next Release Date: May 2008 : International Energy Agency, Coal Information 2007


 Confidential & Privileged                                 Tripartner Trade                                                           7
   World Coal Production (2009)
                             Thermal                                                       Coking
                              85%                            vs.                            15%

                                                    Global Production

                                                     6,200 million MT
                                                           (est.)

                                 5,250                                                          950
                                 million MT                                                     million MT

                             Domestic                                            Internationally Traded


                      4,650                    600                                   625                     225
                      million MT               million MT                            million MT              million MT

               Thermal                  Coking                                Thermal                  Coking




Source: IEA, Xstrata, McKloskey, Platts International Coal Report, Braemar Seascope Australia

 Confidential & Privileged                          Tripartner Trade                                                      8
   Average FOB Cost by Country




                       Higher FOB prices have recently enabled Colombia mines to be
                         cost competitive & reshape global coal trade flow patterns

Source: Data provided by Xstrata

 Confidential & Privileged                 Tripartner Trade                           9
  Global Seaborne Coal Trade (2009)




                                                      World Coal Exports: 932 MM mt

                                              2009 Global Coal Exports (% share)

                                  Australia                                          25.6%
                                 Indonesia                                   21.0%           Colombia forecasted to achieve
                                                                                             #3 status by 2011 / 2012
                                    Russia                        10.6%
                                                                                             • Significant export growth will come
                               South Africa                 8.5%                               from Colombia
                              United States                7.7%                              • Highly restricted growth for exports
                                                                                               from Indonesia, Australia, Russia &
                                 Colombia                 7.0%                                 South Africa until 2014 / 2015

Source: International Energy Agency, Bramar Seascope Presentation at Coaltrans India, March 2010

 Confidential & Privileged                             Tripartner Trade                                                               10
   Stage set for Coal ‘Super-Cycle’
       • 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

Sources: Sunday Times (South Africa), Platts International Coal Report, EIA, Transneft, Bloomberg

 Confidential & Privileged                            Tripartner Trade                                                         11
  Contents
   1. Global Coal Market
               – Strengthening Supply / Demand fundamentals
               – Colombia exports to surpass Russia & South Africa

    2. The Race for Colombia
               – Overview
               – Infrastructure
               – Top Suppliers


    3. 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


   4. 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
Confidential & Privileged                  Tripartner Trade                                     12
Colombia Thermal Coal
Production has doubled over the last 10 years with aggressive growth supported by
infrastructure + port capacity additions
                                                     Colombia Thermal Coal
            100

             90

             80

             70

             60                Total Production
                               Domestic Consumption
      Production
             50
      (MM mtpa)                                                                                                           Exports

             40

             30

             20

             10

              0
                   1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F


        “Our least optimistic scenario is that total production will exceed 150 million MT in 2019”
                   -- E. Monroy, Director, Colombia Ministry of Mines & Energy


Confidential & Privileged                           Tripartner Trade                                                          13
   Colombia Thermal Coal Exports
 Exports by Region (Cerrejon)                              Exports to Asia (Cerrejon)




Source: CMC presentation at Coaltrans Miami 2010

 Confidential & Privileged                         Tripartner Trade                     14
 Colombia
Colombia in South America
 • 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
Economy
 • Solid recovery forecasted from recent global economic
   downturn                                                       • Increasingly becoming a valuable trading partner
       – >5% economic growth rate from 2002 to 2007 and                 – Currently negotiating 19 International Investment
          expected to remain robust                                       Agreements with 39 countries
       – 2.7% growth forecasted in 2010                                 – Recent visit to China by government delegation
                                                                          promoting port & other investment opportunities
 • Continuing progress in reducing public debt levels from 35%
   in 2004 to goal of 23.8% in 2020                               • Total exports of USD 41.1 BB (F.O.B.)2008 estimate
       – 2010 budget deficit of 3.1% GDP                                – Petroleum, Coffee, Coal, Nickel

 • Special 30% deduction on tangible fixed income producing       • Steadily improving security & stability within country
   assets                                                               – Last terrorist attack occurred in 2002 on Cerrejon
       – 15% income tax rate                                               railway

                                                                  • Agreements in English are enforceable by court system

Confidential & Privileged                          Tripartner Trade                                                            15
  Foreign Direct Investment




Confidential & Privileged   Tripartner Trade   16
Colombia (II)
Energy & Mining
• 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

Coal
• ~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.


Confidential & Privileged                            Tripartner Trade              17
 Ports

                                                                                         Atlantic 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


                                                                         Pacific Ocean
      • 11




Confidential & Privileged                                   Tripartner Trade                              18
  Infrastructure
                            • 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



Confidential & Privileged   Tripartner Trade              19
  Rail Network
                                           Rail Network
                                           •   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.
                                           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

Confidential & Privileged   Tripartner Trade                                                      20
  Infrastructure
Projects & Investment by Sector                            Total Infrastructure Investment by Sector




                                                                 Projects coming online in the near future

                            Consistent investment within Colombia’s infrastructure will
                               provide for continuing capacity to increase exports


Confidential & Privileged                      Tripartner Trade                                              21
  Contents
   1. Global Coal Market
               – Strengthening Supply / Demand fundamentals
               – Colombia exports to surpass Russia & South Africa

    2. The Race for Colombia
               – Overview
               – Infrastructure
               – Top Suppliers


    3. 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


   4. 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
Confidential & Privileged                  Tripartner Trade                                     22
 Cerrejon
  •   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




Source: CMC presentation at Coaltrans Miami 2010

 Strictly Confidential &
 Privileged
                                                   Tripartner Trade        23
  Cerrejon




Confidential & Privileged   Tripartner Trade   24
  Glencore
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

Confidential & Privileged     Tripartner Trade                                               25
  Drummond
      • 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




Confidential & Privileged                Tripartner Trade                                          26
  Emerging Supplier #1

   • 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




Confidential & Privileged           Tripartner Trade   27
  Emerging Suppliers #2 to #6



                            available upon request




Confidential & Privileged    Tripartner Trade        28

								
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