Achieving Reclamation Success Globally – Peabody Energy’s Experience In Mongolia

Vern PfannenstielSenior Manager – International Reclamation

June 2012

Tons in millions. 2011 sales volumes and proven and probable reserves.

Trading / Business Development Offices

Brisbane St. Louis

Newcastle Beijing

London Singapore

Ulaanbaatar Jakarta

Essen Balikpapan

New Delhi

Essen

London

Beijing

Ulaanbaatar

Urumqi

St .Louis

Singapore

Jakarta

DTA

NCIG

Balikpapan

New Delhi

Peabody’s Global Portfolio

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Peabody’s Business Operates in 3 Primary Segments: U.S. Mining, Australian Mining, and Coal Trading

Mining Operations Position Sales Reserves

S. PRB #1 148 2.7

Midwest #1 30 3.6

Southwest #1 18 1.1

Colorado #1 7 0.2

Australia #5 25 1.2

Total 228MT 8.8BT

Peabody Principles Applied Globally

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• Permit and operate mines in compliance with regulatory

requirements

• Use best practices in environmental stewardship and reclamation

• Conduct operations in the local community as a good neighbor

• Demonstrate industry leadership in best practices and results

“When mining is complete, we will leave the land in a condition equal to or better than before mining”

Best Practices – The Basis for Success

● Best practices for mining and reclamation success– Baseline information

– Integrate engineering, mining, reclamation planning

– Backfill and grade to a designed post mine topography (PMT)

– Topsoil handling and mine soil reconstruction

– Revegetation and surface stabilization

– Monitoring, postmining land use and management

– community and stakeholder interaction

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Mongolia and Ereen Mine Location

“The Land of the Eternal Blue Sky”

Ereen Mine Location

Environmental Setting

● Khangai Mountain geographical zone

● Arid continental climate– Cold, dry and windy

● Steppe transitioning to forest steppe– Cool season grasses and low growing forbs

● Chernozem loess soils buried by a layerof pyroclastic and wind blown materials

● Traditional land use of nomadic herding

● Wildlife relatively sparse

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Ereen Reclamation Project Background

● Ereen Mine – Peabody/Winsway JV operation

– Mining ends June 2009, initiate reclamation program

– Peabody takes technical and implementation lead

– Initiate baseline, reclamation planning and ministry approvals

Ereen Reclamation Project Background

● Ereen Reclamation Program Goals– Reclaim to world class standards using best practices method

– Return land condition and use; develop management plan

– Address MNET demonstration of success

– Release mining license and liability (government sign–off)

– Demonstrate Peabody ethic and value to Mongolia

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Ereen Reclamation Approach

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● Select best practices (Mongolian White Paper)

● U.S. reclamation and success standards● U.S. Peabody technical assistance● Spoil/topsoil plant growth suitability

– Spoil/topsoil quality analysis to U.S. labs

● Develop PMT - stable landform, AOC, drainage● Identify required resources and availability ● Coordinate mine closure/reclamation with Ministries● Pattern on U.S. experience, apply with Mongolian

team and conditions

Education and Outreach to Stakeholders

● Government, community and people– Communication, outreach and involvement with stakeholders throughout

the project– Bulgan Aimag, Saikhoum Soum, # 6 Bag– Ministries, State Inspection Agency and other government officials

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Ereen Reclamation Planning

● Reclamation plan– Mongolian consultants assist with

reclamation plan for Ministry approval

– Ereen baseline and site conditions

– Develop spoil and topsoil handling plan

– Revegetation plan and seed mix

– Water resources development

– Postmine topography design

– Practical, approvable and achievable plan

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Ereen Reclamation Project Planning – Postmine Topography

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Pre-mine Topography and mining disturbance

Post-mine Topography- positive drainage - stable slopes- blend with natural topography- least material handling- cost effective

Ereen Reclamation Project Planning

● Revegetation resources to complete the project:– Purchase JD 450 seeder in U.S., ship to Mongolia (5 months)

– Mongolian State University of Agriculture and NGO to procure seed and complete revegetation activities (Dr. Tumee!)

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Ereen Mine Site Reclamation Seed Mix and Seeding Rates

Scientific Name Common Name Seeding Rate (kg ha-1)

Medicago varia Alfalfa 0.6

Bromus inermis Smooth brome 3.4

Agropyron cristatum Crested wheatgrass 3.7

Stipa sibiricus Siberian needlegrass 2.3

Total 10.0

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Ereen Reclamation Project – 2009 Events

● Initiate reclamation activities in July 2009– Backfill and grading to PMT design (address spoil quality)

– Strong survey control and construction checks, field adjust

– Institute a Peabody safety culture, reinforce a safe work environment daily

– Conduct daily operations meetings

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Ereen Reclamation Project – 2010 Events

● Complete reclamation in June 2010– Final grading and drainages to PMT design– Topsoil replacement (20cm strict tolerances) – Deep ripping and seedbed preparation– Revegetation (no fertilization and no mulch)– Fence project area

Stream Channel Stabilization

● Moderate gradients and uniform channel profile

● New concept – rock check dams and homemade gabions and wattles (no materials available in Mongolia)

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Water Well Development

● Groundwater source identified 2009

● Community and ministry officials request well development

● Design and construction fall 2009/2010

● Stockwater facilities added 2010

● Insulated well house added fall 2011

● Highlights– Dependable, 12 month availability

– Best water quality for herders in 20 kilometer radius

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Monitoring and Graduate Research

● Monitor precipitation, temperature, soils, reclaimed and native vegetation, wildlife, soil ecosystems and invertebrates

● Established cooperative research program with Mongolian State University of Agricultural - Dr. Tumenjargal, Dr. Urganbayar and graduate students

● Education with local community for short/long term site management

● Document reclamation success, advance best practices knowledge for Mongolia, train environmental/reclamation specialists

● Study restored ecosystem function, successional processes

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Ereen Project Site Monitoring Program

● 12 permanent vegetation monitoring points

– 1 meter squared plots at each point

– Seeded plant density, plant height and biomass production (cover 2012)

● Soil and related sampling

● Meteorological station on site– Davis Vantage Pro2 met station

● Monitor water quality at well site

● Site fenced to exclude livestock during establishment/study

– Native vegetation included in fenced enclosure for comparison sampling

● Fauna study in 2012

● Monitor through 2015

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Monitoring and Research

  Average number m-2

SpeciesB Medvar Broine Agrcri Stisib Total

July 2010 5.7 15.8 10.5 13.8 45.8

Oct 2010 9.7 19.4 16.3 2 47.4

July 2011 6.8 9.3 6.7 6.5 29.3

Sept 2011 6.6 7.8 6.3 6.1 26.8A Data averaged from 12 permanent monitoring pointsB Medvar = Medicago varia, Broine = Bromus inermis, Agrcri = Agropyron cristatum, Stisib = Stipa sibericus

Established individuals of perennial seeded species m-2, Ereen Mine reclaimed landsA

● Vegetation monitoring results – Sampled July and October 2010,

May, June, July, August, September 2011

– Excellent establishment of seeded species (> 21 seeded species m-2 )

– Natural regeneration of additional native species observed by end of 2011 (>25)

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Monitoring and Research, continued

● Forage production potential is excellent, desirable species predominate

● Seed production, tillering of seeded species and extensive recruitment evident

● Primarily perennial species by end of year two

● Seed species height 9.4cm (May), 78.4cm (September)

● Hay production potential

– Critical need in Mongolia - potential for other areas

– 600 m-2 hay trial established

– Hay versus grazing land use

  Biomass production kg ha-2

Area June 2011 July 2011 August 2011 September 2011

Reclaimed 1928 3931 7734 8706

Native 406 515 1789 1789

Reclaimed vs. Native 4.7x 7.6x 4.3x 4.9x

A Data averaged from 20 reclaimed and 20 native sample points (Grazing excluded)

2011 biomass sampling results, Ereen Mine reclaimed landsA

Faunal Studies – Initial observations

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● Good indicators of returning ecosystem function

● 26 migrant and resident bird species (5/12)

● 5 mammal species on or immediately adjacent

● Comprehensive study in 2012 (2013)

Tolai hare

Daurian jackdaws

PollinatorsLong-tailed ground squirrelMongolian lark

Ereen Reclamation Project Highlights

● Mongolia’s first complete coal mine reclamation project

● Restored 20 hectares to grazing land

● Water well for domestic and livestock use (new regional source)

● Considered a benchmark and model for reclamation in Mongolia

● Successfully demonstrated best practices approach for Mongolia

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● Seeder donated for revegetation projects

● Achieved community relations and social responsibility goals

● International recognition and case study model (Asia Foundation – Citizen’s Guide and World Coal Association reclamation case study)

Applied Best Practices – Reclamation And Success At The Ereen Mine In Mongolia

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June 2009

May 2010

September2011

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Ereen 2010 to 2012

Bayartai (Good bye)

Achieving Reclamation Success Globally – Peabody Energy’s Experience In Mongolia

Vern PfannenstielSenior Manager – International Reclamation

February 2012