introduction to coal business - listed...

INTRODUCTION TO COAL BUSINESS

SPECIAL ANALYST MEETINGApril 22, 2009

Coals are fossil fuels formed through the oxidation and biodegradation of plant remains d b t d d

COAL TYPES AND ITS CHARACTERISTICS

preserved by water and mud.

HIGH MOISTURE CONTENT OF COAL

CARBON/ENERGY CONTENT OF COAL HIGH

Low Rank Coals

47%

Hard Coal

53%d re

sere

s%

of W

orld

Lignite

17%

Sub-Bituminous

30%

Bituminous

52%

Anthracite

1%

USES Largel po er THERMAL COAL THERMAL & METALLURGICAL COAL Domestic/USES Largely power generation

THERMAL COALPower generation

Cement manufactureIndustrial uses

THERMAL & METALLURGICAL COALPower generation

Cement ManufactureIndustrial uses

Manufacture of iron and steel

Domestic/ Industrial including

smokeless fuel

CV(GAR)( kcal/kg) 4,000-5,000 5,000-6,000 6,000-6,700 6,800-7,000CV: Calorific Values GAR: Gross As Received 2

COAL VALUE CHAIN AND ITS APPLICATIONS

Upstream Intermediate Downstream End Use

Coal MineCoal Mine

Steel and CementCoal Industry

ain

ElectricityPower Plants

IGCCLNG

alue

Cha

ElectricityCoalbedMethane

Power PlantsCH4

PipelineFertilizers

Coa

l Va

Feedstocks

CCS

PetrochemicalProductseg

rate

d

PETCHEM Plants

CCS

SynGas

Gasification

Coal Liquefaction LPG

Di l/

Cooking

Inte

Diesel/Gasoline

Remark: IGCC = Integrated Gas Combined Cycle3

RESOURCE AND RESERVE CLASSIFICATION

4

SEABORNE THERMAL COAL TRADE

Source: Barlow Jonker

• Total global seaborne thermal coal trade accounts for more than 600 mtpa

• Pacific Trade is the largest market for seaborne thermal coal

5

ASIA MARKET CONTINUES TO GROW

4 6%

2.5% CAGR

9.8%

4.6%

CAGR

CAGR

Source: Barlow Junker

Coal demand growth is the highest among other fuels.6

THERMAL COAL SALES AND MARKET OPTIONS

• Currently producers offer mid-term contract, lasting 2 or max 3 years, due to volatility in production cost and market price

• Pricing in the Pacific market is based on the Newcastle Thermal Coal benchmark at reference energy 6322 kcal / kg GAR

TermContract / kg GARContract

• Fixed terms, price is based on Newcastle Thermal Coal benchmark • Adjustments are in line with those in long term contract on energy, ash, sulphur and moisture sub bituminous

One-yeardjust e ts a e l e w t t ose lo g te co t act o e e gy, as , sulp u a d o stu e sub b tu ous

coals)contract

• Commonly used by power utilities for a certain tonnage or cargoes if a shortage in stocks appearsT d • Commonly used by power utilities for a certain tonnage or cargoes if a shortage in stocks appears• One off contract, some on a delivered basis (C&F)Tender

• Pricing reflects supply and demand balance• Actual / physical settlements on the spot market is ~10 % of sales due to the volatility in pricing Spot market

• Popular in Europe where coal is commoditised • Regulations on credit and risk limit entry by Asian coal producers• Reluctance by Asian buyers to move away from physical trade due to reliance on energy imports

Derivatives

7

MINING TECHNIQUES

• Two types of mining techniques – Open Cut mining and Underground mining.

• Depending on the location and depth of cover of the deposit, the mine will be epe d g o t e ocat o a d dept o co e o t e depos t, t e e bedeveloped as either an open-cut or underground operation, or a combination of both

All operations in Indonesia are open-cut mining8

PRODUCTION PROCESS & INDONESIAN MINING COSTS

Production rates vary significantly across mines depending on geological and operating conditions.

Production 8-10% of reserves per annum

40-50% of reserves produced by end of plateau period

Mining method is location-specificMining method is location specific

(Mining Cost Components)

Overburden Removal (46%) Coal Removal (5%) ROM Haul (9%)• Digging soil & rock above coal seams • Digging coal in coal seam • Transfer coal to process area

RoyaltyRoyalty

• Grinding and sieving • Transfer process coal to barge

Processing (3%) Product Haul (8%) & Barging (9%) (20%)Grinding and sieving p g

9

COAL MINING DEVELOPMENT PROCESSES

General Survey

10

INVESTMENT STRUCTURE

(Invest through “LintsPTT SRL

60% 40%

(Australian based)(Invest through “LintsLimited” a fully-own subsidiary of PTT International)

SBI (C l A t H ldi C )

Straits Salt(Australian

60% 40%

(Coal Assets Holding Company) (Australian based)

SAR(Singapore Based)

Madagascar(Coal Greenfield Project)

Brunei(Coal Greenfield

Project)

47.1%35% 33.5%

( g p )Project)

Indonesia Based

100% 100% 80%

Laung(Coal Exploration

Project)

Jembayan(Coal Mine Operation)

Sebuku(Coal Mine Operation)

100% 100% 80%

Project)

SBI

SPECIAL ANALYST MEETINGApril 22, 2009

Important Notice

Nothing in this presentation constitutes an offer of securities for sale.

Th iti h t b d ill t b i t d d th US S iti A t f 1933 d d (th “S iti A t") thThe securities have not been, and will not be, registered under the US Securities Act of 1933 as amended (the “Securities Act"), or the securities laws of any state of the US or other jurisdiction and the securities may not be offered or sold within the US or to, or for the account or benefit of, US Persons (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws. Neither this presentation nor any copy of it is for distribution directly or indirectly in or into the US.p y py y y

This presentation contains certain forward looking statements and forward-looking financial information. Such statements and financial information are based on certain assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Straits Resources or Straits Asia Resources to be materially different from those forecast The inclusion of such statements and information should not be regarded as a representation warranty or prediction withforecast. The inclusion of such statements and information should not be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions or that forecast results will or are likely to be achieved.

This presentation is for information purposes only and does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract or

it t h t Thi t ti h t b fil d l d d i t d d i j i di ti d i i t f thicommitment whatsoever. This presentation has not been filed, lodged, registered or approved in any jurisdiction and recipients of this presentation should keep themselves informed of and comply with and observe all applicable legal and regulatory requirements. This presentation is provided to the recipients on the basis that each recipient warrants that it/he is a person who may receive it without any requirement for filings, lodgements, registrations or approvals in the jurisdiction in which this presentation is received by such recipient.

2

Transaction Drivers

Vision:

• SBI established as an energy coal platform, with the financial, technical and operational capability to actively pursue and develop opportunities in p p y y p p ppthe global coal sector.

• Consolidate and expand existing operations and progress development• Consolidate and expand existing operations and progress development of SBI portfolio of high quality projects.

• Form a regionally significant, diversified and reliable supplier of energy coal to global markets.

• Contribute and participate in providing energy security, economic growth and environmental solutions to the emerging nations of Asia.

3

Rationale:Transaction Drivers

• Transaction provides both stakeholders with a strong strategic platform from which to grow an international coal business.

• Coal represents an important long term diversification strategy and international growth opportunity for PTT.

C l id l i d th ld’ f t t i d t d i• Coal now widely recognised as the world’s fastest growing and most enduring energy source.

• Application of PTT’s regional expertise and relationships in the energy sector to• Application of PTT s regional expertise and relationships in the energy sector to capture new coal opportunities.

• The acquisition of 60% of SBI will enable PTT to diversify its resource base, ti l f t i t d i toperational footprint and income streams.

• Straits Resources will contribute:

Low cost operations generating high demand thermal coal products with substantial long-term growth potential.

High quality and diversified customer base.

Extensive expertise in the mining resource sector.

4

te s e e pe t se t e g esou ce secto

Diversified growth platform with two major coal project opportunities in the pipeline.

Key Assets of SBI

b k• Sebuku• One of the world’s lowest cost export coal operations.• Top quality power station brand.• Total production capacity target of 8Mtpa• Total production capacity target of 8Mtpa• 3.5Mt of sales in 2008• 381Mt JORC Resources

• Jembayan• Total production capacity increased to 11Mtpa • Jembayan and Prangat recognised ‘enviro coals’• Production target for 2009 of 7.0-7.5Mt

254Mt JORC R & 112Mt JORC R

Sebuku

JembayanBrunei

• 254Mt JORC Resources & 112Mt JORC Reserves• Exploration target of 600-700 Mt.

• Sakoa (Madagascar) Coal• Coal inventory (non-JORC) estimated at greater than 100Mt• Coal inventory (non JORC) estimated at greater than 100Mt.

Exploration target could exceed 500Mt.• Feasibility study in 2009, targeting production of 3 to 5 million

tonnes of export thermal coal within 3 to 4 yearsB i C l Madagascar• Brunei Coal

• Joint Venture with Far East Energy (FEE) to explore entire country for coal projects.

• PL’s currently under application.

Madagascar(Sakoa Coal)

5

y pp• Exploration and drilling in 2009 (under EL’s)

Operating Coal Mines

Location Map

6

Sebuku

7

SakoaSakoa

9

Coal’s Position in the Global Energy Equation

11

Source: IEA

The global seaborne traded thermal coal market has grown steadily since its establishmentsteadily since its establishment

Global seaborne traded thermal coal market (Mt)

516554

583631

660 681 669

286260 265

294 310 327 346 355407

455 463

116 125 133 137 142 162188 196 193 212 209 225 237

260 265

101

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

E

Source: Australian Mineral Economics

12The increased dependence on coal-fired power generation and declining domestic availability of coal continue

to drive the growth in seaborne traded thermal coal market

Global end uses of the primary sources of energy - coal, oil, and natural gas

2010E global end uses of coal 2010E global end uses of oil 2010E global end uses of natural gas

2010E global end uses of COAL

2010E global end uses of OIL

2010E global end uses of NATURAL GAS

Commercial0.6%

Residential2.4%

Transportation

0.1%

Power generation

5.1%

Residential5 7%

Commercial2.7%

Transportati

Commercial6.3%

Residential

Transportation

0.9%

Industrial42.8%

Power generation

64.1%

Industrial32.8%

5.7% on54.2%

Industrial

Residential17.1%

Power generation

Total consumption = 140.2 quadrillion Btu Total consumption = 181.1 quadrillion Btu Total consumption = 120.3 quadrillion Btu

Industrial32.3%

g32.9%

Essential commodity for base load power generation, accounting for almost two-thirds of its end usage

Predominantly used in transportation, accounting for more than half of its demand

Predominantly used in industrial and power generation (peaking capacity)

Source: International Energy Outlook 2008, Energy Information AdministrationNote: Btu stands for British Thermal Unit

thirds of its end usage demand capacity)

13

Thermal coal is the key foundation energy source for power generation

Coal is the most cost competitive fuel source globally

Long Run Marginal Cost for new build Base-load Power Stations160

Long Run Marginal Cost for new build base-load power stations

Thermal coal is the

140

Thermal coal is the essential commodity for base load power

100

120

S$/M

Wh

load power generationSubstantial long 60

80

US

run cost advantage over other energy sources20

40

CAPEX

OPEXFuel

0Import Coal ST Domestic Gas

CCGTNuclear Import Gas

CCGTFuel Oil Fired

ST

CAPEX

14

CCGT CCGT ST

Source: WoodMackenzie1 ST: Steam Turbine; CCGT: Combine Cycle Gas Turbine; Long term fuel price outlook (2008-2025); 2008 prices

Coal is the most sustainable energy source globally

Proved reserves (Bnt) World proved reserve life1 (years)

133847

133

Significantly longer

reserve life

60

~6.0x ~5.0x

reserve life

142 169

42

142

Coal Gas Oil Coal Gas Oil22

Source: BP Statistical reviewNote: Conversion rates used — 1 million tonne of oil equivalent = 7.33 million barrels of oil equivalent

1 B d d f 31 D 2007 d 2007A d ti

Coal Gas Oil Coal Gas Oil

15

1 Based on proved reserves as of 31 Dec 2007 and 2007A production2 Coal includes Anthracite, bituminus, sub-bituminous and lignite quality coaloma

Oil and gas continue to face rising finding and development costs

Global finding and development costs—actual for selected reporting companies ($/boe)30

$27.97

20

25 $24.10

15

20

$11 21

10$7.27

$11.21

0

5

1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: Independent Oil & Gas Consultant

16

Rapidly increasing F&D costs for oil & gas further establishes the long term cost competitiveness of thermal coal as a fuel source

Increase in global energy demand to be fueled by strong demand growth from China and India

OECD China India Rest of world

Global energy demand 2005A—2030E (quadrillion Btu) 2005A—2030E global energy demand growth by region (%)

3.4%2.9%

2005E-2030E global energy demand growth by region (%)

220563608

652695

OECD China India Rest of world 9%

0.7% 0 5%

2327

3033

156175

192206

220

138

462513

563 0.5%

China India USA OECD Europe2005A—2030E delivered energy consumption by fuel (%)India

Rest of the world

6787

104 121 138 155

1619

23138

Nuclear5.9%

Renewables 7.7%

Oil

Nuclear5.7%

Renewables 8.5%

gy p y ( )

China2005E-2030E delivered energy consumption by Fuel (%)

241 250 261 269 278 286

2005A 2010E 2015E 2020E 2025E 2030E

Oil36.6%Coal

26.5%

Natural Gas 23 2%

33.0%Coal

29.1%Natural Gas

23.7%

OECD

2005A 2010E 2015E 2020E 2025E 2030E

Source: International Energy Outlook 2008, Energy Information AdministrationNote: Btu stands for British Thermal Unitma

23.2%

2005A 2030E

17

Global energy demand is expected to grow steadily, with higher growth contributed by China / India

Coal is forecast to continue increasing its share within global energy consumption

Large and Expanding Production Base

Sebuku and Jembayan Coal Production (Mt)

20

16

18

JEMBAYAN

10.0

10

12

14

4 05.2

7.0 -8.0

6

8

10

1 5 2 0 2.1 2 0 2.6 3.0 3.5 3.4 3.6

8.01.02.1

4.0

2.0-3.0

2

4

SEBUKU1.5 2.0 2.1 2.0

02000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E Medium

to LongTerm

18

Supply – Demand Fundamentals: The Price Equation

220 C l i f ll 68%

Newcastle coal benchmark prices (US$/ton) Comment

180

200

220

Newcastle Spot Contract 2004 —2006, average thermal coal price was around US$50/t

Coal price fell c. 68% from historical high of US$192/t to US$62/t

120

140

160Market tightened significantly in 2007 and first half of 2008, where spot thermal coal prices

Coal price increasedc. 270%

60

80

100 rose by 270% to a peak of US$192/t in July 2008

Spot coal price has come down

Coal price average c. US$ 50/t

0

20

40

p pby approx 68% since its peak to around US$62/t currently

Source: Bloomberg (as at April 10, 2009), AME

0

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

19

g ( p )

Consensus thermal coal price forecast

Benchmark thermal coal prices (December YE)

220 Historical spot prices Current consensus forecast

Comment

Near to medium term of broker consensus forecasts have come down

160

180

200

Historical spot prices

Historical contract prices

Current consensus forecast

Consensus forecast (July 2008)

significantly as a result of the recent economic slowdown120

140

160

However, the near term weakness does not deflect from an increasingly bullish long-term view — reflected

60

80

100

LT: US$60/t

LT: US$70/t

long term view reflected in increase in long term price forecasts

0

20

40Forecast

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Bloomberg (as at April 10, 2009), CoalPortal, broker reports

20

Cost Competitive Producer

Energy Adjusted to 6,350 Kcal/kg GAR

2007 Seaborne Thermal FOB Cash Cost Curve

70

80

50

60

$/t

30

40US$

Jembayan

Sebuku

10

20

50 100 150 200 250 300 350 400 450 500 55050 100 150 200 250 300 350 400 450 500 55050 100 150 200 250 300 350 400 500 550

Global Seaborne Production (Mt)

21

Source: Barlow Jonker 2007\

Sebuku Brand Coal

The Sebuku brand name is well known and well regarded in both Asia and Europe where power generators and other users have been relying on delivery of the high quality Sebuku Coal for over ten years

Quality Specifications

Coal for over ten years

Parameter Sebuku

Ash % (adb) 9.3

Sulphur % (adb) 0.68 - 0.91

CV Kcal/kg (GAR) 6,000

Total Moisture % (GAR) 15.0

Ash Fusion Temperature oC >1,600

22

Jembayan Coal Products

Quality Specifications

Parameter Jembayan Prangat

Ash % (adb) 4.0 7.0

Sulphur % (adb) 0.2 0.6

CV Kcal/kg (GAR) 5,414 5,700

Total Moisture % (GAR) 22.0 18.5

Ash Fusion Temperature 1,200 1,230oC

23

Indonesian Coal Comparison

5 900

6,100 Mahakam Sumber Jaya - MSJ Coal

Adaro - EnvirocoalSebuku - Sebuku Coal

5,700

5,900

Kaltim Prima Coal- Melawan

PTBA - Air LayaSebuku Sebuku Coal

Jembayan –

5 300

5,500

cal/k

g)

Banpu - Jorong

Kideco - Roto South

Jembayan - Jembayan Coal

yPrangat Coal

5,100

5,300

CV

(kc Banpu Jorong

4,700

4,900Berau - Lati

Arutmin - Ecocoal

4,500

,

10.00 15.00 20.00 25.00 30.00 35.00 40.00

24

Total Moisture (%)Source: Company data, Barlow Jonker Nov 2008

High Quality, Diversified Customer Base

• 32% of Total Sales to Japanese Power Companies (2008)

• 80-90% of sales concluded under long-term contracts

• Outstanding reputation for reliable product delivery and quality control

Name Country Credit rating (S&P / Moody’s)

Ch b El i P C I J AA / A 2

Key Customers of SAR (by country, by rating)

Chubu Electric Power Co Inc. Japan AA / Aa2

Tosoh Corporation Japan NR / Baa3

Kansai Electric Power Co Inc Japan AA / Aa2

ENEL SpA Italy A / A1

Korea East-West Power Co Ltd. South Korea A- / A1

Tenaga Nasional Berhad Malaysia BBB / Baa1

J Power Japan AA / Aa2

Korea South-East Power Co Ltd. South Korea A- / A1

Glencore International AG Switzerland BBB- / Baa3

25

/

Taipower Taiwan NR / 1

2008 Financial Performance Summary

• Sales of 8.6 million tonnesSales of 8.6 million tonnes

• Revenue of US$ 585.2 million

• Profit after tax of US$ 124.4 million

• Cash flow from operations US$ 191.5 million

• Average Sales Price USD 70 50/t• Average Sales Price USD 70.50/t

26

Coal is the Centre of Rapidly Developing Markets

Clean Coal TechnologyCarbon Trading

Coal FuturesClean Coal Technology

C b C t d St

Coal Futures

Coal Derivatives & SwapsCarbon Capture and Storage

p

Coal Trading:Ph i l & Fi i l

Combustion Technology COAL Physical & Financialgy

Emissions Control Coal Pricing

COAL

Hydrogen Generation Risk Management

Coal to LiquidsCoal Seam GasBiofuels

27

Global COAL

PHYSICAL PRODUCTS-- fixed price –

Phys NEWC

FINANCIAL PRODUCTS-- OTC --

S NEWC I dPhys NEWCPhys RB

Phys ARA (DES)Phys ARA (FOB Barge)

Swap NEWC IndexSwap API#2 (ARA)Swap API#4 (RB)

-- cleared --Phys ARA (FOB Barge)Phys INDO A / A2 / B

-- index-linked –Phys NEWC Index

-- cleared --ICE Rotterdam Futures

ICE Richards Bay FuturesgC ICE Newcastle FuturesPhys NEWC Index

Phys API#4 IndexPhys API#2 Index (DES)

Phys API#2 Index (FOB Barge)

g

-- spreads (OTC or cleared) --

Time spreadsy ( g ) Time spreadsFOB spreads

Implied Freight

28

Transaction volume growth on global COAL

30

35

es ■ Physical ■ Financial

25

30

Mill

ion

tonn

e

20

M

10

15

5

10

0

Q2'

01

Q3'

01

Q4'

01

Q1'

02

Q2'

02

Q3'

02

Q4'

02

Q1'

03

Q2'

03

Q3'

03

Q4'

03

Q1'

04

Q2'

04

Q3'

04

Q4'

04

Q1'

05

Q2'

05

Q3'

05

Q4'

05

Q1'

06

Q2'

06

Q3'

06

Q4'

06

Q1'

07

Q2'

07

Q3'

07

Q4'

07

Q1'

08

Q2'

08

Q3'

08

Q4'

08

29

Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

Clean Coal Technologies

Coal's technical response to the environmental challenge is ongoing.....

………… with three core elements………………

•Reducing carbon dioxide emissions with the development of carbon capture and storage

•Improving combustion technologies to increase efficiency and to reduce carbon dioxide and other emissions

•Eliminating emissions of pollutants such as particulates, oxides of sulphur and nitrogen

30

Latest Developments:~ Global Carbon Capture and Storage Institute ~ p g

• Officially launched last week in Australia to:

– Drive global cooperation on CCS projects and technologies.– Accelerate the deployment of carbon capture and storage CCS

technology globally.technology globally.– Assist in achieving the G8 group's goal of 20 large scale CCS

demonstration projects globally by 2020.

• Widespread international support with 85 bodies, including 16 national Governments and more than 40 major companies, signing on as foundation members andcompanies, signing on as foundation members and collaborating participants.

• Annual funding of up to $100 million• Annual funding of up to $100 million.

33

Carbon Capture and Storage Projects in Australia

34

Global Response - Global Solutions~ Existing and Planned CCS Projects ~~ Existing and Planned CCS Projects ~

35

A Multi-step Process to near Zero Emissions

36

Conclusions and Outlook for SBI

• Attractive coal industry fundamentals• Attractive coal industry fundamentals.

• Energy security and economic growth to underpinEnergy security and economic growth to underpin thermal coal as a dominant fuel for decades.

• Environmental solutions gathering global momentum and support.

• SBI ideally positioned to grow an international and diversified coal business with strongand diversified coal business with strong economic credentials.

37

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38

introduction to coal business - listed...

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