Wyoming Infrastructure Authority Spring Energy Conference June 11-12, 2015 Cheyanne

Pacific Rim Coal Marketing

Michael Mewing MC2 Company Pty Limited

Pacific Rim Coal Marketing

* Asia’s reliance on coal

* Asia Pacific Coal Trade

* Indonesian subbituminous coal export industry

* PRB opportunities

* “Demand Pull” market

Asia’s Reliance on Coal

• Japan, Korea & Taiwan have no domestic energy reserves – fully reliant upon imports

• Asia has limited access to natural gas

• Asian electricity grids are independent

• Importance of security of supply

• Coal and nuclear - base load for power generation

• Coal represents 52% of Asia’s primary energy – World’s average 30%

Primary energy world consumption 2013 Million tonnes oil equivalent

BP Statistical Review of World Energy

2014

© BP 2014

BP Statistical Review of World Energy

2014

© BP 2014

Primary energy regional consumption pattern 2013 Percentage

Energy Consumption by Fuel Type 2013

(percentage)

TOTAL (Mtoe)

Coal (%)

Oil (%)

Natural Gas (%)

Nuclear (%)

Hydro (%)

Renewable(%)

North America 2,786.7 17.5 36.7 30.1 7.7 5.6 2.3

Europe & Eurasia 2,925.3 17.4 30.0 32.8 9.0 6.9 3.9

Asia Pacific 5,151.5 52.5 27.5 11.2 1.5 6.0 1.5

WORLD 12,730 30.1 32.9 23.7 4.4 6.7 2.2

USA 2,265.8 20.1 36.7 29.6 8.3 2.7 2.6

China 2,852.4 67.5 17.8 5.1 0.9 7.2 1.5

India 595.0 54.5 29.4 7.8 1.3 5.0 2.0

Japan 474.0 27.1 44.1 22.2 0.7 3.9 2.0

South Korea 271.3 30.2 40.0 17.4 11.6 0.4 0.4

Taiwan 110.9 36.9 39.1 13.3 8.5 1.1 1.1

Source: BP Statistical Review of World Energy 2014

6

Asia Pacific Coal Trade

• Asia - @ 70% of the world’s coal production & trade

• Newcastle bituminous coal historically design spec for Asian power stations (imported coal)

• Australian and Indonesian coal industries have been developed for the export market

• Asian thermal coal imports have increased @ 400 million tons over past 6 years (total 900Mtpa)

• US thermal coals hold a 1% market share in Asia

• Dominance of China = instability

BP Statistical Review of World Energy

2014

© BP 2014

Coal production/consumption by region 2013 Million tonnes oil equivalent

Production by region Consumption by region

Americas, RSA & Asia Pacific Coal Production 1990-2013

(million tonnes per annum) Source: BP Statistical Review of World Energy 2014

0

500

1000

1500

2000

2500

3000

3500

4000

USA Canada Colombia RSA Australia China India Indonesia

1990

2000

2003

2008

2012

2013

Regional Coal Production 1990-2013

(million tonnes)

Region 1990 2000 2003 2008 2012 2013 2013 Mkt

Share

Var 2000-2013

Americas 1,039 1,108 1,106 1,231 1,105 1,079 13.6% (29)

Europe & Euroasia

1,890 1,173 1,198 1,254 1,282 1,222 15.5% 49

Asia Pacific 1,628 2,188 2,764 4,087 5,243 5,336 68.9% 3,148

South Africa 175 224 238 253 258 257 3.3% 33

OECD 2,286 2,028 2,045 2,169 2,056 2,020 25.6% (8)

NON OECD 2,454 2,673 3,267 4,659 5,837 5,877 74.4% 3,204

TOTAL WORLD

4,740

4,701

5,312

6,828

7,893

7,896

100.0%

3,195

Source: BP Statistical review of World Energy 2014

10

Top Ten Coal Producers (million metric tonnes)

11

Top Ten Thermal Coal Producers (2013e)

WORLD PR China

5,800

3,034

USA 756

India 526

Indonesia 486

South Africa 255

Russia 201

Australia 239

Kazakhstan 103

Colombia 81

Poland 65

Top Ten Coking Coal Producers (2013e)

WORLD PR China

1,200

527

Australia 158

USA 78

Russia 73

India 42

Canada 34

Mongolia 20

Ukraine 20

Kazakhstan 12

Poland 12

Source: World Coal Association - Coal Facts 2014 Lignite production 800 million tonnes

Americas, RSA & Asia Pacific Production 1990-2013

(million tonnes)

1990 2000 2003 2008 2012 2013

2013 Mkt Share

Var 2000-2013

USA 934 974 972 1,063 922 893 11.3% (81)

Canada 68 69 63 68 67 70 0.9% 1

Colombia 21 38 50 74 89 86 1.1% 48

Americas 1.039 1,108 1,106 1,231 1,105 1,077 13.6% (31)

South Africa 175 224 238 253 258 257 3.3% 33

Australia 210 312 350 409 453 478 6.1% 166

China 1,080 1,384 1,835 2,802 3,645 3,680 46.6% 2,296

India 223 335 375 516 607 605 7.7% 270

Indonesia 11 77 114 240 386 421 5.3% 344

Total Asia Pacific 1,628 2,188 2,764 4,087 5,243 5,336 67.6% 3,148

Source: BP Statistical Review of World Energy 2014

12

Coal Imports by Country/Region 1990-2012 (million short tons)

Country/Region 1990 1995 2000 2005 2010 2013 Var

2000-2013

China 2 2 2 29 180 319 317

Japan 116 137 169 199 194 203 34

India 6 15 26 45 90 97 71

South Korea 27

51

68

82

126

136

68

Taiwan 20 32 50 67 70 72 22

Asia & Oceania

192 259 341 469 747 906 565

TOTAL WORLD

463

577

719

916

1,161

1,343

624

Source: US Energy Information Administration Agency (EIA)

13

Indonesian Subbituminous Coal Export Industry

• Indonesia’s subbituminous coal exports:

2000 12 million tonnes

2013 +300 million tonnes

• Indonesia largest thermal coal exporter - 35% of Asian market

• A grade subbituminous coals secured market position through quality and cost competitiveness

• Industry has flexibility to respond to market – small equipment, flexible labor force, cost effective logistics

• Challenges:

Quality

Expiry of CCOW’s

Market’s desire for diversity

Government intervention

Coal Exports by Country 1990-2012 (million short tons)

Country/Region 1990 1995 2000 2005 2010 2013 Var

2000-2013

China 20 41 77 93 27 15 (62)

Australia 115 151 206 256 323 332 126

Indonesia 5 35 63 142 295 422 359

USA 106

90

60

52

83

127

67

South Africa 55 66 77 79 57 82 5

Columbia 16 21 39 59 77 92 53

TOTAL WORLD

468

584

723

935

1,212

1,414

691

Source: US Energy Information Administration Agency (EIA)

15

Coalfields of Indonesia

June 19, 2015 16

Export Coal Qualities

Australian bituminous & Indonesian subbituminous

Brand Hunter Valley Ensham Adaro Mulia

Energy: - NAR kcal/kg - Btu/lb

6,080

11,350

6,005

11,250

4,740 9,000

3,950 7,560

Total Moisture % (ARB) 9.0 11.5 25.0 35.0

Volatile Matter % (ADB) 33.5 26.5 43.5 38.0

Ash % (ADB) 13.5 12.0 2.0 3.9

Total Sulphur % (ADB) 0.56 0.70 0.15 0.15

HGI 50 58 53 70

Topsize (mm) 50 50 50 50

IDT (degrees Celsius) 1,450 1,350 1,200 1,180

Sodium in ash % (Dry Basis) 0.50 0.70 0.20 6.5

17

PRB Coal Opportunities

• Market diversity

• FOR costs

• Quality: - Indonesian B grade coals

- new boilers designed for subbituminous coals

• Logistics challenge – rail & port

• Professionalism of US producers

• Ocean Freight

• Indonesian coal industry

• Australian coal industry Cost pressures

Infrastructure costs

SAILING TIMES TO MAJOR ASIAN MARKETS US WEST COAST, INDONESIA & AUSTRALIA

Coalfields of Australia

June 19, 2015 20

“Demand Pull” Market

• Coal will continue to be base load in Asia – limited alternatives

• 5 year demand growth: +700 million tonnes pa

• 2035 demand growth: 1 billion tonnes

• Growth not just in China

• China’s dominance = instability

Asian demand will be met regardless of the level of participation by US coals

International Energy Agency Medium Term Market Report 2014-2019

• 2.1% per annum projected growth 2014-2019 versus 3.3% per annum in 2010-2013 and 4.6%

per annum over past 10 years • 722 million tonnes per annum incremental coal demand increase by 2019

China +471 Mtpa India +177 Mtpa ASEAN + 79 Mtpa OECD Asia + 19 Mtpa Other Developing Asia + 21 Mtpa Africa/Middle East + 38 Mtpa OECD Americas - 54 Mtpa • China “.. will remain the elephant in the room for a while.” “There can also be upturn surprises: the Galilee and Surat Basins in Australia and PRB in United States have the potential to oversupply any demand if the appropriate infrastructure is in place.”

Imported Thermal Coal Demand by Basin 2008-2035 (million tonnes)

Thermal import coal demand by basin (Mt)

0

500

1,000

1,500

2,000

2,500

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Mt

Atlantic Pacific

Source: Wood Mackenzie Coal Market Service

Japan & Korea 5 Year Plans - Coal Fired Power Stations

Generating Capacity Coal Demand

(MW) (Mtpa)

JAPAN

2014 Existing capacity 35,843 85.5

2015-2020 New construction 7,057 15.5

Year 2020 42,900 101.0

SOUTH KOREA

2014 Existing capacity 27,469 91.3

2015-2020 New construction 18,100 63.5

Year 2020 45,569 154.8

“There are 1.3 billion people in the world today who live without access to electricity. A life lived without access to modern energy is a life lived in poverty. The International Energy Agency (IEA) has predicted that more than half of the on-grid electricity needed to meet their ‘energy for all’ scenario would need to come from coal”

World Coal Association, Divestment & future role of coal, November 2014

25