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CHALLENGES & STRATEGIES OF ACQUISITION OF COAL BLOCK ABROAD BY DR. M.M. SEAM ADVISOR (MINING), ESSAR GROUP 20-11-2012 1.

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Presentation on theme: "CHALLENGES & STRATEGIES OF ACQUISITION OF COAL BLOCK ABROAD BY DR. M.M. SEAM ADVISOR (MINING), ESSAR GROUP 20-11-2012 1."— Presentation transcript:

1 CHALLENGES & STRATEGIES OF ACQUISITION OF COAL BLOCK ABROAD BY DR. M.M. SEAM ADVISOR (MINING), ESSAR GROUP

2 ACQUISITION NEED – WHY :

3 COAL FROM WHERE:  INTERNATIONAL COAL MARKET  PRODUCTION (2011) : 7678 Mt (TABLE-I)  COKING : 967 Mt  THERMAL : 5670 Mt  LIGNITE : 1041 Mt  COAL TRADE (2011) : 1142 MT (TABLE-II & III)  COKING : 276 Mt  THERMAL : 861 Mt  LIGNITE : 5 Mt  SOUTH EASTERN ASIA / INDIA : 665 Mt (COKING : 150 Mt) EUROPE : 120 Mt (COKING : 25 Mt)

4 4 COAL FROM WHERE Continue… TABLE – I MAJOR COAL PRODUCING COUNTRIES (IN Mt) S. NO.COUNTRYCOKINGSTEAMLIGNITETOTAL 1P R CHINA USA INDIA AUSTRALIA INDONESIA RUSSIA S. AFRICA GERMANYNA POLAND1165NA139 10KAZAKHSTAN1398NA117 11COLOMBIANA80NA80 TOTAL WORLD

5 COAL FROM WHERE Continue… TABLE – II MAJOR COAL EXPORTERS (IN Mt) S. NO.COUNTRYSTEAMCOKINGTOTAL 1INDONESIA309- 2AUSTRALIA RUSSIA USA COLOMBIA75- 6S. AFRICA72- 7KAZAKHSTAN TOTAL WORLD *

6 COAL FROM WHERE Continue… MAJOR COAL IMPORTERS (IN MT) TABLE – III S. NO.COUNTRYSTEAMCOKINGTOTAL 1P R CHINA JAPAN S. KOREA INDIA CHINATAIPEI GERMANY UK TOTAL WORLD * * Includes 5 Mt of Lignite

7 FUTURE COAL TRADE:  USE OFFICIAL GLOBALLY : +28% (YR )  CURRENTLY (YR 2011) : 1142 Mt  PROJECTED (YR 2020): 2000 Mt  DEMAND : ASIA  FAREAST / S.E. ASIA / INDIA  SOUTH & EAST AFRICA  NORTHERN S. AMERICA  COAL LIKELY TO STAY AMONG MAJOR ENERGY FUELS FOR NEXT FEW DECADES  COAL IMPORTS INTO INDIA TOO LIKELY TO STAY

8 TARGETS FOR COAL IMPORTS:  LIMITED CHOICE  ASIA – MONGOLIA, VIETNAM  AFRICA – S. AFRICA, MOZAMBIQUE, BOTSWANA, ZIMBABWE  AMERICAS – CANADA, USA, COLUMBIA  OTHERS – EX-USSR (RUSSIA, UKRAIN, KAZAKSTAN) & CHINA

9 ACQUISITION PROCEDURE:  NATURE OF BLOCK – GREENFIELD / BROWNFIELD  PROCEDURAL STEPS:  INITIAL CONTACT :  EMBASSY  FINANCIAL INSTITUTION  DIRECT OWNER / AGENT  NON DISCLOSURE AGREEMENT  ENGAGE FINANCIAL / LEGAL CONSULTANT  DUE DILIGENCE  ESCROT ADVANCE – NO OTHER DEALINGS  CHECK DRILLING  ENGAGE MINING CONSULTANT - PREFESIBILITY STUDY

10  CHECK PERMISSIONS, OWNERSHIP DOCUMENTS, LEGALITY OF TRANSACTION  BROWNFIELD – MINING PLANS, EQUIPMENT CAPITAL EX/ MANPOWER ETC.  PRICE NEGOTIATION  COMPLETE TRANSACTION THROUGH LEGAL PRINCIPAL CONSULTANTS / GOVERNMENT AGENCIES

11 CHALLENGES:  LACK OF GOVT. SUPPORT  RESOURCE NATIONALISM :  SPECIAL TAXES  JV WITH LOCAL  POPULIST TAXATION MEASURES – (LOCAL POLITICS)  DIFFICULT MINING DESTINATION  INVESTMENT NOT ONLY IN MINES BUT ALSO ON LOGISTICS – RAIL / ROAD / PORT  DIFFICULT LAND ACQUISITION DUE TO ABSENCE OF LAND RECORDS  R&R HURDLES  LANGUAGE BARRIER  IGNORANCE OF LOCAL LAWS  ADMINSTRATIVE RED-TAPE

12 STRATGIES:  REWORK WORKING GROUP PROJECTION – INDENTITY TARGET COUNTRIES FOR LONGTERM IMPORTS  UPGRADE POLITICAL EFFORTS FOR STRONGER BILATERAL DIPLOMATIC RELATIONS  INSTITUTE SPECIAL FUND FORFOREIGN COAL ACQUISITIONS  PROD PSU’s FOR FOREIGN ACQUISITION  FORMULATE LONG TERM COSTAL THERMAL POWER-GENERATION STRATEGY  DIVERSIFY COAL IMPORTS  MODERATE RESOURRCES NATIONALISM BY GREATER COMMERCIAL / CULTURAL PRESENCE

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