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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 20-11-2012 1

2 ACQUISITION NEED – WHY : 20-11-20122

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) 20-11-20123

4 4 COAL FROM WHERE Continue… TABLE – I MAJOR COAL PRODUCING COUNTRIES (IN Mt) S. NO.COUNTRYCOKINGSTEAMLIGNITETOTAL 1P R CHINA50428311363471 2USA82849741004 3INDIA3550941585 4AUSTRALIA14619969414 5INDONESIA3373-376 6RUSSIA7817878334 7S. AFRICA3250-253 8GERMANYNA 176189 9POLAND1165NA139 10KAZAKHSTAN1398NA117 11COLOMBIANA80NA80 TOTAL WORLD967567010417678

5 COAL FROM WHERE Continue… 20-11-201255 TABLE – II MAJOR COAL EXPORTERS (IN Mt) S. NO.COUNTRYSTEAMCOKINGTOTAL 1INDONESIA309- 2AUSTRALIA144140 284 3RUSSIA11014 124 4USA3463 97 5COLOMBIA75- 6S. AFRICA72- 7KAZAKHSTAN331 34 TOTAL WORLD861276 1142*

6 COAL FROM WHERE Continue… 20-11-20126 MAJOR COAL IMPORTERS (IN MT) TABLE – III S. NO.COUNTRYSTEAMCOKINGTOTAL 1P R CHINA14638 190 2JAPAN12154 175 3S. KOREA9732 129 4INDIA8619 105 5CHINATAIPEI624 66 6GERMANY329 41 7UK276 33 TOTAL WORLD861276 1142* * Includes 5 Mt of Lignite

7 FUTURE COAL TRADE:  USE OFFICIAL GLOBALLY : +28% (YR 2001-2010)  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 20-11-20127

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 20-11-20128

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 20-11-20129

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. 20-11-201210

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 20-11-201211

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 20-11-201212

13 20-11-201213


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