S & T Mining – August 27, New Delhi Overview on Imported Coking Coal Security For Sustainable Growth Of Indian Steel Sector Harsh Sachdev Managing Director, S&T Mining (A SAIL-TATA Steel JV Co.) Coal Market in India-2013, New Delhi 27 th Aug, 2013

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi The Global Economic Status Global Economy: – A marked downturn over the past two years (Global GDP to remain sluggish 2.8% in 2013 compared to 3.9% and 3.2% in 2011 & 2012 respectively) – Most regions likely to see a moderate pick-up, but growth to be below potential Country ---Real GDP(2013) US --– % Canada % UK % Germany % China % India % Brazil % – Employment gains to remain weak at best. Financial uncertainty & Crises – (Reduced liquidity in the market- higher cost of borrowing) Difficult global business scenario prevailing Newport Mining Outlook Report Source :Scotia Bank

S & T Mining – August 27, New Delhi Global Steel Trends Global Steel Production in 2012 at 1.5 Bn. Mt was a growth of 0.7% over the PY. This has been slowest rate of growth since the economic downturn of EU was a decrease of 4.7 %, Germany a decrease of 3.7 %, North Amercia an increase of 2.5 %. In the top 10 Steel producing nations, China, U.S., India, Russia, South Korea & Turkey grew in Modest steel demand pickup expected in China was 46.3 % of the world Steel Production in 2012 & is expected to continue to dominate Global Steel making till 2020.

S & T Mining – August 27, New Delhi Steel: Global Scenario & Emerging Trends Expected Steel Demand Growth in 2014 – China: 2.5% – India: 7.0% – Japan: -0.6% – US: 2.9% – Central & South America: 43% – EU 27: 3.3% Future demand Growth Driver: Further economical development rather than recovery in developed world. China to remain dominant steel producer & consumer Indian steel demand to grow faster

S & T Mining – August 27, New Delhi Crude Steel production (2.1# Bill. T.) is expected to marginally exceed the global demand (2.09* Bill. T.) in China to witness addition of more capacities along with consolidation of marginal players. India too to add more capacities in current decade – Addition of more than 100 Mill. T. capacity by Steel: Global Scenario & Emerging Trends # Source: Deutsche Research,

S & T Mining – August 27, New Delhi Impact On Raw Materials Over 70 % of Steel made is through the BF route & is hence impacted by the costs & availability of raw materials, specially coking coal. Major volumes of Iron Ore & coking Coal are required. – 1.6 tonne of Iron –ore and 0.9 tonne of coking coal for 1 tonne of Crude Steel RM cost as a proportion of total cost of steel companies is a very significant & is a key driver of total steel cost. – Iron Ore comprises: 30% of Cost – Coking Coal: 26% of Cost

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi Global Iron Ore About 800 Bill. T. of Iron ore reserve with 230 Bill. T. of Iron Content have been proved World iron ore export dominated by –Brazil & Australia Key iron ore consumers: China, Japan, US, India and Russia Total Reserves of Iron Ore: 800 Bill. T.

S & T Mining – August 27, New Delhi Global Coking Coal Production: Slow down of global demand growth, still driven mainly by China, India and South America Globally Coking Coal Reserve: 246 Bill.T. Coking Coal demand to grow at ~3% per annum during current decade Coking Coal Production to shadow Steel Growth Globally

S & T Mining – August 27, New Delhi Global Coking Coal Import & Export: Present & Future 2013 : Australian Met coal export expected to grow by 11% US to decrease by 5% y-o-y to 54 Mill. T. Canada to increase 3% y-o-y to 31 Mill. T. Mozambique Mill.T. from Maotize mine, Vale Mongolia not likely to grow in 2013 Source: KPMG Qtrly, March 2013 Chinas import to increase by 18% in 2013 y-o-y to 58 Mill. T. – due to restocking of steel India import to increase to 36 Mn in 2013 Imports by EU to remain flat at around 46 Mill. T. Global Coking Coal export ( F)Global Coking Coal import ( F) Australia to remain a dominant exporter though there will be emergence of new sources like Mozambique … China to overtake Japan as leading coking coal importer.

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi Steel Indian Scenario - Current Indias Steel Production has risen steadily over the Last decade. At 77 Mn. T India is the 4 th largest Steel Producer Globally. In 2012 it was a nett importer of Steel, mainly special grades. The per capita consumption of Steel in India remains low. A high potential for growth.

S & T Mining – August 27, New Delhi With 77 Mill. T. of Crude Steel production in 2012, India is behind China, Japan & the USA. By 2016, India is expected to become worlds 2 nd largest crude steel producer Fast urbanisation to drive Indias steel Industry growth Yr 2020: India to witness emergence of 5-6 players controlling 65~70% of total prodn BF-BOF (Mill. T.) 69 DRI & Others BF-BOF (Mill. T.) 120 DRI & Others Steel Indian Scenario - Emerging

S & T Mining – August 27, New Delhi 2020: India to emerge as net exporter…… Steel Export moving to China, India & South Amercia

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi Iron Ore – The Domestic Scenario With 18 Billion Tonnes (approx) of Haemetite and 11 Billion Tonnes (approx) of Magnetite resource, India is self sufficient to fulfill its Steel Industry requirement. With a ban on illegal mining in Goa & Karnataka – Iron Ore output fell to 167 Mn. Tonnes in FY 13. Imports started. The government of India, is taking various measures, including approaching the supreme court to correct the situation. In 2020, India to consume ~300 Mill. T. of Iron Ore for producing 180 Mill. T. of crude steel.

S & T Mining – August 27, New Delhi Coking coal sources for India: 2012 Total 43 Mill. T Coking coal Import 32 Mill. T Imported PCI 4 Mill. T. Indigenous coking coal 7* Mill. T. Increased dependency on overseas coking coal mining countries Australia to remain a dominant coking coal exporter to India * Indigenous coal at 17% avg ash, while imported met coal ash ~10% CountryQty (approx) (Mill. T.) %age Australia2785% Indonesia310% New Zealand 13.5% Others11.5% TOTAL32100% Coking Coal Sources (2012

S & T Mining – August 27, New Delhi Met Coal Consumption Forecast…. 2020: India is expected to import whopping 83 mill. T. of coking coal (apart from 10 mill. T. of PCI) equalling forex outgo of atleast USD14* Bill. Per year. Total 93 Mill. T. of metallurgical coal import implies that 86 % of Indias BOF steel production to depend on imports – High risk exposure Hot Metal/Pig Iron Production -BOF * At USD 170/t of coking coal price; conversion 1USD = Rs 54

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi A need to separate Coking Coal from Coal. At present Coking Coal also being used to meet Indias Power requirements. An opportunity for washing low grade of Coking Coals, to enhance valuations. An increase in the infrastructure to evacuate coal from Pit heads to the point of consumption. Adequate Railway sidings & rakes. Implementation of the Jharia Action Plan in the prime coking belt of India. Jharia has 5.3 Bn. tonnes of prime coking coal & 6.1 Bn. tonnes of medium coking coal, which has been on fire. A concept of a Single window Clearance wherein all clearances which are sought are applied for, in one place, within the various Government departments. Mining is a Site Specific Activity and hence the same cannot be shifted to an alternate location. The Government needs to play a role a major facilitator in acquisition of land for critical coal projects. Upgrading of efficiency levels by use Mass Production Technologies – Larger sizes of Heavy Earth moving Equipments in Opencast Mines & mechanization in underground mines.- Average output of underground mines is well behind global output at approx. 0.2 MTPA. Coking Coal - Domestic Issues Some of these issues are under active consideration.

S & T Mining – August 27, New Delhi Time taken in getting statutory clearances impact coking coal projects execution timeline. A process of defined time frames for clearances, / default clearances in case of delays needs to be examined. Emerging legislation making coal mining more complex & expensive, will increase lead time to starting coal production. LARR Consent of 80% Project Affected People (this might delay projects) 4 times land price in rural and 2 times land price in urban area for compensation along with other compensation MMDR bill 26% of profit to be given to District Mineral foundation plus other taxes leads to overall tax of 61% for Indian coal Mining (against 30-40% in other countries). Auction by competitive Bidding of Coal Mines Rules Implemented for PSUs – Implementation for Private companies awaited. Domestic Legislative Environment Legislation to ensure inclusive growth & welfare of local communities. Degree of complexity of Domestic Mining to increase.

S & T Mining – August 27, New Delhi Index 1.Steel – The Global Scenario & Emerging Trends 2. Raw Material & Coking coal Availability. 3.Steel – The Indian current & emerging Scenario. 4. Indian Raw Materials & Coking Coal Scenario 5. Coking Coal – Domestic Issues – Emerging Legislation 6.Imperatives & issues

S & T Mining – August 27, New Delhi Country Rating Investment options in Mining Countries

S & T Mining – August 27, New Delhi Country Comparison Mining Investment CountriesAustraliaIndonesiaMozambiqueS. Africa Reserves (Thermal+Coking) 77 Bill.T5.5 Bill. T.16 Bill. T.30 Bill. T. Mining CostsHighModerate InfraHigh High. Upgradation Required Low. Needs huge Investments Moderate. Inadequate Rail Infra Tax Regime Transparent introduction of MRRT & Carbon Tax – Extra Burden Frequent Changes in mine laws. Favours domestic players Favourable to foreign investors with no such issues of local ownership No specific mine policy. Encourages local ownership of mines Proximity to Indian Ports Takes ~18 days to Indias west coast; 14 days to east coast Takes ~12 days to west coast; 9 days to east coast Takes ~10 days to west coast; 12 days to east coast Takes ~12 days to west coast; 14 days to east coast Source: Infraline Country wise mining rights processing time CountryTime to process rights (Months) Colombia1 South Australia <2 Brazil2 Chile7 South Africa >12 India48 Source: Mckinsey & Co

S & T Mining – August 27, New Delhi Country rating for Mining (Behr Dolbear – 2012) ParameterRank 1Rank 2Rank 3Rank 4Rank 5 Economic System Australia Canada Chile USBrazil Mexico Colombia Peru Mongolia China India Indonesia Political system Canada Chile Australia Brazil US Mexico Colombia Peru India Indonesia Mongolia Social Issues AustraliaChileColombiaBrazil Mongolia Canada Indonesia Permitting Delays AustraliaMexicoChile Colombia Brazil Mongolia China South Africa Canada Corruption Australia Canada USChileBrazil Comobia 26

S & T Mining – August 27, New Delhi Country rating for Mining (Behr Dolbear – 2012) ParameterRank 1Rank 2Rank 3Rank 4Rank 5 Currency Stability Australia Canada Brazil ChileUS China South Africa India Mongolia Tax Regime Canada Mexico BrazilAustralia Russia China Chile US Colombia Mongolia India Overall AustraliaCanadaChileBrazilMexico 27 Australia and Canada are two most favourable countries for mining; Australia more favourable : Canadian coal has cost disadvantage compared to Australia in terms of freight

S & T Mining – August 27, New Delhi Investment by Indian Companies Since import is an imperative a number of Indian companies have already coal assets abroad……

S & T Mining – August 27, New Delhi Suggestions towards securing coking coal import Inter-Governmental level of agreement for developing and operating overseas coking coal mines. Using sovereign fund for developing infrastructures in emerging coking coal sources like Mozambique. Mining companies should form consortium with Infrastructure & Logistics companies to invest in infrastructure in new geographies. Priority clearances at Indian ports. Construct a dedicated rail corridor in the country for faster movement of coal from ports to end user plants.

S & T Mining – August 27, New Delhi THANK YOU