Alpha Coal mine and rail project


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Paul Mulder, Managing Director - Coal & Infrastructure, GVK Resources delivered this presentation at the Galilee Basin Coal & Energy Conference 2012. This two day event looks at the significant proposed investment in the Galilee area including coal mining, underground coal gasification, coal seam gas, geothermal, shale and much more, bringing together the wide variety of explorers, project developers, service providers and government representatives under the one roof. For more information about the annual industry gathering in Brisbane/Australia please visit the conference website:

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Alpha Coal mine and rail project

  1. 1. GVK Coal Projects Galilee Basin Coal & Energy Conference 12 November 2012 Presenter – Paul Mulder
  2. 2. Important notice - Disclaimer  IMPORTANT: The information in this document has been provided to you for information only by the GVK Group (GVK) and is subject to change without notice. Nothing contained in this document constitutes investment, legal, tax or other advice. The information in this document does not take into account your investment objectives, financial situation or particular needs. Before making an investment decision, you should consider, with or without the assistance of professional securities adviser, whether an investment in GVK is appropriate in the light of your particular investment needs, objectives and financial circumstances.  Nothing in this document should be considered a solicitation, offer or invitation to buy, subscribe for or sell any security in any place in which, or to any person to whom, it would be unlawful to make such an offer or invitation. The distribution of this document outside India may be restricted by law. Persons who come into possession of this document who are not in India should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.  Neither this document nor any copy hereof may be transmitted in the US or distributed, directly or indirectly, in the US or to any US person including (1) any US resident, (2) any partnership or corporation or other entity organised or incorporated under the laws of the US or any state thereof, (3) any trust of which any trustee is a US person, or (4) and agency or branch of a foreign entity located in the US.  By accepting this document you agree to be bound by these limitations. GVK has prepared this document based on information available to it. Although reasonable care has been taken to ensure that the facts stated and opinions given in this document are fair and accurate, the information provided in this document has not been independently verified. Accordingly, no representation or warranty, express or implied is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained in this document. To the fullest extent permitted by law, none of GVK, its directors, employees or agents or any other persons accepts any liability for any loss whatsoever arising from any use of this document or its contents, or otherwise arising in connection therewith. 2
  3. 3. Introduction to GVK Revenues are derived primarily from O&M fees, incentives for operating the businesses of subsidiaries, and secondarily from the interest income earned out of managing surplus funds through superior financial planning  GVK employs over 8,000 people plus another 18,000 staff for its not for profit EMRI business Power  Airports GVK‟s assets are predominantly in energy, airports and transportation  India‟s Largest Private Airport Operator  Mumbai International Airport – 30m pax  Bangalore International Airport – 12m pax Transport   India‟s First 6 Lane Expressway  Over 550km of roads under construction / development with plans for Mass Rapid Transit  Greenfield port planned (Gujarat Oil & Gas GVKPIL is a listed entity and an ultimate holding company of “GVK” which operates in diversified assets through different vertical businesses  7 deepwater oil & gas blocks in partnership with BHP Billiton Mining   Eight Power Projects – Gas, Hydro & Thermal  5,106 MW of Power  Alpha and associated port and rail infrastructure  Kevin‟s Corner and Alpha West deposits  Two mines in India Urban GVK Group includes GVK Power and Infrastructure Limited (“GVKPIL”) and various other interests of the GVK Family  Two large-scale integrated developments in urban environments  Airport City (Mumbai) and GVK One (Hyderabad) Hotels  Operations  6 world-class properties and one under construction  Total room base of over 1,000 Bioscience Overview  Provides a broad spectrum of across the R&D value chain in chemistry, biology and informatics; Project value add GVK is a natural strategic fit for the Alpha Project  Ability to link Australia to India and the Ultra Mega Power Projects (UMPP) programme  As a major emerging coal user, GVK is committed and aligned to the successful development of its Galilee Basin projects Infrastructure expertise  GVK is a leading infrastructure player  The development of the rail and port infrastructure is the key to opening up and developing the Galilee Basin  Experience in financing and developing large scale projects Investment / financing capability  GVK has strong relationships with leading global banks across debt and equity  It has a track record of success in working with partners and attracting financing for the delivery of large complex projects Commitment to Australia  GVK is committed to expanding its business in Australia  GVK is seeking to expand its resource and infrastructure portfolio to include Australia, particularly Queensland with its Galilee Basin investment being its seed asset. Source: Factset, Factiva, company presentations. 3
  4. 4. GVK EMRI – Saving Lives GVK EMRI – Our Innovative PPP (Public Private not for Profit Partnership) Service Delivery Model to provide free Emergency Response Services Size  350 million people covered in 11 States  Employing more than 18,000 people  3200 ambulances  120,000 calls handled per day  12,000+ emergencies handled per day  Over 300 lives saved per day Speed  Went live in less than 4 months from signing MoU  91% calls taken in first ring Impact  280,000+ lives are saved to date 4
  5. 5. Queensland Projects Overview Alpha Coal Development Pit to Port Logistics Abbot Point T3 Terminal 5
  6. 6. 1 Project Overview Kevin‟s Corner (100%) Alpha Coal (GVK 79%)   Expected to be the first thermal coal project to commence mining in the Galilee Basin It will rank as one of the largest thermal coal operations in the world and represents the next generation of independent thermal coal supply Alpha West (GVK 79%) GVK Railway (100%)    Also expected to rank as one of the largest thermal coal mines in the world Up to 30Mtpa export grade thermal coal mine   Large underground mine west of Alpha 16-24Mtpa export grade thermal coal mine  The first standard gauge, heavy haul railway in Queensland Designed to replicate the efficiencies of the Western Australian iron ore industry GVK Port (100%)   Dedicated terminal at Abbot Point Queensland‟s most northern coal port  Ability for up to 70Mtpa subject to more efficient use of stockpile area and berth configuration Up to 32Mtpa export grade thermal coal  1.82Bt resource  1.2Bt reserves   Open cut mining, 30 years mine life First coal by Q3 2016  Ramp up from 2016 to 2019    High grade thermal coal for export markets, mainly suitable for the premium North Asian utility market  FOB - US$54.8 – 57.5/tonne (Real)   DFS and BFS completed  EIS and EPBC approved   Mining lease to be issued by Q1 2013 Native Title negotiated   ECI contractors short listed LOIs for 43Mtpa received  Preferred mining contractor appointed 495km, standard gauge, stand alone rail link from Galilee Basin to Abbot Point    25,000t haul per train  60Mtpa capacity  Awarded Preferred Developer for T3  Scalable to 120Mtpa  Framework Agreement agreed  Offshore berth option most likely  2 x 30Mtpa stockpile capacity  2 x dedicated ship berths  Port approval by Federal government  4.3Bt resource  1.8Bt resource   Open cut & underground mining 30 year mine life   Underground mining 30 year plus mine life  First privately owned railway in Queensland High grade thermal coal for export markets First coal by Q2 2017   EIS approved by State and Federal governments  High grade thermal coal for export markets Pre feasibility drilling has commenced  Ramp up from 2017 to 2020  Mining targeted for 2018 Rail corridor selected by State government   Concept study completed BFS expected by 2014   Rail corridor approved Third Party and ACCC consultation underway  Leverage Alpha related studies and approvals   Native Title negotiated State significant project  Land acquisition starting   EIS and SEIS submitted BFS has commenced  Mining lease expected to be issued by Q1 2013  Native Title negotiated The Galilee Basin assets comprise a large scale, high quality thermal coal resource with integrated rail and port infrastructure located in Australia’s next major coal basin 6
  7. 7. Project Location The thermal coal projects comprise Alpha Coal Project, Kevin‟s Corner and Alpha West. Alpha is expected to be the first thermal coal project developed in the Galilee Basin. Represents the next generation of independent energy supply 7
  8. 8. GVK Coal – Test Pit Successful Test Pit  First and only exporter of coal from the Galilee basin to date. 125k ROM mined  Coal burning tests undertaken in Korean and Chinese coal fired power stations (Q4 2011)  Validation of geotech parameters and ground water assumptions  C and D seam washing yields greater than forecast (~84%)  Excellent burn results and coal quality parameters as good or better than projected in the BFS  Significant de-risking of the project Depth 16m 43m 52m 8
  9. 9. GVK Railway Overview Asset description  The GVK Railway will comprise initially a new single track, non-electrified, standard gauge, heavyhaul 495 km (mainline) railway  Connects the Alpha and Kevin‟s Corner mines with the Hancock Port Terminal at Abbot Point  Initial capacity of 60Mtpa and scalable to 120Mtpa. Duplicated to 250Mtpa  1 in 320 ruling grade (loaded trains)  Designed to replicate the efficiencies of the iron ore industry in Western Australia  Standard gauge may generate costs savings of ~40% over narrow gauge Rail Rate Unit Standard gauge 1,435 mm 4ft 8.5in No of Wagon per Train Train Length 240 3,866 m Wagon Payload 106 t Wagon Gross Weight 130 t Axle Load 32.5 t Payload per Train (approx) 25 kt No of Locos per train 3 Rail Length 495 km Train Travel Time (loaded) 10 hrs Train Travel Time (empty) 8.5 hrs No of Passing Loops (@30Mtpa) 5 No of Passing Loops (@60Mtpa) 9 Loco capacity 4,400 hp 3,236 kw No of Trains (@30Mtpa) 4 sets No of Trains (@60Mtpa) 8 sets 9
  10. 10. GVK Railway - Status Milestones Achieved  Technical Design – has been completed for a 60Mtpa from both a construction and operation perspective. Focus is on earthworks and geotechnical (completed by June 2012) which will be undertaken in the Early Contractor Involvement phase (which precedes the final EPC bid in February 2013) and Financial Close.  Advanced Approvals – The Co-ordinator General‟s Report was issued on 29 May 2012. which was subsequently ratified by the Federal Government. This is a major approval milestone for the rail. The GVK rail corridor alignment was endorsed as the preferred South to North corridor by the Queensland State Government on 6 June 2012. The Mine & Rail were also granted approval under the EPBC Act by the Federal Government on 23 August 2012.  Rail Corridor Land – More than two thirds of the rail corridor (by chainage) has commercial arrangements/agreements in place.  Construction - Two contract consortia short listed.  Infrastructure Operators Shortlisted – we have an established short list for above and below rail operators.  Operational modeling - has been completed and includes modeling for short listed third party rail haulage customers.  RIM accreditation – has been granted under the Transport (Rail Safety) Act 2010 (Qld).  Rollingstock – Locomotive and coal wagon sourcing being progressed.  McKinsey – we have retained McKinsey to review opex and capex savings across the construction and operation of the railway. 10
  11. 11. GVK Port - Features Overview  GVK‟s proposed offshore terminal GVK Infrastructure has been appointed preferred developer of the GVK Port Terminal  Key features of the development include: – Two rail receival dump stations located in a single common concrete vault and building, situated on the proposed rail loop corridor – Two inloading conveyor streams running in parallel, consisting of four inloading conveyors per stream, feeding coal to the stockyard – A single stockyard consisting of four stockpile rows arranged either side of two parallel machine bunds (two rows per bund) – Two machine bunds, each supporting two stacker/reclaimer machines – Two outloading conveyor streams running in parallel, consisting of five outloading conveyors, surge bin, sample plant and shiploader on each stream – Dual high capacity (9,500 tph) train unload stations in a common vault Approximately 2Mt of stockyard capacity representing 3.3% of annual throughput – One common piled jetty structure, two piled wharf structures to support the offshore outloading conveyors, shiploaders and access roadways and multiple, piled berthing and mooring dolphins Civil infrastructure, including stockyard drains, sediment ponds, stormwater return dam and dredge spoil disposal bunds 11
  12. 12. Port - Stockpile Position Abbot Point (note needs to cross Wetlands) GVK’s proposed stockpile position T3 12
  13. 13. GVK Port - Status Milestones • Technical Design – ongoing work has been undertaken and ability to increase port throughput has been confirmed • Framework Agreement – this agreement which sets out the relationship governing the arrangements between NQBP agreed and executed • Advanced Approvals – significant work undertaken with regard to cumulative impact studies and dredging approvals. • Infrastructure Operators Shortlisted – we have established a short list for port operators • Port Capacity for Third Party Rail Customers– a number of the potential rail customers are seeking access to port capacity. • EPBC Act “T3” approval received 10 October 2012 • Construction Contract – Samsung and Smithbridge Joint Venture announced 17 October 2012 13
  14. 14. EPC Work Packages and Procurement Items 14
  15. 15. Construction Processes  Project to be delivered through fixed cost, fixed time EPC contracts with large global builders with requisite expertise and experience  Process started in November 2011 with contractors commencing for Phase 2 – ECI phase   Parties short listed All shortlisted EPC documentation to be finalised in Q1 2013 PHASE 1 BIDDER PHASE 3 PHASE 2 BIDDER BIDDER Contractor BIDDER BIDDER BIDDER GMAX Bids, Clarifications & ECI Deed Executed ECI Deed, Design, Scope Definition, Deliverable, Schedules & T&Cs BIDDER EPC Proposal with Award & EPC Contract Lump Sum Price, Execution Executable Draft Contract 15
  16. 16. Procurement And Contracts - Work Packages Mobile Fleet Rail Operators Services Agreements: Major service agreements for the Contractor Operated Facilities Excavators Port Operators Draglines Procurement & Contract Work Packages Mining Services Agreements Major Capital Purchases Large Excavators Ancillary Gear Fuel Major Commodity Purchases Tyres Rail Loco‟s and Wagons 16
  17. 17. Supporting Services – Local Community, Major Water & Power Supply 17
  18. 18. Water / Power Water A three pronged approach is being considered for the supply of water to the mine • Pit dewatering bores will provide the required construction water and supplement the water demand during operations • Operations water will be supplied by either o Water harvesting (during high flow periods) from the Belyando/Suttor system and storage in multiple, low evaporation design, dams o Water pipeline (approximately 220km) from the Fairbairn Dam - sufficient water allocations have been purchased or options are in place to purchase Power • Connection access agreement in place for Galilee Projects 18
  19. 19. Power 19
  20. 20. GVK / Hancock’s Community Focus • • Alpha Community Support Program Enterprise Whitsundays Partnership Program – Regional Indigenous Employment Program These community support programs cover the areas of: – Education and Training – Environment – Arts and Culture – Health and Safety – Community / Charity – Sports 20
  21. 21. Local Opportunities T3 Operational Workforce – approximately 100 full-time employees Mine Operational Workforce (inc CHPP) – approximately 1600 employees (including shutdowns) Rail Operational Workforce - approximately 200 full-time employees • • • Operations workforce will be engaged on a mix of continuous shift, rotating day shift and day work Expect that operations workforce will be locally and regionally based GVK committed to providing opportunities for locals to undertake training and development • The Alpha Coal Project is committed to working with businesses and industry in the region and will encourage our contractors to partner or establish strategic relationships with local firms through the contracting and ECI process • The project‟s Industry Capability Network (ICN) gateway is currently the principle means of communicating with potential suppliers and contractors For future company contracting queries or Expressions Of Interest, please direct your enquiries via the following links: Mine Opportunities Railway Opportunities Port Opportunities 21
  22. 22. Market Demand and Customer Base 22
  23. 23. Global Seaborne Thermal Coal Demand World thermal demand will more than triple in volume, mainly fuelled by the insatiable demand of China and India, reaching 2.1 Bt by 2030. This represents an increase of 1.4 Bt over 2011‟s expected 728 Mt – or effectively two Alpha projects per annum. Growth is primarily concentrated in the Pacific basin. Global thermal seaborne import coal demand by country and by rank, China, India, all others (Mt) 23
  24. 24. Reasons why GVK invested in this Project 24
  25. 25. Global Cost Curve (2021) The Alpha Coal project is expected to sit on the first quartile of the global thermal coal cost curve (2021). It is expected to be amongst the most cost efficient mines in Australia Note: Global seaborne supply is forecast to be ~1.4Bt in 2021 25
  26. 26. Alpha Coal Marketing • • • • • • • • • China Korea Japan Taiwan Vietnam Philippines Malaysia India Other     High C Burnout Efficiency (99.8%)  Low C in Ash (1.3%)  Slagging deposits were minimal, Powder and Sinter Type only.  Fouling deposits minimal, Powder Type only  Low to moderate soot blowing will control deposition and maintain heat transfer  High fly ash migration velocity, Low level of particulate emissions  Moderate SOx emissions  Moderate NOx emissions  Trace elements well below World export coal average levels STRICTLY PRIVATE AND CONFIDENTIAL  Favourable Turn Down performance Environmental Alpha coal is not abrasive Excellent Flame Stability at full load Boiler  Excellent Ignitability Milling  Very low mill wear Storage and Handling Coal will handle well on stockpiling and transport Low to moderate power consumption Total Commitments in 2018 by Region  26
  27. 27. Quality Projects Are Always Developed Markets overshoot and undershoot but quality projects like Alpha that sit on the first quartile of the cost curve are nearly always developed Downswing Upswing Downswing Upswing Industry Growth (+) Industry Contraction (-) Project Cost Curve Position Likelihood of Project Development During Business Cycle - Quartile 1 - Quartile 2 - Quartile 3 - Quartile 4 Coal Business Cycle High probability of being developed Low probability of being developed 27
  28. 28. Steps Forward 28
  29. 29. Project Partners The following Project partnering processes are well advanced ECI Process  Contractors for Phase 2 shortlisted  Aligned with ECA financing  Final EPC contract to be finalised in Q1/2, 2013  (Port signed 17 Oct 2012), CHPP, MIU, Rail, Port underway Infrastructure Operators Mine Customers  Started in Sep 2011  Operators shortlisted after a extensive review of technical and safety related parameters  Term sheets for Operations & Maintenance and for investment provided  Preferred operators to be announced in Q4 2012     Started in 2009 Over 42Mtpa of customer arrangements Excludes potential investors that are offtake Final bankable offtake agreements being signed  Started in Sep 2011 Rail & Port Infrastructure Customers  Stapled opportunity of rail and port  Keen interest from very advanced & developing customers representing up to 207 Mtpa of coal capacity  Discussions on Tariff and Haulage Agreement ongoing  Key terms, including tariff and take or pay volumes, expected to be finalised by Q4 2012 29
  30. 30. Timetable 2009 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 Q4 „13 „14 „15 „16 Order of magnitude Pre-Feasibility Studies Bankable Feasibility Studies ECI/FEED Finance Enviro / govt approvals Tier 1 Enviro / govt approvals Tier 2 Financial close Construction Marketing Letters of Intent Offtake Contracts First coal Project first shipments Financial close is expected to occur by 30 June 2013 Project managed process Statutory process Milestone 30
  31. 31. Thank You 31