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23.05.2012 Creating a sustainable Mongolian coal mining industry, Arshad Sayed

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Arshad Sayed, President for Mongolia and India, Peabody Energy

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23.05.2012 Creating a sustainable Mongolian coal mining industry, Arshad Sayed

  1. 1. Creating a Sustainable Mongolian Coal Mining Industry Arshad Sayed, President for Peabody Mongolia and India May 23, 2012
  2. 2. Presentation Overview I. Coal Facts II. Lessons from Other Coal Markets III. Key Factors for a Sustainable World Class Coal Mining Industry IV. Peabody’s Best Practices in Coal Mining V. Mongolia’s Future in the World Coal Market 2
  3. 3. I. Coal Facts ● Almost half of the world’s additional energy demand over the past 10 years was provided by coal 3Source: IEA World Energy Outlook 2011
  4. 4. ● Coal provides 30% of global primary energy needs ● Coal-fired power plants generate 41% of the world’s electricity (more than any other fuel) ● Coal is a vital resource for industry as needed to produce 68% of the world’s steel 4Source: BP Statistical Review of World Energy 2011 I. Coal Facts
  5. 5. 0 1,000 2,000 3,000 4,000 5,000 Coal Oil N. Gas Nuclear Hydro Other I. Coal Facts – The World’s Fastest Growing Major Fuel 0% 10% 20% 30% 40% 50% Coal Natural Gas Hydro Oil Nuclear 48% 31% 13% 29% 7% Source: BP Statistical Review of World Energy 2011; International Energy Agency, World Energy Outlook 2011 ‘Current Policies’ scenario. 5 Coal Grows 65% by 2035 to Become World’s Largest Energy Source Growth 2000 – 2010 Growth to 2035 2009 2020 2035
  6. 6. II. Lessons from Other Coal Markets ● Coal provides a significant direct contribution to economic development at local level, particularly in developing countries – Source of foreign hard currency earnings (from coal export) – Way to save import costs ● Energy is central to sustainable development and poverty reduction efforts – Millennium Development Goals are not fully achievable without clean, reliable and affordable energy from coal 6
  7. 7. II. Lessons from Other Coal Markets 7 Example from Hunter Valley, Australia ● Australian coal mining is now a blend of both the traditional extractive industry and the new era of high- tech knowledge-based economic activities ● Coal mining helps make Singleton - in the geographic heart of the Hunter Valley - one of Australia's richest locations: – Average wage is A$48,000 – Contributes A$2.5 billion from coal, tourism and other industries to the economy – Population 22,500
  8. 8. III. Key Factors for a Sustainable World Class Coal Mining Industry Sustainable coal mining means mining coal safely, profitably and in socially and environmentally responsible ways, over a long period of time so that the resource benefits not just this generation, but generations to come as well. Industry and company responsibilities to meet this goal: ● Adhere to world class standards and techniques in safety, operations, environment and social responsibility ● Ensure the right mix of expertise, leadership, management, reputation and financing ● Ensure best in class techniques to increase productivity and resource recovery ● Continue advancing clean coal technologies ● Extract greater value from coals through coal conversion 8
  9. 9. Government’s responsibility: ● Provide a predictable, stable, and smart policy framework. Both on the regulatory and tax policy aspects so as to guide development and use of coal to reduce electricity production costs and minimize environmental pollution ● Develop an infrastructure platform such that several reserves and deposits can leverage this in order to avoid duplication and minimize the environmental footprint ● Encourage through incentives a healthy relationship between government, private sector, suppliers and contractors across the value chain, universities and research institutes, and labor unions ● Ensure benefits flow to the community and GoM budget should invest more in public goods that benefit all levels of the population 9 III. Key Factors for a Sustainable World Class Coal Mining Industry
  10. 10. 10 Impact-based Model of Sustainable Development Source: “WATER USE AND SUSTAINABLE DEVELOPMENT IN COAL MINING – A CASE STUDY FROM CENTRAL QUEENSLAND” by Robin Evans (Senior Researcher, Sustainable Minerals Institute, UQ) Peter Roe (Manager – Environment, BMA Coal) Jim Joy (Director, Mineral Industry Safety and Health Centre, UQ) III. Key Factors for a Sustainable World Class Coal Mining Industry
  11. 11. IV. Peabody’s Best Practices in Coal Mining 11 OVERVIEW • The world’s largest private-sector coal company (129 years record) o 251 million tons sold in 2011 o $8 billion in revenues o 9 billion tons of coal reserves o 27 billion tons of international resources • Industry leaders for 40+ years • Customers on six continents • 30 mines (Surface/underground; U.S. and Australia) • Recognized globally for achievements in safety, productivity and environmental excellence • Large-scale open-cut mining expertise • Significant financial strength • Historically recognized as “Fortune’s Most Admired” and “Forbes 400 Platinum List” company
  12. 12. Peabody’s Approach to Coal Resource Development ● Peabody has core competencies to share with global partners: – Best-in-class safety practices – World-class mining expertise – Proven record of environmental stewardship – Record of safety, environmental and corporate leadership – Global leadership in clean coal solutions ● Sharing these competencies could have significant benefits for Mongolia: – Improved safety practices – Better utilization and recovery of resources – Greater energy supply reliability – More efficient methods of production – Adoption of latest mining technologies – Enhanced environmental preservation and sustainability in a local area and communities 12
  13. 13. Peabody’s Best-in-Class Safety Practices 0 1 2 3 4 5 6 13 Safety Vision: Zero Incidents of Any Kind Wholesale Utilities CoalMining Retail Agriculture/Forestry/Fishing/Hunting Manufacturing Transportation&Warehousing Education&HealthServices Construction Peabody2011 Leisure&Hospitality Financial Information Source: Peabody 2011 data; U.S. Department of Labor, Occupational Safety & Health Administration, 2010 data; Mine Safety and Health Administration, 2011 data. IncidentsPer200,000HoursWorked 1.3 1.92 3.69 Peabody2010 2.71
  14. 14. World Class Open-Cut Mining Expertise ● Peabody is the largest producer of open-cut mined coal in North America – 89% of Peabody’s volumes sold were from open-cut mines – 148 million tons were produced from Peabody’s three mines in the Southern Powder River Basin – 20 open-cut mines in operation globally ● Peabody optimizes production using multiple mining methods – Cast blasting – Draglines with dozer assist – Truck and shovel with dozer assist ● Surface operations typically recover 90% to 96% of the coal resource ● Open-cut mines in the U.S. are commercially viable and competitive at stripping ratios of up to 20:1 14
  15. 15. World Class Underground Mining Expertise ● Approximately 11% of Peabody’s tons sold are from 10 underground mines ● Peabody utilizes a wide range of underground mining methods, depending on the geology: – Longwall mining – Continuous miners with battery or cable shuttle cars for longwall development – Continuous miner “super sections,” i.e., two continuous miners and four to seven battery cars for room and pillar mining – Mobile roof supports and continuous miners for pillar extraction ● Peabody extracts coal from underground seams ranging in thickness from 40 inches to 12 feet ● Peabody strives for maximum resource recovery and coal preparation plan yields with results dependent on geology and customer requirements – Peabody is the largest user of ash analyzers to monitor and blend coal quality among coal companies in North America – Peabody uses proprietary software to monitor, optimize and blend coal qualities 15
  16. 16. Record of Safety, Environmental and Corporate Leadership ● Seven safety awards and 12+ employees honored ● Six environmental awards in U.S., Australia and Asia ● U.S. Foreign Policy Association Corporate Responsibility honors ● Recognition for leadership by Chief Executive and Institutional Investor magazines 16 30 Major Awards for Leadership in 2011 Big Sky Mine, Montana, USA Ereen Mine, Bulgan province, Mongolia
  17. 17. Peabody Completed Mongolia’s First Coal Mine Restoration Project June 2009 May 2010 August 2010 17 Ereen Mine, Bulgan province, Mongolia
  18. 18. Global Leadership in Advancing Clean Coal Solutions Peabody’s objectives: ● Work to eliminate energy poverty by ensuring that at least half of new generation is fuelled by coal ● Replace 1,000 gigawatts of traditional coal plants with efficient, advanced coal technologies ● Develop at least 100 major Carbon Capture and Storage (CCS) projects around the world within the next ten years. This complements the International Energy Association’s goal of deploying more than 2,000 projects by mid-century ● Deploy significant coal-to-gas, coal-to-chemicals and coal-to-liquids projects globally in the next decade, reducing our overdependence on oil and natural gas ● Commercialize next generation of clean coal technologies to achieve near-zero emissions 18
  19. 19. Clean Coal Projects in the United States, Australia and Asia Global Leadership in Advancing Clean Coal Solutions (cont’d) ● China’s GreenGen, Australia’s COAL21 Fund and U.S. FutureGen projects ● Australia’s Global Carbon Capture and Storage Institute ● Consortium for Clean Coal Utilization ● U.S. Department of Energy National Carbon Capture Center ● Clean coal conversion projects with China’s Huaneng Group and Yankuang Group Co.,Ltd 19
  20. 20. V. Mongolia’s Future in the World Coal Market Mongolia as “Energy Paradise” It has the key ingredients for developing a world- class sustainable coal industry: ● Rich coal resources and world-class coal deposits ● Good geographical location – next to key markets ● Vibrant democracy that expects greater accountability from government and business ● Special respect for, and relationship with, nature and environment as a result of being a nomadic nation 20

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