MCQ synopsis Covers:Layout 1.qxd - Steel Business Briefing

Metallurgical Coal Quarterly A Synopsis 2009

A quarterly analysis and forecast of demand for and supply of metallurgical coal

MCQ

Synopsis

www.mccloskeycoal.com

C O N T E N T S PA G E

IHS McCloskey McCloskey Metallurgical Coal Quarterly Synopsis 2009

Editor Dale Hart

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Introducing Metallurgical Coal Quarterly Metallurgical Coal Quarterly (MCQ), over the seven years since it was launched, has a proven track record of accurately determining the direction and quantum of change for annual pricing. MCQ combines McCloskey’s unrivalled reputation for timely and insightful investigative journalism with a thorough and systematic analysis of both the supply and demand side of the market for hard coking coal, semi-soft coking coal, PCI coal and blast furnace coke. Subscribers to receive comprehensive tabulated data extracted from our own coking coal demand model presented in summary formats. This information and the accompanying text are much valued by our client base that includes most of the world’s leading commodities companies. MCQ is unique, tracking the metallurgical coal market on a quarterly basis (with one issue each year devoted to a 10 year forecast) with in depth analysis covering all 42 IISI reporting iron-making countries looking 18 months to three years out. Every issue also carries handy summary articles on key companies within the industry both from the consumer and supplier side. Each issue extends to some 120 pages and contains:

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• Executive Summary

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• Chapter One: Demand Side Analysis

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MCQ - Synopsis 2009

• Chapter Two: Supply Side Analysis • Chapter Three: Supply-Demand Balance – Outlook for Price • News Summary • Consumer Profile or Article (this quarter Low Volatile PCI) • Supplier Profile (this quarter – New Canadian Suppliers) • Appendix One: Full output reported by country (42) of the demand model from the GDP forecasts, through iron and steel making forecasts, to separate sheets forecasting the demand for coking coal, PCI coal satisfied by either imports or indigenous production. This synopsis report gives a snapshot of the usual three issues to give you an understanding of its content and its relevance to your organisation.

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EXECUTIVE SUMMARY

Executive Summary Enter the Dragon China's massively increased reliance on seaborne imported metallurgical coal since the outset of 2009 has shifted the dynamic of an otherwise very bleak global market. In June 2009 alone China imported over 4mt of seaborne metallurgical coal, smashing the previous monthly record of 2.8mt set just two months before. June now carries its half-year seaborne imports total to almost 12mt, up from 0.3mt in the same period of 2008 (when also some 1.4mt was imported overland from Mongolia). In MCQ29 our central case forecast for the year-on-year increase in Chinese seaborne imports is just over 18mt (for a total of almost 21.5mt seaborne) which may well prove to be conservative although China's level of importing is expected to slow from now to the close of 2009 (with spot price levels a key factor). Chinese imports are only part of the story with exports of metallurgical coal and coke vanishingly small and at current rates neither would top 1mt in 2009 compared with 3.4mt and 12mt respectively in 2008. Converting coke shipments to coal equivalent (using a factor of 1.4) we think China's supply to the global market in 2009 could be up to a staggering 20mt lower than in 2008 (if shipments levels do not recover). As it stands now China looks set to switch from a 14mt net exporter in 2008 to a 20mt or so net importer in 2009 (removing some 30-35mt from the global market). Such huge changes will have an impact on the global market that will extend beyond 2009 Setting China apart, the requirement for seaborne imported metallurgical coal from all other countries will be about 50mt lower this year than last. The recession is deeper than forecast at the start of the year and blast furnace output has been reined back even more tightly. Only metallurgical coal producers' comprehensive plans to cutback export production by up to 50mt or more collectively in 2009 (as we saw in MCQ27 and MCQ28 previously and detailed again in the MCQ29 Demand Section) enacted in late 2008 have largely removed the looming spectre of significant oversupply.

MCQ Estimated Year-on-Year Change in Seaborne Metallurgical Coal (All qualities combined) for Major Countries and Regions (000t) 2009 v 2008 EU15 O. Europe Brazil Japan S. Korea Taiwan Sub total India China Sub Total

-16 230 -3 050 -4 416 -17 392 -3 954 -1 217 -46 259 680 18 044 18 724

Source: MCQ

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY In fact, with the reductions in both the global supply and demand for 2009 so potentially evenly matched it has been the unexpected emergence of China as a massive importer in 2009 which has shunted the market towards tightness. This tightness is clearly shown by spot coal prices for hard coking coal sold into China climbing in June 2009 to $20/t above the recent $129/t FOB benchmark set by BHBP with Japanese mills. We believe the muted recovery in global hot metal output, and thus metallurgical coal use, expected in late Q3 and Q4 2009 combined with China's "new" requirements will test shippers' ability to match demand. The position of the market at the year end will be governed largely by Australia's ability to ship enough coal through its straining infrastructure. Demand for steel has withered in the mature economies and symptomatic of this the opening six months of 2009 saw US car giants General Motors and Chrysler finally declare bankruptcy. The decline in hot metal output cannot be overstated and announcements on potentially permanent closures of blast furnace capacity have peppered the news (see News Review). Pig iron output from the established metallurgical coal importers in the EU15 and Asia (excluding China and India) is running at about 11.5mt/month - down 40% (7.5mt/month or 90mt annualized) from 19mt/month in mid-2008.

Hot Metal Production Trends 2001-2009

Source: MCQDM

Now while most economists believe there will some economic recovery in most countries in both Q3 and Q4 2009, which will continue into 2010, its strength and depth is quite uncertain. True, steel mills have been sounding more optimistic in recent weeks and at the time of writing there has been a rash of announcements heralding the return to production of idled blast furnace capacity. Nonetheless, we are in the grip of a severe global recession. Amazingly perhaps, in the midst of the biggest meltdown in global demand for many decades the market for metallurgical coal could end 2009 in a tight position. The key factors that will govern how the seaborne market for metallurgical coal develops between now and the next term contract negotiation round in early 2010 are;

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY • The extent of the recovery in hot metal output in H2 2009 and early 2010 in the major metallurgical coal importing countries. We think that pig iron production from the former EU15 iron makers will never recover to 2007's 95mt level as a result of permanent capacity closures in Belgium, France, Germany, Italy and the UK and be at just 82mt at the close of the forecast period. Similarly we do not expect Japanese pig iron production to top 2007's 87mt level prior to 2011. • The level of Chinese metallurgical coal imports over the rest of 2009 and into 2010. To a great extent this will depend on the rate at which small mines in Shanxi Province return to production but regional data to end-May 2009 shows coal output to be 22% (47mt) down on 2008's level at 168mt. Production in May alone, at 42mt, was 15mt below the May 2008 level. We now expect seaborne imports to remain above 20mt in each year to 2011. • The level of Australian metallurgical coal exports in H2 2009. Australian metallurgical coal shipments for the year-to-May were 44mt, down 16% (8.6mt) on 2008 levels. To keep the global traded markets for each quality close to balance we estimate that Australia will need to ship above 120mt overall for calendar 2009 (though still 14mt below 2008's levels) which will require monthly exports at 11mt or more for the balance of the year (something not achieved since 2007). This could prove to be a testing target given that vessel queues at Dalrymple Bay Coal Terminal (DBCT) are at about 50 already and those at Newcastle are about the same. • What happens in the USA. US hot metal production is running 55-60% below 2008 levels and mills' metallurgical coal consumption looks likely to be 9mt down year-on-year. We think some mills will close permanently in late 2009 and early 2010. This fact combined with a likley year-on-year 8mt or so fall in exports in 2009 presents a clear survival threat to the thick end of 20mt of productive capacity. Still, US shippers are not a lost cause and they could target further long term sales into both Brazilian and European mills (displacing Australian and Canadian product).

Australian metallurgical coal exports by month 2000 onwards

Source: Australian Government

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

New to MCQ29 • Occasional Review I - China's Metallurgical Coal Imports • Occasional Review II - Metallurgical Coal Price Development since July 2008

Global Outlook - Key Facts Steel Prices Show Some Recovery in late Q2 2009 Steel prices continued to slide from the outset of 2009 as demand shrivelled. HRC prices reached their nadir in May-June around the $380/t to $430/t FOB mark in the USA, Europe and Japan. Since then prices have improved modestly and now stand around the $480/t to $520/t FOB level in various markets. Analysts are divided on the outlook for HRC prices over the balance of the year with the majority favouring a very modest further improvement in prices, perhaps by as much $20/t. Certainly mills are positive and in the USA, EU and Russia producers have all signalled price increases for Q3 2009 deliveries. Historically, steel prices are usually pushed up by a weakening US dollar as the main HRC exporters' costs climb in dollar terms as the domestic currency strengthens. However, we estimate that sharply lower coking coal and iron ore prices achieved by mills for 2009/10 have reduced the average cost of HRC production of exporting mills to about the $400/t FOB level. This fact alone will place a ceiling on the level of price recovery. With so much production capacity idled any small increase in price could stimulate the return to service of mothballed capacity potentially swamping any incremental improvement in demand.

Spot hot rolled coil (band) price evolution

Source: Tex, WSD

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

Global Blast Furnace Output Global output in hot metal has fallen further in 2009 than we expected at the outset of the year in all major producing regions bar Asia where China (principally) and India's strong performance have arrested the severity of the decline. Recently available data shows global hot metal output closed June 2009 some 15.5% (75mt) below equivalent 2008 levels at just over 408mt.

Hot Metal Data for Year to Date 2008 Total 2005

Total 2006

Total 2007

Total 2008

2009 Q1

2009 Q2

Ytd 2009

Ytd Change

EU OE C.I.S. N. America S. America* Africa* ME

92,815 26,713 82,815 48,698 33,428 4,478 2,305

94,255 28,842 88,093 49,998 31,845 4,443 2,041

95,079 29,322 90,047 48,418 35,085 4,852 2,118

90,596 26,244 82,038 48,051 34,497 4,767 2,176

13,432 4,521 15,378 6,082 5,705 679 636

11,868 4,443 16,686 6,296 5,680 680 596

25,300 8,964 32,064 12,378 11,385 1,359 1,232

-47.6% -39.2% -31.5% -52.6% -36.3% -31.6% 15.4%

Asia* Oceania Grand Total

470,301 6,856 768,409

555,269 7,097 861,884

620,984 7,048 932,953

623,943 6,679 918,992

150,167 1,024 197,624

164,146 881 211,276

313,713 1,905 408,300

-2.8% -45.4% -15.5%

Note: Total of monthly and annual data may differ slightly due to revisions of monthly data. * Brazil adjusted for charcoal based furnaces: India adjusted for non coke making processes: RSA for DRI Source: WSA

The contrasting fortunes of blast furnace based mills in various countries are shown clearly by the table below. Of the major metallurgical coal importers, the former EU15 countries, Brazil, Japan, South Korea and Taiwan's blast furnace operators have cut pig iron production very hard and to levels not seen since the end of the Second World War. In contrast, China's hot metal output has gained on 2008 levels in each month of 2009 and Indian output moved back into positive territory for the whole of Q2 2009. China's blast furnace production has clearly recovered from the slowdown in late 2008 as the fiscal stimulus package enacted by the government took effect. Monthly pig iron output has climbed systematically from the start of 2009 to set a new record in June 2009 of 47.5mt beating May's 45mt which topped the previous record of 43.4mt which had stood since June 2008.

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY Year on Year Change in Hot Metal Production by Month for 2009 v 2008 Austria Belgium Finland France F.R. Germany Italy Netherlands Portugal Spain Sweden United Kingdom European Union Canada Mexico United States North America Mainland China India * Japan R.o.Korea Taiwan Asia Australia New Zealand (a) Oceania Total 42 countries (b)

Jan

Feb

Mar

Apr

May

Jun

-38.4% -75.4% -50.0% -50.3% -35.4% -43.1% -65.2% 0.0% -41.0% -45.7% -42.9% -45.1% -50.0% -51.5% -54.3% -53.2% 1.6% -11.9% -27.1% -19.6% -22.5% -4.8% -28.1% 28.6% -23.6% -17.8%

-46.1% -23.3% -62.3% -41.5% -35.8% -46.7% -43.9% 0.0% -24.7% -47.9% -42.2% -39.6% -49.3% -49.2% -62.1% -58.6% 5.4% -15.1% -37.3% -29.8% -15.4% -3.6% -52.8% -2.8% -48.0% -15.4%

-45.9% -55.7% -50.6% -31.5% -51.7% -52.5% -48.5% 0.0% -33.5% -46.2% -37.9% -46.5% -26.0% -22.8% -56.4% -47.9% 4.1% -3.3% -39.6% -21.9% -11.8% -3.7% -58.5% -11.6% -54.1% -16.2%

-5.1% -66.5% -65.9% -58.3% -57.1% -54.9% -49.7% 0.0% -44.5% -51.2% -40.9% -51.6% -32.3% -23.6% -62.0% -52.9% 0.9% 4.3% -39.0% -18.7% -31.2% -5.7% -55.7% -12.4% -51.9% -17.7%

-34.4% -72.9% -35.7% -47.2% -54.9% -52.3% -51.3% 0.0% -57.4% -55.9% -78.7% -55.9% -54.4% -15.9% -57.6% -53.4% 5.5% 10.0% -35.0% -17.2% -31.6% -1.4% -54.5% -16.1% -50.5% -14.8%

-15.4% -74.6% -28.9% -43.6% -44.8% -61.9% -44.5% 100.0% -44.5% -55.0% -38.1% -46.6% -50.9% -23.1% -53.6% -50.1% 9.5% 4.5% -29.8% -15.5% -16.4% 2.8% -50.0% 7.8% -45.0% -10.7%

Source: WSA

China: Hot metal production trend by month since 2000

Source: WSA

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY In MCQ29 we predict: • In 2009 hot metal output will fall almost 9.8% (90mt) year-on-year to just 828mt some 6% (42mt) below our MCQ27 forecast and almost 200mt below our MCQ26 forecast. Blast furnace pig iron production is expected to fall in all regions including Asia. • Blast furnace output from the former EU15 iron makers and Japan will decline by nearly 28mt and 23mt respectively from 2008 levels in 2009. • In 2010 global blast furnace pig iron production will recover and grow by almost 14% (114mt) to the 942mt mark (just 9mt below our MCQ27 forecast but 146mt below the pre-crash forecast made in MCQ26 though ahead of the previous calendar year peak of 932mt set in 2007). • By 2011 we expect global output to reach 1.03bt up 91mt (almost 10%) yearon-year. • Over the period we have factored in permanent capacity closures in both the EU15 and North America.

Pig Iron Production by Region (000t)

EU Other Europe C.I.S. North America South America Africa Middle East Asia* Oceania Grand Total YonY % Change

2005

2006

2007

2008

2009 Est

2010 Forecast

92,846 26,480 82,816 49,543 33,315 4,478 2,305 480,315 6,855 778,953

94,254 28,842 87,950 49,998 31,842 4,443 2,041 555,268 7,097 861,735

95,079 29,436 89,850 48,700 34,400 4,210 2,188 620,984 7,048 931,895

90,594 26,244 82,038 48,051 34,496 4,160 2,176 623,943 6,679 918,381

62,750 18,652 63,100 30,150 25,720 3,520 2,425 617,600 4,260 828,177

75,832 21,562 72,169 38,543 30,417 3,687 2,474 693,871 4,281 942,836

82,177 24,279 77,624 39,468 40,941 3,798 2,548 758,184 4,316 1,033,333

9.6%

10.6%

8.1% MCQ27

-1.5% 918,381

-9.8% 866,086

13.8% 952,045

9.6%

Diff

0

38mt

9mt

* India and Brazil adjusted

2011 Av Growth Forecast 2006-2011 -2.6% -3.2% -2.3% -4.2% 5.7% -2.9% 5.0% 7.3% -7.8% 4.0%

The 41 countries represented account for about 99% of world blast furnace pig iron production in 2009. Source: MCQDM, WSA

Hard Coking Coal Outlook: Our MCQ29 central case estimates are presented below (MCQ27 numbers or comments in italics in parentheses);

2009 • Market precariously balanced but moving to tight (slight oversupply/balance depending on mine owner cutbacks). • Seaborne demand declines by almost 13mt from 2008 levels to 126mt (14mt to 128mt) • Seaborne supply is reduced by 14mt from 2008 levels to 124mt (13mt to about 129mt). Australia, Canada and USA reduce shipments by 7mt, 3mt and 4mt respectively on 2008 levels.

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

2010 • Market becomes tighter - general recovery and increased Chinese import levels outpace supply (remains oversupplied as additional supply overtakes demand growth). • Seaborne demand adds 22mt to 148mt (10mt to near 138mt). • Seaborne supply climbs 22mt on 2009 levels to top 146mt (11mt to just over 140mt) with Australia accounting for 18mt (83%) of the growth.

2011 • Market remains tight as year-on-year demand growth (just under 16mt) just outpaces supply growth (just over15mt) with China's imports remaining at high levels.

Supply - Demand Balance Seaborne Hard Coking Coal (000t) Import Demand

2005

2006

2007

2008

2009 Est

2010 Fcast

2011 Fcast

All Coking Coal

189,347

194,467

203,122

204,961

175,676

215,306

238,250

Seabn Coking Non Seaborne Less Weak/SS/ Seaborne Demand

167,884 21,463 40,735 127,149

172,195 22,271 43,023 129,172

179,424 23,698 43,540 135,884

183,626 21,336 44,601 139,024

157,358 18,317 31,489 125,869

194,635 20,671 46,274 148,361

215,063 23,187 51,072 163,991

80,507 94.9% 22,039 97.9% 19,227 91.3% 800 53.3% 5,561 64.7% 0 0.0% 0 128,135

79,392 92.6% 19,846 81.3% 18,755 74.8% 750 75.0% 5,344 60.7% 0 0.0% 0 124,086

84,849 90.6% 22,153 89.2% 22,592 88.1% 150 42.9% 5,612 60.3% 69 69.3% 0 135,426

83,190 84.5% 22,143 86.3% 27,391 90.8% 0 0.0% 5,292 56.9% 59 59.4% 0 138,075

76,386 77.1% 19,846 79.2% 23,934 76.6% 100 28.6% 3,610 38.8% 38 37.7% 0 123,913

94,585 90.1% 20,680 80.0% 24,173 75.0% 100 28.6% 6,328 49.8% 60 60.0% 50 145,975

109,092 92.7% 21,263 78.0% 23,348 75.0% 100 28.6 % 6,999 53.0% 60 60.0% 500 161,362

92.5% 93.8% -985

85.5% 89.4% 5,087

88.0% 89.8% 459 MCQ27

84.2% 85.6% 949 -514

75.0% 78.5% 1,956 -1,049

82.8% 86.8% 2,386 -2,409

84.8% 88.4% 2,629 NA

Supply Australia Cap Utilisation Canada (exc USA) Cap Utilisation USA (excl Canada) Cap Utilisation Poland Cap Utilisation China, Russia, NZ Cap Utilisation Indonesia Cap Utilisation Others Moz Tot Seabne Supply Global CU (US @ max mt) Global CU (US @ real mt) Unmet Demand

The bottom line shows the extent to which hard coking supply is greater or less than demand for each year. * The demand from the MCQ model has been adjusted upwards to reflect the demand for imported hard coking coal from countries making blast furnace hot metal but not reporting through WSA (such as Pakistan and Egypt). Source: MCQDM and Various

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

Risks to Forecast: • China's imports move from central case assumption • Global hot metal recovery slower or more rapid than forecast • Australian infrastructure constrains shipment growth.

PCI/Semi Soft Coal Outlook The main points of our MCQ29 PCI/semi-soft central case are shown below (the MCQ27 numbers or comments are shown in italics in parentheses);

2009 • Market in balance (oversupplied). • Total seaborne demand falls by 18.3mt to 64mt (13.4mt to 72mt in MCQ27) from 2008 levels. • Seaborne supply falls by 18mt to just over 64mt (11mt to 74mt in MCQ27) from 2008 levels with both Australian and US shipments down 5mt year-on-year.

2010 • Market becomes tighter (moves towards balance). • Seaborne demand climbs 22mt to just under 86.4 (climbs 11mt to just under 83mt).The similar outturn the effect of a steeper decline than MCQ27 forecast for 2009 followed by stronger growth than MCQ27 forecast for 2010. • Seaborne supply grows 20mt to 84mt (9mt to 83mt) with Australia accounting 12mt of the increase.

2011 • Market becomes very tight as year-on-year demand growth (just over 11mt) just outpaces supply growth (just under 10mt) with China's imports for PCI remaining at high levels.

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

Supply -Demand Balance Seaborne PCI and Semi-soft Coking Coal (000t)

SS/Wk Seabne Imp PCI Seaborne Imp Seaborne Demand

2005

2006

2007

2008

2009 Estimate

2010 Forecast

2011 Forecast

40,735 34,619 75,353

43,023 35,303 78,326

43,540 37,684 81,224

44,601 37,869 82,471

31,489 32,644 64,133

46,274 40,111 86,385

51,072 46,408 97,480

44,043 3,063 2,740 3,799 1,100 560 1,950 5,400 1,000 2,380 0 4,005 1,537 71,577

44,991 3,333 2,056 3,191 1,125 750 2,000 7,000 1,000 2,200 0 4,065 1,577 73,289

52,439 2,953 3,306 1,885 1,246 750 1,050 6,931 1,250 2,450 0 3,700 1,200 79,159

51,132 3,237 7,942 2,594 1,270 750 990 5,941 1,250 2,450 0 3,800 1,200 82,556

45,614 2,654 3,066 760 1,100 581 1,072 3,962 500 1,000 0 3,200 1,000 64,509

57,415 2,680 3,000 2,097 1,300 1,200 1,100 6,600 1,500 2,000 50 3,646 1,732 84,321

62,908 3,986 1,500 3,901 1,200 1,200 1,500 7,200 1,750 2,750 500 3,851 1,914 94,159

94% 3,777

96% 5,037 MCQ27

91% 2,065 3,785

81% -85 -143

65% -376 -2,290

80% 2,064 -347

84% 3,321

Seaborne Supply Australia Canada USA China Russia New Zealand South Africa Indonesia Colombia Venezuela (est) Mozambique Filler + Other Pcoke-Coal Equiv WCC & PCI Sup Tot Global CU % Unmet Demand Source: MCQDM

Risks to Forecast: • China's imports move from central case assumption • Global hot metal recovery slower or more rapid than forecast • Australian infrastructure constrains supply growth.

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY

Metallurgical Coke Outlook The market for traded coke is very inactive and thus a dearth of price information has resulted. Pricing for Chinese coke export product is very difficult to obtain with shipments for the year-to-May 2009 totalling just 0.2mt compared with 6.1mt in the same period last year. Piecing together the domestic price (about $220/t for Shanxi ex-works) along with transport costs to the coast (c. another $25/t) and an export tax of 40% would suggest an FOB export equivalent of about $350/t for 12.5% ash product. Other business concluded for Japanese or Australian coke into India over the last months suggests price around $225/t FOB showing Chinese product is effectively priced out of the market.

Chinese Coke Export Prices (12.5% Ash coke - $/t FOB)

Source: MCQ

Based on the year start performance, Chinese coke exports could fall to almost nothing in 2009. In MCQ29 we have assumed some late year recovery and coke shipments put on a spurt to total 4mt for calendar 2009 as whole. If achieved this would represent a 7mt downgrade of our MCQ27 forecast and an 8.2mt drop on 2008's 12.2mt actual shipment total. We estimate that global trade in coke in 2009 will be at 50% of 2008's level, at around 15mt, with all importing regions (and countries) taking less than in the previous year. We expect some recovery in trade levels in 2010 to about 20mt and then to 24mt- 25mt in 2011 as iron making levels pick up. The key assumptions in our MCQ29 forecast are: • Chinese coke exports drop to 4mt in 2009 (over 8mt behind 2008 levels), shipments are then expected to recover somewhat to 8mt in 2010 and to 10.5mt in 2011. • EU15 coke imports are expected to fall to 4.2mt in 2009 before recovering somewhat in 2010 to 5.2mt and then reach over 7mt during 2011.

MCQ - Synopsis 2009

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EXECUTIVE SUMMARY Coke Imports and Exports by Region (000t) 2005

2006

2007

2008

2009 Est

2010 Forecast

2011 Forecast

Av Growth 2006-2011

EU Import EU Export EU Exps-Imps

10,004 2,093 -7,911

9,575 3,242 -6,333

8,816 2,842 -5,974

8,518 2,539 -5,979

4,220 1,365 -2,855

5,250 1,265 -3,985

7,400 1,465 -5,935

-4.5% -11.0%

OE Import OE Export OE Exps-Imps CIS Import CIS Export CIS Exps-Imps

2,796 5,784 2,988 1,953 4,000 2,047

3,082 7,634 4,552 2,270 1,739 -531

3,191 7,115 3,924 3,190 3,941 751

2,671 6,460 3,789 2,200 3,765 1,565

1,225 5,050 3,825 1,500 2,015 515

2,130 6,050 3,920 1,550 2,015 465

2,310 6,400 4,090 2,750 3,215 465

-5.0% -3.2%

NA Import NA export NA Exps-Imps

4,714 1,509 -3,205

4,581 1,582 -2,999

3,082 1,383 -1,699

4,069 1,877 -2,192

1,680 850 -830

1,800 850 -950

2,290 1,150 -1,140

-10.0% -5.5%

SA Import SA Export SA Exps-Imps

2,596 431 -2,165

2,530 459 -2,071

3,420 420 -3,000

3,420 450 -2,970

2,020 450 -1,570

2,270 450 -1,820

2,260 420 -1,840

-2.1% -1.7%

Africa Import Africa Export Africa Exps-Imps

519 114 -405

530 100 -430

630 100 -530

630 50 -580

350 50 -300

520 50 -470

280 50 -230

-9.4% -10.0%

ME Import ME Export ME Exps-Imps

726 0 -726

750 0 -750

700 0 -700

700 0 -700

350 0 -350

500 0 -500

500 0 -500

-6.7% 0.0%

Asia Import Asia Export Asia Exps-Imps

5,057 14,375 9,318

4,275 16,514 12,239

4,832 18,490 13,658

3,930 13,310 9,380

2,400 5,210 2,810

3,150 9,310 6,160

5,050 11,910 6,860

3.6% -5.6%

Oceania Import Oceania Export Oceania Exps-Imps Other Demand (NSC) Global Tot Imp Global Tot Exp Global Exps-Imps

475 59 -416 1,866 30,706 28,365 -2,341

470 80 -390 2,650 30,713 31,350 637

480 75 -405 4,000 32,341 34,366 2,025

480 75 -405 2,500 29,118 28,526 -592

340 75 -265 1,000 15,085 15,065 -20

420 75 -345 1,750 19,340 20,065 725

420 75 -345 2,000 25,260 24,685 -575

-2.1% -1.3%

4.2% 17.0%

-4.9% -3.6% -4.3%

Source: MCQDM, China Coal Monthly

Key Risk: Chinese export levels move from forecast.

MCQ - Synopsis 2009

14


NEWS REVIEW

NEWS REVIEW Global Global: The extent of the downturn in the global demand for steel is perhaps most clearly illustrated by the fate of US car giants General Motors (GM) and Chrysler with both desperately, and very publicly, trying to stave off bankruptcy over the period since the year start. Both GM and Chrysler have received huge loans from the US Treasury Department. In April 2009, as both companies continued to work on plans to try and make them viable, GM received yet a further 60-day, $5bn loan while Chrysler got $500m. By that time the firms had already received a massive combined $17.4bn in aid since December 2008. Eventually, GM filed for bankruptcy protection on 1 June 2009, saying it would be forced to liquidate if its restructuring plan was not approved by the US Treasury Department. In early July, Chrysler also submitted its viability plan to the U.S. Treasury too and presented details of its proposed alliance with Fiat. At the time of writing and to some general surprise, GM is now expected to make a quick exit from bankruptcy protection. This followed from GM’s successful application for bankruptcy court order allowing it to sell its most profitable assets to a "new GM". The new, streamlined GM will own the company's core assets such as Cadillac, Chevrolet, GMC and Buick and will be 61% owned by the US government. GM is now in the processing of selling off its other brands such as Hummer, Saab and its GM Europe arm which owns the Opel brand. What Chrysler will do is much less clear.

Global: Freight Freights rates have bounced back significantly since the start of 2009 on the back of strong Chinese demand for iron ore and both steam and metallurgical coal. In early July 2009 Capesize rates on the Queensland-Rotterdam route were $28/t, way above January’s $11.75/t, although they had fallen back from the recent peak of a couple weeks previous. Capesize rates on the Hampton Roads – ARA route stood at $21.80/t more than three times the prevalent rate at the outset of the year although $5/t lower than the preceding week. Certainly Chinese demand has lifted the market but most analysts are not optimistic about the outlook for freight rates. The consensus is there are now just too many ships in the fleet despite attempts to cancel ship builds during late 2008 and early 2009. At current rates owners have stopped scrapping older vessels too, exacerbating the oversupply position. Owners can earn a profit at current rates. If Chinese demand weakens in H2 2009 then there is little promise of significant recovery in import levels elsewhere. The forward market reflects this and prices are expected to fall from current levels albeit not to the very low levels seen in Q4 2008.

Historic and Current Freight Rates for Major Trade Routes ($/t) Route

000t

03/07/2009

Hampton Rds-Rotterdam Bolivar-Rotterdam Queensland- Rotterdam RBCT-Rotterdam US Gulf – ARA RBCT- Spain Maracaibo-Rotterdam Murmansk-Rotterdam Newcastle-Japan

125 150 150 150 65 70 55 70 65

$21.80 $22.50 $28.00 $18.25 $24.30 $14.70 NA $12.50 $18.00

24/01/09 24/10/08 01/07/08 26/06/08 14/01/08 $6.50 $8.20 $11.75 $7.35 $8.20 $7.50 $14.00 $4.80 $6.00

$4.50 $7.90 $14.75 $8.50 $10.80 $9.25 $14.00 $5.00 $9.00

$42.00 $46.00 $50.75 $36.50 $51.50 $49.00 $49.00 NA $44.50

$45.50 $49.00 $57.50 $42.50 $54.00 $51.25 $51.00 NA $46.40

$22.50 $25.00 $39.00 $25.00 $45.00 $30.00 $40.00 NA $37.50

26/1/07

13/1/06

$20.00 $21.25 $30.25 $23.50 $19.00 $27.50 $26.00 NA $20.00

$11.00 $11.00 $16.25 $11.50 $11.75 $15.50 $14.30 NA $12.75

Source: Clarksons

MCQ - Synopsis 2009

15


NEWS REVIEW

EU Germany May: Rogesa announced it had begun repairs on its blast furnace No.4 in a maintenance program originally planned for summer 2009. The company, which had been running both of its furnaces at reduced output levels, was unsure how long the No.4 furnace will remain offline. April: HKM reported its’ small blast furnace “A” which was closed for relining at Christmas 2008 (brought forward from March 2009) would remain offline until mill orders improve. The company also postponed the expansion of its’ coking plant which was scheduled to start production in 2012, almost doubling the company’s current coke output (1.14mt in 2008) making the works self-sufficient. April: Salzgitter announced it had taken the smallest of its three blast furnaces offline (with production capacity of 1,900tpd or 0.7mt/yr) while it waited for orders to improve. The move reduces the plants total annual hot metal output capacity by 15%. March: ThyssenKrupp Steel announced the temporary closure of its Hamborn No.9 blast furnace (output capacity of 4,500t/day of pig iron) on March 14 in response to the declining demand for steel.

UK June: Corus announced a further 2,000 job cuts in response to the deteriorating world economy and the massive decline in steel demand in both Europe and America. In addition, a further 500 white-collar jobs were also under scrutiny throughout the Corus Long Products division, the majority at Scunthorpe (and an announcement on the closure of this plant was made in early July 2009). June: Xstrata surprised most when it proposed a merger bid on equal terms to Anglo American, which if realised would create the world’s largest export coal shipper (with annual output of metallurgical and thermal coal approaching 200mt/yr). Following Anglo's clear rejection of the bid Xstrata released a detailed case for the merger. May: Corus announced plans to close its 3mt/yr Teesside Cast Products (TCP) plant in Redcar (as forecast in MCQ28) following the cancellation of a contract by an international consortium to buy the plant’s steel slab output. Up to 2,000 workers would lose their jobs. The closure would also remove about 2mt of seaborne demand from the traded metallurgical market. April: Press reports speculated that Corus had settled the majority of its 2009 coking coal tonnage for the UK (over 3mt) with none of it coming from Australia. The company stated it was then currently running at 42% of its 2008 iron making levels.

MCQ - Synopsis 2009

16


NEWS REVIEW

Other Europe Czech Republic June: OKK, a subsidiary of the Dutch New World Resources (NWR) announced it had brought forward the closure of its Jan Sverma metallurgical coke plant (annual capacity of 0.7mt) to autumn 2009 from 2011. The move brings forward the company’s 2010 optimisation programme by concentrating and modernising coke production at its Svoboda plant. Upgrade work currently underway there includes the reconstruction of one of the existing three batteries (due back online in 2012) and the construction of an additional new battery (due online in 2011.)

Turkey July: Kardemir Steel announced plans to build a port capable of handling 180,000t DWT vessels (compared with 15,000 DWT currently) at Zonguldak on the Black Sea to serve its 1mt/yr Karabuk integrated works. The terminal is planned to handle 5mt/yr of ore and coal combined and would enable an expansion of hot metal at this site. Currently Kardemir imports up to 1mt of metallurgical coal through its port and that of sister company Erdemir.

Karabuk Coke Plant Coke Plant Battery ID No. of Ovens Type Start Date Dry Coke Capacity (000 tpa) Dry Coal Capacity (000 tpa) Wet Coal Equivalent (000 tpa) Quenching

1 22

2 22

3 28

4 28

Total at 2006 100

OTFU 1969 95 125 137

OTFU 1969 95 125 137

D 1986 225 296 326

D 1986 225 296 326

641 843 926

W

W

W

W

Source: Kardemir, Metal Bulletin

June: Kibar Holdings announced plans to construct a 2mt/yr integrated mill at a coastal location incorporating new coke ovens. The $1bn project could be underway as early as 2010 if government approvals are forthcoming.

CIS Russia June: Evraz Group announced that it restarted Blast Furnace No. 3 at its Zapsib plant in Novokuznetsk, Russia. Evraz idled the Zapsib plant’s 3,000m3 blast furnace No. 3, which had an annual pig iron capacity of 2.2mt in late October 2008. With the restart of No. 3, the Zapsib plant’s total hot metal capacity will reach 6.5mt/yr. June: Mechel announced it had completed metallurgical coal contracts with Chinese, Japanese and South Korean mills with tonnage totalling 2mt for 2009/10 delivery. June: Mechel OAO reported it has begun to raise production levels at its steel plants. In March 2009 the No.4 Blast furnace at its Chelyabinsk works came online followed by the restart in June of its No.4 coke battery. June also saw the official

MCQ - Synopsis 2009

17


NEWS REVIEW commissioning of Coke Block #2 which comprises three batteries namely No.3, No.4 and No.4 B and has a combined coke making capacity of 0.6mt/yr (and the works overall 1.3mt/yr). June: Mechel OAO announced it had finalised a five year coking coal contract with South Korea's Hyundai Steel to supply up to 0.2mt/yr of K9 brand from its Neryungrinsky mine in the Sakha Republic. Shipments commence from April 2010. May: Mechel OAO reported it had delayed the development of its giant Elga coal deposit by two years but would press ahead with the development of the 315km rail spur to the main line costed at $1.36bn. The company estimates that construction of the line will complete in October 2009. Mechel now projects it will reach its 37mt/yr coal production target by 2012 rather than 2010. May: Mechel OAO confirmed it would purchase 100% of US coking coal producer Bluestone for $436m in cash, $83.3m in preferred shares and assume around $132m of company debt. The deal does not include any of Bluestone's Kentucky steam coal operations. Bluestone’s West Virginian operations include an estimated 725mt of reserves and resources of mainly a premium quality, low volatile hard coking coal. Mechel plans to grow Bluestone’s production levels to more than 7mt/yr from about 3mt/yr last year. April: Press reports revealed Mechel's metallurgical coal production plummeted during Q1 2009 with production down 3.2mt (76.3%) on 2008 levels at 1.02mt.

Ukraine July: ArcelorMittal Kryviy Rih (the Ukraine’s largest hot metal producer) announced that its blast furnace No. 9 had been blown in to programme. The blast furnace was shut down for repairs in early November 2008. Blast Furnace No. 9 was rekindled to compensate for the planned shut down of two other blast furnaces (No.7 and No.8) in the coming weeks for planned maintenance.

Summary of Ukraine Hot Metal Capacity Company

Plant

ArcelorMittal

Kryvyi Rih

Sub Total

BOF Steel Capacity 000t

BF Iron Capacity 000t

BF Total

10,600

10,600

6

10,600

10,600

6

Comments

2 BOF shops, 2 OH: 3 BFs under refurb

Ilyich iron & Steel Co Sub Total

Donetsk

3,050 3,050

7,450 7,450

5 5

3 BOF 4 OH (4.1mt)

Makeevska Steel Works Sub Total

Donetsk

0 0

3,300 3,300

4 4

11 OH furnaces 4.1mt/yr

Dneprovsky iron & Steel Co Sub Total

Dneprodzerzhinsk

2,800 2,800

4,350 4,350

4 4

Asovstal Iron and Steel Works Sub Total

Mariupol, Donetsk

3,000 3,000

5,870 5,870

6 6

EAF and OH also

Zaporistahl Iron & Steel Works Others

Zaporhishya Various

0 2,000

3,000 2,000

5 5

9 OH 3.9mt/yr estimated BF number

Ukraine Total

24,450

42,440

41

Source: Various Company Data, Hot Metal Bulletin

MCQ - Synopsis 2009

18


NEWS REVIEW

North America Canada July: Teck Cominco Resources announced the sale of 17.2% of its equity holding to China Investment Corp. (CIC) for C$1,740 million (about USD$1,500 million), a value of C$18.50 per share. Teck has a dual motive for the sales, first to develop metallurgical coal exports to China and second to reduce debt levels taken on to fund the purchase of Fording. June: Western Canadian Coal Corporation (WCCC) announced it had raised its coal sales target for the fiscal year 2009/10 to 2.2mt in response to significant exports to China. Of the target some 1.3mt will be hard coking coal and the remaining 0.9mt low volatile PCI. June: WCCC announced that its shareholders had approved acquisition of the UK's Cambrian Mining plc (scheduled to complete on 13th July). WCCC will obtain 100% of the shares in Cambrian Mining (valued at £67.4m) by share exchange with each share of Cambrian Mining exchanged for a 0.75 share of WCCC. In total WCCC will now operate five coal mines with operations in Canada, the United States and the UK. May: Metallurgical coal sales by Canadian suppliers nosedived during early 2009 as demand for steel products cratered and mills cancelled orders. All major Canadian suppliers were similarly affected and Q1 2009 sales by Teck Resources were down 36% (2mt) year-on-year at 3.6mt; WCCC down 60% (0.52mt) to 0.35mt; and Grand Cache down 74% ( 0.31) to 0.11mt. May: WCCC announced it had settled 2mt of contracts (for the financial year 2009/10) at an average price of $120-125/t FOB, including 1.2mt of hard coking coal (total planned production from the Wolverine mine) and 0.8mt of ultra low-vol PCI. May: Western Canadian Coal Corp. (WCCC) announced it would maintain operations at both its Perry Creek and Brule mines in British Columbia during 2009 removing the earlier threat of an extended layoff at one or both. April: Teck Cominco reported it had settled most of its 2009 hard coking coal contracts with Asian customers at around $128/t FOB and had secured commitments for 1.6mt of carryover tonnage at 2008/9 prices.

MCQ - Synopsis 2009

19


NEWS REVIEW

USA June: CONSOL Energy Inc. announced it would resume longwall operation at its 3mt/yr Buchanan low-volatile coking coal mine in mid July 2009 following talks with its two customers. The company has achieved sales to support monthly production at the 0.24mst level (2.9mstpa). Production was halted at the mine in the beginning of March 2009. June: Foundation Coal Holdings Inc (FCH) announced it had abandoned legal proceedings against ArcelorMittal (over a metallurgical coal contract) as an out of court resolution had been achieved. ArcelorMittal agreed to take a substantial tonnage of metallurgical coal from Kingston Coal, a subsidiary of FCH. May: Alpha Natural Resources and thermal coal producer Foundation announced they had agreed a merger plan which will create the third largest coal producer in the US. The combined entity would operate 59 mines (with reserves totalling 2.3bt) and producing more than 90mt/yr. Alpha will take a controlling stake (59%) in the new company which will bear its name. May: Peabody Energy Corp. announced it had entered a joint venture with Polo Resources Ltd to develop undeveloped concessions in the South Gobi area of Mongolia (investing US$23m to the project). Peabody earns a 50% stake in the coal resource which is reported to exceed 1bt. April: Shortly after announcing resumption of production in March 2009 Cliffs Natural Resources announced further production cuts (with 355 workers laid off) in response to deteriorating metallurgical coal demand in the USA. Operations were suspended at the company's Green Ridge #1 coal mine in West Virginia along with a two month suspension of production at its Pinnacle mine. In addition, Cliffs cut output at its Oak Grove mine and slowed operations at both the Pinnacle and Concord preparation plants. April: Patriot announced a further 2mt of production cuts during 2009 in response to the downfall in demand. Plans include the closure of two metallurgical coal mines in the Wells Complex as well as suspending the launch of production at the company's new Blue Creek complex. March: Massey Energy filed a lawsuit against Egypt's Al Nasr for the alleged breach of a $280/t priced coking coal contract. The agreement was signed at the beginning of April 2008 and covered the sale of 1.64mt for delivery over the period July 2008 to June 2011.

MCQ - Synopsis 2009

20


NEWS REVIEW

South America Brazil June: Companhia Siderurgica Nacional (CSN) announced the restart of its No.2 blast furnace at its Volta Redonda mill in Rio de Janeiro State following a 90 day outage. The furnace will resume production at 4,200 tpd of hot metal jacking the plant’s total hot metal production capacity up to 14,500 tpd (5.3mt/yr). April: Vale announced it had concluded the sale of all of its 5.89% stake in Usinas Siderúrgicas de Minas Gerais (Usiminas) to four companies including Japan's Nippon Steel at a price of R$594.7 million (R$40.00 per Usiminas common share).

Africa Mozambique May: Riversdale Mining announced a 90% increase in the estimated total resource at its Benga metallurgical - thermal coal project in Mozambique's Moatize region. Further exploration work detailed resources totalling 4.0bt (up from an estimated 2.1bnt in September 2007) of which proven reserves were just over 181mt. Riversdale announced it was currently awaiting government approval for its mining contract and had delayed a related feasibility study until it got the green light. April: Vale announced construction work had begun on its $1.3bn Moatize coal project in Mozambique’s Tete province, with initial coal production planned for 2010. Once fully operational the mine is expected to produce 11mt/yr of which some 8.5mt/yr is reported to be hard coking coal.

South Africa April: ArcelorMittal South Africa Ltd announced it had acquired a 16.3% stake in Coal of Africa Ltd. (CoAL) in a deal which includes the option to enter into an offtake agreement with CoAL for 2.5mt/yr of metallurgical coal. A further option exists to increase the take to 5mt/yr.

MCQ - Synopsis 2009

21


NEWS REVIEW

Asia China July: The Chinese Government issued the 2nd instalment of coke export licences (EL) for 2009, with an additional 6.13mt of coking coal distributed among 37 export companies, taking the total EL tonnage for the year to 12.8mt. May: Ansteel announced it had blown-in its No.2 blast furnace at its Yinghou ayuquan Steel Project. The blast furnace is a replica of the No. 1 furnace that came into operation in September 2008 with an inner volume of 4,038 m3 and a hot metal production capacity of about 3.2mt/yr carrying the plant to 6.5mt/yr in total. March: Press reports reveal a gas explosion at the Tunlan coking coal mine in Shanxi province in February 2009 which killed 74 people will hit the coking coal industry hard. A number of mines have been temporarily closed and shipments disrupted as mine safety experts try and find the cause of the accident. It is widely expected that mine safety measures will be tightened in the province and possibly the rest of the country.

India July: Steel Authority of India Limited (SAIL) announced it had cancelled a blast furnace construction contract at its Bhilai Works in Chattisgarh following a dispute with POSCO Engineering & Construction, the successful tenderer in early 2008. The 4,060 m3 blast furnace was to be commissioned by end-2010 as part of SAIL’s programme to increase Bhilai’ s hot metal capacity from about 5.5mt/yr to 7.5mt/yr. June: Gujarat NRE Coke announced its bid for Australia's Ray Resources. Gujarat NRE currently holds a 16.6% stake in Rey Resources and has offered to buy all remaining shares (83.4%). May: Tata Steel announced it had lifted its stake in Mozambique metallurgical coal developer, Riversdale Mining from 10% to 14.9% (the maximum allowed without permission from Australian foreign investment authorities) for almost A$42m ($30.3m). Other major shareholders now include former Macarthur Coal chief, Ken Talbot with around a 19% interest and Passport Capital holding a 16% stake.

Indonesia June: BHP Billiton announced it was to stop construction at its Haju trial pit in the Maruwai coking coal concessions and was placing the entire project under review for possible sale. Some 450 redundancies resulted from the move and no operational personnel remain in Kalimantan. The move was prompted following a strategic review of BHPB’s overall metallurgical coal expansion programme.

MCQ - Synopsis 2009

22


NEWS REVIEW June: Indonesia’s director general of coal, mineral and geothermal energy announced foreign investors in Indonesia’s coal mining sector will be allowed to take a majority stake in coal mining licences with current discussions suggesting around 80% equity may be held and 20% divested. May: South Gobi announced it was preparing for its first Indonesian trial coking coal shipment from the Mamahak mine in East Kalimantan.

Japan July: Nippon Steel announced that it would be restarting the 4,884 m3 No.1 blast furnace at its Oita Works in early August 2009. The unit has been idled since February 1st 2009. NSC also confirmed that it would continue to hot idle the 3,273 m3 No.2 blast furnace at its Kimitsu Works originally taken off line at the same time as the Oita unit. July: Sumitomo Metal Industries announced that its 2,700m3 No.4 blast furnace at its Wakayama Works was taken off line on 11 July and that the blowing-in of its new, 3,700 m3 No.1 blast furnace at the same site is scheduled for July 17. June: JFE Steel Corp announced it was to start repairs on its Kurashiki No3 blast furnace which has been offline since January 2009. The repairs (to enlarge the inner volume of the furnace to 5,055m3 up from the present 4,359 m3) are currently scheduled to start in October 2009 and complete in April 2010 at an estimated cost of nearly ¥30bn. April: Nippon Coke & Engineering announced it had temporarily suspended operations at its No.1B Coke Oven (with capacity of 0.35) by hot banking.

Oceania Australia July: Bhushan Steel of India announced it had made a cash bid to take undisputed control of Queensland junior metallurgical coal developer, Bowen Energy, cash valuing the target at around A$11.5m ($8.9m). Bhushan made its initial investment in 2007 as part of a move for control of another Australian coal developer, Rocklands Richfield, since taken over by China Coke and Chemicals. Bhushan has also offered cash support to further develop Bowen’s East Middlemount and South Blackwater metallurgical coal prospects in Queensland’s Bowen Basin. July: Indian producer Gujarat NRE Coke Ltd announced it was expanding metallurgical coal production at its Wongawilli mine in New South Wales with the launch of its longwall operation. Once fully operational the mine is expected to produce 2-2.5mt/yr. July: Noble Group subsidiary Gloucester Coal announced it had awarded a seven year mining contract for the operation of its Duralie met/thermal mine in New South Wales, to Leighton Mining. The contract at the 1.8mt/yr mine is valued at around A$350m ($280m).

MCQ - Synopsis 2009

23


NEWS REVIEW June: Felix Resources announced (in response to rumours in the media of a takeover bid by China's Yanzhou Coal) that although discussions had been held over the past year concerning a possible takeover bid it was unlikely they would be concluded. June: Macarthur Coal announced an upward revision of expected coal sales for 2009 to 4.5-4.8mt (from 3.9mt) on the back of spot sales to Chinese iron mills. June: Bluescope, Australia’s largest integrated hot metal producer, announced it was deferring the restart of blast furnace No.5 until August due to continued low demand levels for steel. June: Xstrata announced plans to close its 3mt/yr United thermal/semi-soft underground mine in New South Wales in March 2010 (in line with its 'life of mine' plan) when economic reserves will be exhausted. About 2mt of mainly semi-soft reserves remain at the mine, owned 95% by Xstrata and 5% by mining union CFMEU. June: Aquila Resources announced it had outlined a potential 1.6mt/yr hard coking coal mine (for an estimated capital cost of A$402m ($322m)) at Washpool, Queensland near Wesfarmers’ Curragh mine. A feasibility study is already underway with completion scheduled for late 2010. First output is currently envisaged at 2012. Aquila has applied for a 1.6mt/yr tonnage allocation through the planned new Wiggins Island terminal at Gladstone. May: Noble Group was reported to have taken management control of Gloucester Coal after raising its stake in the company to 57.18%. The move came immediately after the slated merger between Gloucester Coal and Whitehaven Coal had broken off. May: Aquila Resources announced the feasibility study for the Eagle Downs project (in which it has 50% share with Vale holding the balance) will be completed in June 2009. The proposed mine will be developed in two stages for a maximum 7mt/yr output of metallurgical coal utilising two longwall systems. May: Felix Resources reported the new coal treatment plant under construction at its Yarrabee mine would start up in May increasing the capacity of saleable low-vol PCI produced at the mine to 2.8mt/yr. May: Press reports revealed Macarthur Coal had pulled out of the 2mt/yr Dingo West PCI project in Queensland, citing poor market condition, leaving Bandanna Coal with 100% interest. Bandanna reported that it will now look for new partners. April: Cockatoo Coal announced a further evaluation of previously announced test results has identified a 15.6mt resource at Cockatoo’s Baralaba North prospect. April: Production has been suspended at Glennies Creek underground coal mine in New South Wales, Australia, following a fatal accident on April 4th which resulted in the loss of life of one mine worker. A report into the cause of the accident was underway.

MCQ - Synopsis 2009

24


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