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2013年9月5日 Clean Coal Day 2013 International Symposium ~ Change for Clean Coal Business & Sustainable Coal Supply ~ The diversification of supply source ITOCHU CORPORATION Chief Operating Officer Coal Nuclear & Solar Division Chief Operating Officer, Coal, Nuclear & Solar Division Metals & Minerals Company Koichi Kawaguchi Koichi Kawaguchi

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Page 1: Borderless Market

2013年9月5日

Clean Coal Day 2013 International Symposium

~ Change for Clean Coal Business & Sustainable Coal Supply ~

『 』『 The diversification of supply source 』

ITOCHU CORPORATION

Chief Operating Officer Coal Nuclear & Solar DivisionChief Operating Officer, Coal, Nuclear & Solar Division Metals & Minerals Company

Koichi KawaguchiKoichi Kawaguchi

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ITOCHU Corporation

Challenges in Coal Market and ITOCHU Approach

ChallengesChallenges

・To secure Superior Coal Assets

・To establish Stable Supply Chain on economically

・To secure Superior Coal Assets

・To establish Stable Supply Chain on economicallyTo establish Stable Supply Chain on economically sustainable mannersTo establish Stable Supply Chain on economically sustainable manners

ITOCHU’s ApproachCentering on Australia(NSW/QLD) and investment to develop in Colombia and Indonesiato develop in Colombia and Indonesia.

①To expand existing Australian assets②To make huge investment to Colombia/Drummond②To make huge investment to Colombia/Drummond③To establish stable transportation system from

Indonesia/Central Kalimantan

Copyright© ITOCHU Corporation All Rights Reserved. 2

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ITOCHU Corporation

New Trend in Thermal Coal Market①(Demand and Supply)

・Due to plenty of shale gas domestic

SupplyDemand・Decrease in Japan US and EU ・Due to plenty of shale gas, domestic

demand in US sharply decrease.→Colombian coal into US to decline.

・Decrease in Japan, US, and EUdue to economic growth slowdownand shift to low carbon energy.

・Competition in EU market to intensifyamong export coal ex US, Colombia, SA.→Shift to Asian market where steady

・70% of new demand is coming from Asia, leaded by China and India.→Major companies found SPR offices →Shift to Asian market where steady

demand is expected.PRB coal also heads to Asia, through west coast ports.

→Major companies found SPR offices for marketing hub.

・Chinese domestic market to start p“Coupling” with international market.

Borderless Marketby coupling among Atlantic

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by coupling among Atlantic, Pacific and Chinese Domestic markets.

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ITOCHU Corporation

New Trend in Thermal Coal Market②(Atlantic and Pacific)

US C l/D C l bi C l/IAtlantic Pacific

US Coal/DecreaseLess competitive of Appalachian mines for EU market, due to high

Colombian Coal/IncreaseExpanding each mine, backed up by high quality and low cost

cost structure.

Russian Coal/Decrease

y g ystructure.

South African Coal/KeepRussian Coal/DecreaseHigh cost and shortage in port capacity.

South African Coal/KeepDemand decreasing in EU market. No port expansion plan.

Th l f C l bi dShale gas revolution to kick out less-cost-competitive source.

The supply from Colombia and South Africa into Asian market to increase.

Copyright© ITOCHU Corporation All Rights Reserved. 4

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ITOCHU Corporation

ITOCHU Approach Colombia

Drummond Port

Project Location

ReservesReserves : 1.9 billion : 1.9 billion tonton

ProductionProduction : : 30mtpa expanding up to 35mtpa30mtpa expanding up to 35mtpa

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Mine LifeMine Life : more than 50 years: more than 50 years

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ITOCHU Corporation

ITOCHU’s purpose for investment to Drummondp p

①Portfolio New supply source following Australia, Indonesia ②Hi h Q lit②High Quality Compliance in EU, US and Asia(low ash/sulpher) ③Dedicated Infrastructure Integrated coal supply chain(Mine/Rail/Port)

Background & Strategy

Long relationship with DrummondLong relationship with Drummond -Strong connection made from

40+ years trade history created thi i t t t itthis investment opportunity.

-Deepening the partnership withDrummond and jointly looking forinvestment opportunities globally.

Copyright© ITOCHU Corporation All Rights Reserved. 6

photo: Mina Prebbenow

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ITOCHU Corporation

ITOCHU Approach Indonesia

MGM(MGM(MarundaMarunda GrahaGraha Mineral)Mineral)

ReservesReserves: 100million ton: 100million tonIntermediateStockpile

ProductionProduction: 1.8mtpa expanding: 1.8mtpa expandingup to 5mtpa. up to 5mtpa.

Mine Mine LifeLife: : 30+ years30+ years

SMM(SMM(SuprabariSuprabari MapanindoMapanindo Mineral)Mineral)

ReservesReserves: 120million ton: 120million ton

ProductionProduction: Up to 4mtpa in the future: Up to 4mtpa in the future

TabaneoTransshipment point

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ProductionProduction: Up to 4mtpa in the future: Up to 4mtpa in the future

Mine LifeMine Life : : 20+ years20+ years

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ITOCHU Corporation

The purpose in development of MGM and SMM

①New Source Cornerstone in Indonesia ②L ti②Location Close to rapidly growing markets, China and India③Cost competitive Low cost operation with high resilience for market

conditions

StrategyTo become a major supplierTo become a major supplier in Central Kalimantan-Build up know-how on development/operation of minedevelopment/operation of mine, through MGM/SMM experience.(e.g. barge transport system)Secure supply source more-Secure supply source more, liaising with existing and potential partners.

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photo: Intermediate Stockpile

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ITOCHU Corporation

ITOCHU Approach Mongolia Tavan Tolgoi

Tavan Tolgoi(TT)• High quality coking coal.

• ITOCHU is the first company which delivered mongolian coal to Japan in 2006.

• A part of Erdenes TT’s mine is underA part of Erdenes TT s mine is under international bidding process and ITOCHU organized Japanese consortium to make a bid.

TavanTavan TolgoiTolgoi

ReservesReserves : 7.4billion ton: 7.4billion ton

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ProductionProduction : 15mtpa: 15mtpa

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ITOCHU Corporation

Challenges in coal supply countries and ITOCHU’s Solutions

Challenges in coal supply countries①Downturn of international market price.②Development delay or suspension caused by resource

t ti l b i li t d i t lprotection, labor issue, complicated environmental requirement process.

③Delay of infrastructure plan in developing countries③Delay of infrastructure plan in developing countries.

ITOCHU’s Solutions①T d OPEX/CAPEX i i ti t①To reduce OPEX/CAPEX in existing assets.②To seek for new cost-competitiveness for long-term.③To communicate well with government local resident and③To communicate well with government, local resident and

operation site.④To assist infrastructure development together with Japanese

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p g pgovernment sectors.