International Coal — Raymond James Coal Investors Conference 2008
31 slides from International Coal's conference presentation, Dec 4, 2008
Slide 1: Building A Strong Future
1 Building A Strong Future Raymond James Coal Investors Conference Bennett K. Hatfield President and CEO December 4, 2008
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements • You should keep in mind that any forward-looking statement made by us in this presentation or elsewhere speaks only as of the date on which the statements were made. See also the “Risk Factors” in our 2007 Annual Report on Form 10-K and in our subsequent filings on For
Slide 3: Discussion Topics
3 Discussion Topics 1. Coal Market Update 2. Overview of International Coal Group, Inc. a. Coal reserves b. Production growth c. New operations d. Sales position for 2009-2010 3. Summary
Slide 4: Coal Market Update
4 Coal Market Update
Slide 5: Coal Market Update
5 Coal Market Update • The fundamental story for coal remains solid: – Eastern US coal supply is expected to remain heavily constrained by labor scarcity, regulatory delays and heightened MSHA enforcement – Current term price indices, although down from peak levels, remain 30% above year ago levels
Slide 6: Coal Remains the Primary Fuel for Electricity Generation
6 Source: Edison Electric Institute Industry Statistics, November 2008 U.S. Electric Power Industry Net Generation by Fuel Source - 2007 Coal Remains the Primary Fuel for Electricity Generation
Slide 7: EIA Forecast: Continued Growth in US Electrical Demand
7 Source: EIA - - National Energy Supply and Fuel Outlook, September 11, 2008 EIA Forecast: Continued Growth in US Electrical Demand
Slide 8: US Exports Were Key Factor in 2008 Market
8 Source: Energy Information Administration - Short-term Energy Outlook, October 2008 US Exports Were Key Factor in 2008 Market (Tons in 000’s)
Slide 9: Prompt Month Spot Prices Trending Downward
9 Source: Market price data per ICAP United, Inc. Prompt Month Spot Prices Trending Downward … But still well above historical levels
Slide 10: Term Price Indices Also Declining
10 CSX Index Pricing Pitt #8 Index Pricing Source: Market price data per ICAP United, Inc. Term Price Indices Also Declining …But averaging +30% favorable to year ago levels
Slide 11: Market Outlook - Summary
11 Market Outlook - Summary • Asian economic growth is expected to continue to increase worldwide coal demand • US exports are expected to remain well above 2006-07 levels • US thermal coal prices should improve as winter demand reduces inventory and supply tightness becomes apparent • Met coal pric
Slide 12: Overview of International Coal Group
12 Overview of International Coal Group
Slide 13: Summary Statistics
13 Summary Statistics Key Highlights of International Coal Group Market capitalization 1 : $351.1 million Coal reserves: 1.0 billion tons Reserve life: Approximately 55 year s Employees: 2,676 2008 tons sold 2 : 19.3 million 2008 tons produced 2 : 18.1 million 1 Market capitalization is based on 153
Slide 14: Current and Future Operations
14 ICG Illinois Illinois Kentucky Ohio Beckley West Virginia Virginia MD East Kentucky Flint Ridge Hazard Knott County Raven Eastern Buckhannon Sentinel Tygart Valley #1 and #2 Vindex Jennie Creek Current Operations Future Operations ADDCAR Big Creek Current and Future Operations • 13 active mining
Slide 15: High-Caliber Reserve Base
15 34% Leased 349 million tons 39% IL Basin 25% CAPP 36% NAPP 66% Owned million tons Geographic Distribution of Reserves Reserve Ownership High-Caliber Reserve Base • ICG controls 1.0 billion tons of high-quality reserves that are primarily high BTU, low sulfur steam and metallurgical coal • CAPP/NA
Slide 16: 2008 ICG Production Profile
16 21% NAPP Production by State Production by Region Production by Method 44% Under- ground 38% WV 12% IL 2008 ICG Production Profile 67% CAPP 12% ILB 56% Surface 45% KY 5% MD Note: Represents management’s estimate as of October 29, 2008
Slide 17: Projected Production 2008-2010
17 Projected Production 2008-2010 • Key development projects are expanding high margin production • Growth in 2009-10 stems primarily from developing Sentinel, Beckley, and Powell Mountain complexes to targeted capacity • In light of permit challenges and the uncertain economic outlook for 2009, res
Slide 18: Key Operations Profiles
18 Key Operations Profiles
Slide 19: Sentinel Complex
19 Sentinel Complex • Mine Type - underground shaft/slope • Customers - - Mirant Energy, Xcoal, Essar Steel Algoma • Mining Method - room-and-pillar • Total Reserves - 52.5 million tons • 2007 Production - 0.7 million tons • Projected output of 1.5 million tons/year at full capacity • Coal Quality -
Slide 20: Beckley Complex
20 Beckley Complex • Mine Type - underground shaft/slope • Customers - - Sun Coke, Shenango, Xcoal, AK Steel, USS • Mining Method - room-and-pillar • Total Reserves - 32.2 million tons • 2007 Production - 0.04 million tons • Projected output of 1.4 million tons/year at full capacity • Coal Quality -
Slide 21: Powell Mountain Complex
21 Powell Mountain Complex • Acquired May 27, 2008; production initiated mid-July, 2008 • Mine Type - underground • Customers - - Traxys, Eastman Chemical, ABC Coke, Xcoal • Mining Method - room-and-pillar • Total Reserves - 27.1 million tons • Projected output of 1.0 million tons/year at full capac
Slide 22: Committed Tonnage
22 Committed Tonnage Projected Sales 19.3 21.0-22.0 20.5-21.5 (mm tons) • Strong committed sales level for 2009- 2010, yet room to participate in market upside • Little exposure to spot market in 1 st half of 2009 Note: Committed tonnages and projected sales for 2008-2010 represent management estima
Slide 23: ICG is Well-Positioned Among Peers with Low Unsold 2009 Tonnage
23 Note: Per 3rd Quarter 2008 earnings releases and management estimates of ICO publicly traded peers ICG is Well-Positioned Among Peers with Low Unsold 2009 Tonnage
Slide 24: Customer Base Now More Diversified
24 Customer Base Now More Diversified
Slide 25: Met Sales Growth Expected to Enhance Margins and Boost Market Diversity
25 Met Sales Growth Expected to Enhance Margins and Boost Market Diversity Note: Represents management’s estimate as of November 30, 2008
Slide 26: Disciplined Sales Strategy Has Served Us Well
26 Disciplined Sales Strategy Has Served Us Well • Declined renewal of low-priced CAPP contracts during late 2007 • Continued to “layer in” new forward-contract prices as the market steadily improved; new commitments since Feb. 2008 include: – 2009: 5.0 million tons at an average price per ton > $90
Slide 27: Updated Guidance
27 2008 2009 2010 Tons Sold (mm) 19.3 21.0 - 22.0 20.5 - 21.5 Tons Produced (mm) 18.1 20.0 - 21.0 20.0 - 21.0 Average Price Per Ton $53.25 - $53.50 $63.00 - $67.00 n/a Average Cost Per Ton $47.00 - $47.50 n/a n/a Capital Expenditures (mm) $179 $150 n/a Updated Guidance • Significant changes in the c
Slide 28: Summary
28 Summary • ICG is well-positioned amidst the global economic uncertainty: – Most of 2009-2010 coal is committed at substantially higher prices – Unsold volumes for 2009 represent premium quality products – We expect reduced cost pressures in 2009 on labor, as well as on commodities such as diesel,
Slide 29: Thank You!
29 Thank You!
Slide 30: Appendix
30 Appendix
Slide 31: Summary of Active Mining Operations
31 Summary of Active Mining Operations
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