Stanmore Resources Ltd · ASX:SMR
Stanmore Resources — Stanmore Coal — Australian Investors Association (April 2013)
50 slides from Stanmore Resources's conference presentation, Apr 4, 2013
Slide 1: The Outlook for the Coal Industry – A Counter Cyclical Opportunity
For personal use only The Outlook for the Coal Industry – A Counter Cyclical Opportunity Australian Investors Association Speaker: Mr Nick Jorss Managing Director – Stanmore Coal Limited Date: 3 April 2013 Time: 7.45pm Location: Brisbane
Slide 2: Important Information
Important Information This document has been prepared by Stanmore Coal Limited (“Stanmore Coal”) for the purpose of providing a company and technical overview to interested analysts/investors. None of Stanmore Coal, For personal use only nor any of its related bodies corporate, their respective dire
Slide 3: Index
Index 1. Introduction to coal For personal use only 2. Social and environmental impacts of coal 3. Coal market overview 4. Outlook for thermal coal 5. Outlook for coking coal 6. Developing Queensland’s coal basins – what is next? 7. Australia’s competitive position in global coal markets 8. Stanmore
Slide 4: 1. Introduction to Coal
For personal use only 1. Introduction to Coal
Slide 5: 1.1 Coal – a store of ancient thermal energy
1.1 Coal – a store of ancient thermal energy For personal use only • Coal is a combustible organic rock formed from preserved plant material representing the efficient storage of solar energy from the past • Coal has played a central role in human development since prior to the industrial revolution
Slide 6: 1.2 Coal Mythbusters – commonly held misconceptions
1.2 Coal Mythbusters – commonly held misconceptions Myth Fact For personal use only “Wind power is now cheaper than Coal remains the cheapest form of reliable base load coal and gas in Australia” Bloomberg New energy Energy Finance 2013 Global demand for coal has been “In line with the trend over th
Slide 7: 1.3 Australian junior coal sector is oversold
1.3 Australian junior coal sector is oversold Australian Junior Coal Stock Performance For personal use only 140 140.00 Index rebased to 100 120 120.00 All Ordinaries 100 100.00 (LHS) 80 80.00 USD Coal Junior 60 60.00 Average (LHS) 40 40.00 USD thermal coal 20 20.00 price (RHS) 0 0.00 1 6 11 16 21 2
Slide 8: 2. Social and Environmental Impacts of Coal
For personal use only 2. Social and Environmental Impacts of Coal
Slide 9: 2.1 A balanced debate on coal is required
2.1 A balanced debate on coal is required The Australian Coal Industry’s ongoing social licence to operate requires the For personal use only recognition of two key points: 1. the utilisation of coal is necessary for both Australia’s and our trading partner’s long term economic wellbeing; and 2. the
Slide 10: 2.2 The importance of coal as part of the global energy mix
2.2 The importance of coal as part of the global energy mix Feature Benefit For personal use only • Large reserves • Available without raising geopolitical or safety issues • Easily stored • Stockpiles at minesite, port and power stations can be drawn in emergencies • Reliable • Not weather dependen
Slide 11: 2.3 Pollution lessons of the past
2.3 Pollution lessons of the past Environmental event Cause For personal use only The London Smogs complained about for centuries and London and Pittsburgh smogs were caused mainly by burning low quality, climaxing in the 1950’s giving London the name: - “The Big high sulphur coal in the inefficient
Slide 12: 2.4 Efficient coal fired electricity helps reduce air pollution
2.4 Efficient coal fired electricity helps reduce air pollution The World Health Organisation estimates that: For personal use only • nearly 50% of pneumonia deaths among children under five are due to particulate matter inhaled from indoor air pollution • women exposed to heavy indoor smoke are thr
Slide 13: 3. Coal Market Overview
For personal use only 3. Coal Market Overview
Slide 14: 3.1 Substantial historic growth in coal usage
3.1 Substantial historic growth in coal usage Historical Coal Consumption For personal use only 9.00 8.00 7.00 Billion metric tonnes 6.00 5.00 4.00 China 3.00 World 2.00 1.00 - 1980 1985 1990 1995 2000 2005 2010 Source: IEA • Global annual demand for metallurgical and energy coal has risen sharply t
Slide 15: 3.2 Coal growth outstrips all other energy forms
3.2 10 year coal growth outstrips all other energy forms For personal use only Incremental World Primary Energy Demand by Fuel, 2000-2010 (Mtoe) • Between 2000 and 2010 demand for coal fired energy has grown more than all other energy sources (including gas) • “Population growth and rising per-capit
Slide 16: 3.3 Continued recent growth of coal
3.3 Continued recent growth of coal For personal use only • Recent growth of coal imports from 2010 to 2012 continued to be strong despite displacement of US coal as a result of low gas prices Source: Salva Resources Global Coal Markets 2013 – Outlook and Key Themes 16
Slide 17: 4. Outlook for thermal coal
For personal use only 4. Outlook for thermal coal
Slide 18: 4.1 Thermal coal benefits from being low cost
4.1 Thermal coal benefits from being low cost For personal use only Relative Costs of Electricity Generation • Coal remains the cheapest source of Source US $/MWh reliable base load energy Coal 52 – 71 • Modern super critical coal fired power Gas 65 – 78 plants operate at 45% energy efficiencies Nuc
Slide 19: 4.2 Forecasts for strong demand growth in Asia to 2017…
4.2 Forecasts for strong demand growth in Asia to 2017… • Growth in OECD economies energy demand expected in line with GDP For personal use only • Energy demand in excess of GDP growth expected from non-OECD economies (ie Asia) Source: IEA Medium Term Market Report, 2012 19
Slide 20: …and 2020…
…and 2020… For personal use only Source: Wood Mackenzie Global Energy & Metals Forum 2012 20
Slide 21: … continuing through to 2035
… continuing through to 2035 Longer term, IEA forecasts coal demand to grow 65% by 2035, overtaking oil as the For personal use only largest supply of energy Thermal coal is forecast to increase it’s market share as an energy supply source from 27% to 30% when compared to alternatives over the next
Slide 22: … with the bulk of supply to come from Pacific basin coal
… with the bulk of supply to come from Pacific basin coal For personal use only Global seaborne thermal coal import demand by basin and rank (Mtpa) Wood Mackenzie forecasts that Australian thermal coal supply will increase by 429Mtpa by 2030 (+235%) to meet the Asian demand Source: Wood Mackenzie
Slide 23: 4.3 QLD thermal coal is well positioned to meet demand
4.3 QLD thermal coal is well positioned to meet demand Australia will increase its share of the export market… For personal use only Australian coals are forecast to increase their share of the global seaborne market from 20% to 28% due to factors such as: superior coal quality; proximity to e
Slide 24: 4.4 Key drivers - US coal exports capped prices in 2012
4.4 Key drivers - US coal exports capped prices in 2012 For personal use only Newcastle Thermal Coal Price (US$) 250 USD per metric tonne 200 150 100 50 0 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Australian thermal coal, 12000- btu/pound, less than 1% sulfur, 14% ash, FO
Slide 25: 4.5 Recent US gas price rises – switching back to coal
4.5 Recent US gas price rises – switching back to coal • Natural gas reached a low of $1.82 / Mcf in April For personal use only 2012 due to the shale gas drilling boom • Sustainable long term gas prices in the US of $5.00 - $8.00 / Mcf are estimated to be required to ensure profitability of shale g
Slide 26: 4.6 Europe is experiencing strong growth in coal
4.6 Europe is experiencing strong growth in coal • 2012 showed strong growth in coal burn in key European countries: For personal use only Source: IEA Medium Term Market Report, 2012 26
Slide 27: 4.7 Low cost coal is keeping Europe from freezing
4.7 Low cost coal is keeping Europe from freezing • Coal is by far the cheapest form of energy in Europe at present: For personal use only Fuel Equivalent Equivalent Source generating cost generating cost $/MWh $/MWh UK Germany Coal $11.23 $11.23 Gas $34.51 $34.69 Fuel Oil $53.12 $52.12 Source: Argu
Slide 28: 5. Outlook for metallurgical coal
For personal use only 5. Outlook for metallurgical coal
Slide 29: 5.1 Supply constraints exist for coking coal globally
5.1 Supply constraints exist for coking coal globally • The demand for steel inputs (iron ore and coking For personal use only coal) continues to grow – driven by developing economies in Asia and India • The identification of new high quality hard coking coal deposits used in steel production remain
Slide 30: 6. Developing Queensland Basins – What is next?
For personal use only 6. Developing Queensland Basins – What is next?
Slide 31: 6.1 Queensland Coal Basins
6.1 Queensland Coal Basins Bowen (established) For personal use only Established world class coking coals Many large, diversified resources companies operate in the region Numerous Stanmore coking and thermal coal projects Surat (developing + established) High energy export thermal Clean b
Slide 32: 6.2 Developing Queensland Coal Basins – Surat Basin
6.2 Developing Queensland Coal Basins – Surat Basin For personal use only Key Facts Northern Surat: +400km (via Surat Basin Rail to Gladstone) Distance to port Southern Surat: +250km via Port of Brisbane High energy export thermal coal Typical product 6,000-6,800kcal/kg (ad basis) 9-16% ash (ad basi
Slide 33: 6.3 Coal Quality – Surat Basin (Walloon Coal Measures)
6.3 Coal Quality – Surat Basin (Walloon Coal Measures) For personal use only Surat Basin coals are typically high energy, clean burning coals featuring low impurities and emissions. Quality Surat Walloon Coals Other Australian Chinese Coals Comment Export Coals Sulfur (%) 0.4 0.3 - 0.7 0.4 – 1.1 L
Slide 34: 7. Australia’s competitive position in coal
For personal use only 7. Australia’s competitive position in coal
Slide 35: 7.1 Long term competitive position for Australia
7.1 Long term competitive position for Australia QLD port under construction – Wiggins Island For personal use only High quality, high energy coal with favourable clean burning characteristics Close proximity to target Asian markets Substantial current and planned infrastructure to transport c
Slide 36: 7.2 Long term freight rate fundamentals favour Australia
7.2 Long term freight rate fundamentals favour Australia Recent freight rate pricing has been volatile with historic In the short term, low freight rates, when For personal use only freight differentials less pronounced… combined with low natural gas prices, make Shipping rates from export origin
Slide 37: 7.3 Cost rationalisation and production optimisation are a key focus point
7.3 Cost rationalisation and production optimisation are a key focus point Expectation of reducing cost structures and The position on the cost curve is important when For personal use only assessing how well a project can perform if prices reduce improving profits Majors have clearly signalled
Slide 38: 8. About Stanmore Coal Limited
For personal use only 8. About Stanmore Coal Limited
Slide 39: 8.1 About Stanmore Coal
8.1 About Stanmore Coal For personal use only Pure play, Queensland ASX code - SMR 94Mt of JORC 975-1,498 Mt(2) of based coal company Share price - A$0.205(3) Marketable additional Reserves(1) exploration targets Founded in 2008 Shares – 207.8m Mkt cap - $42.6m(3) 686.2Mt of JORC
Slide 40: 8.2 Company Highlights
8.2 Company Highlights For personal use only 1 Attractive pipeline of Queensland coal projects − Belview (Bowen Basin) high quality underground coking coal on existing rail line − The Range (Surat Basin) open-cut 5Mtpa (product) export thermal coal. BFS nearing completion − Other prospective therma
Slide 41: 8.3 Strong Board and Management Team
8.3 Strong Board and Management Team NEVILLE SNEDDON NICK JORSS STEPHEN BIZZELL VIV FORBES ANDREW MARTIN For personal use only Managing Director Director Director Chairman Director Mining engineer with 37 years Extensive experience in Over 40 years of Bowen Basin 20 years in engineering, 15+ years i
Slide 42: 8.4 Belview Project Overview
8.4 Belview Project Overview Acquisition of EPC 1186 Creates Large Coking Coal Project in Bowen Basin region 100% owned For personal use only Substantial underground coking coal project in heart of the Bowen Basin Acquisition of EPC1186 provides access to shallower coking coal (circa 385m depth)
Slide 43: 8.5 Belview Project – Concept Study Results
8.5 Belview Project – Concept Study Results EPC 1186 significantly reduces the initial depth of mining For personal use only Asset description Project ownership 100% Location Blackwater, Bowen Basin, Qld JORC Inferred Resource 95Mt Exploration target1 735-1,103Mt Infrastructure solution Blackwater l
Slide 44: 8.6 Belview Project Concept Study Economics
8.6 Belview Project Concept Study Economics Shallower mining depth reduces capex and operating costs Capital Estimate – Single Longwall For personal use only The project capital costs for a single longwall Capital Item Estimate (A$M) operation used for financial analysis in this Longwall 172 study
Slide 45: 8.7 Belview Project Timetable
8.7 Belview Project Timetable First coal target 2017 For personal use only Concept study estimates underground development can commence in 2017 and longwall mining can commence in late 2018 Source: Xenith Concept Mining Study 45
Slide 46: 8.8 The Range Thermal Coal Project
8.8 The Range Thermal Coal Project Open cut, high energy, export grade thermal coal mine For personal use only 100% owned 5Mtpa open cut export thermal coal mine over 26 years High energy, low emission thermal coal sought after in Asian markets including Japan and Taiwan Capital cost $407M con
Slide 47: 8.9 Tennyson Thermal Coal Project
8.9 Tennyson Thermal Coal Project Underground, export grade thermal coal 100% owned For personal use only Maiden JORC Inferred Resource of 161Mt2 from within the 2.5m thick Aries seam at a depth of 150m to 480m Additional exploration Target1 of 65 – 120Mt established High energy export thermal
Slide 48: 8.10 Asset Development Schedule
8.10 Asset Development Schedule For personal use only Asset 2H12 1H13 2H13 2014 Beyond 2014 -2017: Drilling commences EPC 1186 Belview PFS BFS & Approvals Development Update Concept Study 2017: First coal Mid 2014: The Range BFS & Supplementary EIS Obtain ML grant 2016: First coal Construction Maide
Slide 49: 9. Conclusions and questions
For personal use only 9. Conclusions and questions
Slide 50: 9.1 Conclusion
9.1 Conclusion • Coal will continue to play a key role in steel and energy markets and will continue to be For personal use only a major component of the global energy mix • Chinese emissions - High quality, low impurity thermal coal such as Surat coal will increase as Asia addresses its emission pr
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