International Coal — UBS Boston Coal Conference 2009
37 slides from International Coal's conference presentation, Dec 1, 2009
Slide 1: UBS Boston Coal Conference December 1, 2009
UBS Boston Coal Conference December 1, 2009 Ben Hatfield President & Chief Executive Officer
Slide 2: Forward-Looking Statement
Forward-Looking Statement n Statements in this press release that are not historical facts are forward-looking statements within the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995 and may involve a number of risks and uncertainties. We have used the words “anticipate
Slide 3: Summary Statistics: Highlights of ICG
Summary Statistics Highlights of ICG n Strong operating presence in 3 of 4 largest US coal-producing regions - - Central Appalachia, Northern Appalachia, & IL Basin n Extensive coal reserve holdings with 63% ownership position n Favorable contracted sales position n Metallurgical sales projected to
Slide 4: Operating Strength and Diversity
§ 13 active mining complexes - 8 in Central Appalachia, 4 in Northern Appalachia, and 1 in Illinois Basin Operating Strength and Diversity ICG Illinois Illinois Kentucky Beckley Virginia MD East Kentucky Flint Ridge Hazard Knott County Raven Eastern Buckhannon Sentinel Tygart Valley #1 Vindex Curren
Slide 5: High-Caliber Reserve Base
37% Leased 96 million tons met 273 million tons steam 63% Owned 232 million tons met 399 million tons steam Geographic Distribution of Reserves Reserve Ownership Reserves by Method 11% Surface 89% Underground 37% IL Basin 37% NAPP 26% CAPP High-Caliber Reserve Base (As of September 30, 2009) § ICG c
Slide 6: Large Met Quality Reserve Position
52% Met Quality 328 million tons 48% Steam Quality 301 million tons 76% Hi Vol 250 million tons 16% Low Vol 52 million tons Large Met Quality Reserve Position* (As of September 30, 2009 ) 8% Mid Vol million tons n CAPP/NAPP reserves of 629 million tons are 52% metallurgical-grade quality
Slide 7: Production Profile
24% NAPP 62% CAPP 14% ILB Production by State Production by Region Production by Method 53% Surface 47% Underground 42% KY 40% WV Production Profile (As of September 30, 2009) 14% IL 4% MD
Slide 8: Favorable Sales Position: Committed Tonnage
Committed Tonnage 1 Projected Sales 17.3 - - 17.5 16.5 - 17.5 16.5 - 18.0 (tons in millions) Projected Price Per Ton $59.25-$59.50 $61.00-$62.50 $65.00-$70.00 1 Management’s estimate as of November 30, 2009 Favorable Sales Position % of Sales Uncommitted Committed and not priced
Slide 9: Projecting Doubling of Metallurgical Sales
Projecting Doubling of Metallurgical Sales Future met growth opportunities n Tygart project – Premium high volatile met – 3.5 mm TPY longwall mine projected at 40% met n Vindex Bakerstown project – Premium low volatile met – 0.9 mm TPY CM deep mine n These mines and other permitted sources could inc
Slide 10: Production Growth Is Primarily from Underground Mines
Production Growth Is Primarily from Underground Mines n Nearly all ICG growth is comprised of new or expanding underground mining operations (versus surface mines) – Major new development is Tygart #1 complex in Northern App – Other deep mine growth planned at Beckley, Illinois, & Raven n Surface po
Slide 11: ICG Legacy Liabilities
ICG Legacy Liabilities Total Legacy Liabilities 1 Total: $144 million 1 Source: company Annual Reports as of December 31, 2008. Legacy liabilities include post retirement benefits, black lung liabilities, reclamation liabilities, workers compensation and Coal Act liabilities ($ in millions) Lowest L
Slide 12: Coal Market Update
Coal Market Update
Slide 13: Current Market Conditions
Current Market Conditions n Market has recently improved, but remains somewhat fragile – Rising natural gas prices are subject to retreat in response to mild weather or bloated storage reports – Further, thermal coal production cuts may be needed to achieve balance n However, several positive signal
Slide 14: Producers Reacted Quickly in 2009
Producers Reacted Quickly in 2009
Slide 15: Recent Thermal Spot Pricing Suggests Early Signs of Recovery
Recent Thermal Spot Pricing Suggests Early Signs of Recovery Prompt Month Coal Pricing Per ICAP-United, Inc.
Slide 16: Forward Curve Predicts Meaningful Price Opportunity
Forward Curve Predicts Meaningful Price Opportunity
Slide 17: Favorable Trends for Met Coal Demand
Favorable Trends for Met Coal Demand n Steel capacity utilization has been recovering: – U. S. has rebounded to 65% from 40% in Q1 2009 – Steel sectors in China, Eastern Europe, & India are near 100% n Resilient economic growth in Asia is expected to drive increased met coal consumption – Projected
Slide 18: Summary
Summary
Slide 19: Near-Term Strategy
Near-Term Strategy n Maintain flexibility to match production with changing markets – ICG has idled or reduced 4.2 million annual tons of higher-cost production since January 2009 n Capitalize on improving metallurgical coal market n Continue to strengthen liquidity and maximize cash n Protect profi
Slide 20: Conclusion
Conclusion n Well-positioned for the current economic outlook – Essentially all of 2009 coal is committed at substantially higher prices than in prior years, solid contract base for 2010 – Maturing of new mines, lower labor turnover and reduced commodity prices are expected to help cost performance
Slide 21: Questions?
Questions?
Slide 22: Appendices
Appendices
Slide 23: Production and Operating Statistics
Production and Operating Statistics
Slide 24: Adjusting Production Growth To Match Demand
Adjusting Production Growth To Match Demand 1 Management’s estimate as of October 28, 2009
Slide 25: Summary of Active Mining Operations
Summary of Active Mining Operations
Slide 26: Peer Group Cost and Margin Comparisons
Peer Group Cost and Margin Comparisons
Slide 27: Peer Group Cost Per Ton: Appalachian Production
Peer Group Cost Per Ton Appalachian Production (2007 - 3Q09)
Slide 28: Peer Group Cost Per Ton: Illinois Basin Production
Peer Group Cost Per Ton Illinois Basin Production (2007 - 3Q09)
Slide 29: Peer Group Margin Comparison
Peer Group Margin Comparison Margin Per Ton in Dollars (2007 - 3Q09)
Slide 30: Recap of ICG Capital Investment Strategy 2005-2009
Recap of ICG Capital Investment Strategy 2005-2009
Slide 31: ICG Capital Investment Focus
ICG Capital Investment Focus n Capital investment strategy during 2005-2009 has focused on two key areas: 1. Development capital for construction of new mining complexes to boost production for targeted markets 2. Maintenance capital designed to “catch up” for years of under- investment and upgrade
Slide 32: Substantial Success Achieved in Launching Expansion Projects
Major Expansion Projects 2005 2006 2007 2008 2009 Est • Flint Ridge Complex • Raven Complex • Vindex Barton/Buffalo Expansion • New Sentinel Clarion Mine • Beckley Complex • Hazard Shovel Spread • Tygart #1 Complex (Ongoing) • Other Substantial Exp Projects Total Project Capex (millions) $35.6 $92.2
Slide 33: Maintenance Capital Catch-Up Spending Has Leveled Off
($ in millions) 2005 2006 2007 2008 2009 Est Total Capital Expenditures $116.8 $197.0 $181.3 $171.6 $94.5 Less Project Capex $35.6 $92.2 $123.3 $94.9 $8.0 = Non-Project Capital (Basic Maintenance Capex) $81.2 $104.8 $58.0 $76.7 $86.5 Coal Production (tons, millions) 12.4 16.5 16.4 17.8 16.5 Maintena
Slide 34: Equipment Fleet Now Significantly Stronger
Equipment Fleet Now Significantly Stronger
Slide 35: Miscellaneous Coal Reserves & Sales Statistics Slides
Miscellaneous Coal Reserves & Sales Statistics Slides
Slide 36: Substantial Permitted Reserves
Permitted 199 million tons Non-permitted 801 million tons NAPP 116 million tons CAPP 64 million tons ILL 19 million tons Permitted Reserves Permitted Reserves by Geographic Basin Substantial Permitted Reserves (September 30, 2009) n ICG’s permitted reserves include 162 million tons underground and 3
Slide 37: More Diversified Customer Base
More Diversified Customer Base
International Coal Group — UBS Boston Coal Conference 2009 on 6ix