The Current Status and Challengesof Our Thermal Coal Mining Operations

September 8th, 2014Kanji Nishiura

Mitsubishi CorporationSenior Vice President

COO for Mineral Resources Investment Div.Metals Group

Clean Coal Day in Japan 2014 International SymposiumTowards World’s Energy Security～Coal as a Basic Power & Environmental Friendly CCT～

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1. Overview of Thermal Coal

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1. Overview of Thermal Coal (1)(1) Abundant resources (2) Low‐cost energy fuel(3) Low geopolitical risk

Fossil Energy Resources by typeSource: WEO2013

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1. Overview of Thermal Coal (2)

(1) Abundant resources (2) Low‐cost energy fuel(3) Low geopolitical risk  

Thermal coal¥1.7

LNG : ¥5.5

Oil : ¥6.5

CIF prices per calorific value (2012)Source: Japan Center for Economic Research

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

（JPY／1,000 kcal）

（Fiscal year）

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1. Overview of Thermal Coal (3)

(1) Abundant resources (2) Low‐cost energy fuel(3) Low geopolitical risk  

8%

92%

36%

64%

1%

99%

20%

80%44%56%

5%

95%

8%

92%4%

96%5%

95%

8%

92%

100%

15%

85%

China(3,419Mt)

Indonesia(360Mt)

Australia(402Mt)

South Africa(253Mt)

India(582Mt)

Russia(322Mt)

Colombia(86Mt)

Poland(139Mt)

Germany(189Mt)

Turkey(76Mt)

28%

72%

Ukraine(70Mt)

United States(1,006Mt)

Canada(67Mt)

Total world coal production : 7,608Mt

World’s leading producers :China / United States / India / Indonesia / Australia

Source: IEA Coal Information 2013

Coking coal

Thermal coal

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1. Overview of Thermal Coal (4) - Japan

Coal‐fired power plants have been re‐recognized as a vital electric power source in Japan.   A number of new projects have been announced.  

(1) Location(2) Shareholders(3) Generating Capacity(4) Start date for power

generation

(1) Suzukawa(2) Mitsubishi Corp. 70%,

Nippon Paper 20%,Chubu Electric Power 10%

(3) 100MW(4) 2016～(Estimated)

(1) Takehara(2) J-Power100%(3) 600MW(4) 2020～(Estimated)

(1) Ohsaki(2) Chugoku Electric power

50%, J-Power50%(3) 170MW(4) 2016～(Estimated)

(1) Nagoya(2) Osaka Gas 95%(3) 110MW(4) 2016～(Estimated)

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2. Our Thermal Coal Assets

QLD

NSW

VIC

SA

NT

WA

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2. Our Thermal Coal Assets (1) - Overview

Clermont

Mt. Pleasant(C&A)

Ulan

Perth

Brisbane

Newcastle PortPort Waratah Coal Services

(C&A)

Mt Thorley / Warkworth (C&A)

Hunter Valley Operations (C&A)

Bengalla (C&A)

We have substantial interests in Australia’s thermal coal assets through our wholly owned subsidiary Mitsubishi Development Ltd Pty based in Brisbane.

: MDP Office: Operating Mines: Undeveloped Deposits: Port Services

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2. Our Thermal Coal Assets (2) - Chronology

MDPEstablished

1968

C&A delisted and restructured into a JV of Rio Tinto (80%) and MDP (20%)

2011

Acquired 8.2% share in C&A(Swap deal with our share in Howick)

1999

Commenced operation of Ulan West

2014

Commenced operation of Clermont

2010

Acquired interest in Clermont

19811978

Acquired interest inWarkworth (’76) and Ulan(’78)

1976

Increased ownership of C&A to 10.2%

2002

Acquired interest in Howick

1989

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2. Our Thermal Coal Assets (3) – JV PartnersMDP’s equity thermal coal production of 12Mt is the largest among Japanese companies.

Mines Interest heldby MDP J/V Partners Production

(100% basis)Production

(MDP attributable)

Warkworth(NSW) 28.9%

Coal & Allied

Nippon Steel & Sumitomo Metal

Mitsubishi Materials

55.6%

9.5%

6.0%

8.1 Mt 2.3 Mt

Ulan / Ulan West

(NSW)10.0% Glencore 90.0% 6.1 Mt 0.6 Mt

Clermont(QLD) 31.4%

GS CoalJ-PowerJCD

50.1%15.0%3.5%

11.8 Mt 3.7 Mt

Company % of share held by MDP Major Shareholder Production

(100% basis)Production

(MDP attributable)

Coal & Allied 20.0% Rio Tinto 80.0% 24.9 Mt 5.0 Mt

Total 11.6Mt

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3. Current Status and Challenges

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3. Current Status and Challenges (1)

The Thermal Coal price and Forex have become unfavorable for Australian miners…

“Around one quarter of Queensland’s coal production – including half of all thermal coal production – is in the red”

“Some of these mines are only staying open because production is a more palatable option than closing operations locked into transport costs levied on a take or pay basis”

(16 May 2014, Queensland Resources Council)

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3. Current Status and Challenges (2)

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3. Current Status and Challenges (3)

• Aggressive cost reductions• Productivity improvements

Achieved 20% reduction on FOB unit cost vs peak in 2012

Become a competitive and stable supplier of high quality thermal coal regardless of market conditions 

Optimized Production ‐ Clermont ramped up to full production

Pursue further production efficiency

Our initiatives under the circumstances:

External factors and our expectations:

Tax Regime (including royalties)Balanced structure that supports competitiveness

Regulatory ApprovalsEfficient process to allow timely project delivery

Take or Pay obligations (Port & Rail) Win-win system for both user and provider

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3. Current Status and Challenges (4)

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4. Sustainable Growth

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(1) Heavy Trucks

(2) Coal Seam Gas

(1) Clermont Mine <Example>

(2) Gas Reuse <Study phase for future>

Diesel drive

Emit CO2

Conveyor instead of

trucks

Reduced number of trucks

Methane gas in coal seam

Emittedif exposed

Recover gasin coal seam

In-house powergeneration

4. Sustainable Growth (1)

Typical Gas Emissions at Coal Mines Approach to Minimize Emissions⇒

⇒⇒⇒

Coal seam

Power generator

Methane gas

We are working with our JV partners to reduce greenhouse gas emissions at each site

Underground

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4. Sustainable Growth (2)

Our mining activities are conducted in harmony with the natural environment and local communities, both before and after mining operations.

Rehabilitating Large-scale Open-cut Mines

After rehabilitation, we monitor vegetation recovery to check whether it is taking root and whether animals are returning to the area.

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4. Sustainable Growth (3) - Our vision

Operational Initiatives Reduce cost Optimize production efficiencies

An environmentally responsible and economically sustainable supplier of high quality thermal coal

Environmental and CSR Initiatives Reduce greenhouse gas emissions at our operations Work in harmony with local communities Support Clean Coal Technology through industry associations