Michael Roche - Queensland Resources Council - Challenges for coal and the Galilee Basin

Michael Roche

Chief Execu0ve

Challenges for coal and the Galilee Basin

Galilee Basin Coal and Energy Conference 25 November 2013

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>The Queensland Resources Council (QRC) is a not-for-profit peak industry association representing the commercial developers of Queenslands minerals and energy resources

>87 full members explorers, miners, mineral processors, site contractors, oil and gas producers, electricity generators, including strong Galilee representation

>183 service members - providers of goods or services to the sector >QRC celebrating 10th anniversary this month >Board comprises coal, minerals, oil & gas, energy, contractors and explorers >New President Rob Neale, CEO of New Hope Group

Who is the Queensland Resources Council?

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87 full members 183 service members 38 associate members

Aberdare Collieries Adani Mining Allegiance Coal Altona Mining Ambre Energy Anglo American Anglo American Exploration Aquila Resources Areva Resources Australia Arrow Energy Bandanna Energy Beach Energy BHP Billiton Cannington BHP Billiton Mitsubishi Alliance Blackwood Corporation Caledon Coal Cape Alumina Cape Flattery Silica Mines Carabella Resources Carbon Energy Carpentaria Gold Cement Australia

Civil Mining and Construction Clean Energy Australasia Coalbank Cockatoo Coal ConocoPhillips Australia CuDeco Downer EDI Mining Eagle Downs Coal Management Ensham Resources ERM Power Evolution Mining Exco Resources Glencore - Coal Glencore - Copper Glencore - Zinc Golding Contractors Guildford Coal GVK Inova Resources International Coal Investigator Resources Isaac Plains Coal Mgt Jellinbah Resources

Jindal Steel & Power John Holland Leighton Contractors Liberty Resources Linc Energy Lucas Group Macmahon Holdings MacMines Austasia Mastermyne Mega Uranium Metallica Minerals MetroCoal Millmerran Power Management Minerals and Metals Group Mitsubishi Development New Hope Group Norton Gold Fields Origin Energy OZ Uranium Paladin Energy Peabody Energy QCoal QER

QGC Rio Tinto Alcan Rio Tinto Coal Australia Santos Senex Energy Shell Development (Aust) Sibelco Australia Sojitz Coal Mining Stanmore Coal Summit Resources Superior Coal Tata Steel Resources

Australia Thiess U&D Mining Vale Vital Metals Watpac Civil & Mining Wesfarmers Resources Westside Corporation Whitehaven Coal Yancoal Australia

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Economic contribu,on of the Queensland resources sector

www.queenslandeconomy.com.au

In 2012-13 (directly and indirectly): A record $38 billion in wages and salaries paid and purchases from Qld companies Reduced spend by coal oset by increased spend by CSG/LNG (but coal s0ll $20 billion) One in every four dollars Queensland-wide One in ve jobs Queensland-wide

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www.woodmac.com

Strategy with substance

Seaborne thermal coal supply and demand (2013-2030)

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200

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1,000

1,200

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2,000

2013

2015

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Sea

born

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(Mt)

Australia Indonesia Colombia Russia South Africa USA Other Demand

Source: Wood Mackenzie

Wood Mackenzie 7

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$bnumber

number (left axis) value (right axis)

Source: Bureau of Resources and Energy Economics

This phase of Australian resource investment has peaked

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Strong supply response from Qld coal 2010/11 = 162 mt 2011/12 = 165 mt

2012/13 = 180 mt

2013/14 annualised = 205 mt

- Soaking up latent capacity looking likely

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QLD coal mines have become uncompetitive

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Source: Port Jackson Partners (2012), Regaining our competitive edge in minerals resources. Minerals Council of Australia Minerals Week presentation, 30 May 2012

COAL far from nished Daunia (opened Sept 2013) Kestrel, Broadmeadow expansions now opera0ng Caval Ridge Grosvenor, Eagle Downs under construc0on Springsure Creek strengthening and Galilee Basin projects keep progressing

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Galilee Basin mines of scale and sophis,ca,on GVK has all State and Federal approvals except Abbot Point dredging. Land Court objec,on.

Energy-starved India = GVK, Adani Galilee front runners

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Galilee Basin mines of scale and sophis,ca,on Adanis supplementary EIS out for public comment un,l 20 Dec.

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>10 initiatives to provide lower upfront costs, project and process certainty. >No funding commitment but possible ramp-up to full royalty needs to be

substantial to make a difference to project NPVs.

>Payoff for tax payers is 30 year projects employing thousands of people and royalty stream that will pay off government investment many times over

>Possible declaration of GBSDA in early 2014 to enable compulsory land acquisition

>Reserve Abbot Point T2 terminal for credible first mover >Water allocation from Burdekin at prices intended to facilitate local supply

and management solutions

>Establish multi-user transmission line corridors

Galilee Basin Development Strategy Will It Help?

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A holiday from Queensland coals high eec,ve tax rate?

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>Promised axing of worlds highest carbon tax probably by new Senate after 1 July 2014. Galilee coals not particularly gassy, but policy will help at the margin.

>Promised end of MRRT will also await new Senate. Large administrative savings. Treasurer Hockey has to avoid temptation to tinker with resource sector taxation eg fuel tax credits.

>One stop shop for environmental approvals: need to deliver progressive streamlining over next 10 months, with full operation by September 2014

>Exploration Investor Tax Incentive ($100m over 4 years) may assist with current dire capital raising environment

Federal Election Initiatives Also Important to Galilee Basin

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Explora,on performance Its a struggle

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Statewide support for mining & resources high

79%

33%

16%

5%

5%

82%

35%

14%

5%

4%

TOTAL SUPPORT

Strongly support

TOTAL OPPOSE

Strongly oppose

Dont know / Noopinion

Total 2012

Total 2013

Industries under attack > Orchestrated global/domestic ENGO campaign

aimed at shutting Queensland coal industry down by exaggerating dangers to Great Barrier Reef from shipping and port development. Big focus on blocking Galilee Basin projects.

> Documented threats to reef are (a) Crown of Thorns starfish (b) nutrient run-off from towns and agriculture (c) climate change/storms

> Strategies: Colonise genuine community groups and influence concerns, delay coal projects, then undermine the social licence of the industry; finally shaking confidence of investment community to stop growth

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www.qrc.org.au

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Walking the talk Mackay, Bowen, Townsville, Cairns, Rockhampton, Canberra, London, Paris, Berlin

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>Resources projects should not be at a procedural disadvantage rela0ve to other types of development projects by having greater unnecessary greentape imposed

>The systema0c abuse of appeal process by certain organisa0ons needs to be addressed by considering the standing for objectors, based on exis0ng legal requirements in the Environmental Protec/on Act 1994.

>Need a single integrated objec0ons and appeal process. >Timeframes imposed on the Land Court for decisions, which should be monitored and reported on annually.

> Establish a specialist resources jurisdic0on for the Land Court to ensure resource projects are not held up by surges in the Courts workload.

Reform of objections and appeals process urgently needed

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Michael Roche

Chief Execu0ve

Challenges for coal and the Galilee Basin

Galilee Basin Coal and Energy Conference 25 November 2013

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