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Petra Commodities Key Note Panel Session

Mining the resources not the market

Chairperson : Alberto Migliucci Petra Commodities

Panelist Ken Farrell Pt Bumi Resources

Panelist Rick Ness PT Petrasea / Pt Indika
Panelist Anthony Yuen Citi Research

Monday 1 June 2014

Bali, Indonensia
Mining the resources not the market
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• Pit to port – what are the keys to a successful operation

• What barriers to entry are there for entrepreneurs

or investors?

• Today's market – How is the industry responding

to changes?

Pit to Port

Competing on the cost curve

Oversupply is at least 10% of global production capacity

Focus on cost curve to raise the productivity of their asset base and labour force,
and much less on production and/or sales growth.

Yet there are others choosing to raise production to reduce unit costs, only
depressing markets further. Another factor preventing production cuts are
take-or-pay contracts hindering output cuts during periods of oversupply,
prolonging the downturn in the coal markets.

What are the strategies coal producers are taking to survive?

Time for Bottom-Fishing?

• Asset divestments will remain a key theme for global diversified miners
• This also opens up access for other market players to these assets, which otherwise
would not have been up for sale in a bull market.

• Is this a doorway to opportunity for potential changes in the industry structure which has
long been dominated by the majors.

What barriers to entry are there for entrepreneurs or investors?

Barriers to Entry?

Government policy and interventions.

In recent years, we have witnessed some poorly timed and executed policies that have distracted, or
worse, derailed investors ‘ appetite from the (policies’) intended course and targets. Reform in the coal
industry should be positive, yet is has its negative side effects as seen with recent experiences in
Indonesia, Australia and Mongolia.

The learning curve will be quite steep.

Asset value destruction could be far larger than expected, not to mention the wasted time and
opportunities. We remain convinced that markets will dictate the winners, and in the long run it’s all about

What Lies Ahead?

Where is the industry headed?

Are we there yet?

Given the considerable decline in the price of coal industry

equities so far this year, investors continue to ask whether
we are close to the market bottoming out.

Is the worst is now behind us?

Thank You

Enjoy Coaltrans Asia 20th Anniversary