Coal For Steel Annual Report - Coquecol · Tel. (57) (1) 530 1053 Calle 100 # 19 A - 30 piso 7...

www.coquecol.comTel. (57) (1) 530 1053

Calle 100 # 19 A - 30 piso 7Bogotá - Colombia

Annual Report2019

Coal For Steel

Content Statement from the CEO

p. 3

1. Economic and Global Context of the Coal Sector

p. 9

2. About Us

p. 13

3. Results 2019

p. 27

4. Internal Control Report

p. 39

5. Fiscal Reviewer Report

p. 41

Statement from the CEO

I want to thank all our clients, collaborators, suppliers and

shareholders because you have made it possible for Coquecol

Group to be one of the most important companies in the

country and leaders in the mining sector of metallurgical

coal. Thank you, all our achievements are because of you!

Beyond the junctures of the mining sector, our stra-

tegy continues to be based in a long-term vision

to strengthen and sustain the business group in

the face of the volatility of the market. For this, we

strive for creating a client-oriented corporate culture,

managing high quality standards in our products and

processes, and guaranteeing the profitability expected

by our shareholders.

To develop this strategy we have defined the fo-

llowing guidelines and corporate values:

Ensure the long-term

sustainability of the

company.

Consolidatea risk

management culture.

Achieve the expected pro�tability.

Promote the development of our people.

Develop innovation and

digital transformation

Consolidate customer relationships.

Manage the integral development of Coquecol´s value network.

Annual Report 2019Coquecol Group

| 3

ContentCoquecol Group

2 |

Our corporate values:Coherence and transparency, make us reliable.

Orientation to customer needs.

Quantum Love for our society, our purpose.

Union, we work together and happy.

Excellence, our quality stamp.

Change and innovation, our sustainability.

Orientation to goals, our commitment.

Leadership by example, our differentiator.

Commercial StrengtheningWe keep strengthening the posi-

tioning of the Coquecol Group in the

world, reaching sales of 901,319 tons,

discriminated in 518,264 tons of coal

and 383,055 tons of coke, decreasing

vs. last year due to the drop of coal

and coke international price. Still, our

participation in the domestic market

was 18% in 2019.

We were the first, in the history of

Colombia, to sell the largest meta-

llurgical coal shipment, Jin Wen Feng,

with a total of 93,429 tons shipped in

the month of September. Likewise, we

completed exports with clients like

Gerdau, Noble Resources, Vale Man-

ganes, Trafigura, Glencore International,

Autlan and Nizi.

We also developed our commercial

relationships participating in national

and international coal and coke con-

ferences as: IHS Market Coal Confe

rence, Eurocoke Summit, Carbon

Forum, PDAC and ACM (Colombian

Mining Association).

Trasformation of ourInternal Models

Committed with company sustaina-

bility, we implemented our ODI in-

ventory model aligned with demand

that allowed us to strengthen our

financial structure and decrease the

inventory risks.

Additionally, we developed the fi-

nancial risk mitigation strategy.

Technological transformation

and Improvements in IndustrialProcesess

We implemented SAP S/4 HANA In-

formation System for all group com-

panies, in order to improve the quality

and timeliness of business information,

the efficiency in processes and have

better traceability of our operation.

Moreover, we developed improvement

and efficiency projects in our produc-

tion plants, that allowed us to produ-

ce 273,666 tons of metallurgical coke,

24.073 tons of small coke and 13,129

tons of coke breeze, despite the situation

of market.

We also continued with the extraction

through our own Mining projects rea-

ching a level of 105,465 tons of meta-

llurgical coal.

Loyalty strategiesfor providers

947,801 tons of coal were purchased

in 2019, and the coal extraction pro-

cesses at Intercarbón were strengthe-

ned, seeking to improve product qua-

lity and competitiveness.

Alliances and co-investment strate-

gies continued with the best suppliers

of the areas of influence and we held

the Encuentro Aliados Coquecol mee-

ting (Coquecol´s allies meeting) to

strengthen the commercial relationships

and position better the company.

We ratify our Commitmentto Collaborators

With the actions completed in this

period, we ratify our commitment with

collaborators by deploying actions to

improve human talent development,

well-being and retention, recognizing

they are the architects of the materiali-

zation of our strategic objectives. Some

of these actions included 50% payment

of the health plan of each collaborator

and their family, scheduling healthy

habits days and fitness sessions, co-

vering 100% of our collaborators with

life and funeral insurance policies, im-

plementing food service and food bo-

nuses, incentive plans, consultancies

and generating an alliance with the

Colsubsidio employees fund.

In summary, in this 2019 we conso-

lidated once again our organizational

structure, generating formal employ-

ment at the end of the year for 996

employees in the Group.

Likewise, through our Coquecol Foun-

dation we strengthened relations with

communities and other interest groups,

investing more than $ 700 million and

Statement from the CEOCoquecol Group


| 54 |

based on our four action axes (Education, Family, En-

vironment and Relationships).

Management of Environmental obligationsAs a company committed to compliance of environmen-

tal obligations, all our tasks were developed in accordance

with Coquecol Group environmental policy, all the time

preventing and controlling pollution, minimizing environ-

mental impacts through the implementation of good prac-

tices, the sustainable use of natural resources, compliance

with legal requirements and environmental education.

In line with the above, we developed programs, projects

and activities in all our units for environmental aspects

related with the air components, water, waste manage-

ment, reforestation with native species, trainings, on-boar-

ding and mechanisms to reduce emissions of greenhouse

effect gases.

Financial resultsIn 2019 Coquecol had revenues of

$542,141 million, which shows a de-

crease compared to the $ 610,788 mi-

llion obtained in 2018, this is due to the

volatility of the international coal price;

however our operating margin for the

period was 9.96%, higher compared to

7.7% in 2018, which is the result of ope-

rational efficiencies implemented during

the exercise.

We achieved a net result of $ 31,306

million for the year, equivalent to a net

margin of 5.7%, compared to 4.2% in

2018, and at the end of 2019 we rea-

ched an EBITDA of 11.8% compared to

10.6% in 2018.

Our coal sales prospects for 2020, fo-

cus in continued compliance of existing

contracts and development of the cus-

tomer loyalty strategy.

However, our goals for 2020 may be

affected by current global situation, be-

cause of coronavirus (COVID-19), which

has generated uncertainty and there is

still no clarity of its impact and duration.

Due to these circumstances, the com-

pany activated its Crisis Management

Plan to monitor the situation and take

appropriate actions in a timely manner..

Ricardo Blanco MancholaCOQUECOL CEO


| 7

Statement from the CEOCoquecol Group

6 |

8 |

1. Economicand GlobalContext ofthe Coal Sector

Taking into account the situation that we are currently experiencing world-

wide, due to the spread of the COVID-19 pandemic, it is time to act together

as a sector and take this opportunity to contribute to the economic recovery

that the country needs, developing new projects and expanding the existing

ones, in order to increase the participation of mining in the GDP and the

country investment, contributing to the closure of poverty gaps in the regions.

Contributions of mining to the national economy

Sources: DANE, Central Bank of Colombia, National Mining Agency.

GDPAggregated sector value: 20

billion COP, 2% of national GDP.

DFIDirect Foreign Investment:

Average 20% in the last 20 years.

EXPORTS27% of country exports.

ROYALTY TAXES 5 billion COP annually.

EMPLOYMENT350,000 direct employees

and 900,000 indirect.

LINKAGES2.4 COP generated in other

sectors for each 1 COP generated by mining.

The global economy experienced the lowest growth in the last decade, as a result

of prolonged trade conflicts, intensifying geopolitical tensions, the worsening of

the climate crisis and financial instability. Despite this, the World Bank stated that

a rebound in the economic activity could happen in 2020 if these risks are contained

bringing a growth range between 1.8% and 2.5%.

Meanwhile, despite the international

situation, Colombia’s GDP was 3.3%,

where the more dynamic economic

activities were commerce, public ad-

ministration and defense, professio-

nal, scientific and technical activities.

Dynamism of the economy remained,

despite the national and international

political and economic environment.

However, this figure keeps Colombia

as one of the fastest growing countries

of the region. For 2020, a GDP close to

3.6% is expected given the reactivation

of 4G and capital goods imports.

Reviewing the behavior of our sector,

the solid fuels exports did not interfere

much in the dynamism of the national

economy but did interfere in the raw

materials world recession.

At the beginning of 2019, there was

an oversupply of coking coal and me-

tallurgical coke. This situation made

countries like Vietnam, Indonesia and

Malaysia, that during 2016-2018 were

the most relevant coke consumers, de-

velop coking plants to guarantee their

own supply and encourage solid fuel

exports.

1. Economic and Global Contextof the Coal Sector

Also, there was a strong boom in the

coal and coke production in Poland and

Russia which saturated the global mar-

ket inventories, that were not followed

by the demand of steel companies. This

effect marked a clear trend of lower

prices of the vast majority of raw ma-

terials, in our particular case, steel de-

creased by -22%, coke fell -17% and

coking coal decreased -26%, a situation

that remained for most of 2019.

International Market Sources:

»» SBB Steel Markets Daily – PLATTS.

»» Coke Market Report – Annual Report 2019.

»» National Mining Agency.


| 11

Economic and Global Context of the Coal SectorCoquecol Group

10 |

12 |

2. About Us

2. About Us

We are market leaders in the metallurgical

coal market in Colombia, the highest quali-

ty standards add value to our products and

processes, satisfying our customer´s expectations.

The Coquecol Group includes four Colombian com-

panies who directly intervene in the extraction, pro-

duction, logistics and commercialization of coal and

metallurgical coke.

Thanks to the common purpose and direction of our

companies we are able to offer a model of comprehen-

sive support and a strong portfolio of services and

products that allows us to fully satisfy the needs of

our clients.

GROUP

OLMINEIN

R.C. ARGA

MINING S.A.S.arbonINTER

| 15

About UsCoquecol Group

14 |

2.2. Corporate Governance

At Coquecol we implemented a corporate governance model aimed at

satisfying the needs of our clients by applying best control and moni-

toring practices.

BOARD OF DIRECTORS

CEO

KPMG

LEGAL AND ENVIRONMENTAL

AUDIT

RAW MATERIALS

LOGISTICS

BUSINESS

TECHNOLOGY

INDUSTRIAL

FINANCE

QUALITY

HUMAN RESOURCES AND CSR

RC CARGA

INCOLMINE

INTERCARBON

Fiscal Reviewer Corporate Adviser Risk Management Association Federation

Organizations that support our management:

Omar Hernando González Pardo

President

Otto Bernardo Giraldo Salazar

Federico Guillermo Ochoa Barrera

IvánTrujillo Pantoja

Luis Alberto Botero Botero

2.1. Board of Directors


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16 |

2.3. Value generation

We produce and market coal and metallur-

gical coke worldwide, adding value to our

processes and products with the highest

quality standards meeting the expectations of all

our stakeholders.

Stakeholders needs and expectations

• Customer satisfaction

• Occupational health and safety

• Corporate social responsibility and environmental safety

• Business sustainability

• Sales management• Coke production• Raw material management• Logistics management• Quality management• SISO Management

GRUPO

StrategicsProcesses

Core Processes

Support ProcessesEvaluation

and ControlProcesses

• Strategic planning• Risk management• Environmental

Management • Corporate Social

Responsability

• Corporate Governance• Internal Audit• External Audit

• HR management• Finance management• S&OP management• IT management• Legal management• Organizational Communications

2.4. Products and Quality Specifications

We have high-tech equipment and employees

trained to guarantee the highest standards qua-

lity through our products.

Metallurgical Coke

MetallurgicalCoal

Reactive cokelow in phosphorus

Size30X10040X120 mm

Ash12,5%

Micum 4082,83%

CSR65%

Size10 X305X20 mm

Ash12,8%

Phosphorus0,007%

CSR25%

Volatile Matter26-27%

Ash9,5%

Fluidity400 DDPM

Re�ectance1,13%


18 |

2.

4.

5.

6.

Alignment with Sales Plan

NeedsDe nition

Raw materials parameterization for each supplier.

3

Coke Preparation

After the coke is crushed and sieved, the material is sampled before loading the truck.

Reception and Storage in Port

Coquecol de�nes the parameters to be measured and the sampling frequency, in batches of 1,500 and 3,000 t. The analysis is done by an accredited external laboratory.

Raw Material Reception

Sampling of materials with equipment to ensure quality compliance with supplier requirement.

Raw Material Collection

Storage according to quality characteristics (low, medium and high volatility).

Coal Mix

Validation of mixtures in alignment with production plans and customer needs.

Coking Process

Daily validation of the quality of the raw coke.

2.5. Quality of our products

Total control of the supply and production

chain guaranteeing the quality of the product

to our customers.

2.6 Sustainability and environment

We work in a Sustainable Development Inte-

grated Policy that allows us to comply legal

requirements and manage the environmental

impact of our operation.

We evaluate legal compliance through audits

and compliance reviews of regulations appli-

cable to each operation.

Launched a project to know Coquecol´s matu-

rity level on Sustainability Management. Based

on the Corporate Sustainability Assessment –

RobecoSAM for the Dow Jones Sustainability

Index.


| 21


20 |

2.7 Environmental management

Air component• Isokinetic studies were carried out in 12 chimneys,

in the different coking plants of the Group. All the

results were within normative standards.

• 16 air quality stations were installed, in 5 of the

operating units, in the coking plants and coal stora-

ge yards in the areas of Boyacá, Cundinamarca and

Norte de Santander, to measure PM10 concentrations

in the area of influence of these units, having 100%

of results within regulation requirements.

• Day and night time noise emission studies were

carried out in these same industrial units, by insta-

lling 17 monitoring points.

YEAR

2019

2018

2017

% OF WASTE REUSE

76,0 %

73,0 %

49,3 %

Waste managementThe waste reuse indicator allowed us to measure

the amount of waste whose handling was not final

disposal, decreasing thus the risk of environmental

contamination to natural resources.

Wastes reused and not handled for final disposal

were: ashes, rubble, scrap metal, paper, cardboard,

plastic and rubbers.

Water Component• Sampling days were held in 11 dumping points for

both Domestic Wastewaters (ARD) and not Domestic

Wastewaters (ARnD).

Reforestation• During 2019, 4,647 native species of trees were

planted in the operating industrial units, out of which

3,000 were planted in surroundings of the Quebra-

da. 100% of the planting was done with company

collaborators.

• Dismantling, closure and abandonment of the

Alicante mine and additional 2,000 native species

trees were planted.


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22 |

2.8. Geographic Location

Boyacá

Salamanca Plant

Samacá

Andalucía Yard

Compostela Yard

Paz del Río

Altiplano Mine

Manto 3 Mine

Manto 6 Mine

Manto 9 Mine

Zona Altiplano

Piedro Mine

La Peña Mine

Bocatoma Mine

Ráquira

RC Carga

Duitama

Norte de Santander

Alcala Plant

Presidente Mine

Cúcuta

Ports

Brisa Port

Barranquilla Port

Riverport

Sociedad Portuaria

Palermo

Atlantic Coast

Buenaventura Port

Pacific Coast

Cundinamarca

COQUECOL

RC Carga

DG Bogotá

Castilla Plant

La Mana Mine

Laberinto Mine

El Manzano Mine

Guachetá

Cucunubá Plant

Cucunubá

RC Carga

Ubaté

2.9 Production PlantsWe keep improving the productivity and efficiency

of our plants.

Washing Plant Parnaby

Washing capacity:

23.000 t

Tons washed per month:

18.400 t

Castilla Plant

Area: 52 Hectares

Storage capacity:

85.000 t of coal

5.000 t of coke

Operational furnaces: 605

Production capacity:

168.000 t of metallurgical coke, annually

Cucunubá Plant

Area: 20 Hectares

Storage capacity:

18.000 t of coal

5.000 t of coke





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24 |

Salamanca Plant

Area: 15,5 Hectáreas

Storage capacity:

30.000 t of coal

5.000 t of coke




Alcalá Plant

Area: 100 Hectares

Storage capacity:

65.000 t of coal

20.000 t of coke





26 |

3. Results2019

Sales

EBITDA

Total Liabilities

Net profit

Total Assets

Total Equity

165,4 USD - $ 542,142 COP

19,4 USD - $ 63,739 COP

42,1 USD - $ 137,813 COP

9,5 USD - $ 31,094 COP

77,5 USD - $ 254,141 COP

35,5 USD - $ 116,328 COP

3.1. Financial results

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

165,4 – $542,142

187,9 - $610,789

19,4 – $63,739

16,4 – $53,392

42.1 – $137,813

58.4 – $190,006

9,5 – $31,094

8,2 – $26,696

77,5 – $254,141

114,4 – $371,871

35,5 – $116,328

55,9 – $181,865

COKE AND COALTONS SOLD

2019: 901,319 t

2018: 1,002,922 t

OWN MINING 2019

TOTAL: 106,465 t

INTERCARBON:

75,125 t

PRESIDENTE:

31,340 t

TONSPRODUCES 2019

TOTAL: 351,462 t

METALLURGICAL COKE:

165,911 t

REACTIVE COKE:

125,200 t

SMALL COKE:

22,543 t

COKE FINES:

37,804 t


| 29

Results 2019Coquecol Group

28 |

3.2. Commercial strengthening

In 2019 we consolidated our position in the inter-

national and Colombian domestic market, achieving

an 18% share in the latter.

We also exported to clients such as Gerdau, Noble

Resources, Vale Manganes, Trafigura, Glencore In-

ternational, Autlan and Nizi, being Gerdau our main

client, in the coal product and representing 41% of

our total sales.



| 3130 |

3.3. Innovation anddigital transformation

An Innovation and digital transformation

strategy was defined, identifying oppor-

tunities aligned with the strategic goals

and the value chain of business. Some of

the actions taken on 2019 were:

• Implementation of SAP S/4 HANA In-

formation System for all group compa-

nies, in order to improve the quality and

timeliness of business information, the

efficiency in processes and have better

traceability of our operation.

• Innovation and digital transformation

project with the support of Ernst & Young.

• Business Intelligence information system

(BI) - Tableau.

Tons of Purchased Coal

2019 947,805 t

Influence ZonesCundinamarca

Nte. Santander

Boyacá

Santander

454,109 t

253,716 t

174,574 t

65,406 t

Types of CoalLow Volatile

Medium Volatile

High Volatile

Low Phos Coal

343,472 t

332,203 t

108,147 t

163,984 t

3.4. Loyalty strategies for providers

As one of the main buyers of coal nationwide, we keep signing purchase

agreements and implementing loyalty strategies through value generation

actions that promote the business development of our strategic allies.

With this purpose, we completed the following actions in 2019:

• Developed the Diploma Business

Strengthening and Development

for SMEs generating knowledge in

strategic planning, general cost ma-

nagement, accounting and financial

administration.

• Organized the Coquecol´s Allies

Meeting: An appreciation event to

recognize the trust and the goals

achieved.

• We continue developing strategies

of alliances and co-investments

with the best providers in the areas

of influence.


| 33


32 |

3.5. Risk management

We conducted a high-level assessment of Coquecol and Incolmine business

risks, with the support of Marsh Risk Consulting, in order to cover the risks that

currently threaten the achievement of the organization objectives given the

current market context.

The risk assessment process used in this study is based on the standard global

risk management method, NTC ISO 31000: 2018, which takes into consideration

the strategic, financial, operational risks and pure business risks. Based on the

assessment, the most important strategic risks are:

Environment

Climate change

adaptation

Business management

Demand reduction

or key customers loss

Business management

Operational resilience

Compliance with

regulations

Licensing for

business activities

Business management

Innovation and

market intelligence

Business management

Technology infrastructure

for production

Business model

management

Intervention or

political decisions

Business management

Image management and

organization positioning

Implemented an

Incentive Plan

Rewarding Results

Maintained our

employee base of

1000 employees

Implemented a

Management Training

Plan

Strengthened

Organizational

communication

Implemented a

Comprehensive

Wellness Plan

De�ned the

Organizational Culture

and the corporate values

Strengthened internal

networking and

participation spaces

3.6. Human Resources

We confirm the commitment to our employees

through welfare and development initiatives.



| 3534 |

3.7. Our communities

Coquecol Foundation strengthens relationships with com-

munities and other Interest Groups.

FamilyWe seek to strengthen the

social weave of families of

our communities, digni-

fying the life quality of its

members.

EnvironmentWe develop recycling,

reforestation programs

and good environmental

practices trainings in the

educational institutions with

children and communities in

our Influence zone

RelationshipWe do volunteering days

and collaborate with other

foundations and state

institutions for larger impact

projects.

EducaciónWe support the quality of

the education providing

elements for the learning

environments, improving

the infrastructure, trai-

ning teachers, university

scholarships and developing

trainings for the community.

We also develop our

communication team as an

space for young people to

better use their free time.

Family

Environment

Education

Relationship

Action Axes

Strategic Alliances

Universidad Minuto de Dios

SENA

Fundación Manos Pintadas de Azul

Ejército Nacional

Alcaldías

Uniboyaca

Universidad de los Andes

Universidad Francisco de Paula Santander

Universidad FECS

ONG CRHIO

REDPAPAZ

Escuela deportiva MANUEL QUISENO

Health brigade

Environment

Education:

1.097

6.500 Planted trees

900 School kits

50 Scholarships

Prosperous housing

Parenthood academy

Women empowerment

50

379

320

People impacted



| 3736 |

4. Internalcontrol report

38 |

4. Internal control report

I have audited the processes of Coquecol S.A.C.I,

its policies, procedures and other explanatory infor-

mation. I obtained the required information to fulfill my

duties and I completed my assessment in accordance with

the Information Assurance Standards accepted in Colom-

bia and International Standards on Auditing – NIA. Such

standards require compliance with ethical planning

and performance requirements that give reasonable

assurance about whether the processes are free of

material importance errors.

My responsibility is to state a concept of the inter-

nal control system on 2019.

Concept of the internal control system.

I consider that the evidence obtained through the

audit gives a reasonable base to state my concept:

Coquecol´s internal control is adequate, in all im-

portant aspects.

Ciro Rolando Herrera CastañedaAudit Chief

Appointed by Coquecol S.A.S. C.I

17 March 2020.

5. Fiscalreviewerreport

Internal Control ReportCoquecol Group

40 |

5. Fiscal reviewer report

On the report presented in the Shareholder´s

Meeting on March 17, 2020, on which the au-

ditor issues his opinion regarding Financial Sta-

tements, he reports the following:

“In my opinion, the financial statements mentio-

ned, prepared with information taken faithfully from

books and attached to this report, reasonably pre-

sent, in all material important aspects, the finan-

cial situation of the company as of December 31,

2019, the results of its operations and cash flows

for the year ended on that date, in accordance with

the Accounting and Financial Information Standards

accepted in Colombia, consistently applied as the

year before.”

Report on other legal and regulatory requirements:

Based on the results of my tests, in my concept, du-

ring 2019:

a. The accounting of the company has been carried out

in accordance with legal regulations and accounting

techniques.

b. The operations recorded in the books are in accor-

dance with the bylaws and de decisions of the Sha-

reholders Meeting.

c. The correspondence, the account vouchers, and the

minute book are conserved duly.

Gina Marcela Morales AmayaFiscal reviewer of Comercializadora

Colombiana de Carbones y Coques S.A.S.

C.I. - Coquecol S.A.S. C.I.

T.P. 179818 - T

Member of KPMG S.A.S.

d. The reviewed financial statement and the manage-

ment report are aligned; the report includes support

provided by management that shows free circula-

tion of the invoices issued by vendors or suppliers.

e. The information contained in the statements of

self-assessment of contributions to the social se-

curity system, particularly the one related to affi-

liates and their income used to define contribution,

has been taken from the accounting records and

supports. The company is not in default due to con-

tributions to the social security system.

Fiscal Reviewer ReportCoquecol Group


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Calle 100 # 19 A - 30 piso 7Bogotá - Colombia

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