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MetallurgicalCoal QuarterlyA Synopsis 2009

A quarterly analysis and forecast of demand for and supply of metallurgical coal

MCQ Synopsis

www.mccloskeycoal.com

MCQ - Synopsis 2009 1 © IHS (Global) Limited

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IHS McCloskeyMcCloskeyMetallurgical Coal Quarterly

Synopsis 2009

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Published Quarterly© IHS (Global) Limited 2009

Introducing Metallurgical Coal QuarterlyMetallurgical Coal Quarterly (MCQ), over the seven years since itwas launched, has a proven track record of accurately determiningthe direction and quantum of change for annual pricing.

MCQ combines McCloskey’s unrivalled reputation for timely andinsightful investigative journalism with a thorough and systematicanalysis of both the supply and demand side of the market for hardcoking coal, semi-soft coking coal, PCI coal and blast furnace coke.

Subscribers to receive comprehensive tabulated data extracted fromour own coking coal demand model presented in summary formats.This information and the accompanying text are much valued by ourclient base that includes most of the world’s leading commoditiescompanies.

MCQ is unique, tracking the metallurgical coal market on a quarterlybasis (with one issue each year devoted to a 10 year forecast) with indepth analysis covering all 42 IISI reporting iron-making countrieslooking 18 months to three years out. Every issue also carries handysummary articles on key companies within the industry both from theconsumer and supplier side. Each issue extends to some 120 pagesand contains:

• Executive Summary

• Chapter One: Demand Side Analysis

• Chapter Two: Supply Side Analysis

• Chapter Three: Supply-Demand Balance – Outlook for Price

• News Summary

• Consumer Profile or Article (this quarter Low Volatile PCI)

• Supplier Profile (this quarter – New Canadian Suppliers)

• Appendix One: Full output reported by country (42) of thedemand model from the GDP forecasts, through iron and steelmaking forecasts, to separate sheets forecasting the demand forcoking coal, PCI coal satisfied by either imports or indigenousproduction.

This synopsis report gives a snapshot of the usual three issues to giveyou an understanding of its content and its relevance to yourorganisation.

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Executive Summary

Enter the Dragon

China's massively increased reliance on seaborne imported metallurgical coal sincethe outset of 2009 has shifted the dynamic of an otherwise very bleak global market.In June 2009 alone China imported over 4mt of seaborne metallurgical coal,smashing the previous monthly record of 2.8mt set just two months before. Junenow carries its half-year seaborne imports total to almost 12mt, up from 0.3mt in thesame period of 2008 (when also some 1.4mt was imported overland fromMongolia). In MCQ29 our central case forecast for the year-on-year increase inChinese seaborne imports is just over 18mt (for a total of almost 21.5mt seaborne)which may well prove to be conservative although China's level of importing isexpected to slow from now to the close of 2009 (with spot price levels a key factor).

Chinese imports are only part of the story with exports of metallurgical coal and cokevanishingly small and at current rates neither would top 1mt in 2009 compared with3.4mt and 12mt respectively in 2008. Converting coke shipments to coal equivalent(using a factor of 1.4) we think China's supply to the global market in 2009 could beup to a staggering 20mt lower than in 2008 (if shipments levels do not recover). Asit stands now China looks set to switch from a 14mt net exporter in 2008 to a 20mtor so net importer in 2009 (removing some 30-35mt from the global market). Suchhuge changes will have an impact on the global market that will extend beyond 2009

Setting China apart, the requirement for seaborne imported metallurgical coal fromall other countries will be about 50mt lower this year than last. The recession isdeeper than forecast at the start of the year and blast furnace output has been reinedback even more tightly. Only metallurgical coal producers' comprehensive plans tocutback export production by up to 50mt or more collectively in 2009 (as we saw inMCQ27 and MCQ28 previously and detailed again in the MCQ29 Demand Section)enacted in late 2008 have largely removed the looming spectre of significantoversupply.

MCQ Estimated Year-on-Year Change in Seaborne Metallurgical Coal (All qualities combined) for Major Countries and Regions (000t)

2009 v 2008

EU15 -16 230O. Europe -3 050Brazil -4 416Japan -17 392S. Korea -3 954Taiwan -1 217Sub total -46 259India 680China 18 044Sub Total 18 724Source: MCQ



In fact, with the reductions in both the global supply and demand for 2009 sopotentially evenly matched it has been the unexpected emergence of China as amassive importer in 2009 which has shunted the market towards tightness. Thistightness is clearly shown by spot coal prices for hard coking coal sold into Chinaclimbing in June 2009 to $20/t above the recent $129/t FOB benchmark set by BHBPwith Japanese mills.

We believe the muted recovery in global hot metal output, and thus metallurgicalcoal use, expected in late Q3 and Q4 2009 combined with China's "new"requirements will test shippers' ability to match demand. The position of the marketat the year end will be governed largely by Australia's ability to ship enough coalthrough its straining infrastructure.

Demand for steel has withered in the mature economies and symptomatic of this theopening six months of 2009 saw US car giants General Motors and Chrysler finallydeclare bankruptcy. The decline in hot metal output cannot be overstated andannouncements on potentially permanent closures of blast furnace capacity havepeppered the news (see News Review). Pig iron output from the establishedmetallurgical coal importers in the EU15 and Asia (excluding China and India) isrunning at about 11.5mt/month - down 40% (7.5mt/month or 90mt annualized) from19mt/month in mid-2008.

Now while most economists believe there will some economic recovery in mostcountries in both Q3 and Q4 2009, which will continue into 2010, its strength anddepth is quite uncertain. True, steel mills have been sounding more optimistic inrecent weeks and at the time of writing there has been a rash of announcementsheralding the return to production of idled blast furnace capacity. Nonetheless, weare in the grip of a severe global recession.

Amazingly perhaps, in the midst of the biggest meltdown in global demand for manydecades the market for metallurgical coal could end 2009 in a tight position. The keyfactors that will govern how the seaborne market for metallurgical coal developsbetween now and the next term contract negotiation round in early 2010 are;

Hot Metal Production Trends 2001-2009

Source: MCQDM



• The extent of the recovery in hot metal output in H2 2009 and early 2010 inthe major metallurgical coal importing countries. We think that pig ironproduction from the former EU15 iron makers will never recover to 2007's95mt level as a result of permanent capacity closures in Belgium, France,Germany, Italy and the UK and be at just 82mt at the close of the forecastperiod. Similarly we do not expect Japanese pig iron production to top2007's 87mt level prior to 2011.

• The level of Chinese metallurgical coal imports over the rest of 2009 and into2010. To a great extent this will depend on the rate at which small mines inShanxi Province return to production but regional data to end-May 2009shows coal output to be 22% (47mt) down on 2008's level at 168mt.Production in May alone, at 42mt, was 15mt below the May 2008 level. Wenow expect seaborne imports to remain above 20mt in each year to 2011.

• The level of Australian metallurgical coal exports in H2 2009. Australianmetallurgical coal shipments for the year-to-May were 44mt, down 16%(8.6mt) on 2008 levels. To keep the global traded markets for each qualityclose to balance we estimate that Australia will need to ship above 120mtoverall for calendar 2009 (though still 14mt below 2008's levels) which willrequire monthly exports at 11mt or more for the balance of the year(something not achieved since 2007). This could prove to be a testing targetgiven that vessel queues at Dalrymple Bay Coal Terminal (DBCT) are at about50 already and those at Newcastle are about the same.

• What happens in the USA. US hot metal production is running 55-60% below2008 levels and mills' metallurgical coal consumption looks likely to be 9mtdown year-on-year. We think some mills will close permanently in late 2009and early 2010. This fact combined with a likley year-on-year 8mt or so fallin exports in 2009 presents a clear survival threat to the thick end of 20mt ofproductive capacity. Still, US shippers are not a lost cause and they couldtarget further long term sales into both Brazilian and European mills(displacing Australian and Canadian product).

Australian metallurgical coal exports by month 2000 onwards

Source: Australian Government



Global Outlook - Key Facts

Steel Prices Show Some Recovery in late Q2 2009Steel prices continued to slide from the outset of 2009 as demand shrivelled. HRCprices reached their nadir in May-June around the $380/t to $430/t FOB mark in theUSA, Europe and Japan. Since then prices have improved modestly and now standaround the $480/t to $520/t FOB level in various markets. Analysts are divided onthe outlook for HRC prices over the balance of the year with the majority favouringa very modest further improvement in prices, perhaps by as much $20/t. Certainlymills are positive and in the USA, EU and Russia producers have all signalled priceincreases for Q3 2009 deliveries. Historically, steel prices are usually pushed up bya weakening US dollar as the main HRC exporters' costs climb in dollar terms as thedomestic currency strengthens. However, we estimate that sharply lower coking coaland iron ore prices achieved by mills for 2009/10 have reduced the average cost ofHRC production of exporting mills to about the $400/t FOB level. This fact alone willplace a ceiling on the level of price recovery. With so much production capacityidled any small increase in price could stimulate the return to service of mothballedcapacity potentially swamping any incremental improvement in demand.

New to MCQ29

• Occasional Review I - China's Metallurgical Coal Imports

• Occasional Review II - Metallurgical Coal Price Development since July 2008

Spot hot rolled coil (band) price evolution

Source: Tex, WSD

Global Blast Furnace Output

Global output in hot metal has fallen further in 2009 than we expected at the outsetof the year in all major producing regions bar Asia where China (principally) andIndia's strong performance have arrested the severity of the decline. Recentlyavailable data shows global hot metal output closed June 2009 some 15.5% (75mt)below equivalent 2008 levels at just over 408mt.

Hot Metal Data for Year to Date 2008Total Total Total Total 2009 2009 Ytd Ytd 2005 2006 2007 2008 Q1 Q2 2009 Change

EU 92,815 94,255 95,079 90,596 13,432 11,868 25,300 -47.6%OE 26,713 28,842 29,322 26,244 4,521 4,443 8,964 -39.2%C.I.S. 82,815 88,093 90,047 82,038 15,378 16,686 32,064 -31.5%N. America 48,698 49,998 48,418 48,051 6,082 6,296 12,378 -52.6%S. America* 33,428 31,845 35,085 34,497 5,705 5,680 11,385 -36.3%Africa* 4,478 4,443 4,852 4,767 679 680 1,359 -31.6%ME 2,305 2,041 2,118 2,176 636 596 1,232 15.4%Asia* 470,301 555,269 620,984 623,943 150,167 164,146 313,713 -2.8%Oceania 6,856 7,097 7,048 6,679 1,024 881 1,905 -45.4%Grand Total 768,409 861,884 932,953 918,992 197,624 211,276 408,300 -15.5%Note: Total of monthly and annual data may differ slightly due to revisions of monthly data.* Brazil adjusted for charcoal based furnaces: India adjusted for non coke making processes: RSA for DRISource: WSA

The contrasting fortunes of blast furnace based mills in various countries are shownclearly by the table below. Of the major metallurgical coal importers, the formerEU15 countries, Brazil, Japan, South Korea and Taiwan's blast furnace operators havecut pig iron production very hard and to levels not seen since the end of the SecondWorld War. In contrast, China's hot metal output has gained on 2008 levels in eachmonth of 2009 and Indian output moved back into positive territory for the wholeof Q2 2009.

China's blast furnace production has clearly recovered from the slowdown in late2008 as the fiscal stimulus package enacted by the government took effect. Monthlypig iron output has climbed systematically from the start of 2009 to set a new recordin June 2009 of 47.5mt beating May's 45mt which topped the previous record of43.4mt which had stood since June 2008.





Year on Year Change in Hot Metal Production by Month for 2009 v 2008Jan Feb Mar Apr May Jun

Austria -38.4% -46.1% -45.9% -5.1% -34.4% -15.4%Belgium -75.4% -23.3% -55.7% -66.5% -72.9% -74.6%Finland -50.0% -62.3% -50.6% -65.9% -35.7% -28.9%France -50.3% -41.5% -31.5% -58.3% -47.2% -43.6%F.R. Germany -35.4% -35.8% -51.7% -57.1% -54.9% -44.8%Italy -43.1% -46.7% -52.5% -54.9% -52.3% -61.9%Netherlands -65.2% -43.9% -48.5% -49.7% -51.3% -44.5%Portugal 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%Spain -41.0% -24.7% -33.5% -44.5% -57.4% -44.5%Sweden -45.7% -47.9% -46.2% -51.2% -55.9% -55.0%United Kingdom -42.9% -42.2% -37.9% -40.9% -78.7% -38.1%European Union -45.1% -39.6% -46.5% -51.6% -55.9% -46.6%Canada -50.0% -49.3% -26.0% -32.3% -54.4% -50.9%Mexico -51.5% -49.2% -22.8% -23.6% -15.9% -23.1%United States -54.3% -62.1% -56.4% -62.0% -57.6% -53.6%North America -53.2% -58.6% -47.9% -52.9% -53.4% -50.1%Mainland China 1.6% 5.4% 4.1% 0.9% 5.5% 9.5%India * -11.9% -15.1% -3.3% 4.3% 10.0% 4.5%Japan -27.1% -37.3% -39.6% -39.0% -35.0% -29.8%R.o.Korea -19.6% -29.8% -21.9% -18.7% -17.2% -15.5%Taiwan -22.5% -15.4% -11.8% -31.2% -31.6% -16.4%Asia -4.8% -3.6% -3.7% -5.7% -1.4% 2.8%Australia -28.1% -52.8% -58.5% -55.7% -54.5% -50.0%New Zealand (a) 28.6% -2.8% -11.6% -12.4% -16.1% 7.8%Oceania -23.6% -48.0% -54.1% -51.9% -50.5% -45.0%Total 42 countries (b) -17.8% -15.4% -16.2% -17.7% -14.8% -10.7%Source: WSA

China: Hot metal production trend by month since 2000

Source: WSA

In MCQ29 we predict:

• In 2009 hot metal output will fall almost 9.8% (90mt) year-on-year to just828mt some 6% (42mt) below our MCQ27 forecast and almost 200mt belowour MCQ26 forecast. Blast furnace pig iron production is expected to fall inall regions including Asia.

• Blast furnace output from the former EU15 iron makers and Japan will declineby nearly 28mt and 23mt respectively from 2008 levels in 2009.

• In 2010 global blast furnace pig iron production will recover and grow byalmost 14% (114mt) to the 942mt mark (just 9mt below our MCQ27 forecastbut 146mt below the pre-crash forecast made in MCQ26 though ahead of theprevious calendar year peak of 932mt set in 2007).

• By 2011 we expect global output to reach 1.03bt up 91mt (almost 10%) year-on-year.

• Over the period we have factored in permanent capacity closures in both theEU15 and North America.

Pig Iron Production by Region (000t)2005 2006 2007 2008 2009 2010 2011 Av Growth

Est Forecast Forecast 2006-2011

EU 92,846 94,254 95,079 90,594 62,750 75,832 82,177 -2.6%Other Europe 26,480 28,842 29,436 26,244 18,652 21,562 24,279 -3.2%C.I.S. 82,816 87,950 89,850 82,038 63,100 72,169 77,624 -2.3%North America 49,543 49,998 48,700 48,051 30,150 38,543 39,468 -4.2%South America 33,315 31,842 34,400 34,496 25,720 30,417 40,941 5.7%Africa 4,478 4,443 4,210 4,160 3,520 3,687 3,798 -2.9%Middle East 2,305 2,041 2,188 2,176 2,425 2,474 2,548 5.0%Asia* 480,315 555,268 620,984 623,943 617,600 693,871 758,184 7.3%Oceania 6,855 7,097 7,048 6,679 4,260 4,281 4,316 -7.8%Grand Total 778,953 861,735 931,895 918,381 828,177 942,836 1,033,333 4.0%YonY % Change 9.6% 10.6% 8.1% -1.5% -9.8% 13.8% 9.6%

MCQ27 918,381 866,086 952,045* India and Brazil adjusted Diff 0 38mt 9mtThe 41 countries represented account for about 99% of world blast furnace pig iron production in 2009.Source: MCQDM, WSA

Hard Coking Coal Outlook:

Our MCQ29 central case estimates are presented below (MCQ27 numbers orcomments in italics in parentheses);

2009• Market precariously balanced but moving to tight (slight oversupply/balance

depending on mine owner cutbacks).

• Seaborne demand declines by almost 13mt from 2008 levels to 126mt (14mtto 128mt)

• Seaborne supply is reduced by 14mt from 2008 levels to 124mt (13mt toabout 129mt). Australia, Canada and USA reduce shipments by 7mt, 3mt and4mt respectively on 2008 levels.





2010• Market becomes tighter - general recovery and increased Chinese import

levels outpace supply (remains oversupplied as additional supply overtakesdemand growth).

• Seaborne demand adds 22mt to 148mt (10mt to near 138mt).

• Seaborne supply climbs 22mt on 2009 levels to top 146mt (11mt to just over140mt) with Australia accounting for 18mt (83%) of the growth.

2011• Market remains tight as year-on-year demand growth (just under 16mt) just

outpaces supply growth (just over15mt) with China's imports remaining athigh levels.

Supply - Demand Balance Seaborne Hard Coking Coal (000t)Import Demand 2005 2006 2007 2008 2009 2010 2011

Est Fcast Fcast

All Coking Coal 189,347 194,467 203,122 204,961 175,676 215,306 238,250Seabn Coking 167,884 172,195 179,424 183,626 157,358 194,635 215,063Non Seaborne 21,463 22,271 23,698 21,336 18,317 20,671 23,187Less Weak/SS/ 40,735 43,023 43,540 44,601 31,489 46,274 51,072Seaborne Demand 127,149 129,172 135,884 139,024 125,869 148,361 163,991Supply Australia 80,507 79,392 84,849 83,190 76,386 94,585 109,092Cap Utilisation 94.9% 92.6% 90.6% 84.5% 77.1% 90.1% 92.7%Canada (exc USA) 22,039 19,846 22,153 22,143 19,846 20,680 21,263Cap Utilisation 97.9% 81.3% 89.2% 86.3% 79.2% 80.0% 78.0%USA (excl Canada) 19,227 18,755 22,592 27,391 23,934 24,173 23,348Cap Utilisation 91.3% 74.8% 88.1% 90.8% 76.6% 75.0% 75.0%Poland 800 750 150 0 100 100 100 Cap Utilisation 53.3% 75.0% 42.9% 0.0% 28.6% 28.6% 28.6 %China, Russia, NZ 5,561 5,344 5,612 5,292 3,610 6,328 6,999Cap Utilisation 64.7% 60.7% 60.3% 56.9% 38.8% 49.8% 53.0%Indonesia 0 0 69 59 38 60 60Cap Utilisation 0.0% 0.0% 69.3% 59.4% 37.7% 60.0% 60.0%Others Moz 0 0 0 0 0 50 500Tot Seabne Supply 128,135 124,086 135,426 138,075 123,913 145,975 161,362Global CU (US @ max mt) 92.5% 85.5% 88.0% 84.2% 75.0% 82.8% 84.8%Global CU (US @ real mt) 93.8% 89.4% 89.8% 85.6% 78.5% 86.8% 88.4%Unmet Demand -985 5,087 459 949 1,956 2,386 2,629

MCQ27 -514 -1,049 -2,409 NAThe bottom line shows the extent to which hard coking supply is greater or less than demand for each year. * The demand from the MCQ model has been adjusted upwards to reflect the demand for imported hard coking coal from countries making blast furnace hot metal but not reporting through WSA (such as Pakistan and Egypt). Source: MCQDM and Various

Risks to Forecast:• China's imports move from central case assumption

• Global hot metal recovery slower or more rapid than forecast

• Australian infrastructure constrains shipment growth.

PCI/Semi Soft Coal Outlook

The main points of our MCQ29 PCI/semi-soft central case are shown below (theMCQ27 numbers or comments are shown in italics in parentheses);

2009• Market in balance (oversupplied).

• Total seaborne demand falls by 18.3mt to 64mt (13.4mt to 72mt in MCQ27)from 2008 levels.

• Seaborne supply falls by 18mt to just over 64mt (11mt to 74mt in MCQ27) from2008 levels with both Australian and US shipments down 5mt year-on-year.

2010• Market becomes tighter (moves towards balance).

• Seaborne demand climbs 22mt to just under 86.4 (climbs 11mt to just under83mt).The similar outturn the effect of a steeper decline than MCQ27 forecastfor 2009 followed by stronger growth than MCQ27 forecast for 2010.

• Seaborne supply grows 20mt to 84mt (9mt to 83mt) with Australia accounting12mt of the increase.

2011• Market becomes very tight as year-on-year demand growth (just over 11mt) just

outpaces supply growth (just under 10mt) with China's imports for PCI remainingat high levels.





Supply -Demand Balance Seaborne PCI and Semi-soft Coking Coal (000t)2005 2006 2007 2008 2009 2010 2011

Estimate Forecast Forecast

SS/Wk Seabne Imp 40,735 43,023 43,540 44,601 31,489 46,274 51,072PCI Seaborne Imp 34,619 35,303 37,684 37,869 32,644 40,111 46,408Seaborne Demand 75,353 78,326 81,224 82,471 64,133 86,385 97,480Seaborne SupplyAustralia 44,043 44,991 52,439 51,132 45,614 57,415 62,908Canada 3,063 3,333 2,953 3,237 2,654 2,680 3,986USA 2,740 2,056 3,306 7,942 3,066 3,000 1,500China 3,799 3,191 1,885 2,594 760 2,097 3,901Russia 1,100 1,125 1,246 1,270 1,100 1,300 1,200New Zealand 560 750 750 750 581 1,200 1,200South Africa 1,950 2,000 1,050 990 1,072 1,100 1,500Indonesia 5,400 7,000 6,931 5,941 3,962 6,600 7,200Colombia 1,000 1,000 1,250 1,250 500 1,500 1,750Venezuela (est) 2,380 2,200 2,450 2,450 1,000 2,000 2,750Mozambique 0 0 0 0 0 50 500Filler + Other 4,005 4,065 3,700 3,800 3,200 3,646 3,851Pcoke-Coal Equiv 1,537 1,577 1,200 1,200 1,000 1,732 1,914WCC & PCI Sup Tot 71,577 73,289 79,159 82,556 64,509 84,321 94,159Global CU % 94% 96% 91% 81% 65% 80% 84%Unmet Demand 3,777 5,037 2,065 -85 -376 2,064 3,321

MCQ27 3,785 -143 -2,290 -347 Source: MCQDM

Risks to Forecast:• China's imports move from central case assumption

• Global hot metal recovery slower or more rapid than forecast

• Australian infrastructure constrains supply growth.

Metallurgical Coke Outlook

The market for traded coke is very inactive and thus a dearth of price informationhas resulted. Pricing for Chinese coke export product is very difficult to obtain withshipments for the year-to-May 2009 totalling just 0.2mt compared with 6.1mt in thesame period last year. Piecing together the domestic price (about $220/t for Shanxiex-works) along with transport costs to the coast (c. another $25/t) and an export taxof 40% would suggest an FOB export equivalent of about $350/t for 12.5% ashproduct. Other business concluded for Japanese or Australian coke into India overthe last months suggests price around $225/t FOB showing Chinese product iseffectively priced out of the market.

Based on the year start performance, Chinese coke exports could fall to almostnothing in 2009. In MCQ29 we have assumed some late year recovery and cokeshipments put on a spurt to total 4mt for calendar 2009 as whole. If achieved thiswould represent a 7mt downgrade of our MCQ27 forecast and an 8.2mt drop on2008's 12.2mt actual shipment total. We estimate that global trade in coke in 2009will be at 50% of 2008's level, at around 15mt, with all importing regions (andcountries) taking less than in the previous year. We expect some recovery in tradelevels in 2010 to about 20mt and then to 24mt- 25mt in 2011 as iron making levelspick up. The key assumptions in our MCQ29 forecast are:

• Chinese coke exports drop to 4mt in 2009 (over 8mt behind 2008 levels),shipments are then expected to recover somewhat to 8mt in 2010 and to10.5mt in 2011.

• EU15 coke imports are expected to fall to 4.2mt in 2009 before recoveringsomewhat in 2010 to 5.2mt and then reach over 7mt during 2011.



Chinese Coke Export Prices (12.5% Ash coke - $/t FOB)

Source: MCQ


Coke Imports and Exports by Region (000t)2005 2006 2007 2008 2009 2010 2011 Av Growth

Est Forecast Forecast 2006-2011

EU Import 10,004 9,575 8,816 8,518 4,220 5,250 7,400 -4.5%EU Export 2,093 3,242 2,842 2,539 1,365 1,265 1,465 -11.0%EU Exps-Imps -7,911 -6,333 -5,974 -5,979 -2,855 -3,985 -5,935OE Import 2,796 3,082 3,191 2,671 1,225 2,130 2,310 -5.0%OE Export 5,784 7,634 7,115 6,460 5,050 6,050 6,400 -3.2%OE Exps-Imps 2,988 4,552 3,924 3,789 3,825 3,920 4,090CIS Import 1,953 2,270 3,190 2,200 1,500 1,550 2,750 4.2%CIS Export 4,000 1,739 3,941 3,765 2,015 2,015 3,215 17.0%CIS Exps-Imps 2,047 -531 751 1,565 515 465 465NA Import 4,714 4,581 3,082 4,069 1,680 1,800 2,290 -10.0%NA export 1,509 1,582 1,383 1,877 850 850 1,150 -5.5%NA Exps-Imps -3,205 -2,999 -1,699 -2,192 -830 -950 -1,140SA Import 2,596 2,530 3,420 3,420 2,020 2,270 2,260 -2.1%SA Export 431 459 420 450 450 450 420 -1.7%SA Exps-Imps -2,165 -2,071 -3,000 -2,970 -1,570 -1,820 -1,840Africa Import 519 530 630 630 350 520 280 -9.4%Africa Export 114 100 100 50 50 50 50 -10.0%Africa Exps-Imps -405 -430 -530 -580 -300 -470 -230ME Import 726 750 700 700 350 500 500 -6.7%ME Export 0 0 0 0 0 0 0 0.0%ME Exps-Imps -726 -750 -700 -700 -350 -500 -500Asia Import 5,057 4,275 4,832 3,930 2,400 3,150 5,050 3.6%Asia Export 14,375 16,514 18,490 13,310 5,210 9,310 11,910 -5.6%Asia Exps-Imps 9,318 12,239 13,658 9,380 2,810 6,160 6,860Oceania Import 475 470 480 480 340 420 420 -2.1%Oceania Export 59 80 75 75 75 75 75 -1.3%Oceania Exps-Imps -416 -390 -405 -405 -265 -345 -345Other Demand (NSC) 1,866 2,650 4,000 2,500 1,000 1,750 2,000 -4.9%Global Tot Imp 30,706 30,713 32,341 29,118 15,085 19,340 25,260 -3.6%Global Tot Exp 28,365 31,350 34,366 28,526 15,065 20,065 24,685 -4.3%Global Exps-Imps -2,341 637 2,025 -592 -20 725 -575Source: MCQDM, China Coal Monthly

Key Risk: Chinese export levels move from forecast.



NNEE WW SS RREE VV II EE WW

NEWS REVIEW

Global

Global: The extent of the downturn in the global demand for steel is perhaps mostclearly illustrated by the fate of US car giants General Motors (GM) and Chrysler withboth desperately, and very publicly, trying to stave off bankruptcy over the periodsince the year start. Both GM and Chrysler have received huge loans from the USTreasury Department. In April 2009, as both companies continued to work on plansto try and make them viable, GM received yet a further 60-day, $5bn loan whileChrysler got $500m. By that time the firms had already received a massive combined$17.4bn in aid since December 2008. Eventually, GM filed for bankruptcyprotection on 1 June 2009, saying it would be forced to liquidate if its restructuringplan was not approved by the US Treasury Department. In early July, Chrysler alsosubmitted its viability plan to the U.S. Treasury too and presented details of itsproposed alliance with Fiat. At the time of writing and to some general surprise, GMis now expected to make a quick exit from bankruptcy protection. This followedfrom GM’s successful application for bankruptcy court order allowing it to sell itsmost profitable assets to a "new GM". The new, streamlined GM will own thecompany's core assets such as Cadillac, Chevrolet, GMC and Buick and will be 61%owned by the US government. GM is now in the processing of selling off its otherbrands such as Hummer, Saab and its GM Europe arm which owns the Opel brand.What Chrysler will do is much less clear.

Global: Freight

Freights rates have bounced back significantly since the start of 2009 on the back ofstrong Chinese demand for iron ore and both steam and metallurgical coal. In earlyJuly 2009 Capesize rates on the Queensland-Rotterdam route were $28/t, wayabove January’s $11.75/t, although they had fallen back from the recent peak of acouple weeks previous. Capesize rates on the Hampton Roads – ARA route stood at$21.80/t more than three times the prevalent rate at the outset of the year although$5/t lower than the preceding week. Certainly Chinese demand has lifted the marketbut most analysts are not optimistic about the outlook for freight rates. Theconsensus is there are now just too many ships in the fleet despite attempts to cancelship builds during late 2008 and early 2009. At current rates owners have stoppedscrapping older vessels too, exacerbating the oversupply position. Owners can earna profit at current rates. If Chinese demand weakens in H2 2009 then there is littlepromise of significant recovery in import levels elsewhere. The forward marketreflects this and prices are expected to fall from current levels albeit not to the verylow levels seen in Q4 2008.

Historic and Current Freight Rates for Major Trade Routes ($/t)Route 000t 03/07/2009 24/01/09 24/10/08 01/07/08 26/06/08 14/01/08 26/1/07 13/1/06

Hampton Rds-Rotterdam 125 $21.80 $6.50 $4.50 $42.00 $45.50 $22.50 $20.00 $11.00Bolivar-Rotterdam 150 $22.50 $8.20 $7.90 $46.00 $49.00 $25.00 $21.25 $11.00Queensland- Rotterdam 150 $28.00 $11.75 $14.75 $50.75 $57.50 $39.00 $30.25 $16.25RBCT-Rotterdam 150 $18.25 $7.35 $8.50 $36.50 $42.50 $25.00 $23.50 $11.50US Gulf – ARA 65 $24.30 $8.20 $10.80 $51.50 $54.00 $45.00 $19.00 $11.75RBCT- Spain 70 $14.70 $7.50 $9.25 $49.00 $51.25 $30.00 $27.50 $15.50Maracaibo-Rotterdam 55 NA $14.00 $14.00 $49.00 $51.00 $40.00 $26.00 $14.30Murmansk-Rotterdam 70 $12.50 $4.80 $5.00 NA NA NA NA NANewcastle-Japan 65 $18.00 $6.00 $9.00 $44.50 $46.40 $37.50 $20.00 $12.75Source: Clarksons



EU

GermanyMay: Rogesa announced it had begun repairs on its blast furnace No.4 in amaintenance program originally planned for summer 2009. The company, which hadbeen running both of its furnaces at reduced output levels, was unsure how long theNo.4 furnace will remain offline.

April: HKM reported its’ small blast furnace “A” which was closed for relining atChristmas 2008 (brought forward from March 2009) would remain offline until millorders improve. The company also postponed the expansion of its’ coking plantwhich was scheduled to start production in 2012, almost doubling the company’scurrent coke output (1.14mt in 2008) making the works self-sufficient.

April: Salzgitter announced it had taken the smallest of its three blast furnaces offline(with production capacity of 1,900tpd or 0.7mt/yr) while it waited for orders toimprove. The move reduces the plants total annual hot metal output capacity by15%.

March: ThyssenKrupp Steel announced the temporary closure of its Hamborn No.9blast furnace (output capacity of 4,500t/day of pig iron) on March 14 in response tothe declining demand for steel.

UKJune: Corus announced a further 2,000 job cuts in response to the deterioratingworld economy and the massive decline in steel demand in both Europe andAmerica. In addition, a further 500 white-collar jobs were also under scrutinythroughout the Corus Long Products division, the majority at Scunthorpe (and anannouncement on the closure of this plant was made in early July 2009).

June: Xstrata surprised most when it proposed a merger bid on equal terms to AngloAmerican, which if realised would create the world’s largest export coal shipper (withannual output of metallurgical and thermal coal approaching 200mt/yr). FollowingAnglo's clear rejection of the bid Xstrata released a detailed case for the merger.

May: Corus announced plans to close its 3mt/yr Teesside Cast Products (TCP) plantin Redcar (as forecast in MCQ28) following the cancellation of a contract by aninternational consortium to buy the plant’s steel slab output. Up to 2,000 workerswould lose their jobs. The closure would also remove about 2mt of seabornedemand from the traded metallurgical market.

April: Press reports speculated that Corus had settled the majority of its 2009 cokingcoal tonnage for the UK (over 3mt) with none of it coming from Australia. Thecompany stated it was then currently running at 42% of its 2008 iron making levels.

Other Europe

Czech Republic June: OKK, a subsidiary of the Dutch New World Resources (NWR) announced ithad brought forward the closure of its Jan Sverma metallurgical coke plant (annualcapacity of 0.7mt) to autumn 2009 from 2011. The move brings forward thecompany’s 2010 optimisation programme by concentrating and modernising cokeproduction at its Svoboda plant. Upgrade work currently underway there includesthe reconstruction of one of the existing three batteries (due back online in 2012)and the construction of an additional new battery (due online in 2011.)

TurkeyJuly: Kardemir Steel announced plans to build a port capable of handling 180,000tDWT vessels (compared with 15,000 DWT currently) at Zonguldak on the Black Seato serve its 1mt/yr Karabuk integrated works. The terminal is planned to handle5mt/yr of ore and coal combined and would enable an expansion of hot metal at thissite. Currently Kardemir imports up to 1mt of metallurgical coal through its port andthat of sister company Erdemir.

Karabuk Coke PlantCoke Plant Battery ID 1 2 3 4 Total at 2006No. of Ovens 22 22 28 28 100Type OTFU OTFU D DStart Date 1969 1969 1986 1986Dry Coke Capacity (000 tpa) 95 95 225 225 641Dry Coal Capacity (000 tpa) 125 125 296 296 843Wet Coal Equivalent (000 tpa) 137 137 326 326 926Quenching W W W WSource: Kardemir, Metal Bulletin

June: Kibar Holdings announced plans to construct a 2mt/yr integrated mill at acoastal location incorporating new coke ovens. The $1bn project could be underwayas early as 2010 if government approvals are forthcoming.

CIS

RussiaJune: Evraz Group announced that it restarted Blast Furnace No. 3 at its Zapsib plantin Novokuznetsk, Russia. Evraz idled the Zapsib plant’s 3,000m3 blast furnace No.3, which had an annual pig iron capacity of 2.2mt in late October 2008. With therestart of No. 3, the Zapsib plant’s total hot metal capacity will reach 6.5mt/yr.

June: Mechel announced it had completed metallurgical coal contracts withChinese, Japanese and South Korean mills with tonnage totalling 2mt for 2009/10delivery.

June: Mechel OAO reported it has begun to raise production levels at its steel plants.In March 2009 the No.4 Blast furnace at its Chelyabinsk works came online followedby the restart in June of its No.4 coke battery. June also saw the official





commissioning of Coke Block #2 which comprises three batteries namely No.3,No.4 and No.4 B and has a combined coke making capacity of 0.6mt/yr (and theworks overall 1.3mt/yr).

June: Mechel OAO announced it had finalised a five year coking coal contract withSouth Korea's Hyundai Steel to supply up to 0.2mt/yr of K9 brand from itsNeryungrinsky mine in the Sakha Republic. Shipments commence from April 2010.

May: Mechel OAO reported it had delayed the development of its giant Elga coaldeposit by two years but would press ahead with the development of the 315km railspur to the main line costed at $1.36bn. The company estimates that construction ofthe line will complete in October 2009. Mechel now projects it will reach its37mt/yr coal production target by 2012 rather than 2010.

May: Mechel OAO confirmed it would purchase 100% of US coking coal producerBluestone for $436m in cash, $83.3m in preferred shares and assume around $132mof company debt. The deal does not include any of Bluestone's Kentucky steam coaloperations. Bluestone’s West Virginian operations include an estimated 725mt ofreserves and resources of mainly a premium quality, low volatile hard coking coal.Mechel plans to grow Bluestone’s production levels to more than 7mt/yr from about3mt/yr last year.

April: Press reports revealed Mechel's metallurgical coal production plummetedduring Q1 2009 with production down 3.2mt (76.3%) on 2008 levels at 1.02mt.

UkraineJuly: ArcelorMittal Kryviy Rih (the Ukraine’s largest hot metal producer) announcedthat its blast furnace No. 9 had been blown in to programme. The blast furnace wasshut down for repairs in early November 2008. Blast Furnace No. 9 was rekindled tocompensate for the planned shut down of two other blast furnaces (No.7 and No.8)in the coming weeks for planned maintenance.

Summary of Ukraine Hot Metal CapacityCompany Plant BOF Steel BF Iron BF Comments

Capacity Capacity Total000t 000t

ArcelorMittal Kryvyi Rih 10,600 10,600 6 2 BOF shops, 2 OH: 3 BFs under refurb

Sub Total 10,600 10,600 6Ilyich iron & Steel Co Donetsk 3,050 7,450 5 3 BOF 4 OH (4.1mt)Sub Total 3,050 7,450 5Makeevska Steel Works Donetsk 0 3,300 4 11 OH furnaces 4.1mt/yrSub Total 0 3,300 4Dneprovsky iron & Steel Co Dneprodzerzhinsk 2,800 4,350 4Sub Total 2,800 4,350 4Asovstal Iron and Steel Works Mariupol, Donetsk 3,000 5,870 6 EAF and OH alsoSub Total 3,000 5,870 6Zaporistahl Iron & Steel Works Zaporhishya 0 3,000 5 9 OH 3.9mt/yrOthers Various 2,000 2,000 5 estimated BF number

Ukraine Total 24,450 42,440 41Source: Various Company Data, Hot Metal Bulletin

North America

CanadaJuly: Teck Cominco Resources announced the sale of 17.2% of its equity holding toChina Investment Corp. (CIC) for C$1,740 million (about USD$1,500 million), avalue of C$18.50 per share. Teck has a dual motive for the sales, first to developmetallurgical coal exports to China and second to reduce debt levels taken on to fundthe purchase of Fording.

June: Western Canadian Coal Corporation (WCCC) announced it had raised its coalsales target for the fiscal year 2009/10 to 2.2mt in response to significant exports toChina. Of the target some 1.3mt will be hard coking coal and the remaining 0.9mtlow volatile PCI.

June: WCCC announced that its shareholders had approved acquisition of the UK'sCambrian Mining plc (scheduled to complete on 13th July). WCCC will obtain 100%of the shares in Cambrian Mining (valued at £67.4m) by share exchange with eachshare of Cambrian Mining exchanged for a 0.75 share of WCCC. In total WCCC willnow operate five coal mines with operations in Canada, the United States and theUK.

May: Metallurgical coal sales by Canadian suppliers nosedived during early 2009 asdemand for steel products cratered and mills cancelled orders. All major Canadiansuppliers were similarly affected and Q1 2009 sales by Teck Resources were down36% (2mt) year-on-year at 3.6mt; WCCC down 60% (0.52mt) to 0.35mt; and GrandCache down 74% ( 0.31) to 0.11mt.

May: WCCC announced it had settled 2mt of contracts (for the financial year2009/10) at an average price of $120-125/t FOB, including 1.2mt of hard coking coal(total planned production from the Wolverine mine) and 0.8mt of ultra low-vol PCI.

May: Western Canadian Coal Corp. (WCCC) announced it would maintainoperations at both its Perry Creek and Brule mines in British Columbia during 2009removing the earlier threat of an extended layoff at one or both.

April: Teck Cominco reported it had settled most of its 2009 hard coking coalcontracts with Asian customers at around $128/t FOB and had secured commitmentsfor 1.6mt of carryover tonnage at 2008/9 prices.





USA

June: CONSOL Energy Inc. announced it would resume longwall operation at its3mt/yr Buchanan low-volatile coking coal mine in mid July 2009 following talks withits two customers. The company has achieved sales to support monthly productionat the 0.24mst level (2.9mstpa). Production was halted at the mine in the beginningof March 2009.

June: Foundation Coal Holdings Inc (FCH) announced it had abandoned legalproceedings against ArcelorMittal (over a metallurgical coal contract) as an out ofcourt resolution had been achieved. ArcelorMittal agreed to take a substantialtonnage of metallurgical coal from Kingston Coal, a subsidiary of FCH.

May: Alpha Natural Resources and thermal coal producer Foundation announcedthey had agreed a merger plan which will create the third largest coal producer inthe US. The combined entity would operate 59 mines (with reserves totalling 2.3bt)and producing more than 90mt/yr.

Alpha will take a controlling stake (59%) in the new company which will bear itsname.

May: Peabody Energy Corp. announced it had entered a joint venture with PoloResources Ltd to develop undeveloped concessions in the South Gobi area ofMongolia (investing US$23m to the project). Peabody earns a 50% stake in the coalresource which is reported to exceed 1bt.

April: Shortly after announcing resumption of production in March 2009 CliffsNatural Resources announced further production cuts (with 355 workers laid off) inresponse to deteriorating metallurgical coal demand in the USA. Operations weresuspended at the company's Green Ridge #1 coal mine in West Virginia along witha two month suspension of production at its Pinnacle mine. In addition, Cliffs cutoutput at its Oak Grove mine and slowed operations at both the Pinnacle andConcord preparation plants.

April: Patriot announced a further 2mt of production cuts during 2009 in responseto the downfall in demand. Plans include the closure of two metallurgical coal minesin the Wells Complex as well as suspending the launch of production at thecompany's new Blue Creek complex.

March: Massey Energy filed a lawsuit against Egypt's Al Nasr for the alleged breachof a $280/t priced coking coal contract. The agreement was signed at the beginningof April 2008 and covered the sale of 1.64mt for delivery over the period July 2008to June 2011.

South America

BrazilJune: Companhia Siderurgica Nacional (CSN) announced the restart of its No.2 blastfurnace at its Volta Redonda mill in Rio de Janeiro State following a 90 day outage.The furnace will resume production at 4,200 tpd of hot metal jacking the plant’stotal hot metal production capacity up to 14,500 tpd (5.3mt/yr).

April: Vale announced it had concluded the sale of all of its 5.89% stake in UsinasSiderúrgicas de Minas Gerais (Usiminas) to four companies including Japan's NipponSteel at a price of R$594.7 million (R$40.00 per Usiminas common share).

Africa

MozambiqueMay: Riversdale Mining announced a 90% increase in the estimated total resourceat its Benga metallurgical - thermal coal project in Mozambique's Moatize region.Further exploration work detailed resources totalling 4.0bt (up from an estimated2.1bnt in September 2007) of which proven reserves were just over 181mt.Riversdale announced it was currently awaiting government approval for its miningcontract and had delayed a related feasibility study until it got the green light.

April: Vale announced construction work had begun on its $1.3bn Moatize coalproject in Mozambique’s Tete province, with initial coal production planned for2010. Once fully operational the mine is expected to produce 11mt/yr of whichsome 8.5mt/yr is reported to be hard coking coal.

South Africa

April: ArcelorMittal South Africa Ltd announced it had acquired a 16.3% stake inCoal of Africa Ltd. (CoAL) in a deal which includes the option to enter into an off-take agreement with CoAL for 2.5mt/yr of metallurgical coal. A further option existsto increase the take to 5mt/yr.





Asia

ChinaJuly: The Chinese Government issued the 2nd instalment of coke export licences (EL)for 2009, with an additional 6.13mt of coking coal distributed among 37 exportcompanies, taking the total EL tonnage for the year to 12.8mt.

May: Ansteel announced it had blown-in its No.2 blast furnace at its Yinghouayuquan Steel Project. The blast furnace is a replica of the No. 1 furnace that cameinto operation in September 2008 with an inner volume of 4,038 m3 and a hotmetal production capacity of about 3.2mt/yr carrying the plant to 6.5mt/yr in total.

March: Press reports reveal a gas explosion at the Tunlan coking coal mine in Shanxiprovince in February 2009 which killed 74 people will hit the coking coal industryhard. A number of mines have been temporarily closed and shipments disrupted asmine safety experts try and find the cause of the accident. It is widely expected thatmine safety measures will be tightened in the province and possibly the rest of thecountry.

IndiaJuly: Steel Authority of India Limited (SAIL) announced it had cancelled a blastfurnace construction contract at its Bhilai Works in Chattisgarh following a disputewith POSCO Engineering & Construction, the successful tenderer in early 2008. The4,060 m3 blast furnace was to be commissioned by end-2010 as part of SAIL’sprogramme to increase Bhilai’ s hot metal capacity from about 5.5mt/yr to 7.5mt/yr.

June: Gujarat NRE Coke announced its bid for Australia's Ray Resources. GujaratNRE currently holds a 16.6% stake in Rey Resources and has offered to buy allremaining shares (83.4%).

May: Tata Steel announced it had lifted its stake in Mozambique metallurgical coaldeveloper, Riversdale Mining from 10% to 14.9% (the maximum allowed withoutpermission from Australian foreign investment authorities) for almost A$42m($30.3m). Other major shareholders now include former Macarthur Coal chief, KenTalbot with around a 19% interest and Passport Capital holding a 16% stake.

IndonesiaJune: BHP Billiton announced it was to stop construction at its Haju trial pit in theMaruwai coking coal concessions and was placing the entire project under review forpossible sale. Some 450 redundancies resulted from the move and no operationalpersonnel remain in Kalimantan. The move was prompted following a strategicreview of BHPB’s overall metallurgical coal expansion programme.

June: Indonesia’s director general of coal, mineral and geothermal energyannounced foreign investors in Indonesia’s coal mining sector will be allowed to takea majority stake in coal mining licences with current discussions suggesting around80% equity may be held and 20% divested.

May: South Gobi announced it was preparing for its first Indonesian trial coking coalshipment from the Mamahak mine in East Kalimantan.

JapanJuly: Nippon Steel announced that it would be restarting the 4,884 m3 No.1 blastfurnace at its Oita Works in early August 2009. The unit has been idled sinceFebruary 1st 2009. NSC also confirmed that it would continue to hot idle the 3,273m3 No.2 blast furnace at its Kimitsu Works originally taken off line at the same timeas the Oita unit.

July: Sumitomo Metal Industries announced that its 2,700m3 No.4 blast furnace atits Wakayama Works was taken off line on 11 July and that the blowing-in of its new,3,700 m3 No.1 blast furnace at the same site is scheduled for July 17.

June: JFE Steel Corp announced it was to start repairs on its Kurashiki No3 blastfurnace which has been offline since January 2009. The repairs (to enlarge the innervolume of the furnace to 5,055m3 up from the present 4,359 m3) are currentlyscheduled to start in October 2009 and complete in April 2010 at an estimated costof nearly ¥30bn.

April: Nippon Coke & Engineering announced it had temporarily suspendedoperations at its No.1B Coke Oven (with capacity of 0.35) by hot banking.

Oceania

AustraliaJuly: Bhushan Steel of India announced it had made a cash bid to take undisputedcontrol of Queensland junior metallurgical coal developer, Bowen Energy, cashvaluing the target at around A$11.5m ($8.9m). Bhushan made its initial investmentin 2007 as part of a move for control of another Australian coal developer, RocklandsRichfield, since taken over by China Coke and Chemicals. Bhushan has also offeredcash support to further develop Bowen’s East Middlemount and South Blackwatermetallurgical coal prospects in Queensland’s Bowen Basin.

July: Indian producer Gujarat NRE Coke Ltd announced it was expandingmetallurgical coal production at its Wongawilli mine in New South Wales with thelaunch of its longwall operation. Once fully operational the mine is expected toproduce 2-2.5mt/yr.

July: Noble Group subsidiary Gloucester Coal announced it had awarded a sevenyear mining contract for the operation of its Duralie met/thermal mine in New SouthWales, to Leighton Mining.

The contract at the 1.8mt/yr mine is valued at around A$350m ($280m).





June: Felix Resources announced (in response to rumours in the media of a takeoverbid by China's Yanzhou Coal) that although discussions had been held over the pastyear concerning a possible takeover bid it was unlikely they would be concluded.

June: Macarthur Coal announced an upward revision of expected coal sales for 2009to 4.5-4.8mt (from 3.9mt) on the back of spot sales to Chinese iron mills.

June: Bluescope, Australia’s largest integrated hot metal producer, announced it wasdeferring the restart of blast furnace No.5 until August due to continued low demandlevels for steel.

June: Xstrata announced plans to close its 3mt/yr United thermal/semi-softunderground mine in New South Wales in March 2010 (in line with its 'life of mine'plan) when economic reserves will be exhausted. About 2mt of mainly semi-softreserves remain at the mine, owned 95% by Xstrata and 5% by mining unionCFMEU.

June: Aquila Resources announced it had outlined a potential 1.6mt/yr hard cokingcoal mine (for an estimated capital cost of A$402m ($322m)) at Washpool,Queensland near Wesfarmers’ Curragh mine. A feasibility study is already underwaywith completion scheduled for late 2010. First output is currently envisaged at 2012.Aquila has applied for a 1.6mt/yr tonnage allocation through the planned newWiggins Island terminal at Gladstone.

May: Noble Group was reported to have taken management control of Gloucester Coalafter raising its stake in the company to 57.18%. The move came immediately after theslated merger between Gloucester Coal and Whitehaven Coal had broken off.

May: Aquila Resources announced the feasibility study for the Eagle Downs project(in which it has 50% share with Vale holding the balance) will be completed in June2009. The proposed mine will be developed in two stages for a maximum 7mt/yroutput of metallurgical coal utilising two longwall systems.

May: Felix Resources reported the new coal treatment plant under construction at itsYarrabee mine would start up in May increasing the capacity of saleable low-vol PCIproduced at the mine to 2.8mt/yr.

May: Press reports revealed Macarthur Coal had pulled out of the 2mt/yr Dingo WestPCI project in Queensland, citing poor market condition, leaving Bandanna Coalwith 100% interest. Bandanna reported that it will now look for new partners.

April: Cockatoo Coal announced a further evaluation of previously announced testresults has identified a 15.6mt resource at Cockatoo’s Baralaba North prospect.

April: Production has been suspended at Glennies Creek underground coal mine inNew South Wales, Australia, following a fatal accident on April 4th which resultedin the loss of life of one mine worker. A report into the cause of the accident wasunderway.

www.mccloskeycoal.com

IHS McCloskey, Unit 6, Rotherbrook Court, Petersfield, GU32 3QG, UK. www.mccloskeycoal.comTel: +44(0)1730 265095 Fax: +44(0)1730 260044, E-mail: [email protected]

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