3 rd Annual AJM CTL & GTL Conference (26 27 February 2008) The Arckaringa CTL and Power Project From Concept to Project Development Chris Schrape, Managing Director, Altona Resources PLC 1
Important Notice Statements in this presentation, to the extent not based on historical events, constitute forward-looking statements. Forward-looking statements include, without limitation, statements evaluating market and general economic conditions in the preceding sections, and statements regarding future-oriented costs and expenditures. Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect management s analysis only as of the date thereof. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties with respect to the company include the effects of general economic conditions, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations, industry supply levels, competitive pricing pressures and misjudgments in the course of preparing forward-looking statements.
The Arckaringa Project Location 3
Arckaringa Coal Resources A World Scale Energy Bank Altona Resources holds a 100% interest in three coal exploration tenements with a combined area of 2,592 km 2 in the Arckaringa Basin Coalfield, South Australia The coal deposits have been extensively explored and are one of the World s largest undeveloped Energy Banks combined resource > 7.8 billion tonnes of sub-bituminous coal technically suitable for conversion into clean petroleum products and low cost power equivalent to 7.8 Billion barrels of petroleum products 4
Project Development - A Steady Approach Taking stock - the Hatch Gap Analysis Report (March - April 2007): validated the historical coal data base and conceptual CTL and mine study results identified the work needed to complete a Pre Feasibility Study to Major Company standard ensure a sound basis for proceeding to Final Feasibility, including confidence in technology options attractive project economics critical issues and risk identification a development budget and timeline Pre Feasibility Studies now nearing completion, with encouraging results to date
Pre Feasibility Study Progress Update Technical Program Aspect Status Coal Resource update and coal quality evaluation End March 2008 Groundwater and geotechnical evaluation End March 2008 Mine cost review, based on existing mine designs CTL plant cost and technology review Transport and Fuel Markets study Electricity market competitiveness study CO2 Geo-sequestration plan Final Feasibility Budget and Timeline study Completed Completed Completed Completed Initial study completed Completed
Pre Feasibility Study Progress Update Commercial Project Financial Model developed (Royal Bank of Scotland) Budget and Timeline for Final Feasibility scoped Relationships enhanced, including Investor briefings and regular media releases BP MOU extension Freight Link MOU and joint work program Government and Community Relations Regular briefings for SA Government and Opposition Framework for future State and Commonwealth approvals under development Briefings for local communities and stakeholders
Wintinna Drilling Program May 2007 March 2008 Validation of Coal Resources to current JORC compliant reporting standards Definition of at least 700 million tonnes in the Measured and Indicated Category Extraction of a 5 tonne bulk sample for coal testing and analysis confirmation of quality parameters for mine design and coal feedstock New Geotechnical and Hydro-geological studies to confirm dewatering and mine design parameters 8
First Large Diameter Borehole ACL 1
Wintinna Drilling Program 27 boreholes 6 large diameter (bulk sample) 21 slim core Water production wells Geotechnical holes Native Title clearance obtained Base Mt Barry and top Nilkinina Seam 200mm core Large Diameter core extraction - mid 2007 Arckaringa Seam 200mm core 10
Pre Feasibility - A World Class Group of Advisors and Technical Consultants Project Finance Advisor RBS Due Diligence and independent engineering advisor CTL and Power Plant Design and Costing Groundwater and Geotechnical Assessment Open Cut Mine Design and Costing Non binding MOU Transport MOU Coal Quality Testing and Verification
12 Study Findings to Date - 10 Pillars for Success 1. Huge and proven Coal Resource 2. Conventional Open Cut Mining 3. Suitable CTL technology 4. Large and Expandable Scale 5. Access to existing Railway and Ports 6. Markets for Fuels (export and domestic) 7. Markets for Electricity in South Australia 8. Strong Government support in a stable country 9. Environmental Issues understood 10. Attractive Project Economics
Huge and Proven Coal Resource Huge coal resource, discovered in the 1980 s, with the best part of the Wintinna deposit now being upgraded to current JORC standards Deposit Million Tonnes Measured 2 Indicated 2 Inferred 2 Total Wintinna 1 1,150 750 2,000 3,900 Westfield 100 200 500 800 Murloocoppie 250 300 2,600 3,150 7,850 Notes: 1. For Further detail on coal quality refer to Appendix 1 2. Based on JORC equivalent standards of the day 13
Conventional Open Cut Mining All past and current studies show that the Wintinna deposit can be mined as a conventional Open Cut and Back Fill operation Initial 150 meter deep box cut, thereafter steady state operations through dewatered overburden and gently dipping, consistent coal seams (8 main seams with combined 25-30 meter thickness within a 40-50 meter vertical horizon)* 14 *see Appendix 1 slide
Suitable Technology for CTL and Power With CO2 extraction and storage capability, the process is Sequestration ready and a prime example of clean coal technology ** Refer Appendix 4 for further detail on technology selection Pre Feasibility Plant Design** based on: Coal Gasification - ConocoPhilips Fischer-Tropsch Synthesis Rentech Combined Cycle Gas Turbine power generation 21
Figure 1. Potential Feeds Coal Petroleum Coke Residual Oils Natural Gas Refinery Gas Orimulsion Sewage Sludge Waste Oils Biomass Black Liquor Municipal Solid Waste Hazardous Waste Coal to Liquids Product Options Gasification Plant Slag for Construction Materials or Metals Recovery Combined Cycle Chemical Production Potential Products Oxygen Nitrogen Argon Carbon Dioxide Sulfur/Sulfuric Acid Steam Hot Water Electric Power Hydrogen Carbon Monoxide Fertilizer (Ammonia, Urea, Ammonium Nitrate) SNG Industrial Chemicals Methanol/Ethanol Fine Chemicals Fischer-Tropsch Synthesis Naphtha Diesel Jet Fuel Wax 22
CTL Fuel Products are Environmentally Clean Example: Ultra Clean Diesel Fuel Can be used in existing diesel engines High Cetane and low aromatics increase engine efficiency and decrease maintenance costs Zero Sulphur and lower emissions than conventional diesel Source: Shell 23
The Arckaringa Project - Large and Expandable The Plant can be expanded in 5 MBPA Modular Phases, either sequentially or in combination Output Phase 1 Phase 1 and 2 Combined BASE CASE Construction time BASE CASE After Phase 3 Phase 3 Construction time Liquids (80% distillate, 20% naptha) 15 KBPD or 5 MBPA 30 KBPD or 10 MBPA 4.5 years 45 KBPD or 15 MBPA 2.5 years Pre-Feasibility Studies: Export Power 280 MW 560 MW (Included in above) 840 MW (Included in above) Jacobs Consultancy (UK) for CTL and Power MineConsult Australia for Wintinna Open Cut mining costs Coal from Wintinna Mine 5 MTPA 10 MTPA 2.5 years 15 MTPA 1 year KBPD = Thousand Barrels Per Day MBPA = Million Barrels Per Annum MTPA = Million Tonnes Per Annum 24
Access to Railway and Ports Key strategic location on the Adelaide Darwin railway (owned and operated by Freightlink) Altona has MOU with Freightlink to develop the future transport and port storage contract Darwin is a deep water port and growing gateway to Asia
Fuel and Electricity Markets in South Australia None of this will happen without power and fuel! 26
Fuels Markets CTL fuels (diesel, jet fuel) are environmentally clean and free from market volatility and refinery product margins Altona will provide a secure source of supply from a politically stable country boost Australia s exports to Asia help make SA and NT self sufficient and effectively provide a strategic fuel stockpile for the region
Electricity Markets A growing power deficit in South Australia According to the ESIPC 2007 Annual Planning Report, South Australia has a growing gap between electricity supply and demand The projected Reserve Deficit of 500 MW by 2016 17 excludes the Olympic Dam Expansion and other new mine project demand (an extra 500 MW) 28
Electricity Markets Prominent Hill Olympic Dam Leigh Creek Port Augusta Flinders Power Station Adelaide The project can generate competitive base load power, plus some peak power, and will sell via a new national grid connection and regional links
Strong Government Support Stable geopolitical environment Bipartisan support for resources development in South Australia Strong relationship already established with Government Ministers and Departments Project will likely receive Major Project Status in South Australia provides streamlined framework for Government approvals 30
Environment Issues Understood Environmental Issue Current Status Prognosis Water Use CTL Plant gets all its process water from the coal (high moisture content) No issue plant will be a net supplier of clean water Groundwater Management 1 Part of current prefeasibility Studies Technically achievable Sensitive but potential win/win CO 2 Mitigation 2 Aboriginal Heritage Strategy developed and Geo sequestration site identified Exploration cleared, further survey work needed Gas Storage Licence pioneer Manageable if done well Notes: 1. Refer to Appendix 2 for more information on the proposed Groundwater management 2. Refer to Appendix 3 for further information on CO 2 mitigation 31
Attractive Project Economics - Large Revenues and Low Production Costs Results derived from Royal Bank of Scotland CTL, Power and Mine (Cumulative) Phase 1 and 2 Combined 10 MBPA After Phase 3 15 MBPA Industry Benchmarks for new Plants Project Financial Capital US$m (+ / - 30%) 2,706 4,035 Model CTL and Power Mine (incl. development opex) 500 670 Est. Annual Revenue US$m The Project s combination of CTL products and Power can reduce - diesel @US$100/bbl** - power @US$30/MWh Costs per Barrel, after Power Sales Revenue credit 1,000 150 1,500 225 unit operating costs to the low end of the world cost curve Total Project expenditure US$/bbl Opex US$/bbl US$35 US$20 < 35 < 20 35 65 25 50 ** equates to a crude oil price of approx US$85/barrel 32
Project Development Timeline As per Jacobs Pre-feasibility Studies Module 1 & 2 (10 MBPA Plant) Module 3 (additional 5 MBPA) 33
Thank you.
Appendix 1 - Coal Quality Quality Parameter (As Received Basis) Wintinna Run of Mine Quality (for CTL Plant) Proximate Analysis Unit Value Total Moisture % 38.0 Ash % 10.9 Volatile Matter % 22.0 Fixed Carbon % 29.1 Total Sulphur % 0.98 Gross Specific Energy GJ/tonne 16.2 Other Arckaringa deposits Westfield and Murloocoppie have similar energy, moisture and ash, but higher sulphur (which is extracted in the CTL process in any event) 35
Appendix 2 - Groundwater Management Average groundwater inflows likely to be > 100 ML/day, requiring substantial mine area dewatering and a responsible water disposal plan Aspect Mine Dewatering - Water Allocation Licence Water Supply Opportunities Issues Net usage, requiring assessment of aquifer re-injection replacing other user s needs Regional Drawdown and protection of Spring flows and associated species Aboriginal Heritage Pastoral and other regional water supplies Final mine void management (avoid loss of water to evaporation) Potential to supply regional centres and mining projects with clean water 36
Appendix 3 - CO2 Mitigation Strategy Steps Status Timing Mitigation Options Study GHD Study completed Geo-sequestration best option April 2007 Initial Geosequestration investigations Site Assessment Work program Completed East Officer Basin (~100 km away) site identified Work plan In preparation, to be secured either via agreement with existing PEL holder or via a new Gas Storage Licence Initial discussions with CRCCO2 for research help Aug 2007 2008 Ongoing Government Support Initial investigations into Clean coal technology funding Ongoing 37
Appendix 4 CTL Technology Options The principal technologies selected by Jacobs during the Pre Feasibility Study for the expandable CTL/Power Plant are: Conoco Phillips (CoP) Technology for Gasification selected following a techno-economic evaluation of 4 leading commercial gasification technologies currently available worldwide. Rentech Technology for FT Synthesis selected as one of only two technologies available for third party use. (Jacobs has worked with Rentech on various projects and has detailed data on the technology) UOP Hydro treating and Hydro cracking Technology for Product Upgrade considered as the best suited processes for upgrading Rentech s FT crude products (UOP, Rentech and Jacobs have worked closely over many years to develop and optimise the process conditions of the Product Upgrade Unit to maximise diesel fuel production) Jacobs advises that CoP, Rentech and UOP are world class leaders in their respective technologies, and believes the technologies proposed for the CTL/Power Plant will be well suited and competitive in world terms 38