Mozambique Overview

• Mozambique’s annual GDP growth averaging 7.4% over the past two decades

• Strong economic growth was accompanied by large decreases in poverty; national poverty rate fell 18% between 1997 and 2009

• Recent discoveries of large deposits of coal and gas could transform Mozambique into a significant player in global commodities markets

Source: World Bank (Apr 16, 2015)

Coal Resources in Tete Province

Large relatively untapped coal resource estimate exceeds 23 billion tonnes

Requires significant exploration to completely understand its full potential

Optimal exploitation of marketable products need to be understood so that ultimate success of the coal mining industry in Mozambique is achieved

Could possibly affect related industries, such as coal-fired power generation and coal to liquid conversion

Coal Resources in Tete Province

The coal basins/sub-basins in Tete Province extend ~ 500 km from Zumbo to Mutarara

Deposits in tectonic basins along the Zambezi River, with a E-W orientation, from Zumbo to Songo and in a NW-SE direction from Songo

The geology of the different areas varies considerably and is not easily summarized.

Coal Resources in Tete Province

Basins limited by border-faults parallel to the main directions of the Zambezi Mobile Belt. These faults are often filled with dolerite intrusions

ICVL, and Vale’s mines are located in Moatize-Minjova, are most advanced in activity & are prime focus of current production and exports

In the Moatize-Minjova Basin the Moatize formation reaches a thickness of 340 m, with 6 coal zones (from bottom to top): Sousa Pinto, Chipanga, Bananeiras, Intermedia, Grande Falesia and Andre.

Coal features in Mozambique

Very little of the Mozambique coals

are coking coal

Some seams around Moatize have the right characteristics for coking coal but the yields are low,at best around a 23% HCC coking coal yield, but typically only around 20%

Seams are thick, near surface and low cost to mine, but are low grade Seams comprise thin, alternating layers

of coal and shale which when mined and processed to internationally traded norms, yield low volumes of high cost products

To be internationally competitive, the economics of the industry has to improve

Coal features in Mozambique This quality of thermal coal sells at about 85% to 80% of the South African benchmark RB2 index

Whatever the index, when benchmarked against global competition Mozambican exports will report upper quartile costs, hence marginal economics

At present, the thermal coal’s value is not enough to cover the cost of logistics. The current value of HCC in each tonne of Run of Mine coal is also not enough to cover the total costs

The cost of logistics is too high & are not internationally benchmarked but designed to provide a cash flow for the State

An increase in rail capacity and even a modest reduction in logistics costs will not in itself grow the export volumes, rather it is the ability to dispose of the low grade by-product thermal coal profitably which will enable the industry to grow

International Market

Mozambique

India

China Japan

Low Cost Solution

All-in Logistics Costs must be

affordable for the lower priced TC

exportable products

Efficiency in transportation

Cargo Volume

Systematization of railway, port and shipment

Moatize – Macuse Railway and Port Project Highlights

Item Description

Logistic objectives

Coal transport • Phase I - 25 Mtpa (2019-25) • Phased II & III - 50 Mtpa (2026-34), 100 Mtpa (2035-45) Passenger transport – daily train in each direction (Phase 1)

Length of railway 484 km + 120 km (Estima)

Traction type Diesel

Train configuration 3 locomotives driving 216 wagons of 100t each

Trains in service (daily) 5 trains

Port capacity 80,000 DWT Panamax vessels (Phase I) 150,000 DWT Cape-size vessels (Phase II)

Rail/Port round trip 30 hours

Capital investment US$ 2,953 million (not including financing costs)

Moatize – Macuse Railway and Port Project Railway Design Parameters

Item Description

Gauge Standard gauge 1,435 mm

Design axle load 32 tonnes

Number of main lines Single track (double track to be added in future)

Minimum curve radius 800m, 300m for loading loop lines

Limiting gradient 0.5% for loaded trains, 1.0% for unloaded trains

Traction Type Diesel

Locomotives GE (ES44AC), EMD (SD70ACE), or equivalent

Hauling wagons Series C100 (including ECP braking), or equivalent

Passenger trains Two 2-car diesel multiple units (DMU) for daily trips

Traction tonnage 27,000t by 3 locomotives

Train configuration 3 locomotives driving 216 wagons of 100t each

Trains in service (daily) 5 trains

Capacity per train 20,736 ton

Moatize – Macuse Railway and Port Project Port Design Parameters

Item Description

Bulk berth one 80,000 DWT berth (313m); design bottom depth -15.4 MCD; berth structure design -18.5 MCD

Tugboat berths two 80-ton berths (90m each); design bottom depth -5.6m MCD

Roll-on-roll-off berth water level ramps - low (L= 40m), medium (L= 24m), and high (8m); design bottom depth -2.4 MCD

Tanker berth one berth (120m); design bottom depth -4.7MCD

Sand interception breakwaters

North - 4000m in length South – 3000m in length

Land area 66.9 hectares

Water area 701.1 hectares

Dredging of water area 2865.6 hectares

Backfill of land area 172 hectares

Moatize – Macuse Railway and Port Project Justification

Unlock coal resources by

providing low cost

transport, competitively priced against

other sea-borne export markets

Contribute to GOM objectives,

included in 5 years GOM program (2015 – 2019)

poverty reduction

job creation

economic growth

diversification

Long-term contribution to

human capital in Tete and Zambezia

sustainable employment

opportunities to workers

Lasting impact on regional and

national economy

Market Analysis Thermal and Coking Coal

Thermal Coal Market

• Weak through at least 2016 due to: – OECD countries sluggish economic conditions

– Gas supply glut in US

– Slowing economy in China and push to develop domestic coal in India

– Global movement towards cleaner fuels

• AME forecast import demand growth <3%/yr for next decade

• Surplus supply leading to strong price drop – FOB price forecast of $70-$75/t by 2018, rising to $80/t - $106/t by 2020

• Must reduce logistics costs for Moatize coal to be competitive

Market Analysis Thermal and Coking Coal

Hard Coking Coal Market

• Slowing demand, over-supply

– additional production from weaker currency countries such as Australia

• AME forecast import demand growth of 3.5% over the long term

• Demand growth driven by China and India

– Asia will represent 76% of global coking coal demand by 2030

• FOB price forecast

– $135 - $156/t by 2018, rising to $145 - $182/t by 2030

Mozambique’s Potential in the Global Market

Challenges

• Weak coal prices

• Lack of affordable logistics infrastructure

• Current negative perception among current mine owners

Moatize – Macuse Railway and Port Project is an opportunity

to overcome these challenges

Moatize – Macuse Railway and Port Project Route Recommended

Moatize – Macuse Railway and Port Project Route Recommended

Blue route recommended • shorter distance

• acceptable gradient

• avoidance of wetlands and flood-prone zones

• minimizing impacts on populated areas

• port approach allows for future expansion

Moatize – Macuse Railway and Port Project LIDAR Survey

Moatize – Macuse Railway and Port Project Bathymetry Study : Mutarara-Shire River

Moatize – Macuse Railway and Port Project SOIL Investigation

Completed

On-going

On-going

Moatize – Macuse Railway and Port Project Baseline Study

Completed

On-going

On-going

Moatize – Macuse Railway and Port Project Port Concession Boundary

Moatize – Macuse Railway and Port Project Port Concession Boundary

Auxiliary working area

Moatize – Macuse Railway and Port Project Offshore Soil Investigations

Moatize – Macuse Railway and Port Project Offshore Soil Investigations

Moatize – Macuse Railway and Port Project Navigation Simulation

Moatize – Macuse Railway and Port Project ESIA / RAP - Public Consultation Meeting in Tete

Moatize – Macuse Railway and Port Project Project Stages

Stage Time

Bankable Feasibility Study April 2015

Owner’s engineer End of July 2015

EPC Tender End of August 2015

EPC award December 2015

Social & Environment ESIA/RAP Approval and Financial Close

June 2016

Beginning of Operations 2019

Obrigado

Thank You

Khop Khun Khrap