1 Building A Strong Future Davenport Metals & Mining Symposium Bennett K. Hatfield President and CEO September 16, 2008 Exhibit 99.1 |
2 • Statements that are not historical fact are forward-looking statements and may involve a number of risks and uncertainties. We have used the words “anticipate” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project” and similar terms and phrases, including references to assumptions, in this presentation to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements: market demand for coal, electricity and steel; availability of qualified workers; future economic or capital market conditions; weather conditions or catastrophic weather-related damage; our production capabilities; consummation of financing, acquisition or disposition transactions and the effect thereof on our business; a significant number of conversions of our convertible senior notes prior to maturity; our plans and objectives for future operations and expansion or consolidation; our relationships with, and other conditions affecting, our customers; availability and costs of key supplies or commodities such as diesel fuel, steel, explosives and tires; availability and costs of capital equipment; prices of fuels which compete with or impact coal usage, such as oil and natural gas; timing of reductions or increases in customer coal inventories; long- term coal supply arrangements; risks in or related to coal mining operations, including risks related to third-party suppliers and carriers operating at our mines or complexes; unexpected maintenance and equipment failure; environmental, safety and other laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage; ability to obtain and maintain all necessary governmental permits and authorizations; competition among coal and other energy producers in the United States and internationally; railroad, barge, trucking and other transportation availability, performance and costs; employee benefits costs and labor relations issues; replacement of our reserves; our assumptions concerning economically recoverable coal reserve estimates; availability and costs of credit, surety bonds and letters of credit; title defects or loss of leasehold interests in our properties which could result in unanticipated costs or inability to mine these properties; future legislation and changes in regulations or governmental policies or changes in interpretations thereof, including with respect to safety enhancements and environmental initiatives relating to global warming; the impairment of the value of our goodwill and long-lived assets; the ongoing effect of the Sago mine accident; our liquidity, results of operations and financial condition; adequacy and sufficiency of our internal controls; and legal and administrative proceedings, settlements, investigations and claims and the availability of related insurance coverage. • You should keep in mind that any forward-looking statement made by us in this presentation speaks only as of the date on which we make it. See also the “Risk Factors” in our 2007 Annual Report on Form 10-K and in our subsequent filings on Form 10-Q, all which are currently available on our website at www.intlcoal.com. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this presentation except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this presentation might not occur. All data presented herein is as of September 16, 2008, unless otherwise noted. Forward-Looking Statements |
3 Coal Market Update |
4 Market Overview • Strong world demand has reshaped US coal outlook: Remarkable growth in Asian demand coupled with broad supply shortages Traditional international coal trading patterns are changing: – Substantial infrastructure constraints among key exporters – Other countries limiting exports to protect domestic requirements • US thermal coal pricing escalated rapidly during the first half of 2008. Key drivers included: Dramatic export growth Rising utility demand Unprecedented met coal pricing Supply constraints |
5 Recent Market Developments • Appalachian thermal coal prices have recently softened to mid-May levels (at around $100-$120/ton) for 2009 rail tons • Trading volatility seems to stem from several factors: Global economic concerns Declining oil and natural gas prices Summer trading lull in Europe Thin trading volume • Coal market fundamentals remain solid Continuing strong met coal demand Falling domestic utility inventories Strong exports with declining imports Supply still very constrained; evidenced by tepid Eastern production growth |
6 US Export / Import Trends (tons in 000’s) 1 Represents management’s estimate as of Aug. 31, 2008 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Net Exports US Exports US Imports |
7 $35.00 $55.00 $75.00 $95.00 $115.00 $135.00 $155.00 CSX 12500 1.6# Pitt 8 13000 3.4# Prompt Month Spot Price Trends |
8 $35.00 $45.00 $55.00 $65.00 $75.00 $85.00 $95.00 $105.00 $115.00 $125.00 $135.00 $145.00 $155.00 $165.00 31-Jan-06 $57.50 $55.50 $54.75 $54.00 31-Dec-06 $41.25 $44.50 $45.50 $46.50 31-Jul-07 $43.25 $46.50 $49.35 $51.10 31-Dec-07 $57.50 $56.40 $56.40 30-Jun-08 $157.50 $146.00 $142.50 31-Aug-08 $125.00 $117.50 $111.50 2007 2008 2009 2010 Term Price Indications CAPP 12,500 Btu <1% Sulfur Forward Prices |
9 • Price volatility is expected to diminish over the balance of 2008 International and domestic buying activity is on the rise Major international coal exporters are expected to focus heavily on protecting their own resource needs – Anticipate restricted exports from China, Indonesia, and Vietnam – Russia could play coal and gas card in geopolitical gamesmanship Domestic inventory levels will likely fall further during 2009 • Expect Eastern coal prices to strengthen as we enter an active contract solicitation season over the next few months • Outlook could be impacted by global economic issues, but world- wide energy and steel demand has substantial momentum Market Outlook |
10 Overview of International Coal Group |
11 • Diversified operations participating in 3 of 4 largest US coal producing regions • Extensive reserve base supports internal growth opportunities • Growth initiatives targeted for high margin metallurgical and premium grade thermal markets • 100% union free workforce • Solid and improving balance sheet with minimal long-term legacy liabilities • Expanded and less concentrated investment grade customer base Key Highlights of International Coal Group Summary Statistics Market capitalization 1 : $1.1 billion Coal reserves: 1.0 billion tons Reserve life: Approximately 55 years Employees: 2,551 2007 tons sold: 18.3 million 2007 tons produced: 16.4 million 1 Market capitalization is based on 153.3 million shares outstanding and a stock price of $7.10 as of Sept. 11, 2008. |
12 • 13 active mining complexes - 8 in Central Appalachia, 4 in Northern Appalachia, and 1 in Illinois Basin • 2 new mine complexes (Sentinel and Beckley) opened within last 19 months; Tygart #1 expected to open by late 2009 • Recently acquired Powell Mountain Energy began producing July 2008 Current and Future Operations |
13 • ICG controls 1.0 billion tons of high-quality reserves that are primarily high BTU, low sulfur steam and metallurgical coal • CAPP/NAPP reserves of 611 million tons are 54% met quality High-Caliber Reserve Base CAPP, 247 million tons NAPP, 364 million tons Illinois Basin, 392 million tons 39% 25% 36% |
14 Total Reserve Profile: Owned vs. Leased ICG reserve ownership % is one of the largest among publicly traded peers 66% 34% Leased 338 million tons Owned 665 million tons |
15 ICG Legacy Liabilities Total: $144 million Total Legacy Liabilities 1 Source: company Annual Reports as of 12/31/07. Legacy liabilities include post retirement benefits, black lung liabilities, reclamation liabilities, workers compensation and Coal Act liabilities ($ in millions) Low Legacy Liabilities 1 vs. Peer Group $3,361 $1,225 $942 $735 $407 $335 $156 $144 $117 Reclamation 60% Rockefeller 1% Workers Comp 5% FAS 106 17% Black lung 17% |
16 1 Per management guidance as of 7/23/08 Projected Production 2008-2010 16.4 16.5 12.4 8 10 12 14 16 18 20 22 24 26 2005 2006 2007 2008 2009 2010 Target projects that create high margin production Key focus: increase met tons Sentinel, Beckley, and Powell Mountain complexes, all brought online within past 19 months, have added 3.9 million annual tons production capacity New Tygart complex is planned for late 2009 startup with annual output of 3.5 million tons 19.0 20.5-21.5 22.0-23.0 1 Production Plans Call For Selective Growth CAPP 66% 68% 68% 66% 69% 67% NAPP 19% 19% 19% 22% 19% 22% ILB 15% 13% 13% 12% 12% 11% Production by Region |
17 2008 ICG Production Profile 1 22% NAPP 66% CAPP 12% ILB Production by State Production by Region Production by Method 52% Surface 48% Under- ground 46% KY 38% WV 12% IL 4% MD 1 Represents management’s estimate as of July 1, 2008 |
18 Projected Sales 20.0 22.0 23.5 (mm tons) Committed Tonnage • Strong committed sales level for 2008-2009, yet substantial room to participate in market upside 1 Committed tonnages and projected sales for 2008-2010 are estimated as of August 31, 2008 97 82 45 1 13 17 42 3 0 20 40 60 80 100 2008 2009 2010 Favorable Sales Position Uncommitted Committed (subject to re-pricing) Committed and priced 1 |
19 3.4 3.2 2.6 1.7 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2007 2008 2009 2010 2011 Projected Metallurgical Coal Production 1 1 1 1 Represents management’s estimate as of Aug. 31, 2008 1 |
20 Projected Met Sales Growth By Location 2008 2009 2010 2011 Beckley (Low Vol) 0.6 1.3 1.4 1.4 Vindex (Low Vol) 0.2 0.3 0.3 0.3 Sentinel (High Vol) 0.5 0.55 0.7 0.7 Buckhannon-Powell Mtn. (High Vol) 0.4 0.45 0.45 0.4 Tygart #1 (High Vol) N/A N/A 0.35 0.6 Total 1.7 2.6 3.2 3.4 |
21 Other Potential Met Coal Projects Under Review • Bakerstown Deep Mine production expansion at Vindex Complex near Mount Storm, West Virginia Low volatile metallurgical quality Potential production of 400-500,000 annual tons • Big Creek Property near Richlands, Virginia Mid-volatile metallurgical quality Potential production of 1.0 million annual tons • Tygart #2 Mine Complex near Grafton, West Virginia High volatile metallurgical quality or premium thermal coal Potential production of +2.0 million annual tons |
22 Disciplined Sales Strategy Has Served Us Well • Declined renewal of nearly 2.8 million tons per year of CAPP contract renewals (in mid-$40’s range) during late 2007 • Continued to “layer in” new forward-contract prices as the market steadily improved; new commitments since Feb. 2008 include: 2009: 5.0 million tons at an average price per ton > $90 2010: 2.8 million tons at an average price per ton > $100 2011: 1.5 million tons at an average price per ton > $100 • Much of our remaining 2009 and 2010 unsold position is targeted toward the high value met and premium steam markets |
23 Other Anticipated Sales Improvements • Low-priced contracts are expiring and rolling off Central Appalachian region roll-offs include 0.5 million tons after 2009 and 2.3 million tons after 2010 Northern Appalachian region roll-offs include 1.2 million tons after 2009 • Legacy contracts totaling 1.3 million NAPP tons are steadily increasing in price due to market-based indexing features |
24 Guidance 1 n/a $205 $179 CapEx n/a n/a $45.00 – $47.00 Average Cost Per Ton $35.00 – $37.00 $32.00 – $33.00 $30.50 – $31.00 ILB $95.00 – $105.00 $70.00 – $75.00 $58.00 – $59.00 NAPP $98.00 – $108.00 $80.00 – $85.00 $57.50 – $58.50 CAPP $92.00 – $102.00 $72.00 – $78.00 $54.00 – $55.00 Average Price Per Ton 22.0 – 23.0 20.5 – 21.5 19.0 Tons Produced (mm) 23.0 – 24.0 21.5 – 22.5 20.0 Tons Sold (mm) 2010 2009 2008 1 Per management’s guidance as of 07/23/08 |
25 New Operations |
26 • Mine Type – underground shaft/slope • Customers – Mirant Energy, Xcoal, Essar Steel Algoma • Mining Method – room-and-pillar • Total Reserves – 52.7 million tons • 2007 Production – 0.7 million tons • Production Outlook – expected 1.5 million tons/year pace in late-2008 • Coal Quality – high-vol met, premium utility steam • Transportation – CSX rail Sentinel Complex |
27 • Mine Type – underground shaft/slope • Customers – Sun Coke, Shenango, Xcoal, AK Steel, USS • Mining Method – room-and-pillar • Total Reserves – 32.3 million tons • 2007 Production – 0.04 million tons • Production Outlook – expected 1.4 million tons peak output • Coal Quality – premium low-vol met • Transportation – CSX rail Beckley Complex |
28 Powell Mountain Complex • Acquired May 27, 2008; production initiated mid-July, 2008 • Mine Type – underground • Customers – Traxys, Eastman Chemical, ABC Coke, Xcoal • Mining Method – room-and-pillar • Total Reserves – 27.0 million tons • Production – 1.0 million tons annually at full production • Coal Quality – high-vol met and premium ultra-compliance steam • Transportation – Dual-served CSX and NS rail |
29 • Site development: 2007-2008 • Major construction of shafts and slope: 2008-2010 • Planned developmental production start-up in late 2009 • Projected output of 3.5 million tons/year at full capacity • Quality: High Rank HV Met (45%) Premium NAPP low sulfur Steam (55%) • Underground longwall mine Tygart #1 Complex |
30 Summary |
31 Industry Outlook • Coal markets: Volatility may be the rule for the near term Broad concerns about the economy Lower natural gas and oil prices • However, coal supply is expected to remain very tight due to: Scarcity of experienced labor Challenging regulatory environment, including delayed permit approvals, heightened mine safety enforcement, and other factors • It is important to keep the market changes in perspective: 8/31/08 price for CSX 12500 Btu, low-sulfur for 2009 delivery: $117.50 8/31/07 price for CSX 12500 Btu, low-sulfur for 2009 delivery: $49.40 Prices are up nearly 140% or $68 per ton despite recent declines |
32 • ICG is well-positioned to benefit from new high-margin production that is expected to come online during 2008 - 2012 • We have maintained discipline in our marketing and growth strategy • Our capital spending is targeted on developing higher margin reserves, favoring met quality and owned properties • We anticipate substantial upside performance due to: Improved markets with increased pricing Expanded export opportunities Additional met coal production Improved operating performance Building A Strong Future |
33 Thank You! |
34 Appendix |
35 Summary of Active Mining Operations 6/30/2008 Mine Mining Total Reserves Annual Capacity 2007 Production Coal Transportation Mine Site Type Method (tons in millions) (tons in millions) (tons in millions) Quality Method CAPP Kentucky East Kentucky S MTR, TSL 4.3 1.3 1.0 Utility Rail Flint Ridge UG R&P 29.0 1.5 1.3 Utility Rail, truck Hazard S MTR, TSL 51.2 4.0 3.9 Utility Rail, truck Knott County UG R&P 7.2 1.0 1.0 Utility Rail Powell Mountain UG R&P 27.0 1.0 N/A High vol met, premium utility Rail Raven UG R&P 10.3 1.0 0.6 Utility Rail West Virginia Beckley UG R&P 32.3 1.4 0.04 Low vol met Rail Eastern S MTR, DL, TSL 13.3 3.3 3.3 Utility Rail NAPP West Virginia Buckhannon UG R&P 46.7 1.0 0.6 High vol met, premium utility Rail, truck Patriot S CTR, TSL 3.5 0.9 0.9 Utility Barge, rail, truck Sentinel UG R&P 52.7 1.5 0.7 High vol met, premium utility Rail Maryland Vindex S CTR, TSL 60.2 0.9 0.9 Utility, low vol met Rail, truck ILLINOIS BASIN Illinois Viper UG R&P 39.0 2.5 2.1 Utility Truck S - Surface; UG - Underground CRM - Cross Ridge Mining; CTR - Contour Mining; R&P - Room-and-pillar; LW - Longwall; MTR - Mountaintop Removal DL - Dragline; HW - Highwall; TSL - Truck and Shovel/Loader |