UBS Boston Coal Conference
December 1, 2009
December 1, 2009
Ben Hatfield
President & Chief Executive Officer
Forward-Looking Statement
n Statements in this press release that are not historical facts are forward-looking statements within the “safe harbor” provision of the Private
Securities Litigation Reform Act of 1995 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, 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 various risks, 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; reductions and/or deferrals of purchases by major customers; 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 benefit 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; impairment of the value of our long-lived and deferred tax assets; our liquidity, including the ability to adhere to financial
covenants related to our borrowing arrangements, 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.
Securities Litigation Reform Act of 1995 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, 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 various risks, 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; reductions and/or deferrals of purchases by major customers; 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 benefit 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; impairment of the value of our long-lived and deferred tax assets; our liquidity, including the ability to adhere to financial
covenants related to our borrowing arrangements, 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.
n You should keep in mind that any forward-looking statement made by us in this presentation or elsewhere speaks only as of the date on which the
statements were made. See also the “Risk Factors” in our 2008 Annual Report on Form 10-K and in subsequent filings on Form 10-Q, all of 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 or our anticipated results. 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 December 1, 2009 unless otherwise noted.
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 or our anticipated results. 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 December 1, 2009 unless otherwise noted.
UBS Boston Conference, December 1, 2009
2
Highlights of ICG
n Strong operating presence in 3 of 4 largest US coal-producing
regions - - Central Appalachia, Northern Appalachia, & IL Basin
regions - - Central Appalachia, Northern Appalachia, & IL Basin
n Extensive coal reserve holdings with 63% ownership position
n Favorable contracted sales position
n Metallurgical sales projected to double in 2010
n Planned production growth is primarily from permitted
underground mines with less exposure to environmental issues
underground mines with less exposure to environmental issues
n 100% union-free workforce
n Solid balance sheet with minimal long-term legacy liabilities
Summary Statistics
Market capitalization1: $700.0 million
Coal reserves: 1.0 billion tons
Reserve life: Approximately 58 yrs
Employees: 2,600
2009 tons sold2: 17.3 to 17.5 million
2009 tons produced2: 16.4 to 16.6 million
1Market capitalization is based on 155.2 million shares outstanding and a stock price of $4.51 as of November 25, 2009.
2Management’s estimate as of October 28, 2009
UBS Boston Conference, December 1, 2009
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§ 13 active mining complexes - 8 in Central Appalachia, 4 in
Northern Appalachia, and 1 in Illinois Basin
Northern Appalachia, and 1 in Illinois Basin
Operating Strength
and Diversity
and Diversity
ICG Illinois
Illinois
Kentucky
Beckley
Virginia
MD
East Kentucky
Flint Ridge
Hazard
Knott County
Raven
Eastern
Buckhannon
Sentinel
Tygart Valley #1
Vindex
Current Operations
Future Operations
Powell Mountain
Pennsylvania
Indiana
Ohio
UBS Boston Conference, December 1, 2009
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High-Caliber Reserve Base
(As of September 30, 2009)
(As of September 30, 2009)
37%
Leased
96 million tons met
273 million tons steam
63%
Owned
232 million tons met
399 million tons steam
Geographic Distribution of
Reserves
Reserves
Reserve Ownership
Reserves by Method
11%
Surface
89%
Underground
37%
IL Basin
37%
NAPP
26%
CAPP
§ ICG controls 1.0 billion tons of high-quality reserves that are
primarily high-BTU, low-sulfur steam and metallurgical coal
primarily high-BTU, low-sulfur steam and metallurgical coal
§ Largest reserve ownership position among publicly traded peers
§ ~200 million permitted tons; 162 million underground
UBS Boston Conference, December 1, 2009
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Large Met Quality
Reserve Position*
(As of September 30, 2009)
Reserve Position*
(As of September 30, 2009)
52%
Met Quality
328 million tons
48%
Steam Quality
301 million tons
76% Hi Vol
250 million tons
8% Mid Vol
26 million tons
16% Low Vol
52 million tons
n CAPP/NAPP reserves of 629 million tons are 52%
metallurgical-grade quality
metallurgical-grade quality
UBS Boston Conference, December 1, 2009
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2009 Production Profile
(As of September 30, 2009)
24%
NAPP
62%
CAPP
14%
ILB
Production by State
Production by Region
Production by Method
53%
Surface
47%
Underground
42%
KY
40%
WV
14%
IL
4%
MD
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Projected Sales 17.3 - - 17.5 16.5 - 17.5 16.5 - 18.0
(tons in millions)
(tons in millions)
Projected Price Per Ton $59.25-$59.50 $61.00-$62.50 $65.00-$70.00
Committed Tonnage1
1 Management’s estimate as of November 30, 2009
Favorable Sales Position
%
of
Sales
Sales
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Uncommitted
Committed and not priced
Projecting Doubling of
Metallurgical Sales
Metallurgical Sales
Future met growth opportunities
n Tygart project
– Premium high volatile met
– 3.5 mm TPY longwall mine
projected at 40% met
projected at 40% met
n Vindex Bakerstown project
– Premium low volatile met
– 0.9 mm TPY CM deep mine
n These mines and other permitted
sources could increase annual
met sales to plus 5 mm tons by
2014-15
sources could increase annual
met sales to plus 5 mm tons by
2014-15
UBS Boston Conference, December 1, 2009
Met Sales Growth 2006-10
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Production Growth Is Primarily
from Underground Mines
from Underground Mines
n Nearly all ICG growth is comprised of new or expanding
underground mining operations (versus surface mines)
underground mining operations (versus surface mines)
– Major new development is Tygart #1 complex in Northern App
– Other deep mine growth planned at Beckley, Illinois, & Raven
n Surface portion of ICG production steadily decreasing
– Dropped from 65% in 2007 to 53% in 2009
– Projected to decrease to 31% by 2015
n Although still subject to development risks, underground
mines have become less controversial (and less likely to be
delayed by anti-mining activists) than surface mines
mines have become less controversial (and less likely to be
delayed by anti-mining activists) than surface mines
UBS Boston Conference, December 1, 2009
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ICG Legacy Liabilities
Total: $144 million
Total Legacy Liabilities1
1 Source: company Annual Reports as of December 31, 2008. Legacy liabilities include post retirement benefits, black lung liabilities, reclamation
liabilities, workers compensation and Coal Act liabilities
liabilities, workers compensation and Coal Act liabilities
($ in millions)
Lowest Legacy Liabilities
Among Peer Group
UBS Boston Conference, December 1, 2009
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Coal Market Update
UBS Boston Conference, December 1, 2009
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Current Market Conditions
n Market has recently improved, but remains somewhat fragile
– Rising natural gas prices are subject to retreat in response to mild weather
or bloated storage reports
or bloated storage reports
– Further, thermal coal production cuts may be needed to achieve balance
n However, several positive signals are developing
– Steel capacity utilization has been improving each week since late April
– Coal exports are increasing, especially for metallurgical coals
– US economic indicators, while mixed, are generally showing improvement
n Coal output expected to remain subdued until utility stockpiles
drop
drop
– However, shipment execution should improve as winter demand arrives
– Expect domestic coal inventory levels to fall sharply as dramatic production
cuts become visible in the face of winter demand and rising exports
cuts become visible in the face of winter demand and rising exports
n Overall, we believe worst of market weakness is behind us
UBS Boston Conference, December 1, 2009
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Producers Reacted
Quickly in 2009
Quickly in 2009
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Recent Thermal Spot Pricing Suggests
Early Signs of Recovery
Early Signs of Recovery
UBS Boston Conference, December 1, 2009
Prompt Month Coal Pricing Per ICAP-United, Inc.
15
Forward Curve Predicts
Meaningful Price Opportunity
Meaningful Price Opportunity
UBS Boston Conference, December 1, 2009
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Favorable Trends for
Met Coal Demand
Met Coal Demand
n Steel capacity utilization has been recovering:
– U. S. has rebounded to 65% from 40% in Q1 2009
– Steel sectors in China, Eastern Europe, & India are near 100%
n Resilient economic growth in Asia is expected to drive
increased met coal consumption
increased met coal consumption
– Projected GDP growth in China is 8-10% for 2010 and 2011
– Infrastructure constraints in Australia expected to position Eastern
US producers favorably to service rising global demand
US producers favorably to service rising global demand
n Recent Australian spot sales in the $165 range represent a
28% increase from the $129 March settlements
28% increase from the $129 March settlements
n Industry consensus suggests that met market recovery will
come sooner and stronger than the thermal market rebound
come sooner and stronger than the thermal market rebound
UBS Boston Conference, December 1, 2009
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Summary
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Near-Term Strategy
n Maintain flexibility to match production with changing
markets
markets
– ICG has idled or reduced 4.2 million annual tons of higher-cost
production since January 2009
production since January 2009
n Capitalize on improving metallurgical coal market
n Continue to strengthen liquidity and maximize cash
n Protect profit margin by managing costs
n Be cautious on entering coal contracts beyond 2010 as
pricing environment is expected to improve beginning
mid-year
pricing environment is expected to improve beginning
mid-year
UBS Boston Conference, December 1, 2009
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Conclusion
n Well-positioned for the current economic outlook
– Essentially all of 2009 coal is committed at substantially higher prices than
in prior years, solid contract base for 2010
in prior years, solid contract base for 2010
– Maturing of new mines, lower labor turnover and reduced commodity prices
are expected to help cost performance
are expected to help cost performance
– Met production expected to double in 2010 (versus 2009)
n Favorable operating cash flow expected in 2009 and 2010
– Capital spending reflects a measured and cautious outlook
– Key focus on strengthening liquidity
n As the market rebalances in 2010 and global stimulus
efforts take hold, increasing demand for low-cost electricity
and steel products should bode well for coal
efforts take hold, increasing demand for low-cost electricity
and steel products should bode well for coal
UBS Boston Conference, December 1, 2009
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Questions?
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Appendices
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Production and Operating
Statistics
Statistics
UBS Boston Conference, December 1, 2009
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Adjusting Production
Growth To Match Demand
Growth To Match Demand
1 Management’s estimate as of October 28, 2009
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Summary of Active
Mining Operations
Mining Operations
UBS Boston Conference, December 1, 2009
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Peer Group
Cost and Margin Comparisons
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Peer Group Cost Per Ton
Appalachian Production (2007 - 3Q09)
Appalachian Production (2007 - 3Q09)
UBS Boston Conference, December 1, 2009
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Peer Group Cost Per Ton
Illinois Basin Production (2007 - 3Q09)
Illinois Basin Production (2007 - 3Q09)
UBS Boston Conference, December 1, 2009
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Peer Group Margin Comparison
Margin Per Ton in Dollars (2007 - 3Q09)
Margin Per Ton in Dollars (2007 - 3Q09)
UBS Boston Conference, December 1, 2009
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Recap of ICG Capital
Investment Strategy
2005-2009
UBS Boston Conference, December 1, 2009
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ICG Capital Investment Focus
n Capital investment strategy during 2005-2009 has focused
on two key areas:
on two key areas:
1. Development capital for construction of new mining complexes to
boost production for targeted markets
boost production for targeted markets
2. Maintenance capital designed to “catch up” for years of under-
investment and upgrade the aged equipment fleet inherited from
the Horizon and Anker bankruptcies
investment and upgrade the aged equipment fleet inherited from
the Horizon and Anker bankruptcies
UBS Boston Conference, December 1, 2009
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Substantial Success Achieved in
Launching Expansion Projects
Launching Expansion Projects
Major Expansion Projects | 2005 | 2006 | 2007 | 2008 | 2009 Est |
• Flint Ridge Complex | |||||
• Raven Complex | |||||
• Vindex Barton/Buffalo Expansion | |||||
• New Sentinel Clarion Mine | |||||
• Beckley Complex | |||||
• Hazard Shovel Spread | |||||
• Tygart #1 Complex (Ongoing) | |||||
• Other Substantial Exp Projects | |||||
Total Project Capex (millions) | $35.6 | $92.2 | $123.3 | $94.9 | $8.0 |
Total of $354.0 million invested in expansion projects during 2005-2009
UBS Boston Conference, December 1, 2009
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Maintenance Capital “Catch-Up”
Spending Has Leveled Off
Spending Has Leveled Off
($ in millions) | 2005 | 2006 | 2007 | 2008 | 2009 Est |
Total Capital Expenditures | $116.8 | $197.0 | $181.3 | $171.6 | $94.5 |
Less Project Capex | $35.6 | $92.2 | $123.3 | $94.9 | $8.0 |
= Non-Project Capital (Basic Maintenance Capex) | $81.2 | $104.8 | $58.0 | $76.7 | $86.5 |
Coal Production (tons, millions) | 12.4 | 16.5 | 16.4 | 17.8 | 16.5 |
Maintenance Capex/Ton | $6.55 | $6.35 | $3.54 | $4.31 | $5.24(1) |
UBS Boston Conference, December 1, 2009
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Note : (1) Idled capacity due to market-driven production cuts essentially inflated 2009 maintenance capex per ton
Equipment Fleet Now
Significantly Stronger
Significantly Stronger
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Miscellaneous Coal Reserves
& Sales Statistics Slides
UBS Boston Conference, December 1, 2009
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Substantial Permitted Reserves
(September 30, 2009)
(September 30, 2009)
Permitted
199 million tons
Non-permitted
801 million tons
NAPP
116 million tons
CAPP
64 million tons
ILL
19 million tons
n ICG’s permitted reserves include 162 million tons
underground and 37 million tons surface
underground and 37 million tons surface
Permitted Reserves
Permitted Reserves by
Geographic Basin
UBS Boston Conference, December 1, 2009
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More Diversified
Customer Base
Customer Base
UBS Boston Conference, December 1, 2009
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