Bhp Group Ltd · ASX:BHP
Bhp — Samarco Mineração — Investor Presentation (April 2004)
51 slides from Bhp's investor presentation, April 2004
Slide 1: Samarco's Presentation
Samarco’s Presentation April 2004 1
Slide 2: Agenda
Samarco’s Presentation Agenda • Company Overview • Growth Opportunities • Selected Information 2
Slide 3: Geographic Location
Geographic Location GERMANO MINE 3
Slide 4: Ownership Structure
Ownersnio Structure 626 ohpbittiton x alll Companhia Vale do Rio Doce
Slide 5: A strong fully integrated process exporting 100% of its output
Samarco: A strong fully integrated process exporting 100% of its output Mine Concentration Pipeline Pellet Plants Port 5
Slide 6: Germano Facilities
Garrmnano racilitias “2CON ak Di ee ea bes a
Slide 7: Large Iron Ore Reserves
Large Iron Ore Reserves Germano Alegria Alegria Alegria Alegria Alegria Total / 3/4/5 1/2/6 7 8 9 Média RECURSOS Inferidos (MTMN) 211 806 618 314 536 2485 Indicados (MTMN) 133 293 115 89 275 906 Medidos (MTMN) 12 67 241 150 156 625 Total de Recursos 12 412 1340 734 552 967 4017 RESERVAS Prováveis (M
Slide 8: Germano Process
Garrmnano Procass SAMARCO GERMANO MINE - MINING Front-end Loader Slimes Concentrate Conventional Rotation Thickening Thickning 1 Terminal 1 pei —— Recycled Water Tank ! ! ! ! i Storage Tanks } ' ' ! ' i ' ' ' ! ' i : PIPELINE fl 1 ; ai | — -§ —-s4—e"1 _ i ' nn Overland | Regrinding Columm 4 j ' Grin
Slide 9: Ponta Ubu Facilities
Ponta Ubu Facilities 9
Slide 10: Ubu Process
Uou Procass SAMARCO PONTA UBU = PELLETTIZING Limestone Pellet Tower of Greetings Feed Bentonite — | Coal Balling Disc ~~) er} ee ee | [— Filtering « | —,,, ' ' i ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' : _ Storage Tanks ' Slurry Pond Slurry Pumping | : Roller Screening ' ' 1 ' ' ' ' ' ' i ' ' ' ' ' ' '
Slide 11: Port Terminal
Port Porerryirveyl ~~, —SAMARCO™ ~~ sonnet U BU - Stocking and Sh LO. A. 308m MINIMUM DEPTH 18,2m DRAFT 16,80 + tide EAST SIDE MINIMUM DEPTH 15,0m DRAFT 130+ tide
Slide 12: Muniz Freire Power Plant
Muniz Freire Power Plerye Muniz Freire HPP : Investment: US$25 million Installed capacity: 25MW Annual Energy produced: 120.000 MWh
Slide 13: Guilman Amorim Power Plant (Joint-Venture)
Guilman Guilman Amorim Amorim Power Power Plant Plant (Joint-Venture) (Joint-Venture) 13
Slide 14: Certifications
ALS CME I Carrifiezctions Det NORSKE VERITAS — Cer earional Heawin asp Sarcey DET NORSKE VERITAS MANAGEMENT SYSTEM CERTIFICATE = aera ie “e ate -s MANAGEMENT SYSTEM CERQERIOA on APN Cora ot Pampered Uikinces Ybey Voneemaee Spe ¢ SAMARCO MINERACAD §, SAMARCO MINERACADO 5,4, eee nied Ham torehe 1 TD S
Slide 15: Safety
SAMARCO FREQUENCY RATE OF ACCIDENTS WITH LOST TIME @ Samarco @ Samarco + contractors FREQUENCY RATE OF ACCIDENTS WLT 8 40 0,37 3,81 267 4.09 74,142 0,81 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995°7%997 1999 2001 2002 2003
Slide 16: Education
= Clyje=rier) SAMARCO™ »: Education | 2003 | Concluded ; Inprogress 27 5 14 1 Masters [ Doctorate 1996 2000 2003 Universi . : corel Pri Primary re) Primary 1 pest a University Incomplete ie ecte, OI MPETe Complete Rie He 7 Incomplete : 1,60/0 : University 0,8% : University ' Complete ‘ : 8,9%, ; 25%
Slide 17: Agenda
Samarco’s Presentation Agenda • Company Overview • Growth Opportunities • Selected Information 17
Slide 18: Growth Opportunities
Growth Opportunities • Number 2 pellet exporter worldwide • Very low cost base: among the lowest pellet cost producers in the world • Strong customer base: long term commercial relationship Strong market position with customers • Price relatively low variance: 99% confidence level, price moves by av
Slide 19: Growth Opportunities
Growth Opportunities • Strong cash generation: growing EBITDA margin (over 50%) • Fully integrated process allowing Samarco to capture the entire chain value • Motivated work force: among the Brazilian benchmark work Management excellence force morale • ISO certified for quality, environment and hea
Slide 20: Growth Opportunities
Growth Opportunities • Extensive iron ore reserves • Financially sound: low leverage, high cash flow, hard currency revenues, naturally hedged • Strong shareholders: CVRD and BHP Billiton Long term support advantage • Value added: higher price among iron ore product • Risk diversification – customer
Slide 21: Oil and Gas Support
Oil and Gas Support • This region has an intense oil and gas exploration activity, with present and future need for port access • Samarco already sells port capacity to Socoril, Confab, Brasimp, SubSea 7 and BrasilSupply, supporting their exploration activities Source: Petrobrás, Morgan Stanley Dean
Slide 22: Railway Integration
Railway Integration • New railway can give Samarco access to Vitória and possibly Rio de Janeiro State • The same railway can be used as an export channel to Ubu port, for oil and gas, steel products, automotive, containers and other products. Source: Company information, State of Espirito Santo 22
Slide 23: Expansion Studies
Expansion Studies SAMARCO
Slide 24: Expansion Studies: Project Scope
Expansion Studies Project Scope Germano Unit: Investments in new mines and facilities, conveyor belts, and sub-units for crushing, grinding, concentration, power supply, process water supply, waste dam, and all necessary infrastructure. Pipeline: Construction of the second pipeline, including slurry
Slide 25: Expansion Studies: Project CAPEX
Expansion Studies Project CAPEX DESCRIPTION VALUE US$'000 MINE 10.000 CONCENTRATION 100.000 - Crushing - 14,5 MTPY - Primary Grinding: 1 mill 8.500 KW - Conventional Flotation with Tank Cell - Secondary Grinding: 1 mill 6.200 KW Values in USD - Regrinding: 1 mill 6.200 KW Million PIPELINE Germano-Ub
Slide 26: Preliminary Schedule
Preliminary Schedule YEAR 2004 YEAR 2005 YEAR 2006 YEAR 2007 ACTIVITY 1st Semester 2nd Semester 1st Semestr 2nd Semester 1st Semester 2nd Semester 1st Semester IRON ORE SOURCE DEFINITION CONCENTRATION PROJECT PELLETIZING AND PORT PROJECT PIPELINE PROJECT TAILINGS DISPOSAL CONCEPTION ENERGY SUPPLY CO
Slide 27: Agenda
Samarco’s Presentation Agenda • Company Overview • Growth Opportunities • Selected Information 27
Slide 28: Sales
Sales Sales Volume Pellet Pellet-Feed 13,5 12,5 12,2 5,9 9,4 10,4 5,7 9,4 5,9 3,0 3,7 3,4 2,0 1,8 1,8 1,8 2,3 2,5 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Source: Company data 28
Slide 29: Sales: Market Share
Sales Market Share Seaborne Iron Ore Trade 29
Slide 30: Sales Distribution
Sales Distribution Markets (1,000 t) China Other Asia Europe 5,9 3,1 2,7 4,6 2,3 2,0 2,1 2,2 1,7 2001 2002 2003 2001 2002 2003 2001 2002 2003 Americas Year 2003 Africa/Middle East 2,3 2,3 1,2 1,1 Americas 9% China 43% 1,3 0,6 Africa/Middle East 17% Other Asia 2001 2002 2003 Europe 16% 2001 2002 2003
Slide 31: Customers
Customers EUROPE CHINA MIDDLE EAST ! Arcelor ! Bao Steel ! Hadeed ! Dillingen (Rogesa) ! Hangang ! Qasco ! Thyssen Krupp ! Hangzhou ! GIIC ! Corus Group ! Qingdao ! Khouzestan ! Erdemir ! Shaoguan OTHER ASIA ! Wugang ! Amsteel AMERICAS ! Tianjin ! Krakatau ! Acindar NORTH AFRICA ! China Steel ! Side
Slide 32: Annual Price Negotiation
Annual Price Negotiation Price negotiation is held between buyer and supplier based on certain fundamentals: • Price Settlement: − FOB Prices are settled in the beginning of each Calendar Year between major suppliers and buyers in the European and Asian markets separately; − Prices settled remain va
Slide 33: 10 Year Notional Iron Ore Price
10 Year Notional Iron Ore Price CVRD Itabira fines CVRD iron ore prices for Euro Mills CVRD BF Pellets (US$c/dmtu FOB) 61,88 52,40 53,56 52,10 52,00 49,14 49,24 50,10 46,46 47,36 36,45 30,03 31,04 28,57 28,88 29,69 28,79 28,62 26,95 26,96 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 33
Slide 34: Steel and Steel-metallics Prices
Steel and Steel-metallics Prices Source: CRU International 34
Slide 35: Sales division FOB/CFR
Sales division FOB/CFR CFR Shipments proportion (Mt) 13,68 14,24 17.3% 24.3% 3,46 2,36 2003 2004 CFR Sales Total Sales 35
Slide 36: Steel market demand
Steel market demand World crude steel production (Mt) crude steel prod 1.200,0 8,45% 1.138 9,00% y-o-y change % 1.098 1.061 1.049 8,00% 967 1.000,0 905 851 7,00% 6,82% 800,0 6,33% 6,00% 5,00% 600,0 4,00% 400,0 3,51% 3,61% 3,00% 2,00% 200,0 1,00% 0,35% 1,14% 0,0 0,00% 2001 2002 2003 2004 2005 2006 20
Slide 37: Steel market demand
Steel market demand Seaborne trade in iron ore (Mt) 587 536 479 455 453 430 415 410 383 402 391 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 (f) 37 Source: CRU International
Slide 38: Port congestion Demurrage Management
Port congestion Demurrage Management Waiting time at Ponta Ubu – # days (Jan-Feb 2004) West berth average Total average 3,39 1,50 3,17 1,47 East berth average 2,39 1,36 In line From Berthing to Sailling 38
Slide 39: Financial KPI's: Net Revenue
Financial KPI’s Income Statement Net Revenue USD million 465 412 392 368 Net Revenue 337 327 increase 254 + 83% 1997 1998 1999 2000 2001 2002 2003 Source: Company data 39
Slide 40: Financial KPI's: EBITDA
Financial KPI’s Income Statement EBITDA USD million 244 185 193 164 EBITDA 150 137 increase + 294% 62 1997 1998 1999 2000 2001 2002 2003 Source: Company data 40
Slide 41: Financial KPI's: EBITDA Margin
Financial KPI’s Income Statement EBITDA Margin (%) USD 52,4 48,8 49,3 44,8 45,9 EBITDA Margin 37,3 increase + 114% 24,5 1997 1998 1999 2000 2001 2002 2003 Source: Company data 41
Slide 42: Financial KPI's: Credit Ratios
Financial KPI’s Credit Ratios EBITDA – Capex / Interest Expenses Net Debt / EBITDA (x) USD (x) USD 6,8 15,9 9,5 5,3 5,2 5,1 2,9 2,2 1,9 1,8 1,7 (3,5) 0,8 0,8 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 Source: Company data 42
Slide 43: Financial KPI's: Dividends
Financial KPI’s Dividends payment long history (since 1984). Last 10 years Dividends Payment Capitalized from 1986 to 2003 (USD million) US$ 1.610,3 MM (11%) 150 Continuous dividend 60 payment 43 32 35 26 20 20 20 20 - 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Company data 43
Slide 44: Financial KPI's: Rating
Financial KPI’s Rating (FC limited by country rating) Samarco´s Rating (Fitch) Current Security Class Rating Local Currency BBB- Senior Unsec. (FC) B+ SENs (FC) BBB- FC– Foreign currency SENs – Secured export notes Brazil Rating Security Class Current Rating Local Currency B2 / BB / B+ (Moody´s / S&
Slide 45: Distribution Unit Cash Cost
Distribution Unit Cash Cost Distribution Unit Cash Cost Cost by Category * Consumables Cost * BRL (%) BRL (%) Griding Collectors Media Contractors Starch 4% 10% Power 14% 3% Caustic Soda Bentonite 16% 2% 4% Aglomerant 6% Material Limestone 9% 3% Consumables Others 28% 3% Labor 13% Coal Fuel Oil 13%
Slide 46: CAPEX
CAPEX Capital Expenditures (USD million) * 229,0 204,8 72,1 54,6 34,6 38,6 17,3 23,4 18,2 18,4 23,6 12,9 6,8 13,6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 * Includes power plants and capitalized interest. Source: Company data 46
Slide 47: Maintenance Expenses
Maintenance Expenses Maintenance Expenses* In USD Million In BRL Million 23,5 8,1 7,9 7,0 6,7 17,9 5,9 15,3 12,1 10,8 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 * Includes plant stoppages Source: Company data 47
Slide 48: Productivity and Cost
Productivity and Cost Productivity and Cost Productivity (Revenue / employee) Cash Operating Cost - Base 1999=100 (USD / 1,000 t) * (USD / t)** 450 125 375 389 100 300 100 102 101 96 330 330 75 88 225 276 247 50 150 75 25 0 0 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 * Total employees, inclu
Slide 49: Cost Advantages – Cash Operating Cost
Cash Operating Cost Cost Advantages – Cash Operating Cost (USD/t)* Operation National Steel Wabush s Northshore Kudremukh EVTAC Mining LKAB M Hibbing Minorca 15 Empire LKAB Kiruna Minntac Tilden • Integrated system QCM CVG • Standartization Ferteco IOC Samarco CMP • Automation 10 CVRD (FOB - US$/t)
Slide 50: Debt Payment Schedule
Debt Payment Schedule Debt Current Position (US$ MM) As of December 31th, 2003 Gross Debt Financing Loan 2004 2005 2006 2007 2008 Open Balance Securitization 24,000 12,000 - - - 36,000 IFC 3,133 1,800 1,800 1,800 900 9,433 ABN 2,731 - - - - 2,731 EDC 1,813 - - - - 1,813 BNP Paribas 6,667 6,667 3,333
Slide 51: 51
51
Samarco Mineração — Investor Presentation (April 2004) on 6ix