Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (October 2004)
42 slides from Bhp's investor presentation, Oct 13, 2004
Slide 1: BHP Billiton Base Metals
BHP Billiton Base Metals CSG Briefing 13 October 2004
Slide 2: Disclaimer
Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation ha
Slide 3: Agenda
Agenda Introduction and Strategy Diego Hernandez, President Financial Overview Glenn Kellow, VP & CFO Market Overview John Crofts, Marketing Director Operations Diego Hernandez, President Ian Ashby, VP & Chief Operating Officer Growth Diego Hernandez , President Question and Answer Page No 3
Slide 4: Purpose of Today's Briefing
Purpose of Today’s Briefing • Summary of key messages to close • An update on the CSG’s performance • To discuss some of the key issues facing the CSG and the industry • To demonstrate our continuous optimisation of the existing asset base • To highlight our value enhancing organic growth projects,
Slide 5: BHP Billiton Base Metals
BHP Billiton Base Metals Base M etals M arketing, The Hague M arketing presence in Shanghai, Tokyo and Seoul Resolution Project, Arizona Antamina, Peru Cerro Colorado Chile Tintaya, Peru Cannington, Escondida, Chile Spence Project, Chile Australia CSG Head Office Page No 5 Santiago, Chile
Slide 6: Strategic focus
Strategic focus Base Metals’ mission is to create value for BHP Billiton shareholders through its exposure to the base metals value chain. The clear strategy is to create a demand-focused, low cost production base with a bias towards efficient open cut mining and direct leaching technologies. Numero
Slide 7: HSEC
HSEC CIF e mpl oye e / c ontrac tor • Base Metals is committed to Zero 6 1 2M Roll ing Avg NO P ROJ ECTS Harm • Environment – our license to operate. 5 • Community – BHP Billiton Base Metals aims to be valued as a good 4 corporate citizen in each of the communities in which we operate 3 Ju l-0 2 Au
Slide 8: Production (BHP Billiton Share - payable)
Production (BHP Billiton Share - payable) Copper Production Silver Production 45 1,200 Concentrate Cathode 1,000 800 40 million ounces 000 tonnes 600 400 35 200 0 30 FY2002 FY2003 FY2004 FY2002 FY2003 FY2004 Lead Production Zinc Production 260 250 250 200 240 150 000 tonnes 000 tonnes 230 100 220 50
Slide 9: BHP Billiton's ranking in base metals mine production
Page No 9 Attributable mine prod. - Mozs Attributable mine prod. - ' 000 tonnes 0 10 20 30 40 50 60 P 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 en C ol o e de s lc o P B he H lp P s B ill Do K ito G n dg H e M P B o H ls P ka M B ill ie it dz on R R io io T T in in to to G G ru ru po po M M ex
Slide 10: Competitive Position Unit Costs - 2004
Competitive Position Unit Costs - 2004 (all Data from and copyright Brook Hunt) C1 Pro-rata Costing (1) (1) Assumes by-products share costs Page No 10
Slide 11: Key Issues
Key Issues • Market – Demand – China is the key growth market – Supply – Reactivation of shuttered capacity and new mine development – Base metals’ prices, TC/RC’s and freight • Royalties – Escondida the largest single first category tax payer in Chile – over US$2B paid in first 14 years of operatio
Slide 12: Finance
Finance Glenn Kellow
Slide 13: Base Metals CSG
Base Metals CSG EBIT Summary by Asset (pre-exceptionals) FY2004 FY2003 Variance $US m % EBIT ($US millions) Escondida 808 217 591 272% Tintaya 75 (30) 105 Cerro Colorado 82 28 54 193% A ntamina 103 34 69 203% A lumbrera 0 40 (40) Cannington 171 92 79 86% Highland Valley Copper 7 (3) 10 Other Busines
Slide 14: EBIT Variances – FY03 to FY04
EBIT Variances – FY03 to FY04 EBIT Variances 1,500 881 (103) 45 (17) (19) (5) (36) 1156 1,200 $US Millions 900 600 124 286 300 0 FY03 EBIT Volume Price/ Exch Infl Six Sigma Grade Costs Expl. Ceased/ FY04 TCRCs Sold/ EBIT Other Page No 14
Slide 15: EBIT Sensitivity (FY05)
EBIT Sensitivity (FY05) EBIT Sensitivities Commodity Prices $U S m illions 1 cent change in Copper Price 22 10 cent change in Silver Price 4 1 c change in Zinc Price 2 Exchange Rates 1 cent change in $A rate 2 10 peso movement in CHP rate 6 Copper Price and Chilean Peso Comparison FY02 FY03 FY04 Rea
Slide 16: EBIT Comparison – Base Metals CSG
EBIT Comparison – Base Metals CSG EBIT and Copper Price Revenue byCommodity 4,000 Copper Silver Lead Zinc Gold 1500 EBIT Copper Price $1.20 Realized Price $US/lb. 1156 $1.00 3,000 $US millions 1000 $0.80 $USmillions 2,000 $0.60 500 286 $0.40 1,000 198 $0.20 0 0 $0.00 FY02 FY03 FY04 FY2002 FY2003 FY2
Slide 17: Investing in Profitable Future Growth
Investing in Profitable Future Growth Base Metals Forecast Major Projects Capex (Escondida Norte, Escondida Sulphide Leach, Spence) 900.0 800.0 700.0 600.0 US$M 500.0 400.0 300.0 200.0 100.0 - FY 2004 FY 2005 FY 2006 FY 2007 Actual Budget Forecas t Forecast Page No 17
Slide 18: Southwest Copper
Southwest Copper During FY04, a charge was taken against profit of $425 million, in order to provide for: • higher capital closure costs • expected ongoing costs (overheads and water management) which were previously expensed Page No 18
Slide 19: Marketing
Marketing John Crofts
Slide 20: World refined copper production and BHP Billiton managed sales by region
World refined copper production and BHP Billiton managed sales by region World refined copper production by type BHP Billiton Cu Concs sales by region (Total production in CY04 = 16 Mt) Secondary China 13% Japan 11% Other SXEW Primary refined 21% (Integrated) Asia 17% 14% 44% Americas Includes all C
Slide 21: Copper's intensity of use has recovered
Copper’s intensity of use has recovered from the shocks of the 1970s World Copper Consumption and GDP Per Capita …The growth of 1950-2003 China’s economy, and 130 Emerging Market economic growth. China’s expansion in other 2000 120 industrialisation gathers pace emerging markets are Post-WWII emerge
Slide 22: China accounts for more than 20% of world refined copper demand
China accounts for more than 20% of world refined copper demand Refined Copper Consumption, 1950-2004, ('000 tonnes) 18000 16000 …Asia now World demand – back to accounts for 14000 “normal” after the Oil approx. half world Shocks and collapse of demand for copper 12000 USSR? (But still cyclical) Chi
Slide 23: Continued stock withdrawals have kept prices high
Continued stock withdrawals from Exchanges’ stocks have kept prices high LME copper price – US$/tonne Copper stocks – ‘000 tonnes 3000 1600 LME 3-mth copper price 2800 1400 (monthly average) 2600 SHFE 1200 2400 Comex 1000 2200 2000 800 LME 1800 600 1600 400 1400 200 1200 1000 0 J- F M A M J J A S O
Slide 24: Industrialising countries have followed two distinctive intensity paths
Industrialising countries have followed two distinctive “intensity” paths Copper Demand Intensity of GDP (1950-2002) 30 Korea and High apparent consumption for USA Refined Cu Consumption per Capita Taiwan have 25 export oriented South Korea shown very manufacturing Taiwan economies? Japan strong inc
Slide 25: Independent forecasts predict deficits in refined copper market
Independent forecasts all predict deficits in world refined copper market in 2004 and 2005 ‘000 tonnes 1000 Forecasts 800 600 400 200 0 -200 BHPB refined copper balance -400 Brook Hunt -600 BME CRU -800 ICSG -1000 1999 2000 2001 2002 2003 2004 2005
Slide 26: Treatment and refining charges have risen rapidly
Treatment and refining charges have risen rapidly but from a very low base TC/RC – Nominal Cents/lb 40 •Spot terms have risen rapidly since Spot TC/RC April this year 35 •Expected to remain high in Q4 2004 30 •Contract terms, even including Price Contract TC/RC Participation, are much less volatile
Slide 27: Operations
Operations Diego Hernandez and Ian Ashby
Slide 28: Escondida – A Remarkable Monetisation of a Mineral Resource
Escondida – A Remarkable Monetisation of a Mineral Resource • Discovered in 1981 • Commissioned in 1991 • Currently completing its 7 th growth project in 13 years of operation • Became the largest copper mine in the world in its 5 th year of operation • Currently: – +1 Million t of material mined pe
Slide 29: Escondida – Achieving its Full Potential
Escondida – Achieving its Full Potential Escondida Copper Production (BHPB Billiton Share) Escondida EBIT (BHP Billiton Share) 700 1,000 600 Cathode Concentrate 800 000 payable tonnes 500 $US m illions Constrained 400 600 production and lo w 300 copper prices 400 200 200 100 0 0 FY2000 FY2001 FY2002
Slide 30: Cannington – A World Class Asset Continues to Over-Achieve
Cannington – A World Class Asset Continues to Over-Achieve Cannington EBIT • Achieving record mill throughput > 2.7 Mtpa 200 • Cannington North Block successfully 150 $US Millions completed on budget and ahead of 100 schedule 50 • Business improvement targeting potential 0 FY2000 FY2001 FY2002 FY200
Slide 31: Antamina – Exceeding Design Capacity
Antamina –Exceeding Design Capacity Antamina EBIT (BHPB Share) • Lake sediments mined successfully by May 2004 120 opening up new ore faces in higher grades and 100 increasing mine flexibility $US Millions 80 60 • Plant exceeding design throughput on all ore 40 20 types by 25% and copper ores by up
Slide 32: Tintaya
Tintaya Tintaya EBIT • Successful restart of sulphide operation 60 after 20 month shut. Modern fleet of 240 40 $US Millions ton haul trucks relocated from Robinson 20 operation in Nevada 0 (20) • Reached full capacity on schedule in (40) November 2003 FY2000 FY2001 FY2002 Tintaya Copper Production F
Slide 33: Cerro Colorado
Cerro Colorado Cerro Colorado EBIT • Combined oxide-sulphide leach 100 operation 80 $US Millions 60 • Mine plan sees production through 40 2013 20 • Mature operation using Six Sigma 0 FY2000 FY2001 FY2002 FY2003 FY2004 business improvement Cerro Colorado methodologies to offset the challenges of dec
Slide 34: Growth
Growth Diego Hernandez
Slide 35: Escondida Ore Delivery Systems (Norte and East Conveyor)
Escondida Ore Delivery Systems (Norte and East 3 Conveyor) •Two integrated projects – – Development of new pit at Escondida Norte, and associated crushing and conveying of ore to existing plants – relocation of existing dual conveyors from Escondida pit to the East 3 bench •Conveyor (E3) relocation
Slide 36: Escondida Sulphide Leach
Escondida Sulphide Leach • Marginal and mixed ores from both Escondida and Escondida Norte pits will be bio-leached in Run-of- Mine (ROM) heaps, with conventional SXEW extraction of copper. • Reserve exceeds 1.5 billion tonnes of ore at grades between 0.3% and 0.7% total Cu • A new tankhouse with a
Slide 37: Spence
Spence • Greenfields mine development at Sierra Gorda in northern Chile, 45 kilometres from Calama. • 50,000 tpd of oxide and sulphide ores will be leached to produce an average of 200,000 tpa of copper cathodes. • Reserve is 370 million tonnes at an average 1.06% total copper. • Project has complet
Slide 38: Delivering Value Adding Growth
Delivering Value Adding Growth • Since the merger Base Metals have delivered: – Tintaya Oxide Leach BHP Billiton Base Metals Copper Production – Escondida Phase 4 (assuming scheduled start up of Escondida Norte, Sulphide Leach and Spence) 1600 on time and under budget. 1500 1400 1300 000 tonnes 1200
Slide 39: Additional Growth Options
Additional Growth Options Coarse Particle Recovery • Process optimization project in both Los Colorados and Laguna Seca concentrators. • Objective is to improve total copper recovery by 4-5%, targeting coarse fraction of rougher tailings which contain 2/3 of non-recovered copper. • Project is in Fea
Slide 40: Additional Growth Options (continued)
Additional Growth Options (continued) Technology • Base Metals spends over US$10m each year on R&D. The majority of this is focused on improving leach performance of primary sulphides. If successful this has the potential to significantly improve the financial returns of the Escondida Sulphide Leach
Slide 41: Location of Main Projects
Geographic Distribution of Exploraiton Spend FY 05 Location of Main Projects 21% S outh A merica North America 47% E urope A frica 11% A ustralia 11% 5% 5% A sia Jokkmokk Isurtuq Northern East ern Kazakh stan China Pebble Anatolia Globe East ern Mexico Sonora TCC Reko Diq India Reccy Central Amer ic
Slide 42: Conclusion
Conclusion • Summary of key messages to close • CSG’s performance • Key issues facing the CSG and the industry • Continuous optimisation of the existing asset base • Our value enhancing organic growth projects, helping to meet increased global demand for our commodities Page No 42