Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Day (June 2002)
67 slides from Bhp's investor day presentation, June 2002
Slide 1: BHP Billiton Carbon Steel Materials
BHP Billiton Carbon Steel Materials June 2002
Slide 2: Introduction and Strategy
Introduction and Strategy Bob Kirkby President Carbon Steel Materials
Slide 3: Presenters
Presenters • Introduction and Strategy Bob Kirkby • Marketing Andrew Offen • WA Iron Ore & Boodarie Iron Graeme Hunt • Queensland Coal Dave Murray • Other Assets Bob Kirkby • Conclusion Bob Kirkby
Slide 4: Question & Answer
Question & Answer • Louis Irvine Melbourne • Stefano Giorgini Melbourne • Wayne Isaacs Melbourne • John Raubenheimer Melbourne
Slide 5: BHP Billiton – Diversification (9 months to March 2002)
BHP Billiton – Diversification (9 months to March 2002) Turnover - Geographic Origin EBIT - CSG Southern Rest of Expln, Tech & Base Africa World Steel New Business Metals 3% 15% 12% 3% Carbon Aluminium 4% Steel 11% South Materials America Stainless 30% 15% Steel & Other 3% North Australia America 42
Slide 6: BHP Billiton Context - CSM Key Attributes
BHP Billiton Context - CSM Key Attributes • Significant, stable and attractive returns – Critical mass and cost competitive – Long life, high quality resources – World class infrastructure – Experienced and progressive teams • Value adding growth opportunities
Slide 7: Carbon Steel Materials Assets
Carbon Steel Materials Assets QLD Coal (50 – 80%) WA Iron Ore (65-100%) Prod: 50Mt Prod: 70Mt Years of Life: 50 Years of Life: 35 No 1 Seaborne supplier No 3 Seaborne supplier Samarco Iron Ore (50%) Port Hedland HBI Prod: 12Mt (100%) Years of Life: 40 Prod: 1.8Mt Low cost pellet producer Manganese (
Slide 8: Asset Overview – EBIT Contribution to CSM Earnings
Asset Overview – EBIT Contribution to CSM Earnings (FYTD) 400 300 2001 2002 200 US$M 100 0 -100 Boodarie Iron Illawarra Coal Manganese Samarco Qld Coal WAIO
Slide 9: EBIT ROC – Asset Contribution
EBIT ROC – Asset Contribution (Based on 2001/2002 reported EBIT – 9 months to March) 60% 2001 50% 2002 40% 30% 20% 10% 0% WAIO Samarco Qld Coal Illawarra Manganese Coal (Note: 10 month weighted average net operating assets)
Slide 10: CSM Strategy - Focus 2002/5
CSM Strategy - Focus 2002/5 Customer Focused Marketing CSM Strategy Operating Excellence Prudent Growth
Slide 11: Marketing
Marketing Andrew Offen Marketing Director Carbon Steel Materials
Slide 12: CSM - Background Environment
CSM - Background Environment Crude Steel Production Growth Steel Industry 900 850 • Steel industry continues long term growth - 800 continued steel demand pull @ >2%pa; 750 based on GDP/IP growth 700 • No major substitution of other materials, 650 plastics, light metals 600 1980 1985 1990 1995 2000
Slide 13: Market Structure - Met Coal
Market Structure - Met Coal The top 10 seaborne producers of met coal account for 79% of Other the total market. 18% Rio Tinto BMA BHPB Total HCC exports : 125Mt 2% 29% Jim Walter 3% Yakutz 3% Luscar Note: some of these producers also export significant volumes of 4% weak met coal: CONSOL Fording •
Slide 14: Market Structure – Iron Ore
Market Structure – Iron Ore Top 3 exporters account for 72% of the total market BHP Billiton SNIM Others 16% 11% Total IO exports 453Mtpa 2% LKAB 3% Iscor 4% India 8% CVRD Seaborne iron ore market divided into Atlantic, dominated 34% by CVRD and Pacific dominated by Australian Rio Tinto suppliers, B
Slide 15: Market Structure – Mn Ore and Alloy
Market Structure – Mn Ore and Alloy Alloy Market Mn Ore Market BHP Billiton 9% BHP Billiton Other Other 22% 19% 18% CIS CML Autlan 17% 3% 2% Ghana 5% Eramet* CIS LG Japan Autlan 12% 11% 7% 2% O&M CVRD Eramet* 2% 4% 12% China O&M CVRD 11% China 8% 8% 28% *Includes China JV’s Source: BHPB
Slide 16: CSM Market Position - Asia
CSM Market Position - Asia Major supplier of iron ore & manganese Premier supplier of CSMs - fines, lump - reliable, consistent quality - technical support - technical market , seek VIU Strong Growth Market Static Market Customers Customers - Baosteel, OMR - Nippon Steel, JFE Premier supplier of CSM
Slide 17: CSM Market Position – Atlantic
CSM Market Position – Atlantic Premium supplier of HQCC - high customer reliance - high market share Supplier of manganese Small market for lump ores Growth Market Customers - Usinor, CORUS, TKS Ferroatlantica Supplier of Ferro Alloys to US Steel Industry Core supplier of HCC - selective key custome
Slide 18: CSM Revenue by Region
CSM Revenue by Region EE/M East Africa 1% Americas 2% 5% Australia 9% Japan 34% Western Europe 20% Othre Asia Korea 5% China Taiwan 11% 7% 6%
Slide 19: CSM Marketing Strategy: What is our goal?
CSM Marketing Strategy What is our goal? • To maximize long term margins • To protect our market position • To achieve sustainable market share growth
Slide 20: How are we going to achieve that goal?
CSM Marketing Strategy How are we going to achieve that goal? • Improving our customer focus and pushing to the position of the pre-eminent supplier of raw materials to the steel industry • Optimising our customer & geographic mix, product portfolio and pricing levels to maximize value • Improving o
Slide 21: The Marketing Model
The Marketing Model Pittsburgh Pittsburgh Rio Rio De De JJ Santiago Santiago Houston Houston London London • Base Metals • Stainless • Energy Coal Hague Swiss Sing • Carbon Steel Hague Swiss Sing • Aluminium Hub Hub Principal Principal Hub Hub • Petroleum • Freight • Energy • Reg. Office for Europe
Slide 22: The CSM Competitive Advantage
The CSM Competitive Advantage • Stronger customer relationships – value propositions • Improved capability to position in the market and maximize margins • Improved opportunities to package products/services • Improved information capture, sharing & analysis • Experience and understanding of concent
Slide 23: The CSM Competitive Advantage (cont’d)
The CSM Competitive Advantage (cont’d) • Use of technical support to capture value Ò v.i.u., product differentiation, new markets • Global spread of operations and offices • Minimal use of intermediaries • Dedicated logistics solutions and freight trading
Slide 24: West Australian Iron Ore
West Australian Iron Ore Graeme Hunt President WA Iron Ore & Boodarie Iron
Slide 25: BHP Billiton – WA Iron Ore Business
BHP Billiton – WA Iron Ore Business Area of WA Iron Ore Finucane Is. hway Operations Nor thern Hig Boodarie Great me Nelson Point To Broo Iron Plant Nimingarra PORT ay hw HEDLAND Hig al ast Yarrie e s t Co Nor th W To Perth Great No rthern Hig hway Yandi Mine HAMERSLEY RANGE Mining Area C Ore Body 2
Slide 26: WA Iron Ore – Key Statistics
WA Iron Ore – Key Statistics • Mt Whaleback – shipped 900Mt of high quality Brockman ore since 1969 • Yandi Fines – high VIU (value-in-use) sees growing market demand – shipped + 200Mt since 1992 • Yandi Lump – high quality pisolite lump product – shipped 2.5Mt since 2000 Future Resources • 1400Mt o
Slide 27: Seaborne Iron Ore FOB Cost Curve
Seaborne Iron Ore FOB Cost Curve Pellets Fines + Lump Samarco US$/T MACestim OB 23/25 Yandi Whaleback Jimblebar Goldsworthy 0 100 200 300 400 500 600 Cumulative Production (Mtpa Fe)
Slide 28: WAIO Improved Productivity
WAIO Improved Productivity 2,800 50,000 2,600 45,000 Tonnes sold per Employee 2,400 Number of Employees 2,200 40,000 2,000 35,000 1,800 1,600 30,000 1,400 25,000 1,200 1,000 20,000 YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02 Employee numbers Tonnes Sold per Employee
Slide 29: Success from Operating Excellence - Gross Loading Rate
Success from Operating Excellence - Gross Loading Rate (Nelson Point) 6000 5500 Tonnes per Hour YTD average 5086 5000 4500 YEJ01 average 4000 YEJ00 average 3500 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun YTD Avg YEJ02 Actual
Slide 30: Success from Operating Excellence – Loco Fuel Consumption
Success from Operating Excellence – Loco Fuel Consumption Monthly Fuel Consumption 0.39 0.37 0.35 Average Fuel (L/T) 0.33 0.31 0.29 0.27 0.25 Jun-01 Jan-02 Feb-01 Aug-01 Sep-01 Feb-02 Jul-01 Nov-01 Dec-01 Apr-01 Oct-01 May-01 Mar-01 Mar-02 Month
Slide 31: Adopting New Technology – World’s Longest Train
Adopting New Technology – World’s Longest Train • Total Length 7.353 kilometres • Gross mass 99,732.1 Tonnes • Total Mass (exc. Locomotives) 98,164.5 Tonnes • Nett mass of Ore 82,262.5 Wet Tonnes • Total distance travelled 276 kilometres • Total running time 10 hours 4 minutes
Slide 32: Future Growth Strategy
Future Growth Strategy • Incremental expansion of Newman and Yandi mines • Develop new, high Value-in-Use products to provide steelmakers with competitive advantage: l Yandi Lump l MACTM Lump and Fines l Products & Capacity Expansion (PACE) – Expanding rail and port capacity to meet market growth
Slide 33: Mining Area C
Mining Area C 11 Blending stockpiles Electricity Substation Rail Village Spur Bulk Sample Pit Airstrip C Deposit Pit Outline
Slide 34: Mining Area C
Mining Area C • More than 800 million tonnes of iron ore in seven separate deposits • US$213M (100%) capital expenditure (mine, processing & rail spur) • 740,000 tonne bulk sample April 2002 • Bulk sample product railed and processed • First shipment scheduled to POSCO • Production target – late 200
Slide 35: Products & Capacity Expansion Project (PACE)
Products & Capacity Expansion Project (PACE) Western Stockyard Works Stage 1 • US$351M (100%) capital expenditure (port, mainline, environment) • Upgrade under harbour tunnel to 10,000tph • New berth approach jetty and conveyors • Extend existing berth north and upgrade conveyor • New 10,000tph ship
Slide 36: Boodarie Iron – The Way Forward
Boodarie Iron – The Way Forward
Slide 37: BMA – Queensland Coal
BMA – Queensland Coal Dave Murray Chief Executive Officer BHP Billiton Mitsubishi Alliance (BMA)
Slide 38: BMA – Queensland Coal
BMA – Queensland Coal Location of Assets Queensland Hard Coking Coal Exports Darwin Area Area of of Assets Assets Other Queensland Suppliers 37% Brisbane Perth Adelaide Sydney BMA Canberra 63% Melbourne Source: BHPB
Slide 39: BMA - Queensland Coal Operations
BMA - Queensland Coal Operations Eungella Dam MACKAY Dalrymple Bay Coal Terminal Glenden Hay Point Coal SarinaTerminal Nebo Goonyella O/C ~8Mtpa Moranbah Peak Downs O/C ~8Mtpa Saraji O/C ~5Mtpa Dysart Norwich Park O/C ~4Mtpa Clermont Tieri Capella Bingegang Weir Yeppoon Gregory O/C ~1Mtpa Crinum U/G
Slide 40: BMA Business Structure
BMA Business Structure BHP BHP Billiton Billiton Mitsubishi Mitsubishi 50% 50% BMA BMA Owners Owners Council Council CQCA JV: Gregory JV: Marketing; Peak Downs Mine Goonyella Mine Gregory Mine Singapore Norwich Park Mine Saraji Mine Crinum Mine Brisbane Blackwater Mine Hay Point Terminal
Slide 41: BHPB-Mitsui Business
BHPB-Mitsui Business Eungella Dam MACKAY Dalrymple Bay Coal Terminal Glenden Hay Point Coal SarinaTerminal Sth Walker Creek O/C Riverside O/C ~3Mtpa ~4Mtpa Nebo Goonyella O/C ~8Mtpa Moranbah Peak Downs O/C ~8Mtpa Saraji O/C ~5Mtpa Dysart Norwich Park O/C ~4Mtpa Clermont Tieri Capella Bingegang Weir
Slide 42: Queensland Coal Business Structure
Queensland Coal Business Structure BHP BHP Billiton Billiton Mitsubishi Mitsubishi 50% 50% BMA BMA Owners Owners Illawarra IllawarraCoal Coal Council Council CQCA JV: Gregory JV: Marketing; Peak Downs Mine Goonyella Mine Gregory Mine Singapore Norwich Park Mine Saraji Mine Crinum Mine Brisbane Black
Slide 43: BMA Business – Key Statistics
BMA Business – Key Statistics • Annual Sales (100% terms) YEM90 (FY02 – Projected) – HCC 25.7Mt 35.2Mt – WCC 3.1Mt 9.5Mt – Thermal 1.2Mt 5.3Mt – Total 30.0Mt 50.0Mt • Employees 8,629 3,012 • Marketable Reserves – Operating Undeveloped – 1,860Mt 151Mt • Equipment Draglines Electric Shovels Haul Truck
Slide 44: Productivity Improvement
Productivity Improvement BMA HCC Operations Illawarra Coal Operations FOB Cash Cost (US$/T) Appin Blackwater Tower Elouera Gregory/Crinum Norwich Park West Cliff Riverside Peak Saraji Goonyella Downs 0 20 40 60 80 100 120 Cumulative Tonnes Exported (Millions) Source: BHPB, Barlow Jonker, Hill & Asso
Slide 45: Adopting New Technology - Universal Dragline (UDD)
Adopting New Technology - Universal Dragline (UDD) • 32 Draglines ~70% of total material movement • Current Dragline Movement 330 Million BCM’s pa ~ 700 Million tonnes pa • Projected 20% productivity improvement • Potential Improvement • Equivalent to 6 additional draglines • Equivalent to new 10Mtp
Slide 46: Success from Operating Excellence
Success from Operating Excellence YEJ01 – 4 completed projects (Increased plant yield, drill improvement [2 projects], dragline rope life projects) Actual Annualised Savings US$0.57M US$0.87M Revenue Increase US$1.08M US$4.34M FY02 – 11 completed projects, (Overburden drills, coal blasting, pre-stri
Slide 47: Future Growth Projects
Future Growth Projects • Goonyella Underground – Development of low-capital, low-risk punch longwall in GMS – Equipment ex:Kenmare (3,000 tph) – Flexible production – “Coal on Tap” – Gain experience in north Bowen Basin longwall mining • Comet Industrial Proposed Facility New CHPP ML 1 771 COOK CPP
Slide 48: Illawarra Coal
edi bhpbilliton
Slide 49: BHP Billiton - Illawarra Coal Operations
BHP Billiton - Illawarra Coal Operations APPIN APPIN 316M 316MttResource Resource TOWER TOWER 123Mt 123MtResource Resource WEST WESTCLIFF CLIFF 246M 246MttResource Resource Care and Maintenance CORDEAUX CORDEAUX 221M 221MttResource Resource DENDROBIUM DENDROBIUM 0 10 359M 359MttResource Resource O’B
Slide 50: Export Hard Coking Coal FOB Cost Curve
Export Hard Coking Coal FOB Cost Curve BMA HCC Operations Illawarra Coal Operations FOB Cash Cost (US$/T) Appin Blackwater Tower Elouera Gregory/Crinum Norwich Park West Cliff Riverside Peak Saraji Goonyella Downs 0 20 40 60 80 100 120 Cumulative Tonnes Exported (Millions) Source: BHPB, Barlow Jonke
Slide 51: Illawarra Coal – Optimisation of Operations
Illawarra Coal – Optimisation of Operations Actual Production Tonnes Forecast Production Tonnes 9 8 Dendrobium 7 Elouera 6 5 Tower Mt 4 Cordeaux West Cliff 3 2 1 Appin 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Slide 52: Future Growth Strategies
Future Growth Strategies • Rationalisation and Consolidation of Operations – Appin-West Cliff ‘hub’ – New longwall equipment at West Cliff • Dendrobium Development Underpinned by: • 30 Year Coal Supply Contract with BHP Steel – 30 year contract valued in excess of US$4 Billion
Slide 53: Manganese
edi bhpbilliton
Slide 54: BHP Billiton Manganese Operating Units
BHP Billiton Manganese Operating Units MMC MMC Nelspruit Krugersdorp Hotazel Johannesburg Meyerton Metalloys Advalloy SOUTH AFRICA GEMCO Groote Eylandt Saldanha Bay AUSTRALIA Port Elizabeth TEMCO Bell Bay
Slide 55: Manganese Ore FOB Cost Curve
Manganese Ore FOB Cost Curve US$/mtu Mamatwan Wessels Gemco 0 1000 2000 3000 4000 5000 Cumulative Production ('000tMn) Source: BHPB
Slide 56: Manganese Ferro Alloy – HCFeMn Cash Cost Curve
Manganese Ferro Alloy –HCFeMn Cash Cost Curve (78% Mn equivalent) Temco US$/t Metalloys 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 Cumulative Production (Kt) Note: Represents approximately 70% of current market Source: BHPB
Slide 57: Manganese - Improved Productivity
Manganese - Improved Productivity 2000 4000 Tonnes sold per Employee 1500 3000 Number of Employees 1000 2000 500 1000 0 0 YEM97 YEM98 YEM99 YEJ00 YEJ01 Employee Numbers Tonnes Sold / Employee
Slide 58: Samarco Iron Ore
Samarco Iron Ore
Slide 59: Samarco Iron Ore Operations
Samarco Iron Ore Operations ad ilro Ra RD IRON QUADRANGLE CV ATLANTIC OCEAN Belo Horizonte SAMARCO Mine Tubarão Vitória SLURRY PIPELINE PONTA UBU TERMINAL 396 Km BRASILIA • VITÓRIA IRON Rio de Janeiro QUADRANGLE • RIO DE JANEIRO
Slide 60: Seaborne Iron Ore FOB Cost Curve
Seaborne Iron Ore FOB Cost Curve Pellets Fines + Lump Samarco US$/T MACestim OB 23/25 Yandi Whaleback Jimblebar Goldsworthy 0 100 200 300 400 500 600 Cumulative Production (Mtpa Fe)
Slide 61: Conclusion
edi bhpbilliton
Slide 62: Cost Savings 1993 – 2002 (FYTD) – Actual vs 2% Real Target
Cost Savings 1993 – 2002 (FYTD) – Actual vs 2% Real Target 50% Actual 40% Target 30% 20% 10% 0% 10 yr 5 yr 10 yr 5 yr Iron Ore Met Coal
Slide 63: Cost Reduction
Cost Reduction Ways to reduce costs Drivers for Universal dragline Sustainable Activities cost reduction Electronic Detonators • Investment in Technology Upgrade Equipment • Re-engineering - Organisation Maintain ∆P, Operating Excellence - Process Margins EBIT Model, Outsourcing, SBS (LT Price ↓) •
Slide 64: Sensitivities – FX Impact on CSM EBIT
Sensitivities – FX Impact on CSM EBIT Australian Dollar (US¢1 / A$) • WA iron Ore US$10.0M • Queensland Coal US$16.5M • Illawarra Coal US$3.0M • Manganese US$2.0M South African Rand (10¢ Rand / US$) • Manganese US$1.0M
Slide 65: CSM – Prudently Grow Business Value
CSM – Prudently Grow Business Value Plan to grow Business Value by US$1 billion plus by 2005. More than 50% of target in execution NPV US$M Growth Projects Sa QL Illa Ma To MA Ot To Iro De Ya Fu he ma tal tal wa nO nd tur nd DC ng C-P rP i Lu rob rra eP an rco re oa AC ipe es roj mp ium l E e lin ec
Slide 66: BACKUP SLIDES
| BACKUP SLIDES de bhpbilliton
Slide 67: Carbon Steel Materials Financial Results (FYTD comparison)
Carbon Steel Materials Financial Results (FYTD comparison) Nine Months to March 2002 Turnover EBITDA Depn & Amort EBIT Capex WAIO 791 442 50 392 51 Samarco 121 43 43 Total Iron Ore 912 485 50 435 51 Queensland 917 393 42 351 72 Illawarra 215 66 11 55 11 Total Met Coal 1132 459 53 406 83 Manganese 34