Bhp Group Ltd · ASX:BHP
Bhp — Samarco Mineração — Investor Presentation (March 2007)
60 slides from Bhp's investor presentation, March 2007
Slide 1: Investors' Visit
Investors’ Visit March, 2007 1
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 Company Overview Achievements Corporate Strategy Third Pellet Plant Summary 33
Slide 4: Geographic Location
SAMARCO™ > PONTA UBU 4 TERMINAL
Slide 5: Ownership
Ownership 2001 2002 2003 2004 2005 2006 Employees 1206 1248 1286 1320 1336 1381 Sales - Million Metric Tons Pellets 9.5 12.3 13.7 14.1 14.1 14.1 Pellet-Feed 2.0 2.5 2.7 2.2 1.4 1.9 Total 11.5 14.8 16.4 16.2 15.5 16.0 Gross Revenue (US$ Million) 333 413 500 641 1092 1170 55
Slide 6: Company Overview
Company Overview • It is the world’s second largest exporter of seaborne iron ore pellets - In 2006, Samarco’s net sales were US$1.14 billion with EBITDA of US$695 million • In the years of 2004, 2005 and 2006, Samarco’s pellet production reached its full volume capacity • In November 2005 Samarco s
Slide 7: Company Overview
Company Overview • SAMARCO: • One main raw material • An integrated production process (own mine, beneficiation, transportation and port facilities) • Two products with prices set once a year • 25 customers / Long-term supply contracts For the year ended December 31, (US$ in millions) 2001 2002 2003
Slide 8: Company Overview: Ratings by Fitch
Company Overview Ratings by Fitch • Brazil’s good underlying economic fundamentals, strong market liquidity, positive Company management results and strong shareholder structure allowed for risk re-assessment by Fitch Ratings, resulting in risk re-classification in foreign currency in June from 'BB+
Slide 9: Company Overview: History
Company Overview History: • In 1973, Samitri and Marcona Corporation merged to form Samarco Mineração S.A., with headquarters in Belo Horizonte, in the state of Minas Gerais, Brazil • In 1977, Marcona Corporation was sold to Utah International • In 1978, Utah Marcona Corp. was sold to General Electr
Slide 10: Company Overview: Product Overview
Company Overview Samarco’s Product Overview: • Samarco’s iron ore pellets are produced from two forms of concentrate: low silica (“CLS”) and normal silica (“CNS”), and used in two different steel production process: Direct Reduction (“DR”) and Blast Furnace (“BF”) smelting. - About 80% of current wo
Slide 11: Company Overview: Production Process
Company Overview Production Process: • Production process is divided into three major stages: - Mining and beneficiation - Transportation - Pelletizing and shipping • The first stage starts in the Germano site, where the iron ore (called Itabirite) is mined, grounded and concentrated. • The world’s
Slide 12: Company Overview: Cost Structure
Company Overview Cost Structure: • Samarco is amongst the world’s lowest-cost producers of iron ore pellets: - Efficient mining operations - Energy self generation - Cost-effective pipeline • Operational costs are mainly driven by fuel and electricity costs • Samarco employs various procurement stra
Slide 13: Company Overview: Customer Base
Company Overview Customer Base: • Samarco has developed long-term relationships with Pellet sales by region (wmt) 2006 its clients (average of 17 BF: 0% DR:100% Americas years) 10% China Africa / 31% BF: 96% DR: 4% Middle East 21% • It benefits from a small, BF: 0% stable and diversified DR:100% cus
Slide 14: Company Overview: Customer Base
Company Overview Customer Base: • The Company has signed 10-year supply contracts with its largest customers • Almost 100% of Samarco’s sales are governed by long-term (in excess of three years) volume-based contracts, many of which are automatically renewable when they expire (known as “evergreen”
Slide 15: Germano Facilities
SAMARCO Germano Facilities
Slide 16: Pipeline
Pipeline Altitude (in meters) Distance (in kilometers) 16 16
Slide 17: Ponta Ubu Facilities
SAMARCO Ponta Ubu Facilities *s PELLETIZING PLANT... — CO = it -— "1 —— oO”
Slide 18: Port Facilities
SAMARCO™ MINUMUM DEPTH 150m DRAFT 13,0 + tide
Slide 19: Muniz Freire – Power Plant
Muniz Freire – Power Plant 100% Samarco 19 19
Slide 20: Guilmann Amorim – Power Plant
Guilmann Amorim – Power Plant 20 20
Slide 21: Agenda
Agenda Company Overview Achievements Corporate Strategy Third Pellet Plant Summary 21 21
Slide 22: Integrated Operations Results
Integrated Operations Results Production and Sales Production - In TMS 000´s Sales - In TMN 000's 13,677 14,057 14,071 13,852 13,797 13,266 14,076 13,703 12,326 11,582 19.000 19.000 17.000 17.000 9,890 9,547 15.000 15.000 13.000 13.000 11.000 Pellets 11.000 9.000 Fines 9.000 2,913 7.000 7.000 2,730
Slide 23: Financial Results: Gross Revenue
Financial Results Gross Revenue Faturamento Gross RevenueBruto (US$ MM) Gross Revenue (R$ MM) 1400 3.000 2,618 2,544 1,170 1200 1,092 2.500 1000 1,869 2.000 800 1,529 641 1.500 1,218 600 500 413 333 1.000 777 400 200 500 0 0 01 02 03 04 05 06 01 02 03 04 05 06 23 23
Slide 24: Financial Results: Net Income
Financial Results Net Income Lucro Líquido Net Income (US$ MM) Lucro Líquido Net Income (R$ MM) 600 1.400 1,220 504 500 1.200 442 987 1.000 400 800 689 300 206 600 436 200 102 400 96 180 100 56 200 87 0 0 01 02 03 04 05 06 01 02 03 04 05 06 24 24
Slide 25: Financial Results: EBITDA
Financial Results EBITDA EBITDA US$ MM EBITDA R$ MM EBITDA 800 1800 695 1,615 685 1600 1,497 700 1400 600 1200 500 937 1000 400 322 800 724 627 300 242 600 190 369 200 147 400 100 200 0 0 01 02 03 04 05 06 01 02 03 04 05 06 25 25
Slide 26: Financial Results: ROCE
Financial Results ROCE ROCE ROCE ROCE in US$ (%) in R$ (%) 80,0 80,0 71.6 72.4 70,0 67.4 70,0 60,0 60,0 56.5 50,0 50,0 42.4 40,0 40,0 32.9 32.5 30,0 30,0 26.5 23.1 16.3 20,0 16.3 20,0 12.0 10,0 10,0 0,0 0,0 01 02 03 04 05 06 01 02 03 04 05 06 26 26
Slide 27: Sales Distribution
Sales Distribution Market Share and Sales Distribution Destino Sales das Vendas Distribution em 2002 in 2006 (%) Market Share em (%) In (%) 17,5 17.3 17.2 17.3 Other 17,0 Asia Americas 16.5 10% 16,5 20% 16.1 16,0 Africa/ 15,5 Middle 15.0 Europe 15,0 14.8 East 18% 21% 14,5 14,0 13,5 00 01 02 03 04 05
Slide 28: Agenda
Agenda Company Overview Achievements Corporate Strategy Third Pellet Plant Summary 28 28
Slide 29: Strategy: Competitive Advantages
Strategy Strategy: Competitive Advantages • Favorable market perspectives; • Significant “Player” in the seaborne pellets market: 2nd largest exporter; • Strong and long standing commercial relationships; • Balanced geographical distribution of costumers; • Leading position in operational excellence
Slide 30: Safety & Environmental Policy
Safety & Environment Safety & Environmental Policy : • Samarco operates under rigorous safety standards • The Company is monitored by International Finance Corporation (“IFC”) for the environmental world bank standards, • Is fully compliant with current environmental laws in the country – Has an int
Slide 31: Certificates
Certificates ISO 9001:2000 ISO 14001 OHSAS 18001 BS 7799 1994 1998 2000 2004 31 31
Slide 32: Safety: Lost Time Injury Frequency Rate
Safety Lost Time Injury Frequency Rate 70 70.05 60 50 Samarco Samarco+Contractors Frequency Rate 40 nº accidents per million man hours worked 30 29.24 27.51 20.14 20 11.59 16.10 10.78 10.89 10.76 10 6.45 10.00 8.89 3.81 7.23 2.67 1.09 2.62 2.241.20 0.81 0.40 0.52 0.53 5.19 0.71 0.71 0.21 0.37 0.16 0
Slide 33: Samarco Social Investment Policy
Samarco Social Investment Policy Samarco believes that the company´s growth should be shared with the communities, and seeks various ways to contribute to the practice of citizenship and the sustainable development of these localities. The initiatives are based on four different areas: • Socio-envir
Slide 34: Current Social and Environmental Activities: Environmental Education
Current Social and Environmental Activities Environmental Education 34 34
Slide 35: Current Social and Environmental Activities: Volunteer Work
Current Social and Environmental Activities Volunteer Work 35 35
Slide 36: Current Social and Environmental Activities: Health
Current Social and Environmental Activities Health 36 36
Slide 37: Current Social and Environmental Activities: Regional Development
Current Social and Environmental Activities Regional Development Citizen Community 37 37
Slide 38: The world is going through a period of great growth
Market The world is going through a period of great growth, fired by China and its industrial expansion Growth Rate — GDP Growth Rate — Industrial Production 2000-2012 2000-2012 17.0% 14.4% 14.0% 12.0% 9.1% 9.5% 12.0% 11.0% 8.3% 8.3% 8.0% 8.0% 7.6% 7.4% 7.1% 7.1% 7.1% 9.0% 9.0% 9.0% 8.6% 4.4% 4.1% 4
Slide 39: Iron ore demand will continue with main growth in seaborne market
Market The demand for iron ore will continue with main growth in the seaborne market Market Demand — Iron Ore Market — Iron Ore Million tons 2000-2012 • Demand — the accelerated world growth, specially from 2003 on, 1995 CAGR 05-12 reflected in a higher steel demand. 1908 1952 4.8% 1830 Consequently
Slide 40: New players represent 83% of planned increase in pellets capacity
Market New players represent 83% of the planned increase in pellets capacity New Plants — Pelletizing (MM tons) 200 59.5 178.1 IOC 180 LKAB 2.9% 4.5% 160 Samarco 4.9% 140 17.5 CVRD 5.1% China 120 31.7 33.0% 100 80 55.0 Steel 19.3% 60 Companies 30.3% 40 20 14.4 0 Others 2007 2008 2009 2010 In Study T
Slide 41: Major Players
Severo Major Players Companhia Vale do Rio Doce 41
Slide 42: Marketing: Sales by Region
Marketing Sales by Region 2006 2009 PDR PBF PDR PBF 41% 59% Sales by Region 55% 45% Sales by Region Europe 18% Africa / Africa / Europe Middle East Middle East 16% 29% 21% Other Asia 20% Americas Americas Other Asia 10% 12% 23% China China 20% 31% 42 42
Slide 43: Pricing
Pricing Pricing: - In 2005 an unprecedented 85% rise of the benchmark pellet price, reflected the limited amount of additional supply capacity. Such increase established a new base price level similar, in real terms, to that of the early 1980s. - The recently concluded 2007 iron ore price negotiatio
Slide 44: Pricing: Prices (USD/dmtu)
Pricing Pricing: • The resurgence in the direct reduction sector will put further pressure on pellet supply, keeping pellet prices similar to the 2005 level in real terms through 2009 CVRD and Samarco Iron Ore Prices 120 100% 117.28 113.62 111.40 100 90% 85% 83% 82% 80% 80% Premium over fines (%) 80
Slide 45: Financial KPI's: Revenue
Financial KPI’s Revenue (US$ million) 1,868 1,170 1,191 1,092 641 500 371 430 413 339 333 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2010 Forecast Source: Samarco´s data 45 45
Slide 46: Financial KPI's: EBITDA
Financial KPI’s EBITDA (US$ million) - CY 1,119 685 695 664 322 242 164 181 190 137 147 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2010 Fore cast Source: Samarco´s data 46 46
Slide 47: Financial KPI's: Net Debt/EBITDA
Financial KPI’s Net Debt/ EBITDA (x) US$ 2.90 1.90 1.80 1.80 1.70 1.10 0.90 0.80 0.75 0.60 0.50 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2010 Forecast Source: Samarco´s data 47 47
Slide 48: Profitability: Dividends
Profitability Dividends payment long history (US$ million) The Company paid uninterruptedly annual dividends since its inception 550 450 450 Continuous dividend 300 payment 200 150 60 43 35 2000 2001 2002 2003 2004 2005 2006 2007 2010 Forecast Source: Samarco´s data 48 48
Slide 49: Agenda
Agenda Company Overview Achievements Corporate Strategy Third Pellet Plant Summary 49 49
Slide 50: Project Rationale: Capacity Expansion
Project Rationale Capacity Expansion: • In the years of 2004, 2005 and 2006, Samarco reached its maximum production capacity • The Third Pellet Plant Project will increase capacity to 21.6 million tons by 2008 • Samarco’s historical pellet production: 13.8 13.7 13.9 13.3 12.5 11.6 10.2 9.9 9.4 5.8 5
Slide 51: Project Rationale: Favorable Market Conditions
Project Rationale Favorable Market Conditions: • Pellets account for more than 18% of current global iron ore exports; • Brazil remains the largest exporter with more than one third market share; • In 2006, Samarco’s share in seaborne pellet sales market reached 15%; after Project’s implementation m
Slide 52: Project Description: Mine and Concentration Plant
Project Description The production process of the Expansion will be substantially similar to Samarco’s current operations Mine and Concentration Plant: • Samarco will increase its concentrate capacity from 16.5 to 24 mtpa. • Expected Investment of US$ 276 million 52 52
Slide 53: Project Description: Pipeline
Project Description Pipeline: • Samarco will transport the additional production of its mine and new concentrate plant by a second pipeline been constructed in parallel to the existing pipeline, with capacity to transport 7.5 mtpa of concentrate • Expected Investment of US$ 295 million AD MINAS GERA
Slide 54: Project Description: Pellet Plant, Stock and Loading Facilities
Project Description Pellet Plant, Stock and Loading Facilities: • Samarco will increase its capacity by: - Constructing a new 7.6 mtpa capacity pellet plant at Ponta Ubu - Constructing an additional stockyard area - Enhancing the existing handling and shipping facilities • Expected Investment of US$
Slide 55: Third Pellet Plant Project Highlights
Third Pellet Plant Project PROJECT HIGHLIGHTS Project completion is on Schedule. One lost time injury was registered until February 2007: ¾ Worked hours : 10.540.735 ¾ Lost Time Injuries Frequency Rate(LTIFR) : 0,09 ¾ Classified Injuries Frequency Rate(CIFR) : 0,19 Physical Progress: Up to dat
Slide 56: Agenda
Agenda Company Overview Achievements Corporate Strategy Third Pellet Plant Summary 56 56
Slide 57: Summary: Strong Sponsors
Summary Strong Sponsors: • BHP Billiton (A+ by S&P): a diversified natural resources company occupying industry leader or near industry leader position in major commodity business. • CVRD (BBB+ by S&P): the largest diversified mining company in the Americas and the fifth largest company in the globa
Slide 58: Summary: Solid Credit Profile
Summary Solid Credit Profile: • Experienced Management Team • Leading Market Position • Independent from the Brazilian economy: 100% exporter (revenues in hard currency) and fully integrated (own its mines, pipeline and port facilities) • Increasing performance: 800 CAGR 67.0% 1200 70% 66% 61% 700 N
Slide 59: Summary
Samarco Summary • Samarco is strongly positioned in the pellet market; • Low-cost producer of high-margin product; • The company has an unique “continuous” logistical system that provides a very low cost base; • The end of CAPEX cycle gave the company larger scale, and a higher cash generation capab
Slide 60: SAMARCO
SAMARCO WWW.SaMarco.comMm
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